2002 (8) TMI 158 - AT - Central Excise

Valuation (Central Excise) - Burden of proof - Under-valuation - Adjudication - Evidence - Natural justice - Penalty - Imposition of

Issues Involved:
1. Under-valuation of goods.
2. Quantification of demand.
3. Higher selling price of plywood.
4. Price slip evidence.
5. Invocation of extended period of limitation.
6. Penalty imposition.

Issue-wise Detailed Analysis:

1. Under-valuation of Goods:
The appellants were accused of under-valuing plywood by mis-declaring prices and recovering extra value in cash. The Department relied on statements from dealers and a balance sheet entry for sawn timber sales. The appellants argued that there was no evidence of cash flow or nature of transactions in sawn timber. They contended that statements favoring them were ignored, and the demand was based on a solitary slip. The Tribunal found that the Department failed to establish under-valuation with credible evidence. Statements from dealers were recorded under coercion, and the Department's selective reliance on favorable statements was against natural justice.

2. Quantification of Demand:
The appellants argued that the demand was inflated by multiplying the rate of excise duty on plywood with balance sheet figures of sawn timber sales without proper investigation. The Tribunal noted that the quantification was not properly correlated to the quantity of plywood manufactured and cleared. The Department did not controvert the appellants' stand, indicating a need for re-quantification where the demand is sustainable.

3. Higher Selling Price of Plywood:
The Department relied on a statement from one dealer to quantify the demand, ignoring factors like sales tax, freight, and insurance. The Tribunal found no correlation between raw material, finished product, and power consumption to support the claim that plywood was cleared in the guise of sawn timber.

4. Price Slip Evidence:
The appellants contended that the price slip recovered from M/s. Sakthi Agencies was not enclosed with the show cause notice and could not be relied upon. The Tribunal observed that merely showing the slip at the personal hearing did not afford effective opportunity to the appellants. The price slip could only be related to sales made to M/s. Shree Sakthi Agencies and not to other dealers. The Department's reliance on a solitary slip for demanding differential duty from other dealers was unsustainable.

5. Invocation of Extended Period of Limitation:
The appellants maintained all statutory records, and their unit was regularly audited. The Tribunal found that while some consignments had invalid transport documents, indicating suppression of material facts, the extended period of limitation was invocable.

6. Penalty Imposition:
The Tribunal disagreed with the Commissioner's finding that the Managing Director was instrumental in floating a front company. However, since the Managing Director was involved in the company's affairs and there were invalid transport documents, he could not escape penal liability, though the quantum of penalty needed reduction. The penalty on PKV Menon was set aside due to lack of sufficient evidence.

Separate Judgments:
- Member (Technical): Proposed remanding the aspect of duty demand based on the slip recovered from M/s. Shree Sakthi Agencies for de novo consideration.
- Member (Judicial): Held that the Department failed to prove under-valuation and allowed the appeals for lack of evidence.
- Third Member (Technical): Agreed with Member (Judicial), finding the evidence too slender and compromised, and allowed the appeals.

Final Order:
The impugned order was set aside, and the appeals were allowed with consequential relief, if any.

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