Short levy must be proved from invoices and assessable value before a duty demand can stand

Duty demand based on a 5% free supply shown in invoices could not be sustained where the department failed to establish a short levy on the basis of the declared sale price and assessable value. The record showed that duty had been paid on the clearances, including the free-supply component, and no mathematical or evidentiary basis was produced to demonstrate that the invoiced value resulted in under-assessment. As the alleged short levy was not proved, the demand and penalty were set aside and the assessee succeeded.

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Issues: Whether duty demand could be sustained on the footing that the 5% free supply shown in the invoices was not a permissible discount and whether any short levy was established when duty had been paid on all the clearances.

Analysis: The appellant was permitted to clear goods on the basis of the value declared in its invoices. The invoices reflected a 20th unit free on sale of 19 units, and the appellant maintained that duty had been paid on all products, including the free supply. On the record, no mathematical demonstration was made to show that the sale price reflected in the invoices resulted in a short levy or that the assessable value had been wrongly worked out. The evidentiary basis adopted in the order impugned was therefore insufficient to establish a duty shortfall.

Conclusion: The alleged short levy was not proved and the duty demand could not be sustained. The finding and penalty were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned order was annulled.

Ratio Decidendi: A duty demand cannot be sustained unless the department establishes, on the basis of the invoices and assessable value, that there has been a short levy; where no such short levy is shown, the demand fails.

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