Provisional duty adjustment on actual depot sale price, with limitation and penalty barred absent mala fide intent.

Where depot clearances were made on a working basis and the final sale price depended on seasonal and market factors, duty could be adjusted with reference to the actual depot realisation rather than treating factory-gate value as final; the assessee's adjustment method was accepted on a provisional assessment basis. Where the assessee had fully disclosed the pricing mechanism and voluntarily paid differential duty, the demand was barred by limitation because the extended period was unavailable, and penalty could not be sustained in the absence of mala fide intent. The demand and penalty were set aside, with consequential relief.

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Issues: (i) Whether the assessee was entitled to adjust duty with reference to the actual sale price realised from depot clearances instead of treating the factory-gate value as final, and (ii) whether the demand and penalty could be sustained when the assessee had disclosed the method of working and there was no mala fide intent.

Issue (i): Whether the assessee was entitled to adjust duty with reference to the actual sale price realised from depot clearances instead of treating the factory-gate value as final.

Analysis: The clearances were made on a working basis because the final sale price depended on seasonal and market factors. The assessee had placed the procedure before the jurisdictional authority and had paid substantial differential duty when the depot realisations were higher. In such circumstances, the appropriate course was provisional assessment, and the higher actual sale price could be taken into account for duty adjustment. The objection to adjustment against lower realisation, while accepting the higher realisation basis, was found unjustified.

Conclusion: The assessee's method of duty adjustment based on actual depot sale price was accepted.

Issue (ii): Whether the demand and penalty could be sustained when the assessee had disclosed the method of working and there was no mala fide intent.

Analysis: The assessee had informed the department of the complete working arrangement and had voluntarily paid large differential duty. On those facts, the demand was held to be beyond the normal period and barred by limitation under the excise limitation provision. Since the record showed absence of mala fide intention, the penalty provisions were also held inapplicable, and the impugned order was viewed as self-contradictory to the extent it confirmed penalty despite recording no mala fide.

Conclusion: The demand was held barred by limitation and the penalty was not sustainable.

Final Conclusion: The order of demand and penalty was set aside, and the appeal succeeded with consequential relief.

Ratio Decidendi: Where the assessee has fully disclosed the pricing mechanism, paid differential duty voluntarily, and no mala fide intent is found, the extended period and penalty cannot be invoked, and duty adjustments may be worked out on the basis of the actual realisation under a provisional assessment approach.

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