Assessable value includes disguised cylinder charges; misdescription justified extended limitation, while Section 11AC penalty failed for the pre-commencement period.

Cylinder maintenance charges and fixed rental charges were held includible in the assessable value of oxygen and acetylene gases because they were recovered even where no corresponding service was rendered and were, in substance, part of the gas price. The extended period of limitation was held invocable because the collections were misdescribed and the facts showed non-disclosure of the real nature of the recoveries. Penalty under Section 11AC could not apply for the period before that provision came into force, so it was deleted to that extent; the duty demand and Rule 173Q penalty were upheld.

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Issues: (i) Whether cylinder maintenance charges and fixed rental charges collected by the assessee were excludible from the assessable value of oxygen and acetylene gases; (ii) whether the extended period of limitation was invocable on the ground of suppression of facts with intent to evade duty; (iii) whether the penalty under Section 11AC could be sustained for the entire demand period.

Issue (i): Whether cylinder maintenance charges and fixed rental charges collected by the assessee were excludible from the assessable value of oxygen and acetylene gases.

Analysis: The sales were made on an ex-factory basis, and the price charged to buyers who brought their own cylinders represented the full value of the gases. The collections shown under cylinder maintenance and fixed rental charges were made even where no such service was rendered, and the amounts had no relation to the actual expenditure incurred. Such collections were not shown to be proceeds of any separate ancillary or allied activity, but were in substance part of the price of the gases.

Conclusion: The deductions claimed were not allowable and the duty demand on the differential amount was justified.

Issue (ii): Whether the extended period of limitation was invocable on the ground of suppression of facts with intent to evade duty.

Analysis: The invoices disclosed the charges under the two headings, but the actual arrangement was different, since the levies were recovered even in cases where buyers supplied their own cylinders. The pattern of collections also showed no correlation with cost and supported the inference that the real value of the gas was being collected under convenient labels. These circumstances established non-disclosure of material facts and deliberate evasion.

Conclusion: The extended period was validly invoked.

Issue (iii): Whether the penalty under Section 11AC could be sustained for the entire demand period.

Analysis: Section 11AC came into force only from 28-9-1996, while the demand covered a period commencing from March 1994. Therefore, the penalty under that provision could not operate for the period prior to its commencement.

Conclusion: The penalty under Section 11AC was not sustainable for the entire period and was set aside to that extent.

Final Conclusion: The duty demand and the penalty under Rule 173Q were upheld, but the penalty under Section 11AC was deleted for the period when that provision was not in force, leaving the assessee only partly successful.

Ratio Decidendi: Amounts collected under labels such as maintenance or rental are includible in assessable value where they are recovered even without corresponding service and are in substance part of the sale price; deliberate misdescription of such collections justifies invocation of the extended period.

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