2002 (8) TMI 158 - AT - Central Excise

Timber and plywood under-valuation claims found unproven, duty demand set aside and re-quantification ordered; penalties reduced

Under-valuation of goods: Department relied on dealer statements and a balance-sheet entry but evidence was found coerced, selective and not credible; ... Valuation (Central Excise) - Burden of proof - Under-valuation - Adjudication - Evidence - Natural justice - Penalty - Imposition of Issues: (i) Whether the duty demand based on a price slip/chit recovered from M/s. Shree Sakthi Agencies is sustainable and requires re-adjudication; (ii) Whether duty demands in respect of clearances to other dealers (from whom no price slip was recovered) are sustainable; (iii) Whether penalties imposed on the appellant-company and its officers are maintainable.Issue (i): Whether the price slip/chit recovered from M/s. Shree Sakthi Agencies, together with related statements, constitutes adequate evidence to confirm differential duty for sales to that dealer or requires remand for de novo consideration.Analysis: The Tribunal examined the seized slip/chit and the contemporaneous statement of the dealer's partner, noting that the slip stood largely unsupported by corroborative evidence and that the dealer's statement was vague, promptly retracted and later repudiated on cross-examination. The Division Bench majority found the slip, unsupported, too slender to sustain a finding of under-valuation and held that continuation of proceedings or remand would be futile; the Technical Member took the view that the matter warranted re-adjudication with supply of copies and opportunity for cross-examination. The Tribunal assessed whether the slip alone, without effective opportunity to confront its maker and without corroboration, could justify confirmation of duty.Conclusion: The Tribunal majority concluded that the slip/chit by itself is inadequate to sustain the duty demand for sales to M/s. Shree Sakthi Agencies and no re-adjudication is necessary; the Technical Member would remand that limited issue for de novo consideration with supply of the slip and opportunity for cross-examination.Issue (ii): Whether the duty demands in respect of clearances to other dealers (where no slip was recovered) are sustainable.Analysis: The Tribunal evaluated the evidence relating to 40 dealers and found that the Revenue relied on isolated statements and a solitary slip rather than corroborative documentary or transactional linkage for each invoice. The Tribunal applied the principle that, where invoice procedure under Rule 173C(11) was permitted, the Revenue must show, with corroboration, that each transaction was colourable and extra consideration flowed in specific cases. Suspicion or uncorroborated statements were held insufficient to generalise under-valuation across all dealers.Conclusion: The Tribunal set aside the duty demands in respect of clearances to all dealers other than the one dealer subject to the slip/chit, holding those demands unsustainable for lack of corroborative evidence.Issue (iii): Whether penalties imposed on the appellant-company and certain officers are maintainable.Analysis: The Tribunal considered the evidence of involvement and noted absence of proof linking officers to fictitious transactions or to colourable receipt of extra consideration; it also considered admissions concerning invalid transport documents and the need to re-fix penalties if any liability remains after any remand outcome.Conclusion: Penalties as imposed were set aside; however, the penalty quantum for the appellant-company and its Managing Director was directed to be re-fixed if the remand proceedings result in any confirmed liability (Technical Member view as to limited remand). The penalty on the co-appellant (PKV Menon) was set aside.Final Conclusion: The Tribunal, by majority, concluded that most of the impugned duty demand is unsustainable for lack of corroborative evidence, set aside demands relating to dealers from whom no price slip was recovered, rejected the evidentiary value of the solitary slip for generalising across other transactions, and directed consequential reliefs including setting aside penalties while providing for limited re-fixation of penalty quantum if remand proceedings sustain any liability.Ratio Decidendi: A solitary price slip or isolated statements, without specific corroboration linking extra payments to each impugned invoice and without effective opportunity to confront and cross-examine the source, cannot alone sustain a finding of under-valuation or clandestine realization of price; the burden rests on the Revenue to establish under-valuation for each transaction with corroborative evidence and, in absence thereof, benefit of doubt must be given to the assessee.