Undisclosed relied-upon material defeats undervaluation demand when the basis of quantification is not shared with the assessee

An undervaluation demand was held unsustainable where the valuation rested on a telex message and related cost additions that were not furnished to the assessee. The authorities also failed to supply the assessable-value worksheet or the break-up and basis of quantification, despite an earlier remand directing disclosure before reliance on the disputed material. Denial of access to the relied-upon document and the opportunity to test it through cross-examination breached natural justice, and the duty demand was set aside.

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Issues: Whether the duty demand based on alleged undervaluation could be sustained when the document forming the foundation of the valuation, namely the telex message relied upon in the show cause notice, was not furnished to the assessee and the assessable-value worksheet was not supplied.

Analysis: The show cause notice and the impugned orders rested substantially on a purported telex message said to have been issued by the buyer and on the resulting addition of various cost elements to the assessable value. The assessee was repeatedly denied a copy of that document and the opportunity to cross-examine the buyer's representative with reference to it. The lower authorities also failed to furnish the break-up and basis of quantification directed earlier, despite the Tribunal's specific remand requiring compliance before reliance could be placed on the disputed material. A valuation demand cannot be sustained when the very material used to support it is not disclosed to the affected party and the quantification remains unexplained.

Conclusion: The duty liability could not be upheld and the demand was set aside in favour of the assessee.

Ratio Decidendi: A demand founded on undisclosed relied-upon material, without furnishing that material and the basis of quantification to the assessee, violates natural justice and cannot be sustained.

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