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Shri Iqbal Maklai, PA Holder, Shri A Ishaq, Manager, Sri Srichand S Agicha And Prop of M/s National Veneer Products Versus CCE, Calicut And (Vice-Versa)

Valuation - under-invoicing of products - veneers - mis-declaration of higher quality veneers as low quality veneers - scope of SCN - The appellants rebutted the allegation in the SCN and contended that the allegations were based on assumptions and presumptions - Held that: - the allegation of under invoicing is well established on the basis of the investigation done by revenue. The seized records indicate both the recovery of billed amounts as well as additional amounts recovered as OA by cash .....

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t be ignored and can be made basis for confirming the allegation of undervaluation. - With effect from 01.07.2000, the concept of value in Section 4 of Central Excise Act was changed. The concept of transaction value has been introduced w.e.f. 01.07.2000. Transaction value refers to the actual amount charged for the transaction - By definition, a necessary concomitant of transaction value is that the price should be the sole consideration for the sale. Thus, in a scenario where the buyer has .....

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justified. It is very well established that in quasi-judicial proceedings, as in civil cases, the principle to be applied to evaluate the evidence is preponderance of probabilities. - The investigation done by the Revenue has established the allegation of underinvoicing. Consequently, the demand of differential duty as confirmed by the ld. Commissioner in the impugned order is upheld. - Appeal dismissed - decided against appellant. - Excise Appeal Nos.43-45 of 2007, Excise Appeal No.357 .....

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eneer Products (ii) E/44/2007 - Shri Iqbal Maklai, PA Holder (iii) E/45/2007 - Shri A Ishaq, Manager (iv) E/357/2007 - CCE Calicut vs National Veneer Products 2. M/s. National Veneer Products (hereinafter referred to as NVP) is a proprietary units owned by Sh. Srichand S Agicha. They are engaged in the manufacture of wood veneers falling under chapter 44 of the Central Excise Tariff Act. Simultaneous search operation was carried out at the premises in the compound including four factories M/s. N .....

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r products (viz. veneers) and (ii) mis-declaring higher quality veneers as low quality veneers. Investigations conducted also revealed that invoices issued by NVP reflected only part of the actual price recovered from their customers. Central Excise duty was paid on the prices shown on the invoices. The remaining part of the price was recovered in cash through their representatives and the same was not brought on statutory records as well as their account books. Further, in respect of M/s. Weste .....

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rder held as under:- (i) Duty confirmed ₹ 11,91,671/- based on seized records (ii) Penalty of ₹ 11,91,671/- (iii) Interest on duty payable and (iv) Penalty of ₹ 1,00,000/- each on Shri Iqbal Maklai, PA holder and Shri A Ishaq, Manager While appellants have filed appeals against confirmation of duty and interest, fine and imposition of penalties, Revenue has filed an appeal against restriction of the duty demand to clearances based on seized records and not the entire clearances .....

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NVP in his statement dated 23.1.04stated that he was residing at Mumbai and had furnished power of attorney in favour of Shri Iqbal Maklai to look after the affairs of the factory; that he had engaged Shri M V Shenoy, the manager of M/s. National Plywood to assist Shri Maklai in technical matters. (ii) Shri R Jayakumar, Accountant of M/s. Arch Plyboard and National Veneer Products (NVP) stated vide his statement dated17.10.2003 that he looked after the accounts of NVP along with that of others. .....

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s quality; that he prepared the invoices as instructed by Shri Ishaq who told him the price and the grade to be shown in the invoice. He also stated that in the invoices grades were shown as A, B and C and that A grade veneer had the highest price followed by B and C. (iii) Sh. A. Ishaq, Manager, M/s National Veneer Products instatement dated 24.09.2003; stated that the pricing pattern is decided by Iqbal, P.A. holder. The real sale value of the products is not shown in the invoices and a consid .....

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in invoice does not reflect the actual price. The invoice price shown is undervalued price. The documents and floppy disc, seized by the revenue officers were kept for his reference by himself and Sh. Ishaq in the company guest house. Out of the six note books shown to him, the note books at Sl. No. 3, 5, 6 and 7 diary are written by Sh. Ishaq. The other note books (Sl. No. 2 & 4) are written by Supervisors of M/s. Arch Ply. The statement of Sh. M. V. Shenoy has confirmed that the figures sh .....

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the assessable value as follows: For the period 01.01.2003 to 30.06.2003 : Extra amount collected in cash as per seized private diaries /note book: ₹ 72,96,947/- Extra amount collected as per print out: ₹ 8,49,069/- Extra amount collected in the guise of labour and transportation charges:Rs.4,93,597/- For the period 01.01.2002 to 31.12.2002 and 01.07.2003 to 23.09.2003: Quantity of 'C' grade sales as per the invoices during these periods calculated at the average rate charged .....

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e notice rebutting the allegations made in the show cause notice and contended that the show cause notice had quantified the demand for the period 2001-02 to 2002-03 on the basis of certain evidences which were available only for the period of 01.01.2003 to 30.06.2003; that the evidences allegedly contained in the diary type note book for about 6 months has been applied for all clearances for a period of about 21 months; that the evidences in the form of the statement of junior officials and oth .....

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passed the impugned order in which he confirmed the duty demand of ₹ 11,91,671/- as against the demand in the show cause notice of ₹ 39,80,193/-. He reduced the demand from the show cause notice by restricting it only to the figures obtained from seized documents viz. diary, note books and print outs recovered during search. 8. Aggrieved by the part of the order where the ld. Commissioner has confirmed the duty demand in respect of undervaluation along with penalties, the appellant h .....

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corroborated by any other independent private records, consequently, the demand based on such evidence is not sustainable. The alleged excess collection considered by the department as reflected in the private diary of Ishaq is only for the period 01.01.2003 to 30.06.2003. Sh. Shivdas further argued that the allegation of undervaluation is not corroborated by buyers. No dealer has been investigated by Revenue and hence it is not confirmed that excess payment in cash has been made. Hence, the ent .....

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e Commissioner himself has dropped the demand which was in excess of that culled out from seized documents. There is absolutely no justification for confirmation of the entire demand projected for the entire clearances as contended by Revenue in its appeal. 10. Shri Shivdas also relied upon several case laws in support of his argument. In particular, he relied upon in the following cases: a) Somany Pilkinton's Vs. B. P. Verma 1995 (76) ELT 281 b) Sharon Veneers Vs. CCE -2002 (146) ELT 655 c) .....

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n ble Tribunal in some of its earlier decisions, has already remanded the adjudication orders covered in those cases for denovo decision. The following cases have thus been remanded by the Tribunal: a) CERA Boards & Doors - [2010 (249) ELT 550 (T]) b) Hero Plywoods - [2009 (248) ELT 205 (T)] c) Noble Plywoods -[ 2009 (248) ELT 330 (T)] d) Prestige Boards - [2009 (248) ELT 313 (T)] e) Thumbay Holdings - [2011 (272) ELT 225 (T)] f) National Boards - [2014 (313) ELT 113 (T)] 11. Shri P RV Raman .....

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he day to day activities in the factory, confirmed in his statement dated 25.09.2003, the statements made by Sh. Ishaq about pricing, delivery, collection of extra payments and accounting of purchase transactions. (iii) Shri M. V. Shenoy, has in his statement dated 21.11.2003, agreed that the selling prices shown in the invoices was less than the actual manufacturing cost. The diary type note book used for despatches and production reports, maintained by Sh. Ishaq and other employees also corrob .....

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cument, the amount realized is shown under 2 categories, viz. B/A (Billed Amount) and O/A(Other Amount), the latter indicating the extra amounts collected in excess of the invoice amounts. The veracity and correctness of these entries were confirmed by Shri Ishaq, in his statement dated 24/9/2003 and agreed to by Shri Maklai in his statement dated 25/9/2003. (vi) Despatch note book containing details of dispatch of veneers for the period from 19/9/2002 to 24/2/2003, which reveals mis-declaration .....

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ds. Revenue has contested this finding on the ground that once it is accepted that duty evasion on account of undervaluation is established, application of the transaction value has to be discarded and resort has to be had to the C.Ex. Valuation Rules, where again resort has to be had to the residuary provision of best judgment assessment. It is not necessary to provide proof of collection of the extra amount in each and every case of sale. (ix) Revenue would rely on the following case law in th .....

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eeking to confirm the duty demand as per show cause notice may be allowed. 13. Heard both sides and perused the records. During the course of search undertaken by the Revenue officer against NVP and other connected persons, certain private documents, note books and diaries as well as floppy disc were seized from the factory premises as well as common guest house in the factory compound. Upon analysis of these documents and after recording the statements of Sh. Srichand Agicha, Proprietior, Sh. I .....

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e guest house showed the details of sale transaction and payments received from major customers of the appellant during the period April 2002 to September, 2003. In these documents the amount realised was shown under two categories: (i) Billed amount which indicated the amount as per invoice which has been realised through banking channel and (ii) the other amount indicated the extra amount collected in cash in excess of the invoice amounts. The veracity and correctness of these entries were con .....

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nfirmed that excise records showed the superior quality of veneer to be 'A' and 'B' whereas the clearances were shown to be of inferior grades 'C'. The significance of the terms "billed amounts" and "other amounts" have been clearly explained by Sh. A. Ishaq in his statement dated 24.09.2003. It has been specifically explained that the expression "OA" stood for the amounts collected over and above the invoiced amounts. The factum of collectio .....

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ed to conclude that the allegation of under invoicing is well established on the basis of the investigation done by revenue. The seized records indicate both the recovery of "billed amounts" as well as additional amounts recovered as "OA". by cash. The entries found in the seized records have been corroborated by key employees of NVP, who were holding responsible management positions. Sh. Maklai, P.A. holder is one of them. The Prop. in his statement clearly stated that the f .....

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ation correlatable to the invoices which are statutory records. Consequently, these records cannot be ignored and can be made basis for confirming the allegation of undervaluation. 15. As discussed above, the evidence for underinvoicing is overwhelming. We cannot accept the ld. Counsel's arguments that there is no underinvoicing and the entire demand is based on presumptions and assumptions. 16. The appellant has also assailed the method adopted by the department to calculate the aggregate v .....

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books and printout, but also on the entire clearances shown in RT-12. However, at the time of passing the impugned order, ld. Commissioner has taken the view that it is not proper to calculate the total duty evaded by such mathematical calculation. He has in fact restricted the total demand only to that attributable to the amount of cash recovered as available in the "other amounts". Accordingly, he has reduced the total duty demand from ₹ 39,80,193/- to ₹ 11,91,671/-. 17. .....

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quot;the value for the purpose of assessment on each removal of the goods shall in a case where the goods are sold by the assessee, for delivery at the time and place of removal, the assessee and the buyer are not related, and the price is the sole consideration for the same, be the transaction value". By definition, a necessary concomitant of transaction value is that the price should be the sole consideration for the sale. Thus, in a scenario where the buyer has to necessarily pay an amou .....

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unts in excess of the amounts indicated in the invoices and that there were instances of that nature from January, 2003. Consequently, the transaction value as shown in the invoices has to be rejected and resort has to be had to the provisions of Central Excise Valuation Rules, 2000 to determine the assessable value for charging duty. Since only specific situations where the invoice value may have to be adjusted to include certain costs of materials and services not forming part of the transacti .....

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ced by the Revenue. In fact, he has restricted the demand only to that evidences. This is a case in which Revenue has succeeded in unearthing voluminous documentary as well as oral evidence which unambiguously supports the allegation of under invoicing. Of course, the Revenue has not been able to unearth evidence of each and every invoicewise collection of additional consideration in cash. The question before us is whether, on the basis of available evidence, can we come to the conclusion that t .....

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y 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 well settled law that strict rules of the Evidence Act and the standard of proof envisaged therein do not apply to departmental proceedings of 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 issu .....

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doubt 'but' the preponderance of probabilities tending to draw an inference that the fact must be more probable. Standard of proof cannot be put in a strait jacket formula. No mathematical formula could be laid on degree of proof. The probative value could be gauged from facts and circumstances in a given case. The standard of proof is the same both in civil cases and domestic enquiries". In the case of D. Bhoormull, the Apex Court has stated that the law does not require the prose .....

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