Assessable value must reflect a clear nexus between ancillary design charges and the price of goods cleared.

Ancillary charges for designs, drawings, tooling, jigs and fixtures may be included in the assessable value of excisable goods only where a clear nexus is established between those charges and the negotiated price of the goods cleared. A composite arrangement for design, prototype manufacture and supply does not by itself justify loading separate amounts into value unless the record shows that the payment formed part of the machine price. In the absence of such nexus, the extended period, duty demand and penalty cannot be sustained. The additional amount was therefore held not includible in assessable value, and the demand and penalty failed.

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Issues: Whether the amount received for designs, drawings, tooling, jigs and fixtures could be added to the assessable value of the machines supplied under the agreement, and whether duty and penalty could be sustained without establishing the requisite nexus with the price of the goods cleared.

Analysis: The agreement was read as a composite arrangement for design, drawing, prototype manufacture and supply of machines, not as a separate contract merely for drawings and designs. Charges for drawings and related items can be loaded into the assessable value only when it is shown that they have a nexus with the negotiated price of the assessable goods. The record did not establish that the amount of Rs. 43 lakhs formed part of the price of the machines cleared under the separate orders, nor did the order disclose adequate grounds for invoking the extended period or sustaining penalty.

Conclusion: The additional amount could not be added to the assessable value, and the demand and penalty were not sustainable. The appeal was therefore dismissed.

Ratio Decidendi: Addition of ancillary design and development charges to excisable value is permissible only when a clear nexus with the price of the goods cleared is established; absent such nexus, duty demand and penalty cannot be sustained.

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