2003 (3) TMI 237 - AT - Central Excise

Nondisclosure of expert report and denial to cross-examine in-house expert vitiated fairness; suppression unjustified, demand time-barred, appeal allowed

HINDALCO INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., ALLAHABAD

CEGAT held that nondisclosure of an expert report and denial of opportunity to cross-examine the Assistant Director (in-house expert) deprived the ... Valuation (Central Excise) - ad valorem basis - short-levy of duty on account of under-valuation of the goods - attract the proviso to Section 11A - HELD THAT:- In the present case, if the report had been disclosed to the assessee, they would have pointed out the errors in the conclusion or inadequacy of its coverage. They could also have cross-examined the Assistant Director, who is in the nature of an inhouse Expert. These essential steps would have enabled the Commissioner to weigh the opinion of the expert and reach a considered conclusion. The expert would also become better in his profession when signed by cross-examination. The avoidance of these vital steps in the adjudication proceedings has led to the passing of a clever-by-half order which cannot survive when tested. Further, the finding of suppression of facts against the assessee is wholly unfair, apart from being incorrect. Balance Sheets of companies is a publicly available document. Therefore, the allegation that data stated in the Balance Sheet was suppressed from Central Excise authorities is not a viable allegation. The demand has to fail on the ground of limitation itself. In the result, the appeal is allowed after setting aside the impugned order. Cross-Objection filed by the Revenue, which is in the nature of written parawise comments on the appeal, is also disposed of. Issues involved: Duty liability on account of under-valuation, applicability of Apex Court judgment, introduction of Assistant Director's report, invoking proviso to Section 11A.Summary:1. The appellants, a manufacturer of aluminium products, faced duty demands due to alleged under-valuation of goods, based on outstanding advances in their balance sheet. The impugned order raised a duty liability of over Rs. 2.0 crores and imposed an equal amount as penalty, citing notional interest on advances as per the Apex Court's judgment in Metal Box India Ltd. case.2. The appellants argued that treating credit balance as advances was incorrect, as it did not confer financial benefit, and the Commissioner's decision was illegal. They highlighted the presence of larger debit balances and disputed the relevance of the Metal Box judgment to their case, citing the VST Industries Ltd. case as more applicable.3. The appellants objected to the introduction of the Assistant Director's report in the adjudication, alleging a violation of natural justice principles. They contended that price differences were due to variations in the goods sold, not advances. 4. The appellants further objected to the invocation of the proviso to Section 11A, arguing that the data from their annual Balance Sheets was publicly available, and there was no intent to suppress facts to evade duty payment.5. The Tribunal found the impugned order untenable, noting flaws in the findings and procedural errors. It highlighted the failure to consider relevant factors, misapplication of the Metal Box judgment, impermissible introduction of the Assistant Director's report, and unfair allegations of suppression of facts. The appeal was allowed, setting aside the impugned order, and the Revenue's cross-objection was disposed of.