2010 (12) TMI 1015 - AT - Central Excise

Tribunal remands case for reassessment of duty demand and penalties

THUMBAY HOLDINGS PVT. LTD. Versus COMMISSIONER OF C. EX., MANGALORE

THUMBAY HOLDINGS PVT. LTD. Versus COMMISSIONER OF C. EX., MANGALORE - 2011 (272) E.L.T. 225 (Tri. - Bang.) Issues Involved:1. Evasion of Central Excise duties by undervaluation.2. Admissibility and reliability of evidence, including bank statements and retracted statements.3. Application of the extended period for raising demand.4. Correctness of the quantification of duty demand.5. Imposition of penalties on the company and individuals.Detailed Analysis:1. Evasion of Central Excise Duties by Undervaluation:The appellants, manufacturers of plywood and block boards, were accused of evading excise duty by undervaluing their products. The Directorate General of Central Excise Intelligence (DGCEI) conducted searches and recovered incriminating documents indicating that the appellants collected amounts in cash over and above the invoiced value to evade duty. The adjudicating authority concluded that the appellants had shown only 37% of the actual value collected, leading to a demand of Rs. 7,21,568/- along with interest and penalties.2. Admissibility and Reliability of Evidence:The appellants argued that the bank statements could not be relied upon as evidence since the provisions of the Bankers Book Evidence Act, 1891, were not followed. They also contended that the statements of the dealers and employees were obtained under coercion and later retracted. The adjudicating authority, however, deemed the retractions as afterthoughts and upheld the initial statements as voluntary and admissible. The Tribunal noted that statements recorded under Section 14 of the Central Excise Act are valid evidence but emphasized the need for corroboration when such statements are retracted.3. Application of the Extended Period for Raising Demand:The appellants argued that the show-cause notice was barred by limitation as it was issued 894 days after the initial recovery of documents. The adjudicating authority rejected this argument, citing the Larger Bench decision in Nizam Sugar Factory, which held that the five-year period for raising demand in cases of suppression, fraud, etc., is not curtailed by the date of knowledge. The Tribunal upheld this view, finding the demand not barred by limitation.4. Correctness of the Quantification of Duty Demand:The Tribunal found that the demand was based on slips recovered from one dealer and statements from a few others, which were not sufficient to establish undervaluation for all clearances made by the appellants. The Tribunal emphasized that transaction value under Section 4 of the Central Excise Act is peculiar to each removal and cannot be arbitrarily quantified based on limited evidence. The Tribunal remanded the matter to the Original Authority for reworking the demand, considering direct sales to Tata Coffee Ltd. and the need to ascertain transaction value for each removal.5. Imposition of Penalties:The penalties imposed on the company and individuals were challenged on the grounds that the guilt was not established and the penalties were imposed mechanically. The Tribunal noted that the penal liability of the individuals should be reassessed in de novo proceedings following principles of natural justice. The Tribunal set aside the impugned order and remanded the matter for fresh adjudication on both the duty liability and penal liabilities.Conclusion:The Tribunal found that the evidence presented was insufficient to uphold the entire demand and penalties as quantified by the lower authorities. The case was remanded to the Original Authority for a fresh decision, emphasizing the need for a detailed and justifiable quantification of duty demand and reassessment of penalties following the principles of natural justice.