2017 (6) TMI 813 - AT - Central Excise

Valuation - under-invoicing of products - veneers - mis-declaration of higher quality veneers as low quality veneers - scope of SCN - The appellants rebutted the allegation in the SCN and contended that the allegations were based on assumptions and presumptions - Held that - the allegation of under invoicing is well established on the basis of the investigation done by revenue. The seized records indicate both the recovery of billed amounts as well as additional amounts recovered as OA by cash - The statement of other employees of NVP not only fully corroborates and supports the documents recovered, but also clearly brings out the fact that NVP was recovering amounts in addition to invoiced prices which were not part of the assessable value of the goods for purposes of charging excise duty. The accessed private records were in fact maintained by the staff of the office and contained information correlatable to the invoices which are statutory records. Consequently, these records cannot be ignored and can be made basis for confirming the allegation of undervaluation. With effect from 01.07.2000, the concept of value in Section 4 of Central Excise Act was changed. The concept of transaction value has been introduced w.e.f. 01.07.2000. Transaction value refers to the actual amount charged for the transaction - By definition, a necessary concomitant of transaction value is that the price should be the sole consideration for the sale. Thus, in a scenario where the buyer has to necessarily pay an amount in cash over and above the prices indicated in the invoices, as was the case w.r.t. the appellants, the invoice values cannot be regarded as transaction values. This is because one of the necessary conditions for the existence of a transaction value on each removal at the factory gate is not satisfied. The question before us is whether, on the basis of available evidence, can we come to the conclusion that the goods were undervalued and whether duty demand is justified. It is very well established that in quasi-judicial proceedings, as in civil cases, the principle to be applied to evaluate the evidence is preponderance of probabilities. The investigation done by the Revenue has established the allegation of underinvoicing. Consequently, the demand of differential duty as confirmed by the ld. Commissioner in the impugned order is upheld. Appeal dismissed - decided against appellant.

Issues Involved:

1. Allegation of under-invoicing and mis-declaration of wood veneer quality by M/s. National Veneer Products (NVP).
2. Confirmation of duty demand and penalties by the Commissioner.
3. Appeals by the assessee against the confirmation of duty and penalties.
4. Appeal by the Revenue against the restriction of duty demand to clearances based on seized records.

Detailed Analysis:

1. Allegation of Under-Invoicing and Mis-Declaration:

The Revenue conducted simultaneous searches at the premises of NVP and related entities, discovering that NVP had evaded Central Excise duty by under-invoicing their products and mis-declaring higher quality veneers as lower quality. Invoices reflected only part of the actual price, with the remaining amount recovered in cash and not recorded in statutory records. Investigations revealed that extra amounts were also realized under the guise of transportation and labor charges.

2. Confirmation of Duty Demand and Penalties:

The Commissioner confirmed a duty demand of ?11,91,671 based on seized records, along with penalties of the same amount and additional penalties on key personnel. The duty demand was reduced from the initial ?39,80,193 proposed in the show cause notice, limiting it to figures obtained from seized documents.

3. Appeals by the Assessee:

The assessee argued that the demand was based on uncorroborated private records and lacked independent verification from buyers. They contended that floppy discs used as evidence were not admissible under Section 36B of the Central Excise Act. The assessee cited several case laws to support their argument that the demand was unsustainable without corroboration from the buyers' end.

4. Appeal by the Revenue:

The Revenue argued that the seized documents and statements from key personnel clearly established the under-invoicing and collection of additional amounts in cash. They contended that the Commissioner erred in restricting the duty demand to the figures from seized records and should have applied the Central Excise Valuation Rules for best judgment assessment. The Revenue relied on several case laws to support their position.

Judgment Analysis:

The Tribunal analyzed the evidence, including statements from key personnel and seized documents, which corroborated the allegations of under-invoicing. The private records and statements from employees confirmed that NVP collected amounts in excess of invoiced amounts. The Tribunal upheld the Commissioner's decision to confirm the duty demand based on seized records and rejected the assessee's arguments that the demand was based on assumptions.

The Tribunal also upheld the method adopted by the Commissioner for calculating the duty demand, rejecting the assessee's contention that the transaction value shown in invoices should be accepted. The Tribunal emphasized that the private records maintained by responsible employees, corroborated by their statements, provided sufficient evidence of under-invoicing.

The Tribunal rejected the appeals filed by both the assessee and the Revenue, concluding that the investigation by the Revenue had established the under-invoicing allegations. The Tribunal also noted that each case should be decided based on its evidence and did not merit remanding the case for a denovo decision.

Conclusion:

The Tribunal upheld the impugned order, confirming the duty demand of ?11,91,671 and associated penalties, while rejecting the appeals filed by both the assessee and the Revenue. The Tribunal emphasized the importance of corroborated evidence in establishing the allegations of under-invoicing.

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