Invoice-value assessment for small scale units cannot be replaced by factory gate pricing without proving Section 4 non-compliance.

Rule 173C(11) allowed a small scale industrial unit to be assessed on invoice value without filing a price list, provided the invoice value met Section 4 of the Central Excise Act, 1944. In that regime, each invoice was a separate basis for assessment, and depot clearances could not be re-valued by reference to stray factory gate sales unless the Revenue first established that the invoice values themselves were inconsistent with Section 4. A limitation objection based on the provisional nature of assessment was rejected, although it did not affect the result because the demand failed on merits.

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Issues: (i) Whether a small scale industrial unit entitled to assessment on invoice value under Rule 173C(11) could have its depot clearances valued by reference to stray factory gate sales; (ii) whether the demand was barred by limitation in view of the provisional nature of the assessments.

Issue (i): Whether a small scale industrial unit entitled to assessment on invoice value under Rule 173C(11) could have its depot clearances valued by reference to stray factory gate sales.

Analysis: Rule 173C(11) permitted the assessee to avoid filing a price list and to have assessment made on the basis of invoice value, so long as that value satisfied Section 4 of the Central Excise Act, 1944. In such a regime, each invoice functioned as a separate basis for assessment. The concept that a factory gate price, once available, would govern all removals was inapplicable. The Revenue also did not allege or establish that the invoice values failed to meet the requirements of Section 4.

Conclusion: The demand based on factory gate prices was not sustainable and the assessee succeeded on this issue.

Issue (ii): Whether the demand was barred by limitation in view of the provisional nature of the assessments.

Analysis: The assessment position was treated as provisional in the circular relied upon, and on that footing the plea of limitation could not be accepted. However, this did not alter the ultimate result because the demand itself failed on merits.

Conclusion: The limitation plea was rejected.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Where invoice-value assessment is specifically permitted for a small scale unit under Rule 173C(11), assessments cannot be re-fixed by applying factory gate prices to depot removals unless the Revenue establishes that the invoice values themselves do not satisfy Section 4; a limitation plea based on provisional assessment does not survive where the merits already fail in favour of the assessee.

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