Natural justice bars duty demand beyond admitted payment where relied upon documents are withheld and quantification is unexplained.

Failure to supply relied upon documents necessary to verify duty quantification vitiated the defence, as only partial records were provided despite repeated requests and earlier directions for production. The department also did not clearly explain the basis of the full demand, resulting in denial of an effective opportunity to contest the case and a breach of natural justice. However, the assessee had already paid the admitted amount before the show cause notice, so the demand was sustained only to that extent. The balance demand and the penalties were set aside.

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Issues: Whether the duty demand could be sustained in the absence of complete supply of relied upon documents and whether the quantification of duty and penalties required interference.

Analysis: The duty demand arose from price variation in clearances to consignment agents under the price declaration mechanism. The assessee had repeatedly sought the relied upon records, but the record showed that only partial documents were made available and the directions earlier issued for supply and production of documents were not complied with. The department also failed to clearly explain the basis of quantification of the entire demand. In these circumstances, the assessee was found to have been denied an effective opportunity to defend the case, amounting to breach of natural justice. At the same time, the record showed that the assessee had already paid the admitted amount before issuance of the show cause notice.

Conclusion: The duty demand was upheld only to the extent of the amount already paid by the assessee, the balance demand was set aside, and the penalties were set aside.

Ratio Decidendi: Where the department withholds or fails to supply relied upon documents necessary to test quantification of duty, the demand cannot be sustained beyond the amount admitted and already paid, and penalties are not justified when effective defence is denied.

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