TMI Blog2002 (8) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... nd plywood falling under sub-heading 4408.90 of the CETA, 1985. Proceedings were initiated against the appellant-company by issue of show cause notice No. 6/93, dated 8-2-93 on allegation that they have contravened the provisions of Rules 173C, 173F, 173G and 226 of the CE Rules, 1944 for mis-declaration of the price, under-valuation, improper maintenance of accounts and failure to fulfil the responsibility cast upon the manufacturer under the Self Removal Procedure scheme. The allegation is that the appellant-company has recovered extra value relating to plywood from their customers during the year 1989-90 and 1990-91 in the guise of sale proceeds of sawn timber (a non-excisable item) by floating a fictitious company in the name of M/s. TNTC with their accounts Manager/Commercial Manager PKV Menon as its proprietor. Statements were recorded from various persons including PKV Menon who in his statement dated 6-5-91 stated about the nature of the transactions between the appellant-company and M/s. TNTC to whom most of the portion of the sawn timber was alleged to have been sold for further disposal to the customers. Reliance was also placed on the statement of four dealers of plywoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the dealer viz. M/s. TNTC has been termed as a dummy unit of the appellants which is incorrect inasmuch as the unit has been registered under sales tax and they have their own premises and employees and were maintaining books of account for all transactions. He has vehemently argued that out of 171 consignments transported in 71 vehicles, 125 consignments covering 70% of the sales are covered by valid transport documents and consignments transported by 46 vehicles were rejected on the ground that the same were found to be not lorries. As regards invocation of extended period of limitation, he submitted that there was no charge of clandestine removal of the goods, the appellants have filed invoice under Rule 173C, declaration filed has been approved by the Assistant Commissioner, GP-I was scrutinized and RT 12 returns were assessed. Therefore, invoking the proviso to Section 11A(1) is not maintainable. He also cited the order of this Bench in the case of M/s. VG Plywood Ind. (P) Ltd. and three others v. CCE, Chennai reported in 2001 (5) ECL 160 wherein in an identical matter the Tribunal had set aside the duty demanded and the matter was remanded for de novo consideration for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C, that M/s. TNTC is actually the residential premises of the said Menon, who is also the Accountant/Commercial Manager of the appellant-company and that the said premises did not have any godown to deal with so much quantum of goods. We observe that this finding of the Commissioner cannot be countenanced for the reason that it is not always necessary for a dealer to have godown. Business can also be done or arranged to be done by use of the modern communication facilities, for example diverting a load of goods to various dealers without being unloaded in the premises of the dealer, in this case the premises of M/s. TNTC. Further even if M/s. TNTC was found to be the residential premises of PKV Menon, its Proprietor, that by itself, cannot lead to a conclusion that no business transaction was carried on in that premises and the transactions carried on there are bogus. The learned Commissioner has questioned the transaction of the appellant-company with M/s. TNTC for the reason that the firm was the residential premises of PKV Menon who is the Commercial Manager of the appellant-company and that M/s. TNTC did not have godown to facilitate dealing in the sawn timber etc. This finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial Manager of the appellant-company, during the cross-examination on 25-7-1994 has clearly stated that the statement was recorded against his will and it was given under pressure and coercion made by the officers. He has also stated that the whole night he was beaten up and was harassed and he was forced to give a statement implicating himself and the first petitioner and he was allowed to go only after giving the statement as per direction of the Central Excise Officers at about 3 AM on 7-5-94 and the statement was taken between 1 AM and 3 AM. We find that the Commissioner has given a finding in para 20.3 that statements have been recorded from 7 (not 6 as mentioned) more dealers and the appellants have contended that their statement supports the case of the appellants. Other witnesses such as N. Ashok Kumar, A.V. Sekhar, P. Ravindran, and N. Nagendran have also stated during cross-examination that the statements were recorded from them as dictated by the Central Excise Officers and the statements were not voluntary. We find that while the department chose to rely on the statements which are in favour of the department, the statements though recorded from these seven dealers w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We find that the Commissioner has dealt with this plea in paras 20.2 to 21 wherein he has held that there was recovery of price slip from one of the dealers viz. M/s. Shree Sakthi Agencies and the said price slip indicated certain jottings in pencil and there was a wide variation between the billed price and the selling price. The appellants contended that they had requested for copies of the said slip but their request in this regard has not been granted. We, however, find that the Commissioner has noted in para 20.6 that during the personal hearing the party was offered the facility of pursuing the price slip, but they declined to avail of the same pleading that it would not effect their client and therefore, they cannot now plead that it was neither relied upon, nor supplied to them to their disadvantage. We observe that the appellant-company in their reply to the show cause notice dated 9-6-1993 had expressed their ignorance of the said slip and requested for supply of copies of the same. Just showing the slip at the time of personal hearing, in our view, cannot be taken to be affording effective opportunity to the party. The appellant is entitled to know who the writer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "When the forty dealers of the appellants spread all over South India and it would be difficult to conduct investigation in respect of all. Further among the dealers investigated, only some of them would have admitted the excess payment for business reasons. If a retraction is acceptable to the noticee for his convenience, the department is at liberty to place reliance upon the materials, which point out to the fact that the appellant had under-valued the goods. More over there may be instances where the evidence gathered may not be clinching or does not fully support the case of the department…" We would have remanded those cases for re-consideration, but as already noted above, inasmuch as the department has categorically stated that it would be difficult to conduct investigations in respect of all the 40 cases spread over South India, we are left with no other option except to allow the plea of the appellants that there was no under-valuation in the case of the other 39 dealers as there are not sufficient corroborative material evidence to establish such a degree of probability that a reasonable person would have accepted that extra consideration has flown to the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince he was managing the affairs of the company and since there is admission by the appellant-company that in 46 consignments there were invalid transport documents, it cannot be said that he was not involved or was not concerned with under invoicing and therefore, he cannot escape from penal liability, however the quantum has to be reduced considerably in view of our finding in regard the validity of the slip for the clearances made to other dealers are concerned. We have already held that so far as the existence of M/s. TNTC is concerned, they are entitled to the benefit of doubt in the facts and circumstances of this case. We, therefore, do not find sufficient evidence to hold that Shri PKV Menon was concerned with fictitious sale of sawn timber and flow of cash to Vishnu Khemani for the reason that he has used his residential premises. Therefore, we set aside the penalty imposed on Shri PKV Menon. 8.We also observe that more or less a similar case came up for consideration before the Tribunal in the case of M/s. B.G. Plywoods (P) Ltd. and 3 others reported in 2001 (5) ECL 160 (Tribunal) wherein the Tribunal after detailed hearing and appreciation of the facts has held as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, then his presence for cross-examination was paramount and was fundamental to prove the under-valuation of principles of natural justice. Appellants claim that there was a serious violation in this respect. The Commissioner has noted that Shri Venkatraman and Ramachandran did not turn up and appellants had agreed to file their written submissions. The Commissioner in his order proceeded to hold that even if they had a right to cross-examine him, even then his statement can be taken as corroborative and establishing the facts of under-valuation. We have considered this plea of the appellant. We are not in a position to accept the Commissioner's finding in the light of his own recording in para 57.3 that Shri Ramachandran and Venkatraman did not turn up for cross-examination. It can be gathered from this paragraph that appellants had agreed to file their written submissions which, according to the appellant, was to mean that they did not give up the right to cross-examine on witnesses not turning up. The Commissioner had asked them to proceed with the next stage which he was entitled to do so. We are inclined to accept this plea of appellant, because the claim being very enormous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnan's residence. This alone cannot be the sole criteria for, confirming, the demands. Neither the answers given by witnesses from Ganesh Timber Trading Co., ACS Guruswamy Nadar and Slips seized from Vaitheeswaran Timber Trading Co can be considered to be corroborative for transaction with regard to other dealers. The reason being that the department has accepted the appellant's prayer for clearance of goods on invoice price under Rule 173C(11) of C.E. Rules and evidence to this effect has been produced and there is no serious challenge by Revenue that assessee was operating under the provisions of Rule 173C(11) of C.E. Rules, 1944. The Tribunal in its Larger Bench judgment rendered in the case of CCE, Chandigarh v. Taparia Tools Ltd Others (supra) have held that value of excisable goods is determined with reference to the normal price at which such goods are sold. Where the goods are not sold at the factory gate to any particular class of wholesale buyers, duty on the value of the goods sold to that class cannot be determined on the price at which the sale was effected to another class of buyers. When the price of the goods sold to such class is not ascertainable under Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued till the case was closed and the Commissioner ought to have produced all the officers including the Venaktaraman and Ramachandran for the purpose of cross-examination. The failure to produce these persons for cross-examination has resulted in failure of principles of natural justice as noted in large number of judgments. We have noticed that even the Hon'ble Apex Court has remanded the matters in similar cases to give opportunity to either side to establish their case. It will be, in our humble opinion, unfair on the part of Revenue in not giving opportunity to establish their case merely because the Commissioner was in a hurry to close the case. We note that the Commissioner has proceeded on general premise and on assumptions and presumptions to establish under-valuation. The relevant findings have been recorded. These findings do not show that each of the 241 invoices have been examined and corroboration with regard to under-valuation in respect of each of the transaction has been noted and findings recorded. Appellants' having permitted to function under Rule 173C(11) of C.E. Rules, therefore the department and the Commissioner should show that each of the transaction was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of all other dealers who were independent". In the case before us, the charge against the appellant-company was that they have cleared plywood in the guise of sawn timber by manipulation of records and by creating dummy unit. In view of our discussion above, we hold that while the aspect pertaining to demand of duty based on the slip recovered from M/s. Shree Sakthi Agencies remanded for de novo consideration, the same in respect of other dealers from whom no such slip was recovered, cannot be sustained in the facts and circumstances of this case. The Revenue has pressed into service the decision of the Hon'ble Supreme Court in the case of D. Bhoormull [1983 (13) E.L.T. 1546] and the decision of the Tribunal in the case of Chowbey Sugandhit Tambaku v. CCE, Patna reported in [2001 (131) E.L.T. 222] wherein it was held that the Revenue authorities are not required to prove by mathematical precision activities of clandestine removal which are in the personal knowledge of the manufacturer. In the case before us we find that the preponderance of probability has not been arrived. In view of our discussion above, we pass the following order : (a) The aspect pertaining to dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modification and amendments whenever necessary was been filed by them. They were getting timber logs for manufacturing the product by importing it from Malaysia and other countries. The purchases were also made by entering into High Sea Sale Agreements. 10.The process of manufacture has been described by them in para 4 of the appeal memo which is extracted: "Timber logs are brought from the Log Yard and after cross-cutting, the timbers are identified in two separate categories, the round cylindrical logs which have no cracks and knots are selected for peeling. The peelable logs are taken in stages to peeling, clipping, drying, hot pressing, DD saw cutting and finishing stages of plywood. Other logs with defects like deep cracks, end-to-end cracks or rotten ends, cross-fibre, logs with twists and bends, dry logs, heavy knots, etc. are basically unpeelable timbers and therefore since rotary cut is not possible, they are taken for sawing in the saw mill resulting into production of Sawn Timber, while plywood unit's objective is to get maximum peelable logs, nevertheless all plywood factories necessarily have Saw Mills attached to them so that unpeelable logs can be Sawn and sold a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list and price list were regularly filed, which were duly scrutinised and approved/endorsed by the Department. Audit parties have been frequently visiting the company's unit and had been examining/scrutinising all the invoices and sale bills. The production and sales of sawn timber was in specific knowledge of the department as borne out by the said records. Therefore, they cannot allege suppression of facts and extend larger period under proviso to Section 11A (1) of the Act. They also relied on several voluminous documents to show that the charges brought out in the show cause notice were without any supporting evidence or without application of mind. They showed through the evidence that TNTC was a proprietary firm with its own bank accounts and sales tax and it had no nexus whatsoever with the company. Moreover, the figures would reveal that sawn timbers were sold by the appellant-company to a very large number of buyers and it was absolutely incorrect on the part of the Department to contend that TNTC was the only buyer, through whom the sawn timber used to be sold. They relied on the assessment made to the Sales Tax Authorities for the relevant period and to prove the factua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litary statement of one dealer to enhance the higher selling price of the plywood which cannot be accepted. They have also relied on the various statement given by the witnesses which were in their favour and which was not been taken into consideration by the adjudicating authority. It stated that the Collector has considered the error in holding TNTC to be a fictitious company while at the same time holding in para 15 to have an independent existence. It is stated that the Department has wrongly assumed the rate of excise duty on plywood at 21% and on Veneer is 5.25%. They contend that the accurate rate was 31.5% on plywood 12.6% on Veneers, while the rate of sales tax along with surcharge is 8.8%. Therefore they challenge the correctness of the Commissioner's order. They contend that the dealers are independently receiving the goods and in such circumstance department cannot proceed to rely on the statement of the 3 dealers who have also retracted the statements. They contend that there is no evidence to hold the charge of under-valuation solely on the basis of slips recovered which have no evidential value. He also pointed out that Mr. P. Ravindran in his cross-examination had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on his findings. 16.On a careful consideration I notice that for the purpose of proving that TNTC was a dummy unit the Department had to produce evidence in this regard and no such evidence is available in this regard to uphold that TNTC is a dummy unit. On the other hand the appellant have produced enormous evidence to show that TNTC is in existence in all transaction with them was through cheques and TNTC was having independent transaction and independent dealings. Therefore, the finding arrived at by the Commissioner that TNTC is a dummy unit is factually incorrect finding and requires to be set aside. 17.With regard to the charge of under-valuation the Revenue is seeking to rely on 3 witnesses. On the other hand the appellant have shown that they had clearances with 49 dealers and the Department had not examined any of these dealers to show that the price sold to few of them was the only price and the sales. The department ought to have examined all the dealers to show that the sales made to one or two dealers was not proper sales and it was under-valued. There is no conclusive finding on this aspect of the matter which has been brought to the notice and shown that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the absence of any evidence recovered from other dealers, therefore the price slip recovered from the Sakthi Agencies cannot be a ground to confirm prices at which the goods were sold to larger number of dealers. In that view of the matter the appellant succeeds on merits in view of lack of cogent, reliable and dependable evidence with regard to the parties under-valuation, sale of the goods on higher prices. 20.Department has not proved any invoicing of excisable goods realising the extra cash over the valued amount by fictitious sale of non-excisable item and retracted extra consideration (cash) realised for the excisable goods as the sale proceeded of a non-excisable product as held by the Commissioner in para 31 of his order. 21.I am of the considered opinion that : (a) TNTC was an independent unit having its own existence and the sales were made to them on principal to principal basis by cheques and therefore the charge that clearances were made to a dummy unit is set aside. (b) That there was no abnormal of sawn timber and firewood during the periods 1989-90 and 1990-91 and that there was no under-valuation of sales and the basis of the charge is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee M/s. Sharon Veneers (P) Ltd., during the financial years 1989-90 and 1990-91. A duty demand of about Rs. 59 lakhs had been confirmed in the impugned order upon a finding that the appellant invoiced the goods sold by them at a price lower than the sale price and realised the un-billed portion of the value in the guise of sale proceeds of sawn timber. Both the Members are in agreement that most of the duty demand is not sustainable inasmuch as they have not found Revenue's allegation of realising part of the value as sale proceeds of sawn timbers sustainable. They have also agreed that the demand in respect of the sales other than to one dealer M/s. Shree Sakthi Agencies is required to be dropped. 26. During the hearing of the case, ld. Counsel of the appellants submitted that out of the duty demand of about Rs. 59 lakhs, only a small amount of Rs. 6/- to Rs. 7/- lakhs would relate to the goods sold to M/s. Shree Sakthi Agencies. The difference of opinion is with regard to this portion of the demand only. The ld. Member (T) has taken the view that this portion of the demand is required to be re-adjudicated in view of the recovery of the slip/chit from M/s. Shree Sakthi Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the appellant's sale price was same to all the dealers including M/s. Shree Sakthi Agencies. 29. The learned Counsel also pointed out that even apart from the above legal position, the evidence collected in respect of sales to M/s. Shree Sakthi Agencies was not at all confirmatory of the allegation that the goods sold are under valued. He pointed out that a mere perusal of the statement dated 25-4-91 of Shri P. Ravindran, Partner of M/s. Shree Sakthi Agencies, Salem would show that the statement is too vague to be relied upon as evidence in regard to under-valuation of the goods. He pointed out that according to the SCN, Shri P. Ravindran stated that in respect of 15 mm thickness plywood the sale price was lower than the purchase price inasmuch as he had indicated Rs. 155-160 as the purchase price exclusive of sales tax and he has mentioned Rs. 151-155 as the sale price. The learned Counsel pointed out that such a state of affairs is quite unlikely. This shows that the statement did not indicate the correct factual position. The learned Counsel further pointed out that Shri Ravindran retracted his statement on the very next day in his letter addressed to the Asstt. Collector of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal value and that part of the price was being collected in cash over and above the invoice price. The Division Bench has not accepted the finding regarding collection of part of the price in the guise of sale value of sawn timber. They have set aside the duty demand in respect of the goods sold to all but one dealer, accepting the sale price to those dealers the assessable value of the goods. Thus, the price to all the dealers other than M/s. Shree Sakthi Agencies has been accepted as normal sale price. In the normal course, since the sale price to M/s. Shree Sakthi Agencies was the same as to others, the sale to M/s. Shree Sakthi Agencies should also be treated as at normal price. The difficulty in accepting the sale price to Shree Sakthi Agencies as normal value is the presence of the slip/chit recovered from them during search operations and the statement made by Shri P. Ravindran. Learned Member (Technical) is of the opinion that the matter is required to be considered afresh by the Commissioner while, learned Member (J) feels that the case is lacking in evidence, the 'slip/chit' notwithstanding. The position with regard to this piece of evidence, it would appear, is that M ..... 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