Extended limitation cannot apply absent wilful suppression when relevant valuation facts were known to the Department.

The appellants were job workers engaged in building motor-vehicle bodies on chassis supplied by manufacturers.

The manufacturers paid excise duty on the chassis valued under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, at 110% of the cost of manufacture.

Upon clearance of the completed vehicles, the appellants paid duty after availing CENVAT credit on the chassis, but calculated the value by including only the actual manufacturing cost of the chassis and excluding the additional 10% value prescribed under Rule 8.

The CESTAT Larger Bench held that the additional 10% formed part of the assessable value of the chassis and had to be included in the assessable value of the completed vehicle.

The Department issued a show-cause notice dated 30 April 2008 covering the period 1 November 2004 to 31 March 2007, invoking the extended limitation period under the proviso to Section 11A of the Central Excise Act, 1944.

The appellants challenged both the valuation determination and the invocation of extended limitation.

Whether the additional 10% of the chassis-manufacturing cost, included in the chassis value under Rule 8, was required to be included in the assessable value of the completed body-built vehicle cleared by the job worker?

Whether the Department was entitled to invoke the extended limitation period under the proviso to Section 11A on the allegation of wilful suppression or misstatement of facts with intent to evade duty?

Whether the appeals were maintainable under Section 35L of the Central Excise Act, 1944, the dispute involving valuation and limitation?

The Court applied Rule 8 of the Central Excise Valuation Rules, 2000, under which goods not sold by the manufacturer are valued at 110% of the cost of manufacture; consequently, the entire statutory value of the chassis, including the additional 10%, forms part of the value of the completed vehicle.

Relying on Ujagar Prints (II) and Ujagar Prints (III), the Court held that the assessable value of job-worked goods includes the value of the raw materials, job-work charges, manufacturing expenses and the job worker’s profit, but excludes the manufacturer’s post-manufacturing profit and expenses incurred after receipt of the completed goods.

The Court also relied on Larsen & Toubro Ltd. v. CCE, holding that the grounds for invoking extended limitation must be specifically stated in the show-cause notice.

Continental Foundation Joint Venture Holding v. CCE, holding that “wilful suppression” or “misstatement” requires intent to evade duty and that omission cannot amount to suppression where the relevant facts are known to both parties.

The Court further held that the valuation dispute had an inextricable link with the value of goods for assessment and therefore fell within the jurisdiction contemplated by Section 35L.

The Court upheld the substantive valuation principle adopted by the CESTAT.

Since the chassis had already been cleared to the job worker at a value equal to 110% of its manufacturing cost, that entire value—including the additional 10%—constituted part of the cost of the intermediate product incorporated into the completed vehicle.

The job worker was therefore required to include it when determining the assessable value of the body-built vehicle; only the manufacturer’s anticipated resale profit and post-clearance expenses were excludable.

However, the extended limitation period was unavailable.

The Department knew that the chassis had been valued at 110% of cost because the manufacturer’s clearance documents disclosed that valuation.

The omission to include the additional 10% in the subsequent valuation could not, in these circumstances, constitute wilful suppression or misstatement with intent to evade duty.

The Department was required to act within the ordinary limitation period under Section 11A(1).

The Court also declined to reject the appeals on the jurisdictional objection because the valuation issue was central to the assessment dispute and was closely connected with the rate and value of excisable goods.

Nevertheless, the demand for the period 1 November 2004 to 31 March 2007 was time-barred because the show-cause notice dated 30 April 2008 was issued beyond the one-year limitation period and the conditions for invoking the extended period were not established.

The orders of the original authority, appellate authority and Tribunal were set aside, and the appeals were allowed.