Factory-gate price controls excise valuation where sales are to unrelated buyers and no extra consideration is proved.

Wholesale sales at the factory gate to unrelated buyers at the approved invoice price govern excise valuation where that price is the sole consideration and the Department cannot show any extra consideration or related-party arrangement. Higher depot prices, comparative market data, depot slips, or recorded statements alone do not justify rejecting the ex-factory price when the statutory conditions for valuation under Section 4(1)(a) are met. On that basis, the ex-factory wholesale price remained the correct assessable value, and the demand for differential duty, penalties and confiscation based on depot prices was unsustainable.

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Issues: Whether the assessable value of the goods had to be determined on the basis of the ex-factory wholesale price under Section 4(1)(a), or whether the higher depot prices and surrounding materials justified rejection of the approved factory-gate price and demand of differential duty, penalty and confiscation.

Analysis: The goods were sold to wholesale buyers at the factory gate under approved price lists, and the Department failed to establish that the buyers were related persons or that any consideration other than the invoice price flowed to the manufacturer. The statements recorded under Section 14 did not displace the evidence that the factory-gate sales were at arm's length. The mere existence of higher depot prices, comparison with prices of other manufacturers at a different place, and slips relating to depot transactions could not by themselves dislodge the ex-factory price. Excise duty is levied on the manufacturer and the statutory basis for valuation is the price at the time and place of removal where the conditions of Section 4(1)(a) are satisfied.

Conclusion: The ex-factory wholesale price was the correct assessable value, and the demand based on depot prices was unsustainable.

Final Conclusion: The impugned demand, penalties and confiscation could not stand in law, and the appeals succeeded.

Ratio Decidendi: Where wholesale sales at the factory gate are to unrelated buyers and the price is the sole consideration, that ex-factory price must govern excise valuation and cannot be displaced merely because goods fetch a higher price in depot sales.

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