Factory gate price governs excise valuation where available, and new grounds cannot be added beyond the show cause notice.

Where factory gate sales are available, factory gate price remains the relevant basis for excise valuation even if depot sales also exist. The presence of depot sales does not, by itself, displace factory gate pricing for Central Excise purposes. The Tribunal further held that the department cannot support a valuation challenge on a ground not set out in the show cause notice, and an allegation that trade discount was not actually passed on could not be raised for the first time in appeal. Reliance on Madras Rubber Factory was found inapplicable on the facts, as the dispute involved both factory gate and depot sales and the department's case went beyond the notice.

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Issues: Whether, in the presence of both factory gate sales and depot sales, the factory gate price was the proper basis for excise valuation and whether the department could support a ground not contained in the show cause notice.

Analysis: The Tribunal held that where factory gate prices exist, they are relevant for valuation under the Central Excise regime, and the existence of depot sales does not displace that position. It also found that the department's attempt to rely on an allegation that trade discount had not actually been passed on was outside the scope of the show cause notice. The reliance placed on the Madras Rubber Factory decision was held inapplicable on the facts, since the case involved both factory gate and depot sales and the appeal grounds travelled beyond the notice.

Conclusion: The valuation based on factory gate price was upheld and the departmental challenge failed.

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