2017 (4) TMI 1305 - AT - Central Excise

Tribunal upholds duty demand and penalties for Central Excise evasion, dismisses appeals.

The Tribunal upheld the duty demand and penalties against M/s. National Ply Boards for evasion of Central Excise duty through underinvoicing and ... Clandestine removal - underinvoicing - In the absence of machinery provisions for proceeding against a dead person, duty and other sums do not become “payable” to attract recovery provisions under Section 11 of the Central Excise Act, 1944. Held that: - the allegation of underinvoicing is well established on the basis of the investigation done extensively by Revenue. The seized records indicate both the recovery of “billed amounts” as well as additional amounts recovered as “OA” by cash. The entries found in the seized records have been corroborated by key employees of NPB, who were holding responsible management positions. Sh. Maklai, P.A. holder is one of them. The Prop. in his statement clearly stated that the factory was managed by Sh. Maklai, consequently, admission by the P.A. holder assumes significance. The statement of other employees of NPB not only fully corroborates and supports the documents recovered, but also clearly brings out the fact that NPB was recovering amounts in addition to invoiced prices which were not part of the assessable value of the goods for purposes of charging excise duty. The accessed private records were in fact maintained by the staff of the office and contained information corelatable to the invoices which are statutory records. Consequently, these records cannot be ignored and can be made basis for confirming the allegation of undervaluation. It is on record that the department had made a series of undervaluation cases against many plywood factories in and around Karnataka, Kerala and Tamil Nadu. The modus operandi adopted was more or less identical to that adopted by the appellants in the present case. Since the present investigation has been undertaken by Revenue subsequent to the earlier cases, it is very much likely that general plywood/trade and all the dealers were clearly alerted and have given statements to the Revenue to the extent that no additional consideration has been paid. In any case, we note that the retraction of the two statements by the dealers at the time of cross-examination was done well over two years after the recording of such statements and can clearly be considered as an afterthought. The adjudicating authority on the above basis has determined that the invoice value will need to be added with the additional consideration received in cash and which is evidenced by the documentary and oral evidence recovered and produced by the Revenue. In fact, he has restricted the demand only to that evidences. This is a case in which Revenue has succeeded in unearthing voluminous documentary as well as oral evidence which unambiguously supports the allegation of underinvoicing. The investigation done by the Revenue has established the allegation of underinvoicing. Consequently, the demand of differential duty as confirmed by the ld. Commissioner in the impugned order is upheld - Appeal allowed by way of remand. Issues Involved:1. Evasion of Central Excise duty through underinvoicing and misdeclaration of product quality.2. Abatement of proceedings against a deceased proprietor.3. Confirmation and quantification of duty demand based on seized records.4. Admission and retraction of statements by dealers.5. Applicability of transaction value under Central Excise Act.6. Use of private records and computer printouts as evidence.7. Remanding of similar cases for de novo decision.Issue-wise Detailed Analysis:1. Evasion of Central Excise duty through underinvoicing and misdeclaration of product quality:The investigation revealed that M/s. Arch Ply N Boards and M/s. National Ply Boards evaded Central Excise duty by underinvoicing their products and misdeclaring higher quality ply boards as lower quality ply boards. The invoices issued reflected only part of the actual price recovered, with the remaining amount being recovered in cash and not recorded in statutory records. A comparison of production reports with RG-1 entries revealed a shortage of plywood, leading to the issuance of show cause notices demanding differential duty and penalties.2. Abatement of proceedings against a deceased proprietor:The counsel for the assessee submitted that the proprietor of M/s. Arch Ply Boards had passed away, and in the absence of machinery provisions for proceeding against a deceased person, the demand and penal proceedings should abate. The Tribunal, referencing the Supreme Court's decision in Shabina Abraham v. CCE, agreed that the demand and penalties against the deceased proprietor should abate, and accordingly, the appeals filed by the deceased's concern were disposed of as abated.3. Confirmation and quantification of duty demand based on seized records:The Commissioner confirmed the duty demand based on seized records, including note books, computer printouts, and other documents, which indicated underinvoicing and additional amounts collected in cash. The Commissioner reduced the duty demand from the show cause notice by restricting it to figures obtained from seized documents, resulting in a confirmed duty demand of Rs. 55,64,187/- for National Ply Boards.4. Admission and retraction of statements by dealers:The statements of several dealers initially indicated that they paid extra amounts in cash over the invoice value. However, during cross-examination, many dealers retracted their statements. Despite the retractions, the Tribunal noted that the statements of key employees and corroborating documents provided sufficient evidence of underinvoicing and additional cash collections.5. Applicability of transaction value under Central Excise Act:The Tribunal discussed the concept of 'transaction value' under Section 4 of the Central Excise Act, 1944, which requires that the price be the sole consideration for the sale. Since the appellants collected additional amounts in cash, the invoice values could not be regarded as transaction values. The Tribunal upheld the Commissioner's decision to reject the transaction value and determine the assessable value based on the best judgment assessment under the Central Excise Valuation Rules, 2000.6. Use of private records and computer printouts as evidence:The Tribunal considered the private records and computer printouts seized during the investigation as admissible evidence. These records, corroborated by statements from key employees, indicated underinvoicing and additional cash collections. The Tribunal rejected the argument that floppy discs are not admissible evidence under Section 36B of the Central Excise Act, noting that the private records were maintained by responsible employees and contained information correlatable to statutory records.7. Remanding of similar cases for de novo decision:The Tribunal acknowledged that similar cases involving other plywood manufacturers had been remanded for de novo decisions. However, it emphasized that each case should be decided based on its own evidence and facts. The Tribunal found sufficient evidence in the present case to uphold the Commissioner's order without remanding it for a fresh decision.Conclusion:The Tribunal upheld the impugned order confirming the duty demand and penalties against M/s. National Ply Boards, while abating the proceedings against M/s. Arch Ply Boards due to the death of its proprietor. The appeals filed by the assessees and the Revenue were rejected, and the Tribunal emphasized the sufficiency of evidence in establishing the allegations of underinvoicing and additional cash collections.