Factory gate sales valuation cannot be replaced by depot prices where the declared factory price is genuine.

Genuine factory gate sales cannot be displaced for valuation merely because depot prices are higher or because limited dealer statements suggest that goods were not always available at the declared factory gate price. Where the department accepts factory gate sales as genuine, those sales remain the proper basis for assessable value, and higher depot realizations by themselves do not justify enhancement. The commentary therefore treats depot prices as insufficient to replace authentic factory gate prices in valuation.

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Issues: Whether the assessable value of the goods could be enhanced on the basis of depot selling prices instead of genuine factory gate sales prices.

Analysis: The factory gate sales were admitted by the department to be genuine and formed about 2 to 3 per cent of the sales. The only basis for rejecting the factory gate price was the existence of higher depot prices after admissible deductions and statements of two dealers that they could not obtain goods at the declared factory gate price on some occasions. Such statements were held insufficient to discredit the genuineness of the factory gate sales. The approach of adopting depot prices as the basis for valuation was therefore not justified.

Conclusion: The assessable value could not be revised on the basis of depot prices, and the issue was decided in favour of the assessee.

Ratio Decidendi: Where factory gate sales are genuine, the assessable value cannot be shifted to depot prices merely because of higher depot realizations or limited dealer statements.

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