2024 (9) TMI 1074 - AT - Central Excise

Demand of differential duty - appellant did not submit CAS-4 Certificate issued by the Cost Accountant to the department - value was proposed to be determined as per 110% of value mentioned in the invoice raised to the sister concerned - whether the value at which the appellant have paid the duty is 110% of cost of manufacture of the excisable goods or otherwise? HELD THAT - The appellant admittedly worked out the cost keeping in mind that the same is 110% of cost of the manufacture. However, the appellant have on the safer side calculated higher value since the CAS-4 is always available only after the completion of the year. Subsequently, during the adjudication the appellant have submitted CAS-4 certificate for the entire period, the same was rejected by the Adjudicating Authority stating that the said certificate is Xerox copy. This approach of the adjudicating authority is arbitrary, absolutely illegal and in violation of principles of natural justice. When the adjudicating authority have seen Xerox copies of the CAS-4 certificate, before the rejecting the same on the ground that it is a Xerox copy, he must have asked original from the appellant. Therefore, he gravely erred is not complying the principles of natural of justice. Since the adjudicating authority has observed that due to Xerox copy, a CAS-4 certificate cannot be accepted, at least the Learned Commissioner (Appeals) before him the original certificates were produced should have considered the same and after verification, the appeal could be decided accordingly. The impugned order is not sustainable - Appeal allowed.

Summary

Issues:
- Appellant's failure to submit CAS-4 certificate leading to differential duty demand
- Validity of show cause notice presuming invoice value as cost of manufacture
- Adjudication authority's rejection of CAS-4 certificate as Xerox copy
- Compliance with principles of natural justice in considering evidence

Analysis:
The case involves the appellant clearing goods to their sister concern using the cost construction method under Central Excise Valuation Rules, 2000. The department issued show cause notices due to the appellant's failure to submit CAS-4 certificate, leading to a differential duty demand. The main issue was whether the value declared by the appellant was 110% of the cost of manufacture. The appellant argued that the demand was unjustified as they had submitted the CAS-4 certificate, which was not considered. They contended that the department could not add 10% profit without verifying the actual cost of production. The appellant cited various judgments and circulars to support their case.

The appellant's counsel highlighted that in similar cases where CAS-4 certificates were submitted, demands were dropped. On the other hand, the Revenue representative supported the impugned order. The Tribunal noted that the appellant had calculated duty based on 110% of the cost of manufacture, but the CAS-4 certificate was rejected by the Adjudicating Authority as a Xerox copy. The Tribunal criticized this decision as arbitrary and against natural justice principles. The rejection without verifying the original certificate was deemed illegal.

The Tribunal found that the rejection of the CAS-4 certificate was unjustified, especially when the Revenue failed to provide evidence of undervaluation. The Commissioner (Appeals) was also faulted for not considering the original certificates when produced. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellant. The judgment emphasized the importance of complying with principles of natural justice and ensuring proper consideration of evidence in such cases.