2010 (7) TMI 807 - AT - Central Excise

Tribunal upholds duty demand for undervaluation, orders fresh adjudication on individual transactions.

MYSORE CHIPBOARDS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MYSORE

MYSORE CHIPBOARDS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MYSORE - 2012 (282) E.L.T. 112 (Tri. - Bang.) Issues Involved:1. Allegation of under-invoicing and evasion of Central Excise Duty by MCL.2. Validity of evidence such as inter-office memos, slips, and statements.3. Retraction of statements by MCL employees.4. Methodology for determining undervaluation and differential duty.5. Penalty imposition on MCL and its Resident Director.6. Legitimacy of the Revenue's appeal and procedural correctness.Issue-wise Detailed Analysis:1. Allegation of Under-invoicing and Evasion of Central Excise Duty by MCL:The Directorate General of Central Excise Intelligence (DGCEI) conducted searches at MCL's premises and found incriminating documents suggesting that MCL was undervaluing excisable goods and evading duty by showing only a part of the actual sale consideration in their invoices. The Commissioner confirmed a demand for Rs. 81,01,637/- against MCL based on these findings.2. Validity of Evidence Such as Inter-office Memos, Slips, and Statements:The evidence included inter-office memos, slips, and documents recovered from various locations, which indicated under-valuation and receipt of money in excess of the invoiced amounts. Statements from MCL employees corroborated these findings. The Commissioner relied on these documents and statements to confirm the demand for differential duty.3. Retraction of Statements by MCL Employees:MCL employees retracted their initial statements, claiming they were made under duress. However, the Commissioner, citing the Apex Court judgment in Surjeeth Singh Chhabra v. Union of India, held that retracted confessions still bind the petitioner. The Tribunal upheld the Commissioner's decision, noting that retractions made before a notary are not considered effective unless made before the proper officer.4. Methodology for Determining Undervaluation and Differential Duty:The Commissioner used various documents and statements to determine the extent of undervaluation. For instance, an inter-office memo showed that the actual sale value was higher than the invoiced value by 40% to 54.56%. The Commissioner confirmed the differential duty based on these findings but limited the confirmation to specific instances where concrete evidence was available. The Tribunal remanded the case for fresh adjudication, emphasizing the need for correlation between invoices and alleged undervaluation.5. Penalty Imposition on MCL and Its Resident Director:The Commissioner imposed a penalty of Rs. 81,01,637/- on MCL under Section 11AC of the Central Excise Act and a penalty of Rs. 10,00,000/- on Shri Shyam Daga, Resident Director of MCL, under Rule 209A of the erstwhile CER, 1944. The Tribunal upheld the penalties, noting that MCL had consciously resorted to fraudulent means to evade duty.6. Legitimacy of the Revenue's Appeal and Procedural Correctness:The Revenue's appeal was initially challenged by MCL on procedural grounds, as it was filed by the Commissioner of Central Excise, Mysore, instead of Mangalore. The Tribunal found that the direction to the Commissioner of Central Excise, Mangalore was a typographical error and allowed the appeal to proceed. The Tribunal also remanded the case to the Commissioner for fresh adjudication, instructing to follow the principles laid down in the CERA Boards & Doors case.Conclusion:The Tribunal upheld the findings of undervaluation and the corresponding duty demand in specific instances where concrete evidence was available. The case was remanded for fresh adjudication to determine the exact differential duty, ensuring that each transaction is individually examined. The penalties imposed on MCL and its Resident Director were upheld, emphasizing the fraudulent nature of the undervaluation scheme.