2010 (2) TMI 1046 - AT - Customs

Summary

Issues Involved:
1. Jurisdiction of ADG, DGCEI to issue show cause notice.
2. Whether the process undertaken amounted to manufacture.
3. Correct valuation method for goods cleared to DTA.
4. Evidentiary value of computer printouts.
5. Evidence of suppression of production and clandestine clearance.
6. Evidence linking goods sold at higher rates to the appellant.
7. Evidence linking incriminating records to the appellant.
8. Evidence of money flow back to the appellant.
9. Evidence of abnormal purchase/consumption of raw materials and power.
10. Evidence of transport documents for clandestine clearance.

Summary:

Jurisdiction of ADG, DGCEI:
The appellant argued that the show cause notice issued by the ADG, DGCEI, Bangalore was without jurisdiction. The Tribunal found this argument countered by Notification No. 27/09-Cus., dated 17-3-2009, validated with retrospective effect by Section 91 of the Finance Act, 2009, which empowered ADGCEI to issue such notices.

Manufacture:
The appellant contended that the process did not amount to manufacture until the insertion of note 6 in Chapter Notes, Chapter 25 of the Central Excise Tariff Act, 1985, by Finance Bill, 2006. The Tribunal rejected this argument, citing the Supreme Court judgment in Income Tax Officer, Udaipur v. Arihant Tiles and Marbles (P) Ltd. [2010 (249) E.L.T. 161 (S.C.)], which clarified that converting blocks into polished slabs and tiles brought into existence a new commodity.

Valuation Method:
The appellant argued that valuation should be determined under the Customs Act, 1962 and not under the Central Excise Act. The Tribunal found that the Commissioner had erred by determining the value under Rule 8 of the CVR without putting the assessee on notice, thus violating principles of natural justice. The Tribunal referred to Otis Elevator Company (India) Ltd. v. CCE, Bangalore [2008 (229) E.L.T. 568 (Tri-Bang)] and CC, Bangalore v. Wipro GE Medical Systems Pvt. Ltd., [2009 (242) E.L.T. 275 (Tri.-Bang.)], which supported the appellant's contention.

Evidentiary Value of Computer Printouts:
The Commissioner relied on computer printouts for quantifying differential duty due to undervaluation. The Tribunal noted that the Commissioner failed to render a finding on compliance with Section 36B(2) of the Act, attributing procedural lapses to the investigating agency.

Suppression of Production and Clandestine Clearance:
The appellant argued that there was no evidence of suppression of production and clandestine clearance. The Tribunal found that the departmental authorities had recovered records showing unaccounted clearances and that the General Manager of the appellant firm had admitted to these clearances. The Tribunal held that the demand for Rs. 1,65,45,521/- towards clandestine clearances was, prima facie, sustainable.

Linking Goods Sold at Higher Rates to Appellant:
The Tribunal found that the records and statements provided sufficient evidence to link the goods sold at higher rates by HMG to the appellant, HG.

Linking Incriminating Records to Appellant:
The Tribunal found that the records recovered from HG's premises were authentic and reflected the true state of affairs, as admitted by the General Manager.

Money Flow Back to Appellant:
The Tribunal found no evidence to support the appellant's claim that there was no flow back of money to HG.

Abnormal Purchase/Consumption of Raw Materials and Power:
The Tribunal accepted the department's reasoning that no evidence was left from the initial stage of production due to planned evasion.

Transport Documents for Clandestine Clearance:
The Tribunal found that the unchallenged records of clearances represented actual clearances, making the demand for clandestine clearances sustainable.

Conclusion:
The Tribunal ordered the appellants to pre-deposit an amount of Rs. One crore within eight weeks and report compliance. Upon compliance, there would be a waiver of pre-deposit of the balance dues adjudged against the appellants, pending the decision in the appeal.