TaxTMI 
TaxTMI 
2013 (11) TMI 685
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....p; E/2204/2008 Shri Jitendra Kejriwal 6,20,62,878/- 3. E/2205/2008 M/s Purav Plylam 77,57,860/- 4. E/2206/2008 M/s Aggarwal Plywood 77,57,860/- 5. E/2207/2008 M/s P.T. Trading Co. 77,57,860/- 6. E/2208/2008 M/s Donear Ply wood 77,57,860/- 7. E/2209/2008 M/s Maghar Singh Timbers P. Ltd. 77,57,860/- 8. E/2210/2008 M/s Donear Plywood Pvt. Ltd. 77,57,860/- 9. E/2211/2008 M/s Donear Ply wood 77,57,860/- 10. E/2087/2008 M/s Mangal Muri Plywood 77,57,860/- Vide order-in-original No. 26/Commr./SU/08/CE dated 25/07/2008, the Adjudicating Authority has confirmed demands and imposed penalties as under :- S. No. Appeal No. Party Name Duty & Penalty (Rs.) 1. E/2529/2008 M/s Surya Vikas Plywood Pvt. Ltd. D -2,16,14,572/- P -2,16,14,572/- 2. E/2217/2008 M/s Aggarwal Plywood 36,02,428/- 3. E/2199/2008 Shri Jitendra Kejriwal 2,16,14,572/- 4. E/2200/2008 M/s Maghar Singh Timbers Pvt. Ltd. 36,02,428/- 5. E/2201/2008 M/s Purav....
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..../CE dated 25/07/2008 in as much as the outcome of the other two set of appeals is primarily based upon the outcome of the said set of appeals. The factory of M/s SBL was visited by the officers of Directorate General of Central Excise Intelligence (DGCEI) on 28/6/05, who conducted various checks and verifications. The stock of the finished goods as also of the raw material lying in the said appellant's factory was physically verified and no discrepancy was found therein. However, the officers found cash of Rs. 6,00,000/- lying in their office premises, which was put under seizure. Simultaneous searches were also made at the premises of some of the distributor/dealers of the said appellant on various dates and the goods lying at their premises were put under seizure on the belief that the same stands cleared by M/s SBL by paying duty on the same at a value which was much less than the recovered value. However, the goods seized at the premises of the dealers located in Bangalore, Hyderabad, Ludhiana and Rohtak etc. was released provisionally to the owners on execution of bonds and bank guarantees. Alongwith the goods, the officers also seized various alleged incriminating documents i....
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....ed in the books of accounts. 7. For alleging under valuation of the goods cleared by SBL under the cover of invoices, Revenue has relied upon the above laptop data as also the statement of one Shri Parminder Singh, Director of M/s Maghar Singh Timbers Pvt. Ltd., Ludhaina, one of the appellant's dealers, wherein he has admitted the modus of shifting of the decimal point by two places to the left and multiplying the amount by 4. Though the said statement of Shri Parminder Singh dated 28/6/05 stand retracted by him, such retraction does not stand accepted by the department on the ground of being belated and balled retraction. 7.1 The Revenue has also relied upon the statements of seven other dealers recorded during the course of investigations admitting under valuation of the goods received from SBL. Reliance also stand placed on the rate list seized by the visiting officers during the course of search of the factory premises. The Revenue entertained a view that the prices as reflected in the said rate list has to be multiplied by a factor of 4, for coming to the actual amounts collected by the appellant from their dealers. Shri Naresh Goyal, Account Manager of the appellant in ....
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....on. 11. As the main reliance by the Revenue is on the data recovered from the personal laptop of Shri Jitendra Kejriwal, we shall first deal with the same. The appellants have strongly questioned the authenticity of the said data retrieved by GEQD. Learned Senior advocate Shri Ganesh draws our attention to the fact that the data supplied by GEQD is totally jumbled up and does not lead to any logical conclusion. The said laptop was seized on 28/6/05 from the residence of Shri Jitendra Kejriwal in whose presence the same was opened but no data could be recovered or retrieved. The same was accordingly sealed by the officers. Almost after more than a year i.e. in July 2006, the hard disk purportedly obtained from the said laptop was sent to GEQD for their examination. After a lapse of period of six months, GEQD gave a report dated 26th December 2006. By drawing our attention to the said report of GEQD, he submits that whereas GEQD has certified the integrity of 5 other computers seized from the factory premises of the appellant and the data retrieved from them, there is no such certification as regards the integrity of the laptop data and the print outs obtained from the said lap....
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....splaced as the same was given on the peculiar facts of that case where there was no allegation of fabrication of data made against GEQD. 11.2 Learned Senior advocate has also referred to the provision of Section 36A and 36B of the Central Excise Act 1944 and has contended that the Revenue's reliance on the same is not justified in as much as the specific provisions of Section 36B (2) mentions the regular period of business during which the computer was in use. He submits that the period in the present case is from March 2002 to June 2005 whereas the laptop was admittedly purchased by the Managing Director 4 months prior to the date of seizure and as such the laptop cannot be held to be in use during the relevant period covered by the impugned order. In as much as the laptop was not used in the regular course of business and no regular supply of information in the ordinary course of business was made and stored in the said laptop and as such the same cannot be held to be covered by the provisions of Section 36B of Central Excise Act, 1944. For the above proposition, he relied upon the Tribunal decision in the case of Premier Instruments & Controls Ltd. vs. CCE, Coimbatore reporte....
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....reponderance of probability and not proof beyond doubt. Accordingly, he submits that test of preponderance should be applied and as M/s SBL has not been able to disapprove the entries made in the laptop of their M.D., their appeal be dismissed. Further, meeting the arguments of learned Senior Advocate Shri S. Ganesh, Shri Raha submits that the data as contained in the seized laptop of Shri Kejriwal could not be retrieved earlier owing to failure of Shri Kejriwal to provide power cord on 23/1/06 and 12/4/06. As such, he cannot now make grievance of the fact that there was late retrieval of the data, after a gap of one year. He submitted that the information retrieved from the laptop by GEQD readwith corroborative evidence seized from the dealers premises revealed the various modus of maintenance of data by the appellant. By drawing our attention to the retrieved data, he submitted that figures are maintained according to different codes of transaction, amounts are entered by shifting the decimal places by two to the left, collection of amounts over and above the invoice amounts which have not been entered in the books of account and utilization of the same for expenses which are aga....
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....questioned the authenticity of the same. We have seen the data so retrieved from the laptop as appearing in Annexure C 1.19 to the show cause notice. A plain reading of the same does not lead us to any concrete conclusion. The Revenue has tried to decode the same and has arrived at a finding that the data contained therein was reflecting upon the actual sale value of the goods sold by the assessee to their distributors. They have also alleged that various codes were given to the various buyers. We have also seen that the two code numbers stand given to one distributor or vice-versa one code number stand given to two distributors. As such, the Revenues stand that the data in the laptop was stored in respect of different distributors by giving different code numbers cannot be accepted. Also while decoding the said accounting codes allegedly stored in the data, neither any question is put to the owner of the laptop nor to the distributors to whom the said codes allegedly belonged. No reasoning or explanation stands advanced by the Revenue as to how these alleged codes stand decoded by them and how one code number has been related to a particular distributor. There is no uniformity ev....
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....judication order without considering the request made by the appellants to examine the GEQD. 15. At this stage, we also take into consideration the provisions of Section 36A and 36B of the Central Excise Act, 1944 which stands strongly relied upon by the Revenue. Section 36B has to be readwith Section 36A. For the sake of convenience and ready reference the same are reproduced below :- SECTION 36A -Presumption as to documents in certain cases Where any document is produced by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law and such document is tendered by the prosecution in evidence against him or against him and any other person who is tried jointly with him, the Court shall, - (a) unless the contrary is proved by such person, presume - (i) the truth of the contents of such document; (ii) that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the Court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that person's handwriting, and in the case of a document ....
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....o the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether (a) by a combination of computers operating over that period;?or (b) by different computers operating in succession over that?period; or (c) by different combinations of computers operating in succession over that period; or (d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings under this Act and the rules made there under where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, (a) identifying the document containing the statemen....
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....omputer print outs has been recovered by the Revenue from the factory of SBL. It is the data which was stored in the personal computer of Shri Jitendra Kejriwal, which stands subsequently retrieved by GEQD after a gap of around one and half years which stand relied upon by the Revenue. Section 36A of Central Excise Act, 1944 provides that when any document is produced by any person or has been seized from his custody or control, then, unless contrary is proved by such person, the court shall presume the truth of the contents of such documents. Though the term 'document' is not defined in Central Excise Act, in terms of definition of this term in Section 3 of the Indian Evidence Act, 1872, 'document' means any matter expressed or described upon any substance by means of letters, figures or marks or by more than one of the means intended to used or which may be used for the purpose of recording the matter e.g. :- a writing, words printed, lithographed or photographed; a map or a plan, an inscription on a metal plate or a stone or a caricature. Section 36B of the Central Excise Act, which corresponds to Section 65B of the Indian Evidence Act, extends the scope of the term 'document' t....
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....resent case, the laptop was purchased by Shri Jitendra Kejriwal only 4 months prior to the date of the seizure and, as such, cannot be said to be a computer which was being regularly used, in the ordinary course of the business, for the period in question. The reliance on the provisions of sub-Section (5) (b) by Shri Raha to buttress his argument that even the data retrieved from a computer operated otherwise than in the course of regular activities for the purpose of storing information shall also be admissible as evidence of its contents without further proof, cannot be appreciated in as much as we have already held that the said Section 36B applies to the computer print outs and not to the data stored in the computer. It may not be out of place to mention here that in todays era of technological advancement, it is not only possible, but much easy to transfer such datas in the computers in the custody of the other persons or to interfere with such data. It is probably for this reason that such Section 36B applies to computer print outs and not to the data stored in any computer. 17. The Tribunal in the case of S. Namasivayam vs. CC, Chennai reported in 2009 (240) E.L.T. 255 (....
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....n to the petitioner to point out to the discrepancy before the Adjudicating Authority and cross examination in that case would in no way help the petitioner as there is no material given or spoken to by the respondent/department. It is also seen that from the arguments of the Revenue before the Hon'ble High Court that officer of GEQD could not be made available for cross examination since the concerned person proceeded on long leave and has already been relieved from Forensic Department, Hyderabad. It is also seen that the petitioner in that case filed the writ petition before the Hon'ble High Court before the matter was adjudicated and the Revenue argued that any order passed by the department is amenable to an appeal remedy under the Act before the Appellate Tribunal. As such, it can be reasonably concluded that the said decision of the Madras High Court is in the peculiar facts of that case and was relatable only to the issue of cross examination and nowhere opined on the admissibility of computer data contained in the seized computers. 18. Revenue in their written submissions have referred to the compilations of corroborative evidences filed by them. The said compilation ref....
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....an of M/s Ply House, Dhanbad. Before going to the detailed reference and the evidencery value of the said statements, we would like to observe that the appellant has around 25 to 30 distributors spread all over the country and the goods are cleared by them to said distributors under the cover of Central Excise invoices showing a particular value on which duty is being discharged by the appellant. The said distributors, in turn, sell the goods to their dealers who are approximately 1500. The dealers further sell the goods to the ultimate consumers. During the course of investigation, Revenue recorded the statement of 24 number of distributors out of which the statement of only about 8 distributors were against the assessee. It may not be out of place to mention here that even these 8 deponents of inculpatory statements retracted the same during the course of cross examination. Learned Senior advocate has strongly drawn our attention to the statements of majority of the distributors i.e. 14 distributors, who deposed during the course of investigation, that the plywood/ veneer was being received by them at the prices mentioned in the invoices. The Revenue, though recorded the statemen....
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....the period March 2002 to June 2005. It may not be out of place to take into consideration the appellants contention that about 80% of the clearances by the appellant were to the distributors, who have stated that no amounts over and above the invoice prices were being paid to the appellant and it is only a meager amount of clearances, which were made to the distributors who have given inculpatory statements but retracted the same subsequently. To confirm the demand of around 6.20 crores on the findings of under valuation of goods based upon such retracted statements of some of the distributors of the appellant for a period of more than 5 years is neither justified nor in accordance with law. 21. The Tribunal in the case of Subhnen Dicor P. Ltd. vs. CCE, Vapi reported in 2010 (251) E.L.T. 105 (Tri.-Ahmd.) vide its final order No. A/1897-1917, while dealing with the appellant's contention that the statements, which were favourable to the assessee has not been considered, observed as under :- 7. We also find force in the appellant's contention that the statement of the other dealers, recorded during investigation, who have deposed in favour of the assessee should also be brough....
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....ment. Such a retraction sent to another officer, cannot be taken note of. Shri Raha has also referred to second statement of Shri Parminder Singh recorded on 15/9/05. In the said statement, he was questioned about his earlier retraction wherein he alleged that the officer became temperamental started threatening him to extract statement as per their will. He became afraid on hearing the name of DGCEI. He, however, could not identify the officers who were supposed to have threatened him. As such, according to Shri Raha, the said discrepancy in the second statement destroyed credibility of his retraction. 23. However, we find that even during the course of cross-examination Shri Parminder Singh clarified that no cash payments was made to SBL. He also clarified that all his statements were written as the officers asked him to write like that. By referring to various decisions Shri Raha has submitted that the said retraction as also the result of cross-examination should be rejected and his statement should be accepted as evidence. 24. We note that the said statement of Shri Parminder Singh cannot be made the basis for upholding the charge of under valuation against M/s SBL, in a....
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....statement, further clarified during the course of examination and readwith the statements of the other distributors, which were in favour of the assessee, cannot be made the basis for upholding the charges of under valuation, especially in the light of the observations made by us in the preceding paragraphs. 25. We further note that apart from recording statements of distributor and making investigation at their end, Revenue except in some cases, has not made any further investigation at the end of the dealers. As recorded earlier, SBL has 24 distributors who further sell the goods to their dealers by keeping a small profit margin and such dealers further sell the goods in the open market to the ultimate consumers. If the Revenue is alleging under valuation of the goods cleared by the appellant to their distributors and is alleging recovery of the differential amount in cash, admittedly such distributors would further be recovering the differential cost of the goods from their dealers in cash. No investigation or inquiry stands made at the dealers end except in some cases where Revenue has produced evidence showing more recovery of cash by the distributors to dealers but there i....
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.... to deal with the said submission of the appellant, for the reasons best known to him. We have seen the said plea taken by the appellant in their detailed first reply, wherein reference to the invoices of the other manufacturers stand made. Learned advocate has argued that if their competitors were selling the goods at the same price at which the appellant has sold the same as reflected in the invoices, it is not possible to allege under valuation to the extent of two and a half times. He submits that there is no answer to the question as to how the ultimate consumer in the market would buy the goods which are two and a half times costlier than the identical goods of their competitors and it is not possible for the appellant to survive in the market. We note that the Commissioner, has not dealt with the said plea of the appellant. Admittedly, the invoices of other manufacturers placed on record in respect of identical goods show more or less the same price at which the goods were being sold by the appellant. We agree with the learned Advocate that this fact by itself would indicate that either there was no under invoicing by the appellant or there was under invoicing by all the ....
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....but having held that the evidence produced by the Revenue cannot be considered to be a definite piece of evidence, the fact of final assessment of sales tax and income tax would advance the assessees case. 29. At this stage, we may observe that the allegations and findings of under invoicing are in the nature of clandestine activities and the Revenue is under a heavy onus to prove the same by production of sufficient, positive evidence. As we have already discussed that the evidence relied upon by the department, does not lead to the inevitable conclusion of such clandestine activities of the assessees and on the other hand the evidence produced by the appellant M/s SBL, which is in the shape of the exculpatory statements of 16 distributors, the evidence of sale price of identical goods by the other plywood manufacturers, continuation of the sale of their final product at the same price post June, 2005, establishes the case in their favour. Further the failure of the Revenue to investigate the matter, in detail as regards the cost structure of their goods, price factor of the other manufacturers, the availability of any evidence reflecting upon cash receipt by the appellant from....
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....der valuation of their final product i.e. plywood and block board. The Commissioner, for arriving at the above findings has referred to same very evidences, which were available in the case of M/s Surya Boards Pvt. Ltd. i.e. primarily the computer statements retrieved from the seized laptop of Shri Jitendra Kejriwal read with the other incriminating documents recovered from the premises of the distributors as also the statements of various distributors of the said manufacturers. The appellants have strongly contested the said findings by reiterating the same very defence submissions, which are the subject matter of the appeals in the case of Surya Boards. Its stands contended that the computer data retrieved from the personal laptop of Shri Kejriwal cannot be held to be admissible piece of evidence; that there is no adverse statements recovered from various CPUs recovered from the premises of the manufacturer; no evidence of payment of higher value to the raw material supplier; that there was recording of the statement of all the other distributors during the course of investigations which were in favour of the assessee; non-reliance on the said exculpatory statements of the distri....
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....on by the Commissioner and the arguments adopted by both the sides are identical as were available in the preceding cases. However, in the present case, the Revenues allegation is that the under valuation was to the extent of 3.52 times whereas in the earlier case the allegation was up to the extent of 2.50 times. As we have already held in favour of M/s Surya Boards Ltd. and as discussed the entire case law on the subject and has arrived at a finding in favour of the appellants, by following the same, we set aside the impugned orders and allow all the appeals with consequential relief to the appellants. 34. Before we part, we may also refer to some of the decisions strongly relied upon by the appellants, wherein identical charges of under valuation made on the varying statements of the dealers was held as not permissible. In the case of Sharon Veneers vs. CCE, Chennai reported in 2002 (146) E.L.T. 655 (Tri. -Chennai), wherein the Tribunal observed as under :- 5. Now we proceed to give our finding in regard to various other allegations levelled against the appellants. Under-valuation. We find that the appellants have argued that out of 40 dealers, statements were? taken f....
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....tements were recorded from them as dictated by the Central Excise Officers and the statements were not voluntary. We find that while the department chose to rely on the statements which are in favour of the department, the statements though recorded from these seven dealers which are in favour of the appellants have not been relied upon by the Revenue. This approach of the Revenue is against the principles of natural justice, more particularly when the finding is given against the appellants. Further the Commissioner has noted that out of the seven dealers whose statements are stated to be in favour of the assessee, the statements of four persons do not specifically indicate that they did not pay any extra consideration. Conversely the statements of these persons also do not indicate that they have paid any extra consideration to the appellant-company. The Revenue having obtained statements from 18 persons and relying upon only those statements which are in favour of the Revenue is a one sided approach. Shri Partharasarathy in his statement dated 24-4-91 stated that he was responsible to Shri R.K. Agarwal, Director of Shankar Mercantile Corporation and nowhere in the statement he h....