1. The above appeals are at the instance of the Revenue as well as the assessees. E/2943-45/02-A and E/2946/02-A are filed by the Revenue against Order-in-Original No. 25/01, dated 21-8-2001. The very same order is under challenge by the assessee in E/2787/01-A to the extent it is aggrieved by the order. E/3091-3092/02-A are appeals filed by the assessees from Orders-in-Original No. 50/01, dated 26-11-2001. There is no appeal filed by the Revenue against Order-in-Original No. 50/01.
Appeal E/2786/01 is also an appeal at the instance of the assessee directed against Order-in-original No. 26/01, dated 21-8-2001. There is no appeal by the Revenue against Order-in-original No. 26/01. E/1711/03 is at the instance of the Revenue challenging Order-in-original No.28/01, dated 30-8-2001. The same order is under challenge at the instance of the assessee in E/2788/01-A. E/1610/03 is filed by the Revenue challenging Order-in-original No. 29/01, dated 31-8-2001. Same order is challenged by the assessee to the extent it is aggrieved by it in Appeal E/2788/01-A. Since issue involved in these cases is one and the same, we are disposing of these appeals by a common order.
2. Before we go into the contentions raised by the parties we may point out that another learned Commissioner had occasion to consider identical issues in a batch of adjudication orders where he has dropped the demand under show cause notice in toto. Appeals filed by the Revenue against those adjudication orders are dismissed by us separately under a common order.
3. The assessees are engaged in the manufacture of PTY Twisted Yarn falling under chapter sub-heading 54.02 of the Central Excise Tariff Act, 1985. On the basis of intelligence received by the officers of Anti Evasion Directorate that the assessees are indulging in evasion of central excise duty by resorting to undervaluation and clandestine clearances of PTY; that the assessees were clearing PTY from their factory gate at a very low value in the name of fictitious/non-existing firms, while the goods were actually being cleared to godown at Bhiwandi (Maharashtra), Surat (Gujarat) from where they are subsequently being sold through brokers to actual buyers at higher value, search was conducted by the officers in the godowns at Bhiwandi where the PTY cleared from Daman was stored and also the premises of the main transporters and several records were seized. Show cause notices were thereafter issued alleging that the assessees had issued invoices to show that the sale has been effected at the factory gate whereas sales were actually effected from godown, warehouses of the transporters at Bhiwandi and that the sale price shown on the invoice did not reflect the correct assessable value since the buyers name figured in the invoice were fictitious. It was further alleged that the sale between the buyer and the seller was finalised and the payments from actual buyers were received through crossed bearer cheques and not through account payee cheques. Sale realisation shown in the sale ledger is from bogus buyers whose names appear in the invoices and not from actual buyers while delivery from godown was given to actual buyers and not to those shown in the invoices. It was then proposed to compute the value on the basis of the bank statements furnished by the manufacturers to the bank for claiming credit facility.
4. The Commissioner took the view that as far as Bhiwandi sales are concerned there is no factory gate sale and therefore, there is no normal price under Section 4. He took the view that since the name of the buyer is fictitious the definition of buyer under Section 4(1)(a) cannot be satisfied. It is then pointed out that the show cause notice has not invoked the depot price clause [Section 4(1)(a) proviso (ia) read with Section 4(iv)(b)(iii)]. He therefore took the view that the proposal under show cause memo to make assesssment taking recourse to Rule 7 of Valuation Rules is justified. He then proceeded to hold that the valuation based on bank statement given by the assessee for the purpose of availing credit facility can be relied on for arriving at the assessable value. But, at the same time, he held that the basis of calculation taken in the show cause memo was not correct. Total RG 1 quantity was taken as clearance for home consumption without giving any allowance for captive consumption or direct sale at factory gate. The total quantity was multiplied by the unit value given in the bank statement to arrive at the total assessable value. This was compared every month with the total assessable value on which duty has been paid for the corresponding month. In those months where the total assessable value as per show cause memo was coming to less than the assessable value on which duty has been paid such figures were completely ignored for the purpose of duty calculation and for those months where monthly assessable value as per show cause memo method was in excess of the monthly assessable value on which duty has been paid, the differential value has been taken and differential duty has been calculated. Learned Commissioner took the view that if bank statement has to be taken as representing the market price, it should be so taken in every month.
Since show cause memo makes a month wise calculation leading up to differential duty calculation for a financial year, the Commissioner held that proper allowance has to be given for those months where results go in favour of the assessee. The Commissioner also found that demand wrongly included duty on captive consumption and factory gate sales.
5. The Commissioner rejected the proposal in the show cause notice on the basis of comparison of the price of a unit of M/s. Reliance Industries. Commissioner therefore upheld only a portion of the demand in the show cause notice. He dropped the proposal for confiscation of land, plant and machinery and imposition of penalty on the Managing Director and the transporter.
6. In the appeals filed by the Revenue against order-in-original the main contention taken is that Commissioner should not have modified the method of calculation proposed in the show cause notice on the basis of monthly statement before the bank. It is also contended that there was no justification in exonerating the Managing Director and the transport company. It is also submitted that there was sufficient material for justifying confiscation under Rule 173Q(2) of the Central Excise Rules and, therefore, the Commissioner should have upheld the confiscation.
In the appeals filed by the assessees several contentions are raised challenging the order of the Commissioner. It is contended that the sale to the buyers at Bhiwandi had taken place at the factory gate and not at Bhiwandi as held by the Commissioner. It was further contended that normal price for sale to non-Bhiwandi buyers is available and therefore entire show cause notice based on the assumption that there is no factory gate sale is unsustainable. Assessees-appellants further submit that the value declared in the stock statement could not be adopted under Rule 7 of the Valuation Rules. Lastly, it was submitted that in the absence of any evidence that additional consideration has flown from buyers at Bhiwandi in addition to the value declared in the invoice for sale there is no evidence in the case adduced by the Department to show that price received from the buyer was in excess of the invoice value. Assessees submit that the Commissioner had failed to appreciate that admittedly each invoice was for a specific quantity and that specified quantity was delivered to the ultimate buyer and there was no part delivery. Under these circumstances there was no justification for holding that the assessees were guilty of undervaluation.
6. On going through the orders impugned we find that the only basis on which the Commissioner has accepted the allegation of undervaluation is the bank statement. We are of the view that bank statements given by the assessee for the purpose of getting credit facilities cannot be the sole basis for arriving at a conclusion that there was undervaluation in the invoice. The extent to which such statements made by the assessee can be relied on against him in the matter of assessment has been the subject matter of earlier decisions of this Tribunal.
7. In Punjab Oil & Silicate Mills - 1993 (65) E.L.T. 268, the Department while alleging clandestine manufacture and removal of the goods relied on the figures furnished by the assessee to the Department of Industries or as admitted by the party in their affidavits filed before the Department for getting the coal. The Tribunal took the view that any information obtained from the Department of Industries is not sufficient proof to show that the goods were manufactured unless it was substantiated with other evidence of clandestine removal of the manufactured goods. It was also held that even admission, confession or sworn statement given by the appellants before other authority in different context for different purpose cannot be taken as conclusive proof in the absence of positive evidence adduced by the Department. At best it may be an inference but not substantial proof. Similar view was taken in Rishab Refractories Pvt. Ltd. - 1996 (87) E.L.T. 93. In an earlier decision of this Tribunal in Alwyn Industrial Corporation v.CCE - 1988 (33) E.L.T. 376, the Department sought to place reliance on two letters of State Bank of India informing the excise authorities that the appellant had obtained cash credit limit of Rs. 50,000/-, that loan amount was sanctioned for manufacture of electric wires and cables and as per stock statement received from the appellants manufacturing of cable was done by them. The bank had forwarded 12 stock statements submitted by the assessee. The assessee had denied manufacture of wires and cables. The Tribunal took the view that letters received from the bank cannot be relied on to come to the conclusion that the assessee had manufactured wires and cables without any corroborating evidence.
7. In the light of the above authorities we hold that bank statement by itself cannot be the basis for holding that there was undervaluation.
It is relevant to note that the Commissioner held that "although this is a case of alleged undervaluation, there is absolutely no whisper of any evidence of flow back of additional consideration from the buyer to the manufacturer, either directly or through any channel"....... The Commissioner has further held that the burden is on the Revenue to prove that additional consideration has flown back from buyers which the Revenue has not satisfied. He has also held that payment by crossed bearer cheque cannot by itself suggest cash payment or excess flow back to manufacturer or an additional consideration over and above the cheque payment. So long as the Revenue has not been successful in proving that the actual buyer had paid an amount much more than the value shown in the invoice issued at the time of removal of the goods from the factory, the allegation of undervaluation should fail and no demand on that basis can be sustained. Since we hold that the entire demand is not sustainable, it is not necessary for us to refer and consider in detail the contention raised in the appeals by the Revenue challenging the order of the Commissioner for the reason that he has not sustained the entire demand in the show cause notice. Since we are holding that the Revenue has not been successful in proving the allegation of undervaluation, we are not going into the correctness or otherwise of the contentions raised by the assessees that, as a matter of fact, sale to the Bhiwandi buyers took place at the factory gate and not at Bhiwandi.
8. In view of the above, we dismiss appeals E/2943-2945/02 and 2946/02, E/1711/03 and E/1610/03. Appeals filed by the assessee E/2786/01, 3091-92/02, E/2787-2788/02 and CO./56/03 in E/1610/03 are allowed to the extent indicated above.