The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Department cannot discard actual transaction value and arbitrarily adopt the highest depot sale price while determining assessable value under Rule 7 of the Central Excise Valuation Rules, 2000. 

The bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) ruled that “greatest aggregate quantity” cannot be equated with the “highest price” and emphasized that excise valuation must reflect real commercial transactions rather than hypothetical enhancements. 

The matter arose from orders confirming differential excise duty demand of Rs. 19.60 lakh along with interest and equal penalty on allegations of incorrect valuation under Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. 

The appellant-company was engaged in manufacturing M.S. Ingots and cleared goods both directly from the factory and through its registered depot at Bangalore. The depot issued invoices corresponding to factory clearances, and both factory price and depot price were identical. The company maintained one-to-one correlation between factory clearance and depot sale, with no alteration in the value chain. 

However, the Department ignored the actual transaction values and adopted the highest price prevailing during the week, treating it as the “greatest aggregate value,” thereby raising differential duty demands. 

The Bench comprising A.K. Jyotishi and Angad Prasad framed key issues including whether Rule 7 permits adoption of the highest price instead of actual transaction value, whether “greatest aggregate quantity” can be treated as “highest price,” and whether the Department could disregard a consistent pricing mechanism. 

The Tribunal reiterated that excise duty is chargeable on actual transaction value and not on artificial or hypothetical valuation. Referring to the Supreme Court’s ruling in CCE Vs Ispat Industries Ltd., the Bench observed that valuation must be determined at the time and place of removal and should reflect real commercial value. 

Interpreting Rule 7, the Tribunal relied upon the Supreme Court judgment in CCE Vs Raymond Ltd. and held that “greatest aggregate quantity” refers to the price at which the maximum quantity of goods is sold and not the highest price at which only a small quantity is sold. 

The Bench found that the Department committed a “fundamental legal error” by mechanically selecting the highest price while ignoring bulk transaction values. It further held that such selective adoption of higher price was contrary to settled law and inconsistent with commercial reality. 

The Tribunal also referred to the Supreme Court decisions in CCE Vs Accurate Meters Ltd. and CCE Vs Roofit Industries Ltd. to reiterate that excise valuation must reflect the true and normal transaction value of goods. 

On facts, the Tribunal noted that the assessee had demonstrated complete transparency, uniform pricing at factory and depot levels, and absence of any price manipulation. It observed that the same goods were sold at the same price within the same buyer chain, thereby fully satisfying Rule 7 requirements. 

The Bench further held that the entire demand was based on recorded transactions, filed returns, and verified invoices, with no evidence of suppression or intent to evade duty. Relying on the Supreme Court judgment in Pushpam Pharmaceutical Company Vs CCE, the Tribunal ruled that the extended period of limitation could not be invoked in a purely interpretational dispute. 

Since the demand itself failed on merits, the Tribunal held that the penalty would automatically collapse. Referring to the Supreme Court ruling in Union of India Vs Rajasthan Spinning and Weaving Mills, it observed that penalty requires existence of mens rea in disputed interpretation cases, which was absent in the present matter. 

Accordingly, the Tribunal set aside the impugned orders and allowed the appeals with consequential relief.

Case Details

Case Title:  M/s Lakshmi Metallurgy Ltd. Versus Commissioner of Central Tax

Citation: JURISHOUR-1170-CES-2026(HYD) 

Case No.: Excise Appeal No. 31295 of 2017

Date:  07.05.2026

Counsel For  Appellant: V. Ravindran, Advocate

Counsel For Respondent: A. Rangadham, Authorized Representative 

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