Assessable value for excise cannot be based on a notional molasses price without statutory fixation or proof of flow-back.

Where molasses was sold by sugar mills to distilleries without any statutory price fixation, the assessable value for excise could not be raised merely on the basis of a higher price discussed at a meeting presided over by the Chief Minister. In the absence of proof that any additional consideration flowed back from the distilleries to the sugar mills, and where duty had already been paid on the actual sale price realised, the notional higher price could not be treated as the excisable value. The demand for differential excise duty was therefore unsustainable, and the impugned orders were set aside.

---

---

Issues: Whether, in the absence of any statutory fixation of price and in the absence of proof of any flow back of consideration, the assessable value of molasses sold by sugar mills to distilleries could be enhanced on the basis of the price said to have been agreed at a meeting presided over by the Chief Minister, so as to sustain demand for differential excise duty.

Analysis: The price of molasses was not fixed under any law. The proposed subsidy to the sugar mills did not materialise, and the Department did not establish that any additional consideration flowed back from the distilleries to the sugar mills. Duty had been paid on the actual price realised on sale. In such circumstances, the higher notional price fixed at the meeting could not be treated as the assessable value for excise purposes.

Conclusion: The enhancement of sale price was unjustified and the demand for differential duty was unsustainable; the impugned orders were set aside and the appeals were allowed.

---