Limitation and captive-consumption valuation rules barred a later demand where valuation disclosures were already known to the department.

Extended limitation could not be invoked where declarations for captively consumed yarn were filed and the department knew the valuation basis; a later allegation of suppression could not revive demands raised well after the normal period, so the duty demands and penalties were set aside as time-barred. For valuation, captively consumed yarn was to be assessed on the cost of production up to the spindle stage, and costs arising after that point were not includible; however, the merits of disputed overhead and expense components were not finally determined because the matter failed on limitation.

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Issues: (i) Whether the extended period of limitation could be invoked on the ground of suppression in respect of declarations filed for captively consumed yarn. (ii) Whether the disputed elements of cost were required to be included while computing the assessable value of captively consumed yarn.

Issue (i): Whether the extended period of limitation could be invoked on the ground of suppression in respect of declarations filed for captively consumed yarn.

Analysis: The declarations under Rule 173C had been filed during the relevant period and the department was aware that the assessable value was being worked out on the basis of raw material cost, manufacturing cost and notional profit. If the department considered that other elements of cost also had to be included, it ought to have raised that objection at the time of filing of the declarations. A later allegation of suppression could not be used to revive a stale demand. The notices issued in 1999 for demands relating to 1994-1996 were therefore beyond the normal period and could not be sustained by invoking the extended limitation period.

Conclusion: The demand was time-barred and the plea of suppression failed.

Issue (ii): Whether the disputed elements of cost were required to be included while computing the assessable value of captively consumed yarn.

Analysis: The assessable value of captively consumed yarn had to be determined on the basis of the cost of production up to the spindle stage, namely the stage at which the yarn came into existence as an excisable product. Costs of processes undertaken after that stage were not includible. As the matter was held to be barred by limitation, the Tribunal did not finally go into the entire merits of the competing theories on includibility of administrative overheads, selling and distribution expenses, interest and similar items.

Conclusion: The challenge on merits was not finally decided, and the demand failed in any event on limitation.

Final Conclusion: The demands of duty and the penalties were set aside, and the appeals succeeded on limitation.

Ratio Decidendi: Where the department is aware of the basis on which assessable value is declared, a later demand for additional cost components must be raised within the normal limitation period and cannot be sustained by alleging suppression.

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