Modvat-linked input duty deduction allowed in excise valuation where contract price was fixed on that basis.

For valuation under Section 4 of the Central Excise Act, 1944, the assessable value of copper cables and strips could be based on the contract price actually agreed between the parties, where that price was fixed after excluding the duty element on inputs on which Modvat credit had been taken. The Tribunal treated the agreed price less the corresponding Modvat-linked duty as the relevant valuation basis and held that the deduction was justified. On that approach, the Modvat element was allowable as a deduction and the assessable value had to reflect the contractual price between the parties.

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Issues: Whether, for valuation under Section 4 of the Central Excise Act, 1944, the assessable value of copper cables and strips could exclude the duty element on inputs in respect of which Modvat credit had been availed, where the contract price itself was fixed on that basis.

Analysis: The price lists reflected the agreed contract price less the duty paid on corresponding inputs on which Modvat credit was taken. The dispute had earlier been settled by the Tribunal in the same assessee's matter, where reduction of the price to the extent of Modvat credit was held justified. Following that view, the assessable value was required to reflect the contractual price actually agreed between the parties, including the deduction of the Modvat element.

Conclusion: The deduction of the Modvat element was allowable and the assessable value had to be determined on the basis of the contract price. The issue was decided in favour of the assessee.

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