2017 (4) TMI 224 - AT - Central Excise

Natural justice - valuation - salvaged Diamond - The department proposed to include at 100% of the value of the diamonds instead of 40% in the assessable value of the newly manufactured diamonds, drilling bits - Held that - appellant have submitted all the documents from which it can be ascertained that appellant have submitted value of the salvage diamonds because it is contract between buyer and the appellant that how much value should be considered for the salvaged diamonds. From these documents, prima facie appears that under any circumstances the 100% value of the new diamonds cannot be taken. However, adjudicating authority as well as Commissioner (Appeals) have gravely violated the principle of natural justice by not considering these documents and not properly followed the direction given by the Tribunal in the earlier order. Therefore in our view matter needs to be reconsidered - appeal allowed by way of remand.

Summary

Issues:
1. Inclusion of salvaged diamonds in the assessable value of newly manufactured diamond drilling bits.
2. Discrepancy in the percentage of salvaged diamonds value considered.
3. Violation of natural justice by lower authorities.

Analysis:
1. The case involved a dispute regarding the inclusion of salvaged diamonds in the assessable value of newly manufactured diamond drilling bits. The appellant used salvaged diamonds returned by customers to manufacture new bits. The department proposed to include 100% of the salvaged diamonds' value instead of the appellant's claimed 40%. The Commissioner(Appeals) upheld the differential duty demand based on the higher valuation. The Tribunal, referencing a previous decision, directed the value of diamonds to be determined as per that order. However, in a denovo adjudication, the adjudicating authority once again applied 100% value, leading to a confirmed demand of differential duty.

2. The appellant argued that the lower authorities incorrectly added 100% value of the new diamonds, disregarding evidence supporting a 40% valuation. Various purchase orders indicated salvaged diamonds' value ranging from 20% to 50%, with an average of 40% being appropriate. The appellant submitted price lists, calculations, and purchase orders to justify the 40% valuation. The authorities were criticized for arbitrarily adding ?75 per carat as the salvaged diamonds' value, equating it with the new diamonds' value. The appellant contended that the principle of natural justice was violated as the documents and supplier-purchaser agreements were not considered.

3. The Tribunal noted that in a previous case involving the appellant, salvaged diamonds were considered at 40% of the new diamonds' value. The authorities were directed to reconsider the matter in light of the documents submitted by the appellant, including purchase orders and price lists. It was emphasized that the adjudicating authority and Commissioner(Appeals) had failed to follow the Tribunal's earlier directions and violated the principle of natural justice. The case was remanded to the original adjudicating authority for a fresh decision, with the appellant to be given a sufficient opportunity for a personal hearing.

This detailed analysis of the judgment covers the issues related to the inclusion of salvaged diamonds in the assessable value, discrepancies in valuation percentage, and the violation of natural justice by the lower authorities.