Valuation of pattern cost must be apportioned across all castings produced, not charged in full to a few units.

Non-grant of a separate personal hearing before approval of the price list did not vitiate the proceedings where the assessee's objection on pattern-cost includibility was later considered in duty-recovery proceedings, so no substantive prejudice was shown. On valuation, the cost of patterns used to manufacture castings had to be included in assessable value only on a proportionate basis, because a pattern yields multiple castings and its cost cannot be loaded in full on a limited number of units. The duty demand therefore had to be recalculated on apportionment over the expected quantity capable of being produced from the patterns. The appeal succeeded on this issue and the matter was remanded for fresh working in accordance with law.

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Issues: (i) Whether non-grant of personal hearing before approval of the price list vitiated the proceedings on the ground of breach of natural justice. (ii) Whether the cost of patterns used in manufacture of castings was required to be included in the assessable value in full or only on a proportionate basis across the castings produced from the patterns.

Issue (i): Whether non-grant of personal hearing before approval of the price list vitiated the proceedings on the ground of breach of natural justice.

Analysis: The record showed that the assessee's contention on includibility of the pattern cost was noticed and dealt with by the Assistant Collector in the subsequent proceedings for recovery of duty. The assessee was thus given an opportunity to present its case on the very issue in dispute, and the absence of a separate personal hearing before approval of the price list did not cause prejudice in substance.

Conclusion: The contention of breach of natural justice was rejected.

Issue (ii): Whether the cost of patterns used in manufacture of castings was required to be included in the assessable value in full or only on a proportionate basis across the castings produced from the patterns.

Analysis: The Tribunal applied the principle that where an item such as a pattern yields multiple castings, its cost cannot be loaded entirely on a few castings alone and must be apportioned over the expected quantity capable of being produced from the pattern. The departmental clarification also contemplated inclusion of the proportionate cost of the pattern in assessable value, with apportionment based on expected life, capability, and quantity of castings, and permitted reliance on a Cost Accountant's certificate where required.

Conclusion: The cost of the patterns had to be included only on a proportionate basis, and the duty demand required recalculation accordingly.

Final Conclusion: The appeal succeeded on the apportionment issue, the impugned order was set aside, and the matter was directed to be worked out afresh in accordance with law.

Ratio Decidendi: Where an input or tool used in manufacture yields multiple final products, its cost for valuation purposes must be apportioned over the number of units capable of being produced, rather than being added in full to a limited number of units.

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