Undervaluation and clandestine removal demands fail without independent corroborative evidence of flow back or actual extra consideration.

CESTAT Ahmedabad held that revenue could not sustain central excise demands for alleged undervaluation and clandestine clearances of PTY where the investigation, show cause notices and evidence were materially identical to earlier decided matters. The department had relied on bank statements, stock statements and statements recorded in a different context, but produced no independent corroborative evidence of actual undervaluation or flow back of additional consideration. As no distinguishing facts were shown and the earlier decisions on the same matrix had already gone in favour of the assessee, the adjudication orders dropping the proceedings were upheld and the revenue appeals were dismissed.

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Issues: Whether the revenue's appeals against dropping of central excise duty demands arising from alleged undervaluation and clandestine clearances of PTY were liable to be dismissed in view of earlier decisions on identical facts and evidence.

Analysis: The investigation, the show cause notices, and the evidentiary foundation were found to be materially identical to earlier batches of cases concerning PTY. The adjudication orders had been passed on the basis of the same line of reasoning accepted in the earlier decisions, where it was held that the department had not established undervaluation merely from bank statements, stock statements, or statements recorded in a different context, without independent evidence of flow back of additional consideration or other corroborative material. The same factual matrix had already been decided in favour of the assessee by higher judicial forums, and no distinguishing feature was shown.

Conclusion: The revenue's challenge was not sustainable and the adjudication orders dropping the proceedings were upheld. The appeals were dismissed.

Ratio Decidendi: In cases of alleged undervaluation and clandestine removal, demand cannot be sustained on the basis of bank statements or similar collateral material alone unless the revenue proves, by independent and corroborative evidence, actual undervaluation or flow back of additional consideration.

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