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1991 (10) TMI 166
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....ce at Miao (Arunachal Pradesh) are engaged in the manufacture, of plywood of different grades are evading Central Excise duty by wilful mis-statement and suppression of material facts and mis-declaration of prices and mis-classification of products, the Central Excise officers on 24-9-1985 searched the factory premises of the appellant and seized certain documents. On scrutiny of the seized records such as individual gate passes/challans/sale bills issued from the factory, it was found that 100% of the products have been sold ex-factory to the different wholesale buyers. 4. It is the case of the department that on further scrutiny of the seized records, it was revealed that the appellants adopted dubious methods of clearing the various commercial plywood of average grades in the guise of super-ply-III (maximum defective) grades. It was also found by the officers that there was a confidential letter written by M/s Woodcraft Products Ltd., who is one of the wholesale buyers of the appellants company which made it clear that the goods of higher value were cleared by the appellants as maximum defective grades and thereby they evaded Central Excise duty. The details of production of ....
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....ellants' Company replied the abovesaid Show Cause Notice and pleaded that they are not liable for the above action as stated in the Show Cause Notice. The appellants' company submitted their reply on 10-4-1989 denying all the charges framed against them in the Show Cause Notice. It was stated inter alia that all the products were sold by the appellants' factory to various wholesale buyers on ex-factory prices and it is not possible for them to sell such huge quantity of superior grade to the larger number of buyers in the guise of inferior quality. It was also stated in the reply that the appellants' company had no motive-whatsoever to evade the Central Excise duty. 7. With respect to letter of M/s Woodcraft Products Ltd. which was recovered from the possession of a wholesale buyer, the appellants stated that the said letter was an unsigned letter and it was not written by the appellant and it was not recovered from their premises and it has no connection with the appellants' company. They also stated that the Central Excise department during the time of annual stock taking verified the stock of the appellants and found the same in order. Regarding the abnormal increase of the p....
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....contended by Shri Bagaria that learned Additional Collector had simply ignored the said letter and said certificate dated 3-5-1989 which was issued by WCPL with the above clarifications. In this connection, it was pointed out that the Additional Collector was not correct in holding that the appellants had not produced any proof to substantiate their contention. It was submitted that the abovesaid letter which was written by the WCPL was seized from one of its branches and when the same clarified the entire position, there was or should be no scope whatsoever to arrive at the purported findings by the Additional Collector. It was also stated that the costing (Purta) value is individually not worked out of the different grades separately, but is worked out of all the plywood manufactured in the factory during a given time and of all the grades taken together. Accordingly the costing of both inferior and superior grades is always taken at the same figure which were evident from the documents submitted by the appellants. It was also pointed out that this method of costing value by the appellants was not disputed by the learned Additional Collector and the learned Additional Collector w....
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....the Show Cause Notice related to the period from Sep., 1983 to Sep., 198 and the Show Cause Notice was actually issued on 6-10-1989 and therefore, the same was barred by limitation under Section 11(i) having been issued after the expiry of 6 months. In this connection, reliance was placed on the following decisions :- (i) Collector of Central Excise v. Chemphar Drugs and Liniments [1989 (40) E.L.T. 276]. (ii) Padmini. Products v. Collector of Central Excise [1989 (43) E.L.T. 195)]. 12. It was also pointed out that the letter seized from WCPL cannot be used for extending the period of limitation. Alternatively, it was contended that in any event by relying on the said letter, no demand could be made for the earlier period from September, 1983 onwards or in respect of the goods supplied to other customers. In such circumstances, the levy of penalty under Rule 173Q of the Central Excise Rules, 1944 is not justified. 13. Replying the abovesaid arguments, learned SDR, Shri M.N. Biswas contended that the letter which was seized from the premises of WCPL is very important in this case. He pointed out that in that letter it was mentioned that Bisari III brand material from Bisa....
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....short levied amount is extendable upto 5 years under the proviso of sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944. He also drew our attention to the discussions made by the learned Additional Collector in the impugned Order. He reiterated those reasonings mentioned-in the impugned Order. Shri Biswas also stated that the decisions relied on by the learned Advocate for the appellants are not applicable to the facts of this case. It was his contention that the Order of the learned Additional Collector is based on facts which are established beyond reasonable doubts and not on mere presumptions and conjectures. He also stated that since there was a suppression of facts and wilful mis-statement, the extended period of limitation is applicable. It was also pointed out that merely because the Central Excise Officers had checked the records of the appellants and the Audit Department also did not raise any objection, these are not sufficient reasons to disprove the evidences which are already brought on record. Shri Biswas pointed out that the non-examination of the buyers of the appellants' company will not detract from the value of the evidence which was already....
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.... as demanded in this case and the second point is whether the extended period of limitation under proviso to Section 11A(1) is applicable to the facts of this case. Point No. 1. As far as the point No. 1 is concerned, main evidence which is relied on by the Department is the letter which was seized from the premises of WCPL. That letter reads as follows :- Point No. 1. As far as the point No. 1 is concerned, main evidence which is relied on by the Department is the letter which was seized from the premises of WCPL. That letter reads as follows :- "Inter-communication From :- To :- Woodcraft Products Ltd. Woodcraft Products Ltd. Calcutta All Branches, Cochin. No. WCP: sale : VJ/855/93 dated 6-5-1985 Ref:- Bizari III and superply III from Bizari & Tirap veneer respectively. We write to inform you that Bizari III brand material from Bizari is in fact Bizari 1 grade. Similarly superply III being despatched from Tirap is Venus grade. Your billing for Bizari III & superply III material would be of Royal ply brand which is already in your possession. On account payment would be realised and report to in effect should be communicated to Mr. M.P. Ch....
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....rther stated in the letter as follows :- "By our said letter we only informed our branches that your plywood of superply III brand is the same as the Venus brand manufactured by us in the past." They have also issued another clarification dated 3-5-1989 stating that the expression "Venus grade" used in the above letter described the Venus grade plywood which was manufactured at their factory in the past. They have also stated in the letter that the 'Venus grade plywood' referred to in the letter seized from their factory did not in any way mean nor was intended to mean any plywood manufactured by M/s. Tirap Veneer and Saw Mills Ltd. They also stated in that letter that the said 'Venus grade plywood' manufactured at their factory was the plywood of inferior and defective grade whereas the plywood sold and marketed by M/s. Tirap Veneer and Saw Mills Ltd. under the brand name "Superply III" is also the plywood of inferior and defective grade. They also clarified that this "superply III" brand plywood of Tirap Veneer and Saw Mills is more or less of the same quality as that of Venus grade plywood which was manufactured by them. These clarifications go to show that what was intend....
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....ntioned in Annexure 'B' of the Show Cause Notice and from .the above data of production it was revealed that all of a sudden during March, 1985 to August, '85 the appellants intentionally declared as products of superply III 34.52% of the total production just to evade the payment of Central Excise duty. This data was also mentioned by the learned adjudicating authority in the Order-in-Original. Relying on the same, the material portion of the Order reads as follows :- "With regard to the ratio of their production of various grades. The party has explained that the quality depends on several factors which is not disputed. What is questionable is that defying all laws of averages the steady ratio of the different grades suddenly reversed as shown at page 4 of the Show Cause Notice. Such total change would obviously liquidate the company especially as such defectives and sub-standards are sold at 50% or so of costing. But there is no indication of such close dine or crisis in the company. The company is not able to give any proof of sub-standard wood or defective quality of bonding, nor have they stated that the same markets were not used in the relevant period. There was also no ....
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....uperply III grade. These are only assumptions and presumptions based on no evidence. A charge of clandestine removal has to be proved by the Department by some evidence and not on mere assumptions. 18. In this connection, learned Advocate Shri Bagaria relied on the decisions of Oudh Sugar Mills v. Union of India [1978 (2) E.L.T. (J 172) (SC)]. In that case the Supreme Court held that if the findings of the authorities are reached on assumptions, then ultimate conclusion will have to be rejected as incorrect. This decision Was followed by the Tribunal in the case of Premier Packaging Pvt. Ltd. v. Collector of Central Excise, New Delhi, reported in 1986 (26) E.L.T. 333. m that decision, the Tribunal held as follows :- "It was held by the Supreme Court in this matter that the demand for duty and the imposition of penalty could not be sustained as there was no tangible evidence against the appellants and there was only inference involving unwarranted assumptions. The findings, therefore, being vitiated by an error of law, it was held that the allegation based upon unwarranted assumption cannot form legal basis, for demand of duty." So also in the decision of the Tribunal repor....
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....he same figure. In this connection, he pointed out that at page 118 of the Paper Book furnished in this case, the costing of the plywood of different thickness has been worked out and costing of plywood of 3 mm thickness has been taken as 16.42. The statement on pages 121,123,130 and 132 of the Paper Book relates to the superply III, Venus superply and superply I grades respectively. In this statement also the costing of plywood of 3 mm thickness was taken as 16.42 for all the aforesaid grades. Similar is the position for the plywood of other thickness such as 4 mm, 6 mm, 8 mm etc. These documents which were placed before the Additional Collector have not been disputed by her. On the other hand in the impugned Order, she has clearly stated that method of costing is not disputed. 21. Shri Bagaria also contended that Central Excise authorities used to visit the factory of the appellant frequently and they used to verify the various stocks lying at the factory with reference to connected gate passes, as would be evident from the stock reports and daily production reports and gate passes in form GP. 1 and the RG. 1 registers which were produced alongwith the Paper Book. In such circ....