2002 (1) TMI 835 - AT - Customs

Summary

Issues Involved:
1. Allegations of under-valuation and evasion of duty.
2. Denial of natural justice due to non-supply of documents.
3. Validity of the valuation method adopted for calculating differential duty.
4. Imposition of penalties on transporters and warehouse keepers.

Detailed Analysis:

1. Allegations of Under-Valuation and Evasion of Duty:
The case involved multiple manufacturers, primarily focusing on M/s. JBF Industries Ltd. (M/s. JBF), who were engaged in the manufacture of twisted yarn/polyester texturised yarn. An investigation by the Director General of Anti-Evasion revealed that M/s. JBF was allegedly involved in under-valuation and evasion of duty. The RG 1 registers maintained by M/s. JBF lacked details such as denierage, and invoices issued bore only the buyers' names without addresses. Goods were taken to warehouses, and prices were negotiated by brokers, with payments made via third-party bearer cheques. The goods were then lifted by buyers based on delivery orders from M/s. JBF's Head Office. Investigations showed that M/s. JBF hypothecated stock with a bank, declaring higher values than those shown to the tax authorities. Show cause notices were issued, alleging suppression and seeking recovery of differential duty based on higher prices declared to the bank.

2. Denial of Natural Justice Due to Non-Supply of Documents:
The appellants, represented by Senior Counsel Shri M. Chandrasekharan, argued that there was a denial of natural justice as the Commissioner did not provide all the documents relied upon in the show cause notice. Despite repeated requests, M/s. JBF did not receive all the necessary documents, hampering their ability to draft a proper defense. The Tribunal referred to the Supreme Court judgment in Sanghi Textile Processors (P) Ltd. v. CCE, which emphasized the necessity of supplying essential documents for a fair defense. The Tribunal also cited the case of Sivom Ply-N-Wood v. CCE, where it was held that the department must supply all relied documents for the assessee's defense. The Tribunal found that the Commissioner's orders suffered from a denial of natural justice due to the incomplete supply of documents.

3. Validity of the Valuation Method Adopted for Calculating Differential Duty:
Shri V. Sridharan, representing other appellants, argued that the valuation adopted by the department was flawed. He contended that the department should not have based the differential duty on prices at which other manufacturers sold their goods, especially when ex-factory prices were available. He also pointed out that yarn prices were subject to market fluctuations, and assuming a fixed price for duty calculation was incorrect. The Tribunal noted that the valuation method adopted by the Commissioner was based on prices declared by M/s. JBF to the bank, which were comparable to those of another manufacturer in Silvassa.

4. Imposition of Penalties on Transporters and Warehouse Keepers:
The counsels for transporters and warehouse keepers argued that penalties imposed on them were unjustified as they were functioning in the normal course of business without knowledge of any alleged conspiracy by the manufacturers. The Tribunal observed that the penalties on these parties were a result of the Commissioner's findings against the manufacturers. The Tribunal found merit in the arguments that transporters and warehouse keepers could not be held culpable without evidence of their involvement in the alleged evasion scheme.

Conclusion:
The Tribunal concluded that the Commissioner had not given sufficient opportunity to the appellants to state their case, resulting in a denial of natural justice. The Tribunal set aside the impugned orders and remanded the cases back to the appropriate jurisdictional authority for de novo adjudication. The adjudicating authority was directed to supply all requested documents within two months and allow the noticees to file complete replies within two months thereafter. The appeals were allowed by way of remand, with both sides agreeing to comply with the Tribunal's directions.