2017 (8) TMI 217 - AT - Central Excise

Clandestine removal - undervaluation - plastic bags - The main allegation raised against the appellant is that they received orders from their customers for supply of plastic bags and such orders were placed on weight basis after specifying the size, thickness of the bag. Though the orders were placed on the basis of size and thickness and weight of the bags which was noted by appellants on chits, the appellants raised invoices to customers for lesser value on the basis of the quantity shown in numbers. Held that - it is pertinent to mention that the appellants have not come forward with a plausible explanation as to why they have not mentioned the size and thickness of the plastic bags in the invoices/cash bills when they have mentioned the size and thickness of the bags in the chits. It is admitted by appellants that they were noting down the size and thickness and the corresponding value while orders are placed by the customers. Such chits have been recovered by the department from the sale office of appellant unit. These when compared with the invoice have brought to light that there is much undervaluation by not mentioning the size and thickness of the bags. The appellants have mentioned the quantity of the bags in numbers and have applied the rate for number of bags thereby showing a lesser value for the bags cleared by them. It is also brought out from the evidence from dealers / purchasers like Jegan and MR Plastics that the appellants have cleared plastic bags by issuing chits only and not issuing any invoice or cash bills at all. Such clandestine removal of finished product is unearthed from the evidence collected at the end of transporters also. Thus, we have to say that the department has been able to establish clandestine clearance on the part of the appellants. Quantification of clearances - Held that - the demand is confirmed for the period 2003 04 to 2004 05 (upto 1.11.2005) when the value of clearances exceeded one crore. Therefore, we do not find any ground to doubt or interfere with the quantification of duty also. Extended period of limitation - Held that - The facts and evidence establish that appellants have indulged in undervaluation and unaccounted clearances with an intention to evade payment of duty. The same would not have come to light but for the investigation conducted by department - invocation of extended period justified. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Eligibility for SSI exemption under Notification No. 8/2000-CE.
2. Allegations of clandestine production and clearance.
3. Method of valuation and computation of duty.
4. Evidence of suppression of production and undervaluation.
5. Legitimacy of affidavits and private records.
6. Invocation of extended period for issuing show cause notices.

Detailed Analysis:

1. Eligibility for SSI Exemption under Notification No. 8/2000-CE:
The appellants, manufacturers of HM/PP plastic carry bags, claimed exemption under Notification No. 8/2000-CE for small scale industrial units, asserting that their value of clearances was below Rs. One crore. However, investigations revealed discrepancies in the recorded value of clearances and actual clearances, suggesting that the appellants had undervalued their products to avail of the exemption.

2. Allegations of Clandestine Production and Clearance:
The Preventive Unit officers discovered that the appellants maintained private records indicating actual production and clearance quantities, which were not reflected in the official stock register. The department seized various documents, including chits and notebooks, which showed that the appellants had not accounted for the actual quantity of plastic bags manufactured and cleared, thereby indulging in suppression of production and clandestine clearance.

3. Method of Valuation and Computation of Duty:
The department alleged that the appellants deliberately undervalued their products by issuing invoices based on the number of bags instead of their weight and size, which was noted in the private records. The duty demand was computed using a formula that considered the size and thickness of the bags. The appellants contended that this method was erroneous, but the department justified its approach, stating that it was an accepted industry practice corroborated by the Managing Partner's statements.

4. Evidence of Suppression of Production and Undervaluation:
The investigation revealed that the appellants recorded orders in chits based on the weight, size, and thickness of the bags but issued invoices showing only the number of bags. The department found that the sale proceeds collected were higher than the invoice amounts, with the excess amount not accounted for in the official records. The appellants' contention that the chits were merely order records was refuted by the evidence of actual clearances without corresponding invoices and the discrepancies in the recorded values.

5. Legitimacy of Affidavits and Private Records:
The appellants presented affidavits from their accountant and a customer's accountant, claiming that the clearances included in the department's computation were erroneous. However, the Tribunal found that these documents were not attested and thus not acceptable as evidence. The department's reliance on private records and the inconsistencies in the appellants' explanations further undermined the credibility of these affidavits.

6. Invocation of Extended Period for Issuing Show Cause Notices:
The appellants argued that the second show cause notice, issued for a period already covered by the first notice, was barred by limitation. The Tribunal, however, upheld the department's position, stating that the investigation was continuous and the extended period was justified due to the appellants' suppression of facts and intent to evade duty.

Conclusion:
The Tribunal dismissed the appeal, finding that the appellants had indeed indulged in clandestine clearance and undervaluation of plastic bags to avail of the SSI exemption. The method of valuation adopted by the department was deemed appropriate, and the invocation of the extended period for issuing show cause notices was upheld. The affidavits presented by the appellants were rejected as inadmissible evidence, and the department's findings were sufficiently supported by the recovered documents and testimonies.