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Issues: Valuation of processed fabrics for assessment of central excise duty.
In this case, the Appellate Tribunal CEGAT, New Delhi, considered the valuation of processed fabrics for the assessment of central excise duty. The respondents, textile processors, received grey cotton and artificial silk fabrics from manufacturer-exporters for processing. A dispute arose regarding the determination of the value of these processed fabrics for excise duty assessment. The Assistant Collector assessed the value by including the value of grey fabrics, transport charges, processing charges, and a margin of profit of the manufacturer-exporter. The respondents appealed against the inclusion of the profit margin, which was upheld by the Collector (Appeals). The department appealed to restore the Assistant Collector's order, while the respondents sought to uphold the Collector (Appeals) decision. The department relied on a Supreme Court judgment to argue that the garment exporter's profit margin should be included in the assessable value of the processed fabrics. However, the Tribunal found no parallel between the cited case and the current case. The department failed to provide evidence to support their claim that the respondents were mere dummies of the garment exporter. The Tribunal noted that the respondents operated independently with their own resources and were not controlled by the garment exporter, as evidenced by previous court decisions. Referring to a recent Supreme Court judgment, the Tribunal determined that the assessable value of processed fabrics should be the intrinsic value, which is the price at which such fabrics are sold in the wholesale market. Since the fabrics were not sold, a best judgment assessment under Rule 7 was appropriate. The Tribunal concluded that the profit margin of the garment exporter should not be included in the assessable value as they were not manufacturers of the fabrics. During the hearing, the department argued for the inclusion of additional elements in the intrinsic value of the processed fabric, such as interest on investment cost. However, the Tribunal found no justification for including such elements and maintained that only the profit margin of the garment exporter should not be considered in the valuation. Ultimately, the Tribunal dismissed the appeal and the cross-objection of the respondent, as no further relief was sought.
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