2002 (2) TMI 700 - AT - Central Excise

Summary

Issues:
- Assessment of assessable value based on cost construction method
- Allegation of under-valuation of grey fabrics by suppliers
- Application of the decision in Ujagar Prints case
- Interpretation of the judgment of the Hon'ble Supreme Court
- Consideration of the decision in Sangam Processors case
- Contention regarding the operation of estoppel against Revenue authorities
- Reconsideration of the findings in Sangam Processors case
- Discrepancy in the interpretation of the Supreme Court judgment
- Liability of processed goods for duty at revised assessable value
- Relevance of sale price of raw material supplier in determining assessable value
- Possibility of penal action against the processor

Analysis:

The case involves Revenue appeals against orders passed by the Commissioner of Central Excise (Appeals), Jaipur, regarding the assessment of assessable value of processed woollen and man-made fabrics received on job work basis. The respondents declared the cost of raw material based on declarations by principal suppliers, paying duty as per the law laid down by the Supreme Court in Ujagar Prints case. The department alleged under-valuation of grey fabrics by principals, leading to differential duty demands on respondents. The respondents contended they acted in good faith based on declarations and should not be penalized for suppliers' actions. The Commissioner (Appeals) allowed the appeals, citing the Sangam Processors case where it was held that excise authorities cannot go beyond the declared value.

In the Revenue appeals, it was argued that if grey fabrics are under-priced by suppliers, the processors' declarations cannot prevent the Revenue from demanding differential duty. The Tribunal noted the Supreme Court's ruling in Ujagar Prints case, emphasizing that the trader's selling price must be accepted by the job worker for duty payment, preventing authorities from exceeding the declared value. However, upon review, the Tribunal found it challenging to align the Sangam Processors decision with the Supreme Court judgment, which clearly outlined the components of the value calculation.

The Tribunal concluded that if grey fabrics are undervalued in declarations, processed goods should be subject to duty at the revised assessable value per the Supreme Court's ruling. It emphasized that the sale price of raw material suppliers is irrelevant in determining assessable value, but processors may not face penal action if they rely on declared values. However, it clarified that processors cannot always assess processed fabrics at declared values if grey fabric values are suppressed. Due to conflicting interpretations, the matter was referred to the Hon'ble President for consideration by a Larger Bench to resolve the discrepancy.