Excise valuation must follow actual transaction value when goods are sold to an independent buyer at open auction.

Valuation under the excise rules cannot be shifted to comparable goods where excisable goods are sold to an independent buyer at open auction for the sole consideration of price and the transaction value is available and has not been rejected. In that situation, the actual sale price remains the proper basis for assessment, so a differential duty demand founded on comparable prices is unsustainable. Because the penalty depended on the same valuation basis, it also fails.

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Issues: Whether the differential duty demand and penalty were sustainable when the goods were sold to an independent buyer at an open auction for the sole consideration of price and the transaction value had not been rejected.

Analysis: Rule 7 of the valuation rules applies only where the sale is not to an independent buyer or where price is not the only consideration. Since the sales were to an independent buyer and the actual sale price was available, there was no basis to ignore the transaction value and adopt the price of comparable goods. In such circumstances, the demand based on comparable prices could not be sustained, and the penalty, being dependent on the same demand, also failed.

Conclusion: The differential duty demand and the penalty were set aside in favour of the assessee.

Ratio Decidendi: Where excisable goods are sold to an independent buyer at an open auction for the sole consideration of price, and the transaction value is available and not rejected, valuation cannot be shifted to comparable goods under the valuation rules.

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