Factory-gate sale price must be accepted as normal price unless evidence shows it is not a true commercial price.

Factory-gate sale price of molasses was treated as the normal price for excise valuation because Section 4(1)(a) applies where goods are sold at a price and that price is shown to be the ordinary commercial price. Resort to Section 4(1)(b) and the valuation rules was not justified on mere suspicion or price variation; the department had to establish with evidence that the declared price was not a true commercial price or that the normal price could not be ascertained. In the absence of such factual basis, the direction to apply the valuation rules and remand for de novo re-determination of assessable value was set aside.

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Issues: (i) Whether the price charged at the factory gate for molasses could be accepted as the normal price for assessment under excise law; (ii) Whether recourse to the valuation rules and a remand for re-determination of assessable value was justified.

Issue (i): Whether the price charged at the factory gate for molasses could be accepted as the normal price for assessment under excise law.

Analysis: Section 4(1)(a) applies where the goods are sold at a price and that price can be treated as the normal price. Resort to Section 4(1)(b) and the valuation rules is permissible only when the normal price cannot be ascertained. The record showed sales at the factory gate at different prices, and there was no material establishing that the sales were not ordinary commercial transactions or that the price was not the sole consideration. Mere suspicion based on price variation was insufficient to discard the invoice price without proper investigation into the circumstances affecting the market for molasses.

Conclusion: The factory-gate sale price was rightly treated as the normal price, and rejection of that price was not justified.

Issue (ii): Whether recourse to the valuation rules and a remand for re-determination of assessable value was justified.

Analysis: The valuation rules could be invoked only after a lawful rejection of the normal price. In the absence of adequate factual basis to discard the declared price, the direction to apply Rule 6(b)(i) of the Central Excise Valuation Rules and undertake de novo re-determination lacked legal foundation. The order of remand proceeded on an incorrect understanding of the governing valuation scheme.

Conclusion: Recourse to the valuation rules and the remand order were unjustified.

Final Conclusion: The assessee succeeded, the remand order was set aside, and the original dropping of the demand was restored with consequential relief.

Ratio Decidendi: Where goods are sold at the factory gate, the declared sale price must be accepted as the normal price unless the department establishes on evidence that the price is not a true commercial price or that the normal price cannot otherwise be ascertained; mere price variation or suspicion does not justify automatic resort to the valuation rules.

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