Inventory carrying cost recovery was held includible in assessable value, with suppression supporting extended limitation and penalty.

Recovery of carrying cost for extra raw-material inventory was held includible in assessable value because it formed part of the price-related consideration for the goods and was not a deductible item. Non-disclosure of that debit-note recovery in ER-1 returns was treated as suppression of material facts under self-assessment, so the longer limitation period and penalty were sustained for intent to evade duty. The document states that the appeal failed on both valuation and limitation, and the duty demand with penalty was upheld.

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Issues: (i) Whether the amount recovered from the customer as carrying cost of extra raw-material inventory was includible in the assessable value of the goods. (ii) Whether extended limitation and penalty were sustainable on the ground of suppression of facts.

Issue (i): Whether the amount recovered from the customer as carrying cost of extra raw-material inventory was includible in the assessable value of the goods.

Analysis: The amount was recovered through debit notes as interest on raw-material inventory maintained to ensure timely supply of finished goods. The reasoning applied to carrying cost of finished goods inventory was held to extend to the carrying cost of raw-material inventory as well. Such recovery was treated as part of the price-related consideration for the goods and not as a deductible item.

Conclusion: The amount recovered as carrying cost of extra raw-material inventory was includible in the assessable value, against the assessee.

Issue (ii): Whether extended limitation and penalty were sustainable on the ground of suppression of facts.

Analysis: Under the self-assessment regime, the assessee was required to disclose all material facts needed to verify correctness of duty payment. Since the recovery of extra inventory cost through debit notes was not disclosed in the ER-1 returns, the non-disclosure was treated as suppression of relevant facts. On that basis, the short-payment was held to involve suppression with intent to evade duty, justifying invocation of the longer limitation period and imposition of penalty.

Conclusion: Extended limitation and penalty were upheld, against the assessee.

Final Conclusion: The appeal failed on both valuation and limitation, and the duty demand with penalty was sustained.

Ratio Decidendi: Recovery from the customer of the carrying cost of additional inventory used to supply goods is includible in assessable value, and non-disclosure of such material facts in self-assessment returns constitutes suppression supporting extended limitation and penalty.

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