2010 (8) TMI 811 - AT - Central Excise

Valuation - undervaluing excisable goods - plywood and block boards falling under Chapter 44 of the Central Excise Tariff - inadmissible SSI exemption - Held that - except the employees of PBPL, other witnesses are third parties. They were not bound by their own depositions. Once these statements are retracted, they lose their evidentiary value unless they are corroborated by other evidences. One of the important documents relied on by the Revenue is a pocket diary recovered from Mr. Ashraf. The diary showed details of prices of commercial plywood and Phenol Formaldehyde plywood, in adjoining columns for plywood of various grades. The Commissioner has applied the formula 25% of the sale price as accounted and 75% in cash in respect of clearances to SSP and 30% and 70% respectively in respect of clearances to other customers. We find that this methodology may not be appropriate - Undervaluation involving all the clearances made by the appellants during the material period cannot be found by examining clearances made to some dealers though they account for about 50% of the clearances of the assessee. No concrete case of undervaluation and evasion with reference to any particular clearance has been found by the adjudicating authority. The evidence of higher prices realized by PBPL in the form of entries in the pocket planner of Shri Ashraf is not acceptable without corroboration. Same is the case with particulars of invoices related to sale prices reflected in the documents recovered from SSP on 28-4-2004. These documents showed much higher prices for the assessee s products than the respective amounts on which duty was paid. The impugned order set aside and matter remanded to the Commissioner for taking a fresh decision after following principles of natural justice - appeal allowed by way of remand.

Issues Involved:
1. Allegation of undervaluation of excisable goods.
2. Admissibility and reliability of statements and documents as evidence.
3. Application of extended period for demand of duty.
4. Imposition of penalties on the assessee and its Managing Director.
5. Revenue's appeal for enhancement of demand.

Issue-wise Detailed Analysis:

1. Allegation of Undervaluation of Excisable Goods:
The Directorate General of Central Excise Intelligence (DGCEI) investigated M/s. Plama Boards Pvt. Ltd. (PBPL) for alleged undervaluation of plywood and block boards. Statements from the Managing Director (MD), employees, and dealers indicated that PBPL invoiced only 25% of the actual sale prices, collecting the balance in cash. The Commissioner concluded that PBPL had willfully evaded duty, demanding differential duty of Rs. 1,37,81,152/- and imposing penalties.

2. Admissibility and Reliability of Statements and Documents as Evidence:
The case relied heavily on statements from third parties and documents like a pocket planner recovered from PBPL's accountant, showing higher sale prices. During cross-examination, many witnesses retracted their statements, claiming coercion. The Tribunal noted that retracted statements lose evidentiary value unless corroborated by other evidence. The pocket planner was deemed unreliable as it included personal details and prices of non-manufactured products (PF plywood).

3. Application of Extended Period for Demand of Duty:
The appellants challenged the invocation of the extended period, arguing the absence of concrete evidence of undervaluation. The Tribunal acknowledged that while there was evidence of irregularities, it was insufficient to conclusively prove undervaluation for the entire period.

4. Imposition of Penalties on the Assessee and its Managing Director:
Penalties were imposed on PBPL and its MD under various rules and sections. The MD was penalized for allegedly masterminding the undervaluation scheme. The Tribunal found that the penalties were based on statements that were later retracted and lacked corroborative evidence.

5. Revenue's Appeal for Enhancement of Demand:
The Revenue appealed to enhance the demand by uniformly applying a 75% undervaluation rate across all dealers. The Tribunal found this methodology inappropriate, citing the need to determine transaction value based on each transaction post-1-7-2000, as per the concept of 'transaction value' introduced in the statute.

Conclusion:
The Tribunal set aside the impugned order and remanded the case to the Commissioner for a fresh decision, emphasizing the need for concrete evidence and adherence to principles of natural justice. The Tribunal noted that undervaluation could not be uniformly applied without specific evidence for each transaction, particularly for the period after 1-7-2000. All three appeals were allowed by way of remand.

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