Excise valuation of indispensable bought-out components includes electric motor cost; extended limitation fails without suppression allegations.

In excise valuation, the cost of separately invoiced electric motors used as indispensable components of industrial fans was held includible in the assessable value because the fans could not function without them and the motors formed an integral part of the finished product. The valuation principle applied was that the value of components and raw materials used in manufacture enters assessable value under central excise law, and the exemption-based distinction in Notification No. 120/75-C.E. did not alter that result. On limitation, the extended period could not be invoked because the notices did not allege fraud, collusion, wilful misstatement or suppression of facts; the demand was therefore partly time-barred, with only the normal-period demand sustained.

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Issues: (i) Whether the cost of separately invoiced electric motors, used as indispensable components of industrial fans, was includible in the assessable value of the final product. (ii) Whether the demands were barred by limitation and whether the longer period could be invoked.

Issue (i): Whether the cost of separately invoiced electric motors, used as indispensable components of industrial fans, was includible in the assessable value of the final product.

Analysis: The fans could not function without electric motors and the motors were integral to the finished industrial fans. The motors were bought out, tested, correlated with the specific fans supplied and separately charged to customers. In valuation under Section 4 of the Central Excises and Salt Act, 1944, the settled principle is that the value of components and raw materials used in the manufacture of the final product is includible in the assessable value. The exemption-based distinction under Notification No. 120/75-C.E. did not assist the appellants on the valuation issue decided on merits.

Conclusion: The cost of the electric motors was includible in the assessable value, against the assessee.

Issue (ii): Whether the demands were barred by limitation and whether the longer period could be invoked.

Analysis: The show cause notices were issued under Rule 10 of the Central Excise Rules. They contained no allegation of fraud, collusion, wilful misstatement, or suppression of facts to justify the extended period. On that basis, the demand beyond the normal period of limitation was not sustainable. One notice was fully time-barred and another was partly time-barred, while the demand within the normal six-month period remained valid.

Conclusion: The time-bar objection succeeded in part, in favour of the assessee.

Final Conclusion: The valuation challenge failed on merits, but the assessee obtained partial relief on limitation, resulting in dismissal of the valuation grievance and partial setting aside of the time-barred demand.

Ratio Decidendi: In valuation of excisable goods, the value of indispensable bought-out components forming part of the final product is includible in assessable value, and the extended limitation period cannot be invoked absent allegations justifying its application.

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