Rule 6(3) recoveries and assessable value remain disputed, while extended limitation and penalty were held unsustainable.

Recovery from buyers of an amount already paid under Rule 6(3) of the Cenvat Credit Rules raised the valuation question whether it became additional consideration and part of assessable value, with one view treating it as includible and the other treating prior payment to the Revenue as excluding it from price. On limitation and penalty, both views agreed that the extended period was not available because the material facts were within the Department's knowledge, and that penalty was not sustainable.

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Issues: Whether the amount recovered from buyers, though paid by the assessee under Rule 6(3) of the Cenvat Credit Rules, 2004 as an amount linked to exempted clearances, formed part of the assessable value and attracted a further demand; and whether extended limitation and penalty were sustainable.

Analysis: One view held that the payment under Rule 6(3) is a presumptive reversal of Cenvat credit relatable to exempted goods, so if the same amount is collected from customers it represents additional consideration and is includible in the sale price for the purpose of the further demand. On limitation and penalty, that view found the extended period unavailable because the facts were already within the Department's knowledge, and held that penalty was not justified. The other view held that once the amount under Rule 6(3) has already been paid to the Revenue, the same recovery from customers cannot be treated as additional consideration or as part of assessable value, and relied on the understanding that such payment is an amount paid under the rule rather than a component of price. That view also agreed that limitation and penalty were not sustainable.

Conclusion: The Members did not reach a common final conclusion on the principal valuation issue, while they were in agreement that extended limitation and penalty were not sustainable.

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