2019 (6) TMI 1350 - AT - Central Excise

Valuation - undervaluation of goods - demand based on consumption of fuel increase in price of goods after initiation of investigation etc - demand of 3, 28, 68, 656/- has been made on the ground that the Appellant had undervalued the goods on the basis of statements of buyers - HELD THAT - We find that except the statements of some buyers no evidence has been put on record. The evidence in the form of details of cash receipts from buyers any document proving cash transaction on account of undervaluation has not been brought on record. We also find from the statement of buyers that the statements were inconsistent as initially they stated that the cash amount was given to Appellant through Angadias or their Tiles dealers. However in subsequent statements they stated that the amount was handed over to Shri Hiteshbhai employee of Appellant Unit. During investigation no evidence of any unaccounted money having been received by the appellant from any of the tile manufacturers was found. The main plank of investigation was that the excess amount was routed through shroffs angadias and dealers of tile manufacturers. However no instance of any money having been received through these agencies have been cited in the show cause notice. Admittedly no evidence of the appellant having received the huge amount in unaccounted manner from more than 26 customers to whom frit was sold from February 2005 to February 2010 was found. Even the cross examination of persons whose statements has been relied upon to allege undervaluation was not provided. Not a single insistence of cash receipt at Appellant s end is on record. In such case when the allegation is based upon the statements of buyers which is not supported by even a single evidence and in the light of the fact that no cross examination of such persons whose statements were relied upon was allowed thus the demand does not sustain. Also the Appellant has adequately justified the increase in prices in subsequent years due to increase in prices of raw material and change in machinery. We find that no adverse reasoning has been given against such contention of Appellant. Even otherwise the allegation of undervaluation of goods is based merely upon statements and not any evidence. We are thus of the view that the demands on account of undervaluation which is based merely upon the statement of some buyers are not sustainable. Demand of 2, 95, 33, 205/- has been made against the Appellant on the basis of gas consumption - alleged excess consumption of gas - HELD THAT - Except alleging excess consumption of gas no evidence in the form of procurement or excess consumption of raw materials has been brought on record. Frit is manufactured from eight raw materials and none of the said raw materials has been shown to have been procured in illicit manner or consumed in excess. In such case the demands has no legs to stand - the demands based upon consumption of natural gas is not sustainable as the same is not supported by procurement of any raw material its processing or transportation and identification of any buyer. Demands of 81, 784/- has been made against the Appellant on the ground that they have cleared goods on parallel invoices - HELD THAT - In case of one of the invoices though the alleged consignee M/s Swagat Ceramics has accepted the receipt of goods no evidence of such removal has been found from the Appellant s end. Even the format of such alleged parallel invoice is different from the invoice format of the Appellant and there is no corroborative evidence of transportation of goods - In case of other 5 parallel invoices the buyers of the goods have refused receipt of any goods. The officers had recorded the statement of Shri Samir Parekh the proprietor of the Appellant concern who also has refused supply of goods and issue of parallel invoice. In such case we do not find any reason to uphold the demand against the Appellant. SSI Exemption - Demand of 62, 67, 000/- has been made against the Appellant on the ground that after addition of the value of undervalued and clandestine removal the sale value of the Appellant crosses the SSI Exemption limit and the Appellants are not entitled for SSI exemption in respective years - HELD THAT - Since the charges of undervaluation and clandestine removal of goods are not sustainable against the Appellant hence there is no reason to deny them the benefit of SSI Exemption - subject demand is therefore not sustainable. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Demand of ?3,28,68,656/- for under-valuation of goods.
2. Demand of ?2,95,33,205/- based on excess consumption of gas.
3. Demand of ?81,874/- for clearance of goods on parallel invoices.
4. Demand of ?62,67,000/- for wrongly claiming SSI exemption.

Issue-wise Detailed Analysis:

1. Demand of ?3,28,68,656/- for Under-Valuation of Goods:
The demand was based on the allegation that the appellant under-valued the goods, supported by statements from 26 buyers. However, the tribunal found that the statements were inconsistent and not corroborated by any physical evidence. No cash receipts or documents proving cash transactions were found. The buyers' ledgers did not show any cash payments to the appellant. The tribunal emphasized that the statements alone, without cross-examination and corroborative evidence, could not substantiate the demand. Additionally, the tribunal accepted the appellant's explanation that the price differences were due to varying quality of frit supplied to different buyers and the increase in raw material costs over time. Consequently, the demand based on under-valuation was deemed unsustainable.

2. Demand of ?2,95,33,205/- Based on Excess Consumption of Gas:
The demand was premised on the assumption that excess gas consumption indicated suppressed production and clandestine clearance of frit. However, the tribunal noted that no evidence of excess procurement or consumption of raw materials was presented. Frit manufacturing involves multiple raw materials, and none were shown to have been procured illicitly. The tribunal referenced similar cases where demands based on utility consumption were dismissed due to lack of supporting evidence. Therefore, the demand based on gas consumption was found to be unsustainable.

3. Demand of ?81,874/- for Clearance of Goods on Parallel Invoices:
The demand was related to alleged parallel invoices issued for clandestine clearance of goods. The tribunal found that the format of the alleged parallel invoice differed from the appellant's standard invoices, and there was no corroborative evidence of transportation or receipt of payment. Statements from the alleged buyers and the appellant's employees denied the issuance and receipt of goods under such invoices. Given the lack of concrete evidence, the tribunal concluded that the demand for clearance on parallel invoices was not justified.

4. Demand of ?62,67,000/- for Wrongly Claiming SSI Exemption:
This demand was based on the premise that the appellant exceeded the SSI exemption turnover limit due to under-valuation and clandestine removal of goods. Since the tribunal found the allegations of under-valuation and clandestine removal unsustainable, the basis for denying SSI exemption was invalid. Consequently, the demand for wrongly claiming SSI exemption was also dismissed.

Conclusion:
The tribunal set aside the impugned order and allowed the appeal, stating that the demands were based on assumptions and lacked substantive evidence. The tribunal emphasized the necessity of corroborative evidence and cross-examination to uphold such demands. The decision was influenced by similar cases where demands based on utility consumption and uncorroborated statements were dismissed. The appellant was granted consequential reliefs as per the tribunal's findings.

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