Name of the Case: Commissioner of Central Excise, Allahabad vs. J. R. Organics Ltd.
Case Number: Civil Appeal No. 8502 of 2009
Judges Name: Hon’ble Judges S. Ravindra Bhat J, Dipankar Datta J.
Order dated: 01.03.2023

Facts of the Case:  

1. The revenue has filed this appeal, aggrieved by the order of Customs Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi dated 27.07.2009. CESTAT had rendered its Order dated 12.11.2007 upon a remand order by this Court in CA No. 4975/2002. 
2. The Respondent assessee manufactures organic chemicals for the purposes of which it sources Specially Denatured Spirits from its units at Kaptanganj, Uttar Pradesh. To manufacture SDS one of the essential raw materials required is molasses.
3. The respondent-assessee, contended that upon a proper valuation in terms of Rule 6(p)(ii) of the Central Excise Rule, 1994, the value of SDS was determinable on the basis of its in-house production at Kaptanganj.
4. Since the first show cause notice covered an extended period, penalty too was imposed. Aggrieved, the assessee approached CESTAT which, by its order dated 20.02.2002 allowed the appeal holding that the method adopted by the Commissioner was incorrect. 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 at Sarai District, Gorakhpur, on a specific date.
5. The revenue’s appeal was allowed by this Court which remanded the matter for fresh consideration, inter alia, observing that the mere rejection of the highest rate was insufficient and the Court had to decide on the basis of judicial discretion of the assessing officer, whether there was any rationale in the fixation done and what was the appropriate method of valuation. 

Hon’ble Supreme Court observed/held as follows:

• 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.
• Therefore, held that the words` 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.
• The Court cannot be faulted if the most conservative price should be taken into account when determining the value of goods, as the CESTAT approach and conclusions are unchanging. The Hon’ble Court dismissed the appeal.