Extended limitation and customs valuation rules: demand was time-barred, and reassessment was ordered under the proper valuation sequence.

Extended limitation could not be invoked where the department had been informed of the valuation basis and was aware of the relevant facts; the demand for clearances prior to November 2004 was therefore time-barred. On valuation, Rule 7 of the Customs Valuation Rules had to be examined first for goods cleared by the EOU, and recourse to Rule 7A was permissible only if valuation under Rule 7 was not feasible. Because the order did not explain why Rule 7 was inapplicable, the valuation question required fresh determination and the matter was remanded for reassessment under the proper rule.

---

---

Issues: (i) whether the demand for differential duty was barred by limitation for the period prior to November 2004; (ii) whether assessable value of the goods cleared by the EOU was to be determined under Rule 7 of the Customs Valuation Rules before resorting to Rule 7A.

Issue (i): Whether the demand for differential duty was barred by limitation for the period prior to November 2004.

Analysis: The material facts regarding the valuation method adopted by the assessee had been intimated to the department well in advance, and the department was aware of the basis of valuation. In such circumstances, invocation of the extended period on the ground of suppression was not sustainable. The notices issued in 2004 and 2005 could not validly cover the earlier clearances beyond the normal period.

Conclusion: The demand for the period prior to November 2004 was barred by limitation and stood set aside.

Issue (ii): Whether assessable value of the goods cleared by the EOU was to be determined under Rule 7 of the Customs Valuation Rules before resorting to Rule 7A.

Analysis: Rule 7 applies where identical or similar imported goods are sold in the country of importation, and valuation is then worked out by deductions from the sale price. If valuation is not feasible under Rule 7, recourse may be taken to Rule 7A. The order under challenge did not explain why Rule 7 could not be applied before proceeding under Rule 7A, and the demand therefore required reconsideration on the appropriate valuation method after the assessee established feasibility under Rule 7.

Conclusion: The valuation issue required fresh determination, and the matter was remanded for reassessment in accordance with the proper rule.

Final Conclusion: One appeal was fully allowed on limitation and the other was sent back for fresh adjudication on valuation, resulting in partial relief to the assessee.

Ratio Decidendi: Where the department is aware of the valuation basis adopted by the assessee, the extended period cannot be invoked for suppression; and valuation must proceed under the appropriate rule applicable on the facts before resorting to a residual rule.

---