Excise valuation must reflect the real transaction value. The term "greatest aggregate quantity" under Rule 7 refers to the price at which the maximum quantity of goods is sold, not the highest price achieved for a smaller quantity.

FINAL ORDER No. A/30267-30268/2026

Date of Hearing: 29.01.2026

Date of Decision: 07.05.2026

[ORDER PER: ANGAD PRASAD]

The present appeals, arising in the second round of litigation, lie against confirmation of differential duty demand of Rs. 19,60,313/- along with interest and imposition of equal penalty on the allegation of incorrect valuation under Rule 7 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules 2000.

The controversy lies in the narrow compass yet of recurring significance, namely whether it is depot clearance, the Department has justified in discarding actual transaction value and substituting it with the highest price on the premise of “greatest aggregate value”.

The fact, in brief, is that the appellants are engaged in manufacture of M.S. Ingots and clears goods both directly and through its registered Depot at Bangalore. The Depot is duly registered under Central Excise Rules. Depot issues invoices corresponding to factory clearance factory price and Depot price are identical. There is one-to-one co-relation between factory clearance and Depot sale. It is also important that goods are sold without alteration in value chain.

The Department however, ignored the actual transaction value and adopted highest price of the week and raised the demand treating the same as “greatest aggregate value”.

We have heard both the parties and perused the records with their submissions.

The following issues arise:-

(i) whether Rule 7 of Central Excise Valuation Rules 2000 permits adoption of highest price in respect of actual transaction value?

(ii) whether “greatest aggregate value” can be equated with highest price?

(iii) whether Department can disregard consistent and identical pricing mechanism?

(iv) whether extended period and penalty are sustainable?

At the outset, it is necessary to reiterate the settled legal principle that excess duty is chargeable on transaction value and not on hypothetical or artificial valuation.

Hon’ble Supreme Court in the case of CCE Vs Ispat Industries Ltd. , [2015 (314) ELT 670 (SC)] categorically held that the valuation of excisable goods has to be determined at the time and place of removal and must reflect the real transaction value. Thus, valuation must be rooted in actual commercial reality not notional enhancement.

Rule 7 of Central Excise Valuation Rules 2000 provides that value shall be the normal transactional value at Depots at or about the same. The expression greatest aggregate quantity has been subject matter of judicial interpretation. Hon’ble Supreme Court in the case of CCE Vs Raymond Ltd. , [2001 (123) ELT 327 (SC)] held that greatest aggregate quantity refers to the price at which maximum quantity is sold and not the highest price at which a smaller quantity is sold.

The Department has committed a fundamental legal error by picking highest price arbitrarily and ignoring bulk transactional values and also applied valuation in an indiscriminate and mechanical manner. Such approach stands squarely contrary to settled law, Hon’ble Supreme Court in the case of CCE Vs Accurate Meters Ltd. , [2009 (235) ELT 581 (SC)] wherein, it was held that adoption of price which does not represent normal transaction value is impermissible. Further, in the case of CCE Vs Roofit Industries Ltd. , [2015 (319) ELT 221 (SC)] it was held that excise valuation must reflect the true and real value of goods in commercial sense. Therefore, Department’s method is thus legally unsustainable.

The appellants have demonstrated uniform pricing at factory and Depot. No price fluctuation or manipulation and complete transparency in invoices.

Hon’ble Supreme Court in the case of CCE Vs Fiat India Pvt Ltd. , [2012 (283) ELT 161 (SC)] observed that transaction value is acceptable so long as it reflects the price actually paid and is not influenced by extraneous considerations. In the present case, appellant has maintained direct linkage between