Limitation and related-person valuation fail where the Department knew the facts and the notice omitted the enhancement basis.

Demand was held time-barred where the Department already knew of the agency arrangement and the importer had not wilfully suppressed a material fact; the extended limitation period was therefore unavailable. On valuation, an exclusive indenting or commission agency arrangement, with obligations to canvass orders, advertise products and protect intellectual property, did not by itself establish the mutuality of interest required to treat the parties as related persons under the Customs Act. The further 2% enhancement was also unsustainable because the show cause notice proceeded on a different alleged price difference and did not disclose that commission element; an order cannot rest on a basis not put in the notice.

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Issues: (i) Whether the demand was barred by limitation for want of suppression of the appellant's relationship with the supplier. (ii) Whether the appellant and the supplier were related persons so as to justify enhancement of assessable value, and whether the enhancement made by the Collector could be sustained.

Issue (i): Whether the demand was barred by limitation for want of suppression of the appellant's relationship with the supplier.

Analysis: The declaration in the bills of entry showed that the appellant had not described itself as an ordinary importer or buyer, while the Department was already aware of the agency arrangement and had even initiated provisional assessment scrutiny. In those circumstances, the omission to label the relationship in the declaration did not amount to wilful suppression of a material fact. The foundation for invoking the extended period was therefore lacking.

Conclusion: The demand was barred by limitation and this issue is decided in favour of the appellant.

Issue (ii): Whether the appellant and the supplier were related persons so as to justify enhancement of assessable value, and whether the enhancement made by the Collector could be sustained.

Analysis: The agreement clauses relied upon only appointed the appellant as an exclusive indenting or commission agent and required it to canvass orders, advertise products, and assist in protecting intellectual property rights. Those clauses did not establish the mutuality of interest necessary to treat the parties as related persons under Section 14 of the Customs Act, 1962. The Collector's further enhancement by 2% could not be sustained because the show cause notice proceeded on a different footing, namely an alleged 11.2% price difference, and there was no material in the notice showing that the proposed enhancement included the 2% commission element. An order cannot be sustained on a basis not put in the notice.

Conclusion: The related-person finding and the enhancement of value were unsustainable and this issue is decided in favour of the appellant.

Final Conclusion: The valuation enhancement and penalty were set aside, and the appeal succeeded with consequential relief.

Ratio Decidendi: Suppression cannot be inferred where the Department already knew the material facts, and assessable value cannot be enhanced on a ground not disclosed in the show cause notice; related person status requires mutuality of interest, not merely an agency or distributorship arrangement.

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