2002 (5) TMI 141 - AT - Central Excise

Summary

Issues involved: Alleged short payment of duty on fabrics processed on job work, liability of duty on processor vs. supplier of grey fabric, imposition of penalty on processor, applicability of extended period of limitation, classification of fabric for duty purposes.

Summary:
1. The appeals involved allegations of short payment of duty on fabrics processed on job work basis. The appellant, a fabric processor, was accused of underdeclaring the value of grey fabric used in processing, leading to duty evasion.
2. The adjudicating authority determined that the liability to pay duty initially rests with the "merchant manufacturer" but can pass on to the processor if the former fails to discharge it. Penalties were imposed on both the supplier of grey fabric and the processor.
3. The appellant argued that it was merely a job work processor, declared fabric costs as per supplier instructions, and had no collusion with suppliers. It contended that the extended period of limitation should not apply as it had disclosed values to the department.
4. The Departmental Representative highlighted instances where the appellant did not declare goods, suggesting intent to evade duty.
5. Previous case law supported the appellant's stance that job workers are not liable for duty based on incorrect value statements by suppliers. The primary duty liability should fall on the manufacturer, not the job worker.
6. The Departmental Representative raised concerns about the appellant's failure to file price declarations under Rule 173C, indicating possible intent to evade duty.
7. The Additional Commissioner exonerated the processor from knowledge of false bills but did not address collusion allegations. He found no intent to evade duty by the processor.
8. The Department did not challenge the finding that the processor did not intend to evade duty, thus the extended period of limitation was deemed inapplicable.
9. Another appeal involved a dispute over fabric classification and duty demand based on fabric composition misdeclaration.
10. The Commissioner held the processor responsible for paying correct duty, rejecting the appellant's claim that fabric composition declaration was based on information from the processor.
11. The question of extended period of limitation applicability arose, with the absence of evidence suggesting collusion or awareness of incorrect declarations by the processor.
12. Ultimately, the appeals were allowed, and the impugned orders were set aside.