2010 (10) TMI 645 - AT - Central Excise

Evasion of duty - Notification No. 211/83-C.E., dated 4-8-83 up to 24-3-85 and under Notification No. 100/85-C.E - misdeclaration of the adjusted sale price in relation to manufacture of Panama brand cigarette of the respective description for which protection of revenue was warranted - Revenue was of the opinion that there was no difference between two brands i.e. Panama Viriginia G manufactured by NETCO and Panama Virigina (Special), manufactured by GTC in its various factories - The recorded statement examined by the Authority brought to record shows that there was realisation of excess sale price and the price marked on the packets were lower than the actual price realised from sale of cigarettes - There was no disclaimer of the materials recovered in the course of search and statements recorded on the basis of such materials from deponents proved proximity and intimate connection thereof with the trade of appellants and persons connected thereto - It is well known, that it is very difficult for Revenue, to prove every link, in respect of the commission of the offence under the Act by direct evidence - An admission is the best evidence that an opposing party can rely upon, and though not conclusive, is decisive of the matter, unless successfully withdrawn or proved erroneous - Held that the declaration filed before the authorities were full proof of suppression of fact, when all connected evidence proved realisation of higher MRP. Accordingly, the Excise authorities having discharged their burden of proof, the appellants had no right to call for cross-examination on flimsy plea Regarding penalty - Having noticed that both the appellants had pre-meditated design through the joint venture approach to undervalue the goods resulting in loss of Revenue and been intimately connected with such loss causing evasion of Revenue, levy of penalty on both of them was justified - Appeals are dismissed

Issues Involved:
1. Legality of Search
2. Suppression of Material Facts and Deceptively Similar Goods Manufactured
3. Utility and Relevancy Attributable to Conscious Possession
4. Basis of Levy
5. Natural Justice
6. Evidentiary Value of Statement Recorded
7. Cross-Examination
8. Preponderance of Probability
9. Standard of Proof
10. Misdeclaration
11. Determination of Liability
12. Limitation
13. Penalty

Issue-Wise Detailed Analysis:

1. Legality of Search:
The Tribunal held that the search was legal and properly authorized. The search was conducted based on a reasonable belief of contravention of the Central Excise Act, and the materials recovered during the search were found to be incriminating and relevant to the case.

2. Suppression of Material Facts and Deceptively Similar Goods Manufactured:
The investigation revealed that NETCO manufactured deceptively similar brands of cigarettes under the control of GTC, which were identical in quality to GTC's regular brands. This led to undervaluation and evasion of excise duty. The Tribunal found substantial evidence of such practices, including chemical examination reports and the manner of marking MRP on cigarette packets.

3. Utility and Relevancy Attributable to Conscious Possession:
The materials recovered during the search and the statements recorded were found to be relevant and credible. These materials demonstrated the realization of higher sale prices and the flow of such proceeds to GTC. The Tribunal noted that the evidence showed the exclusive control of GTC over the marketing network.

4. Basis of Levy:
The Tribunal agreed with the Adjudicating Authority that the basis of levy should be the actual sale price realized rather than the MRP embossed on the cigarette packets. The evidence showed that the embossed prices were fictitious and the actual sale prices were higher.

5. Natural Justice:
The Tribunal found no violation of natural justice. The appellants were given ample opportunity to present their case, but they delayed the adjudication process by not filing replies to the show cause notice and raising baseless pleas. The Tribunal held that the principles of natural justice were adhered to by the Adjudicating Authority.

6. Evidentiary Value of Statement Recorded:
The statements recorded under Section 14 of the Central Excise Act were found to be admissible and credible. The Tribunal noted that these statements were not retracted and were corroborated by other evidence. The statements provided a clear picture of the modus operandi and the involvement of the appellants in the evasion of duty.

7. Cross-Examination:
The Tribunal held that the appellants' request for cross-examination was premature and unwarranted as they had not filed replies to the show cause notice. The Tribunal emphasized that cross-examination is not a matter of right and must be justified by the circumstances of the case.

8. Preponderance of Probability:
The Tribunal noted that the standard of proof in civil cases is based on the preponderance of probabilities. The evidence presented by the Revenue was sufficient to establish the appellants' involvement in the evasion of duty. The Tribunal found that the evidence was credible and supported the conclusions drawn by the Adjudicating Authority.

9. Standard of Proof:
The Tribunal reiterated that the standard of proof in civil cases does not require absolute certainty but rather a balance of probabilities. The evidence must be sufficient to convince a prudent person of the existence of the fact in issue. The Tribunal found that the evidence met this standard.

10. Misdeclaration:
The Tribunal found that the appellants had deliberately misdeclared the MRP on the cigarette packets to evade duty. The evidence showed that the MRP was embossed in a barely visible manner, and the actual sale prices were higher. The Tribunal held that this misdeclaration was part of a well-thought-out plan to evade duty.

11. Determination of Liability:
The Tribunal held that the duty liability should be attributed to NETCO, which was the job worker manufacturing the cigarettes. The Tribunal noted that the event of levy is the manufacture of goods, and NETCO was responsible for paying the duty on the goods it manufactured.

12. Limitation:
The Tribunal held that the extended period of limitation under Section 11A of the Central Excise Act was applicable due to the appellants' fraudulent practices and suppression of facts. The Tribunal found that the appellants' actions justified the invocation of the extended period.

13. Penalty:
The Tribunal upheld the imposition of penalties on both GTC and NETCO. The Tribunal found that both appellants were intimately connected with the evasion of duty and had adopted a premeditated design to undervalue the goods. The penalties were justified in light of the appellants' contraventions of the law.

Conclusion:
The Tribunal dismissed both appeals, except for modifying the order of adjudication to hold that NETCO shall be liable for the duty imposed. The Tribunal confirmed the findings of the Adjudicating Authority on all issues, including the legality of search, suppression of material facts, realization of higher sale prices, flow back of funds, misdeclaration, determination of liability, limitation, and penalties.

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