1997 (12) TMI 238 - AT - Central Excise

Summary

Issues:
1. Under-declaration of job charges by appellants.
2. Imposition of penalty and confiscation of property.
3. Interpretation of assessable value and duty calculation.
4. Applicability of Supreme Court judgment in Ujagar Prints case.
5. Comparison of assessable value at merchant manufacturer's gate and processor's gate.
6. Consideration of excess duty payment and trader's profit margin in assessable value.
7. Reference to Tribunal judgment in Lili Foam Industries case.
8. Verification of job charges and trader's profit inclusion in assessable value.
9. Decision on the appeal and setting aside the Collector's order.

Analysis:
The case involved the appellants processing grey fabrics received from merchant manufacturers and collecting job charges at a higher rate than declared. A show cause notice was issued for recovery of duty and penalty, with the allegation of under-declaration of charges and possible confiscation of property. The Collector confirmed the demand, imposed a penalty, and allowed redemption of property on payment of a fine. The appellants argued that the profit of merchant manufacturers should not be included in the assessable value at the processor's gate, citing the Supreme Court's judgment in Ujagar Prints case. The JDR supported the lower orders based on duty rates and value of processed fabrics. The Tribunal analyzed the declarations and found that the value assessed at the merchant manufacturer's gate was higher than at the processor's gate, leading to no short levy despite under-declaration of job charges.

The Collector's interpretation of the Ujagar Prints judgment was deemed incorrect by the Tribunal, as the Supreme Court did not mandate including trader's profit at the processor's gate. The Tribunal emphasized that the assessable value was determined at the merchant manufacturer's gate, making any under-declaration of job charges inconsequential in terms of duty liability. The Tribunal also referenced a judgment in the Lili Foam Industries case to support the appellants' argument regarding contesting the rate of duty and differential duty demands.

Regarding the inclusion of trader's profit in the assessable value, the Tribunal rejected the JDR's plea to refer the case back to verify the situation, stating that unless it was proven that goods were sold at a higher price than declared, the excess job charges over profit margin should not be included. Based on these observations, the Tribunal allowed the appeal and set aside the Collector's order, indicating that there was no loss of revenue due to the under-declaration of job charges.