Factory-gate valuation for repacked excisable goods cannot be based on depot sale price of later smaller containers.

Valuation of excisable goods had to be based on the form in which the goods were cleared from the factory, not on the later sale price of repacked smaller containers. Paint packs were removed in 200 litre bulk packs and repacked outside the factory before depot sale; that later repacking was not shown to amount to manufacture, and the depot could not be treated as the place of removal for the relevant period. As no factory-gate or depot sale price of the original bulk packs was available, the Department's valuation method failed and the demand, extended limitation, penalty and interest were set aside.

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Issues: Whether the assessable value of 200 litre paint packs cleared from the factory could be determined with reference to the depot sale price of smaller repacked containers, and whether the duty demand, extended limitation, penalty and interest could be sustained on that basis.

Analysis: The goods were cleared from the factory in 200 litre bulk packs and were later repacked by job workers into smaller containers before sale from depots. The decisive factor was the form in which the goods were removed from the factory, not the later form in which they were sold after repacking. Repacking outside the factory was not shown to constitute manufacture for paints, and the depot could not be treated as the place of removal for the period before the relevant amendment. Even after the amendment, valuation could not be shifted to the smaller pack sale price when no sale price of the 200 litre packs at the factory gate or depot was available. The demand, extended period, penalty and interest were therefore unsustainable on the facts.

Conclusion: The valuation adopted by the Department was rejected, and the duty demand, penalty and interest were set aside in favour of the assessee.

Final Conclusion: The appeals succeeded because the assessable value had to be fixed on the basis of the goods as cleared from the factory, and the later repacking and depot sales could not be used to enhance valuation on the facts of the case.

Ratio Decidendi: Where excisable goods are cleared from the factory in one form and are later repacked outside the factory without such repacking amounting to manufacture, valuation must be based on the goods as removed from the factory and not on the sale price of the repacked goods sold from depots.

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