2016 (7) TMI 347 - AT - Central Excise

Undervaluation by way of not declaring correct value of grey fabrics. - job work - it was noticed that the merchant manufacturers were under valuing the grey fabrics sent to main appellant for processing and the main appellant has discharged the duty liability on the value given by the merchant manufacturers and their processing charges. - Held that - It is seen in this case that the merchant manufacturer had stated the same value of grey fabrics, and the same was declared by main appellant, cannot be held against the main appellant to demand the Central Excise duty from him. In the entire case records, there is nothing to show that the main appellant was aware of the fact that the merchant manufacturers have not stated the correct value of grey fabrics. - demand set aside - Decided in favor of assessee.

Summary

Issues:
Demand of Central Excise duty on processed fabrics due to alleged undervaluation of grey fabrics by merchant manufacturers sent for processing.

Analysis:
1. The case involved two appeals against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mumbai-V, alleging undervaluation of processed fabrics by not declaring the correct value of grey fabrics. The main appellant was accused of discharging duty liability based on undervalued grey fabrics received from merchant manufacturers. The adjudicating authority confirmed the demands and imposed penalties on the main appellant and its Director.

2. The appellant's counsel argued that the merchant manufacturers admitted to undervaluing grey fabrics without the main appellant's knowledge. Referring to a previous Tribunal case and a Supreme Court judgment, the counsel contended that the main appellant should not be held responsible for the merchant manufacturers' actions.

3. The Revenue contended that the merchant manufacturers admitted to under valuation to evade Central Excise duty, implying the main appellant and its Director should have verified the correct value of grey fabrics. The issue revolved around the demand for Central Excise duty on processed fabrics due to alleged misdeclaration and undervaluation.

4. The Tribunal analyzed the case records and found that the Revenue lacked merit. The main appellant had filed price declarations based on the values provided by merchant manufacturers, as required by law. The Tribunal cited a Supreme Court decision and a previous Tribunal case to support the main appellant's position that they were not aware of any undervaluation by the merchant manufacturers.

5. The Tribunal emphasized that the main appellant acted in good faith by declaring the prices as received from the merchant manufacturers. The Tribunal also highlighted that the Revenue failed to present contrary evidence to dispute the main appellant's claims. Citing various judgments, the Tribunal concluded that the impugned orders were unsustainable and set them aside, allowing the appeals with no penalty imposed on the appellants.

6. Ultimately, the Tribunal ruled in favor of the appellants, setting aside the impugned orders and allowing the appeals with consequential relief, if any, in accordance with the law. The decision was pronounced in open court, concluding the proceedings.