2017 (7) TMI 840 - AT - Central Excise

Valuation - includibility - the allegation by department is that KLR had collected excess amount over & above Central Excise invoices resulting in under valuation and evasion of Central Excise Duty, that KLR supplied bits/hammers/rig parts without discharge of Central Excise duty and that they had indulged in large scale unaccounted procurement of raw materials/inputs - Held that - Adjudicating authority has concluded that even if it is assumed that the said private records relate to KLR, there is no other evidence to drive home the point that the contents reflect the true picture. In this regard, we find that in the de novo proceedings, pursuant to Tribunal s directions, cross examination of Smt. Anuradha Prasad was conducted on 19.07.2004, wherein inter-alia, she has retracted her earlier statement of 02.08.1997 and had complained that the same had not been given out of her volition but as per the dictates of the officers who had recorded the statement. In such circumstances, the allegations of the department, which in any case were solely based on records recovered from the office of Smt. Anuradha Prasad and the statement of Smt. Anuradha Prasad, will then be jeopardy. We are, therefore, unable to find any fault with the adjudicating authority s findings and conclusions on this score. On the aspect of allegation that KLR had undervalued the rigs supplied to the customers, it is seen that the same is based on the statement given by customers as also the statements given by Shri K. Lakshma Reddy on various occasions. Like in the case of Smt. Anuradha Prasad, we find that Shri Lakshma Reddy had also retracted whatever he had stated in his earlier statements. We also find ourselves in agreement with the adjudicating authority s findings that even those allegations, made on the basis of such statements are not backed up by any corroborative evidence. The contention of KLR that on the date of visit to the factory by Department Officers, no unaccounted stocks of raw materials, either steel or buttons were found, has not been suitably countered by the department. This aspect definitely casts a doubt on the allegation of the department that KLR had been receiving raw materials in their factory without any accountal and using them for manufacture of unaccounted goods. The adjudicating authority has also found contradictions in the statements of raw material suppliers. In the circumstances, we hold that the adjudicating authority has been therefore correct in concluding that it would be very difficult to place reliance on them to sustain the charge of the department. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Validity of statements from Smt. Anuradha Prasad.
2. Retraction of statements by Shri K. Laxma Reddy and Smt. Anuradha Prasad.
3. Onus of proof regarding under-valuation of goods cleared by KLR.
4. Allegations of collection of extra amounts by KLR.
5. Allegations concerning procurement of unaccounted raw materials.

Issue-wise Detailed Analysis:

1. Validity of Statements from Smt. Anuradha Prasad:
The department argued that the conventional statements of Smt. Anuradha Prasad, the auditor of KLR, should be considered valid evidence. However, the adjudicating authority cast doubt on these statements, noting that the scribe of the documents recovered was not identified, and there was no corroborative evidence to substantiate the allegations against KLR. During cross-examination, Smt. Anuradha Prasad retracted her earlier statement, claiming it was made under duress. The tribunal upheld the adjudicating authority's findings, stating that without corroborative evidence, the statements could not be relied upon.

2. Retraction of Statements by Shri K. Laxma Reddy and Smt. Anuradha Prasad:
The department contended that the retractions by Shri K. Laxma Reddy, Managing Director of KLR, and Smt. Anuradha Prasad were afterthoughts and not acceptable. However, the adjudicating authority found that both individuals had retracted their statements, and there was no corroborative evidence to support the allegations made based on these statements. The tribunal agreed with this assessment, noting that the retractions and lack of supporting evidence weakened the department's case.

3. Onus of Proof Regarding Under-valuation of Goods Cleared by KLR:
The department alleged that KLR had under-valued the goods cleared, relying on private documents and statements from customers and Shri K. Laxma Reddy. The adjudicating authority found that these allegations were not backed by corroborative evidence and that no unaccounted stocks of raw materials were found during the department's visit to KLR's factory. The tribunal upheld this finding, emphasizing that the burden of proof lay with the department, which failed to provide sufficient evidence.

4. Allegations of Collection of Extra Amounts by KLR:
The department claimed that KLR had collected extra amounts over and above the Central Excise invoices. The adjudicating authority found no evidence to support this allegation, noting that the department had not countered KLR's contention that no unaccounted stocks were found during the inspection. The tribunal agreed, stating that the department had not provided any evidence to substantiate the claim of extra amounts collected.

5. Allegations Concerning Procurement of Unaccounted Raw Materials:
The department alleged that KLR had procured unaccounted raw materials, which were used to manufacture and clear goods clandestinely. The adjudicating authority found that the allegations were based on loose sheets of paper without any signatures or totals, and there was no evidence of unaccounted stocks in KLR's branches or job workers' premises. The tribunal upheld this finding, noting that the department had not provided any corroborative evidence to support the allegations of unaccounted procurement and clandestine manufacture.

Conclusion:
The tribunal found no infirmity in the adjudicating authority's findings and conclusions. The department's appeal was dismissed, as the grounds of appeal were a mere rehash of the allegations already addressed and found wanting in the adjudication process. The tribunal emphasized the importance of corroborative evidence in proving allegations of under-valuation, unaccounted procurement, and clandestine clearance, which the department failed to provide. The benefit of doubt was given to the assessee, and the charges against KLR were not proven.

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