TMI Blog2009 (11) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... d search and verification of the documents and the records and resumed many documents. Officers also conducted follow up investigation, including enquiries with several dealers and recorded various statements and also recovered and seized documents. On scrutiny and investigation of the said documents, Appellants/Assessees were issued Show Cause Notices No. 8/2003 dated, 24th February, 2003 in which it was proposed to confiscate the seized plywood/veneer, and impose penalties. Another Show Cause Notice 18/2004 dated, 31st March, 2004 was issued in which it was proposed to confirm the demand of ₹ 13,94,88,786 besides proposals for confiscation and imposition of penalties on the ground that there was gross under-valuation of the plywood, blackboard and veneer cleared. Show Cause Notice relied on various documents including panchanamas, statements, notebooks, computer data, as detailed in the Annexure to the Show Cause Notices. The Show Cause Notice also arrived at the revised assessable value by adopting certain set of parameters as set out in para 44 of the Show Cause Notice. Appellants filed reply to the Show Cause Notice and also sought for cross-examination of the dealers, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the submission that learned Adjudicating Authority in paras 43 to 45 of the impugned Order has relied upon various other materials like income reflected in the balance sheet on account of share transactions, sale of DFRC scrips to come to the conclusion that such transactions are fictitious in nature and are the additional consideration from the sale of plywood/veneer. It is the submission that there is no basis for such a conclusion. It is also the submission that all these transactions which are reflected in their balance sheets and the income derived from such transaction has been duly declared for Income Tax purposes and assessment under sales tax has also been completed. It is the submission that the transactions relating to the shares are in respect of purchase and sale of shares during the same settlement period, wherein no actual payment of money is involved but loss or profit on the transactions is only accounted in the Appellants' records. For the submission that income derived from sale of DFRC scrip, Steel, it is well-documented and accepted commercial transaction, he would illustrate the accountal and acceptance of the transactions by the Sales Tax Authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cannot be considered as reliable basis to decide the issue of under-valuation. It is the submission that the statements recorded by the various dealers have been rendered as no evidence, as the dealers' have in the cross-examination submitted that the said statements were taken by force from them. It is the submissions that the demand prior to 1st July, 2000 is not sustainable as the normal price of excisable goods at the factory gate to unrelated persons has been established by the Assessee then such normal price available at the factory gate would be applicable to for the clearances made to the entire set of dealers; even if there is an evidence regarding collection of cash over and above the invoice value or not, is irrelevant. It is the submission that the demand for the period from 1st July, 2000 is also not sustainable as this period is governed by the concept of transaction value which would mean that the value shown on the invoice has to be considered as the value which has been received; as there is no direct correlation between the invoice value and additional amount being collected by the Appellant; in the absence of any evidence to show that excess amount of wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the differential duty on the basis adopted in the Show-Cause Notice should be upheld. He would also rely upon the decisions of the Tribunal in the following cases:- (1) Modi Alkalies and Chemicals Ltd. v. CCE, New Delhi, 2002 (147) ELT 1117 (Tri-Del), (2) Commissioner of Central Excise, Meerut v. Universal Glass Ltd., 2005 (182) ELT 3 (SC), for the proposition that once there is an additional consideration, computation of assessable value should be on the basis of comparable value for corresponding date/period or in its absence on the basis of assessable value, worked out on weighted average basis. 5. As regards the department's appeal, it is his submission that the Adjudicating Authority has erred in not considering the entire demand raised in the Show Cause Notice and has erred in confirming only part of the demand as has been raised in the Show Cause Notice. It is his submission that once the Adjudicating Authority has come to the conclusion that there an evidence in the balance sheet that there is receipt of additional consideration and the said figure has been considered for the purpose of calculation of the amount of the duty, the only amount as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the difference in between the actual prices/values charged and the invoice-prices/values. The actual prices/values are determined on the following lines, keeping in view the pattern of transactions and other elements evident from the above narrated details:- A. For Plywood and Blockboard Clearances:- (i) Wherever direct references to the actual item-wise prices and values charged were available in the privately maintained records/documents, as detailed above, the same have been taken as the actual prices/values in respect of the corresponding invoices of SBIPL. (ii) The item-wise rates/prices available in the invoices of SIPL, SML, Jugat Traders and Jugat Sales Corporation which correlate to specific invoices issued by SBIPL, have been adopted as the actual prices and the item-wise values worked out accordingly for these consignments. The prices thus, adopted from the invoices of the Jugat-firms are the net i.e. discounted rates. (iii) For the other clearances of plywood/blockboard during 2001-02 and 2002-03, the state/region-wise prices as per the privately maintained Price List have been adopted and the actual values worked out accordingly, after allowi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted as such. (ii) The actual rates of B-2, C-grade face veneers cleared during 2002-03 have been taken as per the prices evident from the private account-statements/indents discussed at para 17 supra. The prices of C-grade face veneers have also been applied to the face-veneers cleared with description as D-grade, in the light of the evidence discussed supra and also considering the depositions in this regard. (iii) For the remaining clearances of veneers of different grades/varieties, throughout the period, the actual values have been worked out by applying the a proportion/percentage in between the invoice-prices and the actual prices evident in the privately maintained documents/records, discussed supra and also taking into account the changes in the invoice-rates. The determination of actual values and the additional consideration i.e. differential values, as above, are tabulated and shown in Annexure-D-5, along with notes indicating the methods adopted notice wise or item-wise. It can be seen from the above reproduced portion, the Show Cause Notice has proceeded on specific evidences which were collected by the Authorities during the investigation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this category and the same needs to be determined under Section 4(1)(b). In paragraph 18(g), the learned Commissioner records the following findings:- The ratio of the decisions given, therefore, does not support the adoption of the price charged by the Jugat firms for all sales over India. The prices determined for Mumbai region, cannot be made ipso facto, applicable to other regions. Thus, for the sales covered under the criteria set out in Para 44A (ii) and (v), it is concluded that values under Section 4(1)(a) are not available and the same shall be determined under Section 4(1)(b). In paragraph 19, he records the following findings:- There is no basis for such a large number of grades and their submissions are not tenable. However, the discussion on this issue becomes irrelevant as I propose to adopt the valuation based on cost of production as discussed later and the grades lost their relevance in such method. In paragraph 21 clearly he records the following findings:- The discussion above shows that the evidences are specific only for a very limited period and for very few dealers. The value for such specific cases with direct evidence of act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice dated, 21st May, 1999 is set aside as time-barred. However, it is made clear that Rule 7 of the Valuation Rules, 1975 will not be invoked and applied to the facts of this case as it has not been mentioned in the second and the third Show Cause Notices. It is well-settled that the Show Cause Notice is the foundation in the matter of levy and recovery of duty, penalty and interest. If there is no invocation of Rule 7 of the Valuation Rules 1975 in the Show Cause Notice, it would not be open to the Commissioner to invoke the said rule. In the case of SACI Allied Products Ltd. v. CCE (supra), the Hon'ble Supreme Court in Paragraph 17, 18 and 19 has again held:- 17. Thus, according to the Appellate Tribunal, since the dealers in Uttar Pradesh who purchased the goods from Syndet, and independent dealers in other parts of the country to whom the Appellants directly sold the goods are different class of buyers, Appellants' price to the independent dealers cannot be taken as the basis for assessing Appellants' sales to Syndet in Uttar Pradesh. This finding of the Appellate Tribunal is based on first proviso to Section 4(1)(a) of the Act. While the Show Cause Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of the demand made upon the Appellants. That is not moulding relief. The demand that was made upon the Appellants was under Tariff Item 68 and it proceeded upon the basis that there was a process of manufacture of coloured polystyrene from uncoloured polystyrene. Having come to a conclusion against the Revenue on these counts, the appropriate Order for the Tribunal to have passed was to have set aside the demand and left it open to the Revenue to proceed against the Appellants, as permissible under the law. The Appellants would then have had the opportunity of meeting the precise case made out by the Revenue. The ratio of all the cases as handed down by the Hon'ble Supreme Court, is very clear that once Show Cause Notice does not invoke a particular way for demand of the duty and has relied upon only one set of evidences, the Adjudicating Authority cannot go beyond that set of evidences and confirm the demand on any another ground which is not proposed in the Show Cause Notice. 10. As regards the department's appeal and the submissions of the learned special Counsel for the Revenue that the matter needs redetermination, we find that in the grounds of appeal, R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of SBIPL. If indeed the amount of ₹ 10 lacs were the legitimate sales collections, a proper accountal and trace of the source thereof ought to be available, which however is not the case despite the lapse of almost six months from the date of seizure. Thus it appears that the above cash available at the residence of Sri. Narendra Goel was unaccounted in nature. The documentary evidence secured during the investigations clearly indicate a regular receipt of unaccounted cash amounts by Sri. Narendra Goel towards the excess and unaccounted portion of the actual value of the plywood, block-boards sold by SBIPL. More particularly the entries in the private note book No. 12 recovered from the SBIPL depot at Bangalore, discussed supra, indicated that the cash totaling to ₹ 9.10 lacs was sent by the SBIPL personnel at Bangalore to Vizag (admittedly to Sri. Narendra Goel through Sri. KV Bhaskar) in the period immediately preceding the date of search/seizure. Coupled with this, the amounts withdrawn in cash from the bank account held in the name of the fictitious firm M/s Lakshmi Agencies during August, 2002 totalled to ₹ 1.92 lacs. These are the instances which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Rule 25 of the Central Excise Rules. 1.2.2 The Commissioner has held that the goods seized in the factory premises of the Assessee, however, were not yet removed. In the case of goods seized at the Delhi depot, the Commissioner held that the same was not removed without payment of duty. The Assessee has given the explanation wherein the shortage and excess are explained to set off. There is no implied charge that the goods were meant for clandestine removals. The Commissioner has, therefore, held that, even if the goods are not accounted for properly in their records, if they are within the factory premises and there is no evidence of any preparation for clandestine removal, they are not liable for confiscation. 1.2.3 It is a fact that there was an excess quantity of goods when the Officers visited the factory/depot. This fact has not been refuted by the Assessee. The Assessee has sought to introduce a new fact that there was shortage in respect of other grades in order to explain away the excess quantity found. The question of shortage of quantities in other grades was never discussed/referred to in the Show Cause Notice. There is no finding of the Commissioner to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Show Cause Notice, we are not recording any findings on the various submissions made by both sides in view of the facts as has been recorded by us. Since, the OIO is traversing beyond the Show Cause Notice, we hold that the impugned Order is unsustainable and is liable to be set aside and we do so. The impugned Order is set aside. 14. In Appeal No. E/293/07, Revenue has filed an appeal against OIO No. 33/05-06 dated, 27th December, 2006 which was in connection with the proceedings connected with the above appeals. 15. The issue involved in this case is regarding confiscation of goods which were found in excess during the visit to the factory premises of the recipient, i.e. Shri Bajrang Ispat and Plywood Ltd. and goods found at Delhi Depot and Bangalore Depot and also the confiscation of ₹ 12,21,550 seized from the residence of the Managing Director of the Appellant company M/s Bajrang Ispat and Plywood Ltd. 16. The Adjudicating Authority after considering the evidences which were produced before him came to the following conclusion:- In respect of goods seized at Bangalore depot, I find that the goods are undervalued and were meant for sale at suppressed pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. On perusal of the records we find that the reasoning given by the learned Commissioner for release of the goods seized in the premises of the Assessee at Delhi Depot are well reasoned. It is his finding that the there is no evidence that the goods seized in the factory premises were meant for clandestine removal. We find from the records of this case, as well as connected cases, as decided by us, in the above appeals that there is no charge of clandestine removal from the factory premises of the Appellant. The entire exercise and the demand of duty is only on the undervaluation. There are absolutely no allegations or findings that goods are removed from the factory premises of M/s Bajrang Ispat clandestinely. In the absence of any such allegation, in the entire exercise in the investigation carried out, the unaccounted goods which were found in the factory premises of the Appellant-company could not have been held as kept ready for clandestine removal. We also find force in the submissions made by the learned Counsel for Respondent that the quantity which has been calculated as excess unaccounted is only on approximation. We find that, since there being no detailed quantifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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