Valuation of pump-sets: component duty is includible only to the extent actually retained from customers.

In valuing mono-bloc pump-sets, the intrinsic value of the finished goods includes the cost of components, but duty on an electric motor or similar component cannot be added where an exemption notification grants set-off and no duty element was retained from customers. Only duty actually retained by the assessee can be treated as part of the price realisation and recovered to that extent, subject to the applicable limitation period. Where clearances were made under approved classification and price lists, Rule 9(2) was inapplicable. The matter was remanded to verify whether any duty had in fact been retained.

---

---

Issues: Whether, in the valuation of mono-bloc pump-sets, the excise duty attributable to the electric motor or its components, when separately recovered from customers but subject to set-off under the exemption notification, could be included in the assessable value of the pump-set, and whether the demand could be sustained to the extent of any duty actually retained by the assessee.

Analysis: The assessable value of excisable goods must include the intrinsic value of the finished article, including the cost of raw materials and components, and under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944 only duty actually paid on the goods under assessment can be deducted from the cum-duty price. However, where an exemption notification grants set-off for duty on electric motors, rotors or stators used in the pump-set, the duty burden on that component is neutralised for valuation purposes if the assessee has not retained any amount from customers. If any amount collected as duty has been retained, it forms part of the price realisation of the finished goods and can be brought to tax only to that extent, subject to limitation under the applicable recovery provision. Since the goods were cleared under approved classification and price lists and assessed returns, Rule 9(2) was held inapplicable.

Conclusion: The inclusion of the motor or component duty in the assessable value was not justified on the assessee's case as presented, and the matter was remanded for verification whether any duty had been retained; if none was retained, the demand was to be withdrawn, and if some amount was retained, recovery could be limited to that amount.

---