TMI Blog2019 (11) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... rvaluation in the trade of plywood and veneers, has not retracted his statement. The records maintained by Shri Ramesh Shetty in the factory of the appellants cannot be brushed aside as nobody would note down such entries just for fun. Ongoing through the entirety of the circumstances of the case, we find that the Department has undertaken a wide investigation and has established the fact that the appellants were indulging in undervaluation. We find that as this is a case of tax evasion and not a criminal offence to be proved beyond reasonable doubt. We hold that the investigation could establish to set the principles of preponderance of probability in motion for a proper appreciation of the case. Tax evasion - HELD 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. Acceptance of the princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter 44 of the Central Excise Tariff Act, 1985. The Appellant was registered with the Department in 1996 and later surrendered registration but had been filing declarations annually. The Appellant had during the period in dispute, every year over 20 dealers spread across the country and also had individual customers to whom goods were sold. The goods are all liable to duty ad-valorem and assessable under section 4 on the basis of transaction value. DGCEI, Bangalore the Appellant and show cause notices dated 11.12.2006and 19.7.2007 were issued. The allegation was that the Appellant was indulging in undervaluation of goods; were showing a lesser price/value than the actual selling price of the final product and collecting the excess sale price in cash and were procuring raw materials and paid cash without accounting the same in their books of account and showing wrong description to suppress the value of such raw materials. Commissioner of central Excise, vide OIO No17/2007dated 7.12.2007, confirmed the demand of duty of ₹ 66, 06,964/- with interest and imposed equal penalty on the Appellant. Hence, appeal No E/183/2008. Revenue has filed appeal No E/263/2008 pleading that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied goods to the Appellant and paid consideration only by cheque or DD and never paid any cash. This material fact has been ignored by the Respondent, who has applied averages as alleged in the notice and demanded duty wrongly. Investigation has taken a solitary instance of a purchase invoice of M/s. National Veneer Products, Kasargod to allege that the Appellant has been using the excess cash collected without recording such payments, relying on the ledger extracts of two suppliers namely INA India Limited, Bangalore and Rehmaniya Furniture, Kasargod (at Annexure C.1.5 C.1.6 of the notice). The Department s case is disproved from Annexure C.1.5 C.1.6 itself since it is clear from said Annexures that the Appellant had made payment to these two suppliers only by cheque, except for one transaction, in the case of INA India Limited, for which consideration was paid in cash. 2.2. The Learned Counsel submits that the impugned order is contrary to the decision of the Supreme Court in the case of Oudh Sugar Mills Limited v. UOI, 1978 (2) ELT 172 (SC). The demand being on averages and not on evidence is liable to be set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any question of applying averages while computing the transaction value ignoring the assessment of each removal of excisable goods as envisaged in section 4 read with Valuation Rules, 2000 and also Rule 5 of the CER, 2002. 2.5. The Learned Counsel further submits that the entire adjudication demand was barred by limitation as the Appellant was duly registered under the Central Excise law since 1996 but surrendered being well within the SSI exemption limit and annual declarations were filed. It is submitted that when the Appellant was registered and were regularly filing periodical returns, declarations under the CE Rules, and in the light of regular correspondence with the department, departmental visits, etc, the facts were within the knowledge of the department. The Appellant has been victimized merely because of an industry practice that was prevalent in resorting to undervaluation, which cannot be the basis for justifying invoking the extended period of limitation. The Learned Counsel further submits that the question of invoking extended period on a question such as valuation, which is subject matter of dispute, in the case of a registered assessee would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces are to pages in Volume-I). (i). Shri Ramesh Shetty, Manager at Kanmadi's in his statement dated 16/1/06 accepted that 77 entries showing details of sales were actual realization of value from 2/4/2004 to 31/3/05; Managing Partner accepted that this statement was prepared by Shri Shetty. (ii). Shri Hajee Ibrahim, Partner, confirmed the fact in his statement of 23/ 1/06 that Slip at page 17 of seized file No.22 (Page 405) refers to Bill of purchase of veneers from National Veneers, wherein the amount shown was ₹ 80,507, whereas the actual amount paid was ₹ 1, 92, 759; difference was paid in cash. (iii). Purchase Ledgers revealed that payments in cash made in respect of 6 consignments, of wooden planks from M/s Safwan Wood products, were not accounted for by Kammadi. (iv). Purchases ₹ 1, 06, 596 from M/s INA India Ltd in 10 instances and of 18,736 from M/s Rehmania Furniture in 7 instances were not accounted for in the records of Kammadi. Verification from suppliers confirmed that the amounts were paid in cash. (v). Glue Register' showed that it was maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eponderance of probability' as the standard. Thus, the appropriate and correct application of the principle of 'preponderance of probability' has considerable significance for the present Appeals. It is widely accepted that 'Preponderance of probability' is met if the proposition is more likely to be true than not true. Effectively, the standard is satisfied if there is greater than 50% chance that the proposition is true. He submits that 5.1. Lord Denning in Miller Vs Minister of Pensions described it simply as more probable than not . 5.2. P. Ramanatha Aiyar's Advanced Law Lexicon , 3rd Edition, page 3688, - By preponderance of evidence is not meant a preponderance in point of numbers of witnesses, but a preponderance of facts and circumstances that are convincing to the jury. 5.3. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary burden. In the case of Gulabchand Silk Mills Vs CCE, Hyderabad -II, Hon'ble Tribunal observed that clandestine activity can at best be established only by circumstantial evidence and it would be humanly impossible to establish every link in the chain of clandestine activity without any break. 5.6. He submitted that with reference to the present Appeals of Kanmadi and others, the evidence produced by the Revenue to establish undervaluation is similar to the evidence led in the following cases: (i) CERA Boards and Doo₹ 12010 (249) ELI' 550- I'- Bang] (ii) Hero Plywood and Boards [2009 (248) ELI' (205) - I'- Bang] (iii) Noble Plywood [2009 (248) ELT (440) - I'- Bang] (iv) Prestige Boards Pvt. Ltd. [2009 (248) ELT (313) - T- Bang] (v) Thumbay Holdings [2011(272) ELI' (225) - T- Bang] (vi) National Boards and Others Final OrderNo670-687 dated 1/4/2010- T-Bang 5.7. He submitted that in all the above cases, the modus operandi followed by the assessees was absolutely identical. The Hon ble Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh Chabbra Vs. UOI 1997 t89) ZLT 646 (SC). Tribunal observed similarly in the case of Rishab Velveleen (P) Ltd vs. CCE, Meerut 12006 (201) ELT 437 (T-Del). 5.9. On the issue of valuation issue, learned special Counsel submitted that in the present case the duty demand is in respect of clearances after 1/7/2000. As per Section 4 (1) (a) as at present, 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 the removal, the assessee and the buyer are not related, and the price is the sole consideration for the sale, be the transaction value; By definition, a necessary concomitant of the transaction value is that the price should be the sole consideration for the sale. Thus, where additional consideration by way of cash flowed from the buyer to the assessee and the same was required to be paid by the buyer to the assessee, over and above the price shown on the invoice at the time of removal from the factory, one of the necessary conditions for the existence of a 'transaction value' at the factory gate is not satisfied. Further, the price indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw-material utilizing the cash generated and statements of raw-material suppliers such as M/s. INA Ltd. Bangalore and M/s. Rehmaniya Furniture, Kasargod etc. On the basis of the evidences collected and analysed Department alleges that the appellants was involved have only shown 43.24% of the actual value in their invoices and suppressed the balance percentage and have recovered cash over and above the invoiced amount; they have also purchased raw-materials by paying in cash and by describing their raw-materials in different names. The Department came to the conclusion that the appellants have made clearances worth ₹ 2,15,35,646/- during the year 2004-05 whereas they have only shown the value of clearances in the invoices for ₹ 93,12,383/-. 7. Per contra, the appellant submit that the allegation made by the Department is based on 4 slips of paper; on the basis of this, the Department has quantified the undervaluation supposed to have been made by the appellants for a total of 1749 days; moreover the said sheets of paper did not relate to the entire period; the demand is on averages built on conjectures and surmises, would haves and could haves and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We also find that the 4 dealers who accounted for a major portion of the sales of the appellants confirmed that the prices indicated in the invoices of the appellants are not correct prices at which they received the goods; that a part of actual sale consideration is paid by them in cash to Shri. Hajee Ibrahim through his representatives and the amount shown in the invoice was paid by cheque or DD as per instructions given by either Shri. Ramesh Shetty, the Manager or Shri. Hajee Ibrahim, the Managing Partner. We also find that the suppliers of raw-material to the appellants also accepted purchases in cash in addition to the fact that the item procures from them was variously describes as formaldehyde , Urea , Caustic Soda , Formic Acid , Phenol , MUF Glue and PF Blue . We find that Department alleges that purchase of phenol is not found mentioned under Glue register. We also find that Shri Ramesh Shetty vide affidavit dated 27.09.2006 has retracted his statement dated 26.09.2006. However, he did not choose to appear before the Deputy Director of DGCEI to put forth evidence in support of his claim. We also find that Shri Hajee Ibrahim, who has accepted the statement of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. 11. Having upheld the fact of undervaluation resorted to by the appellants we do not find that the ratio of the cases, which were under CrPC or cases pertaining to clandestine removal, relied upon by the appellants cannot be applied. Now we turn our discussion to the quantification of the duty evasion. It is now settled principle that cases of this nature need not be proved with mathematical precision. At the same time, a single piece of evidence cannot be accepted to encompass the whole gamut of transactions. Acceptance of the principle of preponderance cannot be a License to demand duty on the basis of assumptions/presumptions/ vague imputations. Inabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01-02 to 2005-06 (up to 14.01.2006). We find that no corroborative evidence has been put forth to show the actual figures arrived for different years. Understandably, the same has been arrived on the basis of the percentage of undervaluation calculated by them as per the figures available for the period 2004-05. We find that there are no corroborative evidences to arrive at the figures for different periods. It is an accepted fact that the goods sold by the appellants are of different varieties and sizes. Shri Milap Chand Jain has furnished the actual and invoice price goods sold by M/s. Kammadi for different descriptions of goods such as plywood 6mm, plywood 8/9mm, plywood 12mm, plywood 18mm, block board 19mm and block board 25mm. on going through the prices, it is seen that the undervaluation varies from product to product. Moreover, in a typical business atmosphere it cannot be said that all the goods are sold at a uniformly undervalued price. It is also possible that at times the prices indicated may be actual and at times the goods may be sold at a loss. 13. Therefore, extrapolating the figure arrived for one year to all the years in dispute is stretching th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the price actually paid for each transaction, as established by the evidence lent by Revenue. In the light of decision of Supreme Court in the case of CCE, Mumbai vs. Fiat India Pvt. Ltd. [2012 283) ELT 0161 (SC) and directions of the Hon'ble Tribunal in the six cases cited above, requires reconsideration. The formula adopted in the 0I0, applying the provisions of Rule 11 of the Central Excise Valuation Rules,2000, is in the facts and circumstances of the case, legal and proper and hence, merits approval. However, we find that the show-cause notice has not invoked Rule 11 of Central Excise (Valuation) Rules, 2000. Commissioner in the impugned order simply mentions the Valuation Rules, but does not discuss the applicability of Rule 11. Therefore, we are not inclined to accept the submissions of the Special Counsel. We also find that the facts of the case cited by Special Counsel are different. 15. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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