2009 (11) TMI 731 - AT - Central Excise

Summary

Issues Involved:
1. Undervaluation of goods
2. Cost of manufacture
3. Disposal of excess amount realized in cash
4. Documents showing clandestine removal of goods
5. Wrong availment of Cenvat credit on returned materials
6. Quantification
7. Contravention of rules
8. Voluntary payment

Detailed Analysis:

1. Undervaluation of Goods:
The Tribunal found that price lists recovered from Hi-Tech showed higher prices than those on sale invoices, indicating undervaluation. Customers confirmed in statements that actual sale prices were higher than invoice prices and the differential amounts were collected in cash. The Commissioner held that the assessee could not establish the granting of a 40% discount as claimed, and customers' statements indicated no discounts were allowed.

2. Cost of Manufacture:
Cost certificates recovered showed higher manufacturing costs than invoice prices. The Tribunal noted discrepancies between the cost of production and invoice prices. The cost certificates were prepared considering raw material and labor costs, but the actual cost was much higher than the invoice prices.

3. Disposal of Excess Amount Realized in Cash:
The Tribunal found that unaccounted sales receipts were used for meeting certain expenses not accounted for in the books. Muster Roll Statements and scribbling pads indicated that wages were paid in cash from unaccounted sale proceeds. The Tribunal noted that part of the expenditure was met through unaccounted sale proceeds.

4. Documents Showing Clandestine Removal of Goods:
Invoices showed that Hi-Tech sold finished goods under the invoices of M/s. Techno Industries. The Tribunal confirmed that goods were cleared under the invoices of M/s. Techno Industries to evade duty. Statements from employees corroborated this finding.

5. Wrong Availment of Cenvat Credit on Returned Materials:
Hi-Tech did not reverse Rs. 70,868/- of Cenvat credit on rejected and returned inputs. The Tribunal found that the appellant was aware of the irregularity and debited the amount following detection.

6. Quantification:
The evasion was quantified based on recovered price lists. The duty due was calculated for the years 2000-2004 after allowing SSI exemption. The Tribunal noted that the quantification was based on price lists but did not factor in the claimed discounts.

7. Contravention of Rules:
The assessee contravened several Central Excise Rules by suppressing actual prices and realizing higher amounts while paying duty on lower values. The Tribunal found that the Managing Director and Director were liable for penalties under rules for their involvement in under-invoicing and clandestine removal of goods.

8. Voluntary Payment:
The assessee paid Rs. 10,74,868/- voluntarily on different dates in May 2003.

Tribunal's Final Observations:
The Tribunal found that the investigation lacked concrete evidence to prove the allegations of undervaluation and duty evasion. Statements from customers and employees were found to be obtained under coercion and were not reliable. The Tribunal set aside the demand of differential duty and other related liabilities due to lack of positive evidence. However, the demand and penalty related to the non-reversal of Cenvat credit were upheld. The Tribunal remanded the matter for fresh adjudication regarding penalties on the Managing Director and Director, allowing the appellants to produce evidence in support of their challenge to the penalties.