Free-supplied component parts included in assessable value, but extended limitation failed without a proper suppression allegation.

Free-supplied fittings that were contractually required, fitted and tested as integral component parts of LPG tank wagon bullets formed part of the assessable value, so the valuation demand on merits was upheld. The extended period of limitation under Section 11A was not available for the disputed portion because the amended show cause notice did not properly allege suppression in relation to the fittings and the departmental records had already been examined; only the demand within the normal six-month period survived. The appeal therefore succeeded only in part, with the time-barred portion of the demand set aside.

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Issues: (i) Whether the value of fittings supplied free of cost by the customer and used for testing and fitment of LPG tank wagon bullets was includible in the assessable value of the goods; (ii) Whether the extended period of limitation under Section 11A could be invoked in the absence of suppression in the amended show cause notice.

Issue (i): Whether the value of fittings supplied free of cost by the customer and used for testing and fitment of LPG tank wagon bullets was includible in the assessable value of the goods.

Analysis: The contract required the customer to supply the necessary fittings free of cost, and those fittings were fitted and tested before installation on the tank wagons. Their functional utility and use in the fabrication and testing process showed that they formed component parts of the bullets. Since they were integral to the goods, their value was part of the assessable value.

Conclusion: The value of the fittings was correctly included in the assessable value and the demand on merits was upheld.

Issue (ii): Whether the extended period of limitation under Section 11A could be invoked in the absence of suppression in the amended show cause notice.

Analysis: The price lists and contract had been scrutinised by the departmental authorities and the amended notice no longer alleged suppression regarding the fittings, though the demand ultimately confirmed related to them. In these circumstances, the requirement for invoking the extended period was not satisfied for that part of the demand. Only the demand within the normal six-month period preceding the notice survived.

Conclusion: The extended period of limitation was not available for the disputed portion of the demand, and only the demand within six months prior to the notice was sustainable.

Final Conclusion: The appeal succeeded in part: the valuation issue was decided against the assessee, but the larger part of the demand was set aside as time-barred, leaving only the demand within the normal limitation period intact.

Ratio Decidendi: Free-supplied items that are integral component parts used in the testing and fitment of excisable goods form part of the assessable value, but the extended limitation period cannot be invoked without a properly pleaded allegation of suppression in the operative show cause notice.

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