Assessable value includes excess duty collected from buyers as extra consideration, subject to statutory limitation on recovery

A manufacturer's collection from buyers of duty at tariff rates, while paying duty to the Government at a lower exempted rate, was treated as extra consideration forming part of the assessable value. The text also notes that the first show cause notice was only partially within limitation under Rule 10 of the Central Excise Rules because the relevant period was governed by Rule 10 and not Section 11D of the Central Excise Act, 1944. On that basis, the assessment and demand were upheld overall, subject to the statutory time bar on part of the first notice.

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Issues: (i) Whether the first show cause notice was barred by limitation under Rule 10 of the Central Excise Rules; (ii) Whether the excess amount collected from buyers over the duty actually payable under the exemption notification formed part of the assessable value.

Issue (i): Whether the first show cause notice was barred by limitation under Rule 10 of the Central Excise Rules.

Analysis: The notices covered a period when recoveries of short duty were governed by Rule 10, and the then current Section 11D of the Central Excise Act, 1944 was not applicable. On that basis, the demand relating to the first notice could not extend beyond the statutory time limit.

Conclusion: The first show cause notice was partially time-barred.

Issue (ii): Whether the excess amount collected from buyers over the duty actually payable under the exemption notification formed part of the assessable value.

Analysis: The manufacturer collected duty from buyers at tariff rates while paying duty to the Government at the lower exempted rate under Notification No. 70/76-C.E. dated 16-3-1976. The difference constituted extra consideration received on sale, so the declared assessable value was not the correct value and had to be enhanced by that amount. The absence of invocation of Section 11D of the Central Excise Act, 1944 during the relevant period did not alter this conclusion.

Conclusion: The excess collection was includible in the assessable value and the duty demand on that basis was sustained.

Final Conclusion: The assessment and demand were upheld, and the appeal failed.

Ratio Decidendi: Where a manufacturer collects from buyers an amount over and above the duty actually payable under an exemption notification, the excess is extra consideration forming part of the assessable value, and the demand is sustainable subject to statutory limitation.

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