2008 (3) TMI 336 - HC - Central Excise

Whether the Settlement Commission, without considering all the relevant documents pertaining to their claim regarding deduction of freight, which documents had been seized by the Excise Authorities and were in their possession, gave a finding that it was not possible to accept any deduction towards freight from the assessable value as claimed by the petitioners? Held that - The documents at Exhibit-1 and Exhibit-2 to the affidavit-in-reply dated 24-10-2007 which are described in the said affidavit as actual profit & loss account of the petitioners for the period from May-1999 to November-2001 and the summary sheet for 21 files containing the details of month wise transactions ought to have been considered. In the net result, while confirming all other findings of the Settlement Commission, we remand the matter to respondent no. 2 for the purpose of re-evaluating the question of grant of deduction to the petitioners in respect of freight charges after considering the aforesaid documents at Exhibit-1 and Exhibit-2 and any other relevant documents in this regard which already form a part of the record before the Tribunal.

Summary

Issues:
Challenge to order of Settlement Commission regarding deduction of freight charges.

Analysis:
The Writ petition sought to quash an order passed by the Settlement Commission, Customs & Central Excise, which denied the deduction of freight charges from the assessable value claimed by the petitioners. The petitioners contended that the Settlement Commission did not consider all relevant documents seized by the Excise Authorities, leading to the unfavorable finding. The Settlement Commission's decision was primarily based on the lack of evidence indicating that the petitioners had actually incurred any amounts towards freight of their finished products.

The case background involved the petitioners, engaged in manufacturing glass sheets, being issued a show cause notice for central excise duty on grounds of undervaluation of goods. After filing an application for settlement, the Settlement Commission admitted the application but later dismissed it due to non-compliance with an interim order. A subsequent Writ petition challenged this dismissal, leading to a re-hearing of the application by the Settlement Commission, culminating in the impugned order regarding the deduction of freight charges.

The petitioners argued that the seized document, described as the "actual profit & loss account," supported their claim for deduction of freight charges. They maintained that the sale price in the document included freight, which was later credited back to customers in a separate account. The petitioners emphasized that they never claimed to have paid the freight themselves but were entitled to the deduction based on the customers' payments. The documents at Exhibit-1 and Exhibit-2, along with other relevant records, were crucial for understanding the petitioners' accounting practices and supporting their claim for the deduction of freight charges.

The High Court, while affirming other findings of the Settlement Commission, remanded the matter for re-evaluation specifically concerning the grant of deduction for freight charges. The Court emphasized the importance of considering all relevant documents, including Exhibit-1 and Exhibit-2, to determine the petitioners' eligibility for the deduction. Consequently, the Rule was made absolute in favor of the petitioners, directing a reassessment of the deduction of freight charges by the Settlement Commission based on the provided documents and other relevant evidence already part of the record.