Under the Central Excise Rule, where goods manufactured for captive consumption are valued by reference to a comparable unit's price under Rule 6(b)(i), must the highest price recorded at that unit on a particular day be adopted, or the most conservative price?

Central Excise Rule — Rule 6(b)(i) — Valuation for captive consumption — Wholesale cash price — Conservative pricing — Central Excise Rule — Rule 6(b)(i) — Captive consumption — Conservative price mandatory — Held: Valuing goods produced for captive consumption under Rule 6(b)(i) of the Central Excise Rule requires the most conservative comparable price, not the highest price recorded on a particular day, since a wholesale cash price must be conservative in every respect and free of any loading. CESTAT's order adopting the conservative value is affirmed; appeal dismissed. (¶7, 9)

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“The normal price of the goods is the price at which the goods are 'ordinarily' sold in the course of wholesale trade, it is a sort of representative price of the course of wholesale trade. It is a sort of representative price of the goods during a particular period. Hon'ble Supreme Court in the case of A.K. Roy ad another vs. Voltas Limited (supra), in para '19' the judgment has observed the while determining the price which is to represent the real value of the goods to be taxed, the price must be conservative in every respect. Therefore, while determining the price of the goods being cleared for captive consumption by invoking Rule 6(b) (i), on the basis of the price of comparable goods of the same assessee or other assesses, the most conservative price must be adopted, not the highest of the prices as it will loose the character of the normal price.”

“21. The next question is : what exactly is the meaning of the term the 'wholesale cash price'? In Vacuum Oil Company v. Secretary of State for India in Council, it was held that the term means the price paid by retail traders on wholesale purchase. The essence of the idea is that the purchase must be a wholesale purchase and not a retail one. In other words, the sale must be wholesale and not a retail one in order that the price realised may be termed the 'wholesale cash price'. In that case the appellants before the Privy Council imported at Bombay, very large quantities of lubricating oil of a particular manufacture and mark. They sold it direct to numerous customers, never to dealers. The price they charged was the same whether a large or small quantity was bought, except that if a consumer contracted to buy from them all his requirements for a year, he was entitled to a discount from 2-1/2 to 15 per cent according to the quantity bought in the year. No other lubricating oil of a like kind and quality was sold in Bombay. On the question whether the appellant was bound to pay customs duty on the basis of clause (a) or clause (b) of Section 30 of the Sea Customs Act, 1878, the Privy Council held that since the sales were to customers direct, the real value of the goods cannot be ascertained under clause (a) of Section 30 and that clause (b) of Section 30 was applicable. Their Lordships said that in determining the price which is to represent the real value of the goods to be 'taxed, "the price must be conservative in every respect and free in particular from any loading for any post- importation charges incurred in relation to the goods". "The price is to be a price for goods. as they are both at the 'time' and 'place' of importation. It is to be a 'cash price', that is to say a price free from any augmentation for credit or other advantage allowed to a buyer; it is to be a net price, that is to say it is a price 'less trade discount' ". Their Lordships, therefore, held that the words the 'wholesale price' were used in the section in contradistinction to a 'retail price', and that not only on the round that such is a well recognised meaning of the words but because their association with the words 'trade discount' indicates that sales to the trade are those in contemplation, and also because only by attaching that meaning to the word is the 'wholesale price' relieved of the loading representing post- importation expenses which, as a matter of business, must always be charged to the consumer, and which are eliminated.”