2010 (7) TMI 807 - AT - Central Excise

Search and Seizure - Determination of transaction value - Normal value versus transaction value Held that - For all the clearances after 1-7-2000 the value has to be determined based on each transaction. Therefore the differential duty should be confined only to the evidences available on record - period prior to 1-7-2000 the Commissioner has to decide the normal price for each variety of goods and he can adopt the same for all the clearances. It does not mean that the invoice value has to be accepted. The normal price has to be determined based on the evidence available - matter remanded to the Commissioner Undervaluation - Charge of undervaluation based only on the principle of preponderance of probability - extrapolation Held that - In the cases cited extrapolation of a finding in respect of an offending transaction was applied to other transactions in view of the concrete evidence in the case examined - undervaluation of excisable goods is as serious a charge as clandestine removal - Differential duty can be demanded only where undervaluation is established - There could be cases where the facts of one case of undervaluation and the pattern involved are such that extrapolation is safe and justified - facts highlighted by the Commissioner do not justify such a course of action. As undervaluation cannot be ruled out and is likely to have taken place as is apparent from the price lists chits and IOM seized - case remanded to the Commissioner for fresh adjudication

Issues Involved:
1. Allegation of under-invoicing and evasion of Central Excise Duty by MCL.
2. Validity of evidence such as inter-office memos, slips, and statements.
3. Retraction of statements by MCL employees.
4. Methodology for determining undervaluation and differential duty.
5. Penalty imposition on MCL and its Resident Director.
6. Legitimacy of the Revenue's appeal and procedural correctness.

Issue-wise Detailed Analysis:

1. Allegation of Under-invoicing and Evasion of Central Excise Duty by MCL:
The Directorate General of Central Excise Intelligence (DGCEI) conducted searches at MCL's premises and found incriminating documents suggesting that MCL was undervaluing excisable goods and evading duty by showing only a part of the actual sale consideration in their invoices. The Commissioner confirmed a demand for Rs. 81,01,637/- against MCL based on these findings.

2. Validity of Evidence Such as Inter-office Memos, Slips, and Statements:
The evidence included inter-office memos, slips, and documents recovered from various locations, which indicated under-valuation and receipt of money in excess of the invoiced amounts. Statements from MCL employees corroborated these findings. The Commissioner relied on these documents and statements to confirm the demand for differential duty.

3. Retraction of Statements by MCL Employees:
MCL employees retracted their initial statements, claiming they were made under duress. However, the Commissioner, citing the Apex Court judgment in Surjeeth Singh Chhabra v. Union of India, held that retracted confessions still bind the petitioner. The Tribunal upheld the Commissioner's decision, noting that retractions made before a notary are not considered effective unless made before the proper officer.

4. Methodology for Determining Undervaluation and Differential Duty:
The Commissioner used various documents and statements to determine the extent of undervaluation. For instance, an inter-office memo showed that the actual sale value was higher than the invoiced value by 40% to 54.56%. The Commissioner confirmed the differential duty based on these findings but limited the confirmation to specific instances where concrete evidence was available. The Tribunal remanded the case for fresh adjudication, emphasizing the need for correlation between invoices and alleged undervaluation.

5. Penalty Imposition on MCL and Its Resident Director:
The Commissioner imposed a penalty of Rs. 81,01,637/- on MCL under Section 11AC of the Central Excise Act and a penalty of Rs. 10,00,000/- on Shri Shyam Daga, Resident Director of MCL, under Rule 209A of the erstwhile CER, 1944. The Tribunal upheld the penalties, noting that MCL had consciously resorted to fraudulent means to evade duty.

6. Legitimacy of the Revenue's Appeal and Procedural Correctness:
The Revenue's appeal was initially challenged by MCL on procedural grounds, as it was filed by the Commissioner of Central Excise, Mysore, instead of Mangalore. The Tribunal found that the direction to the Commissioner of Central Excise, Mangalore was a typographical error and allowed the appeal to proceed. The Tribunal also remanded the case to the Commissioner for fresh adjudication, instructing to follow the principles laid down in the CERA Boards & Doors case.

Conclusion:
The Tribunal upheld the findings of undervaluation and the corresponding duty demand in specific instances where concrete evidence was available. The case was remanded for fresh adjudication to determine the exact differential duty, ensuring that each transaction is individually examined. The penalties imposed on MCL and its Resident Director were upheld, emphasizing the fraudulent nature of the undervaluation scheme.

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