TaxTMI 
TaxTMI 
TaxTMI 
2010 (12) TMI 1015
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....es and premises of some of the dealers on 28-4-2004 and on subsequent dates. The 'BA' group of companies is a conglomerate of five companies as detailed in the order-in-original and this group is controlled by Shri B. Abdul Salam, who is the over all incharge of all the said units, on a day to day basis. Shri J.M. Ashraf is the chief executive of 'BA' group of companies and special power of attorney holder of the said THPL. Shri Manoj Kumar Amin, is the marketing executive of 'BA' group of companies. The factory premises, offices and various premises of the dealers of the 'BA' group were searched and incriminating documents were recovered. Further investigation and verification of documents indicated that all the units are involved in large scale evasion of Central Excise duties by undervaluing their clearances of final products. Incriminating documents, such as chits, indicating the actual amounts collected, etc., were recovered from various premises indicating the modus operandi. On the basis of price list and chits recovered from the premises of M/s. Navin Glass and plywood, Davanagere, a dealer of the goods of THPL, price list seized from the premises of the office of BA group,....
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....tral Excise Rules, 2002. (c) Vide the impugned order, the Commissioner (Appeals) sustained the order of the Original Authority in toto. 2. In the appeal filed before us, the impugned order is challenged on the following grounds :- The impugned order was cryptic and the appellate authority did not give specific findings on the grounds raised by the assessee-appellant. The case of the Revenue was that amounts were collected in cash in excess of the invoice value and deposited in current account No. 1750 at Vijaya Bank, Brigade Road, Bangalore. It is submitted that the Commissioner (Appeals) did not render any finding on the following submissions made before him. (a) First of all, the above bank statement cannot be relied on as evidence since the provisions of Bankers Book Evidence Act, 1891 were not followed and non-observance of the said Statute, the bank statement loses its value as evidence. (b) Even assuming that the above bank statement has evidentiary value, there are no cash deposits in the said bank statement except of Rs. 4,000/- deposited for opening the account. (c) T....
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....4000/- in three years. The authorities had not ascertained the market price of the goods involved during the material period. Merely because the figures on four slips of paper tallied with figures of three invoices of the appellant, a conclusion was drawn that the sales price of the appellant's products were undervalued for entire one year. In his Statement dt. 6-5-2004, Shir Manoj Kumar Amin had stated that entries in page No. 44 of the file were to the best of his knowledge made by their accountant. He had further stated that page No. 53 of the file was their price list. During cross-examination on 12-2-2007, Shri Manoj Kumar Amin disowned the statement and stated that the same was obtained under coercion. The impugned order relying on retracted statements of witnesses was bereft of legality. The statement obtained from Shri J.M. Ashraf was signed by him after certain portions appearing in the same had been deleted at his instance. This cast aspersions on the manner in which the investigation had recorded the statements. Shri Manoj Kumar Amin had signed a statement already kept ready. The investigation gathered four chits/slips corresponding to three invoices from the premises of....
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.... to be proved with sufficient evidence. It was held that evidence of clearances to some agents could not be applied to others as the demand thereby became hypothetical and based on assumptions. Appellant relied on the following decisions of this Tribunal. (a) CCE v. Surya Ceramics [2006 (201) E.L.T. 392 (T)], wherein it was held that undervaluation with regard to clearance to certain parties and there was no evidence indicating practice of undervaluation in relation to clearance to dealers all over the country - demand to be restricted to clearances made to parties/regions receiving undervalued goods. (b) Alfa Ceramics Industries v. CCE [2002 (145) E.L.T. 454 (T)], wherein it was held hat evidence collected in respect of sales to Madhya Pradesh Distributors about collection of part of sale price in cash over and above the invoiced price, not to lead to reasonable inference that similar was the case in respect of sales in other areas also. This decision was maintained by the Supreme Court in 2003 (156) E.L.T. A325 (S.C.). (c) Truwoods Pvt. Ltd. v. CCE, 2005 (186) E.L.T. 583 (T), wherein it was held that presu....
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....b Industries Ltd. case. In Avishkar Processing Pvt. Ltd. v. CCE [2006 (198) E.L.T. 53 (Tri.)], it was held that confessional statement of the Director of assessee, cannot be relied upon to confirm charges of clandestine removal in the absence of corroborative evidence. In Monarch (I) Pvt. Ltd. v. CCE [2006 (197) E.L.T. 396 (Tri.)], it was held that when the demand was confirmed on the basis of calculation sheet annexed to the show-cause notice, basis of collection not disclosed in the sheet, no quantity against the value of the clearances given and no investigation made regarding the seller and purchaser of the goods, Department had failed to prove the charge of clandestine removal. Other case laws following the same line of reasoning were also cited. 2.2 The show-cause notice was barred by limitation. Entire documents were recovered on 28-4-2004. Show-cause notice was issued on 11-10-2006. It is submitted that when it was established that there was short payment etc. due to suppression, fraud etc. with intention to evade duty, then the Department could go back five years from the date of knowledge but the demand notice ought to be issued within a period of one year from the ....
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....ctly resorting to Rule 11 without ascribing reasons on the inapplicability of the preceding rules. In State of Kerala v. C. Velukutty [1966 (60) ITR 239 (S.C.)], the Supreme Court observed that the limits of power were implicit in the expression "best of his judgment". Judgment did not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of natural justice. Though there was an element of guess-work, it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case. In the appellant's case, the manner of computing the purported demand of duty for all the goods sold by the appellant during 2003-04 was not only arbitrary but was also harsh and without basis. It was held in United Glass v. CCE [1995 (75) E.L.T. 209 (S.C.)] that exercise of discretion for conducting a best judgment assessment should not be arbitrary. The appellate authority had not appreciated that the decision of the Tribunal in Woodman Industries v. CCE [2004 (164) E.L.T. 339 (Tri.)] maintained by the Supreme Court in 2004 (170) E.L.T. A307 (S.C.) had held that allegation of undervaluation was not sustainable on the basis of scr....
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.... & Plywoods, Davangere. The veracity of these slips was corroborated by Shri L.S. Navin of the said dealer. 2. One price list recovered from Shri L.S. Navin. He stated that the price list showed prices per sq. feet of different plywood purchased from various manufacturers. He affirmed that the document was in his handwriting and that the rate/sq. feet shown therein against the company name "BA" was the rate at which payments were made to THPL and the prices shown on the invoices were not the actual prices charged. 3. Price list seized from the office of BA group of companies. This document indicated that actual values realized from the customers were much higher than the prices shown on the invoices. 4. Statements of S/Shri L.S. Navin, Ashraf Khan and Ashok Kumar confirmed the billing practice of the BA group, namely, recovering from the customers values much higher than those indicated on the invoices. All of them named Shri Manoj Kumar as cash collecting agent of THPL. 5. Statements of Shri B.A. Salam dt. 17-5-2004, 28-9-2005 and 18-7-2006. He confirmed that....
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....nine slips recovered from the residential premises of Shri Navin were admittedly signed by Shri Ashraf. These related to invoices received by HTC, FP and THPL. The prices shown on the invoices and the actual values recovered were the same for the three units. 3.2 The ld. Counsel for the Revenue sought to support the impugned order on the principle of preponderance of probability. Effectively, this standard was satisfied if there was greater than 50% chance for the proposition to be true, it is argued. Lord Denning in Miller v. Minister of Pensions described it simply as "more probable than not". Courts have adopted preponderance of probability as the standard in the context of clandestine activity such as smuggling and clandestine removal of excisable goods without payment of appropriate duty time and again. In Maharashtra State Board of Secondary and Higher Education v. K.S. Gandhi & Ors. [(1991) 2 SCC 716], it was held as under : "37. It is thus settled law that strict rules of the Evidence Act, and the standard of proof envisaged therein do not apply to departmental proceedings or domestic tribunal. It is open to the authorities to receive and place on record all the....
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....ed that the duty evasion on account of the undervaluation was substantially or likely to be true it was legal to hold that the allegation stood proved in toto. Even if the degree of proof was 51% for the Revenue as against 49% for the appellant, the case of the Revenue should be upheld. Requirement of establishing undervaluation with reference to each dealer would mean asking for the highest degree of proof. Such a standard was applied only to criminal cases. The Hon'ble Apex Court and this Tribunal have time and again ruled against stipulating a standard of proof which would demand a high degree of mathematical precision in cases involving clandestine activity. 3.5 The documentary evidence supported by the employees of the assessee and dealers proved the facts sought to be established. The degree of proof provided was adequate to establish the Revenue's case. The practice of receiving substantial part of sale consideration in cash by showing lower prices in the invoices would have been in vogue for all clearances in view of the evidence gathered by the Revenue. 3.6 Revenue placed reliance on the following cases :- (a) Apex Court decision and ob....
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....y. Reliance is placed on the valuation provisions to argue that in case of the clearances in question, there was no transaction value and the additional consideration had to be included in the value for the purpose of duty. 3.9 Revenue would like to place reliance on the decision of this Bench in the case of Carpenter Classic Exim Pvt. Ltd. v. CC [2006 (200) E.L.T. 593 (T-Bang.)], wherein, on the basis of (i) documentary evidence in respect of only one consignment and, (ii) statements of the MD and others, the so called 'transaction value' was rejected and the best judgment valuation was applied in respect of all the goods imported over a period of time, under 25 bills of entry. 3.10 Revenue also relied on the following case laws :- (a) National Board & others [Final Order No. 670 to 687/2010, dated 1-4-2010] (b) Cera Boards & Doors and others v. CCE, Calicut [2010 (249) E.L.T. 550 (Tri. - Bang.)] (c) Sharon Veneers v. Commissioner [2002 (146) E.L.T. 655 (Tri.)] 4. We have heard both sides and perused the case records. The case of the Revenue is that during the material period the assessee ....
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....ied on material recovered from a dealer of the assessee and explained by the dealer and the employees of the assesee. As regards the claim of the assessee that the demand included also value of clearances on sale directly to Tata Coffee Ltd. for a value of Rs. 13,81,242/-, the Commissioner denied the relief as the assessee had not furnished the particulars in time as promised. 4.2 We find that as claimed by the assessee, the impugned order has disposed the appeal cursorily without considering pertinent challenges raised to the correctness of the order of the Original Authority. The appellate authority has resorted to the easy course of simply agreeing with the findings of the Original Authority. As rightly argued by the appellant, the impugned order is cryptic and is passed in violation of principles of natural justice. In any case, a major share of the demand pertains to direct clearances to Tata Coffee Ltd. which has not been considered in affirming the demand of the Original Authority, apparently, for the reason that the particulars had not reached the Commissioner (Appeals) before he passed the order. Therefore, we remand this matter Original Authority for re-working the ....
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.... representatives of the group visited them with the paper chit indicating actual price. The differential amount was paid in cash. He agreed in his statement dt. 28-4-2004 that such chits had been seized from his residence by the officers. The Original Authority found that the slips corresponded to invoices issued in the case of five slips seized. Assessee had collected 36.82% of the total consideration through invoices and the remaining 63.18% clandestinely. He found that Shri Manoj Kumar Amin had started a firm by name M/s. Amin Timber & Plywood Agency and transacted no business. He had opened M/s. Kumar Plywood Agencies on paper two years earlier. He had opened an account in Vijaya Bank, Brigade Road Branch, Bangalore, in the name of M/s. Kumar Plywood Agencies on the advice of Shri B. Abdul Salam. He found that as deposed by Shri Manoj Kumar Amin, he had deposited unaccounted proceeds of sales of plywood and block boards in current account No. 1750 with Vijaya Bank, Brigade Road branch, Bangalore. He observed from a statement obtained from the said bank that amounts had been withdrawn from the said account by BA group firms. No amount was withdrawn by M/s. Kumar Plywood Agencies....
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....sions of Section 11A. He distinguished various case laws cited in support of the plea of limitation by the assessee. The assessee had mis-declared value on the invoice and short paid the duty due on excisable goods manufactured and cleared by it. Shri B. Abudl Salam and Shri J.M. Ashraf were mainly responsible for the offence which was carried out with the connivance of Shri Manoj Kumar Amin. He found them liable for penalty in terms of Rule 26 of the Central Excise Rules, 2002. 4.4 We find that the finding of evasion of excise duty to the extent confirmed in the orders of the lower authorities is based on slips recovered from the shop and residential premises of Shri L.S. Navin, a dealer in plywood and block board manufactured by the BA group of units. Statements were also obtained from the employees of the assessee such as Shri J.M. Ashraf and Shri Manoj Kumar Amin. On the basis of the statements recorded, it is established that the assessee short paid duty in respect of clearances covered by the six invoices to the extent of about 67%. Duty payable to the same extent was so evaded in respect of all clearances made by the assessee during the material period. This finding is....
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....ceived over and above invoice prices and also when cross-examination was not allowed, it would lead to the conclusion that there was no sufficient material to establish cash recovery over and above the invoice price and hence the invoice prices could not be upset. The facts of the present case are not entirely similar to the facts of the above case. However, in Sharon Veneers case [2002 (146) E.L.T. 655 (Tri.)], it was held that reliance on retracted statements of three dealers who constituted 8% of the total dealers was not sufficient to establish undervaluation. In the case in hand only three out of 25 dealers were contacted by the investigation. Only one of them gave a statement clearly incriminating the assessee. This statement was retracted. Therefore, the total evidence available may not be adequate to quantify evasion for a whole year by the assessee on clearances of excisable goods sold through all of its dealers. 4.7 The lower authorities have relied on statement of accounts obtained from Vijaya Bank to establish evasion by the assessee. It was submitted that as per the Bankers Book of Evidence Act, 1891, the bank statement relied upon was illegally obtained and coul....
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....tion. The ld. Counsel for the Revenue had argued that the case of evasion of the Revenue is established by the fact that in the case of direct sales of goods to Tata Coffee Ltd., the assessee had raised invoices for the following three varieties of plywood at much higher prices compared to prices invoiced for such goods when sold to others. He had cited the following cases :- Item Prices charged from Tata Prices charged from others 6mm Ply Rs. 126.95/ sq.m. Rs. 51/ sq.m. 12 mm Ply Rs. 213.45/ sq.m. Rs. 85/ sq.m. 18 mm Ply Rs. 307.30/ sq.m. Rs. 125/ sq.m. We find considerable force in the submission by the ld. Counsel for the Revenue that there definitely was considerable undervaluation and evasion of duty by the assessee. 6. As regards applying the finding of evasion in respect of clearances other than those covered by the documents recovered, the ld. Counsel for the Revenue sought to apply the principles of preponderance of probability. This test was met if the proposition was more likely to be true than not true. He had relied on several case laws in support of this argument. It is his submission that the extent of evasion discovered in respect of the invoices ....
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....mined under Section 4 of the Act and Valuation Rules. Arbitrary values worked out as average percentage cannot be applied to quantify the duty due. The impugned order has quantified the duty due based on formula worked out on the basis of slip and a couple of invoices. This was not permissible. We have given careful consideration to these arguments of the assessee. We are in agreement with the assessee on this point. We have already held that in order to quantify the duty due, transaction value has to be ascertained in respect of each removal. In the case of Cera Boards & Doors (supra), this Bench held in a similar case of undervaluation as follows :- "11.12 As regards the period after 1-7-2000 for valuation, the concept of 'transaction value' has been introduced. In the concept of transaction value, each transaction is important. Therefore, the transaction value is to be determined for the clearances after 1-7-2000. As far as the period after 1-7-2000 is concerned, the value for assessable purpose is the transaction value. The transaction value is the value for each transaction. The concept of transaction value is entirely different from the concept of normal value. While th....