Excise limitation and valuation principles: demand failed without proof of suppression, and free-supplied inserts were excluded from assessable value.

Excise demand cannot be sustained beyond the six-month limitation period absent proof of suppression of facts, and prior departmental knowledge of the contracts defeated any attempt to extend time. On valuation, where the assessee had opted for invoice assessment under Notification No. 120/75-C.E., the invoice and contract price could be accepted because no commercial or financial relationship affecting price was shown. Free-supplied inserts furnished by the Railways were not part of the contractual consideration and were not includible in assessable value. The demand was therefore set aside and consequential relief followed.

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Issues: (i) whether the demand was barred by limitation on the ground that it was issued beyond six months without proof of suppression of facts; (ii) whether, under Notification No. 120/75-C.E. dated 30-4-1975, the invoice price and contract price could be accepted for assessment and whether the value of free-supplied inserts formed part of the assessable value.

Issue (i): whether the demand was barred by limitation on the ground that it was issued beyond six months without proof of suppression of facts.

Analysis: The demand notice was issued beyond the six-month period. The record did not show any suppression of facts by the assessee, and the departmental officers had already seen the contracts. The allegation of suppression was not substantiated, and no basis was shown for extending the limitation period.

Conclusion: The demand was time-barred and this issue was decided in favour of the assessee.

Issue (ii): whether, under Notification No. 120/75-C.E. dated 30-4-1975, the invoice price and contract price could be accepted for assessment and whether the value of free-supplied inserts formed part of the assessable value.

Analysis: The assessee had opted for invoice assessment under the notification, and there was nothing to show that the contractual price was influenced by any commercial or financial relationship. The free-supplied inserts provided by the Railways could not be treated as part of the assessable value. The benefit of the notification was therefore available, and the valuation adopted by the lower authority was not sustainable.

Conclusion: The assessee was entitled to assessment on the invoice price and the value of the free-supplied inserts was not includible; this issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded both on limitation and on merits, and the impugned demand was set aside with consequential relief.

Ratio Decidendi: A demand under excise law cannot be sustained beyond the prescribed limitation period without proof of suppression of facts, and free-supplied materials not forming part of the contractual consideration are not includible in the assessable value where invoice assessment under the applicable notification is available.

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