TMI Blog2019 (11) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... later stage, we find that the fact that there is under-valuation in the trade of the impugned products - We find that on the one hand, the Department tries to put down the pieces of evidence as an impregnable concrete defence to substantiate the allegation of under-valuation, defence attempts to wash it of saying it s a third-party evidence and as such, it cannot be relied upon and on the one hand, Sh. T.P. Haneefa, looking after the affairs of the company has denied any knowledge of payments over and above and on the other hand, the so-called confirmatory statements were retracted during the cross-examination - We find that DGCEI has made a series of cases against manufacturers of Veneers and Plywood across South India. Some cases have travelled up to the Tribunal on adjudication. Understandably, we are dealing with a case of tax-evasion and not a criminal case wherein the degree and standard of evidence is much higher and more precise. As far as the tax-evasion cases are concerned, we find that the principle of pre-ponderance of probability has precedence over proof beyond doubt. It is widely accepted that 'Preponderance of probability' is met when a proposition is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed partnership firm and continued the operations in the name of M/s Wood Veneers. (iii). M/s Perfect Boards Doors have Shri T.P. Haneefa and Smt C.P. Jasleena as partners. (iv). M/s Wood Boards is a proprietorship concern. Shri C.P. Marshab was the proprietor who expired on 13.11.2004. After his demise his younger brother C.P. Javid became the proprietor of the unit. 2. DGCEI conducted investigation against M/s Prime Veneer Limited, M/s Wood Veneers Others, M/s Perfect Boards Doors and M/s Wood Boards. On conclusion of the investigation DGCEI issued different SCN which were adjudicated by Commissioner. Revenue has based the allegations on certain records, recovered from one of the dealers in Bengaluru namely The Veneers and Space System and Agencies , belonging to one person Shri G. Suryanarayana. Investigation claimed that Shri G. Suryanarayana admitted that the records were maintained by him and contain details of payments (additional consideration) made to the representatives of the group. During the investigation statements of some of the other dealers were also recorded who have been alleged to have admitted that they h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E/470/2009 5,01,726 E/563/2009 Prime Veneers 2/2009/ 12.02.2009 E/471/2009 22,96,581 E/561/2009 T.P. Haneefa 2/2009/ 12.02.2009 E/472/2009 10,000 ---- G. Surya Narayana 01/2009 11.02.2009 E/473/2009 10,000 G. Surya Narayana 02/2009 12.02.2009 E/474/2009 Do G. Surya Narayana 03/2009 12.02.2009 E/475/2009 Do G. Surya Narayana 04/2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents relied upon by the department on the individual invoices do not indicate the alleged undervaluation of 59.51%. Shri Suryanarayana has explained that the entries in exercise note book do not relate to the additional consideration paid in cash; he was maintaining the flat of Mustafa in Bangalore and taking care of his son s education expenses; the Mustafa Account in his note book relates to such expenses and has no relationship with sale proceeds of plywood; records of the Dealer allegedly indicate certain payments made to Shri T.P. Mustafa; Shri T.P. Mustafa is not alive and the investigation was not in a position to record any statement from him; it is be pertinent to note that the records indicate there are some entries where some payments have been shown to have been made to one Shri Thangal; investigation has not been in a position to identify the person or record the statement from him; investigation has questioned Shri T. P. Haneefa, partner of Perfect Boards, who is presently taking care of the affairs and. He has deposed that he is not in a position to offer any comments since details of payments if any could be known only to Mr Mustafa; Shri Haneefa has not admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d party premises (Dealer s premises) and no other evidence to corroborate the said records, the ratio of the decision of Hon ble SC in the case of CBI v. V.C. Shukla - 1998 AIR SC 1406, is squarely applicable. He also relies on the decision of the Hon ble High Court of Delhi in the case of M/s. Vishnu Co. Pvt. Ltd. Others in CEAC 62/2014 with 73-90/2014 [2016 (332) E.L.T. 793 (Del.)], wherein it was held that the allegation of clandestine evidence cannot be sustained only on the basis of records recovered at third party. Therefore it is necessary that such evidences would be corroborated by independent evidences. It was also held that in the case of retraction subsequently during the course of cross examination it becomes necessary for the department to produce other evidence which is of independent nature which corroborates the retracted statements the above decision of Hon ble High Court has been accepted by the CBEC as pert CBEC Vide the Circular Circular No. 1063/2/2018-CX, dated 16-2-2018. The CBEC vide Circular 1053/2/2017 dated 10.03.2017 has also emphasised the said requirements in the process of adjudications; Tribunal in Final Order No. 20244-20248/2019 dated 08.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition by the successor. The same does not provide for issue of notice to the successor, to show cause in respect of lapses of predecessor. (v). Commissioner has dropped the demand in respect of the period prior to 13.11.2004 in respect of Wood Veneer and Wood Board. In Wood Veneers Smt C.P. Nazreena W/O Shri Mustafa was the proprietor and in Wood Boards Shri Mashab was the proprietor up to 13.11.2004. Both these individuals expired in an accident on 13.11.2004 and the Commissioner has dropped the demand in respect of the proprietary units for the period up to 13.11.2004. He has followed the decision of Tribunal in the case of D. Matai V CCE reported in 2000 ELT (126) 1264 (Tri-Mum); he has also held that there was no provision to recover the demand from the legal heirs of deceased; in these two cases, the demand was not a confirmed in pursuance to an order of adjudication prior to change of ownership. Tribunal in the case of Sharada Industries reported in 2017 (347) E.L.T. 180 (Tri. - Bang.) followed the same and the decision is in conformity with the decision of Honourable SC in the case of Shabina Abraham Vs Commissioner of Central Excise and Customs reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of other dealers recorded under Section 14 of Central Excise Act, 1944; they all had confirmed that assessee had been collecting additional amount in cash, over and above the invoice amount for each transaction; evidentiary value of the statement could not be ignored. (v). Section 11(A)(2) of Central Excise Act, 1944,inter-alia, mentions that the Central Excise Officer shall after considering the representation, if any made by the person on whom the notice is served under subsection (i), determine the amount of duty on goods due from the said person; the expression 'after considering the representation is very important; it casts the responsibility on the Adjudicating Authority to verify the correctness of the representation vis- -vis the facts and figures mentioned in the show cause notice; the additional amount paid by the dealers to the manufacturer having been already established, it was the responsibility of the adjudicating authority to verify, whether the figures mentioned were correct in the light of submissions made by the dealers or the extent of discrepancy could have been pointed out based on evidence, adduced by the assessee, if any. In terms of Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the investigation, different SCNs were issued to the four main appellants and others which were decided by the Commissioner vide OIO No. 01/2009 dated 11.02.2009; No. 02/03/04 all dated 12.02.2009. Different appeals, i.e. No. E/465/2009 by Perfect Boards and Doors, E/470/2009 by M/s Wood board; E/471/2009 by M/s Prime Veneers Ltd and E/468/2009 by M/s Wood Veneers, were filed. In respect of personal penalty, Sh. T.P. Haneefa filed E/466/2009, E/467/2009, E/472/2009, E/469/2009 and Sh. G.Suryanarayanan filed Appeals No E/473 to 476/2009. The Department filed Appeals No E/560 to 563/2009 against the partial dropping of the demands by Commissioner. As the evidence contained is the same set of documents and as learned Commissioner has dealt with all the cases in a similar manner, the cases were presented by counsel together and therefore, we propose to take up all the appeals together. 5.1 . The main evidence put forth by the Department is in the form of: (i) Exercise Notebooks recovered from M/s The Veneers and M/s Space Systems, Bangalore allegedly containing invoice wise details of actual amount, amounts shown in invoice and difference payable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Prime/PVWI. This has not been denied by the Director of M/s Prime. On the basis of the clearances made by M/s PVWI to M/s The Veneers it is seen that the actual price is ₹ 233.567% of the invoice value. This M/s PVWI had suppressed their actual price in the invoice value. This M/s PVWI had suppressed their actual price in the above ratio. Similarly based on the clearances to M/s The Veneers it is calculated that the actual value of clearance made by M/s Prime is 241.03% of the invoiced price. 44. In the above circumstances, I am convinced that M/s Prime as well as PVWI had suppressed the actual value/price of the goods cleared to M/s The Veneers, which has been evidenced by the statements of Sh. G. Suryanarayanan and Sh. T.P. Haneefa and have been corroborated by the private records viz. note books and diaries seized in investigation. 5.4 . As against the above findings by the Commissioner, the appellants based their defence on the following grounds: (i). the entire case is made on the basis of third-Party records and payment of additional consideration was not corroborated by any independent witnesses. They wish to rely upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing through the various records and the statements of the different persons, though retracted at a later stage, we find that the fact that there is under-valuation in the trade of the impugned products. We find that on the one hand, the Department tries to put down the pieces of evidence as an impregnable concrete defence to substantiate the allegation of under-valuation, defence attempts to wash it of saying it s a third-party evidence and as such, it cannot be relied upon and on the one hand, Sh. T.P. Haneefa, looking after the affairs of the company has denied any knowledge of payments over and above and on the other hand, the so-called confirmatory statements were retracted during the cross-examination. We find that DGCEI has made a series of cases against manufacturers of Veneers and Plywood across South India. Some cases have travelled up to the Tribunal on adjudication. CERA Boards and Doors 2010 (249) ELT 550 (Tri. Bang) was one such case. This Bench observed that: 11.5 As regards the allegation of under invoicing is concerned, we find that the investigation done is very extensive. They have confronted the officials of the assessee-company at their depot in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartmental 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 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 anti circumstances in a given case. The standard of proof is the same both in civil cases and domestic enquiries. 8 . In view of this we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les clearly illustrate that application of formula for calculating the actual sale value is not at all correct and dependable. Each invoice value and corresponding actual value vary in accordance with the type and quality of goods billed. I find that investigation has not been made any attempt to find out the differential amount collected by the assessee over and above the billed amount in respect of all dealers instead they had gone after the formula based on evidence from one dealer. It is to be noted that on the left-hand side wrapper of the note book 1-3/27 Sh. G. Suryanarayanan has indicated actual sale price of the different goods manufactured and cleared by M/s Prime. Therefore, if investigation would have conducted to find out the actual value in respect of each variety of goods cleared, they would have been in a position to calculate the actual value by multiplying the actual value of the particular type with total clearance quantity of that grade. The investigation has not made any attempt in this direction to find out the actual sale value on realistic terms. In this circumstance, I am unable to accept the actual sale value worked out by the investigation on a generalize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be determined based on the evidence available. 11.13 As regards the period after 1-7-2000, the Commissioner has to go strictly by the transaction value and decide the short levy. After deciding the differential duty leviable on the basis of the above principles, the Commissioner can determine the quantum of penalty, etc. We find that there are no reasons as to why we should differ from the observations of the Tribunal as above. Therefore, we hold that the quantification of the duty liability requires to be arrived strictly on transaction to transaction basis on the above terms as was observed by this bench in CERA Boards. 11 . The show cause notice proposes to recover additional duties on the basis of a percentage of under valuation arrived at. Learned Commissioner has correctly denied an approach of quantifying the duty liability on an approximation basis as is proposed in annexure-D to the SCN in respect of Prime Veneers and Others. However, the Commissioner has taken recourse to the annexures C 1-16, C 1-13 etc. It is seen that in these annexures amounts shown and amounts collected invoice wise are mentioned, giving refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the C series. However, he has not elaborated on the reasons as to why he was following the same except stating that the record has invoice wise clearances and the amounts actually paid. We find that in the said annexures, the names of the recipients are not mentioned. In view of the decision of the Tribunal in the case of CERA Boards (supra) the quantification of duty evaded is to be done on the basis of transaction value. However, in the absence of details like names of the consignees, this bench cannot come to a conclusion, on the basis of the available records, that all the entries mentioned in the C series annexures relied upon by the Commissioner, relate to that the actual transactions that have taken place. As discussed above, these annexures were prepared by Sh. G. Suryanarayanan during the course of recording of his statement. The said annexures do not indicate if they are corroborated by entries, if any, found in the records recovered from the premises of the appellants and others. This assumes significance due to the fact that Sh. Suryanarayanan during the course of cross-examination has denied his statement recorded. Moreover, duty evaded post 01.07.2000, requires to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Therefore, we find it necessary to remand the matter back to the Commissioner to analyze the evidence available, and submissions made by the appellants and the money trail in this regard to arrive at the conclusion regarding the clandestine removal alleged to have been committed by M/s Prime Veneers Ltd. 14. Penalties: Sh. T.P. Haneefa has filed Appeals No. E/466, 467, 469, 472/2009 and Sh. Suryanarayanan Appeals No E/473,474,475,476/2009. Ongoing through the OIOs, we find that Commissioner has been very lenient in imposing the penalties and has imposed nominal penalties of ₹ 10,000/- in each case. It is not the case of the appellants that the said persons have no role in the dealings of the companies. Therefore, we do not find any reason to interfere with the same looking into the role played by the respective individuals. However, as regards the penalty imposed on various companies under Section 11AC of CEA, 1944 as discussed above, the appeals are being remanded for re-calculating in the duty confirmed, it is directed that the penalties shall be equivalent to the re-confirmed duties. We find that as penalty under Section 11AC is to be imposed, penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each transaction. Hence the fact regarding the payment of additional amount stands established / substantiated. (iv). In terms of Section 11(A)(2), the adjudicating authority needs to verify the correctness of the representation vis- -vis the facts and figures mentioned in the show cause notice. The additional amount paid by the dealers to the manufacturer having been already established and it was the responsibility of the adjudicating authority to verify, whether the figures mentioned in the Annexure-D were correct. If it was found incorrect, he could have arrived at the value in the light of submissions made by the dealers under the provisions of Rule 11 of Central Excise (Valuation) Rules, 2000 using reasonable means consistent with the principles and general provisions. (v). the assessee has taken over M/s PVWI with all its assets liabilities on 01.07.2002. The demand made in the SCN was for the duty evasion committed by M/s PVWI during the period assessed prior to 01.07.2002 itself. Hence the view of the Adjudicating Authority that there was no liability at the time of the acquisition does not appear to be correct and legal. On the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intained by one dealer, M/s Veneers Ltd Bangalore and the statement of its proprietor, Shri G. Suryanarayanan. The facts are not corroborated at the end of the appellant and no such records were available. Shri T.P. Mustafa who was proprietor/looking after the affairs of group companies expired and his brother T.P. Haneefa had taken over. Records seized contain a record called Mustafa Account . As Shri Mustafa is no more his statement was not recorded. There are references to one Mr Thangal who was supposed to be middle man between Shri Suryanarayanan and Shri Mustafa. Revenue could not trace the said Shri Tangal and record his statement. Shri T.P. Haneefa who later took charge of the Group could not/did not confirm the entries in the books/accounts maintained by Shri Suryanarayanan or his statement. However, as the issue relates to undervaluation and the preponderance of probability suggested the existence of the same and could not be brushed aside. There should be a reasonable way to quantify the duty evasion. There were certain records available with Shri G. Suryanarayanan and his committal statement was there. Under the circumstances we find that the Commissioner has correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new assessee to settle the liability. In the present case the SCN is issued on 18.10.06. No fresh demand can be enforced/recovered from the assessee. There is no allegation that the successor company had committed the offence/evaded duty during the period prior to 01.07.02. Also, no notice is issued to the partners of the erstwhile PVWI. Generally when a manufacturing firm is bought by another party, the duty on pre-takeover manufacture cannot be recovered by the department from the buyer of the firm even though under purchase agreement buyer is liable to pay such liabilities because department can initiate proceedings for recovery of duty only against a person who is liable to pay under the Excise Law. The buyer firm is not responsible for the duty liability or irregularities committed by the firm and is partners as per the ruling of the Hon ble Tribunal in the case of Makers Development Services Vs Collector [1989 ELT 126 (T)]. They submitted that the amount was not a confirmed demand as on the date of transfer of the unit. The appellants further submitted that Section 11 of CEA, 1944 was amended in 2004. A provision has been made in the CEA to enable recovery of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f duty on account of commissions and omissions of the predecessor/Transferor. We find that there are no reasons to interfere with the order of the commissioner in this regard. 16. Dropping of Demand due to the death of proprietor: Learned Commissioner has also dropped the demand relating to M/s Wood Boards and Wood Veneers where respective proprietors expired in an accident. We find that as contended by the appellants, the decision is in conformity with the ratio of the decision of the Tribunal cited by the Commissioner and was also relied upon in the case of Sharda Industries, 2017 (347) ELT 180 (Tri. Bang). Hon ble Apex Court decision in the case of Sabina Abraham, 2015 (322) ELT 372 (SC) supports the same view. Therefore, in this regard also, we find that the Department s contentions are not acceptable and the Commissioner s order need not be interfered with in respect of the demands dropped by him for the period up to 13.11.2004 in the case of Wood Boards and Wood Veneers. In view of the above, we find that the Departmental appeals do not survive and hence are liable for rejection. 17. (i). In respect of the main appellants, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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