Assessable value includes undisclosed fitments and packing charges, but differential duty demand can still fail on limitation.

Extra fitments and charges added to mopeds at the time of clearance, including rear shock absorbers, metallic painting, chrome finish and packing charges, were treated as part of the assessable value where they were not separately disclosed in the price list and were not shown to be merely bought-out items or special packing at the customer's request. However, the differential duty demand was held time barred because the department had knowledge of the material facts by 23-10-1975 but issued the show cause notice only on 5-1-1977. The penalty was sustained for breach of Rule 173Q but reduced in amount.

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Issues: (i) Whether the value of rear shock absorbers, metallic painting, chrome finish and packing charges formed part of the assessable value of the mopeds. (ii) Whether the demand for differential duty was barred by time and what relief, if any, followed on penalty.

Issue (i): Whether the value of rear shock absorbers, metallic painting, chrome finish and packing charges formed part of the assessable value of the mopeds.

Analysis: The clearance records and price lists did not disclose the extra charges for shock absorbers, modification of the frame, metallic painting, chrome finish or packing. The goods were cleared with these additions at the time of removal from the factory. In the absence of evidence that the fitments were merely separable bought-out items or that any special packing was provided at the customer's request, the added value was treated as part of the value of the articles for excise purposes under the then applicable valuation provision.

Conclusion: The inclusion of the value of the extra fitments and packing charges in the assessable value was upheld, against the assessee.

Issue (ii): Whether the demand for differential duty was barred by time and what relief, if any, followed on penalty.

Analysis: The demand had to satisfy the limitation applicable to a written demand under Rule 9(2) read with Rule 10 of the Central Excise Rules, 1944. Although suppression was found, the department had become aware of the material facts by 23-10-1975, while the show cause notice was issued only on 5-1-1977. On that footing, recovery of differential duty for the earlier period could not be sustained. As regards penalty, the infringement of Rule 173Q was made out, but the amount warranted reduction in view of the period involved and the circumstances.

Conclusion: The claim for differential duty was held to be time barred, and the penalty was reduced to Rs. 4,00,000.

Final Conclusion: The assessee succeeded on limitation, while the valuation objection failed on merits, resulting in retention of penalty only to the reduced extent.

Ratio Decidendi: Extra fitments and charges added to excisable goods at the time of clearance and not disclosed in the price list may form part of assessable value, but any demand for differential duty must still be made within the prescribed limitation period under the Central Excise Rules, 1944.

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