Excise valuation under Section 4 must follow wholesale cash price in the relevant market, with fair hearing on market materials.

Section 4 fixes excise assessable value by reference to the wholesale cash price of goods of like kind and quality at the time of removal in the relevant wholesale market, not by the manufacturer's restricted sales to stockists or the stockists' resale prices. The correct market and point of time must be identified first; a departmental valuation based on a different market or on contractual stockist sales does not satisfy the statutory test. Because such valuation depends on market materials and factual enquiry, the assessee must receive disclosure of the material relied on and a fair opportunity to respond before liability is fixed.

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Issues: (i) whether the assessable value for excise duty under Section 4 had to be determined on the basis of the price at which the manufacturer sold to its stockists or on the basis of the wholesale cash price in the relevant wholesale market at the time of removal; (ii) whether the demand notices founded on the impugned assessment were liable to be quashed for want of compliance with natural justice.

Issue (i): Whether the assessable value for excise duty under Section 4 had to be determined on the basis of the price at which the manufacturer sold to its stockists or on the basis of the wholesale cash price in the relevant wholesale market at the time of removal.

Analysis: Section 4 required determination of value by reference to the wholesale cash price of goods of like kind and quality at the time of removal from the factory or other place of production. The relevant market was not any open market or the manufacturer's own sale to selected stockists, but the factory market if a wholesale market existed there, or otherwise the nearest wholesale market. The price had to be ascertained with reference to the correct location and point of time, and a restricted sale to stockists under contractual conditions could not by itself furnish the statutory wholesale cash price. The departmental method based on the stockists' resale price in an open market was therefore not in conformity with the statutory test.

Conclusion: The assessable value had to be determined under Section 4 by reference to the statutory wholesale cash price at the proper market and time, and not on the basis adopted by either side; the departmental computation was unsustainable.

Issue (ii): Whether the demand notices founded on the impugned assessment were liable to be quashed for want of compliance with natural justice.

Analysis: Determination of assessable value under Section 4 involved factual investigation and reliance on market materials. Such a determination could not be made wholly behind the assessee's back. The assessee had to be given disclosure of the materials relied upon and a fair opportunity to contest them before liability was fixed.

Conclusion: The impugned assessments and the demand notices were quashed, and further proceedings on that basis were restrained unless a proper assessment was made in accordance with law.

Final Conclusion: The petition succeeded, the assessments and consequential demand notices were set aside, and the authorities were left free to proceed afresh only in accordance with the statutory method and fair procedure.

Ratio Decidendi: Under Section 4, excise value must be fixed by reference to the wholesale cash price in the relevant wholesale market at the time of removal, and any market-based assessment must be made on disclosed materials after giving the assessee a fair opportunity to respond.

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