2018 (1) TMI 1397 - HC - Central Excise

Principles of Natural Justice - it was alleged that appellants failed to produce any document ignoring the relevant evidence which were already on record such as trial balance, certificate of cost accountant etc. - Held that - There were enough materials before the Tribunal, on the basis of which, it could have dealt with all the three issues, namely, the point of limitation, the research and development expenses in the total cost of production and finally the head office expenses as well. There is no justification for the Tribunal to fault the assessee. On two prior occasions, the tribunal did not agree with the findings in the order-in-original and set aside these orders and remanded the case. If the Tribunal says and based on what the Revenue argued that there are research and development expenses and head office expenses and issue with regard to the same is involved, then, prima facie, by its very nature, there is a distinction brought about in the Tribunal s conclusion itself on the cost incurred at the factory and at the head office. When in the factory, all the manufacturing activities are carried out and the administration work is handled by the head office through its staff, then, all the more we cannot sustain the order under challenge. Application disposed off.

Summary

Issues Involved:

1. Correctness of the CESTAT's order upholding the orders-in-original.
2. Whether CESTAT erred in holding that the appellants failed to produce relevant evidence.

Detailed Analysis:

1. Correctness of the CESTAT's order upholding the orders-in-original:

The appeal challenges the CESTAT's order dated 20th April 2015, which upheld the orders-in-original dated 30th April 2007 and 31st August 2007. The orders-in-original were issued by the Commissioner, Central Excise, Mumbai-V, confirming the duty liability and penalties based on show cause notices. The dispute pertains to parts manufactured and cleared from Kandivali prior to December 2003. The assessee argued that the assessable value was determined under Section 4(1)(b) read with Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975, and later under Section 4(1)(b) read with Rule 8 of the Central Excise Valuation Rules, 2000. They contended that the declarations were accompanied by Chartered Accountant’s certificates, which were not objected to by the Revenue. The Revenue, however, included research and development expenses and head office administrative expenses in the cost of production, leading to the issuance of multiple show cause notices and subsequent orders confirming the demand. The Tribunal's decision to uphold these orders was challenged on the grounds that the Tribunal did not perform its duty as the last fact-finding authority and failed to consider the evidence presented by the assessee.

2. Whether CESTAT erred in holding that the appellants failed to produce relevant evidence:

The Tribunal's impugned order was criticized for being short and cryptic, lacking complete reasoning. The Tribunal faulted the assessee for not producing documents to support their claim regarding the head office and research and development expenses. The assessee argued that they relied on several documents, including those collected during the investigation and audit, to counter the demand. The Tribunal, however, noted that the assessee could not trace out any further records. The High Court observed that the Tribunal should have passed a more detailed order, considering all the materials before it. The Tribunal's conclusion that the assessee failed to establish a correlation between the expenses and the manufacturing activity was found to be inadequate. The High Court emphasized that the Tribunal should have independently applied its mind to the materials before the adjudicating authority and passed a reasoned order. The Tribunal's failure to do so led to the High Court quashing and setting aside the order under appeal and remanding the case back to the Tribunal for a fresh decision on merits.

Conclusion:

The High Court allowed the appeal, quashing and setting aside the Tribunal's order. The case was remanded back to the Tribunal for a fresh decision on merits, with the direction that the Tribunal should not be influenced by its earlier conclusions. All contentions of both sides were kept open.