Customer-supplied drawings used in manufacture are includible in assessable value, and nondisclosure can justify penalty.

Customer-supplied drawings used in manufacturing are treated as additional consideration and included in assessable value under the valuation rules, even when supplied free of cost. The text explains that drawings, blueprints and similar technical inputs fall within the valuation scheme when they directly support production and are not already reflected in the declared value. It also notes that penalty may be sustained where the assessee fails to disclose such value in returns, does not produce evidence of free supply despite departmental requests, and the conduct supports an inference of intent to evade duty.

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Issues: (i) Whether the value of drawings supplied by customers free of cost for manufacture of casting items was includible in the assessable value; (ii) Whether penalty was sustainable.

Issue (i): Whether the value of drawings supplied by customers free of cost for manufacture of casting items was includible in the assessable value.

Analysis: The valuation scheme treats as part of the assessable value any additional consideration flowing directly or indirectly from the buyer to the assessee. Rule 6 of the valuation rules specifically covers the value of drawings, blueprints, technical maps and similar items supplied free of charge or at reduced cost and used in production. The drawings supplied by customers were used in manufacture and their value was not included in the declared assessable value.

Conclusion: The value of the customer-supplied drawings was held includible in the assessable value, against the assessee.

Issue (ii): Whether penalty was sustainable.

Analysis: The record showed repeated departmental requisitions for proof of free supply of drawings, but the assessee did not produce the evidence and the value was not disclosed in the ER-1 returns. That conduct was treated as inconsistent with a bona fide omission and supported the inference of intent to evade duty. The plea of prevailing confusion was rejected because the statutory scheme itself expressly required inclusion of such value.

Conclusion: The penalty was upheld against the assessee.

Final Conclusion: The appeal failed in entirety and the impugned order sustaining duty valuation and penalty was maintained.

Ratio Decidendi: Where customer-supplied drawings are used in manufacture, their value forms part of the assessable value as additional consideration under the valuation rules, even if supplied free of cost.

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