Fully amortised customer-supplied pattern cost cannot be added again for later castings; related demand and penalty fail.

Where customer-supplied pattern cost had already been fully amortised through the initial clearances of castings, no further amortisation could be added for later clearances made from the same patterns. The later castings involved no fresh pattern cost and no additional consideration to the manufacturer, so the valuation basis for the demand failed. The earlier precedent was distinguished on the factual position of complete amortisation under the excise valuation framework. As the principal valuation objection did not survive, the related interest and penalty also could not be sustained, and the duty demand was set aside.

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Issues: Whether the cost of customer-supplied patterns, once fully amortised against the initial clearances of castings, was required to be amortised again for additional castings manufactured from the same patterns, and whether the resulting demand, interest and penalty could be sustained.

Analysis: The cost of the patterns had already been fully spread over the number of castings initially ordered and cleared, so the pattern value stood exhausted. Additional castings made later with the same patterns did not involve any fresh pattern cost or any further consideration flowing to the manufacturer. On that footing, requiring continued amortisation for the later clearances would amount to including a cost that had already been fully accounted for. The reliance placed on earlier valuation precedent was distinguished on the basis that the present dispute turned on the factual position of complete amortisation under the applicable excise valuation framework. Once the demand on the principal valuation issue failed, the connected levy of interest and penalty could not survive.

Conclusion: The demand was unsustainable, and the assessee succeeded on the valuation issue.

Final Conclusion: The appeal was allowed, with the consequence that the duty demand and all ancillary liabilities based on the same valuation objection did not survive.

Ratio Decidendi: Where the full cost of a customer-supplied pattern has already been amortised and discharged through the initial clearances, no further amortisation can be added for later clearances made using the same pattern in the absence of any fresh pattern supply or additional consideration.

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