TaxTMI 
TaxTMI 
2009 (3) TMI 431
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Interiors, Kerala; (5) M/s. Arihant Marketing, Coimbatore; and (6) M/s. Krishna Agencies, Tamil Nadu are liable for confiscation. He had imposed redemption fine in respect of each of these items. He had also imposed penalties on these parties, the details of which are also given in the tabular column. Sl. No. Appeal No. Name of the Parties Amount involved & Period of dispute 1. E/947/2006 M/s. CERA Boards & Doors, Kannur v. CCE, Calicut Duty: Rs.79,21,663/- Penalties: Rs.79,21,663/- u/s 11AC Rs.5,000/- u/r 26 Redemption Fine: Rs.25,000/- (Rs.12,50,000/- already deposited) 1-12-1998 to 5-12-2002 2. E/948/2006 M/s. Krishna Agencies, Salem v. CCE, Calicut Duty: Nil Penalty: Rs.5,000/- u/r 26 Redemption Fine: Rs.8,000/- 1-12-1998 to 5-12-2002 3. E/949/2006 M/s. Ply Home, Coimbatore v. CCE, Calicut Penalty: Rs.5,000/- u/r 26 Redemption Fine: Rs.2,500/- 1-12-1998 to 5-12-2002 4. E/950/2006 M/s. Decowood Interiors, Cochin v. CCE, Calicut Penalty: Rs.5,000/- u/r 26 Redemption Fine: Rs.15,000/- 1-12-1998 to 5-12-2002 5. E/951/2006 M/s. Gee Ply, Erode v. CCE, Calicut Penalty: Rs.5,000....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee had evaded Central Excise duty from the year 1998 to 2002, to be precise, up to 5-12-2002. The allegation is that they had paid duty only in respect of 30% of the actual value. Therefore, the second Show Cause Notice dated 22-12-2003 had been issued for the differential duty for this period in respect of all the clearances made by the unit during this period. After issue of the two Show Cause Notices, the Commissioner of Central Excise, Calicut had taken up the adjudication and passed the impugned order. 6. The Commissioner has given elaborate findings from Para 54 to Para 106 and on the basis of his conclusions, he has given his Order in para 107 of the impugned order. His findings starts from Para 54. He has given the gist of the Show Cause Notices in Para 54. As already stated, the Show Cause Notice dated 9-4-2003 proposes confiscation of goods seized at six places in the course of the investigation. The relevant parties, along with the main appellant, are parties to the said Show Cause Notice. The Show Cause Notice dated 22-12-2003 is for a demand of Rs.4,29,01,384/- being the differential duty on the goods manufactured and removed from the main assessee M/s. CERA Board....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(6) Shri G.N. AgarwaJ, M/s. Gee Ply, Erode; (7) Shri Sunny John, M/s. Decowood Interiors, Cochin; (8) Shri Kailash Kumar, M/s. Arihant Marketing, Coimbatore; (9) Shri Arvind L. Patel, M/s. Krishna Agencies, Salem; (10) Shri T.V.G. Ganezan, M/s. Jamuna Agencies, Vellore; (11) Shri Abdul Khayoom, M/s. Woodlands Doors & Plywoods, Chennai. In Para 55 of the impugned order, the Commissioner has stated that he had examined all the above statements and the documents thoroughly. 6.2 From Para 56 onwards, the Commissioner is discussing each of the relied on document and which had been enumerated by him in Para 55. We do not think that it is necessary for us to repeat his findings on each of the slips, documents, computer printouts, statements, etc. Suffice it to say that all these documents, printouts, statements etc., point out towards the fact of undervaluation. From the statements and from the facts mentioned in these documents, the Commissioner has come to the conclusion that the assessees had paid duty only on 30% of the actual sales consideration, which is indicated in their invoices. In that case, the balance 70% had escaped assessment of Central Excise Duty. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted the differential duty payable by the assessee M/s. CERA Boards. In other words, in respect of all the other dealers, he had dropped the demand, as the investigation had not recorded statements from those dealers admitting that M/s. CERA Boards had supplied goods to them showing lesser price in invoices and collected the differential amounts. While coming to the conclusion, he had relied on the following decision:- (i) Sharon Veneers v. CCE, Chennai - 2002 (146) E.L.T. 655 (Tri.-Chennai) wherein it is held that price slips recovered from one of several dealers of assessees cannot be relied upon to show that goods have been sold on prices indicated therein to all the other dealers. (ii) The decision of the Hon'ble Supreme Court reported in 1983 (13) E.L.T. 1546 (S.C.) that the department has to investigate all of the 40 dealers of the assessee all over of South India to prove undervaluation and cannot plead that it is difficult to do so. (iii) Alfa Ceramics Industries v. CCE, Indore - 2002 (145) E.L.T. 454 (Tri.-Del.) wherein it has been held that evidence collected in respect of sales to Madhya Pradesh distributors about collection of part of sale price in cash over and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Beauty Dyers v. CCE, Chennai - 2001 (136) E.L.T. 339 (T) wherein it is held that Revenue is required to sustain the allegation only by preponderance of probability. 6.9 In Para 88, he has dealt with the contention of the appellant that the Show Cause Notice ignores the statement of Shri K.S. Harris, Managing Partner that it was possible that sales representatives at Bangalore might have collected extra amount and the implied meaning of the statement of the Managing Partner thereto that such cash collection was done without the knowledge of the factory management/partners. All these contentions have been negatived by the Commissioner on the basis of the available documentary evidences, which have been unearthed. He had also rejected the contention of the appellant that for the period prior to 1-7-2000, the normal price, which was available should be adopted. The Commissioner had held that the assessee was hoodwinking the department by showing lesser amount. Therefore, the normal price would be the value shown in the invoices + the amount collected by them over and above the invoice price. In other words, the normal price as claimed by the party has not been accepted. 6.10 As r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erala 14 23 56 2. Karnataka 10 5 11 3. Tamil Nadu 10 13 11 4. Other States 33 25 14 TOTAL 67 66 92 Therefore, with effect from 1-4-2001, there were two streams of clearances from the factory, direct ex-factory sales to dealers in Kerala and Tamil Nadu and clearances to depot at Bangalore from where the goods would be sold to dealers at Karnataka. As far as the ex-factory clearances to dealers in Kerala and Tamil Nadu are concerned, the assessees were raising sale invoice showing the assessable value on which duty was paid and net price to dealers. In respect of goods stock transferred from the assessee's factories to the Bangalore depot, they were paying duty on the assessable value prevailing at the depot and sales tax was not paid on such clearances from the factory. The Bangalore depot at the time of sale of these goods would raise a sale invoice and pay the applicable sales tax in Karnataka. The Bangalore depot was catering to 149 dealers and 86 dealers in 2001-02 and 2002-03 respectively in Karnataka while the factory gate sales were made to 90 dealers and 63 dealers situated in Kerala, Tamil Nadu and other S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....il Nadu, prior to 1-7-2000, should be taken to represent the normal price under Section 4(1)(a) of the Central Excise Act, 1944 as it stood before 1-7-2000. For the period prior to 1-7-2000, since the normal price of excisable goods at the factory gate has been established by the assessee and accepted by the Commissioner, even if the assessee have realized higher price from certain other buyers, the same would be irrelevant for the purpose of payment of excise duty once the normal price in the factory gate has been established. The following case-laws were relied on:- (a) Somany-Pilkington's Ltd. v. B.P. Verma (Director, Publications) - 1995 (76) E.L.T. 281 (Del.) (b) Indian Oxygen Ltd. v. CCE - 1988 (36) E.L.T. 723 (S.C.) (c) DCM Ltd. v. Union of India - 1991 (51) E.L.T. 305 (Raj.) (d) Transpeck Industry Ltd. v. CCE - 2003 (162) E.L.T. 1095 (Tri.-Del.) (e) CCE v. Falcon Tyres Ltd. - 2002 (147) E.L.T. 1166 - Affirmed by Supreme Court as reported in 2003 (155) E.L.T. A247 (S.C.) (f) Andaman Timber Industries Ltd. v. CCE - 1999 (114) E.L.T. 946. (vi) As far the demand for the period from 1-7-2000 to 31-3-2001 is concerned, the period is governed by the concept of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a highly fictitious figure. If such a huge amount of cash was collected by the assessee, the same ought to have been reflected at least in some of the documents of the assessee. No such evidence is available to show that the assessee had collected such huge cash. (ix) Without prejudice to the various contentions, it was submitted that the demand has been confirmed by the Commissioner only in respect of clearances made to 14 dealers whose statements indicated that they had paid a certain percentage of sale proceeds in cash over and above the invoice prices. Out of the 14 dealers, the statements allegedly recorded from 3 dealers viz. Shri Shankar Patel, Shri V.S. Solanki and Shri Ram Naik J. Shah, were not relied upon in the Show Cause Notice at all and have been suddenly introduced in the Order-in-Original in violation of the principles of natural justice. The Commissioner has further confirmed the demand in respect of clearances made to these three dealers by drawing an inference that since the assessee had allegedly collected amounts in excess of invoice price from the other 11 dealers, they might have collected excess amount from these dealers also. Thus, the duty involved in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ersion on the entries of private registers. As regards the collection book maintained by Shri T.R. Bhaskar, Branch Manager, it was submitted that the documents have been maintained for his own purpose and, therefore, the assessee do not have anything to do with the documents. (xi) The Commissioner has confiscated the goods valued at Rs.12,80,926/- lying at the assessee's depot under Rule 25 of the Central Excise Rules and imposed a redemption fine of Rs.25,000/-. The confiscation of the goods is not maintainable for the reason that the appellants have conclusively established that no undervaluation as alleged by the department have taken place. (xii) Further, in the course of the hearing before the Tribunal, Shri Shiva Dass emphasized the following propositions: He stated that for the period prior to 30-6-2000, 88% of the sales were made through dealers from whom statements have not been recorded. The Commissioner, in his OIO, dropped the demand for all the dealers excepting the 11 dealers on the ground that there is no evidence to prove undervaluation and the demand is based on presumptions and assumptions. In the appeal filed before the Tribunal, there is no challenge to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ression "best of his judgment". Judgment is a faculty to decide matters with wisdom truly and legally. Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guess-work in a "best judgment assessment", it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case. Though sub-section (2) of Section 12 of the Act provides for a summary method because of the default of the assessee, it does not enable the assessing authority to function capriciously without regard for the available material. Can it be said that in the instant case the impugned assessment satisfied the said tests? From the discovery of secret accounts in the head office, it does not necessarily follow that a corresponding set of secret accounts were maintained in the branch office, though it is probable that such accounts were maintained. But, as the accounts were secret, it is also not improbable that the branch office might not have kept parallel accounts, as duplication of false accounts would facilitate discovery of fraud and, it would have been thought advis....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... predictability in the administration of justice. (xvi) Identical issue having been obtained finality, the Department is not permitted to raise the same dispute for other assessees. The Revenue has accepted that the investigations done in respect of M/s. CERA Boards and M/s. Prestige Boards are identical. In this regard, it is pertinent to note that the department has accepted the Order-in-Original 10/2006, dated 27-3-2006/5-5-2006 in the case of M/s. Prestige Boards Pvt. Ltd. Since no appeal has been filed and the period to file an appeal has elapsed, the Order-in-Original has become final. Having accepted the Commissioner's order and findings therein, the Department cannot raise, the same dispute in other similarly placed cases. Reliance was placed on the following decisions: (a) Birla Corporation Ltd. v. CCE - 2005 (186) E.L.T. 266 (S.C.) (b) Indian Oil Corporation Ltd. v. CCE, Baroda - 2006 (202) E.L.T. 37 (S.C.) (c) CCE, Navi Mumbai v. Amar Bitumen & Allied Products Pvt. Ltd. - 2006 (202) E.L.T. 213 (S.C.) (d) CCE, Mumbai v. Bigen Industries Ltd. - 2006 (197) E.L.T. 305 (S.C.) (e) Boving Fouress Ltd. v. CCE, Chennai - 2006 (202) E.L.T. 389 (S.C.). (xvii) I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....E v. Malbro Appliances P. Ltd. - 2007 (208) E.L.T. 503 (Del.) = 2007 (5) S.T.R. 256 (Del.). 8. The Revenue also has filed an appeal against the impugned order of the Commissioner. The grounds of appeal of the Revenue are as follows:- (A)The findings of the Adjudicating Authority that Department has not adduced convincing evidences to allege undervaluation in respect of all clearances other than those made to 11 customers from whom statements have been recorded is not correct to the facts and circumstances of the case. (B) In Para 83, adjudicating authority remarked that no evidence has been adduced by the Dept. to prove that M/s. CERA Boards have shown lesser price in the invoices issued to all customers except eleven customers from whom private price lists were recovered. But contradicting this stand, the adjudicating authority has included three more dealers by stating that "I find that M/s. CERA Boards also have supplied goods to these dealers and Shri K.S. Mohammed Ali, Managing Director of M/s. Prestige Boards, who used to interact with the dealers of CERA Boards, is the brother of Shri K.S. Harris, Managing Partner of M/s. CERA Boards. In the circumstances I am sure ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not want to repeat. Further, Shri Ramanan stated that several employees of M/s. CERA, Bangalore Office and customers of CERA had given clear statements with regard to the undervaluation and they had not at all retracted. Even when retracted, they were withdrawn. At no point of time, any threat or duress was alleged. Shri K.S. Harris, in his statements dated 24-3-03, 30-9-03 and 28-11-03, had never denied the collection of cash over and above the prices indicated on the invoice. In fact, he admits that such cash is not reflected in the books of account. It is pertinent to note that in their statements S/Shri Dayananadan, Cyril D'Souza and T.R. Bhaskar, all employees of CERA, at the Bangalore office have unanimously observed that the records in question reflected sales transaction of CERA from their Bangalore office. The employees explained the entries made in these books and records, which clearly established the practice adopted by CERA, of collecting additional consideration over and above the invoice prices. The statements of each corroborated the records, documents maintained by others and their correctness and the veracity. None of them contradicted the others. The remittances ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....statements were recorded in the case of M/s. Prestige, 10 were common with that of the case of CERA and 3 were common with that of the case of Noble/Hero. The prices shown on the invoices and the actual prices recovered are closely approximate or same for all the four units. In view of the above points, the operations of the units should, for the purposes of marketing, pricing, invoicing and collection, be regarded as unified operations. 9.3 Shri Ramanan stated that the investigations revealed that the under invoicing and collection of cash over and above the invoice values appears to be a uniform practice and there is enough justification for applying in respect of all the clearances of the unit for the past 5 years. He stated that the correct application of the principle of 'preponderance of probability' has considerable significance for the present appeals. The facts and circumstances of the present 4 cases involving evasion of duty through undervaluation, following the same modus operandi, calls for an unified view. Moreover, "preponderance of evidence" is the standard required in most civil cases. The standard is met if the proposition is more likely to be true than not tru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roof, often it is nothing more than a prudent man's estimate as to the probabilities of the case. He relied on the following decisions:- (a) Shah Guman v. State of Andhra Pradesh - 1983 (13) E.L.T. 1631 (S.C.). (b) Manilal Bhanabhai Patel v. UOI - 1992 (60) E.L.T. 99 (Guj.). 9.5 Further, he relied on the decision of the Hon'ble Allahabad High Court in Rishi Kesh Singh v. The State (AIR 1970 All. 51 at 90), wherein it is held" that 'preponderance of probability' means 'outweighing in the process of balancing however slight may be the tilt of the balance or the preponderance'. Further, he relied on the decision of this Bench in the case of Gulabchand Silk Mills Pvt. Ltd. v. CCE, Hyderabad-II - 2005 (184) E.L.T. 263 (Tri.-Bang.) wherein it was observed that 'clandestine activity can at best be established only by circumstantial evidence and it would be humanly impossible to establish every link in the chain of clandestine activity without any break'. As in the said case, in the present cases, incriminating documents/records have been supported by admissions by the employees of the Group and a few dealers, though not all. The expectation that all dealers, who are actually part....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... present case, it cannot be said that the price at which the goods were sold to the dealers were the normal price. In this case, there is an additional consideration also by way of cash. One cannot say that normal price existed. The amounts recovered by CERA over and above the invoice prices, should be regarded as additional consideration and should be added to the invoice price to arrive at the sale price and determination of value done in terms of the Valuation Rules that existed prior to 1-7-2000. He rejected the argument advanced by the appellant saying that it is devoid of any merit. The normal price can be accepted only when such price is the sole consideration of sale. In this case, it is true that it is not the sole consideration. 9.9 Similarly, in respect of the clearances after 1-7-2000 also, the 'Transaction Value' should be arrived at only after adding the extra amount received in cash to the invoice value. Therefore, it is fallacious to argue that a transaction value existed at the factory gate for the goods cleared after 1-7-2000 from the CERA since evidences adduced have clearly established that it was incumbent on dealers/customers, who purchased goods from these....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Alfa Ceramics, (cited supra), the evidence presented clearly established through documents and statements of the two distributors established in Madhya Pradesh that with reference to the transactions effected through the distributors, 'Alfa' had realized extra amounts in excess of the invoiced amounts. The tribunal accepted this argument of Revenue. But the Tribunal further held that 'evidence gathered has convincingly established that part of the sale price from the MP distributors have been collected by cash. Such evidence is lacking in respect of dealers in other areas. In such a situation, evidence obtained in respect of sales to MP distributors cannot lead to the reasonable inference that similar was the case in respect of all sales in other areas also. In the present case, he stated that there is overwhelming evidence of the practice of undervaluation. 9.13 He further distinguished the facts of Malabar Plywood Works (cited supra) and Western Plywoods (cited supra) case also. 10. In view of the above submissions, Shri Ramanan requested the Bench that the appeals filed by M/s. CERA Boards & Doors and seven others should be rejected as devoid of any merit and that the ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to be confirmed, it should be confined only to 11 dealers. 11.3 Another important point, which the learned Advocate Shri Shiva Dass made was that the total clearances fell under two periods. The period prior to 1-7-2000 when the concept of 'normal price' was prevalent. After 1-7-2000, the concept of 'Transaction Value' has been imposed. Shri Shiva Dass argued that for all the clearances prior to 1-7-2000, only the normal price should be adopted. He stated even if excess collections had been made in few cases, that should be ignored and the normal price, which, according to him, is the invoice price or the factory gate price, should be adopted. This is his main point. 11.4 As regards the period after 1-7-2000, he stated that the transaction value has to be adopted. That means, you have to go only by the evidence and where there is no evidence, he stated that the duty cannot be demanded only on presumptions and assumptions. 11.5 As regards the allegation of under invoicing is concerned, we find that the investigation done is very extensive. They have confronted the officials of the assessee-company at their depot in Bangalore. They had also contacted certain dealers. They ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed. This is the essence of his argument and he distinguished all the case-laws relied on by the learned Advocate for the assessees. For example, there is the case of Sharon Veneers (cited supra). Shri, Ramanan had distinguished it on the ground that the facts and circumstances and the quality of evidence produced in the present case are entirely different from those in the case of Sharon Veneers. As regards the Somany Pilkington Ltd. (supra) case, there, one of the sales executive of the company Mr. Vyas was collecting some excess amount on his own behalf. In this case, there is no evidence that any person collected cash on his own behalf. So, this case-law also .cannot be applied here. He distinguished the other cases also. 11.8 Similarly, the learned Advocate for the assessees produced before us a large number of case-laws to show that the differential duty should be demanded only in respect of the clearances made to dealers, who have been investigated and who had given statement regarding excess collection. At this juncture, we would like to mention that we would not like to discuss each and every case-law, which has been cited by both sides because the fact in one case is no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rned, the duty should be decided on the basis of the normal price. What is normal price? During the relevant period, Section 4(1)(a) read as follows: "(4)(1)(a): the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale." 11.10 We are of the view that the normal price in respect of the clearances prior to 1-7-2000 should be determined by the Commissioner on the basis of the available evidence in accordance with law. Once the normal price in respect of each variety of goods is decided, then that value should be adopted for calculation of duty. Once that is done, the differential duty can be calculated. Therefore, this cannot be done at the level of the Tribunal. All the evidences have to be examined. We make it clear that on the basis of the available evidence, the normal price should be decided by the Commissioner in respect of the goods cleared during the relevant period. Once that is done, that would be applicable to all clearances. We want to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....seized from (1) M/s. CERA Boards & Doors, Bangalore; (2) M/s. Ply Home, Coimbatore; (3) M/s. Gee Ply, Tamil Nadu; (4) M/s. Decowood Interiors, Kerala; (5) M/s. Arihant Marketing, Coimbatore; and (6) M/s. Krishna Agencies, Tamil Nadu are liable for confiscation. His findings are based on the fact that the documents seized from the Depot of M/s. CERA Boards, residences of their employees and from the premises of their dealers were corroborated by the statements of the persons concerned revealed undervaluation by showing lesser price, namely 30% of the actual price in invoice and collecting amount over and above the invoice price. In view of the overwhelming evidence, we confirm the findings of the Commissioner that the above dealers are liable for penalty under Rule 209A of the erstwhile Central Excise Rules, 1944/Rule 26 of the erstwhile Central Excise (No. 2) Rules, 2001/Rule 26 of the Central Excise Rules, 2002. He had imposed redemption fine in respect of each of these items. He had also imposed penalties on these parties. We uphold the penalties imposed on these six dealers from whom goods have been seized. The confiscation and redemption fine is also upheld, as the Commissioner....