2015 (5) TMI 178 - AT - Central Excise

Tribunal overturns order on grey fabric valuation for Central Excise Duty, stresses need for evidence

Anita Prints Versus Commissioner of Central Excise, Mumbai-II

The Tribunal set aside the order confirming demands related to transportation and octroi charges in the valuation of grey fabrics for Central Excise Duty. ... Valuation of goods - Non inclusion of value towards the shrinkage and amount of transportation charges - Held that:- show cause notice does not rely upon any documents which indicate the value which is attributed to the transport and octroi in the said show cause notice. The said show cause notice blindly states that transport charges and octroi are to be included in the assessable value of the goods without evidencing that the said transport charges and octroi are paid by the appellant and the amount which in indicated in the show cause notice is the amount which has been deduced from the records maintained in the appellant’s premises. It is a settled law that when the department raises demands on the assesse, the onus has to be discharged by the department by submitting tangible evidences. In the absence of any such evidence which indicates the specific amounts as have been paid by the appellant, the entire fulcrum of the show cause notice is displaced and any order confirming the demand raised on such show cause notice has to go. - impugned order is unsustainable and liable to be set aside - Decided in favour of assessee. Issues:Valuation of grey fabrics for Central Excise Duty - Inclusion of transportation and octroi charges in valuation.Analysis:The appeal was against the Order-in-Appeal regarding the valuation of grey fabrics processed on a job work basis. The lower authorities alleged that the appellant incorrectly valued the fabrics by not considering shrinkage and transportation charges. The Tribunal remanded the matter for reconsideration. Subsequently, the authorities dropped the proceedings on shrinkage but confirmed demands related to transportation and octroi charges. The appellant challenged this valuation in the Tribunal.Upon hearing both sides, the appellant argued that the demands based on transportation and octroi charges were unsubstantiated, emphasizing the lack of tangible evidence provided by the department. The appellant cited several judgments to support their claim. They contended that the valuation should be based on raw material cost and job working charges, as established by the Apex Court in Ujagar Prints. Additionally, they argued that since the demand was unjustified, no penalty should be imposed.The departmental representative defended the order, highlighting discrepancies in the Chartered Accountant's certificate and asserting that the demands were correctly confirmed as there was no evidence that the suppliers bore the transportation and octroi charges. After considering both arguments and examining the records, the Tribunal focused on the issue of undervaluation based on transportation and octroi charges.The Tribunal found merit in the appellant's submissions, noting that the show cause notice lacked specific evidence regarding the transportation and octroi charges paid by the appellant. Citing established law, the Tribunal emphasized that the department must provide tangible evidence when raising demands. The Tribunal also agreed with the appellant's argument that duty liability for job workers should be calculated based on raw material cost and job working charges, as supported by the Chartered Accountant's certificate following the precedent set by the Apex Court in Ujagar Prints.Consequently, the Tribunal concluded that the impugned order was unsustainable and set it aside, allowing the appeal with any consequential relief. The decision highlighted the necessity for concrete evidence in valuation disputes and reaffirmed the legal principles governing the assessment of duty liabilities for job workers.