Customs, Excise and Gold Tribunal - Delhi
Prabhat Terpenes And Synthetics (P) ... vs Collector Of Central Excise on 13 May, 1993
Equivalent citations: 1993(48)ECR624(TRI.-DELHI)
ORDER Lajja Ram, Member (T)
1. These are two appeals - one appeal bearing No. E/1840/89-A, filed by the Collector of Central Excise, Chandigarh, under Section 35C(1) of the Central Excises and Sail Act, 1944, (hereinafter referred to as the 'Act'), and other appeal bearing. No. E/2023/88-A, filed by M/s. Prabhat Terpcnes and Synthetics Pvt. Ltd., Jammu, (hereinafter referred to as the 'party' or the 'PTS'), under Section 35B of the Act. As both the appeals are directed against the same Order-in-Original No. 10-CE/88-C No. V(68)15A/15/10/CE/AA & R/88/3058, dated 19.5.1988, passed by the Collector of Central Excise, Chandigarh, they were heard together, and are being disposed of by this common order.
2. M/s. Prabhat Terpenes and Synthetics (PTS), were engaged in the manufacture of rosins and turpentine oil, falling under Item No. 68, and synthetic resins, falling under Item No. 15A, both of the erstwhile Schedule to the Act (hereinafter referred to as the Tariff). The sales by PTS were partly from the factory gate to the various customers, and partly through M/s. Prabhat General Agencies (PGA), whose depots were located at Delhi, Bombay, Bangalore, Madras and Calcutta. PGA was a HUF concern, whose 'Karta' was the Managing Director of PTS.
3. The entire production of turpentine oil, falling under Item No. 68 of the Tariff was sold through PGA, while rosin, falling under Item No. 68 of the Tariff, and synthetic resins, falling under Item No. 15A of the Tariff were sold partly to independent buyers at the factory gale and partly through PGA.
4. In respect of the goods falling under Item No. 68 of the Tariff, the party had opted for the benefit of exemption Notification No. 120/75-CE, dated 30.4.1975, which related to invoice value assessment.
5. While opting for invoice value assessment, under Notification No. 120/75-CE, dated 30.4.1975, the party, had declared, in an affidavit that the 'invoice price' charged from PGA was not influenced by any commercial, financial or other relationship, other than the relationship created by sale of the excisable goods. It was affirmed that they had not directly or indirectly derived any benefit out of the sale proceeds of the goods sold by PGA, and that all the transactions between them and the PGA were at 'arm's length', and on 'principal to principal' basis. They slated that they had no relationship with PGA, and that the price was the sole consideration for the sale.
6. In the Show Cause Notice, dated 22.5.1986, issued by the Collector of Central Excise, Chandigarh, it was alleged that PGA were the favoured buyers of PTS, the prices charged from PGA were substantially lower than the prices charged from the independent buyers in respect of the sale at the factory gate, and that in view of their special relationship with PGA, the price charged by them from PGA was not the sole consideration for the sale. In the circumstances, it was alleged that exemption of duty under Notification No. 120/75-CE was not admissible in respect of the goods falling under Item No. 68 of the Tariff, and the prices were to be determined under Section 4, taking into account the higher prices charged from the customers by PTS/PGA.
7. As the transactions of sale between the party and the PGA were alleged to be influenced by commercial, financial and relationship, other than the relationship created by the sale, and as that sale was not at 'arm's length', it was alleged that they have wrongly availed of the benefit of Notification No. 120/75-CE, by giving a false affidavit to the effect that they have no relationship with PGA, and that the transactions of sale between them were at arm's length'.
8. It was thus alleged that they have evaded Central Excise duty of Rs. 1857078.77 for the period 1.4.1981 to 30.9.1985 in respect of the goods falling under Item No. 68, valued at Rs. 190658865.
9. Differential value, in respect of the turpentine oil, falling under Item No. 68 of the Tariff, were arrived at by taking into account the value of comparable goods charged by M/s. J & K Rosin and Turpentine Factory, Jammu.
10. In respect of Rosin of different grades, also falling under Item No. 68, the differential value were calculated on the basis of the rates charged (during the period of sale to PGA) from independent buyers.
11. As regards synthetic resins it was alleged that they were partly sold to independent buyers at the factory gate, and partly through PGA, who sold them from their depots located at different places. The prices charged from the PGA were considerably lower than the prices charged from the independent buyers in respect of the sales at the factory gate, and that the prices charged by PGA, when the goods were sold from their depots, was, more or less, equal to the higher prices charged at the factory gate, from the independent customers, that is customers other than PGA.
12. The differential value in respect of synthetic resins was calculated on the basis of rates charged of these products by Calcutta Depot of PGA. The party did not produce the invoices of other depots of PGA from where those goods were sold.
13. It was thus alleged that the party have suppressed the value of Rs. 3462194.06, in respect of the goods falling under old tariff item No. 15A, involving duly of Rs. 457442.84 for the same period, that is from 1.4.1981 to 30.9.1985.
14. The prices charged at various depots of PGA were more or less equal to the prices charged at Jammu from the independent customers (other than M/s. Prabhat General Agencies and its allied units); that is, the rates at which goods were sold directly to independent buyers were almost the same as those at which the goods have been sold by PGA to independent buyers in course of normal trade (vide paragraph 2 of the Show Cause Notice, dated 22.5.1986), and which had formed the basis for arriving at the differential duty.
15. It was also observed that the party had not only suppressed the fact of their special relationship with PGA but have also manipulated the records to avoid detection by the Central Excise department.
16. It was observed that the party had been indicating only on the office copies of the GP-Is/invoices that the goods were defective, in justification of charging the lower prices, while on original GP-1s/invoices, no such mention was there. By this manipulation in accounts, they wanted to create evidence to the effect that the lower prices charged from PGA were justified. It was alleged that it was a proof of their mala fide intention to evade the payment of central excise duty by misleading the department by tampering with the records in this manner.
17. The case was adjudicated by the Collector of Central Excise, Chandigarh, under his Order-in-Original No. 10-CE/88, dated 19.5.1988. In his adjudication order, the Collector came to a finding that the Central Excise duly amounting to Rs. 457442.84 on synthetic resins (Tariff Item No. 15A) and Rs. 1425232.97 on Rosin (Tariff Item No. 68) on the clearances effected during the period from 1.4.1981 to 30th September, 1985, was demandable from the party, in terms of the provisions of extended lime limit under Section 11A of the Act.
18. The demand of duty on turpentine oil amounting to Rs. 431845.50 was not found sustainable. In the case of turpentine oil for the purposes of arriving at the assessable value, the price of comparable goods of the other manufacturer, M/s. J & K Rosin and Turpentine Factory, Jammu, had been taken into account in the Show Cause Notice. The Collector observed that the nature of the product with regard to quality, grade, etc. of the other manufacturer had not been brought on record. Similarly, it had also not been brought on record as to what economics of scale etc., were being enjoyed by the other manufacturer of comparable goods. He, therefore, held that it would not be justifiable to adopt the price of another manufacturer as the normal price for the purposes of Central Excise duly liability, in so far as turpentine oil was concerned.
19. Accordingly, Central Excise duty of Rs. 1882675.89 was demanded under Section 11A of the Act. A penalty of Rs. 10 lakhs under Rule 173Q of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules') was also imposed on PTS.
20. In adjudication, the Collector of Central Excise, Chandigarh came to a finding that the prices charged by the party from the PGA were not the sole consideration for the sale, and that there were other considerations and relations, which influenced the price.
21. In his view, the sale price lo PGA was vitiative, and was not covered by Section 4(1)(a) of the Act. In this connection, he relied upon the Tribunal's decision in the case of Rasoi Ltd., Calcutta v. Collector of Central Excise, Calcutta .
22. In that decision, the Tribunal has held that the selling price of a manufacturer was rejectable if such sale price was not the sole consideration for the sale even if the buyer and the seller were not related persons. Relying upon the Supreme Court judgments at 1969 SCR 988-Juggilal Kamlapat v. C1T, and 59 STC 277 Mc. Dowell and Company, the Tribunal agreed with the assertion of the representative of the Department that the lower authorities were justified in 'lifting the corporate veil' and unmasking the 'colourable device', adopted by the appellants to suppress the real value of their goods.
23. With regard to demand on synthetic resins, falling under Item No. 15A of the Central Excise Tariff, during the material period, the adjudicating Collector had concluded that the price charged from PGA was influenced by considerations other than purely commercial, and that the price was not the sole consideration for sale, and that the price charged from PGA could not be called the 'normal price'. There had been considerations, including that of the special relationship, which had affected the price charged from PGA. He added that the agreement purported to have been entered into on 'principal to principal' basis had been used as a device to evade duty.
24. He has held that the price at which the goods were sold by PTS to buyers other than PGA was the price to be adopted for the purposes of demanding duty.
25. As referred to above, for the purposes of arriving at the assessable value in respect of turpentine oil, the price of comparable goods of the other manufacturer M/s. J & K Rosin and Turpentine Factory, Jammu had been taken into account. The Collector of Central Excise, Chandigarh did not consider it justifiable.
26. As regards synthetic resins, falling under Item No. 15A of the Tariff, the price of the product charged at depots by PGA had been taken into consideration, for the purposes of computing normal price. He had observed that this was also the price charged from independent buyers other than PGA, in respect of the sales at the factory gate. In other words, prices charged from the independent buyers when sales were effected at the factory gale, were equal to the prices charged by PGA when they effected sales to the customers from their depots/branches.
27. He stated that it would be in the fairness of things to adopt the price at which the goods were sold by PTS to buyer other than PGA, as the price which the goods of similar grades sold to PGA, were capable of being sold, for the purpose of demanding duty so far as the price of rosin of various grades is concerned.
28. In exercise of the powers conferred under Section 35E(1) of the Act, the Central Board of Excise & Customs reviewed the impugned Order of the Collector of Central Excise, Chandigarh, and directed the Collector of Central Excise, Chandigarh, to apply to the Tribunal for setting aside the said order in so far as it related to turpentine oil, and confirm the differential duty involved on the said goods, that is turpentine oil, or to pass such orders as may be deemed fit. It was observed in the Order-in-Review by the Central Board of Excise & Customs that M/s. Jammu and Kashmir Rosin and Turpentine Factory, Jammu, whose value of turpentine oil was compared with that of the assessees, were also situated in Jammu, and the Collector of Central Excise, Chandigarh had not made clear in his order as on what account the quality, grade etc. of the product manufactured by the asscssees differed from that of the manufacturer of the comparable product--J & K Rosin and Turpentine Factory.
29. The party had also filed appeal with the Tribunal against the said order, that is appeal No. E/A No. 2023/88-A, before us.
30. In their appeal, the party has contended that the PGA could not be said to be a "related person" of the appellant company. The goods supplied to PGA were defective, and no adverse inference should be drawn for not indicating the defective nature of the goods on the original copy of the Central Excise gate passes/invoices etc.
31. They submitted that in any case allowance on account of freight, insurance, interest on outstandings etc., should have been given if the ex-depot prices charged by PGA, are taken to be the assessable values.
32. Further the Collector had adopted diverse methodology for determining the assessable values of different products, in place of quantifying the additional consideration, if any, which flowed from PGA to the appellant company and adding the same to the invoice prices charged by the appellant company from PGA.
33. It was also contended that the department was aware of their operations and it could not be said that anything was suppressed, and in any case the identity of PGA could be inferred from the Central Excise documents. Thus, only the normal period of limitation of six months was applicable.
34. It was also mentioned that they had requested to cross-examine their own Managing Director, and the investigating officers, but their request was turned down by the adjudicating Collector.
35. Both the appeals were heard together on 22.2.1993, when Shri A.K.S. Bedi, Advocate appeared for the party, and Shri Prabhat Kumar, SDR appeared for the Revenue.
36. At the outset, Shri A.K.S. Bedi, the learned Advocate submitted with regard to the Miscellaneous Application filed by, the party for the additional documents that these documents were part and parcel of the adjudication order, and were annexed to the Show Cause Notice; thus really, the Miscellaneous application was not necessary and that he was not pressing for its acceptance.
37. The learned Advocate stated that the appellants were a private limited company. They were manufacturing goods falling under Item No. 68 of the Tariff which were being assessed on the basis of invoice value, under Notification No. 120/75-CE, during the relevant period. They were also manufacturing synthetic resins, falling under Item No. 15A of the Central Excise Tariff in respect of which assessments were being made under Section 4 of the Act.
38. Briefly narrating the facts of the case, the learned Advocate submitted that the department has gone on the presumption that there was a special relationship between the party and the PGA. At the same time, the depot prices have been taken as the basis for demanding differential duty, without allowing even admissible deductions. He referred to the decision in the case of Assistant Collector, Central Excise v. MRF Ltd. in support of his contention that freight, transport charges, transit-insurance etc., should have been deducted from the depot prices.
39. On the question of their special' relationship with PGA, it was mentioned that the department was aware of their relationship with the PGA. Remarks on the RT-12 returns will also show that the question of suppression will not arise.
40. The learned Advocate admitted that it was factually correct that the prices charged from other buyers, other than PGA were higher.
41. Shri Prabhat Kumar, the learned SDR brought out the facts showing their special relationship with the PGA, and the mala fide of the party. They had not declared their 'special relationship' with the PGA and in fact, they suppressed the chain of dealings and transactions between them and the PGA. He submitted that the transactions between them and the PGA were not at 'arm's length'.
42. The mala fide of the party could be seen from the fact that on the second copy of the gate passes, they had written "defective", while on originals, no such endorsement was made.
43. He stated that the case was based on facts. The party had mis-declared that their invoice price was not influenced by any commercial, financial or other relationship, between them and the PGA. They suppressed the fact that this relationship was a factor for showing lower prices. They filed a wrong affidavit. Under SRP, obligation for correct declaration was on the manufacturer. If the trust, reposed is betrayed, then a heavy penalty is called for. The onus in the circumstances of the case was on the assessee to prove that they did not act in a mala fide manner.
44. Full facts were not disclosed to the Department. Endorsements on the RT-12 returns were simply on the basis of differences in prices, and the facts of 'special relationship' with PGA were suppressed, and their 'special relationship' was not declared.
45. As regards the argument that from the depot prices admissible deductions should have been allowed, Shri Prabhat Kumar, the learned SDR submitted that no deductions have been claimed from the depot sale prices by the party. In this connection, he relied upon the Supreme Court's decision in the case of Union of India v. Bombay Tyre International 1983 (14) ELT 1896 (SC) : 1983 ECR 1627D (SC) : ECR C 663 SC.
46. Further the depot prices were equivalent to the prices charged from independent customers when sales were affected at the factory gate. In this connection, he relied upon the Supreme Court decision in the case Indian Oxygen Ltd. v. Collector of Central Excise .
47. On limitation, it was submitted that they had availed of invoice value assessments under Notification No. 120/75-CE by suppressing facts and by mis-declaring their 'special relationship' with PGA. They had filed a false affidavit. Thus the extended period of limitation was correctly invoked in this case.
48. He relied upon the following citations in support of the arguments advanced by him:
(a) - Jaishri Engineering Co. Pvt. Ltd. v. C.C.E. (Penalty imposable if there was deliberate suppression or wrong statement-Rule 173Q of the Central Excise Rules, 1944).
(b) -Inspector, Central Excise v. Bengal Paper Mills.
In this decision, the Calcutta High Court has held that the word 'mis-statement' in old Rule 10 was not confined only to a bona fide wrong statement but it also includes a false statement.
(c) -Jeypore Sugar Co. Ltd. v. Collector of Central Excise.
The Tribunal in that decision has held that the invoice value assessment under Notification No. 120/75-CE is not admissible to assessee after giving a declaration which was not factually truthful.
(d) -Formica India Division, Pune v. Collector of Central Excise, Bombay.
The Tribunal has held that any slackness on the part of the excise staff posted in the factory would not lessen or mitigate the burden cast on the assessee.
(e) Dye Chem. Palghar v. Collector of Central Excise, Bombay.
The Tribunal has held in this decision that a mere suppression of facts or mis-statement in the information statutorily required to be supplied to the excise authorities attracts the larger period of limitation, regardless of intent.
(f) Lampions Madras v. Collector of Central Excise, Madras.
In this decision, the Tribunal has observed that it is not only for wilful mis-statement or suppression that the extended period of five years for recovery of duty of excise could be invoked, but for contravention of any of the provisions of the Act or Rules, with intent to evade payment of duty.
(g) -Collector of Central Excise v. Metal Box India Ltd.
Non-disclosure of the financing agreement entered with buyers amounts to material suppression of facts, and thus, the extended period of limitation of 5 years was applicable under the provisions of Section 11A of the Act.
49. Shri Prabhat Kumar, learned SDR stated that the party were working under SRP and have betrayed the trust. They have suppressed the details of their financial arrangements and 'special relationship' with the PGA, and that the onus of correct declaration was on them. In the circumstances of the case, penalty has been rightly imposed on them. He relied upon the Tribunal's decision in the case of Ice and Diesel Engineering Works v. Collector of Central Excise, wherein it has been observed that the extended period was applicable, if assessee makes a mis-declaration or suppresses facts in the price list.
50. They had written 'defective' in original gate passes, but no such mention has been made in the second or third copies of the gate passes, which shows their wilful mala fide for the purposes of Section 11A of the Act. He relied upon the decision of the Bombay High Court in the case of Swan Mills Ltd. v. Union of India . It has been observed therein that the contention that although the assessment orders passed under Rule 1731, had become final, they cannot be executed unless a further enquiry under Section 11A of the Act is held, cannot be accepted. Such a proposition is gravely misplaced and presumes that Section 11A of the Act contains provisions for the execution of the assessment orders passed under Rule 173 I.
51. In reply, Shri Bedi, the learned Advocate submitted that they could have a bona fide belief that their relationship with the PGA may not make them ineligible for invoice value assessment, under Notification No. 120/75-CE. He relied upon the following decisions in this regard:
(1) Snowwite Industrial Corporation v. C.C.E. (2) Collector of Central Excise, Baruda v. Kosun Metal Products Ltd.
The Supreme Court has observed in the second case that Entry on RT-12 for short payment was not sufficient nor it amounts to a proper notice, and that the limitation was to run from the date of Show Cause Notice, under Section 11A of the Act.. They have further observed that the larger period of limitation of 5 years was inapplicable, if no fraud, collusion Or any wilful mis-statement or suppression of facts was involved.
52. He submitted that no penalty was imposable even if the prices were not correct. In this connection, he relied on the following decisions:
(a) Universal Cables Ltd. Satna v. Union of India The Madhya Pradesh High Court has held that omission to enter correct price in price list is not a contravention of Rule 173C within the meaning of Rule 173Q.
(b) Gwalior Rayon Mfg. (Wvg.) Co. v. Union of India and Ors..
The adoption of price of identical goods manufactured and sold at the nearest place would be more reasonable and would also reduce to the minimum the discretion available to the proper officer for equating the comparable goods with the excisable goods (paragraph 20). The High Court has also observed that if a price list was filed in the form and manner prescribed under Rule 173C, showing the price of the goods, even if not correctly, it cannot be said that the petitioner contravened the provisions of Rule 173C.
53. As regards the appeal filed by the Revenue against the Order-in-Original of the Collector of Central Excise, Chandigarh Shri Prabhat Kumar, the learned SDR reiterated the grounds of appeal.
54. In reply, Shri A.K.S. Bedi, the learned Advocate stated that the value adopted of comparable goods was not correct and on this point, the order of the Collector, Central Excise, Chandigarh, was correct. The condition for adopting the value of the comparable goods had not been satisfied in the case, and he submitted that the appeal filed by the Revenue may be rejected.
55. We have carefully gone through the arguments advanced on both the sides. Both the learned Advocate, who represented the party and the learned SDR who represented the Revenue very ably argued the matter, and quoted a number of citations in support of the respective arguments advanced by them.
56. The excisable goods in respect of which the demands for Central Excise duty have been made were classifiable under Item No. 68 and Item No. 15A of the erstwhile Schedule to the Central Excises and Salt Act, 1944. Rosins and turpentine oil were classifiable under Item No. 68, and synthetic resins were classifiable under Item No. 15A. In respect of excisable goods Tailing under Item No. 68, the manufacturers were availing of the exemption under Exemption Notification No. 120/75-CE, dated 30.4.1975, relating to invoice value assessments. In respect of excisable goods falling under Item No. 15A, assessments were required to be made on ad valorem basis, under Section 4 of the Act.
57. Let us first lake up that pail of the demand which related to the goods falling under Item No. 68, and in respect of which exemption under Notification No. 120/75-CE was being availed of.
58. Exemption Notification No. 120/75-CE reads as follows:
In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), cleared from the factory of manufacture, on sale, from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of the invoice price (excluding duty and local taxes, if any, included in such price) charged by the manufacturer for the sale of such goods:
Provided that the aforesaid exemption shall be admissible only if:
(i) the manufacturer files with the Superintendent of Central Excise having jurisdiction a written declaration to the effect that he opts to avail of the said exemption;
(ii) the manufacturer avails of the said exemption uniformly in respect of all goods, sold by him, which fall under the item aforesaid;
(iii) the manufacturer certifies that the price referred to in the invoice represents the price actually charged by him for the relevant sale and that the price is the sole consideration for the sale;
(iv) the invoice price is not influenced by any commercial, financial or other relationship, whether by contract or otherwise, between the manufacturer or any person associated in business with the manufacturer, and the buyer or any person associated in business with the buyer, other than the relationship created by sale of the aforesaid goods,
(v) no part of the proceeds of the subsequent sale, or disposal of such goods accrues either directly or indirectly to or for the benefit of the manufacturer or any person associated in business with him.
Provided further that a manufacturer shall be entitled to withdraw his option referred to in Clause (i) of the preceding proviso after giving to the Superintendent of Central Excise, having jurisdiction, a prior notice in writing of at least 7 days, and where the manufacturer has withdrawn his option he shall, unless otherwise directed by the Central Board of Excise and Customs, be precluded from availing of the aforesaid exemption during the remaining period of the relevant financial year."
59. Clause (iii) of the proviso stipulates that the invoice price should be the price actually charged by the manufacturer, and that the invoice price should be the sole consideration for the sale. Thus one primary condition for availing the benefit of invoice value assessment is that no other consideration, other than the consideration of sale and purchase of goods, enters into the price mechanism. These provisions also stipulate that the price is the actual price. Nothing else than the price charged should enter into the transaction of sale and purchase.
60. Clause (iv) of the proviso provided that the exemption from so much of the duty of excise leviable on goods under Item No. 68 as was in excess of the duty calculated on the basis of the invoice price charged by the manufacturer for the sale of such goods was admissible only if the invoice price was not influenced by any commercial, financial or other relationship between the manufacturer and the buyer, other than the relationship created by sale of the excisable goods.
61. Although the intention was not to equate the 'invoice price' with the 'normal price' under Section 4 of the Act, the scheme of Notification No. 120/75-CE envisaged that the invoice price should be a price at 'arm's length'; it should be a genuine, correct and actual price, and that except the relationship of seller and buyer, the invoice price should not be influenced by any other relationship, or consideration.
62. PGA was a HUF concern, whose 'Karta' was the Managing Director of the appellant company PTS. Besides, Shri T.L. Chudiwala. the 'Kana', other co-parceners in the HUF were his son, grandson, wife and daughter. The family of Shri T.L. Chudiwala has also the control over the PTS, through the Managing Directorship of Shri Chudiwala himself and their majority shareholdings. The son and wife of Shri T.L. Chudiwala were directors in the PTS.
63. Further an interest free loan of Rs. 30 lakhs had been given by PGA to PTS. There were other chain of transactions between PTS and PGA, which established their mutuality of interest in the activities of each other. There were also other relationships between PGA and the PTS which entered into the price mechanism of the goods manufactured by PTS and sold/transferred to PGA.
64. In his statement, dated 8.1.1986, Shri T.L. Chudiwala had detailed the reasons for which lower/concessional prices were being charged by PTS from PGA. The various reasons given were as under:
(i) Investment of huge amount (about Rs. 30 lakhs) by PGA in PTS as interest free loan.
(ii) PGA to accept all the off-grade and sub-standard material of PTS.
(iii) PGA to extend know-how of process, free of charge.
(iv) PTS to supply 30 to 40 per cent of rosin, and entire quantity of turpentine oil, to PGA only.
(v) PGA to extend all assistance including technical assistance in the establishment of the plant and to market the entire production of PTS through its branches.
65. These reasons only confirm the special relationship (relationship much beyond the relationship of a buyer and seller), between PTS and PGA. Some of the reasons in- spire no confidence and appear to be a camouflage for evading Central Excise duty [reason No. (ii)].
66. It was also stated that the prices charged from PGA were loaded with octroi, CST, freight and other taxes, and delivery charges.
67. The comparison for arriving at the differential duty has been made of the prices as shown in the GP-ls under the column "total assessable value", and as shown in the invoices under column "rate per Kg/litre". Central Excise duty has been calculated on these values which are obviously ex-duty assessable values. There is no reference to any other charge like octroi, CST, freight or any other taxes or delivery charges. Thus, the comparison was between the ex-duty assessable values, and the version in the statement of Shri T.L. Chudiwala is beyond the point.
68. It has also been staled that the products in liquid form were not sold from the depots/branches in the same Slate as these were received from the manufacturing unit; rather some blending process was carried as per specifications of the particular customers. It was at the same time added that the product in solid state viz., rosin, synthetic resin etc. were sold as such, that is, as they were cleared from the factory.
69. In this connection, it is seen that the two prices, one charged from the PGA and the other charged from the customers, other than PGA, were compared, in respect of the goods as cleared from the factory. Processing at subsequent stage, does not account for the large difference in prices of the same goods, in the same form when cleared for PGA, and for other customers, other than PGA.
70. The facts and circumstances of the case clearly establish that the invoices raised by the PTS against PGA were not the genuine invoices as are usually raised in a free market, the prices shown in the invoices were not the correct invoice prices, prices were not genuine and correct prices, and that the relationship between PGA and PTS was not only of the buyer and seller, and the invoice price was influenced by other considerations, other than the relationship of buyer and seller. The price was not the sole consideration for the sale. Thus the party was not eligible for availing of the benefit under Notification No. 120/75-CE for invoice value assessments.
71. While availing of the exemption under Notification No. 120/75-CE, the party has filed an affidavit that they satisfied the various conditions subject to which the exemption under Notification No. 120/75-CE was available. As is obvious from the statement of Shri Chudiwala himself, this affidavit did not correctly disclose the special relationship between PGA and PTS and, suppressed the facts of their mutual relationship. The price charged from PGA were not at 'arm's length and PTS were not eligible for exemption under Notification No. 120/75-CE.
72. In the case of Jeypore Sugar Co. Ltd. v. Collector of Central Excise and Customs 1991 (36) ELT 104 (Tribunal), the Tribunal have observed that the invoice value assessment under Notification No. 120/75-CE was not admissible to assessee after giving a declaration, which was not factually truthful. The Tribunal have also observed in para 9 of their order that the assessee cannot be absolved of their responsibility to disclose the material fact of actual price realisation which had a bearing on the duty due from them.
this definitely constitutes suppression, and justifies the application by the Collector of the proviso to Section 11A (1) under which duty can be recovered within 5 years from relevant date.
73. In the case of Suowwhite Industrial Corporation v. C.C.E. , relied upon by the party, the question that was canvassed and which required to be determined was whether the agreement, dated 1.5.1962, entered into with Gillanders Arbuthnot & Company Ltd., of Calcutta, by the appellants, was an agreement for sale or was one for sole selling agency. The Hon'ble Supreme Court had observed that the difference of the prices between the transfer and the selling prices was suggestive of an outright sale. These observations, in the facts and circumstances of the case before us, confirm the view we have taken. The difference of the prices was so large that it could not be said that the sale/transfer to PGA constituted an 'outright sale'.
74. The Hon'ble Supreme Court further observed that if a manufacturer were to enter into agreements with dealers for wholesale sales of the articles manufactured on certain terms and conditions, it would not follow from that alone that the price for those sales would not be the 'wholesale cash price' for the purpose of Section 4(1)(a) of the Act, if the agreements were made at arm's length, and in the usual course of business.
75. The facts and circumstances of the case, as discussed above, clearly establish that the transactions between the party and the PGA were not at arm's length, and were not made in the usual course of business. Independent of the transactions, the party and the PGA were bound by a relationship, as stipulated by Section 4(4)(c) of the Act.
76. Thus, the party's reliance on this decision of the Hon'ble Supreme Court in no way support the hypothesis advanced by them and canvassed for our acceptance. On the other hand, the observations made, support the case of the Revenue.
77. In the case M/s. Texmaco Ltd.v. Collector of Central Excise, Calcutta, 1992 (AIR) SC 2020 : 1991 (37) ECR 369 (SC), the appellant M/s. Texmaco Ltd. pursuant to contracts entered into in this behalf with the Railway Administration had fabricated and delivered to the railways, the wagon bodies mounted on 'wheel sets' supplied by the railways. The invoices raised by the appellant respecting these wagons reflected only the price of the wagon bodies, without including the value of the 'wheel sets', on which the wagon bodies were mounted. The goods were cleared for purposes of excise duties on such invoice value. The Revenue had raised demand for recovery of short levy and had sought to recover the unpaid duty on the value of the wheel sets also.
78. The Hon'ble Supreme Court found no fault with the reasoning of the Tribunal that the value of the article was the full intrinsic value of the article inclusive of the cost of the materials and components supplied free by the customer and irrespective of the fact that no expenditure was incurred by the manufacturer on such components.
79. On behalf of the appellants with regard to Clause (iv) of the Notification No. 120/75-CE, it had been stated that Clause (iv) did no more than merely importing the requirement that the invoice price should reflect a transaction at arm's length, and not that appellants' invoice price should also include the value of the 'wheel sets' supplied by the Railways.
80. In that case, there was no dispute that the invoice price represented the value of the wagons, less the value of the 'wheel sets' supplied by the railways, and that the invoice price was the price at arm's length, and it was the only consideration for the sale of the wagon bodies. M/s. Texmaco Ltd. and the Railway administration had no other relationship between them, but only of a buyer and seller.
81. The Hon'ble Supreme Court observed that while the Notification No. 120/75-CE posits and predicates the possibility that the 'invoice value' could be lesser than the 'assessable value', there was nothing in Clause (iv) which enjoins upon the appellant to include the value of the 'wheel sets'. They held that requiring the 'assessable value' and the 'invoice value' to be the same as something compelled by Clause (iv), was really to construe the Notification against itself.
82. It has, however, been mentioned that the 'assessable value' would take into account the full commercial value, including that of the 'wheel sets'.
83. In the case before us the 'invoice value' did not reflect a transaction at arm's length. While there could be no dispute that the 'invoice value' could be lesser than the 'assessable value', it also could not be disputed that the 'invoice value' should correctly reflect the value of the manufacturer's supply and services. The invoice should be a genuine invoice, the price should be the correct price and the transaction should be at 'arm's length'. The whole thing depends upon the fair play and truth, and this has to be discerned from the totality of transactions, and attendant circumstances.
84. As the facts and circumstances of the case clearly establish the 'invoice price' was specifically and purposely depressed for supplies' to PGA, and such reduction in 'invoice price' was on account of relationship, other than the relationship of a buyer and seller, between the PGA and the manufacturer-PTS. This is obvious from the fact that the prices charged for the same goods at the same time from the buyers other than PGA, were considerably higher than the prices charged from PGA.
85. In the case of Union of India v. Bombay Tyre International 1983 (14) ELT 1896 (SC) : 1983 ECR 1627D (SC) : ECR C 663 SC, the Hon'ble Supreme Court had observed that where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arm's length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise. There is all along emphasis on the sale transaction being at arm's length.
86. In paragraph 22, it has been stated that where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arm's length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise.
87. In paragraph 31, it has been mentioned that if there is a special or favoured buyer to whom a specially low price is charged because of extra-commercial considerations e.g. because he is a relative of the manufacturer, the price charged for those sales would not be the "wholesale cash price" for levying excise, under Section 4(1)(a) of the Act.
88. Again in paragraph 42, it has been observed that the new Section 4(1) contains inherently within it the power to determine the true value of the excisable article after taking into account any concession shown to a special or favoured buyer, because of extra-commercial considerations in order that the price be ascertained only on the basis that it is a transaction at arm's length.
89. It is to be noted that the expression "related person", is wider than the expression "a relative". It is clear from the definition of the "related person" under which the "related person" has been explained as a person who is so associated with the assessee that they have interest directly or indirectly in the business of each other and includes....
90. Whether (i) the price was the sole consideration for the sale; (ii) there was a special or favoured buyer to whom a specially low pricewas charged because of extra-commercial considerations: and (iii) the transaction was at arm's length, will depend on the totality of the circumstances.
91. As observed by the Hon'ble Supreme Court in the case of Snowwhite Industrial Corporation v. Collector of Central Excise , it depends on the facts and circumstances of each case to determine the true nature of the dealings between the parties.
They affirmed that the relationship has to be determined independent of the transaction in question. If the relationship independent of the transaction in question conferred certain additional or extra-commercial advantages only on the persons involved in such relationship, then they could be considered to be "related persons".
92. The transactions which involve huge duty differential have to be seen in their totality, and their combined effect has to be seen.
93. In the case of W.T. Ramsay Ltd. v. I.R.C. (1982) AC 30 : (1981(2) WLR 449 ; (HL), it was observed that it is the task of the Court to ascertain the legal nature of any transaction to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded.
(quoted in 1985 ITR Vol. 154 at page 155).
94. In the case of Federal Commissioner of Taxation v. West Traders Pvt. Ltd. (1980) 30 ALR 353, again, it has been mentioned that to force the Courts to adopt, in relation to closely integrated situations, a step dissecting approach which the parties themselves may have negated, would be a denial rather than an affirmation of the true judicial process [quoted in (1985) ITR 154 at page 156].
95. In the case of Juggilal Kamalpat v. C.I.T., U.P. , the Hon'ble Supreme Court has observed that the Courts were entitled to go behind the legal form of the transaclion.and to find out what was the substance, to pierce the veil of corporate entity and look at the reality of the transaction.
The Hon'ble Supreme Court held that in certain exceptional cases, the Court is entitled to lift the veil of corporate entity and to pay regards to the economic realities behind the legal facade. For example, the Court has power to disregard the corporate entity if it is used for tax evasion or to circumvent tax obligation or to perpetrate fraud.
96. The Hon'ble Supreme Court in the case Me. Dowell and Company Ltd. v. Commercial Tax Officer SC (ITR) 1985 Vol. 154 page 148, had observed that it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly and without resorting to subterfuges.
97. They quoted with approval the observations in Lord Howard De Walden v. IRC 1942 (1) KB 389; 25 TC 131 that it scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers.
98. Thus, taking the totality of relationship between PGA and PTS and applying the 'just, fair and reasonable test', we hold that the prices charged by PTS from PGA were not real and genuine, and that PTS were not eligible for availing of the exemption under Notification No. 120/75-CE, and that the prices should have been declared under Section 4 of the Act.
99. The party has submitted that if their invoice prices were not acceptable then the admissible deductions from the prices charged by PGA from the customers at the point of sale from their depots/branches should have been allowed to them. In this connection, they relied on the Supreme Court judgment in the case of Assistant Collector, Central Excise v. MRF Ltd. 1987 (27) ELT 553 (SC) : 1987 (10) ECR 625 (SC) : ECR C 1042 SC. In that case, before the Hon'ble Supreme Court, the point for consideration was that of various deductions claimed by MRF Ltd. and/or disallowed and/or allowed by the Assistant Collector or allowed by the Assistant Collector in the various jurisdictions qua, the factories of MRF Ltd. [As observed by the Hon'ble Supreme Court in the case of Snowwhite Industrial Corporation 1989 (41) ELT 360 (SC) : 1989 (23) ECR 169 (SC) : ECR C 1428 SC, the decision in the MRF case is under review.]
100. In the case before us, the party have contested that any cost towards distribution has been incurred by them. On their own, without disclosing the fact of their special relationship with PGA, and without mentioning the 'favoured character' of transactions with them, they charged prices from PGA which were lower by 2 to 3 times when compared to the prices charged by them from independent buyers at the factory gate. There were factory gate sales too in this case, and those sales were at higher prices. These higher prices were equivalent to the prices charged by PGA from the customers at the point of sale from their depots/branches. In the circumstances when factory gate normal prices were available and these prices were equivalent to ex-depot prices, the question of any deduction from such ex-depot price, did not really arise.
101. Relying upon their earlier judgment in the case of Union of India and Ors. v. Duphar Interframe Ltd. (Civil Appeal No. 569 of 1981) reported in 1984 ECR 1443 : ECR C 709 SC, the Hoa'ble Supreme Court had held in the MRF case that the wholesale dealers having taken delivery of the goods manufactured by MRF Ltd. and there being a removal of the goods from the factory gate, the cost of distribution at duty paid sales depots cannot be taken into account for the purposes of determining the assessable value of the goods.
102. In the case before us, there were factory gate sales to independent buyers, and the prices at which excisable goods were sold to such independent buyers at the factory gate, were known. These prices were more or less, the same at which PGA were selling similar goods from their depot.
103. As the wholesale price at the factory gale was ascertainable and known, the question of transportation charges or any other deduction becomes entirely irrelevant.
104. As held by the Hon'ble Supreme Court in the case if Indian Oxygen Ltd. v. Collector of Central Excise , once the price ex-factory was ascertainable, the issue of deductions from the prices ex-depots did not survive for the decision. But if the ex-factory prices were not ascertainable, and the goods were to be assessable ex-depot, then it would be for the manufacturer to claim on the basis of actual evidence, of the deductions admissible from the price list, as per the provisions of the Act.
105. In the case before us, as part of the goods were cleared from the factory gate to the independent buyers, the wholesale price was known, and such prices have rightly been taken as the basis for calculating Central Excise Duty by the Collector of Central Excise, Chandigarh, while adjudicating the case.
106. In the case of Turpentine Oil, it is found that the entire production was sold through PGA. Thus, in so far as Turpentine Oil is- concerned, there was no sale at the factory gate. The Collector of Central Excise, Chandigarh, at Page 11 of his order has come to a finding that it would not be justifiable to adopt the prices of another manufacturer, that is of Jammu & Kashmir Rosin and Turpentine Factory, Jammu, as normal price for the purposes of duly liability of PTS in so far as Turpentine oil was concerned. He has ordered that the demand of duly on turpentine oil amounting to Rs. 431845.50 was not sustainable.
107. Against this part of the Order of the Collector of Central Excise, Chandigarh, the Revenue has come in appeal. As the facts and circumstances of the case and the law as established by the Hon'ble Supreme Court show, the decision taken by the Collector of Central Excise, Chandigarh is correct in law and does not call for any interference.
108. Thus we find no merit in the appeal filed by the Collector of Central Excise, Chandigarh.
109. There was deliberate suppression of facts, as regards the admissibility of Notification No. 120/75-CE, and determination of correct assessable values. Wrong statements have been made about their relationship with PGA. Therefore, the Department was fully justified to claim duly beyond a period of six months, to invoke extended period of limitation. The penalty was also correctly imposed on the party by the Collector of Central Excise, Chandigarh.
110. As observed by the Hon'ble Supreme Court in the case of Jaishri Engineering Company Private Ltd. v. Collector of Central Excise , the question whether there was any fraud, collusion, wilful mis-statement or suppression of facts for the Department to be justified to claim duty beyond a period of six months, is a question of fact. The Hon'ble Supreme Court held in that case that having come to the conclusion that there was deliberate suppression or wrong statement, it follows automatically that the Tribunal was justified in upholding the imposition of penalty. It was added that the quantum of penalty was a matter which the Tribunal was free to fix as they thought fit, as the justice of the case demanded.
111. The Hon'ble Supreme Court observed that the fact that the Department visited the factory of the appellant and they should have been aware of the production of the goods in question were no reason for the appellant not to truly and properly describe those goods.
112. The party had admitted that the expression indicating the quality of the material had been omitted in the original copies of gate passes/invoices. It was; said to be for protecting certain banking facilities or benefits as those documents were routed through banks.
113. In their view, the omissions of the expressions in original documents was immaterial and could not amount to concealment from the Central Excise Department.
114. This is a very strange argument and is a reflection on their psychology. By tampering the documents, they have only shown their mala fide intention and by advancing the above argument, they have tried to defend the action which is really without any defence. This argument is obviously devoid of any merit and merits rejection. In place of admitting their mistake they have tried to justify it. One who comes to seek justice should come up with clean hands. Again we quote the observations in Lord Howard de Walden v. I. R.C. (1942) 1 KB 389 that it scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers.
115. Any mutilation in any of the copy of the gate pass is punishable under Rule 52A of the Central Excise Rules 1944. Any tampering with any of the copies of the gate pass shall make it invalid. Rule 52A is extracted below:
Rule 52A. Goods to be delivered on a gate pass.-(1) No excisable goods shall be delivered from a factory except under a gate-pass signed by the owner of the factory and countersigned by the proper officer.
Explanation.- In this rule, and in any other rule, where the term "gate-pass" is used, it shall mean-
(i) gate pass in the proper form; or
(ii) assesee's own such delivery invoice, challan or advice or other document of similar nature in which all the particulars contained in gate-pass in the, proper form are also given; or
(iii) such other form as the Collector may in any case or class of cases specify.
(2) The gate pass shall be made out in triplicate with indelible pencil using double-sided carbon and shall contain no mutilations, over-writings, corrections or erasures. The gate pass shall be presented to the proper officer for counter-signature at least one hour before the actual removal of the goods from the factory. After counter-signature, the proper officer shall return the original and triplicate copies of the gate-pass to the manufacturer retaining the duplicate for his record. The original copy shall accompany the consignment to its destination and triplicate retained by the manufacturer. The manufacturer may, with the approval of the proper officer, make extra copies of a gate pass for his own use, clearly marked 'EXTRA COPY-NOT FOR COVERING TRANSPORT. The original copy shall be produced by the carrier on demand by any Central Excise Officer while the goods are en route to such destination from the factory:
Provided that in respect of removal of excisable goods consumed within the factory for manufacture of other goods in a continuous process the manufacturer may make out a single gate pass, at the end of the day.
(3) If all the packages comprising a consignment are despatched in one lot at any one time, only one gate pass shall be made out in respect of the consignment. If, however, a consignment is split up into two or more lots each of which is despatched separately either on the same day or on different days, a separate gate-pass shall be made out in respect of each such lot. In case a consignment is loaded on more than one vehicle, vessel, pack animal or other means of conveyance which do not travel together but separately or at intervals a separate gate-pass shall be made out in respect of each vehicle, vessel or pack animal or other conveyance.
(4) Gate passes shall be maintained in two sets one for clearance for home consumption and the other for clearance for export. Each gate pass shall bear a printed serial number running for the whole year beginning on the first January or such other date as approved by the proper officer as may correspond to the accounting year of the factory. Only one gate pass book of each type shall be used by a factory for an excisable commodity at any one time unless otherwise specially permitted by the Collector in writing.
(5) If any person-
(a) carries or transports excisable goods from a factory without a valid gate pass, or
(b) while carrying or removing such goods from a factory, does not on request by an officer, forthwith produce a valid gate pass, or
(c) enters any particulars in the gate pass which are, or which he has reason to believe to be false he shall be liable to a penalty not exceeding one thousand rupees, and the excisable goods in respect of which the offence is committed shall be liable to confiscation.
116. Thus the allegations in this regard are proved and the plea of the party is without any merit.
117. The party have pleaded that in any case no penalty should have been imposed on them. In support, they have relied upon the Supreme Court decision in the case Dinesh Chandra Jamnadas Gandhi v. Slate of Gujarat .
118. In that case before the Hon'ble Supreme Court, the point related to the hardship of a small time tradesman who purchases the goods from big manufacturers and sells them in retail, and very often the manufacturers or wholesalers are not touched, but the small fry were exposed to prosecution.
119. Further, the matter in that case concerned the Prevention of Food Adulteration Act, 1954, and the Prevention of Food Adulteration Rules, 1955. The Supreme Court had found the definition of 'fruit products' as imperfect.
120. The facts and the view taken by the Hon'ble Supreme Court in that case in no way help the party.
121. In the case Good Year India Ltd. v. Collector of Central Excise, , relying upon the Andhra Pradesh High Court decision in the case of Nizam Sugar Factory Ltd. v. Collector of Central Excise, , the Tribunal affirmed that if any manufacturer removes any excisable goods in contravention of the provisions of the Act or Rules made thereunder, such goods shall be liable to confiscation and imposition of penalty. The Andhra Pradesh High Court had emphasised that in the context of statutory purpose, legislature has used peremptory language creating an absolute liability that does not require the presence of any mens rea against those that remove goods without posting the relevant entries in the statutory books, and that the rules seeking the protection of the public revenue proceeds on the basis that the removal of excisable goods could not but be intentional and could only be with the knowledge of the manufacturer.
122. The party has also taken a plea that the Department was aware of their relationship with the PGA, and in support referred to the remarks on their RT-12 returns.
123. Remarks on RT-12 returns without issue of show cause notice have no basis for demand of duty. As the facts and circumstances of the case, as discussed above, will show, the special relationship with PGA has been suppressed by the manufacturer, and the remarks on RT-12 Returns were only on the basis of price differential as between the clearances made to independent buyers at the factory gate and to the PGA. In no way, it could be said that the Department was aware of their special relationship. In fact, the nature of their transactions with PGA and their special relationship came to light only when the various invoices recovered from the depots of PGA located at Delhi, Bombay, Bangalore, Madras and Calcutta and the stock/sale registers at their Calcutta Depots were recovered by the Central Excise Department.
124. The Hon'ble Supreme Court in the case of Collector of Central Excise, Baroda v. Kosan Metal Products, had observed that short levy in RT-12 is of no consequence and when a demand is made under the Act for recovery, then such demand must be under Section 11A of the Act.
125. Thus, the Supreme Court's decision confirms the view that any notings on the RT-12 returns without issue of a Show Cause Notice cannot form the basis for limitation. The limitation has to be counted from the date of issue of the Show Cause Notice.
126. In the case before the Supreme Court, there was no ground in support of the allegation, that there has been fraud, collusion or any wilful mis-statement or suppression of facts on the part of the respondent.
127. In the case before us, the facts clearly support the view taken by the Collector of Central Excise, Chandigarh in his adjudication order.
128. In the case, Universal Cables Ltd., Satna v. Union of India the Madhya Pradesh High Court has viewed that omission to enter correct price is not a contravention of Rule 173-C within the meaning of Rule 173Q. They added that when the petitioner filed a list in the form and the manner prescribed under Rule 173C, showing the prices of the goods, it could not be said that the petitioner contravened the provisions of the Rule even on the assumption that the information supplied by it under that Rule was false in relation to the prices.
129. In the case before us, the party has irregularly and illegally availed of the benefit of Notification No. 120/75-CE by making incorrect statements and after suppressing vital facts.
130. As held by the Hon'ble Supreme Court in the case of Jaisliree Engineering Co. Pvt Ltd. v. Collector of Central Excise, , when there was deliberate suppression or wrong statement, imposition of penalty was justified.
131. In the case Gwalior Rayon & Manufacturing Weaving Company Ltd. v. Union of India , the Madhya Pradesh High Court relied upon their decision in the case of Universal Cables Ltd., Satna v. Union of India and Ors. .
132. In this connection, it may be mentioned that the issue in the case before us is that while prices in respect of factory gate sales were correctly declared, by suppressing vital facts and making incorrect statements, the party evaded Central Excise duty in respect 6f clearances to PGA.
133. The observations of the Supreme Court in the case Jaishree Engineering Co. Pvt. Ltd. are fully applicable to the facts of this case.
134. A point has also been made by the party that they wanted to cross-examine their own Managing Director and the Central Excise Officers and this cross-examination was denied to them.
135. The Managing Director of the company controlled the affairs of the appellant company to whom the notice had been issued. The replies and the various submissions have been made on behalf of the appellant company whose Managing Director was sought to be cross-examined. This was a very strange request and when the notice has been issued to the appellant-party, there was no bar that the Managing Director could make any submission as he liked. Full opportunity was given to the appellant to put up their case and no grievances on this account have been made at any stage of the proceedings.
136. The Madras High Court in the case of Maniitdra Nath v. Collector of Central Excise. 1977 (Tax LR) 1754 quoted in 1982 ELT 386 (Madras) has observed as under:
7...The right to cross examine is not necessarily a part of reasonable opportunity. Whether in a particular case a particular party should have the right to cross examine or not, depends upon the facts and circumstances of the case and it very largely depends upon the adjudicating authority who is not guided by the rules of evidence as such. He must, however, afford such opportunity as would ensure to the party concerned proper opportunity to defend himself. It is well known that in these matters the Revenue or Excise authorities are entitled to make their independent enquiries and to rely upon such enquiries provided the results of such enquiries are communicated to the person concerned against whom such enquiry is sought to be relied on and he is given an opportunity to rebut or contradict any evidence adduced by such enquiry. In this case such procedure was followed....
137. The Tribunal in the case of Ludhiana Food Products v. Collector of Central Excise, has hold that the Collector of Central Excise, Chandigarh did not violate the principles of natural justice by not allowing the facility of cross-examination of the Accountant of the appellants' firm.
138. The allegations in this case are supported by the records. The statement was made by Shri T.L. Chudiwula, Managing Director, in pursuance of the summons under Section 14 of the Act. He had not retracted from his statement and has not staled at any stage that the factual information supplied by him was not correct.
139. In these circumstances, we are of the view that the request for cross-examination of their own Managing Director and other officers, whose names have not been specified, was not justified and was rightly disallowed by the Adjudicating Authority.
140. Accordingly, we find that the Order-in-Original passed by the Collector of Central Excise, Chandigarh was correct in law and does not call for any interference.
141. However, taking into account all the relevant circumstances in view, we reduce the amount of penalty from Rs. 10 lakhs to Rs. 5 lakhs. Subject to above, the order passed by the Collector of Central Excise, Chandigarh vide Order-in-Original No. 10-CE/88. C. No. V(68)15A 15/10/CE/AA&R/1881/3058, dated 19.5.1988, is hereby confirmed.
142. Thus both the appeals-one filed by M/s. Prabhat Turpentine &. Synthetics Pvt. Ltd., Jammu, and the other filed by the Collector of Central Excise, Chandigarh, are hereby rejected and the impugned order passed by the Collector of Central Excise, Chandigarh is hereby confirmed, and we order accordingly.