Undervaluation by merchant manufacturers cannot be attributed to an assessee lacking knowledge of the true declared value.

An assessee cannot be fastened with differential duty or extended limitation for undervaluation of grey fabric where merchant manufacturers disclosed the lower value and the assessee had no knowledge of the true value. The demand was based on alleged undervaluation by third-party suppliers, but the record showed that the lesser value was disclosed by those suppliers themselves. On those facts, the Tribunal correctly absolved the assessee of liability, and the SC affirmed that view.

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Issues: Whether the assessee could be held liable for differential duty and extended limitation where the lower value of grey fabric was disclosed by merchant manufacturers and not known to the assessee.

Analysis: The differential duty demand was founded on the allegation that the grey fabric used in manufacture had been shown at a lesser value. The record showed that the merchant manufacturers had disclosed the lesser value, but that this fact was not known to the assessee. On those facts, the assessee could not be fastened with responsibility for the undervaluation attributed to third-party suppliers. The Tribunal's view absolving the assessee of liability was found correct.

Conclusion: The assessee was not liable for the demand or the extended period invocation, and the appeal was dismissed.

Ratio Decidendi: An assessee cannot be made liable for undervaluation attributable to merchant manufacturers where the assessee had no knowledge of the true value disclosed by those suppliers.

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