TMI Blog2009 (11) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Shri D. Ram Babu himself. Such unaccounted amounts were received in cash. The assessee had also removed manufactured goods clandestinely under the invoices of M/s. Techno Industries, owned by a partnership firm comprising the wife and son of the Managing Director, of the assessee Shri D. Ram Babu. A document showing cost of each of the finished goods of the assessee was recovered from the premises of Hi-Tech on 2-5-2003. Price lists issued by Hi-Tech was recovered from M/s. Anand Rock Drillers, Udaipur, one of the dealers of the assessee-company. The cost of manufacture of products worked out by Hi-Tech and the prices of such products in the price lists recovered were both higher compared to the corresponding sale prices reflected in the sale invoices. On the basis of these evidence, it was tentatively found that Hi-Tech had shown lower values than the actual sale prices on the invoices and evaded excise duty by undervaluation. After recording admission statements from Shri D. Ram Babu, Shri Sumanth Kumar, Director and the customers of M/s. Hi-Tech, a show cause notice was issued to the assessee. After due process of law, the Commissioner found that the assessee had evaded the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Price of the said goods as per their invoices (Rs.) Reference 1. 41/2 panther hammer 8,349/- 5,727/- Page No. 12 2. 6 Tiger hammer 17,497/- 12,931/- Page No. 9 3. 6 bushless hammer 17,627/- 15,804/- Page No. 15 (iii) Disposal of excess amount realized in cash : A perusal of the Muster Roll Statement of March, 2003 showed details of 153 employees and their total wages as Rs. 3,03,295/-. Muster Roll Registers seized from the factory, however, indicated that the wages were paid only to 10 employees for the month of March 2003. Shri B. Govinda Rao, Manager (Accounts) stated that the assessee had only 10 employees in their records and an amount of Rs. 23,596/- paid as wages for March, 2003. The remaining amount was paid in cash from the unaccounted cash received as sale proceeds from their customers. Certain scribbling pads seized from the assessee s factory contained details of collection and expenses met in cash. Shri B. Govinda Rao, Manager (Accounts) confirmed that some of the entries in the said scribbling pads related to unaccounted receipt of cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved himself in under-invoicing and clandestine removal of excisable goods with intent to evade payment of central excise duty. He was liable for penalty under similar statutory provisions. (viii) Voluntary payment : Assessee paid Rs. 10,74,868/- on different dates in May, 2003. 3. In the impugned order, the Commissioner found that even though price lists recovered indicated that 40% discount was allowed, the assessee could not establish granting such discounts. Customers who had given statements had deposed that no discounts had been allowed. Shri E. Srinivas, Marketing Representative of the assessee stated that no discounts were generally offered to their customers. The Commissioner held that the assessee could not claim that it had allowed 40% discount to their customers in the absence of any evidence furnished. The fact that price lists were recovered from one of the dealers showed that such price lists were operated by the assessee. Though the statement rendered by customers of the assessee related to a small quantum of the assessee s sales, their statements indicated undervaluation; the charge was found also on the basis of corroborative evidence such as printed price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed that under invoice No. 804 dated 31-7-2002 the assessee had sold discovery hammer with spares at a total price of Rs. 40,000/- but showed only Rs. 19,090/- excluding sales tax. This voluntary statement could not be assailed and could be relied upon as evidence. The affidavits of the customers produced by the assessee were an after thought and backed by no supporting evidence. 4. The appellants had claimed that a competitor company namely M/s. Widia India Ltd., had stated in their letter dated 24-8-1998 that they were allowing discounts ranging from 30% to 35% in respect of drill rods manufactured by them. M/s. Rapicut Carbides Ltd., another competitor vide their letter dated 25-2-1998 addressed to the same customers M/s. Buoyant Marketing (Pvt.) Ltd., had informed that they would be offering a discount of 52% with effect from 1-3-1998. However the assessee had not filed any copies of invoices of M/s. Widia India Ltd., and M/s. Rapicut Carbides Ltd. As regards copies of two invoices issued in favour of M/s. S.V. Traders by M/s. JCR Mining Equipments, Commissioner found that the same did not mention discount, though the net prices reflected in the invoices was more or less e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded from their employees and no copies had been handed over to them. This was evident from their depositions during cross-examination. The assessee submitted that the charge was based on about five statements recorded from customers whereas they had large number of major buyers whose transactions with the assessee had not been investigated. The customers in their cross-examination had denied that the statements obtained from them was voluntary and denied having paid any amount in excess of what had been shown on the invoices. Evidence of similar prices of competitors produced was not considered by the Commissioner. Evidences submitted for purchase price of steel from PSUs like SAIL/VISL, statements, letters given by sub-contractors, copies of sales register, pricing charts, labour charges consumables (in support of cost) were ignored. The Commissioner had arrived at the conclusion of undervaluation on presumptions and assumptions. The Commissioner had only allowed cum-duty benefit and rejected its other pleas before him. The adjudication order was passed arbitrarily in a manner not acceptable in law. 5.1 The price list, a major evidence relied on, indicated that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undervaluation was found on the basis of statements of its customers and employees according to which Hi-Tech realized amounts in excess of invoice price in cash and the same was not accounted. This cash was used to meet unaccounted expenditure. During cross-examination all the deponents testified that their statements were dictated by investigating officers and the statements were not voluntary. In the light of the averments of witnesses disowning contents of their respective statements, these statements lost evidentiary value. Several case laws were cited in support of the proposition that such statements could not be relied upon. As regards the statement of Shri A.B. Rao, it was submitted that this evidence could not be relied upon as the witness was not produced by the authorities for cross-examination by the appellant. However, the invoice in question reflected the correct price of Rs. 18,313/- net of taxes, discount, etc., Therefore the allegation of under-valuation could not be found on the basis of the statement of Shri A.B. Rao. 5.3 As regards another important evidence namely the price list, it is their submission that the price list had shown that the buyers were allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Therefore, the finding relying on the material on the scribbling pads was not sustainable. He also testified the arguments relating to the number of employees on the regular muster roll of M/s. Hi-Tech as 10 and monthly gross salary as Rs. 23,596/-. 6. The ld. Counsel strenuously argued the case of the appellant that the impugned demand on account of undervaluation was confirmed without any evidence. Commissioner relied on retracted statements of third parties without any corroboratory evidence. A price list was relied on but the Commissioner adopted list prices ignoring the discount offered in the price list. Evasion was found on the basis of evidence gathered from one dealer and a few customers. Transactions with about 80 dealers were not investigated; so also about 95% of its customers. Unreliable factor of evasion ascertained in such investigation was applied to all clearances of the assessee during the material period. He relied on several judicial authorities to argue that the impugned demand was not sustainable. 7. Learned SDR made a valiant effort to save the impugned demand and the impugned order. She reiterated the findings of the Commissioner relying on the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was evaluated according to Evidence Act and accurate proof was essential. This was no bar to departmental adjudication based on preponderance of probability. It was also held that non-availability of witnesses for cross-examination was not a fatal flaw when the findings were based on documents about which there was no credible explanation and nothing on record was available to show that the statements were not voluntary. The case is distinguishable. We find that the ratio of this decision is not particularly relevant to the facts of the present case; it restates the settled legal position as regards quality of evidence necessary for departmental adjudication. (vi) Haryana Acrylic Mfg Co. Pvt. Ltd. v. CCE, New Delhi [2001 (130) E.L.T. 562 (Tri.-Del.)]. In this case, the Tribunal held that admission by a senior executive of company looking after production and clearance of goods can be relied upon to prove clandestine removal. In the instance case there is no such admission regarding undervaluation. (vii) In the case of P.V. Varghese v. CEGAT [2008 (232) E.L.T. 420 (Ker.)] cited by learned SDR, Hon ble High Court of Kerala ordered that statements of third parties could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant-company. Another charge found is that the appellant received credit notes towards the price including duty on inputs returned to the supplier in March, 2003; appellant had not reversed the corresponding credit of Rs. 70868/-. On clearance of excisable goods under the invoice of M/s. Techno Industries, an amount of Rs. 1,60,468/- was demanded. Cenvat credit not reversed in time was demanded under Rule 12 of CCR amounting to Rs. 70,868/- and equal amount of penalty as the credit was imposed in addition to personal penalties. 9. We find that the statements were recorded from five customers and investigation did not cover the remaining 95% customers of the assessee. These statements also were found on cross-examination to have been dictated by the officers and obtained under coercion. Statements obtained from the employees of the appellant-company were also found to have been obtained under coercion and had not reflected the true state of affairs. That the assessee received unaccounted sale proceeds in cash and that the same was spent on unaccounted expenditure of the appellant were found in the impugned order on the basis of these statements. Moreover, the appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. In the instant case only one dealer out of a relatively large number of assessee s dealers was contacted. The dealer was not enquired as to the nature of his sale prices vis-a-vis list prices. Only a couple of buyers of the assessee s products were contacted who incriminated assessee regarding valuation. These statements had been obtained under coercion; they had been pre-typed or dictated by the officers. These third party statements could not have been relied on. 9.1 As regards the non-reversal of Cenvat credit of Rs. 70,868/- on account of rejection and return of credit availed inputs by Hi-Tech, we find that the appellant reversed the same only in May, 2003 at the instance of the department, though it had received credit note for the price including duty in March, 2003. This reversal cannot be held to have been made voluntarily. The evasion was therefore intentional as found by the Commissioner. The demand confirmed and equal penalty imposed on Hi-Tech u/s 11AC of the Act by the Commissioner on this account, we find, are therefore justified. As regards clearance of excisable goods under the invoice of M/s. Techno Industries, we find that the appellant had not advanced an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved, has to be established by the department. We note that the Department in their comments have stated that when forty dealers of the appellant were spread all over South India, it would be difficult to conduct investigation in respect of all. It is for the department to establish the charge of under-valuation by bringing in acceptable evidence though not with mathematical precision. We find that the appellants have clearly stated that statements have been recorded under threat and coercion while the department in their comments sought to challenge this assertion by the appellants that the appellants have not brought any documentary evidence in this regard. As regards the cost certificate, the appellant claimed that the same was prepared and used as a lever to bargain with its customers for higher price and the same had not reflected actual cost. Appellants produced certificates from independent cost accountants showing different values representing the actual cost of production of its various final products. The Commissioner was bound to go by these cost certificates unless the same had been dislodged by cost certificates issued by another competent cost accountant. In support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not verified by the Commissioner though the appellant showed details of purchase price of steel from SAIL/VSIL to prove that the certificates were genuine. The cost certificate produced by the assessee could probably have been rejected since usually such certificates are qualified statements and the same are issued on the basis of records produced, etc. In any case, the Commissioner could have arranged verification of particulars relating to major items of cost such as raw material price. The Commissioner did not give any finding that the purchase price of steel supported by bill of invoice of SAIL/VSIL relied on for determining the cost was incorrect. 12. As regards the price lists, the appellant was able to produce invoices of a competitor which had shown comparable prices. The fact that an offence case had been booked for undervaluation against M/s. JCR Mining and Equipment and the appeal filed by the assessee was pending before the Tribunal may not be adequate to discard this evidence. Moreover, even at the time of hearing, the departmental representative did not bring to our notice the said order of the Commissioner and the status of the appeal. We find that in Usha Amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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