Deemed credit cannot be denied without proof of fraud or suppression; penalty under Rule 57I was also unsustainable.

Deemed credit could not be denied merely because a duty differential arose on adoption of average value; the notification's denial clause applied only where fraud, collusion, wilful misstatement or suppression of value was established. On the facts, the record did not prove such culpable conduct, so deemed credit was allowed. The penalty under Rule 57I was not sustainable on the same facts and was set aside. The duty demand and reduced penalty amounts were, however, upheld.

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Issues: Whether deemed credit could be denied under the notification when fraud, collusion, wilful misstatement or suppression was not established, and whether the penalty under Rule 57I was sustainable.

Analysis: The duty differential based on adoption of average value was accepted and not pressed, but the record did not establish fraud, collusion or deliberate suppression of value. The denial clause in the deemed credit notification was meant for cases where such culpable conduct was proved, and could not be invoked merely because a differential duty had been worked out on a reasonable valuation basis. On the same facts, the penalty under Rule 57I was not justified.

Conclusion: Deemed credit was allowed and the penalty of Rs. 5,000 imposed under Rule 57I was set aside, while the duty demand and reduced penalty amounts were upheld.

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