Indian Kanoon - Search engine for Indian Law

BACK GROUND OF INVESTIGATION

3. The Appellant NETCO in Appeal Case No. E/154/88-A was manufacturing specified brands of cigarettes on behalf of the Appellant GTC in Appeal Case No. E/153/88-A under the control of the later and the goods so manufactured by NETCO were marketed by GTC. Such goods were subject to levy of duty on Adjusted sales Price determinable with reference to Maximum Retail Price (MRP) basis in terms of Notification No. 211/83-CE dated 4.8.83 up to 24.3.85 and under Notification No. 100/85-CE thereafter. Revenue noticed that during the period 11.2.85 to 16.9.85 both the Appellant Companies resorting to the mode of undervaluation, violated the provisions of Rules 93, 226 and 9(1) of Central Excise Rules, 1944 and evaded excise duty of Rs.43,25,130/- for which they both were held to be jointly liable under Excise Law. According to Revenue, such evasion was made wilfully and by mis-statement and suppression of material facts as well as by mis-declaration of the adjusted sale price in relation to manufacture of Panama brand cigarette of the respective description for which protection of revenue was warranted. So also there were materials before the Investigating Authority to allege that the sale price of cigarettes realised over and above the MRP had flown to GTC.

LEGALITY OF SEARCH

15. Legality of search was challenged by Appellants under technicality of no signature on each page of Panchnama. Panchnama for the search was prepared by the officers of Excise Department in the presence of witnesses who attested the same along with the person against whom authorisation was issued or his authorised representative present. There was no complaint about illegality of search made by appellants forthwith or infirmity thereof was challenged before Court. The search and seizure operations were authorised by competent authority and competency of the Authority remained unchallenged. Pursuant to authorization, search was conducted. Authorities had reasonable belief that the appellants were manufacturing deceptively similar cigarettes without any difference in quality between the original/regular brand manufactured by GTC in its factories and in different parts of the country through its job workers and such deceptively similar cigarettes resembling with the original/regular brands. There was undervaluation of adjusted sale price of cigarettes of deceptively similar cigarettes which was determinable with reference to the Maximum Retail Price (MRP) mentioned in the cigarette packets. Such MRP without being printed on the cigarette packets as required by law was embossed. The MRP embossed on cigarette packets were hardly visible. Taking advantage of such situation the appellants were realising sale price from brand loyal consumers over and above the MRP declared on the cigarette packets since consumers were unaware of the dubious practice adopted by appellants. In the circumstances, there existed grounds upon which the belief of contravention of the provisions Act was entertained by the Search Officials. In the course of search it was found that the appellants had in their possession, custody and control various incriminating documents demonstrating their questionable conduct. When there existed some material upon which belief warranting search could be formed, Courts are not concerned with the propriety of the belief or sufficiency of the material. The circumstances were so eloquent that they themselves presented oblique motive of the Appellants. Thus search was unassailable and statements recorded in the course of search were in accordance with law.

16.3. Adjudication was done following due process of law on the basis of evidence establishing loss of revenue caused by the Appellants undervaluing adjusted sale price determinable with reference to MRP. When chemical examination report dated 17.09.1985 established that there was no difference in quality between the deceptively similar brand of cigarettes manufactured by NETCO and regular/original brands of cigarettes manufactured by GTC in its different factories and at different places through its job workers that established undervaluation of goods so manufactured by NETCO. Also that proved evasive practice and suppression of material facts in price lists submitted for approval by Excise Authorities. That brought them to the purview of proviso to section 11A of Central Excise Act, 1944 for invocation of extended period. So also the MRP on cigarettes being embossed in barely visible manner proving conduct of the appellants contumacious. When all these practices surfaced through investigation that established fraud and that has unravelled all. Revenues stand has been fortified from the ratio laid down by Apex Court judgment in the case of UOI Vs. Jain Shudh Vanaspati Ltd.  1996 (86) ELT 460 (SC). Except the baseless plea that non-relied upon documents were not supplied and no cross examination was allowed, the appellants failed to show that adjudication suffered from any legal infirmity.

PENALTY

32. Having noticed that both the appellants had pre-meditated design through the joint venture approach to undervalue the goods resulting in loss of Revenue and been intimately connected with such loss causing evasion of Revenue, levy of penalty on both of them was justified.

COCLUSION

33. In view of our aforesaid observations and findings, we hold as under:

(1). There were goods with deceptively similar brand manufactured by NETCO and the same was marketed by GTC by declaring MRP on the packets much lower than the MRP of the regular brands. The MRP on the packets of deceptively similar brand was embossed instead of being printed as per the mandate of the law. The embossed MRP was barely visible.