2017 (10) TMI 192 - AT - Central Excise

Valuation - includibility - various charges like warehouse rent, transit insurance, clearing and forwarding charges, bank charges, 4.5% on money locked-up on the cost of filament yarn, handling charges, waste accrual and appropriation of sale proceeds on waste - Department was of the view that the appellant has not included certain expenses/costs to arrive at the cost of the raw materials/filament yarn for discharging duty - Natural Justice - Held that - It is cardinal principal of law and jurisprudence that a defendant who is charged with infraction of law should not only be put to notice but also the documents relied upon for such charges should made be available to him. It emerges that higher assessable value including 18 elements in respect of goods cleared and manufactured by appellant to Dunlop India during the period of dispute was solely based on a telex message from the latter and which was apparently recovered from the latter during the course of investigation - It is evident that while some other documents were enclosed and provided to appellant at the time of issue of SCN, the said telex message had not been supplied. It is further seen that even after the appellant s request for copy of this purported telex message, the department could not provide the same - it transpired that the authorities concerned refused to take cognizance or rely upon the said letter of Dunlop. Even the request to allow cross examination of representative of M/s. Dunlop India Ltd. with reference to aforesaid telex message was turned down. The duty liability upheld in the impugned order, based on a purported telex message which was never provided to the appellant, will therefore not sustain and will have to be set aside - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Alleged under-valuation of Dipped Man-made Fabrics (DMMF).
2. Non-inclusion of specific cost elements in the assessable value.
3. Violation of principles of natural justice.
4. Non-provision of crucial documents (telex message from M/s. Dunlop).
5. Failure to furnish the break-up of assessable value and quantification of duty demand.

Issue-wise Detailed Analysis:

1. Alleged Under-Valuation of DMMF:
The appellants were accused of under-valuing DMMF by not including various cost elements in the assessable value. The department issued multiple show cause notices (SCNs) demanding a total duty of ?1,12,87,314.26 for the period March 1988 to September 1991, alleging that the appellants did not include expenses such as warehouse rent, transit insurance, clearing and forwarding charges, bank charges, handling charges, waste accrual, and appropriation of sale proceeds on waste.

2. Non-Inclusion of Specific Cost Elements:
The department proposed to include several cost elements to arrive at the assessable value of DMMF, such as warehouse rent, transit insurance, clearing and forwarding charges, bank charges, handling charges, waste accrual, and appropriation of sale proceeds on waste. The appellants contended that these charges were already included in the cost of raw materials supplied by the customers for job work and that there was no evidence to prove that conversion charges collected or appellant's profit were suppressed.

3. Violation of Principles of Natural Justice:
The appellants argued that the orders were passed without affording them a personal hearing or a chance to defend their case. The Tribunal and the Commissioner (Appeals) repeatedly remanded the matter on the grounds of violation of principles of natural justice, emphasizing the need for the department to furnish the relevant documents and details to the appellants.

4. Non-Provision of Crucial Documents (Telex Message from M/s. Dunlop):
The appellants highlighted that the department relied on a telex message from M/s. Dunlop to allege under-valuation but failed to provide a copy of this telex message to the appellants. The Tribunal had directed the department to furnish a copy of the telex message and allow the appellants to cross-examine a representative of M/s. Dunlop. Despite these directions, the department did not comply, leading to the conclusion that the duty demand based on the telex message could not be sustained.

5. Failure to Furnish the Break-Up of Assessable Value and Quantification of Duty Demand:
The appellants contended that the department did not provide the break-up of the assessable value or the quantification of the duty demand, leaving them in the dark about the basis for the duty demand. The Tribunal noted that the department's failure to provide these details and documents violated the principles of natural justice and rendered the duty demand unsustainable.

Conclusion:
The Tribunal concluded that the duty liability upheld in the impugned order, based on a purported telex message which was never provided to the appellants, could not be sustained. The appeal was allowed with consequential relief as per law, and the duty demand was set aside. The Tribunal emphasized the need for adherence to the principles of natural justice and the importance of providing all relevant documents and details to the appellants.

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