Invoice price under exemption notification must reflect genuine commercial value; buyer's wholesale price cannot replace it without price influence.

Notification No. 120/75 applied only where the invoice price was a genuine price and was not influenced by any commercial, financial or other relationship between manufacturer and buyer. On the facts discussed, contractual clauses for procurement of raw materials and testing expenses did not amount to special favour or price influence, and the manufacturer's responsibility for ingredients remained intact. The buyer's wholesale price therefore could not be adopted as the duty basis. The commentary concludes that the condition in proviso (iv) was satisfied, making the demand unsustainable and the refund claim maintainable.

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Issues: Whether the appellant was entitled to the benefit of Notification No. 120/75 on the footing that the invoice price of the goods was not influenced by any commercial, financial or other relationship with the buyer, and whether the demand based on adoption of the buyer's wholesale price was sustainable.

Analysis: The exemption under the notification was available only if the invoice price was a genuine price and was not influenced by any relationship between the manufacturer and the buyer other than the sale of the goods. The contractual clauses relating to procurement of raw materials and testing expenses did not establish any special favour or financial influence affecting the invoice price. The manufacturer remained responsible for procuring the ingredients, and the arrangement for supply of certain materials, if required, was only a contractual incident of the tender arrangement. The additional testing arrangement also did not show that the invoice price was fixed without regard to commercial realities. The lower authorities therefore erred in treating the buyer's price as the basis for duty.

Conclusion: The appellant satisfied the condition in proviso (iv) to Notification No. 120/75. The demand was unsustainable and the refund claim was justified.

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