Differential duty and penalty fail where declared ancillary charges were not shown to mask pipe value or deliberate suppression.

Differential customs duty could not be sustained merely because the amounts declared for transportation, joining and laying of pipes exceeded the actual expenditure, where those figures formed part of the commercial arrangement and there was no finding of deliberate understatement of pipe value by shifting price into ancillary heads. In the absence of any allegation of suppression or artificial value-shifting, profit linked to the ancillary contractual activity could not be denied on that basis. The penalty founded on the same demand also could not survive and was liable to be set aside.

---

---

Issues: Whether differential duty could be demanded on the basis that the amount declared towards transportation, joining and laying of pipes exceeded the actual expenditure incurred, and whether penalty was sustainable in the absence of an allegation of deliberate suppression or shifting of value.

Analysis: The declared figures for transport, joining and laying were treated as part of the commercial arrangement and there was no finding that the value of the pipes had been deliberately understated by transferring part of the price into those heads. In the absence of any allegation of deliberate suppression or artificial shifting of value, profit on the ancillary contractual activity could not be denied merely because the actual expenditure was lower than the amount declared. The basis adopted for the demand was therefore not justified, and the penalty founded on the same demand also could not survive.

Conclusion: The differential duty demand was unsustainable and the penalty was also liable to be set aside, in favour of the assessee.

---