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TMI Blog2010 (7) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments were recovered under mahazars dated 28-8-2003 and statements recorded from various key persons/persons involved in the business of MCL. MCL has a factory at Mysore and sales depots at Delhi, Lucknow, Ludhiana, Chennai, Mumbai and Kolkata. They also have consignment agents at Ahmedabad, Hyderabad, Nagpur and Pune. Investigations conducted showed that MCL had undervalued excisable goods cleared by them by showing only a part of the actual sale consideration in their invoices and thereby evaded payment of Central Excise duty. 2. The following documents seized appeared to suggest under-valuation and receipt of money in excess of amount invoiced by MCL : (i) Inter office memo dated 20-6-2003 from Bangalore office to the factory of MCL (ii) Slips recovered from the Lucknow office of MCL (iii) Documents recovered from Sri Balaji Glass & Plywoods, Bangalore (iv) Documents seized from Bangalore Office of MCL (v) Documents recovered from M/s. Rohini Plywood & Laminates, Bangalore (vi)&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the corresponding invoice, the difference ranging from 40% to 54.56%. Sri Umedmal Jain, cashier admitted in his statement dated 23-8-2003 that the actual value was much more than the value shown in the invoices of MCL and such additional amounts were collected in cash by their consignment agents/branch managers and transferred to the company as per the direction of Sri Shyam Daga, Resident Director MCL or Sri G.R. Surekha, another executive of the assessee. The value difference is not explained by MCL satisfactorily. The delayed explanation that these differential amounts represented advance was not convincing. In the absence of any evidence to the contrary, the Commissioner held that there was undervaluation in respect of these invoices to an extent of Rs. 3,79,452/-, as the IOM was corroborated by the statements of Sri K. Sridhar and Sri Umedmal Jain. He relied on the Apex Court judgment in the case of Surjeeth Singh Chhabra v. Union of India - 1997 (89) E.L.T. 646 (S.C.), wherein it has been held that "the confession, though retracted, is an admission, and binds the petitioner" and ignored the retraction by the cashier in cross examination in 2006. Where the invoices sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Balaji Plywoods, Bangalore stated that the prices shown in the invoices of MCL and their distributors were less than the actual value of goods and that invoice amounts were collected by the representatives of Sri L.N. Daga through cheques, and the balance over and above the invoice value were collected from them in cash by Sri L.N. Daga. Printed price lists were recovered by the DGCEI from the premises of M/s. Balaji Plywoods, Bangalore, which showed the prices of premium grade plywood/blockboard to be sold by the dealers. Sri K.S. Srinivas, Proprietor of M/s. Balaji Plywood, Bangalore in his statement dated 2-9-2003 had stated that he purchased the Archid brand plywood and products from M/s. Arunachal Plywood Agency/Assam Timber Agency and sometimes directly from MCL under invoices. The investigating authorities relied on the statement dt. 2-9-2003 given by Sri K.S. Srinivas of M/s. Balaji Glass and Plywoods, Bangalore confirmed and corroborated by Kutcha slips/sheets seized from the other premises and concluded that there was no substance in the averments/arguments made by MCL on this issue, but failed to counter the point that the price list seized from M/s. Balaji Glass a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the actual prices mentioned in them. MCL stated that Shri Anup Agarwal was not an employee of MCL or its Delhi office, but an employee of M/s. Shyam Plywood and Laminates, Delhi. MCL furnished a copy of sworn affidavit dated 30-8-2003 of Shri Anup Agarwal showing that he was an employee of M/s. Shyam Plywood & Laminates, Delhi. In support, MCL have submitted copies of Bank statements obtained from Vijaya Bank, Ramnagar Branch, New Delhi showing payment of salary to Shri Anup Agarwal by M/s. Shyam Plywood & Laminates, New Delhi. He had also sworn that he was not aware as to what statements the officers made him to sign on 28-8-2003, since a copy of the same had not been given to him. The Commissioner held that in the absence of any reference being made on the slip with regard to any particular invoice, adverse conclusions could not be drawn from the said kutcha slips. He dropped the proposal to demand differential duty. Some loose papers were allegedly recovered from the personal custody of Shri Anup Agarwal of MCL. Based on these, it was alleged that the prices of goods of MCL as they appeared on the said slips showed that the prices shown in the invoices were much less than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial duty. (h) Writing pad recovered from the Ludhiana Branch office The writing pad revealed the sales for May, June & July of 2003 as amounting to Rs. 42,32,248/- and sales of previous year at Rs. 1,17,44,429/- and based on similar slips reportedly found, it was alleged that unaccounted collection of sale consideration had been made by MCL. Sri Rrajesh Arora, sales executive of the Ludhiana office of MCL had stated that the figures appearing in the said slips were not accounted in the sales account of Ludhiana Branch, without offering any explanation for non-accounting of the above details in their books of accounts. MCL contended that their Ludhiana Branch office covered a number of markets in North India such as Punjab, Haryana, Himachal Pradesh, Jammu & Kashmir etc. and that when total figures were taken for the whole area, the quantity sold would be close to the figures found in the said slips. MCL had stated that there was no evidence forthcoming to show any flow back of differential value from the Ludhiana Branch of MCL to their head office and no documentary evidence in the form of cash or accounts were found in the Ludhiana office/Delhi office or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey had purchased goods from M/s. Kela Brothers and that the invoiced amounts were much less than the actual amounts shown in the chart prepared by Vaishal K. Shah, Proprietor of M/s. Adinath Plywood Centre, Ahmedabad. On this basis it was alleged that M/s. Kela Brothers had raised bills/invoices for less than 50% of the actual sale consideration collected by them. Vaishal Kismatbhai Shah, Proprietor of M/s. Adinath Plywood centre, Ahmedabad, had stated that he was making payments of the invoiced amounts in cheques, and the remaining extra amounts were paid in cash to Shri Prem Kishore Sikchi. In this manner, he had made payments of Rs. 15,59,873/- through cheques, and Rs. 19,69,193/- in cash to M/s. Kela Brothers. As a consignment agent of MCL, M/s. Kela Brothers were required to sell the goods on the value on which duty liability had been discharged by MCL, which was to be considered as transaction value for the purposes of assessment. Sri Prem Kishore Sikchi of M/s. Kela Brothers confirmed that the cash receipts were in respect of products of MCL and that they were handing over the sale consideration collected in cash to Sri Shyam Daga or to his representatives viz., Rasil, Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price lists, chits, invoices and extra payments made and that such co-relation had been brought out through the admissions made in the statements. 6.2 The Commissioner concluded that collection of additional consideration from the customers by MCL/Shyam Daga was established at least in some cases, on the basis of evidence. There were also circumstantial evidences for the receipt of additional consideration in cash by MCL/Shyam Daga. There was also evidence to show that the goods were sold at higher prices than the prices reflected in the invoices of MCL. Though the goods may not have been sold at the prices mentioned in the price lists, the invoice prices were far less even if up to 50% discounts were given as claimed by MCL/Shyam Daga. 6.3 He also referred to the judgment of Apex Court which had held that "it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are within the knowledge of the opponent or the accused," in the judgment 1974 (04) LCX004 = 1983 (13) E.L.T. 1546 (S.C.) in the case of Collector of Customs, Madras and Others v. D. Bhoormall. The Apex Court supported the view that the investigation had to establish t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention and fraudulent action to evade payment of Central Excise duty. As MCL have fabricated their statutory records intentionally by suppressing the actual sale value of the goods from the statutory authority, Central Excise duty evaded by them by fraudulent means is liable to be recovered. (f) Shri Shyam Daga, Resident Director of MCL, has masterminded the undervaluation of the goods and collected additional consideration in cash over and above the invoice value without reflecting in any of the statutory records. Such collections have been made directly by himself, and/or through his representatives/managers. The statements given by various persons clearly show the central role played by him. The entire operation of underinvoicing of the goods has been carried out by him knowingly and willfully, with an intention to evade payment of Central Excise duty, and therefore, he is liable for penalty. 8. Considering the facts discussed above, the Commissioner has confirmed demand of an amount of Rs. 80,36,177 on the additional consideration of Rs. 5,02,26,106/- on goods sold by M/s. Kela Brothers (Cal), Ahmedabad, Rs. 60,712/- on the additional co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct the Commissioner of Central Excise, Mangalore to file the subject appeal was not at all a subject of discussion by the Committee when it had met on 4-4-2007. The minutes had merely indicated the decision of the Committee to file the appeal against the impugned order. There was no mention of the Commissioner of Central Excise, Mangalore being directed to file the appeal as the 'authority to file the appeal'. The 'Commissioner of Central Excise, Mangalore' came to be inserted only while typing out the order of the Committee. From the endorsement on the order of the Committee, it is seen that a copy thereof was marked only to Commissioner of Central Excise, Mysore. Accordingly, a letter was also issued to the Commissioner of Central Excise, Mysore. The direction in the name of the Commissioner of Central Excise, Mangalore in the order of the Committee was thus clearly a clerical/typographical error. It did not reflect the decision of the Committee. 11.1 The Review Committee again met on 26-10-2009 and found that in terms of sub-section (4) of Section 35B of the Act, either the adjudicating authority or the authorized officer could file the appeal pursuant to the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any such decision or order and may, by order, direct such [Commissioner] [or any other Commissioner] to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the [Committee of Chief Commissioners of Central Excise] in its order. [Provided that where the Committee of Chief Commissioners of Central Excise differs in its opinion as to the legality or propriety of the decision or order of the Commissioner of Central Excise, it shall state the point or points on which it differs and make a reference to the Board which, after considering the facts of the decision or order, if is of the opinion that the decision or order passed by the Commissioner of Central Excise is not legal or proper, may, by order, direct such Commissioner or any other Commissioner to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order, as may be specified in its order.] xxx xxx xxx xxx (4) Where in pursuance of an order under sub-section (1) or sub-section (2) the adjudicating authority or the authorised officer makes an applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retracted his statement and submitted as follows during cross examination :- "that he received the Inter Office Memo dated 20-6-2003 from K. Sridhar and he sent the same to him (Jain) for confirming the contents of IOM and he verified receipts recorded in the IOM recorded at the right side with the ledger. However, he has not verified the details of 11 Bills recorded on the left side of the IOM and he has not been able to confirm the credit balance of Rs. 1,91,577/- to K. Sridhar since the same was not tallying with the ledger; that the receipts on the right side mentioned in the IOM can be in the nature of advance payments as well as 'on account' payments; that he has verified the receipts mentioned in the IOM with the 'Account Confirmation Statement' received from Balaji Plywoods, Vijayaxvada for the year ended 2003-2004 and found the entries to be the same, that he further verified the said receipts with the Ledger extracts of MCL for the same period and found that the said receipts are figuring in the Ledger." 14. It is submitted that "From the above, it was very clear that the said IOM was documented by K. Sridhar to Umeedmal Jain for verification of outstanding balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alore. 17. In the IOM Invoice Nos. 236, 237, 298, 299, 354, 390, 39, 405, 406, 499 and 500 had been referred and MCL in their reply to SCN have stated that most of the invoices referred only to B-grade articles. After going through the said documents, Commissioner was of the opinion that the Invoice Nos. 354, 390, 391, 405 and 500 covered goods of B-grade as indicated on these invoices. He allowed benefit of doubt to the assessee in respect of these invoices; but in respect of rest of the six invoices, the total differential value between the relevant invoices and the value shown in the IOM worked out to Rs. 3,79,452/-. This IOM was sent by K. Sridhar, Regional Manager of MCL, Bangalore to Shri Umeedmal Jain, Cashier, MCL, Mysore, who had admitted that he had received the said IOM through fax. The values shown in the IOM had been verified with the relevant invoices and there appeared to be variation in the values between the IOM and the invoices. Sri Umeedmal Jain had admitted in his statement that the actual value was much more than the value shown in the invoices of MCL and such additional amounts were collected in cash by their consignment agents/branch manager and transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry can be taken on record as retraction made only on the day it is submitted to the Central Excise/Customs Department or the Adjudicating Authority. (i) S. Prithviraj Kawad v. CC, Chennai [2006 (206) E.L.T. 512] (ii) Ashraf Puliyulla Parambil v. CC, Chennai [2007 (213) E.L.T. 555] (iii) Em Pee Bee International v. CCE (Adj.), Chennai [2008 (229) E.L.T. 704] (iv) Tejwal Dyestuff Industries v. CCE, Ahmedabad [2007 (216) E.L.T. 310 (LB)] 20. As regards the statements furnished by the employees of the assessee, they are admissible in evidence when found to be voluntary and not vitiated in any manner as held by the Apex Court in Bhana Khalpa Bhai Patel v ACC, Bulsar [1997 (96) E.L.T. 211 (S.C.)]. Therefore, the statements given by S/Shri K. Shridhar and Umeedmal Jain are acceptable evidence. In Blue Star Ltd. [2003 (161) E.L.T. 141 (Bom.)], it was held that strong and cogent material on record was required to refuse and discard statements recorded under statute. In Govindasamy Regupathy [1998 (98) E.L.T. 50 (Mad.)], the High Court held that statements made under Section 108 before Customs Officer were rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise duty was liable to be paid. 23. Sri Anoop Trivedi had admitted that he had collected additional amounts in cash which was over and above the invoice value shown as detailed in Para 6.1, 6.2 and 6.3 of SCN, and that he had not retracted his statement dt. 28-8-2003. Further, Sri H.A. Ray the branch manager had also seen the statement dt. 28-8-2003 of Sri Anoop Trivedi and had remarked that he had read the statement of his marketing executive, which was in four pages and agreed with the contents of the said statement. M/s. MCL had suppressed the sale value to a great extent in respect of excisable goods manufactured and cleared from MCL in their invoices and statutory records. 24. We have considered the findings and arguments of MCL in this regard. The six loose slips/sheets were recovered from the personal custody of the assessee's employee. It had evidentiary value as an incriminating document. We find that even though Shri Jamil Ahmed retracted his statement in cross examination, the statement of Shri Anoop Trivedi is valid evidence and supports the finding of undervaluation. He is an employee of MCL and made an informed statement initially. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be attributed to MCL or Shyam Daga alone. This was stated by Shri Prem Kishore Sikchi in his statement dated 18-4-2005. The appellants denied that the entries in the private accounts of M/s. Kela Brothers related to MCL or Shyam Daga. The total amount said to have been spent in cash on behalf of MCL was a ridiculously high Rs. 271.09 lakhs against the total sales of goods valued at Rs. 203.30 lakhs. It was not indicated for what purpose, the said amount had been spent by M/s. Kela Brothers on behalf of MCL. 27. It is further submitted that the gravamen of the charge was that MCL had under invoiced the goods cleared. Any alleged differential payment should have direct correlation with the invoices covering the goods cleared during the impugned period. Such an alleged feedback was required to be supported by documentary evidence in the form of cash or accounts found at the appellant's premises. No such evidence was found and no correlation established between invoices and kutcha slips. The impugned demand and penalties deserved to be vacated. 28. We find that the Commissioner arrived at the finding of under- valuation by MCL based on documents and statements of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating authority found that evidence brought out in the investigation showed flow back of additional consideration in the form of cash to MCL as evidenced by chits/slips/pads, and supported by the corroborative evidence of statements of persons/dealers/customers/consignment agents. The assessee's challenge is based on belated retraction of witnesses. In the light of the statement of Sri Prem Kishore Sikchi and the documentary evidence, we find that the Commissioner's finding on undervaluation has to be upheld. 30. The Commissioner found the charge of undervaluation and collection of additional amounts in cash by MCL where incriminating documents were recovered and such collection corroborated by statements given by the employees of M/s. Kela Brothers (Cal.), Ahmedabad, M/s. MCL, Mysore and MCL, Lucknow Branch, and M/s. Adinath Plywood Centre, Ahmedabad. Since the undervaluation and collection of additional consideration in cash by MCL had been proved in the instances referred to above, MCL were liable to pay the Central Excise duty on such clearances made to or through M/s. Kela Brothers (Cal.), Ahmedabad, M/s. MCL, Mysore and MCL, Lucknow Branch. 31. We have consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deciding the differential duty leviable on the basis of the above principles, the Commissioner can determine the quantum of penalty, etc." 32. We remand this matter to the Commissioner for a fresh decision in the light of the decision in CERA Boards case. The Commissioner shall also decide the penal liabilities of the assessee and the Director of the assessee in de novo proceedings after hearing them. Appeal E/317/2000 33. In this appeal, the Revenue seeks confirmation of entire duty on MCL as proposed in the Show Cause Notice, which the impugned order disposed. The following submissions are made :- 33.1 The Commissioner did not appreciate that he was required to prove the charge of undervaluation based only on the principle of preponderance of probability. This criterion was met if the proposition was more likely to be true than not true. Effectively, the standard was satisfied if there was greater than 50% chance that the proposition was true. Lord Denning in Miller v. Minister of Pensions had described it simply as "more probable than not". Though the Commissioner relied on IOM and held it to be of high evidentiary value and undervaluation was established, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore his retracted statements were not admissible in evidence. As per his statements the assessee collected higher amounts than the invoice amounts. However, the slips recovered from him could not be linked to any clearances. We have cited the relevant finding of the Commissioner elsewhere in the order. We find that the Commissioner order is correct and the demand canvassed is not backed by any evidence. In the circumstances this plea of the Revenue is rejected. 34. As for the fax sent by Umiya Enterprises and statement of Shri Pankaj Patel relied by revenue in appeal for seeking confirmation of differential duty, the Commissioner had dropped the proposal as the transaction did not take place. We find that the fax related to transaction involving classic grade plywood which Umiya Enterprises did not buy. The particular transaction did not happen. We find that therefore the Commissioner rightly dropped the demand on this count. There cannot any demand based on this fax. The invoices considered dealt with inferior quality products whereas the fax dealt with premium quality products. We find no infirmity in the decision of the Commissioner. We reject this part of the appeal. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oice value whose authenticity was not in doubt. The revenue also relied on the decision of the Bench in the case of Carpenter Classic Ltd. - 2006 (200) E.L.T. 593. In that case, DRI could provide concrete evidence only in respect of one out of 25 Bills of Entry relating to consignments of 'kitchen modules'. Yet, based on this evidence, corroborated by the statements of the Director of the importing company and some of the employees, the Tribunal confirmed the duty demand on all consignments accepting the fact that even if convincing evidence was produced in respect of a small proportion of the whole set of clearances, the requirement of preponderance of probability was met and one did not need to look for 100% evidence with respect to each clearance. 35.1 In this regard we find that the Commissioner rendered his findings as follows. Where incriminating documents were recovered and such collection corroborated by statements given by the employees of M/s. Kela Brothers (Cal.), Ahmedabad, M/s. MCL, Mysore and MCL, Lucknow Branch, and M/s. Adinath Plywood Centre, Ahmedabad demand is confirmed. Since the undervaluation and collection of additional consideration in cash by MCL had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... safe and justified. In the instant case, we find that the facts highlighted by the Commissioner do not justify such a course of action. As undervaluation cannot be ruled out and is likely to have taken place as is apparent from the price lists, chits and IOM seized, we consider it necessary to remand the case canvassed in the Revenue appeal to the Commissioner for adjudication. Allowing this prayer, we are remanding the dispute regarding undervaluation for fresh adjudication except that relating to the case pertaining to fax recovered from Umiya Enterprises and sales from the Delhi branch of MCL in the light of ratio of this Tribunal in the case of CERA Boards & Doors. It is open to the Revenue to canvass its case before the Commissioner in the remand proceedings to be conducted in the light of the ratio of the CERA Boards and Doors case cited before us by the Revenue. 36.1 In deciding the appeal filed by the Revenue we have duly considered the submissions made by the assessee. These are based on belated retractions of witnesses. In allowing the Revenue appeal by way of remand, we have not considered such statements of third parties as evidence. We have found the initial sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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