Customer-supplied components fitted into the final product must be included in assessable value; suppression can justify penalty.

Customer-supplied Centre Bearings and Reverse Sleeve Yokes fitted into the Propeller Shaft Assembly before clearance formed part of the assessable value under excise valuation principles. Non-inclusion of those items amounted to failure to disclose the correct duty base, supporting a finding of suppression and the consequent extended-period and penalty consequences. Penalty was held justified, though reduced in the circumstances from Rs. 25,000 to Rs. 10,000.

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Issues: Whether the value of customer-supplied Centre Bearings and Reverse Sleeve Yokes fitted into the Propeller Shaft Assembly was required to be included in the assessable value, and whether penalty was warranted for non-disclosure.

Analysis: The goods supplied by customers were fitted into the final product before clearance, yet their value was not added to the assessable value of the Propeller Shaft Assembly. This amounted to a contravention of the excise rules governing declaration and determination of correct duty liability. Since the appellants did not disclose the exclusion of these items from assessable value, the finding of suppression was upheld, making the extended period and penalty consequences sustainable. Having regard to the totality of facts, the penalty was reduced.

Conclusion: The value of the customer-supplied items had to be included in the assessable value, and penalty was justified, but the penalty was reduced from Rs. 25,000 to Rs. 10,000.

Ratio Decidendi: Where customer-supplied components are incorporated into the cleared final product, their value forms part of the assessable value, and failure to disclose such exclusion can attract penalty.

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