2017 (7) TMI 841 - AT - Central Excise

Clandestine manufacture and removal - undervaluation - it was alleged that the assessee was removing drilling rigs, hammer assemblies and parts without accountal and without payment of duty and also indulging in under-valuation/under-invoicing of drilling rigs, such operations were conducted at various premises connected with the assessee on 26.03.2003 - Held that - the adjudicating authority has analysed and addressed all these three issues in the impugned order. Adjudicating authority also accepted the request of KLR for cross examination of the persons whose statements have been relied upon in the show cause notice. The details of such cross examinations have been given in paras 32 to 43 of the impugned order. Perusal of these paras will indicate that the persons who were cross examined have, in the depositions given by them in cross examination, mostly given averments contrary to what had been purportedly given by them earlier in the statements recorded from them by the department officers. In other words, the statements of such persons, which have been relied upon in building up the case against KLR have been retracted by the same persons in the subsequent depositions in cross examination. On the dispute concerning alleged suppression of value of drilling rigs, adjudicating authority has thoroughly analysed the controversy in paras 55.2 to 71 of the impugned order. Lower authority has observed that there is no mention in the show cause notice whether spares sent along with rigs termed as free replacement parts were manufactured by KLR or were bought out ones. He has also observed that while customers had paid extra amounts of cash over and above the invoice price, this could be attributed to the free replacement parts also supplied. We find that this observation of adjudicating authority has merit. From the facts on record, none of the customers from whom statements had been recorded have admitted to any connivance with KLR to suppress the value of the rigs in their mutual interest. Adjudicating authority is also correct in his finding that the department also has not been able to get any evidence of such alleged collusion between customers and KLR in the alleged suppression of value of rigs. Appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
1. Alleged undervaluation of drilling rigs by KLR.
2. Clearance of parts to Bangalore depot without accounting.
3. Unaccounted receipt of raw material from Eastern Steel Corporation.

Detailed Analysis:

1. Alleged Undervaluation of Drilling Rigs by KLR:
The department alleged that KLR suppressed the actual price charged for the sale of rigs and collected amounts in cash over and above the invoice price. The adjudicating authority analyzed the evidence and concluded that there was no concrete proof of undervaluation. The statements from customers did not indicate any collusion with KLR to suppress the value of rigs. The adjudicating authority found merit in the explanation that the extra amounts collected were for spares/parts supplied along with the rigs. The lack of concrete evidence to support the department's allegations led to the conclusion that the benefit of doubt should go to the assessee. The Tribunal upheld this conclusion, finding no infirmity in the adjudicating authority's decision.

2. Clearance of Parts to Bangalore Depot Without Accounting:
The adjudicating authority confirmed the demand of differential duty of ?3,94,335/- on hammers, bits, and spares cleared clandestinely, along with interest and equal penalty under Section 11AC of the Central Excise Act, 1944. The confiscation of goods valued at ?42,550/- seized at the Bangalore depot and the imposition of a redemption fine of ?10,000/- were also upheld. The Tribunal found no infirmity in these conclusions, noting that the adjudicating authority had considered all sides of the issue and found credible evidence of unaccounted clearances.

3. Unaccounted Receipt of Raw Material from Eastern Steel Corporation:
The department alleged that KLR deposited unaccounted sale proceeds into the bank accounts of Eastern Steel Corporation for unaccounted raw material purchases. The adjudicating authority found that there was no evidence of unaccounted stocks or raw materials in KLR's factory premises or records. The investigation did not establish a chain of evidence linking the deposits to unaccounted raw material purchases. The Tribunal agreed with the adjudicating authority's finding that the charge of unaccounted raw material procurement was not proved.

Conclusion:
The Tribunal dismissed both the department's appeal and KLR's appeal. The department's appeal failed due to the lack of concrete evidence to support the allegations of undervaluation and unaccounted raw material procurement. KLR's appeal was dismissed as the adjudicating authority's findings on the clandestine clearance of hammers, bits, and spares, and the confiscation of goods at the Bangalore depot were upheld. The Tribunal found that the adjudicating authority had conducted an unbiased analysis of the facts and evidence, confirming credible allegations while dismissing unsubstantiated ones.