P.G. Chacko, Member (J) - (1.)THE appellants were engaged in the manufacture of polyurethane foam and articles thereof and were availing Modvat facility during the period of dispute. In a surprise visit to their factory, officers of the department found that the appellants were removing (without payment of duty) finished goods by way of replacement for goods rejected and returned by their customers. It was also noticed that sales incentives and sales commission were not included in the assessable value of the goods cleared by the party. Accordingly, a SCN was issued demanding duty of Rs. 85,253/ - on the above "replacements" and duty of Rs. 95,749/ - on the sales incentive/commission element of the assessable value of the goods cleared on payment of duty, and proposing penalties under Section 11AC and Rule 173Q. The SCN was contested. The adjudicating authority confirmed the demand of duty against the assessee and imposed on them penalties of Rs. 1,81,002/ - and Rs. l lakh under Section 11AC and Rule 173Q respectively. The order of the said authority was appealed against. The Commissioner (Appeals) passed an order, relevant part of which is reproduced below :
7. I find that the appellants have fairly conceded that the rejected goods returned by M/s. Lotus Laminations have been replaced with materials from RG1 stock for which they offered to pay the duty and also paid the same on 16 -3 -98. In view of the averments made by the appellants as above, this part of the impugned order is sustained. Coming to the other aspects of the issue, that is furnishing of detailed information with regard to various receipts listed in their letter dated 6 -12 -97 addressed to the Superintendent, the advocate fairly conceded that all the documents which are needed to prove the veracity of their averments including the stocks lying in the factory which were received for repairs, reconditioning etc. were completely destroyed in the fire accident on 25 -9 -99 which fact was intimated to the Superintendent on 4 -11 -99 itself. He accordingly pleaded that the appellants have expressed their inability to furnish any more details and also to prove the veracity of their earlier statements. In view of the above, and in the absence of any material evidence in support of the appellants' defence, which the appellants could not produce even now, I cannot find any infirmity in the reasoning adopted by the lower authority and I find no reason to interfere with the impugned order.

8. In the light of the above discussions, the impugned order on merits as well as on imposition of penalties is sustained and the appeal is rejected.

(2.)IN the present appeal against the above order, we have heard both sides. Ld. advocate submitted that, in respect of goods returned by customers other than M/s. Lotus Laminations, nothing was conceded by him before the lower appellate authority and that such goods, which were . kept in stock for rectification of defects, were completely destroyed in a fire accident on 25 -9 -99. In answer to a query from the bench, ld. Counsel could not say for certain whether any claim for scompensation had been made to any insurance company in respect of the goods destroyed in fire. He, further, submitted that the entire records pertaining to such goods were also destroyed in the fire accident. Ld. counsel, further, pointed that the lower appellate authority had not examined the valuation dispute involved in the case. Ld. SDR was of the view that, in the light of the submission made by Id. counsel, the case may be remanded to the Commissioner (Appeals).
(3.)AFTER giving careful consideration to the submission, we are inclined to accept the suggestion made by ld. SDR. The question whether sales incentives and commission were includible in the assessable value of goods was not examined by ld. Commissioner (Appeals). This question needs to be examined by him insofar as the demand of duty of Rs. 95,749/ - is concerned. As regards the demand of Rs. 85,253/ -, we note that this demand is on goods allegedly removed clandestinely by way of 'replacements' for identical goods rejected by customers. There were a few such customers including M/s. Lotus Laminations. The duty demanded on the replacements in respect of M/s. Lotus Laminations was paid by the assessee. However, the duty demanded in respect of the goods allegedly removed, without payment of duty by way of replacements in respect of goods rejected and returned by other customers has not been paid, In this respect, the assesses submission is that the goods returned by the customers were actually kept in stock only and the same were destroyed in fire. If such goods were destroyed in fire, the assessee could have claimed damages from the insurer, if any. The advocate has not been able to furnish the relevant facts in this connection. We are of the view that, for the ends of justice, an opportunity should be given to the assessee to reagitate this matter before the lower appellate authority. The assessee will be at liberty to adduce evidence, if any, before that authority.
For the above reasons, we have no option but to remand, the case to the lower appellate authority for fresh decision on both the issues. Needless to say that the assessee be given a reasonable opportunity of being heard. Accordingly, the impugned order is set aside and the appeal is allowed by way of remand. (operative part of the order was in open court on 23.1.06)