Extended limitation and transaction value deductions failed where invoice-based clearances and documented discounts supported the assessee.
Clearances made under invoices, with payments received through account payee cheques and sales to a Government undertaking, did not support any allegation of suppression or clandestine removal; the extended period of limitation could not be invoked and the demand failed on that basis. Contractual and record-based deductions for pro rata recovery, cash discount, trading turnover, freight and sales tax were supported by contemporaneous evidence, so assessable value had to be determined on the actual transaction value after permissible deductions. The confirmation of duty, interest and penalty was therefore unsustainable and was set aside.
Issues: (i) Whether the demand could be sustained by invoking the extended period of limitation on the basis of alleged suppression or clandestine removal. (ii) Whether deductions towards pro rata recovery, cash discount, trading turnover, freight and sales tax were allowable while determining the assessable value.
Issue (i): Whether the demand could be sustained by invoking the extended period of limitation on the basis of alleged suppression or clandestine removal.
Analysis: The clearances were made under invoices, payments were received through account payee cheques, and the sales were to a Government undertaking. In the absence of material showing clearance without invoices or any suppression or misstatement, invocation of the extended period could not be justified.
Conclusion: The extended period of limitation was not available to the Revenue and the demand on that basis failed.
Issue (ii): Whether deductions towards pro rata recovery, cash discount, trading turnover, freight and sales tax were allowable while determining the assessable value.
Analysis: The purchase terms and payment records supported the prompt payment discount and the deductions on account of pro rata recovery. The evidence also established trading activity and freight-related deductions. The assessee had paid duty on the actual transaction value after allowing the eligible deductions, and the valuation had to be made in accordance with the transaction value principles under the central excise law.
Conclusion: The claimed deductions were allowable and the confirmation of duty, interest and penalty was unsustainable.
Final Conclusion: The impugned order confirming duty, interest and penalty was set aside and the appeal succeeded with consequential relief.
Ratio Decidendi: Where clearances are made under invoices, payments are traceable through banking channels, and contractual deductions are supported by contemporaneous records, the extended period cannot be invoked and only the actual transaction value after permissible deductions can be assessed to duty.