2019 (4) TMI 726 - AT - Central Excise

Clandestine removal - undervaluation - cum duty benefit denied - penalty u/r 26 of CER - Held that - The appellant would have recovered excess amount than invoiced amount to defraud state exchequer by less payment of Central Excise Duty. It appears unacceptable that the cases of sale at Jodhpur and same sale at Ahmedabad, where the Department has recovered the evidences there was under invoicing but for other no under invoicing would have been resorted to. It is evident from the statement recorded by the various persons, it is very evident that the Appellant No. 2 and 3 have planned and execute the undervaluation of excisable goods for the purpose of evading applicable Central Excise duties. The adjudicating Authority has, therefore, rightly imposed penalties on them under Rule 26 of Central Excise Rules - no illegality has been committed by the adjudicating authority on this score. Appeal dismissed - decided against appellant.

Issues Involved:
1. Allegation of undervaluation of goods.
2. Request for cum duty benefit.
3. Penalty imposition on the company’s executives.
4. Evidence and investigation adequacy.

Detailed Analysis:

Allegation of Undervaluation of Goods:
The case revolves around the appellant, a manufacturing entity, accused of evading Central Excise duty by undervaluing their products in invoices for sales made to customers in Ahmedabad and Jodhpur. The Department's investigation revealed that the appellant was receiving additional payments in cash over and above the invoice value through commission agents. This was corroborated by statements from various personnel, including the Senior Manager, President, and commission agents. The appellant admitted to undervaluation for sales to Jodhpur clients and some sales to Ahmedabad customers.

Request for Cum Duty Benefit:
The appellant sought cum duty benefit for the admitted duty liability on sales to Jodhpur buyers, arguing that the duty should be recalculated to ?18,99,391/-. However, the adjudicating authority denied this request, citing precedents where cum tax benefit was not extended in cases of clandestine removal and undervaluation. The judgment emphasized that the additional cash consideration received was not inclusive of duty, thus ruling out the applicability of cum duty benefit.

Penalty Imposition on the Company’s Executives:
The appellant contended that penalties should not be imposed on its executives under Section 26 of the Central Excise Rules, 2002, as the goods were not liable for confiscation. However, the adjudicating authority upheld the penalties, noting the deliberate planning and execution of undervaluation by the executives. The relevant rule stipulates penalties for individuals involved in dealing with excisable goods liable for confiscation, and the evidence indicated that the executives were complicit in the scheme to evade duty.

Evidence and Investigation Adequacy:
The appellant argued that the Department's extrapolation of data from a few cases to the entire sales was unjustified, as investigations were only conducted for seven buyers. The adjudicating authority, however, found that the evidence recovered, including statements and documents, sufficiently indicated a pattern of undervaluation beyond the investigated cases. The judgment relied on the principle that absolute proof is not required; rather, a prudent estimate based on the probability of the case suffices. The authority concluded that the appellant's claim of undervaluation being limited to unorganized sectors was not credible, given the evidence of similar practices in other sales.

Conclusion:
The Tribunal upheld the adjudicating authority's decision, rejecting the appellant's claims for cum duty benefit and the argument against penalties on the executives. The evidence supported the conclusion of systematic undervaluation and evasion of Central Excise duty, justifying the penalties imposed. The appeals were dismissed, affirming the original order.

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