Factory gate price governs depot valuation unless the Department proves it is not genuine; extended limitation then fails.

An ascertainable and approved factory gate price under Section 4 of the Central Excises and Salt Act, 1944 can govern valuation for depot sales unless the Department proves with evidence that the approved price is not genuine. On the facts described, the show cause notice did not allege that the approved ex-factory price was artificial or below actual realization, and the finding of non-genuineness was unsupported. As the valuation basis stood, the suppression allegation also failed, so the extended limitation period under Section 11A could not be invoked. The Department's valuation, demand and penalty were therefore unsustainable.

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Issues: (i) Whether the approved factory gate price under Part I could be adopted as the assessable value for sales made through depots; (ii) Whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): Whether the approved factory gate price under Part I could be adopted as the assessable value for sales made through depots.

Analysis: The existence of a factory gate price was not denied. Where an ex-factory price is ascertainable, it forms the basis for valuation under Section 4 of the Central Excises and Salt Act, 1944 even for depot sales. The Department could reject the approved Part I price only if it established that the price was not genuine. The finding that the ex-factory price was not genuine was unsupported by evidence, and the show cause notice did not allege that the approved factory gate price itself was artificial or lower than the actual factory gate realization.

Conclusion: The approved Part I factory gate price had to be adopted as the assessable value for depot sales, in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The invocation of the extended period under Section 11A of the Central Excises and Salt Act, 1944 rested on the premise of suppression and undervaluation. Once the assessable value was held to be the approved factory gate price, the basis for alleging suppression of facts and applying the larger limitation period failed.

Conclusion: The demand could not be sustained on limitation, in favour of the assessee.

Final Conclusion: The valuation adopted by the Department was unsustainable and the demand and penalty were set aside.

Ratio Decidendi: Where an ascertainable and unchallenged factory gate price is approved, it governs valuation under Section 4 for depot sales unless the Department proves with evidence that the approved price is not genuine; in the absence of such proof, suppression-based extended limitation cannot be invoked.

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