Factory-gate price governs valuation; depot price applies only where no factory sale exists, with suppression triggering extended limitation and penalty.

Where an ascertainable factory-gate price existed for identical goods, that price governed valuation and a higher depot price could not be substituted merely because depot sales fetched more. For goods not sold at the factory gate, assessable value could be based on depot price after admissible deductions, but the assessee had to prove actual deductions such as transport charges. Suppression of the true selling arrangement and wilful misstatement attracted the extended limitation period, so the demand was not time-barred. Penalty was warranted for the suppression, though the amount was reduced as excessive.

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Issues: (i) whether, where a normal factory-gate price was available for identical goods, the higher depot price could govern assessable value; (ii) whether, for varieties of goods not sold at the factory gate, assessable value had to be determined on the depot price after permissible deductions; (iii) whether the demand was barred by limitation or saved by suppression and wilful misstatement; and (iv) whether penalty was warranted and if so, to what extent.

Issue (i): whether, where a normal factory-gate price was available for identical goods, the higher depot price could govern assessable value.

Analysis: Where ex-factory price is ascertainable, that price is the proper basis for valuation and the higher price realised from depot sales does not become relevant merely because the same goods are also sold from another place at a higher rate. Commercial variation in prices by itself does not displace the factory-gate price in the absence of evidence of extra consideration or related-party dealings.

Conclusion: The higher depot price could not be adopted for goods having an ascertainable factory-gate price, and the assessee succeeded on this issue.

Issue (ii): whether, for varieties of goods not sold at the factory gate, assessable value had to be determined on the depot price after permissible deductions.

Analysis: For goods for which no wholesale market existed at the factory gate, valuation could be made on the basis of the depot price after allowing admissible deductions, including actual transport charges. However, the burden to establish the claimed deductions lay on the assessee. In the absence of cogent proof of actual transport expenditure, the claim for a larger deduction could not be accepted, though the deduction actually allowed on the basis of the material accepted by the authority was upheld.

Conclusion: The demand based on depot valuation for goods not sold at the factory gate was sustainable, subject to the deductions accepted on the evidence available, and this issue was decided against the assessee.

Issue (iii): whether the demand was barred by limitation or saved by suppression and wilful misstatement.

Analysis: The record showed that the assessee had not disclosed the fact that certain varieties were sold only through depots and had projected factory-gate sales for valuation purposes despite the absence of such sales. This amounted to suppression and wilful misstatement with intent to pay lesser duty, attracting the extended period of limitation under the proviso to Section 11A.

Conclusion: The demand was not time-barred and was validly covered by the extended period, against the assessee.

Issue (iv): whether penalty was warranted and if so, to what extent.

Analysis: As the assessee had suppressed material facts and declared factory-gate prices for varieties not actually sold at the gate, penalty was attracted. However, the quantum imposed was considered excessive in the circumstances and was reduced.

Conclusion: Penalty was justified, but the amount was reduced to a lesser sum, partly in favour of the assessee.

Final Conclusion: The valuation based on depot price was sustained only for those varieties lacking a factory-gate market, the plea of limitation failed, and the penalty survived but stood reduced, resulting in a partial relief to the assessee.

Ratio Decidendi: Where factory-gate price is ascertainable, it governs valuation of identical goods; where no factory-gate market exists, depot price less proved admissible deductions may be adopted, and suppression of the true selling arrangement attracts the extended limitation period and penalty.

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