2009 (11) TMI 929 - AT - Central Excise

Summary

Issues Involved:
1. Alleged under-valuation of plywood, blackboard, and veneer.
2. Confiscation of seized plywood/veneer.
3. Imposition of penalties on the assessee and its managing director.
4. Confiscation of cash seized from the managing director's residence.
5. Confiscation of goods found in excess at the factory and depots.

Issue-wise Detailed Analysis:

1. Alleged Under-valuation of Plywood, Blackboard, and Veneer:
The Assessee was accused of gross under-valuation of their products, leading to a Show Cause Notice proposing a demand of Rs. 13,94,88,786. The Commissioner, as Adjudicating Authority, confirmed a demand of Rs. 3,95,79,558 based on a revised assessable value determined through the cost of production method. The Assessee argued that this method was not proposed in the Show Cause Notice, thus the Adjudicating Authority had travelled beyond the proposals. The Tribunal found that the Adjudicating Authority's method was indeed beyond the Show Cause Notice, relying on the Supreme Court's ruling that a Show Cause Notice is the foundation for levy and recovery of duty, and any deviation is impermissible.

2. Confiscation of Seized Plywood/Veneer:
The Show Cause Notice also proposed confiscation of seized plywood/veneer. The Commissioner ordered confiscation and imposed penalties on the dealers. However, the Tribunal noted that the evidences discussed in the Show Cause Notice were deemed insufficient by the Adjudicating Authority. The Tribunal concluded that the evidences were not reliable for determining under-valuation, hence the confiscation order was unsustainable.

3. Imposition of Penalties on the Assessee and Its Managing Director:
The Commissioner imposed equal penalties on the Assessee and a penalty of Rs. 5,00,000 on the Managing Director. The Tribunal, however, found that the basis for the penalties was flawed as it was based on a method not proposed in the Show Cause Notice. Consequently, the penalties were set aside.

4. Confiscation of Cash Seized from the Managing Director's Residence:
The Revenue argued that the cash seized represented unaccounted sale proceeds. The Commissioner, however, found no concrete evidence linking the cash to unaccounted sales. The Tribunal upheld this finding, noting that the Revenue failed to challenge the factual findings of the Adjudicating Authority regarding the evidences collected.

5. Confiscation of Goods Found in Excess at the Factory and Depots:
The Commissioner held that the goods found in excess at the factory and depots were not liable for confiscation as there was no evidence of preparation for clandestine removal. The Tribunal concurred, stating that the entire exercise was based on under-valuation, not clandestine removal. The Tribunal found the explanations for the excesses and shortages justifiable and upheld the Commissioner's decision to release the goods.

Conclusion:
The Tribunal set aside the impugned Order-in-Original, finding it unsustainable as it traversed beyond the Show Cause Notice. The Revenue's appeal for remand was rejected due to lack of challenge to the factual findings. The Tribunal upheld the release of seized goods and cash, rejecting the charges of under-valuation and related penalties.