Assessable value includes buyer-supplied consideration and free inputs; suppression supports extended limitation and penalties.

Amounts received from the buyer as tooling advance and the value of free-of-cost inputs were held includible in assessable value because they formed part of the commercial consideration under the valuation rules; the majority also found non-disclosure of the arrangement sufficient to justify invocation of the extended period. Cenvat credit taken on inputs found short and later written off was held reversible on merits, and the suppression of shortages supported extended limitation. The connected penalties on the company and its employees were sustained, with only the direction that duty and interest already paid towards tooling advance would not be refunded.

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Issues: (i) whether tooling advance received from the buyer was includible in the assessable value and whether the extended period could be invoked; (ii) whether the value of inputs supplied free of cost by the buyer was includible in the assessable value and whether the extended period could be invoked; (iii) whether Cenvat credit taken on inputs found short and later written off in the books was required to be reversed and whether the extended period could be invoked, with consequential penalty liability.

Issue (i): whether tooling advance received from the buyer was includible in the assessable value and whether the extended period could be invoked

Analysis: The tooling amount was received in money under the parties' arrangement for manufacture of goods to be supplied to the buyer. The majority held that such amount formed part of the transaction value under the valuation provisions and that the invocation of the wrong valuation rule by the adjudicating authority did not erase the duty liability. The non-disclosure of the supplemental arrangement and receipt of advance in the course of self-assessment was treated as suppression, making the extended period available.

Conclusion: The tooling advance was includible in the assessable value and the extended period was rightly invoked.

Issue (ii): whether the value of inputs supplied free of cost by the buyer was includible in the assessable value and whether the extended period could be invoked

Analysis: The transaction was treated as one on principal-to-principal basis and not as job work. The facts were distinguished from cases involving intermediate manufacture under the job-work scheme. The free inputs supplied by the buyer were regarded as additional consideration connected with the sale of the finished goods and therefore includible in valuation. The abrupt discontinuance of earlier inclusion of such value, without disclosure to the department, supported invocation of the extended period.

Conclusion: The value of free-of-cost inputs was includible in the assessable value and the extended period was rightly invoked.

Issue (iii): whether Cenvat credit taken on inputs found short and later written off in the books was required to be reversed and whether the extended period could be invoked, with consequential penalty liability

Analysis: The credit taken on inputs found short on physical verification and later written off in the accounts was held to be reversible on merits. The majority also held that the failure to disclose the shortages and the write-off to the department amounted to suppression. On that basis, the extended period applied. Once the duty demand survived, the penalties on the company and its employees under the excise penalty provisions were also upheld.

Conclusion: The credit was required to be reversed, the extended period was invocable, and the penalties were sustainable.

Final Conclusion: The appeals failed in full. The duty demands were sustained on all issues and the connected penalties were upheld, with the limited direction that duty and interest already paid towards tooling advance would not be refunded.

Ratio Decidendi: Amounts received from the buyer, whether as cash tooling advance or as free supplies forming part of the commercial arrangement, are includible in assessable value when they constitute additional consideration or transaction value, and deliberate non-disclosure of such valuation facts or stock write-offs justifies invocation of the extended period and consequential penalty.

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