Most Conservative Price Is Considered While Determining Goods Value: SC Affirms CESTAT's Order Challenged By Excise Commissioner

The Supreme Court while deciding an appeal filed by the Commissioner of Central Excise, Allahabad challenging the order passed by the CESTAT (Customs Excise & Service Tax Appellate Tribunal) held that the most conservative price is to be taken into account while determining the value of goods.

The two-Judge Bench of Justice S. Ravindra Bhat and Justice Dipankar Datta asserted, “In view of the clear principle enunciated by this Court which is that the most conservative price is to be taken into account while determining the value of goods, CESTAT approach and conclusions, in the opinion of this Court cannot be faulted.”

The Bench affirmed the CESTAT order with regard to the fixation of prices of the concerned goods.

ASG N. Venkatraman and Advocate Mukesh Kumar Maroria represented the appellant while Advocates V Lakshmikumaran and Charanya Lakshmikumaran represented the respondent.

In this case, the respondent i.e., the assessee company was involved in manufacturing organic chemicals for the purposes of which it sourced Specially Denatured Spirits (SDS) produced from its unit. To manufacture SDS, one of the essential raw materials required was molasses and the assessee was issued three show-cause notices.

The Commissioner had for the purposes of determining the value of SDS, determined the highest rate of the product of SDS prevalent in another unit. Aggrieved, the assessee approached CESTAT which, by its order allowed the appeal holding that the method adopted by the Commissioner was incorrect. The matter was remanded back for fresh consideration by the Apex Court.

The Supreme Court in view of the facts and circumstances of the case noted, “… this Court is of the opinion that the impugned order cannot be faulted.”

The Court also relied upon the case of A.K. Roy Vs. Voltas Limited 1973 (3) SCC 503 in which the issue was related to the meaning of the term 'wholesale cash price'.

Accordingly, the Court dismissed the appeal and affirmed the order of CESTAT.

Cause Title- Commissioner Of Central Excise, Allahabad v. M/s J.R. Organics Ltd.

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