Excise valuation accepts genuine differential pricing for separate buyer classes; highest obtainable price cannot be applied mechanically.

In excise valuation, different franchisee buyers located in different places or commercial categories may be treated as separate classes of buyers, so genuine price variations are permissible where no extra-commercial consideration is shown. The Department cannot adopt the highest price merely because it was obtainable, and it must displace the genuineness of the differential pricing. Once commercial pricing is demonstrated, the assessee is not required to explain every variation in exhaustive detail. The valuation approach based on mechanically applying the highest price was therefore unsustainable, and the differential pricing basis was accepted.

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Issues: (i) Whether different franchisee buyers situated at different places could be treated as separate classes of buyers for valuation where the goods were sold at different prices; (ii) whether the highest price realized from any buyer could be adopted as the assessable value merely because it was capable of being obtained, and whether the assessee was required to explain each price variation.

Issue (i): Whether different franchisee buyers situated at different places could be treated as separate classes of buyers for valuation where the goods were sold at different prices.

Analysis: Different buyers located in different places, or falling within different commercial categories, may constitute separate classes of buyers. Where the price varies between such buyers and the variation is not shown to be driven by any extra-commercial consideration, the mere existence of different prices does not render the valuation unacceptable. The pricing pattern in the present case was not shown to be arbitrary in law merely because the Department preferred a uniform basis.

Conclusion: The buyers could be treated as separate classes of buyers, and the different prices charged were permissible.

Issue (ii): Whether the highest price realized from any buyer could be adopted as the assessable value merely because it was capable of being obtained, and whether the assessee was required to explain each price variation.

Analysis: Assessable value cannot be fixed on the footing that the highest price obtainable must necessarily govern where price is the sole consideration and no extra-commercial element is established. The burden to disprove the genuineness of price variation lies on the Department, and the assessee is not required to furnish exhaustive reasons for every differential price once commercial pricing is shown. The Commissioner's approach in adopting the highest price as the basis of assessment was therefore unsustainable.

Conclusion: The highest price could not be mechanically adopted, and the Department failed to displace the assessee's price variation.

Final Conclusion: The valuation order was unsustainable and the appeal succeeded with consequential relief.

Ratio Decidendi: In excise valuation, where sales are to different classes of buyers and price is the sole consideration, genuine differential pricing must be accepted unless the Department proves that the variation is artificial or influenced by extra-commercial factors.

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