Custom, Excise & Service Tax Tribunal
(1)M/S. Mysore Chipboards Ltd vs (1 & 2) The Commissioner Of Central on 7 July, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Appeal Nos: (1) E/37, 38/2007 & E/317/2007
Misc. Application No.E/Misc./527/2009 in E/317/2007
(Arising out of Order-in-Original No. 6/CCE/2006 dated 5.10.2006/19.10.2006 passed by the Commissioner of Central Excise, Mysore)
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
Yes
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3. Whether their Lordship wish to see the fair copy of the Order?
Yes
4. Whether Order is to be circulated to the Departmental authorities? Yes
(1)M/s. Mysore Chipboards Ltd.
(2) Shri Shyam Daga, Resident Director
(3) The Commissioner of Central
Excise, Mysore
Appellants
Vs.
(1 & 2) The Commissioner of Central
Excise, Mysore
(3) M/s. Mysore Chipboards Ltd.
Respondents
Appearance Shri B.V. Kumar, Advocate, for the Party Shri P.R.V. Ramanan, Special Counsel, for the Department CORAM MR. M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) MR. P. KARTHIKEYAN, HONBLE MEMBER (TECHNICAL) Date of Hearing:24.02.2010 Date of decision:07.07.2010 MISC. ORDER No._______________________ 2010 FINAL ORDER Nos._______________________2010 Per P. Karthikeyan These are appeals filed by M/s. The Mysore Chipboards Ltd (herein after referred to as MCL) and Revenue against order No. 6/06 dated 5.10.2006 of the Commissioner of Central Excise, Mysore . MCL are manufacturers of plywood, block hoards, particle boards falling under Ch 44 of the Central Excise Tariff. On 28.08.03, pursuant to intelligence that MCL were evading payment of duty by resorting to under-invoicing of the goods manufactured and sold , the officers of the Directorate General of Central Excise Intelligence (DGCEI ) conducted searches at their factory, offices and premises of some of their dealers/consignment agents etc, also on subsequent days. During the search, incriminating records/documents were recovered under mahazars dated 28-8-2003 and statements recorded from various key persons/ persons involved in the business of MCL. MCL has a factory at Mysore and sales depots at Delhi, Lucknow, Ludhiana, Chennai, Mumbai and Kolkata. They also have consignment agents at Ahmedabad, Hyderabad, Nagpur and Pune. Investigations conducted showed that MCL had under-valued excisable goods cleared by them by showing only a part of the actual sale consideration in their invoices and thereby evaded payment of Central Excise duty.
2. The following documents seized appeared to suggest undervaluation and receipt of money in excess of amount invoiced by MCL :
(i) Inter office memo dated 20-6-03 from Bangalore office to the factory of MCL
(ii) Slips recovered from the Lucknow office of MCL
(iii) Documents recovered from Sri Balaji Glass & Plywoods, Bangalore
(iv) Documents seized from Bangalore Office of MCL
(v) Documents recovered from M/s. Rohini Plywood & Laminates, Bangalore
(vi) Fax copy recovered from the premises of M/s. Umaiya Enterprises, Cochin
(vii) Documents recovered from Delhi Office of MCL
(viii) Writing pad recovered branch office of MCL
(ix) Documents recovered from consignment agent M/s. KeIa Bros.(Calcutta), Ahmedabad
3. Statements recorded from employees of the factory/office/branch offices and the dealers of MCL supported the tentative finding of undervaluation apparent from the documents seized. The evidence on record appeared to show that MCL were recovering a certain percentage of the assessable value in cash. The extent of under-valuation as evidenced by the above documents appeared to be as high as 40% to 50% and accepted by various dealers of MCL. The average percentage of invoicing adopted by MCL for particle boards was 45.68% of the actual sale value and the average percentage of invoicing adopted for other products was 38.56% of the actual sale value .
4. A show cause notice was issued. After due process, the Commissioner has confirmed a demand for a total amount of Rs. 81,01,637/- as against Rs. 7,51,53,570/- demanded in the SCN. The Commissioner relied upon a Inter Office Memo (IOM) seized at MCL and six slips seized from the briefcase of Shri Anup Trivedi at Lucknow among other documents seized. The quantification of the differential duty on the sales made by MCL have been based on these documents. MCL has challenged the demand confirmed in the order. Revenue is in appeal seeking confirmation of entire demand of duty evaded by MCL as alleged in the SCN.
5. The case of the revenue as per the impugned order is based on the following documents recovered by the Revenue.
(a) Inter office memo dated 20.06.2003 An Inter Office Memo (IOM) dated 20.06.2003 prepared by Manager of MCL Branch office at Bangalore, Shri.K.Sridhar , and issued to Shri. Umeedmal Jain, cashier in the factory, contained bill no., amount, payment details etc relating to some sales. The bill nos. reflected in the inter office memo were compared with the related factory sales invoices of MCL; these had been issued to one M/s. Balaji Plywoods, Vijayawada. On comparison of the values shown in the IOM and the factory invoices, each of the values appearing in the bills in the IOM was found to be more than that in the corresponding invoice, the difference ranging from 40% to 54.56%. Sri Umedmal Jain, cashier admitted in his statement dated 23.8.03 that the actual value was much more than the value shown in the invoices of MCL and such additional amounts were collected in cash by their consignment agents / branch managers and transferred to the company as per the direction of Sri Shyam Daga, Resident Director MCL or Sri G. R. Surekha, another executive of the assessee. The value difference is not explained by MCL satisfactorily. The delayed explanation that these differential amounts represented advance was not convincing. In the absence of any evidence to the contrary, the Commissioner held that there was undervaluation in respect of these invoices to an extent of Rs.3,79,452/-, as the IOM was corroborated by the statements of Sri K.Sridhar and Sri Umedmal Jain.He relied on the Apex Court judgment in the case of Surjeeth Singh Chhabra vs. Union of India (1997 (89) ELT 546 (SC)), wherein it has been held that the confession, though retracted, is an admission, and binds the petitionerand ignored the retraction by the cashier in cross examination in 2006.Where the invoices showed B grade goods, proposal to demand differential duty was dropped.
(b) Slips recovered from Lucknow Branch of MCL from Sri Anup Trivedi:
Six loose slips/sheets in the handwriting of Sri Anup Trivedi, Marketing Executive of MCL were seized and the amounts indicated in the slips were found to be much higher compared to the prices appearing in the corresponding excise invoices. Sri Anup Trivedi stated that it was a one time arrangement made only in respect of M/s. Saif Plywood, Gorakhpur, and that he had requested M/s Saif Plywood to sell their products at a higher price. In the loose sheets, rate per sq. meter shown was much higher than the rate shown in the respective invoices of MCL. He also stated that the extra amounts collected were not paid to MCL but paid to M/s Saif Plywood for promotion of sales of products of M/s Saif Plywood.Sri Jamil Ahmed, partner of M/s. Saif Plywood, Gorakpur admitted that he had paid some extra amount over and above the prices shown in the said invoices and that no receipts were given.Commissioner rejected the retraction by these witnesses and confirmed demand on differential value of Rs.296717/-related to four invoices.He dropped the proposal to demand duty on six other invoices for the reason that the invoices covered B grade goods. Both Shri. Shyam Daga & Shri. D.K. Batra, Manager, MCL had not denied such transaction. Further Shri. Batra, when confronted on the undervaluation stated that an amount of Rs. 16 lakhs had already been paid by MCL towards duty on this count.
He relied on the Apex Court judgment in the case of Surjeeth Singh Chhabra vs. Union of India (1997 (89) ELT 546 (SC)), wherein it has been held that the confession, though retracted, is an admission, and binds the petitioner and ignored the retraction of statement of August 2003 by the cashier in cross examination in 2006.
These instances could not be generalized to cover each of the transactions made by MCL, Lucknow Branch. The investigation had not brought out any hard evidence from the other buyers of MCL, Lucknow.
(c) Documents recovered at M/s. Balaji Plywoods Bangalore:
Printed Price Lists recovered from M/s. Balaji Plywoods Bangalore showed the prices of premium grade plywood/blockboard. These were much higher compared to the sale invoices of MCL. Sri KS. Srinivas, proprietor of M/s. Balaji Plywoods, Bangalore stated that the prices shown in the invoices of MCL and their distributors were less than the actual value of goods and that invoice amounts were collected by the representatives of Sri.L.N.Daga through cheques, and the balance over and above the invoice value were collected from them in cash by Sri L.N. Daga.Printed price lists were recovered by the DGCEI from the premises of M/s Balaji Plywoods, Bangalore, which showed the prices of premium grade plywood / blockboard to be sold by the dealers. Sri K. S. Srinivas, Proprietor of M/s. Balaji Plywood Bangalore in his statement dated 2.9.03 had stated that he purchased the Archid brand plywood and products from M/s. Arunachal Plywood Agency / Assam Timber Agency and sometimes directly from MCL under invoices.
The investigating authorities relied on the statement dt. 2.9.03 given by Sri K. S. Srinivas of M/s. Balaji Glass and Plywoods, Bangalore confirmed and corroborated by Kutcha slips / sheets seized from the other premises and concluded that there was no substance in the averments / arguments made by MCL on this issue, but failed to counter the point that the price list seized from M/s Balaji Glass and Plywoods pertained to premium grade and the invoices which they had compared for the prices pertained to commercial grade.
The Commissioner held that the price list recovered pertained to premium grade and the invoices referred to commercial grade which could not be compared. No unaccounted cash attributable to differential value had been seized at Balaji Glass and Plywood, Banglore nor any incriminating documents recovered from them.
There was no explanation in the investigation report, as to why the prices of premium grade products as per the price lists seized, applied to the invoices under which commercial grade products had been cleared.
Undervaluation could not be presumed but had to be proved and established by the department with direct physical evidence or sufficient circumstantial evidence as held by Tribunal in 1984 (15) ELT 451 (T) and 1986 (26) ELT 333 (T).
(d) Rohini Plywoods and Laminates, Bangalore:
Price lists recovered from M/s Rohini Plywoods and Laminates, Bangalore, on comparison with invoices indicated undervaluation. Commissioner held that the statement of Shri. Shyamsundar Sultania of M/s Rohini Plywoods and Laminates, was not incriminating, and he had not accepted that additional amounts over and above the invoice value were collected in cash from buyers and such differential amount was paid to Shri L.N. Daga or his representatives. Shri Shyamsundar Sultania in his statement had stated that the price list pertained to MRP on premium grades and invoice compared during investigation was in respect of ex-factory price of MCL of commercial grade. There was no reason why the prices of premium grade products as per the price lists seized, should be applied to the invoices under which commercial grade products had been cleared.He dropped the proposal to demand duty.
(e) Documents recovered from Bangalore office, MCL:
The prices indicated in price lists of MCL recovered were much higher than the ones indicated in the invoices. Shri D.K. Batra, Manager, MCL, had stated that discounts ranging from 20 to 50% was offered to the customers.
(f) Documents recovered from the Delhi office of MCL Loose papers recovered from the personal custody of Shri Anup Agarwal, Marketing Executive of MCL showed that the prices shown in the invoices were much less than the actual prices mentioned in them. MCL stated that Shri Anup Agarwal was not an employee of MCL or its Delhi office, but an employee of M/s. Shyam Plywood and Laminates, Delhi. MCL furnished a copy of sworn affidavit dated 30.08.2003 of Shri Anup Agarwal showing that he was an employee of M/s. Shyam Plywood & Laminates, Delhi. In support, MCL have submitted copies of Bank statements obtained from Vijaya Bank, Ramnagar Branch, New Delhi showing payment of salalry to Shri Anup Agarwal by M/s. Shyam Plywood & Laminates, New Delhi. He had also sworn that he was not aware as to what statements the officers made him to sign on 28.8.03, since a copy of the same had not been given to him. The Commissioner held that in the absence of any reference being made on the slip with regard to any particular invoice, adverse conclusions could not be drawn from the said kutcha slips. He dropped the proposal to demand differential duty.
Some loose papers were allegedly recovered from the personal custody of Shri Anup Agarwal of MCL. Based on these, it was alleged that the prices of goods of MCL as they appeared on the said slips showed that the prices shown in the invoices were much less than the actual prices mentioned in the said slips.
The investigating agency had stated that the prices were in the handwriting of Shri Anup Agarwal and that the slips reflected the actual selling prices, quantity and total value of certain goods of MCL.
The said slips did not give any invoice no. nor grades of products nor stated the basis for such notings so that they could be relied on to find undervaluation. Hence any such conclusion drawn was not sustainable. There was no basis to consider the loose slips recovered from Shri.Anup Agarwal, said to be an employee of a dealer of MCL as evidence to allege undervaluation by MCL. Hence evidence built up on these slips could not be relied. Further the investigation had failed to bring out any evidence to show flow back of differential value from the MCL, New Delhi branch to MCL head office. The investigating agency had not brought any evidence such as cash or accounts at MCL, New Delhi Branch or any other place.
(g) Documents recovered from the premises of Umiya Enterprises, Cochin The SCN had relied on a fax message dated 26.4.2003 sent by Shri Pankaj Patel of M/s Umiya Enterprises addressed to Shri Shyam Daga, in which additional discounts for Archidply classic grade products was requested. It also showed that such additional discounts were refused by Shri Shyam Daga.This fax message was recovered from the premises of M/s. Umiya Enterprises, Cochin.
MCL stated that Archidply classic grade products (referred to in the fax message ) were specially made for premium project requirements with higher quality standards. Further the transaction did not come through which was evident from the statement dated 28.03.2003 of Shri Pankaj Patel. Further they stated that the invoice No. 168 dated 03.05.03 from which the prices had been taken for comparison as stated above, pertained to Archid ply regular grade whereas the fax message dated 26.04.03 referred to Archid ply classic grade products.
The Commissioner held that since the grades of the products corresponding to the fax message dated 26.04.03 and the invoice No. 168/03.05.03 were different, it was incorrect to compare the prices of two different grades of products and allege undervaluation. The net price was not agreed upon, and there was no contract or sale, hence the charge was not maintainable. He dropped the proposal to demand differential duty.
(h) Writing pad recovered from the Ludhiana Branch office.
The writing pad revealed the sales for May, June & July of 2003 as amounting to Rs. 42,32,248/- and sales of previous year at Rs 1,17,44,429/- and based on similar slips reportedly found, it was alleged that unaccounted collection of sale consideration had been made by MCL. Sri Rrajesh Arora, sales executive of the Ludhiana office of MCL. had stated that the figures appearing in the said slips were not accounted in the sales account of Ludhiana Branch, without offering any explanation for non-accounting of the above details in their books of accounts.
MCL contended that their Ludhiana Branch office covered a number of markets in North India such as Punjab, Haryana, Himachal Pradesh, Jammu & Kashmir etc. and that when total figures were taken for the whole area, the quantity sold would be close to the figures found in the said slips. MCL had stated that there was no evidence forthcoming to show any flow back of differential value from the Ludhiana Branch of MCL to their head office and no documentary evidence in the form of cash or accounts were found in the Ludhiana office/Delhi office or the MCL premises or the premises of dealers or elsewhere in the country. Further MCL had requested to cross examine Sri Rajesh Arora and Sri Shantilal. But they were not mad available. As per the settled law any evidence recorded from a person was required to be ignored/discarded if he was not produced/made available for examination.
In the SCN it was alleged that a slip of paper was seized from the Ludhiana Branch Office of MCL (Annexure C-15) revealing the sales for May, June, July amounting to Rs.42,32,248/- and sales of previous year at Rs.1,17,44,429/- and based on similar slips reportedly found it was alleged that MCL received unaccounted cash on sales. In his statement dt.28.8.03, sales executive of the Ludhiana office of MCL had stated that the figures appearing in the said slips were not accounted in the sales account of Ludhiana Branch, without offering any explanation for non-accounting of the above details in their books of accounts. He had also stated that he would explain the reasons for non-accountal of the sales figures in their accounts the next day. However, the show cause notice itself said that he did not offer any explanations later for such non-accountal. No further statement was recorded, nor any summons calling upon the said witness to give his explanation was brought out on record. In effect, the investigation was incomplete in this respect.
However Shri Rajesh Arora had not explained the basis or details of the slips, whereas MCL effectively explained the turnover for the region with reference to the figures available on record. In the circumstances, the Commissioner dropped the proposal to demand differential duty.
(i) Documents recovered from M/s. Kela Brothers, Ahmedabad These contained details of various unaccounted receipts and payments in connection with the sale of MCL products. M/s Kela Brothers had paid cash of (i) Rs 64,59,252/- during 2000-2001 (from 1/01 to 3/01); (ii) Rs 1,49,42,146/- during 2001-02, (iii) Rs 2,17,76,100/- during 2002-03 and (iv) Rs 70,48,608/- during 2003-04 up to 28.08.03.
Further, it was alleged that the amount billed as a percentage of actual value varied from 44.83% to 62.40%. It was also alleged that there was variation in the rate as compared to the rate appearing in the slips after discount. M/s. Adinath Plywood Centre, Ahmedabad admitted that they had purchased goods from M/s. Kela Brothers and that the invoiced amounts were much less than the actual amounts shown in the chart prepared by Vaishal K. Shah, proprietor of M/s. Adinath Plywood Centre, Ahmedabad. On this basis it was alleged that M/s. Kela Brothers had raised bills/invoices for less than 50% of the actual sale consideration collected by them.
Vaishal Kismatbhai Shah proprietor of M/s. Adinath Plywod centre, Ahmedabad, had stated that he was making payments of the invoiced amounts in cheques, and the remaining extra amounts were paid in cash to Shri. Prem Kishore Sikchi. In this manner, he had made payments of Rs 15,59,873/- through cheques, and Rs 19,69,193/- in cash to M/s Kela Brothers.
As a consignment agent of MCL, M/s. Kela Brothers were required to sell the goods on the value on which duty liability had been discharged by MCL, which was to be considered as transaction value for the purposes of assessment. Sri Prem Kishore Sikchi of M/s Kela Brothers confirmed that the cash receipts were in respect of products of MCL and that they were handing over the sale consideration collected in cash to Sri Shyam Daga or to his representatives viz., Rasil, Lalit and Narkar etc. and that most of the payments were made by them to Sri Narkarbhai and explained the various amounts and dates paid to such persons apart from referring to decimals to conceal the correct figures. He also stated that the extra amount over and above the bill amount was paid only in respect of supplies made by MCL. From the statement of Sri Prem Kishore Sikchi under invoicing by MCL was convincing and evident. The issue of collection of cash over and above the invoice value of MCL was corroborated by the statement of Sri Vaishal Kismath Bhai Shah, Proprietor of M/s. Adinath Plywood centre, Ahmedabad and had revealed the bill wise details of payments made by him to M/s. Kela Brothers amounting to Rs 19,69,193/-.
6. From the above, it was evident that the products cleared by MCL were undervalued and the additional sums over and above the invoice value were being collected in cash from the customers and eventually reaching MCL in the form of cash without creating any evidence on record. Sri Shyam Daga, who had gone through relevant statements of others revealing the undervaluation had not denied the same.
6.1. The Commissioner held that under the circumstances, Sri Shyam Dagas action/non-action had to be considered as indirect acceptance of the issue of undervaluation. There was enough evidence to find undervaluation. The pattern of undervaluation systematized by MCL was also clear from the supporting evidences collated by the investigation agency at various premises of MCL/branches/deports/consignment agents/distributors/customers corroborated with documentary evidences of slips/chits/price lists etc., and statements of various persons. Sri Prem Kishore Sikchi had categorically stated that the work sheet is properly examined by him which is correctly prepared on the total amounts sent/spent by M/s. Kela Brothers to MCL/Shyam Daga and that he had signed on the same to confirm that it had been correctly prepared. The statement was given on the details of undervaluation in his own handwriting and could not be considered or construed that such details, that too in 15 pages, had been given under duress as stated by MCL. It had to be concluded that MCL had undervalued the goods in respect of the clearances made to M/s. Kela Brothers and had collected cash over and above the invoice value. Further the Commissioner found co-relation between price lists, chits, invoices and extra payments made and that such co-relation had been brought out through the admissions made in the statements.
6.2. The Commissioner concluded that collection of additional consideration from the customers by MCL/Shyam Daga was established at least in some cases, on the basis of evidence. There were also circumstantial evidences for the receipt of additional consideration in cash by MCL/Shyam Daga. There was also evidence to show that the goods were sold at higher prices than the prices reflected in the invoices of MCL. Though the goods may not have been sold at the prices mentioned in the price lists, the invoice prices were far less even if up to 50% discounts were given as claimed by MCL/Shyam Daga.
6.3. He also referred to the judgment of Apex Court which had held that it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are within the knowledge of the opponent or the accused, in the judgment 1974 (04) LCX004 in the case of Collector of Customs, Madras and others Vs. D. Bhoormall. The Apex Court supported the view that the investigation had to establish the case not to its mathematical precision, but to such a degree of probability that a prudent man may on its basis believe in the existence of the facts of the issue.
6.4. Accordingly he confirmed the demand following the principle of preponderance of probability approved as acceptable in such cases by the apex court. The Commissioner also observed that the corroborative evidence put forth in the investigation was conclusive at least in the three instances as discussed earlier, but could not be generalized and made applicable to all the clearances made by MCL throughout India covering all the consignment agents/dealers without adequate evidence.
7. Findings of the Commissioner can be summarised as follows:
(a) The chits/slips/pads where scribbling relied in the investigation are considered as evidence in support of undervaluation which are duly corroborated by the statements.
(b) The price lists recovered from various places refer to premium grade products, but the investigation is comparing the same with the commercial grade products, and there is no evidence forthcoming in the investigation on this vital point.
(c) There are three cases where excess amount over and above the invoice value is collected in cash by MCL where corroborative evidence has been collected by the investigation.
(d) There is sufficient evidence to prove that MCL have been paid differential value by the customers/consignment agent/dealers in respect of the above three cases, but no evidence is brought on record to prove that MCL /Shyam Daga have received cash in respect of other transactions.
(e) Since the under valuation and collection of additional consideration in cash has been proved in the instances referred to above, MCL are liable to pay the Central Excise Duty on such clearances made. They have consciously resorted to fraudulent means and have suppressed the facts of under valuation from the knowledge of the Department, with an intent to evade payment of duty. They were preparing parallel slips along with the invoices indicating the invoice nos, quantity, actual selling prices of the goods, etc. Such slips were used by them for the purpose of collecting the actual sale consideration from their customers. This pattern clearly reveals their deliberate intention and fraudulent action to evade payment of Central Excise duty. As MCL have fabricated their statutory records intentionally by suppressing the actual sale value of the goods from the statutory authority, Central Excise duty evaded by them by fraudulent means is liable to be recovered.
(f) Shri Shyam Daga, Resident Director of MCL, has masterminded the undervaluation of the goods and collected additional consideration in cash over and above the invoice value without reflecting in any of the statutory records. Such collections have been made directly by himself, and/or through his representatives/managers. The statements given by various persons clearly show the central role played by him. The entire operation of under invoicing of the goods has been carried out by him knowingly and willfully, with an intention to evade payment of Central Excise duty, and therefore, he is liable for penalty.
8. Considering the facts discussed above, the Commissioner has confirmed demand of an amount of Rs. 80,36,177 on the additional consideration of Rs. 5,02,26,106/- on goods sold by M/s. Kela Brothers (Cal), Ahmedabad, Rs. 60,712/- on the additional consideration of Rs. 3,79,452/- on goods sold by MCL, Mysore as reflected in the Inter Office Memo; and Rs. 4,748/- on the additional consideration of Rs. 29,677/- collected in respect of Invoice Nos. 269, 273, 274 & 275. Rs. 16 lakhs voluntarily paid by MCL is appropriated by the Commissioner. Interest is demanded under Section 11AB of the Act, and penalty equivalent to the amount of duty evaded, totaling to Rs. 81,01,637/- is imposed on MCL under Section 11AC of the Act, read with Rule 173Q of the erstwhile CER 1944/Rule 25 of the erstwhile CE(No.2) Rules, 2001/Rule 25 of the CER, 2002.Penalty of Rs. 10,00,000/- is imposed on Shri Shyam Daga, Resident Director, MCL under the provisions of Rule 209A of the erstwhile CER 1944/Rule 26 of the erstwhile Central Excise (No.2) Rules, 2001/Rule 26 of the Central Excise Rules, 2002.
9. The assessee and the Revenue have filed appeals aggrieved by the above order. There is also a Miscellaneous application filed by the Revenue.
10. The order of the Commissioner has been challenged by M/s Mysore Chipboards Ltd. (MCL) and Shri Shyam Daga, Resident Director of MCL as regards the liability confirmed against them. Revenue has filed appeal No. E/317/2007 against the impugned order. During hearing of the appeals, the assessees representative had raised an objection that the Revenues appeal was not maintainable as the same had been filed by the Commissioner of Central Excise, Mysore. Committee of Chief Commissioners vide their order passed under Section 35E (1) of the Act had directed the Commissioner of Central Excise, Mangalore to apply to the CESTAT for correct determination of points arising out of the impugned order with which Revenue was aggrieved. Subsequently, Revenue also filed a Miscellaneous application No. 527/2009 in appeal No. E/317/2009 Misc. Application No. 527/2009
11. In this application, Revenue prays the Tribunal to take note of a corrigendum to order No. 2/2007 dated 4.4.2007 passed under Section 35 (1) of the Central Excise Act, 1944 (the Act) by the Committee of Chief Commissioners. It is submitted that when the Committee of Chief Commissioners met, it had considered an office note proposing to direct the Commissioner of Central Excise, Mysore to file the subject appeal. This was approved by the Chief Commissioner, Mysore Zone and placed before the Committee. Proposal to direct the Commissioner of Central Excise, Mangalore to file the subject appeal was not at all a subject of discussion by the Committee when it had met on 4.4.2007. The minutes had merely indicated the decision of the Committee to file the appeal against the impugned order. There was no mention of the Commissioner of Central Excise, Mangalore being directed to file the appeal as the authority to file the appeal.The Commissioner of Central Excise, Mangalore came to be inserted only while typing out the order of the Committee. From the endorsement on the order of the Committee, it is seen that a copy thereof was marked only to Commissioner of Central Excise, Mysore. Accordingly, a letter was also issued to the Commissioner of Central Excise, Mysore. The direction in the name of the Commissioner of Central Excise, Mangalore in the order of the Committee was thus clearly a clerical/typographical error. It did not reflect the decision of the Committee.
11.1. The Review Committee again met on 26.10.2009 and found that in terms of sub-section (4) of Section 35B of the Act, either the adjudicating authority or the authorized officer could file the appeal pursuant to the order of the Committee. The subject appeal was therefore, filed by the adjudicating authority in accordance with the above provisions. However, the Committee of Chief Commissioners also issued a corrigendum to its order No. 2/2007 dated 4.4.2007 to the effect that Commissioner of Central Excise, Mysore was directed to file the appeal instead of Commissioner of Central Excise, Mangalore.
11.2. The assessee has vehemently opposed the application. The application is opposed on the ground that allowing it would amount to condoning delay in filing the appeal by the authorised officer. Moreover, the corrigendum amounted to the Committee of Chief Commissioners reviewing its earlier decision to direct the Commissioner of Central Excise, Mangalore to file the subject appeal. In terms of subsection (4) of Section 35E, the adjudicating authority or the authorized officer has to file appeal following an order of the Committee of Chief Commissioners to the appellate Tribunal within a period of one month from the date of communication of the order under subsection (1) of Section 35E. Several case laws are cited in support of the claim that Tribunal has no powers to condone delay in filing the appeal beyond limitation prescribed in subsection (4) and that an order of the Committee of Chief Commissioners could not be reviewed by the Committee. Allowing the Misc. application would entail both these impermissible consequences.
11.3. We have carefully considered the submissions made by both sides and perused the records. During hearing of the appeal, we had directed the ld. Special Counsel for the Revenue to produce records relating to the meeting of Committee of Chief Commissioners. We find from the concerned file that the office note approved by the Chief Commissioner, Mysore Zone had proposed directing the Commissioner of Central Excise, Mysore to file the subject appeal. We also find that the submissions contained in the Misc. application are factually correct. Subsections (1) & (4) of Section 35E relevant to the application read as follows :-
(1) The [Committee of Chief Commissioners of Central Excise] may, of its own motion, call for and examine the record of any proceeding in which a [Commissioner of Central Excise] as an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such [Commissioner] [or any other Commissioner] to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the [Committee of Chief Commissioners of Central Excise] in its order.
[Provided that where the Committee of Chief Commissioners of Central Excise differs in its opinion as to the legality or propriety of the decision or order of the Commissioner of Central Excise, it shall state the point or points on which it differs and make a reference to the Board which, after considering the facts of the decision or order, if is of the opinion that the decision or order passed by the Commissioner of Central Excise is not legal or proper, may, by order, direct such Commissioner or any other Commissioner to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order, as may be specified in its order.] xxx xxx xxx xxx (4) Where in pursuance of an order under sub-section (1) or sub-section (2) the adjudicating authority or the authorised officer makes an application to the Appellate Tribunal or the [Commissioner (Appeals)] within a period of [one month] from the date of communication of the order under sub-section (1) or sub-section (2) to the adjudicating authority, such application shall be heard by the Appellate Tribunal or the [Commissioner (Appeals)], as the case may be, as if such application were an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeals, including the provisions of sub-section (4) of section 35B shall, so far as may be, apply to such application.
12. We find that the Committee of Chief Commissioners had passed an order directing the Commissioner of Central Excise, Mangalore in accordance with the provisions of Section 35E (1). We find that the adjudicating authority who passed the impugned order was Commissioner of Central Excise, Mysore. The Committee of Chief Commissioners had considered several orders of the Commissioners of Central Excise in the jurisdiction assigned to the Committee. There was no conscious decision by the Committee to direct a Commissioner different from the Commissioner of Central Excise, Mysore to file the subject appeal. From the records, it is apparent that a typographical error had occurred and the Commissioner of Central Excise, Mangalore came to figure in the order issued under Section 35E (1) by the Committee of Chief Commissioners as authorized officer. We are satisfied that this typographical error or clerical error should not come in the way of the Revenue seeking relief provided under the law. In the interest of justice, we hold that the subject appeal filed by the Commissioner of Central Excise, Mysore is maintainable and in accordance with law. We overrule the objections raised by the assessee in this regard. The Miscellaneous application is accordingly disposed of.
Appeals No.E/37&38/2007
13. The assessee has challenged the demands on various grounds. As regards the demand on under valuation to the extent of Rs. 3,79,452/- on the basis of the IOM seized, the same is challenged on the ground that the demand on the difference between value shown in the IOM and the sales invoices was without basis. The Commissioner had relied on statements of K. Sridhar, Regional Manager, MCL, Umeedmal Jain, Cashier of MCL and Soorya Narayana, Proprietor of M/s. Balaji Plywoods. Shri Umeedmal Jain retracted his statement and submitted as follows during cross examination :-
that he received the Inter Office Memo dated 20.6.2003 from K. Sridhar and he sent the same to him (Jain) for confirming the contents of IOM and he verified receipts recorded in the IOM recorded at the right side with the ledger. However, he has not verified the details of 11 Bills recorded on the left side of the IOM and he has not been able to confirm the credit balance of Rs.1,91,577/- to K. Sridhar since the same was not tallying with the ledger; that the receipts on the right side mentioned in the IOM can be in the nature of advance payments as well as on account payments; that he has verified the receipts mentioned in the IOM with the Account Confirmation Statement received from Balaji Plywoods, Vijayawada for the year ended 2003-2004 and found the entries to be the same, that he further verified the said receipts with the Ledger extracts of MCL for the same period and found that the said receipts are figuring in the Ledger.
14. It is submitted that From the above, it was very clear that the said IOM was documented by K. Sridhar to Umeedmal Jain for verification of outstanding balance of the account of Balaji Plywoods, Vijayawada and the amounts indicated on the left side of the said IOM could not be verified and confirmed by him as the same was not tallying with the Ledger Accounts maintained by him and the amounts shown on the right side of the IOM, reflected the receipt of amounts, on account, from M/s. Balaji Plywoods, which he was able to confirm as the same tallied with the Ledger Accounts. In other words, the said invoice amounts indicated on the left side of the IOM were incorrect figures and hence could not be verified and confirmed by Umeedmad Jain. However, the Ld. Commissioner completely disregarded the contradictions arising out of the retraction statement and the cross-examination of Umeedmal Jain with respect to the allegations made in this regard.
15. The Commissioner had disregarded the evidence produced by the appellants i.e. extracts from the ledger account of MCL and the books of account of Balaji Plywoods filed along with their reply dated 16.01.2006 wherein the values of invoice numbers 236, 237, 298, 299, 354, 390, 391, 405, 406 and 500 were recorded as per the sales invoices and so also the details of payments made by them, which tallied with the receipts mentioned in the IOM. There was no difference between values in the books of account and the values shown in sale invoices of MCL. Amounts were paid in accordance with the sale invoices. This being the case, the adverse inference of undervaluation drawn by the Ld. Commissioner in respect of the invoice amounts shown on the left side of the IOM and that too only with respect to six invoices, to the tune of Rs.3,79,542/- was merely a conjecture and without any proper legal basis. Demand of Rs. 60,712/- needed to be vacated.
16. The Commissioner had rendered the following finding in the order in this regard. On comparison of the values shown in the IOM and the factory invoices, the value appearing in the IOM was found to be more than what had been shown in the invoices, the difference ranging from 40% to 54.56%. Sri Umeed Mal Jain, in his statement dated 28.08.2003 given before the SIO, DGCEI, Bangalore, had agreed that the IOM had been seized from his possession and that the same had been sent to him by Sri K. Sridhar. The authenticity of the said IOM had been confirmed by Sri K. Sridhar in his statement dated 28.08.93 given before the SIO, DGCEI, Bangalore.
17. In the IOM invoice Nos. 236, 237, 298, 299, 354, 390, 39, 405, 406, 499 and 500 had been referred and MCL in their reply to SCN have stated that most of the invoices referred only to B-grade articles. After going through the said documents, Commissioner was of the opinion that the invoice nos. 354, 390, 391, 405 and 500 covered goods of B-grade as indicated on these invoices. He allowed benefit of doubt to the assessee in respect of these invoices; but in respect of rest of the six invoices, the total differential value between the relevant invoices and the value shown in the IOM worked out to Rs.3,79,452/-. This IOM was sent by K. Sridhar, Regional Manager of MCL, Bangalore to Shri Umeedmal Jain, Cashier, MCL, Mysore, who had admitted that he had received the said IOM through fax. The values shown in the IOM had been verified with the relevant invoices and there appeared to be variation in the values between the IOM and the invoices. Sri Umeedmal Jain had admitted in his statement that the actual value was much more than the value shown in the invoices of MCL and such additional amounts were collected in cash by their consignment agents/branch manager and transferred to the company as per the direction of Sri Shyam Daga / Sri G. R. Surekha. MCL and Shri Shyam Daga, in their replies to SCN, only explained the details of receipts shown on the right hand side of the said memo and the payments were received only through Cheques / D. Ds. But the value difference was not explained by MCL satisfactorily.
18. In the absence of any evidence to the contrary, the Commissioner found undervaluation on these invoices to an extent of Rs.3,79,452/-, as the IOM was corroborated with the statements of Sri K. Sridhar and Sri Umeedmal Jain. The belated attempt to show that these differential values were due to advances, was not logical.
19. We have considered the above arguments and the findings of the Commissioner. The demand of Rs. 60,712/- in respect of Invoice Nos. 236, 237, 298, 299 and 406 for a value of Rs. 3,79,452/- was confirmed by the Commissioner based on the submissions by Shri K. Shridhar and Shri Umeedmal Jain, both employees of MCL. Their initial statements were not retracted. The retraction before the notary within a few days of recording the statements was not made known to the department. Effective retraction of statements recorded on 28 August, 2003 was made only in the reply to the Show Cause Notice on 16.01.2006. The IOM exchanged between the functionaries of the assessee and recovered from one of them under mahazar showed particulars of bills such as number, amount, payment details, etc. The memo reflected also corresponding sales invoices. The value appearing in the IOM was higher compared to the corresponding sale invoices by 40% to 54.56%. The invoice prices were verified. Shri Umeedmal Jain had admitted that the actual value was higher than the value shown in the corresponding invoices. Differential amounts were collected by consignment agents/branch manager and transferred to the company. In the reply to the Show Cause Notice, figures appearing on the right side of the IOM were not explained. The Commissioner concluded under valuation based on the statements of assessees employees. The retraction filed before notary is not acceptable. We note that in the following decisions, it was held that retracting from any statement given before an officer of Customs/Central Excise can be regarded as a retraction only when it has been made before the proper officer. Retraction before any other authority or notary can be taken on record as retraction made only on the day it is submitted to the Central Excise/Customs Department or the Adjudicating Authority.
(i) S. Prithviraj Kawad Vs. CC, Chennai [2006 (206) ELT 512]
(ii) Ashraf Puliyulla Parambil Vs. CC, Chennai [2007 (213) ELT 555]
(iii) Em Pee Bee International Vs. CCE(Adj.), Chennai [2008 (289) ELT 704]
(iv) Tejwal Dyestuffs Industries Vs. CCE, Ahmedabad [ 2007 (216) ELT 310(LB)]
20. As regards the statements furnished by the employees of the assessee, they are admissible in evidence when found to be voluntary and not vitiated in any manner as held by the Apex Court in Bhana Khalpa Bhai Patel Vs ACC,Bulsar [1997 (96) ELT 211(SC)]. Therefore, the statements given by S/Shri.K. Shridhar and Umeedmal Jain are acceptable evidence. In Blue Star Ltd. [ 2003 (161) ELT 141(Bom.)], it was held that strong and cogent material on record was required to refuse and discard statements recorded under statute. In Govindasamy Regupathy [1999 (98) ELT 50(Mad)], the High Court held that statements made under Section 108 before Customs Officer were regarded as voluntary and not to be viewed with suspicion. Retraction of such confessional statement did not affect its evidentiary value. It was not established that the initial statements had been given under duress. In the circumstances, demand of Rs. 60,712/- has to be upheld. We do so.
21. As regards the challenge to demand of Rs. 4,748/-, the same related to invoices 269, 273, 274 and 275 for goods sold to Saif Plywoods, Gorakhpur. The demand was based on loose slips recovered from Shri Anoop Trivedi, an employee of the assessee. Shri Anoop Trivedi and Jamil Ahmed of Saif Plywoods had admitted excess collection to the tune of Rs. 26,677/- in respect of the invoices involved. Shri Jamil Ahmed made depositions in cross examination retracting the initial statement. He stated that the excess collection was for sales promotion of plywood products sold by Saif Plywoods.
22. In the impugned order the Commissioner found that these slips dealt with the sale of goods by MCL from their Lucknow branch. One of the slips referred to the transaction pertaining to invoice no.275 dt. 24.7.03. to a customer M/s. Saif Plywood. On examining this slip it was seen that an amount of Rs.15,159.43 had been charged over and above the said invoice and the said slip also revealed that for 6 mm BUR Ply the rate charged was Rs.288/- per sq. meter. The value in the said invoice as well as the name of the party, details of goods including specification and invoice no. could be seen in the said slip to infer that the said slip corresponded to the invoice no. 275 dt. 24.7.03 of MCL. Further the value as shown in the invoice had been deducted from the total sale consideration. After deducting the invoice value, tax was added and the resultant amount was the one which was payable by the party in cash over and above the invoice value. From this slip, it was evident that invoice value was much less than the actual sale consideration. In a similar way based on the slips MCL had resorted to undervaluation in respect of invoice nos. 274, 273 and 269 as detailed in the para 6.3 of SCN. All the slips referred to the sales made to M/s. Said Plywoods, Gorakhpur. The transaction reflected in the slips pointed strongly to the undervaluation adopted by MCL. In these four invoices, the additional amount collected over and above the invoices worked out to Rs.29,677/-, on which Central Excise duty was liable to be paid.
23. Sri Anoop Trivedi had admitted that he had collected additional amounts in cash which was over and above the invoice value shown as detailed in Para 6.1, 6.2 and 6.3 of SCN, and that he had not retracted his statement dt.28.08.03. Further, Sri H.A. Ray the branch manager had also seen the statement dt. 28.08.03 of Sri Anoop Trivedi and had remarked that he had read the statement of his marketing executive, which was in four pages and agreed with the contents of the said statement. M/s. MCL had suppressed the sale value to a great extent in respect of excisable goods manufactured and cleared from MCL in their invoices and statutory records.
24. We have considered the findings and arguments of MCL in this regard. The six loose slips/sheets were recovered from the personal custody of the assessees employee. It had evidentiary value as an incriminating document. We find that even though Shri Jamil Ahmed retracted his statement in cross examination, the statement of Shri Anoop Trivedi is valid evidence and supports the finding of under valuation. He is an employee of MCL and made an informed statement initially. There is no acceptable retraction of the same. The witness has not complained that the initial statement was given under duress. The statement rendered under Section 14 of the Act is therefore admissible evidence. The demand based on this evidence and documents seized is liable to be sustained. We order accordingly.
25. The demand of 80,36,177/- has been challenged on the ground that the deposition by Shri.Prem Kishore Sikchi and Vaishal K. Shaw were retracted during cross examination. Commissioner has disregarded these retractions. The elaborate statements furnished on 28.08.2003 to the effect that MCL had collected cash over and above the bill amount from their dealers, such amounts was given to persons nominated by Shyam Daga i.e. Rushil, Lalit Navkar, etc, the submission that figures had to be read without decimal for the actual figure and that extra collections made in respect of supplies were reflected in the file seized were all retracted. During the period March, 1998 to August, 2003, an amount of Rs. 6,65,66,117/- had been paid in cash or spent on behalf of MCL by KBC(Cal.) Ahmedabad, as per the statement prepared by the Department was not correct. Another submission by Vaishal K. Shah dated 28.8.2003 was that Rs. 15.59 lakhs was paid to MCL by cheque and Rs. 19.69 lakhs was paid by cash. All these submissions were retracted as incorrect during cross examination. Several entries related to payments towards car rent, personal expenditure on Shyam Daga, share purchases etc. Some entries related to Zeus ply and some entries related to supply of Marine ply etc. Shri Prem Kishore Sikchi deposed during cross examination that the amount of Rs. 6,65,66,177/- pertained to transactions not only of MCL but various others .
26. It is submitted that Shri Kishore Sikchi had explained the entries figuring in the documents recovered from the premises of KBC, Ahmedabad. No duplicate set of accounts or unaccounted cash was found from the said premises. Several case laws are cited in support of the claim that a confession statement recorded under protest and threat had no evidentiary value. Otherwise, such statements had to be corroborated by independent evidence. In the subject case, such evidence was absent. No statements were obtained from dealers to whom M/s Kela Brothers had sold the goods. In private accounts found in the premises of Prem Kishore Sikchi could not be attributed to MCL or Shyam Daga alone. This was stated by Shri Prem Kishore Sikchi in his statement dated 18.04.2005. The appellants denied that the entries in the private accounts of M/s Kela Brothers related to MCL or Shyam Daga. The total amount said to have been spent in cash on behalf of MCL was a ridiculously high Rs. 271.09 lakhs against the total sales of goods valued at Rs. 203.30 lakhs. It was not indicated for what purpose, the said amount had been spent by M/s Kela Brothers on behalf of MCL.
27. It is further submitted that the gravamen of the charge was that MCL had under invoiced the goods cleared. Any alleged differential payment should have direct correlation with the invoices covering the goods cleared during the impugned period. Such an alleged feedback was required to be supported by documentary evidence in the form of cash or accounts found at the appellants premises. No such evidence was found and no correlation established between invoices and kutcha slips. The impugned demand and penalties deserved to be vacated.
28. We find that the Commissioner arrived at the finding of under valuation by MCL based on documents and statements of Shri. Prem Kishore Sikchi of M/s Kela Brothers and Vaishal K. Shah, Proprietor of Adinath Plywood Centre, Ahmedabad. Shri. Prem Kishore Sikchi, was a consignment agent of MCL and cannot be held to be a third party. His statement has to be held as admissible evidence. He had confirmed collection of cash and handing over the same to Shri Shyam Daga through Shri Shyam Dagas agent. He had identified the relevant entries showing such collections spent on behalf of MCL. Shri Shyam Daga when confronted with the statements of Prem Kishore Sikchi and Vaishal K. Shah did not immediately deny such cash recoveries. We find that the Commissioner rightly relied on the principle of preponderance of probability in finding under valuation by the assessee. He relied on the judgment of the apex court in the case of Collector of Madras & Others Vs.D. Bhoormall (1974 04 LCX 004). Shri Sikchi himself was the author of the incriminating documents seized from M/s Kela Brothers, consignment agent of MCL. He had explained the nature of transactions in detail including the pattern of accounting in the private documents. MCL had furnished different figures (Rs. 75.72 lakhs and 87.32 lakhs) as representing duty paid sales in the reply to the Show Cause Notice. In view of this, the Commissioner found the claim of the appellant refuting excess collection of Rs. 271.09 lakhs as not reliable.
29. In the order, the Commissioner has entered the following finding on the dispute. Sri Prem Kishore Sikchi had reiterated that the extra amount over and above the bill amount was made only in respect of supplies made by MCL and that the seized filed No.A/1 pertained to MCL only and that the said annexure contained entries regarding all payments made by them to MCL or amount spent on behalf of MCL. Further, Sri Prem Kishore Sikchi had stated that he had properly examined all worksheets prepared on the basis of seized papers showing the amount collected and paid to MCL or spent by them on behalf of MCL and that it was correctly prepared ; he signed on the said worksheet; Rs.6,65,66,117/- was the correct total. Sri Prem Kishore Sikchi categorically stated that the work sheet was correctly prepared on the total amounts sent / spent by M/s. Kela Bros (Calcutta), Ahmedabad to MCL / Shyam Daga and that he has signed on the same to confirm that it was correctly prepared. Adjudicating authority found that evidence brought out in the investigation showed flow back of additional consideration in the form of cash to MCL as evidenced by chits/slips/pads, and supported by the corroborative evidence of statements of persons/dealers/customers/consignment agents.The assessees challenge is based on belated retraction of witnesses. In the light of the statement of In the light of the statement of Sri Prem Kishore Sikchi and the documentary evidence, we find that the Commissioners finding on undervaluation has to be upheld.
30. The Commissioner found the charge of undervaluation and collection of additional amounts in cash by MCL where incriminating documents were recovered and such collection corroborated by statements given by the employees of M/s. Kela Brothers (Cal), Ahmedabad, M/s. MCL, Mysore and MCL, Lucknow Branch, and M/s. Adinath Plywood Centre, Ahmedabad.Since the undervaluation and collection of additional consideration in cash by MCL had been proved in the instances referred to above, MCL were liable to pay the Central Excise duty on such clearances made to or through M/s. Kela Brothers (Cal.), Ahmedabad, M/s. MCL, Mysore and MCL, Lucknow Branch.
31. We have considered the submissions by the appellant. We find that DGCEI has gathered evidence as regards of collection of excess amounts compared to the value on which duty was paid by MCL for clearances under excise invoices made to or through M/s. Kela Brothers (Cal.), Ahmedabad, M/s. MCL, Mysore and MCL, Lucknow Branch. However, we find considerable force in the submission by the appellant that the demand being towards differential duty, the same should have been correlated to particular invoices covering such clearances. This is not done by the Commissioner. In a similar case of under valuation, found by the authorities, in the case of CERA Boards & Doors Vs. CCE, Calicut [2010 (249) ELT 550(Tri.-Bang.)], the Tribunal made the following observations:-
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 the normal value can be notional, the transaction value is the actual amount transacted in respect of the goods. Of course, under certain circumstances, the transaction value has to be determined in accordance with the Rules. Anyhow, we would not go into that. Suffice it to say that for all the clearances after 1-7-2000, the value has to be determined based on each-transaction. Therefore, the differential duty should be confined only to the evidences available on record. These are our two observations. Therefore, the Revenues contention that uniformly for all the clearances, 70% should be added to the invoice value is not accepted. We reiterate our finding to say that for the period prior to 1-7-2000, the Commissioner has to decide the normal price for each variety of goods and he can adopt the same for all the clearances. It does not mean that the invoice value has to be accepted. The normal price has to be determined based on the evidence available.
11.13 As regards the period after 1-7-2000, the Commissioner has to go strictly by the transaction value and decide the short levy. After deciding the differential duty leviable on the basis of the above principles, the Commissioner can determine the quantum of penalty, etc.
32. We remand this matter to the Commissioner for a fresh decision in the light of the decision in CERA Boards case. The Commissioner shall also decide the penal liabilities of the assessee and the Director of the assessee in de novo proceedings after hearing them.
Appeal E/317/2000
33. In this appeal, the Revenue seeks confirmation of entire duty on MCL as proposed in the Show Cause Notice, which the impugned order disposed. The following submissions are made :-
33.1. The Commissioner did not appreciate that he was required to prove the charge of under valuation based only on the principle of preponderance of probability. This criterion was met if the proposition was more likely to be true than not true. Effectively, the standard was satisfied if there was greater than 50% chance that the proposition was true. Lord Denning in Miller Vs. Minister of Pensions had described it simply as more probable than not. Though the Commissioner relied on IOM and held it to be of high evidentiary value and under valuation was established, he did not confirm differential duty in respect of clearances of B grade goods. Actually what mattered was the difference between the invoice value and the value indicated in the IOM. We find that there is considerable merit in this submission by the Revenue. The demand was raised in respect of some invoices by the Commissioner comparing the value in the invoices and the corresponding figures appearing in the IOM. The quality of the particle board under clearance was irrelevant. The adjudicating authority dropped the demand in respect of certain invoices for the reason that the invoices covered B grade goods. We find that this decision is incorrect as the short levy was alleged not on the basis that any price list operated by the assessee/dealer showed higher prices compared to the invoices and that the price lists pertained to quality goods whereas the invoices were for B grade goods. This aspect needs to be looked into by the Commissioner in the remand proceedings which we order. In respect of clearances through Lucknow office, though MCL was found to have suppressed the sale value to a great extent, the Commissioner upheld under valuation only in respect of four invoices. This was not consistent with the findings in the order. We find that the Commissioner has given sufficient reasons for confirming demand of differential duty only in respect of the particular four invoices. He could not have confirmed demand without details of the invoices linking clearances by MCL. Such particulars were available only in respect of four invoices issued to M/s Saif Plywood, Gorakhpur. That the assessee collected extra amounts in excess of invoice value for other sales from the Lucknow branch is not in serious doubt. We allow this plea by remand for re-adjudication in the same manner we order in respect of sales by M/s Kela Brothers which we presently take up. Yet another prayer of the Revenue is that the Commissioner had failed to consider the evidence built upon the slips recovered from Shri. Anoop Agarwal. This was contradictory to the statement of Shri D.K. Batra, Manager of MCL. The Commissioner found lack of evidence on flow back while in similar circumstances, the amounts recovered by M/s Kela Brothers and their transmission to MCL had been upheld. The Commissioner found that Shri Anoop Agarwal was not an employee of MCL at the material time based on evidence. Therefore his retracted statements not were admissible in evidence. As per his statements the assessee collected higher amounts than the invoice amounts. However, the slips recovered from him could not be linked to any clearances. We have cited the relevant finding of the Commissioner elsewhere in the order. We find that the Commissioner order is correct and the demand canvassed is not backed by any evidence. In the circumstances this plea of the Revenue is rejected.
34. As for the fax sent by Umiya Enterprises and statement of Shri Pankaj Patel relied by revenue in appeal for seeking confirmation of differential duty, the Commissioner had dropped the proposal as the transaction did not take place. We find that the fax related to transaction involving classic grade plywood which Umiya Enterprises did not buy. The particular transaction did not happen. We find that therefore the Commissioner rightly dropped the demand on this count. There cannot any demand based on this fax. The invoices considered dealt with inferior quality products whereas the fax dealt with premium quality products. We find no infirmity in the decision of the Commissioner. We reject this part of the appeal. In regard to sales from Ludhiana Branch, Sri.Rajesh Arora, employee of MCL had furnished details of sales which indicated collection of extra amounts without accounting. The Commissioner had ignored the fax message in the handwriting of Shri. Shyam Daga. Shri Rajesh Arora, an employee of MCL had furnished details of sale, which indicated realisation by MCL of huge amounts during May-July 2002 to May,June and July, 2003. The Commissioner wrongly discarded the statement of Shri Arora. This was in contradiction to the inference drawn in para 143 of the OIO. We find that Commissioner did not find any material other than some slips which did not give any details of invoices such as goods sold, buyers or amounts. He rightly dropped the demand as not backed by evidence.
35. Yet another grievance of the Revenue is that the Commissioner had considered Rs. 5.02 crores as the value that escaped assessment whereas the correct amount was Rs. 6.66 crores. It is also submitted that the price lists recovered from Office of MCL at Bangalore, MCL, Ludhiana and MCL, Delhi pointed to existence of two prices. One is the actual selling price and the other, corresponding lower price shown on the invoices. Sales through M/s Kela Brothers alone accounted for excess collection of Rs. 6.66 crores. It was seen from the conditions given at the bottom of the price list that the prices were the actual rates charged from dealers. In the face of overwhelming evidence, the Commissioner had erred in limiting the demand to MCLs clearances to M/s. Kela Brothers, some clearances made from MCL, Mysore and MCL, Lucknow. The Commissioner should have confirmed duty on account of under valuation in respect of all clearances made by MCL to all their buyers as proposed in the show cause notice. The revenue has relied on the following observations of the Tribunal in the case of Surya Ceramics 2006 (201) ELT 392 namely, in a case of clandestine operations, the revenue authorities cannot be put to prove every detail of the clandestine transaction. That too when there is sufficient evidence showing that the goods were clandestinely dealt with for evasion of duty. These were very relevant to the present case. Unlike in the Surya Ceramics case , in the present case, there was documentary evidence in the form of companys own price list, documents reflecting collection of amounts in excess of invoice value whose authenticity was not in doubt. The revenue also relied on the decision of the Bench in the case of Carpenter Classic Ltd. Vs. 2006 200 ELT 593. In that case, DRI could provide concrete evidence only in respect of one out of 25 Bills of Entry relating to consignments of kitchen modules. Yet, based on this evidence, corroborated by the statements of the Director of the importing company and some of the employees, the Tribunal confirmed the duty demand on all consignments accepting the fact that even if convincing evidence was produced in respect of a small proportion of the whole set of clearances, the requirement of preponderance of probability was met and one did not need to look for 100% evidence with respect to each clearance.
35.1. In this regard we find that the Commissioner rendered his findings as follows. Where incriminating documents were recovered and such collection corroborated by statements given by the employees of M/s. Kela Brothers (Cal), Ahmedabad, M/s. MCL, Mysore and MCL, Lucknow Branch, and M/s. Adinath Plywood Centre, Ahmedabad demand is confirmed. Since the undervaluation and collection of additional consideration in cash by MCL had been proved in the instances referred to above, MCL were liable to pay the Central Excise Duty on such clearances made to or through M/s. Kela Brothers (Cal.), Ahmedabad, M/s. MCL, Mysore and MCL, Lucknow Branch. He held that in finding the charge and applying the level of undervaluation found in respect of a few clearances could not be applied to all clearances of the assessee. We find ourselves in agreement with the Commissioner in this finding on the facts of the case.
35.2 In this connection, we note that what matters is the quality of evidence gathered by the revenue. In the cases cited extrapolation of a finding in respect of an offending transaction was applied to other transactions in view of the concrete evidence in the case examined. Preponderant probability ruled that in all such cases assessee had committed the same offence. But we do not find such evidence in the case at hand. Even in cases confirmed, the Commissioner followed probability principle. We cannot confirm any demand when there is probability that in all cases the assessee may not be guilty of the same transgression. Concrete evidence collected by the DRI was available in the Carpenter Classic Ltd. case. Revenue relied on the apex court decision and observations in the case of CIT Vs. H.M. Esuf Ali and H.M. Abdulla -90 ITR 271 SC . In that case, on the basis of private records pertaining to 19 days, projection of turnover for 355 days by the CTO was approved by the apex court. We note that the appellant had strong evidence to justify such projection in the case cited. These authorities alone cannot support the revenues case for demanding the entire duty proposed in the SCN unless it is shown that in respect of a significant part of the impugned clearances positive evidence of undervaluation existed and there was a reliable pattern which showed beyond doubt a probability that same level of undervaluation was there in respect of all clearances impugned.
36. We find that undervaluation of excisable goods is as serious a charge as clandestine removal. Differential duty can be demanded only where under valuation is established. In the wake of transaction value introduced w.e.f 1.7.2000 in the Act such evidence has to be available in respect of each removal. There could be cases where the facts of one case of undervaluation and the pattern involved are such that extrapolation is safe and justified. In the instant case, we find that the facts highlighted by the Commissioner do not justify such a course of action. As undervaluation cannot be ruled out and is likely to have taken place as is apparent from the price lists, chits and IOM seized, we consider it necessary to remand the case canvassed in the Revenue appeal to the Commissioner for adjudication. Allowing this prayer, we are remanding the dispute regarding under valuation for fresh adjudication except that relating to the case pertaining to fax recovered from Umiya Enterprises and sales from the Delhi branch of MCL.in the light of ratio of this tribunal in the case of CERA Boards & Doors. It is open to the Revenue to canvass its case before the Commissioner in the remand proceedings to be conducted in the light of the ratio of the CERA Boards and Doors case cited before us by the Revenue.
36.1 In deciding the appeal filed by the Revenue we have duly considered the submissions made by the assessee.These are based on belated retractions of witnesses. In allowing the Revenue appeal by way of remand, we have not considered such statements of third parties as evidence. We have found the initial statements of employees and employee of consignment agent of MCL, effectively retracted two years later, as acceptable evidence.
37. Decision on appeal filed by Shri. Shyam Daga, the Residential Director of MCL is linked to the assessees liability to duty. In the circumstances, the appeal filed by Shri. Shyam Daga is allowed by way of remand. The other appeals are allowed in part by way of remand on the terms discussed above. The Miscellaneous application filed by the revenue is also disposed of.
(Pronounced in open Court on 07.07.2010) (P. KARTHIKEYAN) Member (T) (M.V. RAVINDRAN) Member (J)