2013 (12) TMI 451 - AT - Central Excise

Differential duty demanded on dipped nylon/polyester fabrics - Goods manufactured on job-work basis Held that - The annexures are prepared party-wise and period-wise and not for each job-work - It might have been almost impossible for the adjudicating authority doing de-novo adjudication in 2004 to give finding for each job - there is no means to co-relate various charges with the prices declared by M/s Andrew Yule and Company - the appellant themselves had provided a buffer of additional cost element 1% to 5%, albeit to take into account cost variations on account of exchange rate variation - The SCN or adjudication does not examine the issue as to what extent such buffer already provided did not offset under declaration of value due to any element, if any not included it is not appropriate to allege any suppression on the ground that they did not include such costs to the materials supplied by others based on similar charges incurred by appellant. In the case of wastages also the calculation is not very clear in as much as the calculation of Revenue only takes into account the wastage of yarn in processing but does not take into account weight gain in processing due to dipping of the fabric in resorcinol formaldehyde latex solution - There is also a moisture regain factor mentioned - Such factors are seen to be taken into account in a few material reconciliation statements given to the parties concerned and forming part of annexures to SCN - the cost construction of Revenue is half baked - Neither there was desired clarity on method of costing to be adopted thus, suppression with intention to evade payment of duty cannot be held against the appellant - this is not a case where extended period of time could be invoked for demanding duty short paid Decided in favour of Assessee.

Issues Involved:
1. Valuation dispute regarding differential duty on dipped nylon/polyester fabrics manufactured on a job-work basis.
2. Inclusion of various cost components in the assessable value.
3. Invocation of the extended period for demanding duty.
4. Allegation of suppression of facts by the appellant.

Detailed Analysis:

1. Valuation Dispute:
The core issue is the differential duty demanded on dipped nylon/polyester fabrics manufactured by the appellant on a job-work basis for the period June 1983 to June 1988. The appellant charged job-work fees but did not include certain costs in the assessable value, leading to a dispute over the valuation of the goods. The demands confirmed were Rs. 3,51,425/- for the period 01-07-83 to 15-12-84 and Rs. 4,16,882.36 for the period 17-12-84 to 28-02-86.

2. Inclusion of Cost Components:
The appellant did not include bank charges for opening letters of credit, to-bond and de-bond charges, C&F charges, and process loss of yarn in the assessable value. Revenue argued that these costs should have been included as the appellant was aware of such expenses from their own import activities. The Show Cause Notice (SCN) was based on the costs incurred by the appellant when importing similar yarn. However, there was no necessary proof of such expenditure incurred by each supplier of raw materials.

3. Extended Period for Demanding Duty:
The Tribunal previously remanded the case to determine if the extended period for demanding duty could be invoked, requiring specific findings on whether the appellant committed any of the omissions stated in Proviso to Section 11A of the Central Excises and Salt Act. The adjudicating authority was to examine if there was suppression of facts with an intent to evade duty. The Tribunal noted that the SCN did not provide specific evidence of willful misstatement or suppression of facts by the appellant.

4. Allegation of Suppression of Facts:
The Revenue argued that the appellant mis-declared the cost of materials, citing a discrepancy in the cost declared by M/s Andrew Yule and Company. They also pointed out agreements indicating wastage of yarn, which the appellant did not factor into the assessable value. The appellant countered that the legal position on costing was unclear at the time and that they had declared values in a bona fide manner, approved by departmental officers.

Tribunal's Findings:
The Tribunal found that the annexures to the SCNs were not specific to each job-work, weakening the Revenue's case. It was noted that the appellant had included a buffer cost to account for variations, and the SCN did not examine if this buffer offset any under-declaration. The Tribunal also observed that the calculations by Revenue did not consider weight gain during processing and other factors, making their cost construction incomplete.

Given the lack of clarity in legal principles at the relevant time and the absence of specific evidence of suppression with intent to evade duty, the Tribunal held that the extended period for demanding duty could not be invoked. Consequently, the impugned order was set aside, and the appeal was allowed.

Conclusion:
The Tribunal concluded that there was no ground for alleging suppression against the appellant due to the unclear legal position at the time and the bona fide manner in which values were declared. The extended period for demanding duty was not applicable, leading to the setting aside of the impugned order and allowing the appeal.

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