2005 (4) TMI 537 - Commission - Central Excise

Summary

Issues Involved:
1. Under-valuation and suppression of actual value and grade substitution.
2. Clandestine clearance of goods.
3. Non-payment of duty on MS barrels.
4. Under-valuation through substitution of higher density products.
5. Unaccounted clearance of goods under second set of invoices.

Detailed Analysis:

1. Under-valuation and suppression of actual value and grade substitution:
The Show Cause Notice (SCN) alleged under-valuation and grade substitution by the main applicant company from March 1999 to July 2000, resulting in a proposed demand of Rs. 69,90,509/-. The applicant admitted to grade substitution but only from December 1999, arguing that the allegation was based solely on documents recovered from a dismissed employee. However, the Bench found corroboration in the statements of two directors of the company, confirming grade substitution even earlier. The Bench concluded that the applicant's claim of grade substitution starting only from December 1999 was not acceptable. The revised duty liability was calculated at Rs. 28,51,795/- after considering the non-eligibility for sales tax abatement.

2. Clandestine clearance of goods:
The SCN also proposed a demand of Rs. 10,81,881/- for clandestine clearances during April to July 2000. The applicant admitted to some clandestine clearances and agreed to pay the differential duty. The Bench noted that the quantification of clandestine clearances by Revenue was not convincing, particularly the reliance on bank statements without grade-wise breakup. The revised duty liability for clandestine clearances was determined to be Rs. 5,75,525/-.

3. Non-payment of duty on MS barrels:
The SCN proposed a demand of Rs. 39,696/- on MS barrels cleared as scrap. However, Revenue conceded that this demand was not sustainable, and the Bench had nothing further to observe on this issue.

4. Under-valuation through substitution of higher density products:
The SCN alleged under-valuation through substitution of higher density products, proposing a demand of Rs. 1,49,473/-. The applicant argued that the charge was based on incorrect assumptions and that the actual collections were as per the declared density. The Bench observed that the Revenue's reliance on comparable price concepts without evidence of actual higher density goods being sold was not convincing. Therefore, the proposed demand on this charge did not stand scrutiny.

5. Unaccounted clearance of goods under second set of invoices:
The SCN proposed a demand of Rs. 94,801/- under Section 11D of the Central Excise Act for unaccounted clearance of goods under a second set of invoices. The applicant claimed that this demand was already part of the proposed demand for clandestine clearances. Revenue conceded this point, and the Bench decided that the demand under Section 11D should remain, while the demand under Section 11A should be dropped to avoid duplication.

Final Settlement:
The Bench settled the proceedings with the following terms:
1. The total duty liability was settled at Rs. 35,22,121/-. The main applicant was directed to pay the balance of Rs. 24,14,255/- within 30 days.
2. Immunity from interest was granted except for 10% simple interest per annum. Revenue was to calculate and communicate the interest amount.
3. Immunity from confiscation and consequent fine on Rs. 8 lakhs seized from the premises of an individual and the goods seized from the premises of two dealers was granted. The cash amount of Rs. 8 lakhs was to be adjusted towards the balance duty.
4. Immunity from penalties and prosecution under the Central Excise Act was granted to the main applicant and eleven co-applicants.
5. Immunity from confiscation and consequent redemption fine for goods provisionally released to two co-applicants was also granted.

The above immunities were granted under Section 32K of the Central Excise Act, with a caution that the settlement would be void if obtained by fraud or misrepresentation of facts.