Assessable value of drilling rigs excludes rods, pipes and bits treated as accessories; extended limitation needs positive suppression.

Drill rods, drill pipes and drill bits supplied with drilling rigs were treated as operating accessories and tools, not constituent parts of the rigs, so their value was excluded from the rigs' assessable value. Separate tariff headings and HSN notes supported distinct classification, and necessity for deeper drilling did not by itself make the items part of the machine. The extended limitation period was unavailable because the contracts and price lists disclosed the items, the dispute had already surfaced in audit, and no positive suppression was shown, making the demand time-barred.

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Issues: (i) Whether drill rods, drill pipes and drill bits supplied with drilling rigs were integral parts of the rigs so that their value was includible in the assessable value of the rigs; (ii) Whether the demand was barred by limitation and the extended period could be invoked on the basis of suppression of facts.

Issue (i): Whether drill rods, drill pipes and drill bits supplied with drilling rigs were integral parts of the rigs so that their value was includible in the assessable value of the rigs.

Analysis: The rigs were complete machines capable of independent use, while the rods, pipes and bits were operating equipment and tools required according to the nature of the work and the terrain. The relevant tariff headings and HSN notes showed that drill pipes and rods were classifiable under headings different from boring machinery, and drill bits were classifiable as earth-boring tools. The materials relied on also treated such items as accessories or tools rather than constituent parts. Accordingly, items supplied along with the rigs did not become parts of the rigs merely because they were necessary for deeper drilling.

Conclusion: The value of drill rods, drill pipes and drill bits was not includible in the assessable value of the drilling rigs, and the issue was decided in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked on the basis of suppression of facts.

Analysis: The contracts showing the items supplied with the rigs were filed with the price lists and the price lists were approved. The same controversy had earlier been raised by audit objections and answered by the assessee. In the absence of any positive act of concealment, mere separate invoicing and a disputed classification position did not justify the extended period.

Conclusion: The extended period was not invocable and the demand was time-barred, in favour of the assessee.

Final Conclusion: The demand and penalty could not be sustained, and the appeal succeeded with the impugned order set aside.

Ratio Decidendi: Items that are merely operating accessories or tools, though necessary for use of a machine, are not includible in the machine's assessable value unless they are shown to be constituent parts, and the extended limitation period requires positive suppression or deliberate withholding of information.

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