Buyer-supplied free materials are includible in assessable value, with no cum-duty benefit and no revenue-neutrality defence.

Rule 6 of the Central Excise Valuation Rules, 2000 treats the money value of buyer-supplied goods used in production as additional consideration when it is not already included in the price, so the value of free supplies was includible in the assessable value. On the facts stated, no separate deduction of excise duty or cum-duty adjustment was available because the landed cost of the free supplies was adopted without profit loading and the appellant had not taken credit on those goods. Revenue neutrality was rejected, suppression of receipt and use of free supplies was found, and the extended period of limitation was held invocable; the duty demand and penalty survived.

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Issues: (i) whether the value of free supplies made by the buyer was includible in the assessable value of the manufactured goods; (ii) whether deduction of excise duty from the value of such free supplies or extension of cum-duty benefit was warranted; (iii) whether the dispute was revenue neutral and whether the extended period of limitation could be invoked.

Issue (i): whether the value of free supplies made by the buyer was includible in the assessable value of the manufactured goods.

Analysis: Rule 6 of the Central Excise Valuation Rules, 2000 treats the money value of goods supplied directly or indirectly by the buyer free of charge for use in connection with the production and sale of the excisable goods as additional consideration, to the extent not already included in the price. The buyer-supplied components used in the manufacture of the final product therefore formed part of the assessable value.

Conclusion: The value of the free supplies was rightly includible in the assessable value, against the appellant.

Issue (ii): whether deduction of excise duty from the value of such free supplies or extension of cum-duty benefit was warranted.

Analysis: Deduction of duty element from input cost was not available because the appellant had not taken the credit on the supplied goods and the buyer had already availed it. On the facts found, the value adopted was the landed cost of the free supplies without profit loading, so no separate cum-duty adjustment arose.

Conclusion: Neither deduction of excise duty from the free-supply value nor cum-duty benefit was available, against the appellant.

Issue (iii): whether the dispute was revenue neutral and whether the extended period of limitation could be invoked.

Analysis: Revenue neutrality was negatived because the credit was not available to the appellant and had in fact been availed by the buyer. The appellant also crossed the SSI threshold on account of inclusion of the free-supply value. Non-disclosure of receipt and use of free supplies amounted to suppression of facts.

Conclusion: Revenue neutrality was rejected and invocation of the extended period was upheld, against the appellant.

Final Conclusion: The inclusion of the buyer-supplied goods in the assessable value was upheld, the duty demand and penalty survived, and the appeal failed in entirety.

Ratio Decidendi: Under Rule 6 of the Central Excise Valuation Rules, 2000, the money value of buyer-supplied goods used in the manufacture of excisable goods constitutes additional consideration and is includible in assessable value where not already included in the transaction price.

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