2000 (4) TMI 54 - AT - Central Excise

Summary

Issues Involved:
1. Relationship between trader and job worker affecting assessable value.
2. Applicability of Ujagar Prints decision.
3. Allegation of mutual interest and under-valuation.
4. Penalties and confiscation.
5. Refund of pre-deposit.

Summary:

1. Relationship between trader and job worker affecting assessable value:
The primary issue was whether the relationship between the trader (Ganga Ram Synthetics Ltd.) and the job worker (Prafful Industries Ltd.) would exclude the case from the purview of the Ujagar Prints decision. The Department alleged that the mutual interest between the entities led to under-valuation of goods, demanding differential duty of Rs. 2,69,62,215.77.

2. Applicability of Ujagar Prints decision:
The Tribunal examined the scope and ambit of the Supreme Court's clarificatory order in Ujagar Prints v. Union of India, which stated that the assessable value should be the value of the grey cloth plus job work charges, manufacturing profit, and expenses. The Tribunal concluded that the price realized by the trader, including post-manufacturing profits and expenses, cannot be part of the assessable value.

3. Allegation of mutual interest and under-valuation:
The Tribunal found that Prafful Industries Ltd. charged the same rates for job work from other traders and that Ganga Ram Synthetics Ltd. also got fabrics processed by other job workers at similar rates. This indicated that the job work charges were not influenced by any relationship, and there was no suppression of charges or flow back of funds.

4. Penalties and confiscation:
The Adjudicating Authority's order imposing penalties and confiscation was challenged. The Tribunal set aside the penalties under Rule 173Q(1) and Section 11AC, the confiscation of property, and personal penalties imposed on individuals and Ganga Ram Synthetics Ltd., as the entire exercise by the Department was deemed ill-conceived.

5. Refund of pre-deposit:
The Tribunal directed the refund of Rs. 20 lakhs deposited by Prafful Industries Ltd. as per the stay order, to be processed within three months from the date of receipt of the Final Order.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order in its entirety, including the demand for differential duty, penalties, and confiscation. The Tribunal also ordered the refund of the pre-deposit amount to Prafful Industries Ltd.