By TIOL News Service

MUMBAI, JULY 07, 2016 : THE appellant was alleged to have undervalued the processed fabrics by way of not declaring correct value of grey fabrics. On investigation, it was noticed that the merchant manufacturers were undervaluing the grey fabrics sent for processing and the main appellant had discharged the duty liability on the value given by the merchant manufacturers and their processing charges.

The demand notice seeking recovery of the differential CE duty came to be confirmed by the adjudicating authority along with interest & penalty on appellant as well as its Director.

As this order was upheld by the Commissioner (A), the appellant is before the CESTAT.

The Appellant submitted that the merchant manufacturers have in their statements admitted that they have undervalued the grey fabrics and the appellant was not aware of it. It is further submitted that identical issue was decided by the Tribunal in the case of Madhu Tex Industries Ltd. - 2009-TIOL-985-CESTAT-MUM wherein it is held that appellants only have filled the value appearing in the grey bills provided by the merchant-manufacturers, which cannot be considered as manipulation; that for wrong declaration of the value by the supplier, extended period is not available for recovery of the duty from the job workers.

The AR submitted that the main appellant as well as the Director of the company were in the business of processing of fabrics and should have noted that the value of grey fabrics as declared is very much incorrect and should have asked for the correct value from the merchant manufacturer.

The Bench, at the outset, observed that the Revenue had no case on merits inasmuch as -

++ in the case in hand, there is no dispute that the main appellant had filed the price declaration of grey fabrics as received from merchant manufacturer and in our considered view once the merchant manufacturer declared the price of grey fabrics, on which the processing charges is to be paid by the main appellant, then the price cannot be disputed by the appellant as he may not be aware of the cost of procurement of grey fabrics by merchant manufacturer.

++ it is seen in this case that the merchant manufacturer had stated the same value of grey fabrics, and the same was declared by main appellant, cannot be held against the main appellant to demand the Central Excise duty from him. In the entire case records, there is nothing to show that the main appellant was aware of the fact that the merchant manufacturers have not stated the correct value of grey fabrics.

Noting that in view of the authoritative judicial pronouncements in the case of S Kumars Ltd. - 2005-TIOL-147-SC-CX and Madhu Tex Industries Ltd. (supra), the impugned orders are unsustainable, the Bench set aside the same and allowed the appeals with consequential relief.

(See 2016-TIOL-1650-CESTAT-MUM)