TMI Blog2009 (3) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... al, we are of the view that it would not be correct to confirm the entire demand as such on the basis of overwhelming probability. Even taking into account the submission of the assessees, we have ordered re-computation of the duty liability for the two periods viz. (i) before 1-7-2000 and (ii) after 1-7-2000 in accordance with Section 4 prevailing during the said period. Therefore, we partially allow the Revenue’s appeal in terms of the remand directions. - E/947-954/2006 and 339/2007 - 245-253/2009 - Dated:- 24-3-2009 - S/Shri T.K. Jayaraman, Member (T) and M.V. Ravindran, Member (J) Shri G. Shiva Dass, Advocate, for the Appellant. Shri P.R.V. Ramanan, Special Counsel, for the Respondent. [Order per: T.K. Jayaraman, Member (T)]. - All these appeals have been filed against the Order-in-Original No. 14/2006, dated 12-5-2006 passed by the Commissioner of Central Excise and Customs, Calicut. 2. In fact, 8 appeals are from the assessees and Revenue has also filed one appeal against the same impugned order. 3. First, let us deal with the appeals of the assessees concerned, who have been affected by the impugned order. The details of all the appeals are given in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory at Kannur in Kerala and they have a depot in Bangalore. They have dealers in Kerala, Karnataka and Tamil Nadu. In 2001, they established a Depot at Bangalore to cater to the dealers in Karnataka. The Director-General of Central Excise Intelligence carried out certain investigations in October, 2002. Very elaborate investigations had been carried out and on the basis of the investigations, prima facie, it was found that the assessee had been undervaluing the goods cleared by them. 5. The gist of the allegation is that the assessee pays duty only on 1/3 rd of the actual value of the goods sold by them. The balance amount of the value of the goods is received by them by cash on which no duty has been paid. This is all the gist of the allegations. They have searched various premises in connection with the investigation. They had seized a large number of incriminating records. They had also taken the statements of 11 dealers. The statements of various persons concerned with the appellant's unit, factory and depot had been taken and on the basis of that, Show Cause Notices had been issued. In fact, there are two Show Cause Notices. Certain goods had been seized at six premises in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises of Shri T.R. Bhaskar, Manager, M/s. CERA Boards, Bangalore; (vi) Cash statements; (vii) Computer printouts (viii) collection books, note books; (ix) loose slips seized from the residential premises of Shri Cyril D'Souza; (x) A collection book and two receipt books seized from the residence of Dayanandan, (xi) A collection book seized from the premises of Shri T.R. Bhaskar; (xii) Diary of Shri Dayanandan, Sales Executive seized at the depot premises; (xiii) Diary maintained by Shri Deepak Dhiman, Sales Executive, M/s. CERA Boards; (xiv) Documents seized from the premises of M/s. Naveen Glass Plywoods, a dealer of M/s. CERA Boards; (xv) documents seized from M/s. Standard Plywoods, Bangalore; (xvi) Statements of Shri T.R. Bhaskar, Branch Manager and Shri N. Dayanandan, Sales Executive; (xvii) Statement of Shri Cyril D'Souza; Sales Executive; (xviii) Statement of Shri M.P. Narayanan, Representative; (xix) Statement of Shri K.S. Harris, Managing Partner of M/s. CERA Boards; (xx) Statement of Shri K.S. Mohammad Ali, Partner of M/s. CERA Boards. Then the statements of the following 11 dealers have also been recorded. (1) Shri Gajanan K. Kadolkar, Proprietor of M/s. Gajanan G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C, Jaipur - 2000 (117) E.L.T. 515 (T) 6.4 In Para 82, he gives his conclusion saying that he is convinced that the evidences indicate the undervaluation. Up to Para 82, all the evidences have been weighed by the learned Commissioner. 6.5 Para 83 is the crucial para, where the Commissioner had restricted the demand of duty only in respect of the dealers, who have accepted the undervaluation. In other words, while the Revenue had demanded duty for the period from 1-12-1998 to 5-12-2002 for an amount of Rs. 4,29,01,384/- in respect of all the dealers of the appellant, the Commissioner has given a very categorical finding that "But I find that no evidence has been adduced by the Department to prove that M/s. CERA Boards have shown lesser price in the invoices issued to all these customers while supplying goods to them and collected amount over and above the invoice prices to evade payment of Central Excise Duty. Evidence have been adduced by the department in respect of the aforementioned eleven customers only from whom statements have been recorded, in addition to the clearances made to their Bangalore depot." However, the Commissioner had stated that 3 more dealers viz. M/s. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions made during the period from 1-12-1998 to 5-12-2002 with all the customers of M/s. CERA Boards except the 14 dealers, without conducting necessary investigation on the sales made to them is not sustainable. 6.7 From Para 85 onwards, the Commissioner has dealt with the other contentions made by the party against the demand. In this paragraph, he has justified the inference of undervaluation in respect of the demands. He did not accept the contention of the assessee that the entire case of the department has been built on assumptions and vague statements. 6.8 In Para 87, he has stated that the case has been built not on mere paper slips or chits but on authentic documents corroborated by other evidences such as the various documents seized from the dealers' premises and those from the persons holding responsible positions in the firm, the Managing Partners and employees and also their statements. He had relied on the decision of the Hon'ble Supreme Court in the case of Collector of Customs, Madras v. D. Bhoormull [1983 (13) E.L.T. 1546 (S.C.) = AIR 1974 (SC) 859] wherein it has been held that prosecution of the department is not required to prove its case with mathematica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en stated, is very relevant. As regards the other case-laws, he had stated that that they are not very relevant. 6.13 In Para 106, he has held that the noticees are liable for penalty in terms of the various provisions of the Central Excise Act. 7. The learned Advocate Shri G. Shiva Dass, made the following submissions:- (i) The allegation of undervaluation is based on assumptions and presumptions. The Show Cause Notice covers the period 1998-1999 to 2002-2003 (up to 5-12-2002). The Commissioner has quantified the alleged extra collection on the basis of the statement of 14 dealers. Though the Department conducted searches at the factory and residential premises of the partners of the assessees, they could not unearth any evidence, which would corroborate or support the documents seized at Bangalore. Therefore, there is no corroboration. (ii) The assessees have a wide dealer network spread over the 3 southern States of Karnataka, Kerala and Tamil Nadu. In respect of sales to dealers in Kerala and Tamil Nadu, the assessee was selling the goods at the factory gate itself. In respect of the dealers in Karnataka also, the assessee was selling the goods from the factory gate its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory statements vis-a-vis other dealers with respect to whom no investigations were conducted by the department. Year Total value of clearances in all the States (Rs.) Value of clearances to dealers whose statements have been recorded (Rs.) Percentage 1 2 3 4 1998-99 1,65,60,538.00 30,54,506.00 18.44% 1999-00 1,56,84,727.00 25,39,476.00 16.19% 2000-01 1,92,53,733.00 38,02,842.00 19.75% 2001-02 1,74,68,876.00 8,77,565.87 5.03% 2002-03 1,27,35,714.00 27,74,198.00 22.93% (iv) The above table indicates that the demand is unsustainable, as the number of dealers who have not been investigated is far higher and with respect to whom no investigations have been conducted by the Department. As far as Karnataka is concerned, all the statements given by the dealers relate to clearances made from the depot after 1-4-2001 only. In respect of the dealers in Kerala, only one dealer in the whole of Kerala has tendered a statement against the assessee. As far as the dealers in Tamil Nadu are concerned, no dealer has state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessees during this period, it was submitted that for the period from 1-7-2000 to 31-3-2001, the invoice price would represent the actual transaction value and no further addition to the same is permissible. (vii) The Show Cause Notice relies upon a few transactions of cash from the depot to the assessee's factory through Mr. Narayanan or Mr. Xavier to come to a conclusion that the so called cash collection at the Bangalore Depot has in fact being received by the assessee at their factory. Apart from denying that any amount in excess of the invoices raised from the factory were ever collected by the assessees, it was submitted that as far as the evidences showing transmission of cash is concerned, the same represent legitimate sale proceeds and consequently, the same has been separately explained by the appellants. There is no provision in the Central Excise Law that the sale proceeds must be realized in DD/cheque. The assessee had shown that the amounts received in cash as indicated in seized records have been duly accounted in the assessee's ledgers maintained by the assessee's factory. (viii) The allegation that cash is stated to have been transmitted through Shri X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se slips, computer printouts, price lists, made-up files seized from S/Shri Cyril D'souza, T.R. Bhaskar, etc., the collection book of Shri Dayanandan, collection book of Shri Deepak Dhiman etc. These have already been enumerated. For all these things, the learned advocate had taken a defence stating that the loose slips are typed and do not indicate the author. They do not contain any signature. The department had not examined the author of the computer printout. It has not examined the concerned dealers to bring out the correct explanation to the computer printout. Mr. K.S. Harrins, on 30-9-2003, denied that the computer printout (price lists) was generated by the appellants. The computer printouts is not authenticated nor does it indicate any relation between the goods manufactured by the appellants and the goods indicated therein. The loose slips are typed and do not indicate the author. They do not contain the signature. Statements indicate that the expenses for the Bangalore Depot were being sent periodically from the factory to Shri T.R. Bhaskar. It would be clear from the entries made in the document bearing No. CI (13) that the money to meet the expenses of Bangalore depot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled law that in case of undervaluation, the burden is on the Revenue to prove that the undervaluation has taken place and the additional consideration has flown in. It is settled by various judicial fora that the Revenue cannot plead inability to undertake complete investigation but still seek the confirmation of demand based on the principles of preponderance of probability on the presumption that the pattern would have been the same for other areas or other periods based on a few evidences available especially when it is possible to undertake further investigations in respect of all the dealers whose names are available on record. The following decisions were relied on: (a) B.G. Plywood India (P) Ltd. v. CCE - 2001 (96) ECR 709 (b) Sharon Veneers v. CCE, Chennai - 2002 (146) E.L.T. 655 (Tri.-Chennai) (c) Alfa Ceramics Industries v. CCE, Indore - 2002 (145) E.L.T. 454 (Tri.-Del.) - Affirmed by Supreme Court as reported in 2003 (156) E.L.T. A325 (S.C.) (d) CCE v. Western Ply Woods - Final Order No. 1159/2005, dated 13-7-2005 (e) CCE C (Appeals), Calicut v. Malabar Plywood Works - 2006 (201) E.L.T. 17 (Tribunal) = 2006 (75) R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from other materials. The branch office had dealings with other customers. Their names were disclosed in the accounts. The accounts of those customers or their statements could have afforded a basis for the best judgment assessment. There must also have been other surrounding circumstances, such as those mentioned in the Privy Council's decision cited supra. But in this case there was no material before the assessing authority relevant to the assessment and the impugned assessments were arbitrarily made by applying a ratio between disclosed and concealed turnover in one shop to another shop of the assessee. It was only a capricious surmise unsupported by any relevant material. The High Court, therefore, rightly set aside the orders of the Tribunal". (xv) It is a well settled law that unless there are compelling reasons to depart, decision of the Court and Tribunal on identical issues are binding on coordinate Benches. The court and tribunal have been consistently holding for almost 19 years right from 1989 to 2007 that in such cases of undervaluation, the Revenue has to take efforts to prove undervaluation and flow back of additional consideration in either all or in substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Hindustan Polymers Co. Ltd. v. CCE, Guntur - 1999 (106) E.L.T. 12 (S.C.). (c) SACI Allied Products Ltd. v. CCE, Meerut - 2005 (183) E.L.T. 225 (S.C.). (xviii) The duty liability for the period after 1-7-2000 onwards by adopting the percentage mentioned by the respective dealers in their statements and in line with the method of quantification adopted by the Commissioner is Rs.12.91 lakhs only as indicated in Annexure-I to the letter dated 26-7-2007 filed by the appellants. The duty liability, if calculated based on evidences whether corroborated or uncorroborated, would be Rs.17.57 lakhs. (Reply to Show Cause Notice, pg. 791 - Volume 7 and Annexure-47, pg. 982 in Volume 8). This working out of demand would be in line with the decision of the tribunal in the case of Alpha Ceramic Industries v. CCE (cited supra) as confirmed by Supreme Court as reported in 2003 (156) E.L.T. A325 (S.C.) and of the Tribunal in the case of Vidarbha Veneer Industries Ltd. v. CCE. (cited supra). (xix) The duty demand has been reduced substantially from the stage of Show Cause Notice. An amount of Rs.12.50 lakhs has been paid before the issue of Show Cause Notice. If Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as confirmed. (C) The adjudicating authority in Para 87 cited Hon'ble Supreme Court case of Collector of Customs, Madras v. D. Bhoormull [1983 (13) E.L.T. 1546 (S.C.) = AIR 1974 SC 859] wherein it was held that the department is not required to prove its case with mathematical precision and all that it requires is the establishment of such a degree of probability that a prudent man may on its basis believe in the existence of the fact in issue, thus, legal proof is not necessarily perfect proof. The adjudicating authority also cited CEGAT case of Rajasthan Foam Ltd. v. CCE, Jaipur - 2000 (116) E.L.T. 157 (Tribunal). (D) CEGAT in a case 1984 (18) E.L.T. 701 (Bom.) held that price under Section 2(10) of the Sale of Goods Act, means money consideration for the sale of goods. CEGAT in a case 1989 (39) E.L.T. 79 (Tribunal) also held that additional consideration quantified in terms of money value flowing directly or indirectly from the buyer in any form to be added to the declared price for determining normal price. Hence the stand taken in Para 83 is contradictory to the settled case laws cited in Para 87 of the adjudication order. (E) However, the contention of the adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been fully corroborated by the employees of CERA, it is seen that with respect to more than 130 dealers in Karnataka, certain amounts over and above the invoice prices were being systematically collected during the period covered in Show Cause Notice. In addition, 11 dealers had admitted the fact of payment made in cash over and above the prices shown on the invoices raised by CERA. The dealers covered thus, numbering more than 140, are from the States of Karnataka, Kerala and Tamil Nadu. Some of the statements of the aforesaid 11 dealers were retracted only at the time of cross-examination during the process of adjudication i.e. more than two years after the issue of the Show Cause Notice, and rightly the adjudicating authority has rejected the retractions as an afterthought. Further, the records recovered from the premises of two dealers namely M/s. Naveen Glass and Plywoods and M/s. Standard Plywoods corroborated the statements of their authorized representatives and confirmed by Shri T.R. Bhaskar in his statement dated 20-3-2003. All these clearly established the fact of undervaluation. 9.2 Shri Ramanan emphasized that investigations were conducted in respect of 4 manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances that are convincing to the jury." He relied on the decision of the Apex Court in the case of Maharashtra State Board of Secondary and Higher Education v. K.S. Gandhi Others -1991 (2) SCC 716 wherein it has been held in Para 37 as follows:- "37. It is thus well settled law that strict rules of the Evidence Act, and the standard of proof envisaged therein do not apply to departmental proceedings or domestic tribunal. It is open to the authorities to receive and place on record all the necessary facts though not proved strictly in conformity with the Evidence Act. The evidence must be germane and relevant to the facts in issue. In grave cases like forgery, fraud, conspiracy, misappropriation, etc., seldom direct evidence would be available. Only the circumstantial evidence would furnish the proof. ........ There must be evidence direct or circumstantial to deduce necessary inferences in proof of the facts in issue. There can be no inferences unless there are objective facts, direct or circumstantial from which to infer the other fact which it is sought to establish.......... The standard of proof is not proof beyond reasonable doubt 'but' the preponderance of probabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants or not and whether 'extrapolation' on the basis of some instances would be proper or not, he stated the following grounds:- (i) The unified operations of the four firms of the Group clearly indicate concerted clandestine activity involving large scale undervaluation. (ii) The documentary evidence, supported by the statements of some dealers and the concerned employees, proves that the facts sought to be established were true and most probable. (iii) Once it is accepted that duty evasion on account of undervaluation is substantially more likely to be true and probable, the allegations stand proved in toto. (iv) It was also stated that whether the units belonging to the same Group would have adopted a different pricing method for some units alone at the cost of receiving less than 1/3rd of the total sale value or losing business by charging such widely different prices. He brought to our notice that as per documentary evidence, clearances to more than 132 dealers were found to be undervalued and for the Group as a whole, statements recorded of more than 30 dealers revealed that the practice of recovery of additional consideration over and above the invoice price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the assessees. With regard to the Sharon Veneers, (supra), which has been relied on by the Commissioner also, Shri Ramanan stated that the evidence presented in the present case is far more detailed, strong and conclusive inasmuch as there are a number of slips, evidencing recovery of extra amounts, corroborated by corresponding entries in the collection books/ledgers maintained by the employees of the assessee, entries/cash statements showing cash remittances to the Head Office at Kannur through employees and others; the confirmatory statements of the employees from whom the said books were recovered and, also the statements from dealers, confirming extra payments made in cash, etc,. Therefore, he said that this case cannot be compared with the facts of the Sharon Veneers case. 9.11 As regards the Somany Pilkington case (cited supra), the department had recorded the statements of 62 dealers. Only 5 of them alleged extra payments made to Shri Vyas, a Sales Executive of the company. They also stated that the payments were made at the instance of Shri Vyas, who had admitted in this statement that he did not share the extra amount with anyone and the company was not aware of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the clearances made by M/s. CERA Boards Doors, who are the main party in the appeals. The period involved in these appeals is from 1-12-1998 to 5-12-2002. The Show Cause Notice proposed confirmation of differential duty of Rs. 4,29,01,384/-. Penalties were also proposed. However, the Adjudicating Authority, after considering the evidences available on record, confined the demand of duty in respect of clearances made by 14 dealers only and confirmed a demand of Rs. 79,21,663/-. Equal penalty has been imposed. In these appeals, two Show Cause Notices are involved. One Show Cause Notice relates to the seizure of certain goods recovered from six premises. That issue had also been adjudicated. The goods had been held liable for confiscation. Therefore, redemption fine has been imposed in respect of those goods. Penalties have been imposed on the concerned persons. Anyhow, that is not the main issue in this appeal. The main issue relates to undervaluation. 11.1 Both Revenue and the party are agitated over the impugned order. According to the Revenue, the Commissioner should not have confined the demand only to 14 dealers. On the other hand, he ought to have confirmed the demand for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depot officials themselves have accepted that cash in excess of the invoice value is being separately collected. In fact, according to the Revenue, 30% of the actual value only is mentioned in the invoice and the remaining 70% is collected as cash. This is the main charge. We cannot say that this charge is baseless because the dealers from whom statements have been recorded have accepted that excess cash is being collected. Therefore, one thing is very clear that the price mentioned in the invoice is not the correct price. There is evidence that the appellants had been collecting cash over and above the invoice price. 11.6 The next question is how to quantify the demand for the period from 1-12-1998 to 5-12-2002. According to the Revenue, in view of the overwhelming evidence for this practice of collecting approximately 70% of the real value of the goods by cash, for all the clearances during the said period, the value has to be enhanced and differential duty has to be collected in accordance with the Show Cause Notice. 11.7 The learned Special Counsel, Shri P.R.V. Ramanan, argued for adopting the concept of preponderance of probability. He cited from various decisions to butt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: "Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive." Therefore, we are keeping the above observation in mind while deciding the case. We are reiterating that the cases relied on by both the sides cannot be applied in their entirety to these appeals, as then facts are different. 11.9 The whole issue relates to undervaluation. In terms of the Central Excise law, which existed prior to 1-7-2000, normal price concept was prevalent. That means duty has to be paid on the normal price. Conceptually, the normal price is a notional price. It need not be the actual price. However, there are methods of determining the normal price in accordance with the Central Excise law. The learned Advocate for the party Shri Shiva Dass stated that in respect of all the clearances made before 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luation, the concept of 'transaction value' has been introduced. In the concept of transaction value, each transaction is important. Therefore, the transaction value is to be determined for the clearances after 1-7-2000. As far as the period after 1-7-2000 is concerned, the value for assessable purpose is the transaction value. The transaction value is the value for each transaction. The concept of transaction value is entirely different from the concept of normal value. While the normal value can be notional, the transaction value is the actual amount transacted in respect of the goods. Of course, under certain circumstances, the transaction value has to be determined in accordance with the Rules. Anyhow, we would not go into that. Suffice it to say that for all the clearances after 1-7-2000, the value has to be determined based on each-transaction. Therefore, the differential duty should 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission of the assessees, we have ordered re-computation of the duty liability for the two periods viz. (i) before 1-7-2000 and (ii) after 1-7-2000 in accordance with Section 4 prevailing during the said period. Therefore, we partially allow the Revenue's appeal in terms of the remand directions. 12. Summing up, the appeals are disposed of in the following manner:- Sl. No. Appeal No. Decision 1. E/947/2006 Remanded to the Original Authority for re-quantification of duty in the light of the findings given. After re-quantification of the duty, the Commissioner can determine the quantum of penalty. 2. E/948/2006 The appeal is rejected by confirming the penalty and redemption fine imposed in the impugned order. 3. E/949/2006 The appeal is rejected by confirming the penalty and redemption fine imposed in the impugned order. 4. E/950/2006 The appeal is rejected by confirming the penalty and redemption fine imposed in the impugned order. 5. E/951/2006 The appeal is rejected by confirming the penalty and redemption fine imposed in the impugned order. 6. E/9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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