TMI Blog2010 (7) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... ly where undervaluation is established - There could be cases where the facts of one case of undervaluation and the pattern involved are such that extrapolation is safe and justified - facts highlighted by the Commissioner do not justify such a course of action. As undervaluation cannot be ruled out and is likely to have taken place as is apparent from the price lists, chits and IOM seized - case remanded to the Commissioner for fresh adjudication - E/37, 38 and 317/2007 - 985-987/2010 - Dated:- 7-7-2010 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. REPRESENTED BY : Shri B.V. Kumar, Advocate, for the Assessee. Shri P.R.V. Ramanan, Special Counsel, for the Department. [Order per : P. Karthikeyan, Member (T)]. These are appeals filed by M/s. The Mysore Chipboards Ltd. (herein after referred to as MCL ) and Revenue against Order No. 6/06, dated 5-10-2006 of the Commissioner of Central Excise, Mysore. MCL are manufacturers of plywood, block boards, particle boards falling under Ch. 44 of the Central Excise Tariff. On 28-8-2003, pursuant to intelligence that MCL were evading payment of duty by resorting to under-invoicing of the goods manufactured and sold, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manded in the SCN. The Commissioner relied upon an Inter Office Memo (IOM) seized at MCL and six slips seized from the briefcase of Shri Anup Trivedi at Lucknow among other documents seized. The quantification of the differential duty on the sales made by MCL have been based on these documents. MCL has challenged the demand confirmed in the order. Revenue is in appeal seeking confirmation of entire demand of duty evaded by MCL as alleged in the SCN. 5. The case of the revenue as per the impugned order is based on the following documents recovered by the Revenue. (a) Inter office memo dated 20-6-2003 An Inter Office Memo (IOM) dated 20-6-2003 prepared by Manager of MCL Branch office at Bangalore, Shri K. Sridhar, and issued to Shri Umedmal Jain, cashier in the factory, contained bill no., amount, payment details etc. relating to some sales. The bill nos. reflected in the inter office memo were compared with the related factory sales invoices of MCL; these had been issued to one M/s. Balaji Plywoods, Vijayawada. On comparison of the values shown in the IOM and the factory invoices, each of the values appearing in the bills in the IOM was found to be more than that in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to demand duty on six other invoices for the reason that the invoices covered B grade goods. Both Shri Shyam Daga Shri D.K. Batra, Manager, MCL had not denied such transaction. Further Shri Batra, when confronted on the undervaluation stated that an amount of Rs. 16 lakhs had already been paid by MCL towards duty on this count. He relied on the Apex Court judgment in the case of Surjeeth Singh Chhabra v. Union of India - 1997 (89) E.L.T. 546 (S.C.), wherein it has been held that the confession, though retracted, is an admission, and binds the petitioner and ignored the retraction of statement of August 2003 by the cashier in cross examination in 2006. These instances could not be generalized to cover each of the transactions made by MCL, Lucknow Branch. The investigation had not brought out any hard evidence from the other buyers of MCL, Lucknow. (c) Documents recovered at M/s. Balaji Plywoods, Bangalore : Printed Price Lists recovered from M/s. Balaji Plywoods, Bangalore showed the prices of premium grade plywood/blockboard. These were much higher compared to the sale invoices of MCL. Sri K.S. Srinivas, Proprietor of M/s. Balaji Plywoods, Bangalore stated that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l amounts over and above the invoice value were collected in cash from buyers and such differential amount was paid to Shri L.N. Daga or his representatives. Shri Shyamsundar Sultania in his statement had stated that the price list pertained to MRP on premium grades and invoice compared during investigation was in respect of ex-factory price of MCL of commercial grade. There was no reason why the prices of premium grade products as per the price lists seized, should be applied to the invoices under which commercial grade products had been cleared. He dropped te proposal to demand duty. (e) Documents recovered from Bangalore office, MCL : The prices indicated in price lists of MCL recovered were much higher than the ones indicated in the invoices. Shri D.K. Batra, Manager, MCL, had stated that discounts ranging from 20 to 50% was offered to the customers. (f) Documents recovered from the Delhi office of MCL Loose papers recovered from the personal custody of Shri Anup Agarwal, Marketing Executive of MCL showed that the prices shown in the invoices were much less than the actual prices mentioned in them. MCL stated that Shri Anup Agarwal was not an employee of MCL or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discounts were refused by Shri Shyam Daga.This fax message was recovered from the premises of M/s. Umiya Enterprises, Cochin. MCL stated that Archidply classic grade products (referred to in the fax message) were specially made for premium project requirements with higher quality standards. Further the transaction did not come through which was evident from the statement dated 28-3-2003 of Shri Pankaj Patel. Further they stated that the invoice No. 168 dated 3-5-2003 from which the prices had been taken for comparison as stated above, pertained to Archid ply regular grade whereas the fax message dated 26-4-2003 referred to Archid ply classic grade products. The Commissioner held that since the grades of the products corresponding to the fax message dated 26-4-2003 and the invoice No. 168/3-5-2003 were different, it was incorrect to compare the prices of two different grades of products and allege undervaluation. The net price was not agreed upon, and there was no contract or sale, hence the charge was not maintainable. He dropped the proposal to demand differential duty. (h) Writing pad recovered from the Ludhiana Branch office The writing pad revealed the sales for Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In effect, the investigation was incomplete in this respect. However Shri Rajesh Arora had not explained the basis or details of the slips, whereas MCL effectively explained the turnover for the region with reference to the figures available on record. In the circumstances, the Commissioner dropped the proposal to demand differential duty. (i) Documents recovered from M/s. Kela Brothers, Ahmedabad These contained details of various unaccounted receipts and payments in connection with the sale of MCL products. M/s. Kela Brothers had paid cash of (i) Rs. 64,59,252/- during 2000-2001 (from 1/2001 to 3/2001); (ii) Rs. 1,49,42,146/- during 2001-02, (iii) Rs. 2,17,76,100/- during 2002-03 and (iv) Rs. 70,48,608/- during 2003-04 up to 28-8-2003. Further, it was alleged that the amount billed as a percentage of actual value varied from 44.83% to 62.40%. It was also alleged that there was variation in the rate as compared to the rate appearing in the slips after discount. M/s. Adinath Plywood Centre, Ahmedabad admitted that they had purchased goods from M/s. Kela Brothers and that the invoiced amounts were much less than the actual amounts shown in the chart prepared by Vaishal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The pattern of undervaluation systematized by MCL was also clear from the supporting evidences collated by the investigation agency at various premises of MCL/branches/depots/consignment agents/distributors/customers corroborated with documentary evidences of slips/chits/price lists etc., and statements of various persons. Sri Prem Kishore Sikchi had categorically stated that the work sheet is properly examined by him which is correctly prepared on the total amounts sent/spent by M/s. Kela Brothers to MCL/Shyam Daga and that he had signed on the same to confirm that it had been correctly prepared. The statement was given on the details of undervaluation in his own handwriting and could not be considered or construed that such details, that too in 15 pages, had been given under duress as stated by MCL. It had to be concluded that MCL had undervalued the goods in respect of the clearances made to M/s. Kela Brothers and had collected cash over and above the invoice value. Further the Commissioner found co-relation between price lists, chits, invoices and extra payments made and that such co-relation had been brought out through the admissions made in the statements. 6.2 The Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove that MCL have been paid differential value by the customers/consignment agent/dealers in respect of the above three cases, but no evidence is brought on record to prove that MCL/Shyam Daga have received cash in respect of other transactions. (e) Since the undervaluation and collection of additional consideration in cash has been proved in the instances referred to above, MCL are liable to pay the Central Excise Duty on such clearances made. They have consciously resorted to fraudulent means and have suppressed the facts of under valuation from the knowledge of the Department, with an intent to evade payment of duty. They were preparing parallel slips along with the invoices indicating the invoice nos., quantity, actual selling prices of the goods, etc. Such slips were used by them for the purpose of collecting the actual sale consideration from their customers. This pattern clearly reveals their deliberate intention and fraudulent action to evade payment of Central Excise duty. As MCL have fabricated their statutory records intentionally by suppressing the actual sale value of the goods from the statutory authority, Central Excise duty evaded by them by fraudulent me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir order passed under Section 35E(1) of the Act had directed the Commissioner of Central Excise, Mangalore to apply to the CESTAT for correct determination of points arising out of the impugned order with which Revenue was aggrieved. Subsequently, Revenue also filed a Miscellaneous Application No. 527/2009 in Appeal No. E/317/2009 Misc. Application No. 527/2009 11. In this application, Revenue prays the Tribunal to take note of a corrigendum to order No. 2/2007, dated 4-4-2007 passed under Section 35(1) of the Central Excise Act, 1944 (the Act) by the Committee of Chief Commissioners. It is submitted that when the Committee of Chief Commissioners met, it had considered an office note proposing to direct the Commissioner of Central Excise, Mysore to file the subject appeal. This was approved by the Chief Commissioner, Mysore Zone and placed before the Committee. Proposal to direct the Commissioner of Central Excise, Mangalore to file the subject appeal was not at all a subject of discussion by the Committee when it had met on 4-4-2007. The minutes had merely indicated the decision of the Committee to file the appeal against the impugned order. There was no mention of the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he records. During hearing of the appeal, we had directed the ld. Special Counsel for the Revenue to produce records relating to the meeting of Committee of Chief Commissioners. We find from the concerned file that the office note approved by the Chief Commissioner, Mysore Zone, had proposed directing the Commissioner of Central Excise, Mysore to file the subject appeal. We also find that the submissions contained in the Misc. application are factually correct. Sub-sections (1) (4) of Section 35E relevant to the application read as follows :- (1) The [Committee of Chief Commissioners of Central Excise] may, of its own motion, call for and examine the record of any proceeding in which a [Commissioner of Central Excise] as an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such [Commissioner] [or any other Commissioner] to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the [Committee of Chief Commissioners of Central Excise] in its order. [Provided tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the law. In the interest of justice, we hold that the subject appeal filed by the Commissioner of Central Excise, Mysore is maintainable and in accordance with law. We overrule the objections raised by the assessee in this regard. The Miscellaneous application is accordingly disposed of. Appeals No. E/37 38/2007 13.1 The assessee has challenged the demands on various grounds. As regards the demand on undervaluation to the extent of Rs. 3,79,452/- on the basis of the IOM seized, the same is challenged on the ground that the demand on the difference between value shown in the IOM and the sales invoices was without basis. The Commissioner had relied on statements of K. Sridhar, Regional Manager, MCL, Umeedmal Jain, Cashier of MCL and Soorya Narayana, Proprietor of M/s. Balaji Plywoods. Shri Umeedmal Jain retracted his statement and submitted as follows during cross examination :- that he received the Inter Office Memo dated 20-6-2003 from K. Sridhar and he sent the same to him (Jain) for confirming the contents of IOM and he verified receipts recorded in the IOM recorded at the right side with the ledger. However, he has not verified the details of 11 Bills recorded on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oo only with respect to six invoices, to the tune of Rs. 3,79,542/- was merely a conjecture and without any proper legal basis. Demand of Rs. 60,712/- needed to be vacated. 16. The Commissioner had rendered the following finding in the order in this regard. On comparison of the values shown in the IOM and the factory invoices, the value appearing in the IOM was found to be more than what had been shown in the invoices, the difference ranging from 40% to 54.56%. Sri Umeedmal Jain, in his statement dated 28-8-2003 given before the SIO, DGCEI, Bangalore, had agreed that the IOM had been seized from his possession and that the same had been sent to him by Sri K. Sridhar. The authenticity of the said IOM had been confirmed by Sri K. Sridhar in his statement dated 28-8-1993 given before the SIO, DGCEI, Bangalore. 17. In the IOM Invoice Nos. 236, 237, 298, 299, 354, 390, 39, 405, 406, 499 and 500 had been referred and MCL in their reply to SCN have stated that most of the invoices referred only to B-grade articles. After going through the said documents, Commissioner was of the opinion that the Invoice Nos. 354, 390, 391, 405 and 500 covered goods of B-grade as indicated on these invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoices by 40% to 54.56%. The invoice prices were verified. Shri Umeedmal Jain had admitted that the actual value was higher than the value shown in the corresponding invoices. Differential amounts were collected by consignment agents/branch manager and transferred to the company. In the reply to the Show Cause Notice, figures appearing on the right side of the IOM were not explained. The Commissioner concluded undervaluation based on the statements of assessee s employees. The retraction filed before notary is not acceptable. We note that in the following decisions, it was held that retracting from any statement given before an officer of Customs/Central Excise can be regarded as a retraction only when it has been made before the proper officer. Retraction before any other authority or notary can be taken on record as retraction made only on the day it is submitted to the Central Excise/Customs Department or the Adjudicating Authority. (i) S. Prithviraj Kawad v. CC, Chennai [2006 (206) E.L.T. 512] (ii) Ashraf Puliyulla Parambil v. CC, Chennai [2007 (213) E.L.T. 555] (iii) Em Pee Bee International v. CCE (Adj.), Chennai [2008 (229) E.L.T. 704] (iv) Tejwal Dyestu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total sale consideration. After deducting the invoice value, tax was added and the resultant amount was the one which was payable by the party in cash over and above the invoice value. From this slip, it was evident that invoice value was much less than the actual sale consideration. In a similar way based on the slips MCL had resorted to undervaluation in respect of Invoice Nos. 274, 273 and 269 as detailed in the para 6.3 of SCN. All the slips referred to the sales made to M/s. Said Plywoods, Gorakhpur. The transaction reflected in the slips pointed strongly to the undervaluation adopted by MCL. In these four invoices, the additional amount collected over and above the invoices worked out to Rs. 29,677/-, on which Central Excise duty was liable to be paid. 23. Sri Anoop Trivedi had admitted that he had collected additional amounts in cash which was over and above the invoice value shown as detailed in Para 6.1, 6.2 and 6.3 of SCN, and that he had not retracted his statement dt. 28-8-2003. Further, Sri H.A. Ray the branch manager had also seen the statement dt. 28-8-2003 of Sri Anoop Trivedi and had remarked that he had read the statement of his marketing executive, which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77/- pertained to transactions not only of MCL but various others. 26. It is submitted that Shri Kishore Sikchi had explained the entries figuring in the documents recovered from the premises of KBC, Ahmedabad. No duplicate set of accounts or unaccounted cash was found from the said premises. Several case laws are cited in support of the claim that a confession statement recorded under protest and threat had no evidentiary value. Otherwise, such statements had to be corroborated by independent evidence. In the subject case, such evidence was absent. No statements were obtained from dealers to whom M/s. Kela Brothers had sold the goods. In private accounts found in the premises of Prem Kishore Sikchi could not be attributed to MCL or Shyam Daga alone. This was stated by Shri Prem Kishore Sikchi in his statement dated 18-4-2005. The appellants denied that the entries in the private accounts of M/s. Kela Brothers related to MCL or Shyam Daga. The total amount said to have been spent in cash on behalf of MCL was a ridiculously high Rs. 271.09 lakhs against the total sales of goods valued at Rs. 203.30 lakhs. It was not indicated for what purpose, the said amount had been spent by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and that the said annexure contained entries regarding all payments made by them to MCL or amount spent on behalf of MCL. Further, Sri Prem Kishore Sikchi had stated that he had properly examined all worksheets prepared on the basis of seized papers showing the amount collected and paid to MCL or spent by them on behalf of MCL and that it was correctly prepared; he signed on the said worksheet; Rs. 6,65,66,117/- was the correct total. Sri Prem Kishore Sikchi categorically stated that the work sheet was correctly prepared on the total amounts sent/spent by M/s. Kela Bros (Calcutta), Ahmedabad to MCL/Shyam Daga and that he has signed on the same to confirm that it was correctly prepared. Adjudicating authority found that evidence brought out in the investigation showed flow back of additional consideration in the form of cash to MCL as evidenced by chits/slips/pads, and supported by the corroborative evidence of statements of persons/dealers/customers/consignment agents. The assessee s challenge is based on belated retraction of witnesses. In the light of the statement of Sri Prem Kishore Sikchi and the documentary evidence, we find that the Commissioner s finding on undervaluation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be confined only to the evidences available on record. These are our two observations. Therefore, the Revenue s contention that uniformly for all the clearances, 70% should be added to the invoice value is not accepted. We reiterate our finding to say that for the period prior to 1-7-2000, the Commissioner has to decide the normal price for each variety of goods and he can adopt the same for all the clearances. It does not mean that the invoice value has to be accepted. The normal price has to be determined based on the evidence available. 11.13 As regards the period after 1-7-2000, the Commissioner has to go strictly by the transaction value and decide the short levy. After deciding the differential duty leviable on the basis of the above principles, the Commissioner can determine the quantum of penalty, etc. 32. We remand this matter to the Commissioner for a fresh decision in the light of the decision in CERA Boards case. The Commissioner shall also decide the penal liabilities of the assessee and the Director of the assessee in de novo proceedings after hearing them. Appeal E/317/2000 33. In this appeal, the Revenue seeks confirmation of entire duty on MCL as proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubt. We allow this plea by remand for re-adjudication in the same manner we order in respect of sales by M/s. Kela Brothers which we presently take up. Yet another prayer of the Revenue is that the Commissioner had failed to consider the evidence built upon the slips recovered from Shri Anoop Agarwal. This was contradictory to the statement of Shri D.K. Batra, Manager of MCL. The Commissioner found lack of evidence on flow back while in similar circumstances, the amounts recovered by M/s. Kela Brothers and their transmission to MCL had been upheld. The Commissioner found that Shri Anoop Agarwal was not an employee of MCL at the material time based on evidence. Therefore his retracted statements were not admissible in evidence. As per his statements the assessee collected higher amounts than the invoice amounts. However, the slips recovered from him could not be linked to any clearances. We have cited the relevant finding of the Commissioner elsewhere in the order. We find that the Commissioner order is correct and the demand canvassed is not backed by any evidence. In the circumstances this plea of the Revenue is rejected. 34. As for the fax sent by Umiya Enterprises and stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll their buyers as proposed in the show cause notice. The revenue has relied on the following observations of the Tribunal in the case of Surya Ceramics - 2006 (201) E.L.T. 392 namely, in a case of clandestine operations, the revenue authorities cannot be put to prove every detail of the clandestine transaction. That too when there is sufficient evidence showing that the goods were clandestinely dealt with for evasion of duty. These were very relevant to the present case. Unlike in the Surya Ceramics case, in the present case, there was documentary evidence in the form of company s own price list, documents reflecting collection of amounts in excess of invoice value whose authenticity was not in doubt. The revenue also relied on the decision of the Bench in the case of Carpenter Classic Ltd. - 2006 (200) E.L.T. 593. In that case, DRI could provide concrete evidence only in respect of one out of 25 Bills of Entry relating to consignments of kitchen modules . Yet, based on this evidence, corroborated by the statements of the Director of the importing company and some of the employees, the Tribunal confirmed the duty demand on all consignments accepting the fact that even if convin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned clearances positive evidence of undervaluation existed and there was a reliable pattern which showed beyond doubt a probability that same level of undervaluation was there in respect of all clearances impugned. 36. We find that undervaluation of excisable goods is as serious a charge as clandestine removal. Differential duty can be demanded only where undervaluation is established. In the wake of transaction value introduced w.e.f. 1-7-2000 in the Act such evidence has to be available in respect of each removal. There could be cases where the facts of one case of undervaluation and the pattern involved are such that extrapolation is safe and justified. In the instant case, we find that the facts highlighted by the Commissioner do not justify such a course of action. As undervaluation cannot be ruled out and is likely to have taken place as is apparent from the price lists, chits and IOM seized, we consider it necessary to remand the case canvassed in the Revenue appeal to the Commissioner for adjudication. Allowing this prayer, we are remanding the dispute regarding undervaluation for fresh adjudication except that relating to the case pertaining to fax recovered from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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