2017 (2) TMI 360 - AT - Central Excise

Natural justice - mis-declaration of value - grey fabrics - no evidence of the said allegation has been given by the Revenue to the appellants despite specific request for the same - imposition of penalty - Held that - in absence of any invoice-wise correlation between the purchase price of the grey fabrics and the value adopted for the purpose of Central Excise cannot be accepted. The statement given by the merchant manufacturer was changed during the cross examination. The Revenue could have countered that retraction by producing some records. However, Revenue has not done the same and, therefore, failed to substantiate the evidence relied upon in the show-cause notice - penalty set aside - appeal allowed - decided in favor of appellant.

Issues: Alleged mis-declaration of the value of grey fabrics supplied, demand of duty and penalty imposition, rejection of declared price, imposition of penalties without substantive evidence, imposition of penalties under Rule 209A of the Central Excise Rules, 1944, reliance on retracted statements, lack of tangible evidence supporting allegations, imposition of penalty without physical handling of goods or knowledge of suppression of value, reliance on fictitious bills, failure to provide crucial documents compromising defense, lack of correlation between purchase and excise invoices, failure to substantiate allegations of under-valuation.

Analysis:
1. The appeals were filed concerning the alleged mis-declaration of the value of grey fabrics supplied by M/s R.B. Textile Mills to Shree Mahaganesh Texpro Ltd., resulting in the confirmation of duty and penalty imposition along with interest and equivalent penalty. The appellants argued that they followed the prescribed procedure and filed a declaration with respect to the value of grey fabrics sent for processing. The Revenue challenged the declared price, leading to litigation. The appellants contended that the Revenue failed to produce substantive evidence to reject the declared value, and the demand was based on retracted statements without proper substantiation. Penalties under Rule 209A were sought to be imposed without allegations of goods being liable to confiscation.

2. The counsel for Shri Prakash Balar argued that the allegation of low value declaration was not supported by tangible evidence, primarily relying on a retracted statement. It was emphasized that to impose penalties under Rule 209A, physical handling of goods and knowledge of their confiscation liability are essential, which were lacking in this case. The defense highlighted that the case was built on assumptions and presumptions without concrete proof.

3. The Revenue's argument was based on the submission of fictitious bills lacking essential fabric details. They contended that the declared value was lower than the actual purchase price of grey fabrics, justifying the imposition of penalties under section 209A. The reliance was placed on previous tribunal decisions and a High Court case to support the penalty imposition even without confiscation of goods.

4. The Tribunal analyzed the submissions and found that the Revenue failed to provide crucial documents, severely compromising the appellant's defense. The absence of invoice-wise correlation between purchase prices and excise valuation was noted. The retracted statement was not adequately countered by the Revenue with supporting records, leading to the inability to substantiate the under-valuation allegations. Consequently, the penalties imposed on the appellants were not sustained due to the lack of substantiated evidence by the Revenue.

5. Ultimately, the appeals were allowed on the basis of the Revenue's failure to substantiate the under-valuation allegations, highlighting the importance of providing concrete evidence to support penalty imposition in such cases.

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