2014 (5) TMI 245 - AT - Central Excise

Under Valuation - allegation that they were showing only a part of the actual consideration in their invoices and collecting the remaining amount in cash - Held that - the adjudicating authority has not recorded any acceptable reasoning as to how he came to such a conclusion. - the reasoning given by the adjudicating authority seems to be incongruous in as much as all these dealers from whose premises the price lists were recovered did in the initial stages stated that these are the price lists of the main appellant but on cross-examination, clearly stated that the price lists were their own price lists and not the price lists of the appellant. The adjudicating authority, after examining the records and the statements recorded and the cross-examination, found that the statements which indicated under valuation of the goods were effectively nullified by the cross-examination. The demands confirmed on different ground which was never an allegation in the show cause notice is fatal to the case of Revenue - the demand of duty liability does not survive and is unsustainable, we find no reason for visiting the main appellant as well as all other appellants with penalties. - Decided in favor of assessee.

Issues Involved:
1. Whether the adjudicating authority correctly dropped the demand raised in the show cause notice.
2. Whether the adjudicating authority correctly confirmed the demand of approximately Rs.88 lakhs on the main appellant-assessee.
3. Validity of penalties imposed on the main appellant and other appellants under Rule 26.
4. Whether the extended period for demand was applicable.

Issue-Wise Detailed Analysis:

1. Dropping of Demand Raised in the Show Cause Notice:
The Tribunal noted that the adjudicating authority, after examining records, statements, and cross-examinations, found that the statements indicating under-valuation of goods were nullified during cross-examination. The Tribunal observed that there was no re-examination done, and no cogent evidence supported the Revenue's claim of under-valuation. Additionally, no incriminating documents or confiscation of goods were found during the Revenue authorities' visits. Hence, the Tribunal concluded that the Revenue's appeal lacked merit and upheld the adjudicating authority's decision to drop the demand.

2. Confirmation of Demand of Approximately Rs.88 Lakhs:
The adjudicating authority's findings in Para 60 onwards concluded that the main appellant had under-valued goods. However, the Tribunal found no acceptable reasoning for this conclusion. The adjudicating authority relied on price lists recovered from dealers, which were later clarified during cross-examination as the dealers' own price lists, not the appellant's. The differential duty was worked out based on presumptive figures, which was not backed by evidence. The Tribunal emphasized that the re-working of assessable value was neither contemplated in the show cause notice nor communicated to the appellant, making the entire demand unsustainable and liable to be set aside.

3. Validity of Penalties Imposed:
The Tribunal held that since the demand of duty liability was unsustainable, there was no reason to impose penalties on the main appellant or other appellants. The penalties imposed under Rule 26 were set aside. The Tribunal agreed with the main appellant's counsel that penalties could not be imposed based on assumptions or presumptions without tangible evidence of clandestine removal or under-valuation.

4. Extended Period for Demand:
The main appellant argued that the extended period could not be invoked as they had been filing regular returns. The Tribunal did not find it necessary to record findings on this submission, as the appeals were disposed of on merit, rendering the demand and penalties unsustainable.

Conclusion:
The Tribunal set aside the impugned order regarding the confirmation of demand of duty and upheld the order dropping the proceedings by the adjudicating authority. The appeal filed by the Revenue was rejected, and the appeals filed by all other appellants were allowed. The Tribunal emphasized that the adjudicating authority could not confirm demands based on assumptions or reworked assessable values not alleged in the show cause notice. The penalties imposed on the appellants were also set aside.

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