Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2019 (11) TMI 121

..... galore viz., ‘The Veneers’ and ‘Space System & Agencies’ - 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 - Preponderance of probability. HELD THAT:- 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 impregnable concrete defence to substantiate the allegation of under-valuation, defence attempts to wash it of saying it’s a thi .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... running business of M/s Prime Veneers and M/s Wood Industries (partnership firms of Shri T.P Mustafa and Shri C.P Marshab) during July 2002. Shri T.P Mustafa and Shri C.P Marshab became directors of M/s Prime Veneers Limited. Shri T.P Mustafa and Shri C.P Marshab died in an unfortunate accident on 13.11.2004. Shri T.P. Haneefa, the surviving director along with other directors was looking after the affairs of the company after the demise of Shri Mustafa and Shri Marshab. (ii). M/s. Wood Veneers is proprietorship concern of Smt. Nazreena w/o Sri T.P. Mustafa. She expired on13.11.2004 along with Sri T.P. Mustafa, and Sri C.P. Marshab died in an accident on 13.11.2004. Subsequent to their death, her legal heir C.P. Javed, Ms. Fatima and Sri Zubair Haji 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 L .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... 4/2009 12.02.2009 E/476/2009 Do 3. Shri Learned Counsel for the appellants, submits that there are no documentary evidences to support the charge of undervaluation; the Adjudicating Authority has confirmed the demand only on the basis of records recovered from the Dealers of the Appellant in Bangalore viz., The Veneers and Space System & Agencies . He has dropped the demands for a certain period in each of the cases but confirmed demands in subsequent period demand for a period on the basis of records recovered at Dealer in Bangalore holding that there was evidence for payment of additional consideration grounds. (i). In respect of M/s Prime Veneer and Wood Industries a partnership firm, he dropped demand, for the period October 2001 to June 2002 as the units were acquired by Prime Veneer Limited in July 2002, on the ground 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 .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... rayana does not have any evidentiary value; no evidence that additional consideration paid was for the sale of plywood by the Appellants; moreover, the money was purported to have been paid to Late Shri Mustafa who was a director; it is settled legal position that the company and its directors are distinct legal persons. Hence the demand of the duty in the hands of the Appellant is not legally sustainable. Both the show cause notice and the impugned order attribute the monies paid by G Suryanarayana to Shri Late Mustafa as additional consideration for Ms/ Wood Boards and M/s Wood Veneers, when these firms are proprietary units and Shri Late Mustfa had role in the businesses of these firms; therefore, in the case of M/s Perfect Boards, wherein Shri Late Mustafa has no connection, the allegation cannot sustain at all. 3.2. Learned 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 o .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... es. 3.4. Learned Counsel further submits that in the case of M/s Prime Veneers Limited, the Appellant has contested the demand of ₹ 2, 32,808; the allegation was made on the basis of invoices of M/s Badariya Industries Mill Road, Kannur, recovered from the premises of M/s Prime Veneer Limited. Shri Pavithran, Accountant of the unit in his statement has deposed that the said invoices relates to removal of goods manufactured at M/s Prime Veneers Limited. It was also noticed that the said unit in Mill Road was not working during the period February 2005; the appellant contested that M/s Bhadriya Industries have another unit at Taliparamba and the invoices relates to clearances from the said unit and the said clearances were reflected in Sales Tax returns filed by the unit. 3.5. On the appeals filed by the Revenue, the learned 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 .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ENGALURU conducted search at various premises on 30.03.2005; search operation resulted in seizure of incriminating records/documents indicating Under valuation of the products and statements of concerned were recorded; Evidences / documents gathered during investigation indicated (i) additional consideration was paid in cash by the dealers to the assessee in relation to the sale of goods over and above the invoice price and b) the actual price of the goods sold was worked out. He submitted that Adjudicating Authority confirmed demands partly without any reason on theoretical terms and not on evidence available. The impugned order is not proper, correct and legal for the following reasons. (i). actual sale consideration received by different assessees is worked out based on percentage of invoiced price and percentage of additional 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 re .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... e 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. Hon ble High Court of Karnataka observed (2012 (27) S.T.R (452), inter alia, that If his family members were to take over the business after his death, continued to carry on the very same business, probably they would comply with the requirements of the statute. If they do not take over the business or comply with the provisions of the Act, they cannot be held liable of the dues of the deceased. That appears to be the principle underlining these two provisions. The above decision 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 accor .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... recovery of the same from the office premises of M/s The Veneers or residence of Sh. G. Suryanarayanan. 5.2. Sh. Suryanarayanan during the course of recording of his statement is alleged to have prepared invoice wise amount and actual amount of invoice in respect of all the clearances of the four above said companies. On the basis of records recovered, prepared by Sh. Suryanarayanan, it was alleged that M/s Perfect Boards and Doors have received an amount of ₹ 69,37,219/-; M/s Wood Veneers received an amount of ₹ 51,93,514/-; M/s Prime Veneers received an amount of ₹ 1,85,78,072/- and M/s Wood Board received an amount of ₹ 2,15,18,231/- over and above the price indicated in the invoices. Thus, it was alleged that these companies have indulged in under-valuation of the products sold by them to the tune 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. .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... any particular person under a particular invoice. The entries in the said register, diaries and records are sketchy, vague and therefore cannot be primary evidence. Department covered up the deficiencies in the documents/records by way of oral statement of Sh. G. Suryanarayanan recorded under Section 14 of Central Excise Act, 1944. Such evidence is not acceptable in terms of Section 93 of the Indian Evidence Act, 1872. The so-called account of Mustafa contained various expenses incurred and payments made by Sh. G. Suryanarayanan on behalf of Sh. T.P. Mustafa who expired on 13.11.2004. It can be seen that many of the entries pertain to personal expenses of Sh. Mustafa, his son, Sh. Marshab and their apartment. The entries like driver s salary, apartment maintenance, electricity, telephone, car repair etc. in no way can be said 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 s .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... d. In fact, according to the Revenue, 30% of the actual value only is mentioned in the invoice and the remaining 70% is collected as cash. This is the main charge. We cannot say that this charge is baseless because the dealers from whom statements have been recorded have accepted that excess cash is being collected. Therefore, one thing is very clear that the price mentioned in the invoice is not the correct price. There is evidence that the appellants had been collecting cash over and above the invoice price. We find that as the issue involved in both the cases is about the undervaluation of Veneers and plywood, the ratio of the case is very much applicable as far as the appreciation of principle is concerned. 7. 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 more likely to be understood by people of reasonable intelligence to be tru .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... accepting the fact that there was under-valuation resorted to by these companies, we find that the methodology adopted to quantify the duty evaded should be sustainable on the evidence available and quantum thereof, needs to be arrived in a logical; rational and legally appropriate manner. 9. We find that Learned Commissioner accepted the fact of under-valuation and has been categorical in finding that the method of approximation cannot be applied. We find that the Commissioner has found as below: 54. The calculation of actual sale value on the basis of average formula will never reflect the correct and actual value. For example, in respect of Invoice No. 205/ dated 5.10.04 (clearance by M/s Prime) to M/s The Veneers the invoice value is ₹ 87,069/- and actual sale value proved by investigation is ₹ 2,52,585/-. The 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 &# .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... case of under-valuation as the present one. We find that the Tribunal in the case of CERA Boards (supra) has observed that: 11.12 As regards the period after 1-7-2000 for valuation, the concept of transaction value has been introduced. In the concept of transaction value, each transaction is important. Therefore, the 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 tha .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... rafts are mentioned. It is not coming forth whether these drafts pertain to accounted value of sale or towards additional consideration. In some places, though small amounts are mentioned, words L are found so as to infer that the transactions were in lakhs. However, in some cases such notations are not there. In the annexures refer to, by Commissioner, as C-1-16, C1-13, C-1-20 etc., We find that though entries are listed invoice wise and a reference is given to the seized documents, the names of dealers/traders/customers are not mentioned. Commissioner has also not recorded any findings on the same. We find that the quantification of the duty requires to be arrived on the basis of evidence available. 12. Moreover, the appellants submit that whereas the Show Cause Notice Proposed valuation under Rule 6 of the Valuation Rules, 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 quantificati .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... dustries. On account of this, a duty of ₹ 2, 37,464/- was confirmed by the Commissioner. Commissioner finds that Sh. Pavitran, Sh. Aboobacker and Sh. T.P. Haneefa have accepted the same. However, ongoing through the statement of Sh. T.P. Haneefa record on 17.08.2006, it is seen that he only stated that he was not sure whether all the goods covered under the said invoices (23 invoices numbering 22-44) were cleared from M/s Prime Veneers Ltd; if the same was cleared from M/s Prime Veneers Ltd. under the invoices of M/s Bhadriya Industries, appropriate duty on the same would be paid. We find that this is a partly committal statement. It is not coming forth whether any further evidence has been adduced to establish the clandestine removal. The charge of clandestine removal is a serious charge and is required to be proved along 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 .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... valuation of goods by the assessees, in respect of all the other clearances, (apart from which mentioned in Annexure C) has been admitted by the other dealers and the statements have not been retracted. (iii). The evidence gathered from the dealers under summons proceedings did not specify the amount / additional consideration paid by them, but stated that they had paid additional amount over and above the invoice price. Dealers have confirmed that assessee had been collecting additional amount in cash, over and above the invoice amount for 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-à-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 p .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... that the person who recorded the same has retracted during cross examination. Under such circumstances, we find that the Commissioner has rightly did not rely upon the quantification of duty on a theoretical and hypothetical basis and relied upon evidence which is apparently cogent. We find that this case stands slightly on a different footing on factual matrix than the other cases detected by DGCEI during the relevant period. In this case the evidence is in the form of records and diaries maintained 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 co .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... k over the said firm w.e.f. 01.07.02 based on a sale agreement dated 01.06.02 accordingly; all the assets and liabilities of the partnership firm have been the part of the newly formed company, Prime. The new assessee is responsible for all liabilities. But at the time of acquiring/purchase, the former firm had no liability under Central Excise Law. If there was a confirmed demand as on 01.06.02/01.07.02 it would be the responsibility of the 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 .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... recoverable from erstwhile companies cannot be recovered from the present companies. The case laws submitted by the Department are not applicable in view of the above provisions. We find that though the Rules provide for recovery of existing confirmed dues from the transferee, there are no provisions to enable to issue Show Cause Notice to successor/Transferee for recovery of 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 t .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||