2010 (12) TMI 1139 - AT - Central Excise

Issues Involved:
1. Alleged undervaluation of goods by the assessee.
2. Validity of evidence (slips, chits, and statements) used to determine undervaluation.
3. Applicability of extended period for issuing show-cause notice.
4. Determination of transaction value and applicability of best judgment assessment.
5. Legality of penalties imposed on the assessee and individuals.

Issue-wise Detailed Analysis:

1. Alleged Undervaluation of Goods by the Assessee:
The assessee, part of the BA Group, was accused of undervaluing its products (plywood, block boards) by invoicing lower prices while collecting higher actual sale prices in cash. Evidence included slips recovered from a dealer, which showed discrepancies between invoiced and actual prices. Statements from employees and dealers corroborated the practice of collecting additional amounts in cash. The Commissioner confirmed a demand of Rs. 49,73,107/- in differential duty for clearances made from 7/2001 to 3/2004, along with applicable interest and penalties.

2. Validity of Evidence:
The assessee challenged the reliance on slips and chits, arguing they were not primary evidence and the statements were obtained under duress and retracted during cross-examination. However, the Tribunal found that the initial statements were valid as they were not retracted promptly, and the statements were corroborated by documentary evidence. The Tribunal held that statements recorded under Section 14 of the Central Excise Act by Central Excise Officers, who are not police officers, are valid evidence.

3. Applicability of Extended Period for Issuing Show-Cause Notice:
The assessee argued that the demand was time-barred as the show-cause notice was issued after more than two years from the date of knowledge of the alleged evasion. The Tribunal referred to Section 11A, which allows a five-year period for issuing notices in cases of fraud, collusion, or suppression of facts. It cited precedents where the relevant date was not the date of acquiring knowledge by the department. Consequently, the Tribunal upheld the invocation of the extended period for issuing the show-cause notice.

4. Determination of Transaction Value and Applicability of Best Judgment Assessment:
The Tribunal agreed with the assessee that the value for duty purposes should be the transaction value for each clearance, as per Section 4 of the Central Excise Act. It rejected the Commissioner's method of enhancing the declared value by a uniform percentage (49.32%) across all clearances, as it introduced arbitrariness. The Tribunal cited the case of CERA Boards & Doors, which emphasized determining the transaction value based on each transaction for the period after 1-7-2000. The Tribunal found that applying a percentage to invoice values to determine duty was legally inappropriate.

5. Legality of Penalties Imposed:
The Tribunal found that the penalties imposed were arbitrary and not sustainable without establishing the guilt of the appellants beyond reasonable doubt. It emphasized that penalties could only be imposed if the alleged offences and allegations were proven. The Tribunal referred to several judicial decisions supporting this view and concluded that the Commissioner's order imposing penalties was not justified.

Conclusion:
The Tribunal set aside the impugned order and remanded the case for a fresh decision by the Original Authority regarding the duty liability and penalties. It instructed that the penal liability of individuals should also be reconsidered in de novo proceedings, following principles of natural justice. The appeals were disposed of accordingly.

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