2023 (10) TMI 7 - AT - Central Excise

Clandestine removal - Undervaluation of goods - evasion of duty - it is alleged that the goods sold through Surya Rubbers Chemicals Pvt. Ltd. (SRCL) and Pyramid Rubber Company Pvt. Ltd. (PRCL) are not accounted in the books of RRPL - Non-existing/dummy units - HELD THAT - There are strong force in the statements made by the appellants that when adjudicating authority has held that RRPL, SRC and PRC are related persons, it contradicts the finding in the impugned order that SRC and PRC are only dummy units created for procuring the tenders offered by KSRTC. In addition to that during hearing, the Learned counsel for the appellant draws our attention to large number of documents including registration, deed of partnership, VAT registration and proforma of registration issued by Central Excise authorities to SRC RRPL firms, books of accounts etc., to substantiate that the units are functioning independently and not dummy units as alleged. Considering the law laid down by the Apex Court in the matter of Commissioner of Central Excise, New Delhi Versus Superior Products and Goodyear South Asia Tyres Pvt. Ltd. 2015 (8) TMI 61 - SUPREME COURT , wherein it is categorically held that all the three units even few of the directors or responsible persons are one and same, they cannot be considered as related persons since all the three were having separate legal entities. Undervaluation - HELD THAT - The document relied on by the adjudicating authority to adopt the value of the rubber cannot be considered as admissible evidence. Moreover, appellant had produced documents issued by Rubber Board regarding the average value of rubber at the relevant time. If the Investigating authority had reason to believe that the cost of rubber at the relevant time was higher than the value shown in the books of accounts, they could have obtained authentic data from the Rubber Board or other agency than relying on unsigned/unauthenticated document allegedly recovered during investigation. Moreover, there is no evidence regarding place of recovery of said document, it is unsigned and it was not brought to the notice of concerned person during investigation - Considering the above fact, there is no reason to allege undervaluation regarding transactions carried out between the RRPL, SRC and PRC. Regarding the submission made by the learned AR relating to the payments made by PRC and SRC allegedly to the rawmaterial suppliers, to a specific question regarding the books of account related to manufacturing activities for the goods supplied by the SRC and PRC, the learned AR fairly admits that there are no such records available on record. Appeal allowed.

Summary

Issues Involved:
1. Allegation of under-valuation of goods.
2. Allegation of clandestine removal of goods without payment of duty.
3. Confiscation of unaccounted goods.

Summary:

1. Allegation of Under-Valuation of Goods:
The appellant, M/s. Rachana Rubbers Pvt. Ltd. (RRPL), was accused of under-valuing Pre-cured Tread Rubber (PCTR) and other products by clearing them through related entities, Surya Rubbers & Chemicals Pvt. Ltd. (SRCL) and Pyramid Rubber Company Pvt. Ltd. (PRCL), which were alleged to be dummy units. The show-cause notice did not establish that RRPL, SRCL, and PRCL were "related persons" as per Section 4(3)(b) of the Central Excise Act, 1944. The adjudicating authority's reliance on Rule 11 of the Central Excise Valuation Rules, 2000, was contested since it proceeded beyond the scope of the show-cause notice. The Tribunal found that the document used to allege under-valuation was inadmissible as it was unsigned and lacked a disclosed source. The appellant provided evidence from the Rubber Board indicating the average price of rubber, which contradicted the adjudicating authority's findings. The Tribunal concluded that there was no basis for the under-valuation allegation.

2. Allegation of Clandestine Removal of Goods Without Payment of Duty:
The adjudicating authority alleged that RRPL, SRCL, and PRCL were involved in the clandestine removal of goods. However, the Tribunal found inconsistencies in the adjudicating authority's findings, particularly the contradictory statements about the relationship between RRPL, SRCL, and PRCL. The Tribunal noted that the appellant provided substantial documentation, including registration certificates and inspection reports, proving the independent functioning of SRCL and PRCL. The Tribunal also highlighted that the adjudicating authority failed to provide admissible evidence to support the allegation of clandestine removal. Consequently, the Tribunal found the allegation unsustainable.

3. Confiscation of Unaccounted Goods:
The adjudicating authority ordered the confiscation of 102 rolls of PCTR and 182 boxes of BG, which were unaccounted for and seized from RRPL's factory premises. The Tribunal found that the evidence provided by the appellant, including inspection reports and registration documents, demonstrated the legitimacy of SRCL and PRCL's operations. The Tribunal also noted the lack of proper evidence to substantiate the confiscation order. As a result, the Tribunal deemed the confiscation order unsustainable.

Conclusion:
The Tribunal allowed the appeals with consequential relief and set aside the penalties imposed on the appellants. The order was pronounced in the Open Court on 28/07/2023.