2013 (6) TMI 395 - AT - Central Excise

Clandestine removal and under-valuation of goods - Demand based on statement - corroborative evidence - Majority Decision - Cleaner of films/sheets in the guise of Lay Flat Tubing (LFT) - Held that - The impugned order of demand has relied upon the statement of Shri Kamlesh Pandey, Production Supervisor, who was associated with the appellant company only for a period of about 8 months and as such, his deposition as regards clearances of sheets under the guise of LFT for the period prior to his joining the factory, cannot be held to be true reflection of factual position. Further, it also stands recorded in the said statement of Shri Pandey that the production program register was being maintained on the instructions of Shri H.K. Singh. However, the Revenue has not bothered to record the statement of Shri H.K. Singh, which would have classified that position. Inasmuch as no production program register was being maintained by the appellant for over-the-counter clearances on cash and carry basis, the statement of Shri Pandey in respect of program register cannot be held to be a relevant statement. Revenue authorities have recorded the statements of the owners of vehicles who were engaged by the appellant for transportation of the goods. The said statements do not indicate that the owners were self-driving the vehicles and they would be in a position to give correct particulars as regards invoices, where the name and city of the consignee is mentioned. In the absence of any such corroborative evidence as to that the transportation were made by the said vehicles and that the material transported was nothing but plastic films and sheets and reliance placed by the Revenue authorities on the statements of the transporters is incorrect and such statements do not instill the confidence that the appellant had removed the plastic films and sheets in the guise of LFT. The adjudicating authority has not recorded any finding that the appellant was receiving excess payment than the amount indicated on 814 invoices in Annexure II to the Show Cause Notice, even after scrutinizing the documents resumed from the head office of the appellant. The appellant had, in their statement, clearly stated that the head office of the appellant was collecting cash as indicated in all the 814 invoices. If that be so, the Revenue has not carried out their investigation any further to show or bring on record that the appellant had received the excess amount than the amount billed as indicated in 814 invoices to Annexure II of the Show Cause Notice. In the absence of any such evidences, it cannot be said that the appellant had cleared plastic films and sheets in the guise of LFT. The provisions of Section 11A of Central Excise Act, 1944 talks about the issuance of Show Cause Notice to the person who is liable to pay duty. It is undisputed in this case that till 5-3-2005, the clearances for home consumption were effected by M/s. Mayura Industries, which was a partnership firm registered with Central Excise authorities. The business of M/s. Mayura Industries was taken over by the current appellant M/s. Radha Madhav Corporation Ltd. w.e.f. 6-3-2005. Thus the demand of duty for the period prior to 6-3-2005 can be raised only on Mayura Industries and not on M/s. Radha Madhav Corporation Ltd., Public Limited Company having distinct and identifiable entity. There is no dispute on the fact that in adjudication proceedings, the charge of clandestine removal and undervaluation is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions. Suspicion however grave cannot replace the proof. Decision of Oudh Sugar Mills Ltd. v. Union of India 1962 (3) TMI 75 - SUPREME COURT OF INDIA is clearly applicable to the instant case inasmuch as the demand cannot be sustained without any tangible evidence, based only on inferences involving unwarranted assumptions. In favour of assessee.

Summary

Issues Involved:

1. Demand of duty on goods cleared by RMCL in the guise of Lay Flat Tubing (LFT).
2. Demand of differential duty under two categories (Annexure A-1 and Annexure A-2).
3. Penalty under Section 11AC of the Central Excise Act, 1944.
4. Imposition of penalties on individual appellants.
5. Admissibility and relevance of statements and documentary evidence.
6. Treatment of amount received as cum-duty price.
7. Invocation of the extended period for demand.
8. Liability of the newly incorporated company for the period prior to its incorporation.

Detailed Analysis:

1. Demand of Duty on Goods Cleared by RMCL:

The primary issue was whether RMCL cleared plastic films/sheets in the guise of LFT to evade higher excise duty. The impugned order confirmed a demand of Rs. 72,27,371/- on this ground, with an equal penalty under Section 11AC and interest as applicable. Penalties were also imposed on the Director and General Manager of RMCL.

2. Differential Duty under Two Categories:

- Annexure A-1:
The demand of Rs. 11,07,596/- was based on the allegation that RMCL cleared plastic laminated films/sheets as LFT to Eastern Group of Companies. The Commissioner relied on a purchase order and statements from company officials. However, the Tribunal found that the evidence was insufficient and contradictory, and the cross-examination of key witnesses was not allowed. Therefore, the benefit of doubt was extended to RMCL, and the demand under Annexure A-1 was set aside.

- Annexure A-2:
The demand of Rs. 61,19,775/- was based on the allegation that RMCL cleared plastic films/sheets as LFT to non-existent buyers. The Tribunal upheld this demand, citing corroborative evidence such as production program registers, statements from company officials, and transporters. However, the amount was directed to be recalculated treating the received amount as cum-duty price.

3. Penalty under Section 11AC:

The Tribunal upheld the penalty equal to the recalculated duty amount under Section 11AC, considering the deliberate manipulation of records, use of non-existent vehicle numbers, and receipt of payments in cash.

4. Penalties on Individual Appellants:

- Shri Anil Agarwal (Director):
The penalty was reduced from Rs. 10,00,000/- to Rs. 2,00,000/- considering the harshness of the original penalty and his distinct role.

- Shri K.B. Nair (General Manager):
The penalty was reduced to Rs. 25,000/- as he was an employee acting under instructions, though he should have been aware of the procedures and laws.

5. Admissibility and Relevance of Statements and Documentary Evidence:

The Tribunal found that the statements of various individuals and documentary evidence were crucial in establishing the case for Annexure A-2. However, the statements alone were insufficient for Annexure A-1 due to lack of corroboration and denied cross-examination.

6. Treatment of Amount Received as Cum-Duty Price:

The Tribunal accepted the appellants' claim to treat the amount received as cum-duty price, as there was no evidence of additional consideration over the invoice price. This treatment was upheld based on the principle that the transaction value includes all elements unless proven otherwise.

7. Invocation of Extended Period:

The Tribunal upheld the invocation of the extended period for demand, citing deliberate misrepresentation and suppression of facts by RMCL.

8. Liability of Newly Incorporated Company:

The Tribunal noted that RMCL was incorporated in January 2005 and took over the business of Mayura Industries in March 2005. Therefore, RMCL could not be held liable for any duty prior to its incorporation. The demand for the period before March 2005 was not sustainable against RMCL.

Separate Judgments:

- Member (Technical):
Upheld the demand under Annexure A-2 and penalties, but directed recalculation treating the amount as cum-duty price.

- Member (Judicial):
Disagreed with the confirmation of the demand under Annexure A-2, citing insufficient evidence and procedural lapses. Allowed the appeal of RMCL and set aside penalties on individual appellants.

- Third Member (Judicial):
Concurred with Member (Judicial), emphasizing the lack of credible evidence and procedural fairness. Allowed the appeals in toto.

Conclusion:

The Tribunal, by majority, allowed the appeals with consequential relief, setting aside the demand under Annexure A-1 and related penalties, and remanding the demand under Annexure A-2 for recalculation treating the amount as cum-duty price. Penalties on individual appellants were also reduced.