Invoice price as sole consideration defeats differential excise duty and knocks out consequential penalty and interest

Where the invoice price is accepted as the actual sale price and no evidence shows any additional consideration flowing back from buyers, that price constitutes the sole consideration for valuation under central excise principles. On that basis, differential excise duty cannot be demanded merely because a higher declared value is suggested. Once the duty demand fails, any penalty and interest based on that demand also cannot survive.

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Issues: Whether differential excise duty and consequential penalty and interest were sustainable when the assessee sold the goods at the invoice price and there was no evidence of any additional consideration flowing back from the buyers.

Analysis: The Department accepted the correctness of the invoice price and did not show that any amount over and above the invoice price had flowed back to the assessee. In such circumstances, the price at which the goods were actually sold to the dealers was the sole consideration for the sale within the meaning of Section 4(1)(a) of the Central Excise Act, 1944. The declared price could not, by itself, justify a demand for differential duty when the sale price evidenced by the invoices represented the actual consideration. Once the duty demand failed, the penalty and the interest demand, being consequential, also could not survive.

Conclusion: The demand for differential duty was unsustainable, the penalty and interest could not be maintained, and the assessee succeeded while the Revenue failed.

Ratio Decidendi: Where the invoice price is accepted as the actual sale price and no extra consideration is shown to have passed from the buyer, that price constitutes the sole consideration for valuation and no differential excise duty can be demanded on the basis of a higher declared value.

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