Extended limitation and stock transfer valuation: full cost of manufacture applies, and suppression was not established

Extended limitation could not be invoked where price declarations and cost data had already been filed, the valuation method had earlier been questioned by the Department, and no suppression or misrepresentation was shown; the demand was therefore confined to the normal period. For stock transfer clearances, assessable value had to be determined on the full cost of manufacture under the valuation rules, not on a narrower conversion cost, and chartered-accountancy guidance could not override that statutory method. The duty and penalty orders were set aside and the matter remitted for recomputation on the basis of normal limitation, with penalty to be reconsidered accordingly.

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Issues: (i) Whether the demand could be confined to the normal period on the ground that the relevant facts were already within the knowledge of the Department and there was no suppression or misrepresentation; (ii) Whether, for goods cleared on stock transfer basis, the assessable value had to be determined by taking the full cost of manufacture under the valuation rules and not merely a conversion cost.

Issue (i): Whether the demand could be confined to the normal period on the ground that the relevant facts were already within the knowledge of the Department and there was no suppression or misrepresentation.

Analysis: The price declarations and cost data had been filed earlier, the Department had already questioned the very method of valuation, and proceedings on the same issue had earlier been dropped after scrutiny by the jurisdictional Assistant Commissioner. The record did not support the allegation that material facts had been withheld or that there was any sustainable misrepresentation before the Department. In these circumstances, the larger period could not be invoked.

Conclusion: The demand was held to be recoverable only for the normal period of limitation, and the plea for the extended period failed.

Issue (ii): Whether, for goods cleared on stock transfer basis, the assessable value had to be determined by taking the full cost of manufacture under the valuation rules and not merely a conversion cost.

Analysis: Under the valuation framework, the relevant expression was cost of manufacture, which covers all costs incurred up to the date of removal. The Tribunal rejected the attempt to restrict valuation to a narrower conversion cost concept and did not accept the reliance placed on chartered-accountancy guidelines to dilute the statutory valuation method. On this aspect, the Commissioner's approach was upheld.

Conclusion: The valuation was required to be worked out on the basis of full cost of manufacture, not a limited conversion cost.

Final Conclusion: The orders of duty and penalty were set aside and the matters were remitted for recomputation of duty on the basis of the normal limitation period, with penalty to be reconsidered accordingly.

Ratio Decidendi: Where the primary facts relevant to valuation are already disclosed to the Department and the issue has earlier been examined, the extended period cannot be invoked for suppression; and for stock transfers, assessable value must be based on the full cost of manufacture under the valuation rules.

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