TMI Blog2010 (8) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... about 50% of the clearances of the assessee. No concrete case of undervaluation and evasion with reference to any particular clearance has been found by the adjudicating authority. The evidence of higher prices realized by PBPL in the form of entries in the pocket planner of Shri Ashraf is not acceptable without corroboration. Same is the case with particulars of invoices related to sale prices reflected in the documents recovered from SSP on 28-4-2004. These documents showed much higher prices for the assessee’s products than the respective amounts on which duty was paid. The impugned order set aside and matter remanded to the Commissioner for taking a fresh decision after following principles of natural justice - appeal allowed by way of remand. - E/893-894/2006 and E/152/2007 - Final Order Nos. 1145-1147/2010 - Dated:- 26-8-2010 - Shri M.V. Ravindran and P. Karthikeyan, JJ. Shri K. Prameswaran, Advocate, for the Appellant. Shri P.R.V. Ramanan, Special Counsel, for the Respondent ORDER M/s. Plama Boards Pvt. Ltd., Baikampady Industrial Area, Mangalore (PBPL for short) are engaged in the manufacture and clearance of plywood and block boards falling und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements recorded from third parties. The appellants examined the witnesses during adjudication when they retracted their initial depositions implicating the assessee in undervaluation. It was argued that in the absence of evidence, the allegations could not be sustained. After due process of law, the Commissioner found that the charges against the appellants were established. Accordingly, he passed the impugned order demanding differential duty of ₹ 1,37,81,152/-, applicable interest and imposing penalty of equal amount as the duty demanded, under Section 11AC of the Act. He imposed a penalty of ₹ 1 lakh on PBPL under Rule 173Q / Rule 25 of Central Excise Rules, 2001/2002. He also imposed a penalty of ₹ 10 lakhs on Shri PMA Razak and ₹ 10 lakhs on PBPL u/r 209 of Central Excise Rules, 1944/Rule 26 of Central Excise Rules, 2001/2002. 2. Appeal No. E/893/06 and E/894/06 filed by PBPL and Shri PMA Razak respectively challenge the demand and penalty on the assessee and penalty on the MD, PBPL. Appeal No. E/152/07 filed by the Revenue seeks to enhance the demand by treating the suppressed value as 75% in respect of all the dealers instead of reckoning the suppr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Razak never admitted receiving cash from Shri Ashraf as deposed by Shri Ashraf or from Shri Umar Frooq. Shri Umar Frooq denied having been asked to collect any amount in cash by Shri PMA Razak or anybody else and hand it over to Shri Razak. In cross-examination of Shri Umar Frooq, it was established that no question was put to him by the investigating officer concerned regarding collection of excess amounts and its payment to Shri Razak. The Adjudicating Authority had ignored the statements of Shri Razak wherein he had stated that the price figuring in the pocket planner including salaries paid to the assessee s employees not being fully accounted and the deposition relating to undervaluation made by the dealers in the three statements were not seen by him. He had stated that these had to be verified. As regards the discrepancy in the rates collected and those figuring in the invoice Shri Razak bona fidely believed that duty had to be paid on a uniform price and not on the actual prices recovered and hence he stated there was discrepancy. No direct question was put to Shri Razak regarding collection of excess cash. On the contrary S/Shri Ashraf and Umar Farooq categorically denied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s products were not contacted. The appellants had furnished affidavits obtained from eight of their regular customers which showed that the assessee had not resorted to undervaluation. The appellants had also submitted invoices raised by its competitors for sales of comparable goods at prices realized by the assessee. The impugned order demanded duty of an amount of ₹ 2.13 crores payable on differential value of ₹ 12.5 crores allegedly received in cash. However, as appeared in the pocket planner relied on, only an amount of ₹ 45,000/- was not accounted and utilized for payment of salary in the month of March, 2004. This allegation related to only one month. The investigation did not endeavor to explain such proceeds having been spent on raw materials purchased. The appellants had furnished cost calculations of various items of plywood to the Adjudicating Authority to justify the sale price. These were ignored. (f) Appellants had not dealt with M/s. Plydeal, Chennai. M/s. Plydeal had purchased plywood from M/s. Shri Ganapathy Enterprises, who was a customer of the assessee. The statement given by partner of M/s. Plydeal was not, therefore, relevant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice was recovered from the made up file of M/s. Plydeal, the same did not represent the prices of the appellant s products. A wrong assumption was made that the said document was the price list issued by PBPL. The notice inferred that the assessee s products were sold by the dealers at 6 or 7 times the corresponding rate indicated in the invoice of PBPL. The price list showed prices ex-godown Chennai inclusive of taxes and other levies in Chennai and pertained to M/s. Piydeal. Shri R.C. Kochar had indicated that it was his own price list. There was no acceptable evidence adduced to substantiate dealings between M/s. Piydeal or its partner and PBPL. (h) The reliance placed on the pocket planner is assailed on the ground that the same contained personal details of Shri Ashraf such as transactions he had with several persons, invocation of blessings of Allah on newly wed couple, telephone numbers. Entries in the diary included in case of SSPL and others plywood of both grades COM and PF; PBPL did not manufacture PF grade of plywood. COM was commercial grade and PF Phenol Formaldehide grade. During cross-examination Shri Ashraf averred that PBPL did not manufacture PF gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was not possible to prove the case in the light of CC, Chennai v. D. Bhoormull [1983 (13) E.L.T. 1546 (S.C.)] case was violative of principles of natural justice. (k) Invocation of extended period has been challenged in the absence of evidence of undervaluation through the modus operandi alleged and not proved. Therefore, demand of interest as well as imposition of penalty was also not sustainable. 4. In the appeal No. E/894/06 filed by Shri PMA Razak, it is submitted that the impugned order imposed penalty on the appellant without valid basis. There were bald allegations that the MD had been managing the affairs of the company and had master minded whole activity of under invoicing and collected part of the sale consideration in cash either directly or through his representative with intent to evade payment of duty. The requirement of the Rule 209A of Central Excise Rules, 1944/ Rule 24 of Cenvat Credit Rules, 2001/2002 was that the person concerned had knowledge that the goods involved were liable for confiscation. There was no such allegation regarding confiscation of goods or even the appellant having any knowledge in this regard. Penalty was therefore liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh Farooq. 5.2 The Revenue relied upon the Apex Court s judgment in Surjeet Singh Chabbra v. UOI [1997 (89) E.L.T. 646 (S.C.)] where the Apex Court ruled that a confessional statement made before a Customs Officer though retracted within six days was an admission and was binding. The assessee s own employees who had written and maintained private documents and records admitted of the modus operandi and explained entries in several documents. These transactions were also explained and confirmed by 10 main dealers, thus establishing the modus operandi beyond doubt. Clear references to invoices were available in these records. These records could not therefore to be ignored. 5.3 It is submitted that the appellants had sought to undermine the value of the statements through retractions made at the time of cross-examination after two years. Firstly, these retractions were made very late. Secondly, no complaint of duress or coercion was made before the cross-examination. Thirdly, statements of key employees of dealers were recorded by Departmental officers spread over more than a year. Fourthly, records seized from various premises/personal custody of employees were shown to them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove the impossible. 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 often it is nothing more than a prudent man s estimate as to the probabilities of the case. 31. The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered ..................... Since it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as part of its primary burden. 5.6 Relying on the Tribunal s decision in the case of Gulabchand Silk Mills v. CCE, Hyderabad-II [2005 (184) E.L.T. 263 (Tri. - Bang.)], it was observed that clandestine activity could at best be established by the circumstantial evidences and it would be humanly impossible to establish every link in the clandestine activity without any break. As in the said case, in the present case too, incriminating records have been supported by the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Other dealers who gave statements also retracted. There was no admission statements given by Shri Razak. The investigating officers did not put relevant questions to him. He had admitted small errors only. 7. Ld. Counsel for the Revenue reiterated the findings contained in the impugned order. He also reiterated the submissions made in the appeal. 8. We have carefully studied the case records and considered the submissions made by the counsels for the parties. The Commissioner found undervaluation of clearances of plywood made by PBPL during the material period relying on statements obtained from the customers of the assessee, the MD, the Accountant, the marketing person as well as documents seized from the assessee s factory, the premises of SSP and M/s. Plydeal, Chennai, the crucial evidence being the statements obtained from representatives of various dealers of the assessee and its employees. The Commissioner found it necessary to analyse the same. His analysis is reproduced below :- Sl. No. Name of the dealers/ employee/ Investigation officers Brief of the record of the statement Brief of cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rother in laws wedding on 1-5-04 and the second statement was written as dictated by the departmental officers. He in reply, to the question raised by adjudicating authority, stated that the amount of ₹ 41 Lakhs was written by him, he knew Mr. Razak personally. He also stated that he is not keeping any records which is not relevant to him and the officers also have not kept any records brought from outside into his office. In the first statement dt. 8-4-04, he has written in his hand writing that the statement was received by him and it is recorded as per his deposition without coercion, and threat. He has given the details of cash payment made to M/s. Plama Boards also attested the details of accounts retrieved from the computer. He has also explained that some of the abbreviations like C-oswin, C Inder etc. and clearly stated that he has paid in cash ₹ 39.79 lakhs to M/s. Plama Board. He also visited M/s. Plama Board during mid 2002 and negotiated all the formalities including cash payment. The statement only corro-borates what has been recovered by way of documents. The explanation of the code words/ letters in the documents were given by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma Board. Further it was retracted after a delay of nearly 22 months. 5. Mr. M. Baboo Singh, Proprietor M/s. Yashas Plywoods He stated in his statement that he has paid the differential amount over and above the amount quoted in the invoice in cash. The cash payment was made to the representatives of M/s. Plama Board who used personally visit them. He retracted his statement He also stated that he is not connected to Central Excise and the invoices recovered from his office was returned as such he did not inform to any body. In the statement he has stated that the statement is recorded without force, threat, or inducement and also written that the statement is correct. Further during cross examination he is not complained that the statement is taken under force. So the retraction statement is not acceptable. 6. Mr. Kishore. M. Patel, Manager, M/s. Kalyani Timber Plywoods He stated in his statement that he had only one transaction with M/s. Plama Boards and the invoice amount was around 30% of the actual price. He had paid the entire amount includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Babulal N. Patel, Partner, M/s. Saraswathi Saw Mills He stated in his statement that the invoice amount was around 30% of the actual price and the remaining amount is collected in cash. During cross examination he stated that he received only one consignment and he has not paid any amount in cash over and above the invoice price. The statement was typed by his cousin Mr. Himmat Palel, as deposed by Mr. Gonvind Agarwal, so his contention that he has not gone through the statement is not acceptable. The retraction is only an after thought. 10. Mr. Deepak Saboo, M/s. Ply Plaza, He stated in his statement that the invoice amount was around 30% of the actual price and the remaining amount is collected in cash. The statement was given voluntarily without threat, force or inducement and it was typed by him. During cross exami nation he stated that he has not paid any amount in cash over and above the invoice price. When the statement was typed by him. he cannot claim that he has not gone through the statement Retraction at this stage that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual price. The first statement has written by him, this as not retracted at the time of giving his second statement on 2-8-05 only during cross examination he has retracted his earlier statements hence it can not be accepted as it is an afterthought 9. In the initial statements the dealers had deposed to the effect that the invoices showed only about 25% of the actual price paid for purchases of plywood from the assessee. All the statements adverse to the assessee were contradicted during the cross-examination by the counsel for the appellants and by the Adjudicating Authority. As can be seen from the above analysis, the Commissioner found that the initial statements given by various persons reflected the true state of affairs. In the absence of allegation of threat or coercion when initial statements were recorded, they were acceptable as evidence. 10. On a perusal of the above analysis, we find that except the employees of PBPL, other witnesses are third parties. They were not bound by their own depositions. Once these statements are retracted, they lose their evidentiary value unless they are corroborated by other evidences. One of the important doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce be difficult to accept that the statement made during cross-examination of Shri R.C. Kochar is entirely true to facts. As regards the estimate it has not been co-related to any sale invoice of PBPL by the Commissioner. 14. We find that the Commissioner has applied the formula 25% of the sale price as accounted and 75% in cash in respect of clearances to SSP and 30% and 70% respectively in respect of clearances to other customers. We find that this methodology may not be appropriate. In the Sharon Veneers case (supra), the Tribunal held that undervaluation cannot be found in respect of all clearances when only three out of 40 dealers had been examined and their statements had been retracted. We find that the ratio of this decision applies to the case on hand. Undervaluation involving all the clearances made by the appellants during the material period cannot be found by examining clearances made to some dealers though they account for about 50% of the clearances of the assessee. No concrete case of undervaluation and evasion with reference to any particular clearance has been found by the adjudicating authority. Therefore, the applicability of the ratio of case laws such as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty as determined in the impugned order. The revenue seeks to revise the demand uniformly applying 75% of the sale price as having escaped duty. The period of dispute is post 30-6-2000 when the concept of transaction value has been introduced in the statute. We find that in a similar case of undervaluation of plywood in the case of Cera Boards Doors v. CCE, Calicut [2010 (249) E.L.T. 550 (Tri. Bang.)], this Bench had found enormous evidence for undervaluation. The Tribunal observed as under in the order :- 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 1-7-2000, a factory gate price exists and this factory gate price is the normal price and, therefore, the same should be adopted in spite of the fact that in certain cases, excess col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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