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PJ/CASE LAW/2016-17/3036

Whether order of CESTAT is sustainable, when it is passed blindly without even looking at important documents?

Case:COMMISSIONER OF CUSTOMS & CENTRAL EXCISE Vs P.S.L. LTD.

Citation:2015 (325) E.L.T. 460 (S.C.)

Brief Facts: The respondent is the manufacturer of Spirally Welded MS Pipes and Cement guniting of said pipes falling under Chapter Heading 7305.90 of the Schedule to the Central Excise Tariff Act, 1985. They had executed the work order of M/s. L&T, Chennai in respect of their Water Supply Project to the Visakha Industries Water Supply Company Limited promoted by the A.P. Industrial Infrastructure Corporation Limited. For this purpose, M/s. L&T had supplied the Spirally Welded MS Pipes at the rate of Rs. 15,000/- per metric [ton] of pipes sold and paid excise duty declaring that value.
The Revenue found that M/s. L&T was buying the aforesaid product from Steel Authority of India Limited (SAIL) at a much higher prices, i.e., Rs. 18,992/- per metric [ton] of pipes rolled and it was the depressed value of Rs. 15,000/- which was shown in the invoices raised by M/s. L&T for supply of this product to the respondent. On that basis, show cause notice dated 2-12-2004 was issued demanding differential duty of Rs. 40,95,850/- towards supply of the aforesaid HR coils purportedly at reduced cost.
The contention of the respondent was not accepted by the adjudicating authority in his Order-in-Original. In the detailed order passed by the Additional Commissioner, while confirming the demand in the show cause notice, he also recorded that the transaction between M/s. L&T and the assessee did not appear to be a transaction at arm’s length and the price was suppressed. This order was confirmed in appeal by the Commissioner (Appeals). However, in the further appeal preferred by the respondent-assessee before the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as ‘CESTAT’), the appeal of the respondent was allowed vide impugned orders. The CESTAT has also relied upon the judgment of this Court in the case of ‘H.B.L. Aircraft Batteries Ltd. v. Commissioner of Central Excise, Hyderabad’ [2004 (5) SCC 664 = 2004 (167)E.L.T. 483 (S.C.)].

Appellant’s Contention:The CESTAT has not discussed the facts of the present case appropriately and has accepted the version of the respondent-assessee blindly without even going into the documents, more particularly, the so called forward contract entered into between M/s. L&T and the assessee which was not even produced by the assessee. The finding that the transaction was not at arm’s length which was arrived at on the basis of material on record after detailed discussion has not even been commented upon and is side-tracked. On these facts, the judgment of this court in H.B.L. Aircraft Batteries Ltd. could not have been mechanically applied.
 
Respondent’s Contention:  The respondent contended that there was a forward contract between the respondent and M/s. L&T for a fixed period and during this period, the price of Rs. 15,000/- was agreed  upon. The respondent also tried to disclose the basis of arriving at the aforesaid price. On this basis, it was contended that insofar as the respondent is concerned, the transaction value was Rs. 15,000/- and therefore, the duty was rightly paid thereupon.

Reasoning of Judgement:The Court has accepted the contention of the revenue. Tribunal erred in accepting version of assessee blindly without even looking at forward contract which was not even produced by assessee. Further, Tribunal’s side tracking, without making any comment, detailed findings in adjudication order of price not being at arms length. Tribunal’s order set aside and matter remanded for deciding issues afresh by dealing with aspects raised by Revenue.

Decision: Order Set aside and matter remanded.

Comment:The Case is related to valuation of goods. Assessee has sold the goods at 15,000 per metric ton as against purchase price of ` 18,992 per metric ton. Assessee contended that the price is being covered under a forward contract. Tribunal has allowed the appeal of assessee blindly without even looking at forward contract which was not even produced by assessee.
The Supreme Court has allowed the appeal of department and remanded back the matter to CESTAT as the order of CESTAT was passed without looking at the important documents of the matter.  
 
 

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