2004 (12) TMI 411 - AT - Central Excise

Summary

Issues:
Dispute over duty payment by processing houses for grey fabrics from 1997 to 2002.

Analysis:
The appeals involved a common dispute regarding whether the processing houses had paid duty correctly and fully for grey fabrics processed by them. The demand was raised using the proviso to Section 11A of the Central Excise Act, alleging that the appellants had suppressed facts related to the actual value of the processed fabrics. The processing involved bleaching, dyeing, and printing, with differences in nature and quality affecting processing charge rates per meter. The appellants declared values of processed fabrics based on grey fabrics' value, processing charges, administrative costs, and sometimes a profit margin. The Central Excise authorities alleged under-valuation based on processing charge rates and weight discrepancies of grey fabrics. The impugned orders revised grey fabric prices and processing charges, rejecting declared values and charges by the appellants.

The appellants challenged the Commissioner's action on merits and limitation. They argued that the Commissioner's procedure contradicted the Supreme Court's judgment in Ujagar Prints case, where the supplier declares grey fabric prices, and the processor adds processing charges for duty calculation. The appellants contended that they adopted suppliers' declared values, so no responsibility lay on them to independently determine grey fabric values. They also disputed the re-determination of processing charges as contrary to commercial invoices and actual charges realized. The appellants emphasized that the duty demand lacked a factual basis, relying on commercially realized charges and declared fabric prices.

Regarding the time-bar issue, the appellants contended that they provided detailed information on each processed lot, including fabric price, processing costs, and shrinkage, in contemporaneous declarations. They argued that the department had all relevant details but took no action, so the allegation of suppressing material facts was unfounded. The appellants cited a Tribunal decision supporting their case against similar demands.

After reviewing the records and submissions, the Tribunal found the duty demands unsustainable. The re-determination of grey fabric weights and prices lacked a factual basis, as it was done theoretically without actual weighing or evidence of fabric weight changes post-processing. The Tribunal accepted the appellants' contentions that the re-determination was based on presumption, with incorrect processing charge determinations. The orders were set aside, penalties vacated, as penalties cannot survive without duty evasion. The appeals were allowed on merits, and the limitation issue was not addressed due to the merit-based success.