Excise valuation on net price after passing Modvat credit benefit to buyer through reduced sale price.

Excise valuation must reflect the net price actually realised where Modvat credit is contractually passed on to the buyer by reducing the sale price. The contract and price list showed a trade discount linked to Modvat benefit, and there was no specific factual challenge to that position. On that basis, duty was required to be computed after deducting the amount equal to the Modvat credit from the gross price, making the higher demand unsustainable.

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Issues: Whether, for excise valuation, the assessable value was to be reduced by the amount of Modvat credit where the contract and price list reflected that the benefit of such credit was passed on to the buyer by lowering the price.

Analysis: The relevant inquiry was whether the Modvat benefit had in fact been transferred to the buyer through a proportionate reduction in price. The record showed that the contract provided for a trade discount on account of Modvat credit and the price list reflected the same position. In the absence of a specific factual challenge to these aspects, the duty liability had to be computed on the net price realised after deducting the amount equal to the Modvat credit from the gross price.

Conclusion: The assessee was entitled to have duty computed only on the net price realised, and the demand was not sustainable.

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