1998 (7) TMI 412 - AT - Central Excise

Tribunal Rules in Favor of Universal Dyeing Works in Tax Dispute Case

UNIVERSAL DYEING AND PRINTING WORKS Versus COLLECTOR OF C. EX., BOMBAY

The Tribunal found in favor of M/s. Universal Dyeing and Printing Works, setting aside the demand of Rs. 20,77,992.57 and penalties imposed. The ... Valuation - Penalty and confiscation Issues:1. Confirmation of demand of Rs. 20,77,992.57 and penalty imposed on M/s. Universal Dyeing and Printing Works.2. Interpretation of Notification No. 79/82 regarding exemption of man-made fabrics from Additional Duty of Excise.3. Application of Ujagar Prints formula for determining assessable value.4. Justification of Collector's requirement for job-worker to prove various items of expenditure incurred by the supplier.5. Assessment of correct assessable value for availing exemption notification.6. Validity of penalty and confiscation orders based on alleged duty evasion.Analysis:1. The judgment addressed the confirmation of a demand of Rs. 20,77,992.57 and penalty imposed on M/s. Universal Dyeing and Printing Works. The Collector confirmed the demand, imposed penalties, and confiscated goods and assets. However, the Tribunal found that the assessable value declared by the job-worker was in accordance with the Ujagar Prints formula, and the demand failed as there was no evidence of incorrect duty payment under the exemption notification.2. The interpretation of Notification No. 79/82 exempting man-made fabrics from Additional Duty of Excise was crucial. The notification specified different categories based on value per sq. metre, with varying rates of additional duty. The Tribunal emphasized the need to determine the assessable value accurately, considering whether the duty was ad valorem or a combination of ad valorem and specific duty.3. The application of the Ujagar Prints formula for determining the assessable value was pivotal. The Department did not dispute the value declared by the job-worker. The Collector, however, focused on the wholesale prices charged by the supplier, disregarding the job-worker's declared value. The Tribunal held that the Collector's approach was not aligned with the Ujagar Prints formula.4. The judgment scrutinized the Collector's requirement for the job-worker to prove the supplier's expenditure items for deduction from wholesale prices. The Tribunal deemed this requirement unjustified and contrary to the Ujagar Prints formula, emphasizing that the job-worker's declared value should encompass raw material costs, manufacturing expenses, and profit margin.5. Assessing the correct assessable value for availing the exemption notification was a key issue. The Tribunal highlighted that the job-worker's declared value should reflect the sum total of raw material costs, manufacturing expenses, and profit margin. Failure to prove incorrect duty payment under the exemption notification rendered the demand of Rs. 20,77,992.57 unsustainable.6. The judgment also addressed the validity of penalties and confiscation orders based on alleged duty evasion. Relying on a High Court decision, the Tribunal concluded that penalties and confiscation orders related to duty evasion were unsustainable. The impugned order was set aside, except for the confirmed demand of Rs. 13,123.50, leading to the appeals being allowed in part.