Manipulated valuation by split invoicing defeats declared price and justifies extended limitation for suppressed duty demand.

Split invoicing used to depress the price of compressors and shift part of the consideration to exempt accessories was treated as a manipulated valuation device, so the declared price was not accepted as the true wholesale cash price for assessment under Section 4. Deliberate undervaluation and suppression of material facts supported invocation of the extended limitation period under the proviso to Section 11A, making the duty demand not time-barred. Penal action under Rule 173Q(1)(d) was justified in principle for suppression and undervaluation, but the penalty amount was moderated in light of the overall facts.

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Issues: (i) Whether the demand of duty was barred by limitation and whether the extended period under the proviso to Section 11A was invocable on account of suppression of facts. (ii) Whether the declared price of compressors could be treated as the normal assessable value under Section 4 when the assessee split the transaction and loaded part of the consideration on exempt accessories. (iii) Whether the penalty imposed under Rule 173Q(1)(d) required interference.

Issue (i): Whether the demand of duty was barred by limitation and whether the extended period under the proviso to Section 11A was invocable on account of suppression of facts.

Analysis: The record showed detailed investigation, recovery of documents, recording of statements, and a specific allegation that compressors were undervalued while essential parts were separately invoiced at inflated prices. The earlier correspondence did not reveal the later-discovered device of packing tested compressors after removing essential components and billing those components separately. The approval of price lists did not protect declarations alleged to be false, and the later notice was based on fresh material unearthed through investigation.

Conclusion: The extended period of limitation was rightly invoked and the demand was not time-barred.

Issue (ii): Whether the declared price of compressors could be treated as the normal assessable value under Section 4 when the assessee split the transaction and loaded part of the consideration on exempt accessories.

Analysis: The evidence showed a single commercial transaction artificially divided into two invoices, with the compressor shown at a depressed price and essential parts shown separately at an inflated price. The price of the compressors was below cost not because of distressed or defective sales but because of a device to shift consideration to non-dutiable parts. Such splitting was held to be an extra-commercial arrangement, inconsistent with a true wholesale cash price and with valuation based on an arm's length transaction.

Conclusion: The declared price was not acceptable as the normal value, and the duty demand based on the reassessed value was sustained.

Issue (iii): Whether the penalty imposed under Rule 173Q(1)(d) required interference.

Analysis: The finding of deliberate undervaluation and suppression supported penal action, but the circumstances warranted moderation of the quantum. The Tribunal accepted the duty demand, yet considered the original penalty excessive in the overall facts.

Conclusion: The penalty was upheld in principle but reduced from Rs. 40 lakhs to Rs. 20 lakhs.

Final Conclusion: The appeal failed on the principal valuation and limitation issues, while relief was granted only by reducing the penalty and accepting interest at 12% on the duty confirmed.

Ratio Decidendi: Where an assessee splits one commercial transaction into separate invoices to depress the price of dutiable goods and transfer part of the consideration to exempt goods, the declared price is a manipulated price and not the true wholesale cash price for valuation under Section 4; deliberate suppression permits invocation of the extended limitation period.

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