Custom, Excise & Service Tax Tribunal
M/S Purva Plylam vs Cce, Rohtak on 29 July, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 09/04/2013. DATE OF DECISION : 29/07/2013. Excise Appeal No. 2086-2087, 2194-2211, 2217 and 2527-2529 of 2008 [Arising out of the Order-in-Original No. 25-27/Commr./SU/08/ CE dated 25/07/2008 passed by The Commissioner of Central Excise, Rohtak.] For Approval and signature : Honble Ms. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Surya Boards Ltd. ] M/s Surya Vikas Plywood Pvt. Ltd. ] M/s Donear Dicor Pvt. Ltd. ] M/s Mangal Murti Ply Wood ] Shri Jitendra Kejriwal ] M/s Aggarwal Plywood Corpn. ] M/s Purva Plylam ] M/s Donear Plywood ] M/s Maghar Singh Timbers Pvt. Ltd. ] Shri Jitendra Kejriwal ] M/s Maghar Singh Timbers Pvt. Ltd. ] M/s Purva Plylam ] Appellants M/s Donear Plywood, Chandigarh ] M/s Donear Plywood ] Shri Jitendra Kejriwal, M.D. ] M/s Purva Plylam ] M/s Agarwal Plywood Corporation ] M/s P.T. Trading Co. ] M/s Donear Plywood ] M/s Maghar Singh Timbers Pvt. Ltd. ] M/s Donear Plywood Pvt. Ltd. ] M/s Donear Plywood ] M/s Agarwal Plywood Corporation ] Versus CCE, Rohtak Respondent
Appearance S/Shri S. Ganesh, Senior Advocate (for M/s Surya Boards), Amar Dave, K.K. Anand and Abhijeet, Advocates for the appellants.
Shri A. Raha, Special Counsel for the Respondent.
CORAM : Honble Ms. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) Final Order No. 57103-57126/2013 Dated : 29/07/2013 Per. Archana Wadhwa :-
All the appeals are being disposed of by a common order, as they arise out of the same set of circumstances and investigations, though the various appeals arise out of three different adjudication orders passed by the Commissioner, as detailed below :-
Vide order-in-original No. 25/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/2528/2008 M/s Surya Boards Ltd.
D 6,20,62,878/-
P 6,20,62,878/-
2. 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 Plylam 36,02,428/-
6. E/2202/2008 M/s Donear Ply wood 36,02,428/-
7. E/2203/2008 M/s Donear Ply wood 36,02,428/-
8. E/2086/2008 M/s Mangal Murti Plywood 36,02,428/-
Vide order-in-original No. 27/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/2527/2008 M/s Donear Dicor P. Ltd.
D 42,42,439/-
P 42,42,439/-
2.
E/2194/2008
Shri Jitendra Kejriwal
42,42,439/-
3.
E/2195/2008
M/s Aggarwal Plywood
10,60,610/-
4.
E/2196/2008
M/s Purav Plylam
10,60,610/-
5.
E/2197/2008
M/s Donear Ply wood
10,60,610/-
6.
E/2198/2008
M/s Maghar Singh Timbers Pvt. Ltd.
10,60,610/-
2. As per facts on record M/s Surya Boards Ltd. [hereinafter referred to as SBL] is engaged in the manufacture of decorative plywood commonly known as Veneer falling under Chapter 44 of the Central Excise Tariff Act. The other two units under the name and style of M/s Surya Vikas Plywood Pvt. Ltd. [hereinafter referred to as SVPPL] and M/s Donear Dicor Pvt. Ltd. [hereinafter referred to as DDP] are the two other sister concerns of M/s SBL which are also engaged in the manufacture of decorative plywood. Shri Jitendra Kejriwal is the Director of all the three units. The other appellants upon whom penalties stand imposed are the dealers of the three manufacturing units. Apart from confirming demands of duties and imposing penalties, the Adjudicating Authority has also confiscated the decorative plywood seized from various places including the seizure from the premises of the dealers, with an option to the owners to redeem the same on payment of redemption fine. Further, cash of Rs. 6,00,000/- seized from the premises of M/s SBL stands confiscated.
3. We have heard both the sides, duly represented by S/Shri S. Ganesh, Senior Advocate (for M/s Surya Boards and other manufacturing units), Amar Dave, K.K. Anand and Abhijeet, Advocates and Shri A. K. Raha, Special Counsel for the Revenue.
Appeals arising out of order-in-original No. 25/Commr./SU/08/CE dated 25/07/2008.
4. We shall be first dealing with the first set of appeal arising out of order-in-original No. 25/Commr/SU/08/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 appellants 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 including some computer print outs and paper slips etc. from the premises of dealers.
5. Based upon the initial recovery of documents either from the appellants premises or from the premises of the dealers, Revenue entertained a view that the appellant had under invoiced their final product i.e. veneer and they have been collecting the differential cost of the goods by way of cash, which was further utilized by them for unaccounted purchase of raw materials. Accordingly, further investigations were conducted and statements of various persons were recorded. We shall be dealing with the said statements in the finding portion of the order.
6. During the course of search of the appellants factory on 28/6/05, various computers were also seized from the factory premises. Personal laptop of Shri Jitendra Kejriwal was seized from the residence of the Director and was sealed by the officers. It is seen that after the seizure of the laptop, Shri Jitendra Kejriwal, Managing Director of SBL from whose residence the laptop was seized was called in the office on 23/1/06 and 12/4/06 for retrieving the data stored in the said laptop. However, the laptop data could not be retrieved on the said dates owning to the absence of the power cord. Thereafter the laptop was again sealed in his presence and the same was sent for analysis to the Government Examiner Questioned Documents (hereinafter referred to as GEQD, Hyderabad). The data stored in the said laptop was retrieved by GEQD and was sent to the department for further action. The said data so retrieved by GEQD, attached as Annexure C-1 to C-12 to the show cause notice is the main basis for the Revenue, readwith the statements recorded during the course of investigations and the computer print outs recovered from the dealers premises, to allege under invoicing of the goods. According to the Revenue, the data retrieved from the personal laptop of the Managing Director reveals that the appellant M/s SBL was resorting to various codes for distributors for maintenance of the data and the figures therein were being maintained according to different codes of transactions, amounts therein were entered by shifting the decimal places by two to the left, collection of amounts over and above the invoices amounts which have not been entered in the books of accounts and utilization of the same for expenses which are again not entered 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 appellants 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 his statement 31/7/06 deposed that these rate list are maintained by them based on which goods are billed to their various dealers at the rates mentioned in the rate list.
8. Based upon the above evidences, a show cause notice dated 16/12/05 was issued to various persons proposing confiscation of the goods seized from their premises and the confiscation of the seized currency of Rs. 6 lacs. Subsequently another show cause notice dated 22/3/07 was issued to M/s SBL alongwith the other appellants alleging under valuation of their final product to the extent of 2.5 times approximately and proposing to confirm the demand of duty of Rs. 6.20 crores approximately. The said two show cause notices stand adjudicated by the Commissioner by a single order No. 25/Commr./SU/08/CE dated 25/07/2008.
9. Both the sides duly represented by learned Senior Advocates have advanced elaborate arguments in support of their contentions and have also referred to and relied upon various decisions of the Courts. Further, written submissions stand filed by both the sides, which we have gone through and have appreciated the arguments.
10. On going through the impugned order, we find that the Adjudicating Authority has upheld the allegations of under valuation of the goods manufactured and cleared by SBL during the period March 2002 to June 2005 to the extent of 2.5 times of the invoice value by mainly relying upon the data retrieved from the personal laptop of Shri Jitendra Kejriwal, Director of SBL. The said data stands compared by him to the computer statements recovered from the premises of the dealers like M/s Maghar Singh Timbers Pvt. Ltd., Ludhiana, M/s Donear Plywood, Chandigarh and some paper slips recovered from the appellants factory as also from the premises of M/s Donear Plywood. He has also relied upon the statement of Shri Parminder Singh, Director of M/s Maghar Singh Timbers Pvt. Ltd., Shri Vijay Kant Goyal, Partner of M/s Donear Plywood, Naresh Goyal, Account Manager of M/s Surya Boards, Shri Jitendra Kejriwal of SBL, Shri Rajesh Sharma, Field Executive and Accounts clerk of M/s Surya Boards Ltd. and Shri Manish Rungta, Proprietor of M/s Donear Plywood. We shall be dealing with the evidentionary value of the said statements at the appropriate places, some of the statements stand retracted by the deponents either after making the same or at time of cross examination.
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 laptop which are running into about 63 number of pages. By drawing our attention to the said print outs, he submits that the same are totally jumbled up and does not lead to any conclusion. He submits that such data was neither retrieved in the presence of the appellant nor the transfer of the data from laptop to the hard disk was done in the presence of the appellant and, as such, the same cannot be held to be the genuine and correct reproduction of the data stored in the laptop.
11.1 He further submits that based upon the said data given by GEQD, Revenue has made a list of some alleged accounting codes which according to the Revenue stands given to every distributor of the appellant. He submits that there is no explanation by the Revenue as to how the department obtained these purported accounting codes nor it stand explained by the department anywhere nor has any distributor corroborated the said accounting codes. In some cases the same party has been given two different accounting codes or two different parties have been given the same accounting code and there is no basis for preparation of such a list by the Revenue, based upon which the huge demand stands confirmed against them. There are serious contradictions in the chart prepared by the Revenue based upon such codes, which are unreliable on the face of it. He also makes a grievance of the fact that the GEQD officer, who prepared the report was not offered for cross examination even though a specific request to that effect was made by the appellant. The Adjudicating Authority has denied the said request by observing that the same was made belatedly. He submits that the report itself is dated 28/12/07 whereas the request for cross examination was made on 31/3/08, while filing reply to the show cause notice. The impugned order was passed after a period of 4 months during which period the Adjudicating Authority could have offered the cross examination of GEQD. He submits that it was necessary to examine the GEQD officer in as much as they are disputing the very authenticity of the report given by him. For the above propositions, he relies upon Tribunals decision in the case of S. Namasivayam vs. CC, Chennai reported in 2009 (240) E.L.T. 255 (Tri. Chennai) and also submits that the reliance by the department on the Madras High Court decision in the case of Money Madras Trading Company is completely misplaced 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 Revenues 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 reported in 2005 (183) E.L.T. 65 (Tri. Chennai) which has analyzed and interpreted provisions of Section 36B in detail. He has also referred to the Tribunal decisions in the case of Subhnen Decor P. Ltd. vs. CCE, Vapi reported in 2010 (251) E.L.T. 105 (Tri. Ahmd.), S. Namasivayam vs. CC, Chennai reported in 2009 (240) E.L.T. 255 (Tri. Chennai) and Brims Product vs. CCE, Patna reported in 2001 (130) E.L.T. 719 (Tri. Kolkata).
12. As against the above submissions of the learned Senior advocate made on the laptop data, learned advocate Shri Raha appearing for the Revenue has strongly relied upon the provisions of Section 36A and 36B of the Central Excise Act, 1944, which provides that truth of the contents, signature and every other part of seized documents shall be presumed unless contrary is proved by the person from whose custody or control such documents have been seized. Section 36B (1) (c) interalia, provides that computer print out shall be deemed as a document and admissible as evidence of its content without further proof, subject to the conditions mentioned in sub-Section (ii) of Section 36B. It is his contention that the various clauses of Section 36B, when read together, would suggest that computer print out 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 truth its contents without further proof. As such, he submits that the print outs retrieved from the personal laptop seized from the residence of Shri Jitendra Kejriwal, Managing Director of SBL are admissible evidences and the onus to disapprove the same lies on the appellant. He has also drawn our attention to the decisions laying down that where private records are recovered from the factory, the burden to prove that they were wrong and did not belong to the assessee was on the appellant. Specific attention stand made to the Honble Allahabad High Court decision in the case of Somani Iron & Steels Ltd. vs. CESTAT reported in 2011 (270) E.LT. 189 (All.) as confirmed by the Honble Supreme Court reported as 2012 (277) E.L.T. A26 (S.C.), CCE vs. International Cylinders Pvt. Ltd. reported in 2010 (255) E.L.T. 68 (H.P.), CC, Madras and others vs. D. Bhoormull reported in 1983 (13) E.L.T. 1546 (S.C.). As such, he has strongly contended that the degree of proof by the Revenue ought to be preponderance 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 again not entered in the account books. He submits that the manner of making entries in the personal laptop of Shri Kejriwal stand explained by Shri Parminder Singh, Director of Maghar Singh Timbers Pvt. Ltd. As such, he prays for acceptance of such retrieved computer data, as admissible evidence.
13. We have considered the submissions made by both the sides. The Revenue has strongly relied upon the data retrieved from the seized personal laptop of Shri Jitendra Kejriwal which was purchased 4 months prior to the date of the seizure. It is also not disputed that though the entries made in the said laptop are for the last 4 months period, the Revenue has applied the same for the entire period from March 2002 to June 2005. It stands observed in the impugned order of Commissioner that though the said data was not available for the whole period, it is enough to establish the modus operandi adopted by M/s SBL in excise duty evasion in as much as it contains even the minutest details of expenditure towards the purchases of M/s SBL like firewood, seizure, travel expenses, cell phone expenses of employees, extra amounts paid to the employees apart from salary without accounting in the books of accounts.
14. On the other hand, the appellant has strongly contested the authenticity of the data retrieved from the said laptop and hence contended that the same is fabricated. We find that though the said laptop was seized on 28th June 2005 from the residence of Shri Jitendra Kejriwal, the data was not retrieved from the same at the time of seizure itself. Thereafter Shri Jitendra Kejriwal was called in the office on 23rd January 2006 and 12th April 2006 for retrieving the data from the said laptop in his presence. However, the same could not be done on account of absence of power cord but it is not understood as to what was the difficulty in obtaining the power cord so as to operate the laptop and to retrieve the data on the said dates. However, the laptop were again put under seal in the presence of Shri Jitendra Kejriwal and in the presence of witnesses. The same was subsequently sent to GEQD in July 2006 and the report was obtained from GEQD on 26th December 2006. The said retrieval of data by GEQD was admittedly not in the presence of the appellant. The appellants have attributed the allegation of fabrication of the said data by investigating officers and have also 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 even in the code numbers.
14.1 We also find force in the appellants contention that when the GEQD report has given a certificate as regards the integrity of the data in respect of 5 computers, from whom the data stand retrieved by them, there is no integrity certificate about the data retrieved from the personal laptop. The arguments of Shri Raha that omission of separate integrity certificate in respect of laptop cannot be construed as a fatal lapse that would render the entire information retrieved from it as a nullity, cannot be appreciated. Admittedly the GEQD report certified the integrity of the digital evidence storage media and it was authenticated by MS hash value. There is no such authentication and integrity certificate in respect of laptop and no explanation stands given by GEQD, about such lapse on their part. Conspicuous absence of a certificate about the integrity of the data which was retrieved from the laptop, weakens the Revenue case especially when the appellants have alleged fabrication and corruption of the data retrieved by GEQD, who has also not been offered for cross examination. When the appellants are questioning the authenticity of the data so retrieved from the computer laptop, it was obligatory on the part of the Adjudicating Authority to offer the GEQD officer for cross examination so as to test the veracity of the same. The Adjudicating Authority has not accepted the assessees request for cross examination on a simplicitor ground that such request was made late. Rejection of such request has come up for the first time in the impugned order itself and no intimation about the same was given to the assessee prior to the passing of the order. Tribunal in the case of S. Namasivayam vs. CC, Chennai reported in 2009 (240) E.L.T. 255 (Tri. Chennai) has held :-
After careful consideration of the records of the case and the submissions by both sides we find that the impugned order has been passed in gross violation of principles of natural justice. The entire case, we find, was built mainly on the basis of data contained in the hard disc of the computer recovered from the premises of M/s Sai Crafts. Once the integrity of the data retrieved by the GEQD and relied upon by the investigating agency to frame allegations against the appellants was questioned it was not fair on the part of the adjudicating authority to have passed the adjudication 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 persons handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested;
(b) admit the document in evidence, notwithstanding that it is?not duly stamped, if such document is otherwise admissible in evidence.] SECTION 36B. Admissibility of micro films, facsimile copies of documents and computer print outs as documents and as evidence. (1) Notwithstanding anything contained in any other law for the time being in force,
(a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or
(b) a facsimile copy of a document; or?
(c) a statement contained in a document and included in a printed?material produced by a computer (hereinafter referred to as a computer print out), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a computer print out shall be the following, namely :
(a) the computer print out containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
(b) during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived;
(c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and
(d) the information contained in the statement reproduced or is derived from information supplied to 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?thereunder 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 statement and?describing the manner in which it was produced;
(b) giving such particulars of any device involved in the?production of that document as may be appropriate for the purpose of showing that the document was produced by a computer;
(c) dealing with any of the matters to which the conditions?mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.
(5) For the purposes of this section, ?
(a) information shall be taken to be supplied to a computer if it?is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;
(b) whether in the course of activities carried on by any?official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;
(c) a document shall be taken to have been produced by a computer?whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.
Explanation. For the purposes of this section,
(a) computer means any device that receives, stores and?processes data, applying stipulated processes to the information and supplying results of these processes; and
(b) any reference to information being derived from other?information shall be a reference to its being derived therefrom by calculation, comparison or any other process.]
16. We have carefully read the said Sections. We find that sub-Section (1) (c) of Section 36B refers to a statement contained in a document and included in a printed material produced by a computer. The said document has been referred to as computer print out. It is in respect of the computer print out that the said section refers to as regards the admissibility of the same as evidence. Admittedly no computer 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 to :-
(a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or
(b) a facsimile copy of a document; or?
(c) a statement contained in a document and included in a printed?material produced by a computer (hereinafter referred to as a computer print out), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, Thus the presumption of truth is in respect of documents recovered from a person and the document includes computer printout. In this regard, Section 65B of the Indian Evidence Act, uses a more general term Computer output which is deemed to be a document and computer output means any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media, produced by a computer i.e. information recorded in a computer printout, a compact disk, optical disk, floppy disk etc. obtained as computer output. The presumption is about the truth of the computer output/computer printout seized. But there is no presumption of truth of the information stored in the memory space of a computer seized from the custody or control of a person, which is electronic record, and from which computer output/printout is generated. Secondly for exercise of the presumption under Section 36A readwith Section 36B, the computer printout must have been seized from the custody or control of a person or at least should have been produced from his computer in his presence. The presumption cannot be exercised in respect of computer printout taken from a seized computer by some outside agency like GEQD in absence of the person from whose custody or control the computer had been seized. Therefore, the provisions of Section 36A readwith Section 36B of the Central Excise Act, 1944 are not invokable in respect of the computer printout, generated by the GEQD from the personal computer/laptop seized from Shri Jitendra Kejriwal.
16.1 In any case, we find that even the reference in Section 36B is in respect of computer print outs produced by the computers, which was in regular use during the relevant period and such information was being regularly supplied to the computer in the ordinary course of the said activities. Admittedly in the present 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 (Tri. Chennai) has observed that the Revenues case build on the basis of data contained in the hard disk of the computer, the integrity of which is challenged by the assessee cannot be relied upon, without cross examining GEQD. We further take into consideration the Tribunals decision in the case of Premier Instruments & Controls Ltd. vs. CCE, Coimbatore reported in 2005 (183) E.L.T. 65 (Tri. Chennai). In para 9 of their decision, the Tribunal has examined the provisions of Section 36B of the Central Excise Act, which dealt with admissibility of computer print outs and has analyzed the conditions as contained in sub-Section (2). It was observed that in as much as the computer was not shown to have been used regularly to store or process information for the purposes of any activities regularly carried on by the company and it was also not shown that information of the kind contained in the computer print out was regularly supplied by the company to the personal computer of Shri Sampat Kumar, a Junior officer of the company, in the ordinary course of activities and it was not shown that the computer was operating in the above manner properly, conditions cannot be held to be satisfied by the Revenue. The said provisions cast a burden on the party who wants to rely on the computer print out, to show that the information contained in the print out had been supplied to the computer in the ordinary course of business of the company. For arriving at the above conclusion, Tribunal relied upon the precedent decision in the case of International Computer Ribbon Corporation vs. CCE, Chennai reported in 2004 (165) E.L.T. 186, wherein after observing that the print outs were neither authentic not recovered in Muzzafarnagar and the assessee having disowned the same, Revenues finding of clandestine manufacture and clearances on the same basis was rejected. The Revenues reliance on the decision of Honble Madras High Court in the case of Mani Bhadras Trading Company vs. CC (Seaports Exports), Chennai reported in 2010 (251) E.L.T. 194 (Mad.), is not appreciated as we note that the Honble High Court has observed in para 9 that though it is needless to add that reasonable opportunity would include cross examination but has concluded that not granting of opportunity of cross examination would not be in violative of principles of natural justice, on the ground that it is open 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 Honble 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 Honble 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 refers to a statement showing correlation to the laptop data with ledger and invoices so as to demonstrate the ratio of 2.5% between the transactions value shown in laptop to the invoice value in each transactions. Further, as for the proof of the modus of decimal shifting by two places to the left, sample corroborative evidence from the ledger of SBL relating to lump-sum payment received from dealers without reference to any particular invoice has been tabulated. From the above, Revenue seeks to contend before us that the modus operandi of decimal shifting by two places to the left was deliberately adopted by Shri Kejriwal and the values in the laptop print out sans the decimal were the actual transaction values. They have also submitting that on one hand, the appellant is submitted that the data introduced in the laptop is fabricated and on the other hand they are saying that the same is jumbled which grounds are self-conflicting.
18.1 However, we do not find any merits in the above contention of Shri Raha. The basic question required to be decided is as to whether the information retrieved from the personal laptop of Shri Kejriwal, which was purchased only 4 months prior to the seizure, at his back by the GEQD after a period of one and a half years can be considered to be a sufficient evidence for confirmation of demand for the entire period of March 2002 to June 2005. Having already discussed that such jumbled up retrieved data, without any reference to the decoding of the same etc. by itself cannot be considered to be the relevant evidence, especially when the appellant has disowned the same, attributed the allegation of fabrication and the same being not clear entries in the records
19. In view of the foregoing discussions, we are of the view that the Revenues reliance on the retrieved data by GEQD cannot be held to be an admissible piece of evidence so as to rely upon the same for arriving on the findings of under valuation.
20. It is further seen that for the corroboration of the above data recovered from the personal laptop of Shri Jitendra Kejriwal, Revenue has also relied upon the statement of the various persons. The main statement relied is that of Shri Parminder Singh, Director of M/s Maghar Singh Timbers Pvt. Ltd., Shri Vijay Kumar Goyal of Donear Plywood, Shri B.K. Aggarwal of M/s Aggarwal Plywood Corporation and Shri Sunil Kumar Tulsian 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 statement of the said distributors, during the course of investigation, has chosen not to refer to the same or to rely upon the same or to make them a part of the show cause notice or to place them on records. The appellants contention is that Revenue is expected to refer to the entire material collected by them during the course of investigations, to be fair to the assessee. We fully agree with the above contention of the learned advocate. The entire purpose of the investigation is to find out the correct position. Any material or evidence, which further the assessees case and demolishes the Revenues case is not required to be kept out of consideration, with a view to win or lose a case. The exclusion of the statements of 16 distributors by the Revenue from the records of the case, while issuing a show cause notice to them, reflects upon the unfairness of the Revenue. The principals of natural justice and fair adjudication required the Revenue to place the entire evidence on record collected by them during investigation, while issuing the show cause notice to the assessee and to leave the same for the Adjudicating Officer to decide the disputed issue based upon the entire evidence. The inclusion of only those statements which are inculpatory, reflects upon the unfairness of the Revenue.
20.11 As regards the statement of 8 distributors, it is seen that only three deponents were offered for cross examination. During the course of cross examination all the distributors deposed that the statements made by them in the presence of the excise officers was under pressure and were not correct reflection of facts. The other deponents of the inculpatory statements retracted the same by filing an affidavits before the Commissioner which has not been considered by him.
20.2 It is well settled law that the statements of third parties, which are proposed to be relied upon by the Revenue are required to be tested for their correctness or veracity by the tool of cross examination. In the light of the fact that 16 distributors have given statements and have filed evidences to show that there was no under invoicing by M/s SBL and in the light of the retraction of statements by the three deponents, it has to be held that the said statements cannot be made the basis of alleging and upholding the under invoicing of the goods in all the clearances made by the appellant during 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 appellants contention that the statements, which were favourable to the assessee has not been considered, observed as under :-
7.?We also find force in the appellants contention that the statement of the other dealers, recorded during investigation, who have deposed in favour of the assessee should also be brought on record and cannot be brushed aside on the simple ground that they are not the relied upon documents. The Revenue cannot pick and choose evidences which are in its favour and cannot ignore the evidences collected during investigation, which might support the assessees case. We also note that no incriminating documents have been recovered from the said appellants premises and no unaccounted cash has been recovered from the appellant. In this scenario, it was important that the dealers whose statements were recorded should have been offered for cross-examination.
We also find force in the appellants contention that the statements of other dealers, recorded during investigation, who have deposed in favour of the assessee should have also been brought on record and cannot be brushed aside lightly on the simple ground that they are not the relied upon documents. Revenue cannot pick and choose evidence which are in its favour and cannot ignore the evidences collected during investigation, which might support the assessees case.
22. Revenue has strongly relied upon the statement of Shri Parminder Singh of M/s Maghar Singh Timbers Pvt. Ltd. recorded on 28/6/05 deposing that they are working on a profit margin of less than 5% and the actual price of Donear goods was 2.5 times the invoice rate that the price differential over and above the invoice price was paid in cash, that all Donear products were under invoiced to the extent of 2.5 times and the excess payment was collected by one Sonu representing Shri Kejriwal. It is seen that the said Parminder Singh, during the course of adjudication has given affidavits in favour of the assessee to the effect that there has not been any under invoicing by the appellant and no payment was made in cash. Apart from above, Revenue has not been able to find out Sonu, referred by Shri Parminder Singh, through whom the excess payments were being sent back to Shri Kejriwal. The statement of Shri Parminder Singh was also retracted by him and the retraction letter was received by the Directorate General on 27/3/05, even though he claimed to have posted the same by registered post on 29/6/05. The Revenues contention is that in as much as the statement of Shri Parminder Singh was recorded by a senior Intelligence officer of DGCEI, at Ludhiana, the retraction should have been sent to the same officer who recorded the statement. 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 as much we have already noted that all the other statements of distributors recorded during the course of investigations were in favour of the assessee wherein they clarified that no such cash payment were being made by them. Admittedly the products manufactured by M/s SBL and sold by them to various distributors were the same products. It cannot be held that in case of one distributor, the price was two and a half times than the invoice price and the difference was being collected in cash, whereas from other distributors only the invoice price was being collected. The goods being manufactured by the appellant is a common veneer and not custom made items. The same goods cannot be sold to one distributor at a lower price and to other distributor at a high price of two and a half times. Further, the Revenue has not produced on record any evidence of excess cash receipt by M/s SBL. Even the person, Sonu, said to have been mentioned by Shri Parminder Singh is not traceable and the Revenue has not been able to identify the same. Who is this Sonu who was collecting the excess payment from Shri Parminder Singh and was delivering the same to Shri Kejriwal. There is no trace of the said Shri Sonu. Revenue has not been able to produce any evidence to show the excess payment by Shri Parminder Singh to Shri Kejriwal. As this fact casts serious doubts on the statement of Shri Parminder Singh, which cannot be accepted the prime evidence for upholding the charges of under valuation, in the overall facts and circumstances of the case.
24.1 For the same reason, we find no justification for accepting the other statement of various deponents who have retracted the same by way of filing affidavits or at the time of cross examination. The result of cross examination, cannot be taken lightly, otherwise the same defeats the very purpose of the cross examination. The Commissioner, as an Adjudicating officer was within his rights to put question to the witness so as to satisfy himself about the correctness of the answers given by the said witness. Having allowed the cross examination of the said persons, the Adjudicating officer was bound by the result of the same and could not have simplicitor brushed aside the same on the ground that the same does not reflect the correct position of facts. Instead of referring to each and every statement, suffice it to say that such retracted 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 is no further evidence showing payment of excess recovery by the distributors to the manufacturer. There is also nothing on record to show as to how the differential cost of the plywood stands recovered by the appellant from their distributors and in turn by the distributor from their dealers. No further investigations stand made at the end of the ultimate retailer, who has sold the goods to the consumer and there is nothing on record to show as to at which price the veneer is ultimately sold by the retailer in the open market. There is also no effort made by the department to reflect upon the fact that there is huge and vast difference in the price recovered by the appellant from their distributors and the price at which the plywood is ultimately sold to the ultimate consumer. In our views such an inquiry and investigation should have been made by the Revenue, so as to strength its case of under valuation in the hands of the manufacturers. The allegations by the Revenue are under valuation of the plywood to the extent of 2.49 times, which is a huge difference between the invoice price and the alleged recovered price from the distributors. If the appellant was actually indulging in under valuation to the extent of two and a half times and was recovering the cash from the distributors, the same under valuation would travel to the dealers and the distributors would be recovering the said differential amount from the dealers in cash. There is virtually no evidence or an allegation to show that the distributors were recovering the differential amount from their dealers in cash. Further such dealers would be selling plywood at a cost which would be almost 2 and half times more than the invoice price. Again there is no allegation or any evidence to show that the dealer/retailer has further sold the goods in the market at a price which is two and a half price higher than the invoice price.
26. At this stage, we may deal with the contention of the learned Advocate that in their reply filed before the Commissioner, they have taken a categorical stand that the prices of their competitors, in respect of identical goods was more or less the same. They have also placed on record the invoices issued by the distributors of the other manufacturers indicating that the identical goods were being sold in the market at the same price. The Adjudicating Authority has chosen not 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 other manufacturers of the veneer. Admittedly no such case had been made out against the other plywood manufacturers and nothing has been brought to our notice. It cannot be said that the entire plywood manufacturing industry was indulging in under invoicing of their goods. This fact itself leads us to conclude that the allegations of under invoicing against the present appellant cannot be sustained.
27. Not only that, we also note that even after making out the present case for the period upto June 2005, the appellant continued to sell their final product at the prices, which were more or less similar to the prices at which the goods were being earlier sold. Except for the minor escalation on account of increase in the manufacturing cost, in the course of normal business, the prices remained more or less same and also stand accepted by the Revenue without any objection. If that be so, we fail to understand as to how the findings of the Commissioner for the intervening period can be upheld.
28. We also note that the Revenue has also not made any attempts to study the cost structure of the goods, in question. No efforts have been made to arrive at the manufacturing cost of the goods so as to establish its case that the invoice price was even less than the manufacturing cost. Though we agree with the learned advocate appearing for the Revenue that this cannot be made the sole basis for alleging under valuation but admittedly the same would have been an important factor to uphold the finding of under invoicing, especially when there is no direct evidence of such an allegation and the Revenues case is based upon the retrieved data from the laptop of the Managing Director readwith retracted statements of some of the dealers. Not only that the cost structure of the appellants product was not considered, even the pricing factor of similar goods for the relevant period or after 2005 when the appellant continued to sell their goods at the same price was not considered and questioned. The appellants have also strongly contended that their sales tax assessments alongwith income tax assessments for the relevant year stand completed by the respective departments even without raising any objection. This fact, by itself may not be of much relevance if the Revenue is able to produce conclusive and admissible evidence in support of its allegation of under invoicing, 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 the distributors and further cash sales by the distributor to their dealers, the ultimate sale price of the product etc. etc. demolishes the Revenues case against the assessee. We accordingly find no justifiable reasons to uphold the demand of duty against M/s SBL or to impose any penalty upon them. For the same reasons, penalty imposed upon the Managing Director is required to be set aside. We order accordingly.
30. As regards the seizure and confiscation of Rs. 6,00,000/- recovered from the appellants premises, the appellant has taken a categorical stand that the said cash was withdrawn from the bank of the appellant for the payment of its workers and was in nature of cash in hand for carrying out the daily activities. They have produced the relevant bank statement, which has not been taken into account by the Adjudicating Authority. In view of our finding that there was no under invoicing by the appellant as also in view of the fact that the appellant has been able to show the withdrawing of the said amount from their banks, we find no justifiable reasons to confiscate the said Rs. 6,00,000/-. Accordingly, the order of confiscation is set aside.
31. As regards the penalties imposed upon various dealers and the confiscation of the goods seized from their premises, we are of the view that their appeals are required to be allowed in as much as we have already allowed the appeal of M/s SBL. As such without going into the individual defence taken up by each and every dealer, we set aside the impugned order relatable to them and allow their appeals with consequential relief.
Appeals arising out of order-in-original No. 26/Commr./SU/08/CE dated 25/07/2008.
32. Vide the said impugned order, Commissioner has adjudicated upon two show cause notices dated 16/12/05 and 23/2/07 and has confirmed demand of duty of Rs. 2,16,14,572/- against M/s Surya Vikas Plywood Pvt. Ltd. (hereinafter referred to as SVPPL) alongwith imposition of penalty of identical amount. In addition penalty also stand imposed upon the said appellant under Rule 25 of the Central Excise Rules as also on the other appellants who are either the distributors of the said M/s Surya Vikas Plywood Pvt. Ltd. or the Director of the said company. From the impugned orders, we note that the said demands stand confirmed against the main appellant M/s SVPPL on the allegations and findings of the under 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 readwith 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 distributors; questioning the reliance on the statement of only 4 distributors, who have retracted the same during the course of cross-examination; non-recording of statement of 1500 dealers of around 24 distributors; non-verification of cost of production and absence of any allegation that the value at which goods were sold was less than cost of production; absence of any evidence indicating flowback of cash from the distributors to the manufacturers; absence of any investigations at the end of the retailer; the fact of selling the goods at the same price even after the visit of the officers and non-questioning of the same by the Revenue; the fact of selling of identical goods by the other manufacturers at more or less the same price and reliance on various decisions. We may also refer to the fact that some of the distributors, in their statements have admitted the extent of under valuation to the extent of 20% whereas the others have indicated that the under valuation was 30% or 50% or 100%. The learned advocate appearing for the manufacturing unit has very strongly contended that in as much as the extent of under valuation indicated by the distributors varies, the said demands cannot be held to be reflecting the correct position. The said statements have to be held as having been given under pressure of the Revenue in as much as there is so much of inconsistency in the same that they cannot be blindly adopted to allege under valuation to the extent of 3.52 times.
32.1 As we have already dealt with, in detail with the said arguments of the appellants and have concluded in their favour in the case of M/s Surya Boards and others, we do not feel the requirement of going into details about the same very arguments. By following the decisions of the appeal arising out of the earlier order-in-original No. 25/Commr./SU/08/CE dated 25/07/2008, we set aside the present impugned order also and allow all the appeals with consequential relief to the appellants.
Appeals arising out of order-in-original No. 27/Commr./SU/08/CE dated 25/07/2008.
33. Vide the said impugned order, the Adjudicating Authority has confirmed the demand of duty of Rs. 42,42,439/- and imposition of penalties on M/s Donear Dicor Pvt. Ltd. and its distributors and the other appellants on same findings of under valuation of the decorative plywood being manufactured by them. The evidences relied upon 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 from 18 dealers which represented 63.15% of the total sales during the relevant period and merely 3 dealers representing 7.91% of the sales alleged to have given extra payment to the appellant-company and two dealers out of these three representing 7.46% of the sales retracted their statement within a reasonable time. The department sought to place reliance on the statement of one Mr. Parthasarathy of Shankar Mercantile Corporation and during the cross-examination, he has denied having paid any extra consideration to the appellant-company. This position is not controverted by the Revenue. We find that it is for the Revenue to establish with credible evidence the aspect pertaining to under-valuation. The charge that extra payment has been made and extra consideration received, has to be established by the department. We note that the Department in their comments have stated that when forty dealers of the appellant were spread all over South India, it would be difficult to conduct investigation in respect of all. It is for the department to establish the charge of under-valuation by bringing in acceptable evidence though not with mathematical precision. We find that the appellants have clearly stated that statements have been recorded under threat and coercion while the department in their comments sought to challenge this assertion by the appellants that the appellants have not brought any documentary evidence in this regard. We find that PKV Menon, Commercial Manager of the appellant-company, during the cross-examination on 25-7-1994 has clearly stated that the statement was recorded against his will and it was given under pressure and coercion made by the officers. He has also stated that the whole night he was beaten up and was harassed and he was forced to give a statement implicating himself and the first petitioner and he was allowed to go only after giving the statement as per direction of the Central Excise Officers at about 3 AM on 7-5-94 and the statement was taken between 1 AM and 3 AM. We find that the Commissioner has given a finding in para 20.3 that statements have been recorded from 7 (not 6 as mentioned) more dealers and the appellants have contended that their statement supports the case of the appellants. Other witnesses such as N. Ashok Kumar, A.V. Sekhar, P. Ravindran, and N. Nagendran have also stated during cross-examination that the statements 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 has stated that he has received any extra consideration from the dealers for the appellant-company. Shri Nagendran of M/s. Shree Sakthi Agencies, during cross-examination clearly stated that he has not paid anything over and above the billed amount to Shri Parthasarathy, who was the employee of M/s. Shankar Mercantle Corporation.
34.1 Similarly, in the case of Somany Pilkingtons Ltd. vs. B.P. Verma (Director, Publications) reported in 1995 (76) E.L.T. 281 (Del.), the Honble Delhi High Court in a more or less identical case of under valuation observed as under :-
90. Out of 200 dealers, D.R.I. Officers, recorded the statements of 62 dealers under Section 14 of the Act. Except 5, the other dealers, appear to have denied payment of any extra amount to even Mr. Vyas or plaintiff. In the show cause notice, the Department did not rely upon the statements of all the 62 dealers, but relied only on the statements of 7 dealers. This, in my view, not only violated the legal procedure, but resulted in grave injustice to plaintiff.
91. There is no material on record to suggest that the money collected by Mr. Vyas was paid to the plaintiff or to any of its Directors, or it was credited in the account of the Company. Payment should be from buyer to the assessee.
92. In other words, there was no material before the Authority, to indicate the involvement of plaintiff or any of its Directors, either directly or indirectly, with any act of Mr. Vyas.
93. From the perusal of the admitted facts and documents, it is evident that the total number of transactions involving the alleged payment of extra money over the invoice price, constituted less than 1% of the total sales/transaction alone, during the period in question. In other words, in the substantial majority of transactions, dealers paid the price, as indicated in the invoices. Thus, this price, alone constituted the normal price, at which the goods were ordinarily sold. By the show cause notice, the Department sought to recover excise duty, on the additional amount, allegedly received by Mr. Vyas. This, in my view, is contrary to Section 4 of the Act. So, the Department did not follow the provisions as contained in Section 4 of the Act.
34.2 The ratio of the above decisions is that first of all the Revenue is expected to be fair to bring all the investigations results on record and it is not open to the Revenue to only rely upon the statements which are in its favour. Secondly, the result of cross-examination is required to be accepted unless contrary is proved. Thirdly, evidences collected in a small percentage of transactions cannot be applied to the entire transactions covering a longer period.
35. In view of our foregoing discussions, all the three impugned orders are set aside and appeals allowed with consequential relief, if any.
(Pronounced in open court on 29/07/2013) (Archana Wadhwa) Member (Judicial) (Rakesh Kumar) Member (Technical) PK ??
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