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2019 (11) TMI 121

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..... s, 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. 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 m .....

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..... d 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 have been paying some part of value in cash. There are also many other dealers against whom the department did n .....

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..... und that on the date of acquisition the said demand was not a liability in the books of Prime Veneer & Wood Industries; Section 11 provides only for the recovery of confirmed arrears or demand. (ii). In respect of M/s Wood Boards, Commissioner dropped the demand prior to 13.11.2004, date on which Shri Mashab the proprietor expired and his younger brother C.P. Javid has become proprietor. (iii). In respect of M/s Wood Veneers Commissioner has dropped the demand prior to 13.11.2004 when Smt Nazreena proprietor of the unit expired. (iv). In respect of M/s Perfect Boards Commissioner confirmed the demand for the full period. 3.1. Learned Counsel for the appellants further submits that the allegation of undervaluation has been made mainly on certain records recovered by investigation from the premises of one of the dealer viz., M/s The Veneers and another firm (belonging to same business group), M/s Space Agency & Systems, Bangalore and the statement of Shri G. Suryanarayana; Shri G. Suryanarayana retracted the statement during cross examination; as the Commissioner has not re-examined him with any counter, the statement as well as the documentary evidences, lose their credibili .....

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..... rned Counsel further submits that the Investigation has also relied on the statement of some of the dealers namely (i) Gajanan Kallappa Kadolkar of M/s Gajan Glass and Plywoods (ii) Shri Pankaj Shah of M/s Pankaj Associates Secundarabad (iii) B. R. Ramamurthy of M/s Jyothi Glass & Plywood Bangalore (iv) N.Diwakar of M/s Wood ply (India) Pvt Ltd (v) Jeyakar of M/s Saraswathi Traders Madurai (vi) ShafI Ahmed of A. S. Trading Company Bangalore in support of the allegations of undervaluation. The said witnesses have deposed that they have paid additional consideration to the appellant manufacturers in this case. It is pertinent to note that the said statements are not corroborated with any independent evidences. Out of these dealers, Shri Pankaj Shah, Shri Diwakar, K. P. Aboobacker, Sri Shafeer, Shri Gajanan Kalappa Kadolkar have retracted their statements before the adjudicating authority during cross examination. It may be pertinent to note that the said statements are not corroborated by any evidences and the adjudicating authority has no basis or evidence to counter the retractions or support the contents of the statements as correct. The said statements therefore have no evide .....

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..... rned counsel submitted that main ground of department is that the entire demand ought to have been confirmed by Commissioner. This is not sustainable for the following reasons: (i). evidences recovered from M/s Veneers Bengaluru itself is not a valid evidence since it was recovered from third party and not supported by any evidence; the dealer has retracted the statement during cross examination. (ii). the other evidences were only statements not corroborated by any evidences and dealers retracted the statements; CBEC circular 1053/2/2017 Cx dated 10.03.2017 relied, wherein it is reiterated that statements should be supported by evidences as held in the Final Order Nos. 20244-29248/2019 dated 8.3.2019 in the case of M/s Bhuwalka Castings; (iii). no demand to be confirmed unless there are evidences transaction wise as decided in various matters involving plywood under valuation; cases of CERA Boards, Prestige Boards, and others are pending before SC. (iv). dropping of demand in the case of Prime Veneer and Wood Industry in respect of the demand for period 2002 (prior to acquisition) of the firm by Prime Veneers Limited could not have been confirmed by the Commissioner, since the pro .....

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..... ional consideration; worksheets for differential duty calculation calculated the actual sale value, for each month, on the basis of the general formula by multiplying the total amount in the invoices for the month with the said formula; the figure arrived at is cum duty value and accordingly, assessable value was derived from it. (ii). incriminating documents recovered and other evidences gathered from one dealer namely M/s Veneers, Bangalore and its proprietor Shri G. Surya Narayanan indicate the actual sale price of different variety of goods which is higher than the invoice price under valuation of goods has been admitted by the other dealers also in respect of all the other clearances. (iii). the statements given by the dealers have not been retracted by them; demand of differential duty on the entire clearance is worked out in the Show Cause Notice on the basis of the actual rate of goods provided by M/s Veneers and Shri G. Surya Narayanan. (iv). quantification of duty liability, arrived by Commissioner, did not appear to be correct; Commissioner failed to appreciate that the demand was based on the evidence seized from the premises of M/s The Veneers (a dealer) and on the sta .....

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..... n has been affirmed by the Honourable Apex Court in the case of M/s Sabrina Abraham as reported in 2017 (50) STR (241) SC. In the instant case, admittedly, the facts presented, points out to taking over of the business of the deceased proprietor by the successors and continued to carry on the very same business. Therefore, the liability on the successor is accordingly sustainable. 5. Heard both sides and perused records of the case. In the instance case all the appeals are of a group of companies i.e (i) M/s. Perfect Boards and Doors (ii) M/s. Wood Boards (iii) M/s. Prime Veneers Limited and (iv) M/s. Wood Veneers and various individuals involved in the case. The genesis of the case is in the investigation conducted by the officers of DGCEI against these companies subsequent to such searches conducted at various premises on 30/03/2005. The Department presents evidence in the form of diaries, registers, note books, private records/slips recovered from the premises of M/s. The Veneers Bangalore and M/s. Space Systems and Agencies both belonging to Shri G. Suryanarayana and the statement of several other persons recorded. On conclusion of the investigation, different SCNs were issued .....

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..... of 38.31%, 36.7%, 58.51% and 67.56% respectively. 5.3. Learned Commissioner having gone through the various evidences put forth before him has come to the conclusion that the allegations raised in the SCNs were correct in view of the statements of Sh. G. Suryanarayanan on 30.03.2005, 31.03.2005, 11.09.2006 and 05.10.2006; statement of Sh. R. Narayanan dated 30.03.2005 and the statement of Sh. T.P. Haneefa, Director of Prime Veneers in respect of Prime Veneers. Commissioner finds that: 43. I find that from the note books/ private records seized each invoice can be co-related to the actual purchase price. The diaries No.1, 2, 3 & 4 seized from the residence of Sh. G. Suryanarayanan clearly establish the payments made by him to M/s Prime through the representatives of the company. Therefore, from the above, I find that the statements of Sh. G. Suryanarayanan can be very well corroborated to the entries made in the private records as regard to actual clearance value of goods cleared by 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 .....

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..... d to be the considerations collected over and above the invoice price from different dealers and customers. The contents of the registers cannot be linked to any company. (iv). Learned Commissioner has erred factually in stating that Sh. T.P. Haneefa has accepted the findings of the investigation by way of statements of Sh. G. Suryanarayanan. In fact, on being shown all the figures, Sh. Haneefa, who was not aware of the authenticity of the figures and had no knowledge of facts and hence, offered no comments. This cannot be taken as failure to deny. 6. On going through the rival contentions, we find that the issue involved is that of under-valuation of Plywood, Veneer etc. manufacture and cleared by the appellants. The evidence made available by the Department in the form of record registers, diaries which are explained by the person from who possession the same have been recovered. Ongoing 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 impreg .....

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..... d 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 more likely to be understood by people of reasonable intelligence to be true than to be not true. Effectively, the standard is satisfied if at least there is 50% or more chance that the given proposition is believable by a reasonably prudent to be true. In this regard, Hon ble Supreme Court in the case of Maharashtra State Board of Secondary and Higher Education v K. S. Gandhi & Others (1991) 2 SCC 716 1 held that It is thus well settled law that strict rules of the Evidence Act, and the standard of proof envisaged therein do not apply to departmental 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 b .....

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..... he actual sale value by formula is ₹ 2,09,862/-. Similarly, in respect of invoice No.41/dated 11.05.04 the invoice value is ₹ 62,965/- and actual value by investigation is ₹ 1,93,448/-. But actual value on the basis of formula is ₹ 1,51,764/-. Again, in respect of invoice no.249/dated 09.11.2001 (clearance by PVWI) the invoice price is ₹ 52,780/- and actual sale value on investigation is ₹ 1,34,366/-. But the actual sale value on the strength of the formula is ₹ 1,23,277/-. Again, in respect of invoice no.34 dated 20.04.02 (clearance made by PVWI) the invoice value is ₹ 1,27,034/- whereas actual sale value by investigation is ₹ 3,23,213/-. The actual sale value by formula is ₹ 2,96,710/-. The above examples 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 the .....

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..... e 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 invoice value has to be accepted. The normal price has 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 qua .....

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..... , Learned Commissioner has confirmed the duty after arriving at the value under Rule 11 of Central Excise Valuation Rules.; thus, the commissioner has traversed beyond the scope of Show Cause Notice and is against the principles of Natural Justice. 13. We find, in view of the discussion above, that the Learned Commissioner has rejected the method of quantification arrived at in the annexure-D in respective to SCNs saying that the duty cannot be arrived on an assumption and presumption basis, by multiplying the average percentage of duty evasion quantified to all the clearances. Commissioner has placed reliance on the annexures of 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 .....

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..... long with use of raw material, electricity, labour, manufacture of the material, transportation and receipt of money for the same. Going by the records of the case, no effort in that direction appears to have made except noting that M/s Bhadriya Industries was closed during that time and depending on the statements of different persons. The appellants submitted that M/s Bhadriya Industries have Sales Tax Returns and declared the same in their Returns. The impugned order silent in this regard. Under these circumstances, we find that enough evidence has not been put forth before us to come to a definitive conclusion. 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 .....

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..... w 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 portion of the duty demand dropped by Commissioner 16. We find that the Department is aggrieved by the fact that the Commissioner has not confirmed the demands as proposed in the SCNs. However, the same Commissioner has taken recourse to the annexures C 1-16 in the case of Prime Veneers and similar annexures in other .....

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..... r. 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 relied upon the records maintained by Sh. G. Suryanarayanan as they are at least corroborated by his own statement. In this case, at least, a semblance of evidence in the form of diaries, registers etc., is available as corroboration. That is not the case in respect of the statements of the dealers which the Department would like to rel .....

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..... nother 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 revenue arrears including the interest from the person, to whom another person liable to pay duty and interest in pursuance of a confirmed demand has transferred his business or property. 14. For a proper appreciation, it is necessary to go to the provisions of Section 11 of CEA, 1944. Proviso to Section 11 is reproduced as below: Provided that where the person (hereinafter referred to as predecessor) f .....

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..... 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, the appeals are disposed of as follows: Sl. No. Appeal No Appellant Manner of Disposal 1. E/465/2009 Perfect Boards Allowed by way of remand for re-quantification of the Duty confirmed in view of discussion above. Penalty under Section 11AC to be equal to such re-quantified duty. 2. E/468/2009 Wood Veneers do 3. E/470/2009 Wood Boards do 4. E/471/2009 Prime Veneers Allowed by way of remand for re-quantification of the Duty confirmed in view of discussion above. Penalty under Section 11AC to be equal to suc .....

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