2001 (5) TMI 950 - AT - Central Excise

Summary

Issues:
1. Duty calculation based on processed fabrics supplied by traders.
2. Differential duty amount confirmation and penalties imposition.
3. Applicability of extended period under Sec.11A.
4. Levy of penalty based on deliberate suppression.

Analysis:

Issue 1:
The appellants processed grey man-made fabrics supplied by traders, paying duty based on the cost construction formula provided by traders. However, investigations revealed that traders sold the processed fabrics at a higher price, leading to discrepancies in duty calculation. Show cause notices were issued, resulting in the confirmation of a differential duty amount and penalties. The appellants contested that traders' profit should not be included in the assessable value, arguing against the extended period application due to misdeclaration by the fabric owner.

Issue 2:
The Collector's order confirmed the differential duty, imposed penalties, and allowed redemption of confiscated assets on payment of fines. The appeal challenged the duty confirmation, penalty imposition, and asset confiscation. The Supreme Court judgment in the case of M/s. Ujagar Prints was cited, emphasizing the manufacturer's obligation to provide accurate pricing information and invoking Rule 9(2) of the Central Excise Rules 1944 for clandestine removals.

Issue 3:
During the hearing, the Commissioner relied on the Supreme Court judgment but upheld the demand, citing the necessity of correct pricing information. The appellants referenced the Supreme Court's directive not to consider traders' profits in determining assessable value. They argued that misdeclaration by the fabric owner precluded the extended period application under Sec.11A, proposing a lower duty amount for consideration.

Issue 4:
The Tribunal analyzed the submissions and Supreme Court judgments, affirming that traders' profits should not influence duty calculation. The responsibility to pay duty lies with the manufacturer, who must base declarations on raw material supplied. The Tribunal found the grounds for confirming the demand unsustainable, rejecting assumptions underlying the differential duty calculation. Citing the Delhi High Court judgment in Pioneer Silk Mills, the Tribunal allowed the appeal, noting the absence of sustained deliberate suppression charges and granting consequential benefits.