2019 (2) TMI 1550 - AT - Central Excise

Valuation - enhancement of declared value - certain finished goods which were not found accounted for - the Appellant Company (Appellant), is making supplies to plywood manufacturers by under invoicing the value of goods - appellant claims that the case of revenue in the present case is based on certain documents which have never been supplied to them - Held that - From the facts as available it is quite evident that certain relied upon documents which formed the basis of the show cause notice, have not been served upon the appellants and are also not available with the revenue now. Even at the time of adjudication in the remand proceedings these documents were not made available to the appellants. Since the starting point of investigation is the pay-in slips recovered from the premises of appellant during search conducted, it cannot be said that in absence of the said documents department has proved the case within pre-ponderence of probability. In absence of the said documents either in original or in form of any certified copy demand cannot be said to be based on the available evidence for scrutiny. Also, Show cause notice is only narration of search operations and evidences recorded in form of statements of various person. Commissioner has in his order recorded that the persons making the statement have not testified their statements as correct and voluntary. Thus these statements in absence of other evidences cannot be called as reliable evidence in proceedings relating to evasion of duty. Further another fact that needs consideration is that the amount which have been said to be received clandestinely against the duty evaded by way of undervaluation of goods is determined by way of deposits made in the bank accounts of the managing Director. How a person receiving the money in cash against such undervalued goods leave a trail by depositing the said amounts in his accounts has not been considered and answered by the revenue in these proceedings. Appeal allowed.

Summary

Issues Involved:

1. Violation of Principles of Natural Justice
2. Defiance of Order of Tribunal
3. Appreciation of Evidence in form of Statements of Buyers
4. Bank Statement and Pay-in Slips
5. Absence of Pay-in Slips and Chits
6. Retraction of Statements
7. Limitation and Findings on Fraud, Suppression, and Misstatement
8. Confiscation of Goods

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The appellants argued that they were not supplied with copies of certain relied upon documents listed in the show cause notice, specifically documents at S No 5, 6, and 17 of Annexure C. They also contended that they were not allowed a personal hearing after cross-examination despite specific requests. The Tribunal noted that the Commissioner failed to supply the said documents even after the Tribunal's specific directions, which was fatal to the case.

2. Defiance of Order of Tribunal:
The Tribunal had previously remanded the matter for de novo consideration with specific instructions to supply all relied upon documents. The Commissioner proceeded to adjudicate without supplying the documents again, justifying it on the pretext that these documents were supplied earlier. The Tribunal found this defiance significant and detrimental to the case.

3. Appreciation of Evidence in form of Statements of Buyers:
The entire case of the revenue was based on the statements of buyers who, during cross-examination, retracted their statements, claiming they were obtained under coercion. The Tribunal observed that the statements recorded under Section 14 of the Central Excise Act, 1944, were not voluntary and, therefore, could not be relied upon as evidence.

4. Bank Statement and Pay-in Slips:
The demand was primarily based on the bank statements of the Managing Director, showing deposits of around ?2 Crores. The Tribunal noted the absence of evidence linking these deposits directly to the appellant company or proving they were related to the alleged undervaluation and evasion of duty.

5. Absence of Pay-in Slips and Chits:
The Tribunal highlighted that the absence of pay-in slips and chits, which were not supplied along with other relied upon documents, weakened the department's case. These documents were crucial for proving the alleged undervaluation and evasion of duty.

6. Retraction of Statements:
The Managing Director and Manager retracted their statements, claiming they were made under duress. The Tribunal found that the retracted statements, in the absence of corroborative evidence, could not be relied upon to sustain the demand.

7. Limitation and Findings on Fraud, Suppression, and Misstatement:
The appellants argued that the show cause notice was barred by limitation in the absence of findings related to fraud, suppression, or misstatement with the intention to evade duty. The Tribunal did not find sufficient evidence to support the allegations of fraud or suppression.

8. Confiscation of Goods:
The goods valued at ?5.40 lakhs seized during the search were ordered to be confiscated, but since they were provisionally released, the Tribunal found the order for confiscation legally untenable. The appellants contended that the goods were not cleared without payment of duty, and the Tribunal agreed that the confiscation order was bad in law.

Conclusion:
The Tribunal allowed the appeals filed by the appellants, setting aside the order of the Commissioner. The Tribunal emphasized the importance of adhering to principles of natural justice, the necessity of providing all relied upon documents, and the unreliability of retracted statements in the absence of corroborative evidence. The case was significantly weakened by the non-availability of crucial documents and the failure to establish a clear link between the alleged undervaluation and the deposits in the bank accounts.