OIO No. 26/ JC / 2013 Dated: 13.03.2013 Page 1 of 92 lhek “kq Yd ,oa ds Unz h; mRikn “kq Yd vk;q Drky;] ds Unz h; mRikn “kq Yd Hkou] js l dks lZ ] fja x jks M jktdks V-360001 OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE RACE COURSE RING ROAD, RAJKOT-360001 F.No.V.ST/15-325/Adj/2009 By RPAD/HAND DELIVERY vkns ”k dh frfFk Date of Order:- 13.03.2013 Ekw y vkns ”k Lka . Order in Original NO. 26/JC/2013 tkjh djus dh frfFk Date of Issue:- 13.03.2013 vkns ”kdrkZ dk uke : Passed by: ,e- Kkulq Unje संयुƠ आयुƠ ds- m- “kqYd vk;q Drky;] jktdks V ds la nHkZ es a : In the matter of M/s. Anand Industries, 8-A, National Highway, Rafaleshwar, Opp. Dariyalal Resort, Morbi, Dist. Rajkot dkj.k crkvks a uks fVl la- &frfFk Show Cause Notice No. & Date. SCN No. DGCEI/AZU/12(4)34/2008-09 dated 23.04.2009 1. ;g iz frfyfi ml O;fDr dks futh mi;ksx ds fy, fu%”kq Yd nh xbZ gS ] ftls ;g tkjh fd;k x;k gSA 2. bl vkns ”k ds fo:) vk;qDr (vihy) ds- m- “kq- vk;qDrky;] jktdks V esa vihy dh tk ldrh gS A 3. vihy QkeZ bZ-,-&1 es a dh tkuh pkfg, ,o a dsUnz h; mRikn vihy fu;e 2001 dh /kkjk&3 dh mi/kkjk (2) dh “krs Z mfYyf[kr O;fDr }kjk gLrk{kfjr gks uh pkfg,A 4. ds Unz h; mRikn “kqYd vf/kfu;e 1944 dh /kkjk 35 dh mi/kkjk 1 ds vuq lkj vkns ”k dks iz kIr fd, tkus dh rkjh[k ls 60 fnuks a ds vUnj vihy Qkby dh tkuh pkfg,A 5. bl vihy ds lkFk fuEufyf[kr dkxtkr gks us pkfg,% (a) LVkEi vf/kfu;e 1870 ds /kkjk 1 dh mi/kkjk 6 ds vuq lkj bl vkns ”k dh iz frfyfi ;k nw ljs dh iz frfyfi&ftl ij uhps n”kkZ , v/khu fu/kkZ fjr dks VZ dh LVkEi Qhl gks uh pkfg,% (i) ;fn lcTS kDV eS Vj dh jde ew Y; 50 :Ik;s ;k mlls de gks rks 25 iS ls gks A (ii) ;fn ;fn lcTS kDV eS Vj dh jde ew Y; 50 :Ik;s ls vf/kd gks rks 50 iS ls gks A (b) vihy dh iz frfyfi ftlij :Ik;s 2-50 dh dks VZ Qh LVkEi gks uh pkfg,A 6- vihy QkZ e ds lkFk M~ ;w Vh@isUkYVh vkfn ds Hkq xrku dk ew yHkw r izek.ki= la yfXur gks uh pkfg, Notes: - [These notes are for broad general guidance only. The original text of the Central Excise Act, 1944 and the Rules framed there under may be referred to before taking any action in terms of these Notes.]
Notes: - [These notes are for broad general guidance only. The original text of the Central Excise Act, 1944 and the Rules framed there under may be referred to before taking any action in terms of these Notes.]
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BRIEF FACTS OF THE CASE:
M/s. Anand Industries, 8-A, National Highway, Rafaleshwar, Opp. Dariyalal Resort, Morbi, Dist. Rajkot (here-in-after referred to as M/s. Anand for the sake of brevity) are registered with Central Excise vide Registration No. AADFA3648KXM001 for the manufacture of Ceramic Tiles falling under Chapter 69 of Central Excise Tariff Act, 1985. Central Excise duty is leviable on such products as per the provisions of Section 4A of the Central Excise Act, 1944. Accordingly, M/s. Anand were clearing their excisable finished goods on payment of duty @ 8% adv. on the value determined by them after availing an abatement of 45% of the MRP declared in their Central Excise invoices. 2. Directorate General of Central Excise Intelligence, Ahmedabad Zonal Unit [here-in-after referred to as DGCEI for the sake of brevity] collected an intelligence, indicating that the manufacturers of Ceramic Glazed and Vitrified tiles of Morbi and other parts of the State of Gujarat, including M/s. Anand are engaged in large-scale evasion of Central Excise duty by adopting the following modus operandie:-
(i) The manufacturers of such tiles are removing finished goods from their registered factory premises by not declaring the actual MRP of their products in the Central Excise Invoices. They were declaring only a part of actual MRP and consequently evade payment of duty of excise by determining a lower assessable value after availing abatement of 45% on such lower MRP.
(ii) These manufacturers also mis-declare in the Central Excise invoices the
actual ex-factory prices of such tiles, which is recoverable from their buyers. They artificially work out an ex-factory price to match with the lower MRP and manipulated assessable value declared in the aforesaid manner.
(iii) Tiles are sold in the market at prices which vary according to the quality
and grade. Generally the tiles were sold with the grades STD, ECO, COM, REJ etc. in the invoices while the tiles were actually of different qualities viz. Plain Colours, Printed tiles, Glossy tiles, etc. DGCEI gathered that in order to mislead the Department, M/s Anand were not declaring such qualities in their invoices. Though the grades were mentioned as STD, COM, SIL etc. in the invoices, they were informing actual varieties to their buyers on packing slips. In their price lists also, they were mentioning the varieties of tiles like plain colours, printed tiles, glossy tiles, etc.
(iv) The differential value over and above the value declared in the Central
Excise invoices was collected by them in cash from the buyers, and such cash amounts are not accounted for in their statutory records.
(v) These manufacturers and their dealers and distributors have adopted a
fraudulent method to keep the landed cost of tiles at the barest minimum at the destination, so that it does not exceed the artificial MRP declared in the Central Excise invoices. In order to achieve this objective, the manufacturers in connivance with the dealers and transporters were not showing the actual transportation cost of tiles from the factory to such destination. LRs of the transporters and bills of the shipping companies, in case tiles are transported in containers in coastal vessels, contained only less than 50% of the actual freight amount. The dealers paid the freight amounts over and above the declared freight as per documents, in cash to the transporters and shipping companies. Thus they could keep the landed cost below the MRP declared by the manufacturers and avoid VAT on such transportation cost. In most of the cases, freight was kept below Rs. 20,000/- to avoid deduction of Tax at Source as well as evade Service Tax.
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(vi) The recipient dealers and distributors were also not showing on records the actual expenses incurred by them towards local transportation, transit insurance, loading and unloading expenses, actual margin of profit etc. These expenses were also meted out by them in cash.
(vii) The recipient dealers of such tiles were also selling the same to ultimate
consumers by not showing the actual MRP or sale value in their sale bills. They have artificially worked out the selling price to match with the landed cost declared by them on records. Differential value over and above the value declared in the sale bills was collected by them from the consumers in cash. Thus the dealers evaded VAT on the tiles sold by them.
(viii) While part of the cash amounts collected by the dealers and distributors in
the aforesaid manner was spent by them towards meeting the undeclared expenses as mentioned above, the remaining cash amounts which formed the actual cost of tiles, over and above the value declared in the Central Excise invoices, were transferred by them to the manufacturers.
(ix) In order to transfer such cash amounts from dealers to manufacturers,
different methods were adopted by them. In case of transfer from within the State of Gujarat, cash amounts were mostly transferred through angadias. In case of transfer from the various locations outside Gujarat, cash amounts were sometimes, collected personally by the authorized representatives of the manufacturers or their sales personnel during their visit to the dealers, or even by angadias.
(x) The most common method used for collection of cash amounts was
through the bank accounts of ICICI, HDFC etc. banks controlled by the shroffs who opened bank accounts in different private banks, mostly ICICI Bank, in the name of a large number of fictitious trading firms. The shroffs were communicating the name of such trading firm, bank account number, PAN number etc. to the manufacturers. The manufacturers were communicating these details to their dealers and marketing personnel either telephonically or through SMS messages. They were also mentioning a fax number in such communications. Accordingly, the dealers were depositing cash amounts into these accounts at multi-locations, and were sending a copy of the relevant pay-in-slip by fax to the number communicated by the manufacturers. The manufacturers on the basis of fax copies of such pay-in-slips received from the dealers were communicating the details of such cash deposits to the shroffs. Thereafter, shroffs were withdrawing the cash amounts from the respective bank account and was either handing over the same to the manufacturers or their dedicated representatives. In order to evade cash transaction tax or to avoid detection by the authorities, these shroffs were sometimes, transferring such cash amounts to some other bank accounts, mostly held in different co-operative banks in Rajkot, before withdrawing the cash amounts in the aforesaid manner.
(xi) In order to keep the manufacturing cost within the range of artificial value
declared in the Central Excise invoices, the manufacturers were also procuring a number of raw materials either on cash payments or by not showing the actual value in the books of accounts. Cash amounts received by the shroffs in the aforesaid manner, were sometimes handed over to such suppliers of raw materials also at the behest of the manufacturers.
3. DGCEI conducted a detailed study revealed that during the aforesaid process, apart from large-scale evasion of duty of excise, huge amounts of commercial tax, income tax and other local taxes such as octroi or entry tax, wherever applicable, were being evaded by the manufacturers and their dealers situated across the Country. It was also revealed that the aforesaid system of selling tiles without proper sale bills and collecting huge amounts over and above the declared bill value, had become a market
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practice across the country and it was running as parallel economy to the larger ruin of national exchequer. Discreet verification from the banks revealed that over Rs. 1000 Crores were exchanged hands as unaccounted cash amounts, in the aforesaid manner, through a number of shroffs situated in Morbi, Rajkot, Himatnagar and Ahmedabad. Considering the large magnitude of loss to the Revenue to the Union of India as well as State Governments, DGCEI decided to conduct a detailed investigation in the matter. 4. DGCEI selected 11 manufacturers of tiles situated in Morbi, several transporters, shroffs, angadias, shipping companies, dealers and depots situated at different locations and conducted a coordinated search operation on 17.01.2008. Information regarding the details of consignments shipped in coastal vessels was also collected from the Customs Houses at Kandla and Mundra Ports. Similarly, statements of various bank accounts held by different shroffs in ICICI Bank were also collected. 5. The search operation on 17.01.2008 resulted in recovery of a large number of incontrovertible documentary evidences which validated all the aforesaid points of intelligence and also recovered incriminating documentary evidences against several manufacturers, other than the 11 manufacturers which were searched on the same day. 6. Further, DGCEI was conducted search operation on 24.01.2008 at other 11 manufacturers of Morbi. During the search operation at M/s. Angel Ceramics Pvt. Ltd., situated at Old Ghuntu Road, Morbi, a mob of unknown men interrupted the panchnama proceedings and pelted stones and severely damaged the Government vehicles and beaten the officers. Due to this critical - volatile situation DGCEI withdrawn the search parties from all the 11 factories and brought out of Morbi under police escort. 7. An FIR was filed by the officers with local police before departure from Morbi. The entire event appeared to be pre-meditated with the tacit support of some factory owners. This whole episode took place with intent to disrupt DGCEI from carrying out investigation against the manufacturers of tiles. Consequent upon the search operation on 17.01.2008, these factory owners were aware that DGCEI was in possession of huge cache of documentary evidences which exposed their entire fraudulent activities of defrauding Government for a long period. Therefore, they instigated their employees and labourers to create panic among the officers and desist from further search operations at their factories. 8. It revealed from scrutiny of the documents seized on 17.01.2008 that about 60% of all the tiles manufactured in Gujarat were marketed to the dealers and distributors of Kerala, Tamilnadu and Karnataka. DGCEI has collected further evidences against the remaining manufacturers from the dealers and distributors of Kerala, Tamilnadu and Karnataka. 9. Sensing the importance of the evidences which are in the possession of DGCEI and an impending investigation against their fraudulent activities, the manufacturers of tiles decided to start declaring actual MRP in their invoices and stop evasion of duty of excise in the aforesaid manner. Accordingly, most of such manufacturers revised their MRP and started paying appropriate amount of duty from the month of February, 2008. Another search operation was planned by DGCEI for 18.03.2008 and DGCEI felt necessary to utilize the services of armed police battalion for conducting searches. 10. Accordingly, another search operation was conducted on 18.03.2008 at the premises of two manufacturers of tiles viz. M/s. Decolight and M/s. Comet Ceramics M/s. Comet Ceramics was one of the 11 units which were covered during the search operation on 24.01.2008. However, the owners of the said factories were further created critical - volatile situation and hence the Directors of Deco Group and M/s. Comet Ceramics were summoned by DGCEI on 25.03.2008. The Directors of the said units deliberately gave evasive replies and thereby did not extend any cooperation towards the investigation of the case on 25.03.2008. Therefore, Shri Girish Maganlal Pethapara, Chairman-cum-Managing Director and Shri Jayantilal Maganlal Pethapara, owners of Deco Group and Shri Bhimjibhai V. Bhalodia and Shri Virjibhai V. Bhalodia, owners of M/s. Comet Ceramics were arrested on 25.03.2008 under reasons to believe that these Directors were fully aware and concerned in manufacturing, selling, transporting,
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depositing, keeping, manipulating the statutory records, and in all the manners dealing with the said excisable goods which they knew and had reasons to believe were liable for confiscation under the said Act and the Rules framed thereunder, and by these acts they have contravened the provisions of Central Excise Act, 1944 which is punishable under Section 9 read with Section 9AA of the Central Excise Act, 1944. 11. Considering the increasingly aggressive attitude of all the manufacturers of tiles of Morbi and the events which unfolded on 24.01.2008 and again on 18.03.2008, DGCEI decided to conduct investigations against the remaining units by calling upon the official documents and books of accounts under summons proceedings. 12. In view of the above circumstances, official documents were called for from M/s. Anand under summons dated 12.04.2008 and they submitted the records on 13.05.2008. 13. On scrutiny of sales invoices for the period from 2004-05 to 2007-08 produced by M/s. Anand revealed that M/s. Anand were mentioning the general description of tiles i.e. “Ceramic Glazed Tiles” with the grades of tiles viz. “STD” “COM”, “REJ/SIL”, “SIL” and “REJ” in their invoices. The period-wise MRPs of tiles shown in the invoices of M/s. Anand are as below:- Sr. No. Period Quality STD+ STD COM SIL REJ
14. It is evident from the above table that M/s. Anand declared MRPs of different grades of tiles without any standard method. During the period 01.04.04 to 27.06.07, they declared mainly four grades of tiles viz STD, COM, SIL and REJ. From 28.02.07, they were Declaring only three grades viz STD, SIL and REJ. After the initiation of investigations by DGCEI against various tile manufacturers, they revised their MRPs firstly from 22.02.08 and further enhanced substantially from 03.03.08. While they increased the MRP of STD grade tiles by 40 to 60%, the MRP of SIL grade tiles have been enhanced by almost 100% from 03.03.08. 15. It is revealed that M/s. Anand were having uniform MRP for all over India without devising any zone-wise MRP. They were manufacturing two varieties of tiles i.e. Luster and Ordinary and both the said varieties were classified in three grades viz. STD, SIL and DD. The MRPs for STD and SIL grade Luster type tiles have been declared as Rs. 160/- and Rs. 120/- and the MRPs for STD and SIL grade Ordinary type tiles have been declared as Rs. 140/- and Rs. 110/-, respectively. They have declared a single MRP for the DD grade tiles of both the qualities. They have not declared different MRPs for different size, colour and design of tiles. 16. M/s. Anand were not declaring the colour wise, design wise, varieties – Luster or Ordinary grade wise MRPs but showing one MRP for one grade of tiles during the period prior to initiation of investigation by DGCEI. It is only after the initiation of inquiries by the DGCEI that they started declaring the higher MRPs without mentioning the design/ colour of tiles. 17. The revision of MRPs and mentioning the type of tiles by M/s. Anand after the initiation of inquiries by DGCEI reveals that M/s. Anand were manufacturing luster and ordinary tiles of different colours with the actual MRPs which they started declaring from
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03.03.08. These facts indicate that M/s. Anand were evading duty of excise by way of gross undervaluation. 18. The premises of a few dealers of M/s. Anand were also searched by DGCEI. The evidences collected from the dealers of M/s. Anand are discussed in following paras:- 19. DGCEI, Madurai searched the business premises of M/s. Glazeware Trading Co., 33, Dhanappa Mudali Street, Madurai [here-in-after referred as M/s. Glazeware, for the sake of brevity] on 17.01.2008. Shri C. Rajasekaran, Manager of M/s. Glazeware was present during the panchnama proceedings. Some documents and records have been seized for further investigation of the case against M/s. Anand. During the course of verification of physical stock of tiles lying in the said premises, certain quantity of ceramic tiles were placed under seizure on the ground that the MRP affixed on the boxes were not in consonance with the MRPs declared by the respective tile manufacturers in the central excise invoices. 20. The scrutiny of sales invoices of M/s. Anand revealed that M/s. Anand have shown following sales of wall tiles during the period Sept, 2004 to 21.01.08 to M/s. Glazeware:-
Chart showing details of clearances by M/s. Anand to M/s. Glazeware Invoice No. Date Grade of tiles Quantity (No. of boxes) MRP declared
117 16-Jul-07 STD 477.00 100.00 117 16-Jul-07 SIL 1200.00 60.00 149 4-Aug-07 STD 420.00 100.00 149 4-Aug-07 SIL 230.00 60.00 187 21-Aug-07 SIL 1000.00 60.00 253 24-Sep-07 STD 823.00 100.00 253 24-Sep-07 SIL 140.00 60.00 470 20-Dec-07 STD 400.00 100.00 470 20-Dec-07 SIL 25.00 60.00 484 24-Dec-07 STD 1216.00 100.00 484 24-Dec-07 SIL 164.00 60.00 494 28-Dec-07 STD 800.00 100.00 551 21-Jan-08 STD 1452.00 100.00 551 21-Jan-08 SIL 251.00 60.00 612 5-Feb-08 STD 2094.00 100.00 612 5-Feb-08 SIL 89.00 60.00
33358.00 21. It is revealed from the above table that the maximum MRP declared by M/s. Anand in their invoices during the years 2004-05, 2005-06 was Rs. 100/- per box, Rs. 90/-, Rs. 60/- and Rs. 30/- for the tiles of STD, COM, SIL and REJ grades, respectively. As per the normal practice prevailing in the market, it is evident that sale prices of ceramic tiles are differed on the basis of size, cololur and design. M/s. Anand are manufacturing 12x8, size of ceramic wall tiles of different colours and designs. Tiles of dark series, special colours and super special colours were much costly while the tiles of plain light colours and plain light prints were cheaper. Thus, the prices for all such different colour and designs of wall tiles cannot be the same as declared by them in the invoices. This indicates that M/s. Anand have not issued their central excise invoices by declaring all the requisite particulars in connection with their clearances of excisable goods. This also indicates that they were not showing the correct sale prices and MRPs as per the colours and designs of tiles manufactured and cleared by them. 22. Seized file No. 5 contains a quotation dated 03.05.2006 submitted by M/s. Glazeware to SIFFS Tsunami Project, Villavilai under which they have offered rates, inter alia, for 12x12 size floor tiles was Rs. 20/- per sq. ft. for PREM grade tiles and Rs. 18/- per sft. for ECO grade tiles, both of matt finish designs and clearly specified that taxes, loading and unloading charges would be charged extra. One box of 12x12 size tiles contains 11 pcs covering an area of 10.67 sft. and thus the price works out to Rs. 213.40 per box for PREM grade and Rs. 192.06 per box for ECO grade. However, scrutiny of the invoices issued by M/s. Ocean during the year 2006-07 indicates that the MRP declared by them for such PREM grade tiles of 12x12 size was Rs. 160/- per box. Thus it is evidently clear that these MRPs declared by M/s. Ocean in their invoices were not the actual MRPs at which tiles cleared from their factory are sold in the market. The said evidence is incorporated in the notice issued to M/s. Ocean Ceramic Pvt. Ltd.
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23. Seized record No. 6 is a LIC 2005 diary maintained by Shri C. Rajasekaran, owner of M/s. Glazeware. Although the said diary is of the year 2005, the details written therein are of the years 2006 and 2007 as could be seen from the various dates mentioned on several pages. The diary contains mostly the details of discussion and business dealings carried out by M/s. Glazeware during the course of various business tours undertaken by Shri C. Rajasekaran to various places including the State of Gujarat. Most of the purchases of ceramic and vitrified tiles have been made by M/s. Glazeware from the manufacturers of Ocean, Anand, Himat, Opal, Kalyan, Manish, Santosh, Varmora brand tiles of Morbi, as could be seen from the purchase invoices seized from M/s. Glazeware. Similarly, all details of purchase, collection of payments, transfer of payments, costing details etc. written in the said diary are also in respect of these brands. Besides, the diary also contains the details of various LIC policies taken by Shri C. Rajasekaran of M/s. Glazeware. These facts clearly establish that the diary belonged to Shri C. Rajasekaran, owner of M/s. Glazeware. 24. On left side of page No. 3, details of supplies made by M/s. Anand to M/s. AGM Agencies, Annanagar, Madurai are written. Shri Rajasekaran was getting commission from M/s. Anand on the said supplies to M/s. AGM. In this case, M/s. AGM had paid total Rs. 60,000/- in cash to M/s. Anand on 23.01.2007, 24.01.2007, 25.01.2007 and 26.01.2007 as indicated in the said page. As M/s. AGM had asked Shri Rajasekaran to obtain kachcha receipts from M/s. Anand Industries for these payments, he had written these details. 25. On the right side of the said page, on top portion, matches details are written. On the lower side, details of some orders given to various tile manufacturers are written. These are Manish, Star, Kalyan, Anand, Himat, Opal, Ocean etc. Only number of boxes is written. 26. Left side of Page No. 6 of the said diary shows the details of cash payments made by M/s. Glazeware to various tile manufacturers of Morbi, including M/s. Anand. A scanned image of the said page is shown below:
27. The above document indicates that out of the total cash amount of Rs. 4,53,000/, Shri C. Rajasekaran of M/s. Glazeware paid cash amounting to Rs. 1,00,000/- to M/s. Anand on 17.03.2006. The said payments were transferred through angadia. It is clear that such cash payments are not reflected in the books of account of M/s. Glazeware
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and M/s. Anand and the same constitutes the undervalued cost of wall tiles cleared from the factory of M/s. Anand. 28. Left side of page No. 16 of the diary seized at Sr. No. 6 is an order placed to M/s. Anand for KKL for 1100 boxes of tiles of different design Nos. 8016, 8013, 1587, 1628, 4129, 4215, 4271, 4270 and 4292. Thus, it reveals that M/s. Anand were manufacturing and clearing the tiles of different designs to their buyers. Though they were informing the design Nos. to their buyers, they were not declaring the same in their Central Excise invoices. 29. Page No. 17 of the said seized diary indicates the details of another cash payment of Rs. 45,000/- to M/s. Anand on 20.05.2007. A scanned image of the said page is shown below:
30. Investigation conducted by DGCEI revealed that Shri C. Rajasekaran, owner of M/s. Glazeware was also carrying out trading of matches manufactured in Madurai. He was selling such matches in different locations of Gujarat. Left side entries appearing in the above image indicate collection of cash amounts from the buyers of matches. As per the statement of Shri Rajashekharan, which is discussed forthcoming paras, he had
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collected Rs. 2,93,950/- from the buyers of matches and also got an amount of Rs. 2,50,000/-, which he got transferred from Madurai through one Shri Arumugham. Thus out of the total cash amount of Rs. 5,43,950/-, he paid Rs. 5,43,000/- to different tile manufacturers, which included payment of Rs. 42,000/- to M/s. Anand. 31. Page 27 of the seized diary indicates the details of purchase of one consignment of ceramic tiles by M/s. Glazeware for supply to M/s. KSMT Traders, Sheranmadevi on 25.06.2007. A scanned image of the said page of diary is shown below:
32. Shri C. Rajasekaran, owner of M/s. Glazeware in his statement dated 31.05.2008, which is discussed in forthcoming paras, explained the details written on the above page. He confirmed that the 789 boxes of floor tiles and 100 boxes of antiskid tiles were purchased from M/s. Ocean, and that the remaining items shown in the document are sanitary items. The calculation appearing in the document reveals that out of the total 2,27,365/-, an amount of Rs. 43,990/- was deducted being freight amount payable by the buyer. The rate of freight amount is shown in the left side of the document as 16.600 MTs x Rs. 2,650/- per MT which comes to Rs. 43,990/-. The sale price of M/s. Glazeware in respect of floor tiles and antiskid tiles purchased from M/s. Ocean for supply to M/s. KSMT Traders is written as Rs. 210/- and Rs. 200/- per box, respectively. Therefore, the actual MRP at which these tiles are sold to the ultimate consumers is evidently higher than these prices, which will include the additional cost elements in the hands of M/s. KSMT Traders. However, scrutiny of the invoices issued by M/s. Ocean indicates that the maximum MRP which they have declared for their entire range of floor tiles was Rs. 160/- per box. This further substantiates the extent of
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undervaluation carried out by M/s. Ocean for evading excise duty. This evidence is duly discussed in the notice issued to M/s. Ocean. 33. Page No. 38, on right side shows the cash payments of Rs. 1,00,000/- to M/s. Varmora and Rs. 1,500/- to M/s. Anand on 22.07.07. 34. Page No. 49 of the seized diary indicates details of cash payments made by M/s. Glazeware to various tile manufacturers of Morbi. Scanned images of both sides of the said page are shown below for ease of reference:
Image No. 1
Image No. 2
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35. The first image is of the left side of the page. It indicates the details of cash collected by Shri C. Rajasekaran as a part of his trading of matches. In his aforesaid statement, he confirmed to have carried out such trading of matches, which he purchased from Madurai and supplied to various parties situated in Gujarat. This page indicates collection of total cash amounting to Rs. 11,65,950/-. The second image is of the right side of the same page. It indicates that out of the aforesaid cash of Rs. 11,65,950/- collected by him from the buyers of matches, he made cash payments to M/s. Anand, M/s. Ocean, M/s. Himat, M/s. Foram, M/s. Star, M/s. Vasant etc. The paid amounts were shown in 000’s. Thus the cash paid to M/s. Anand on 19.07.2007 is written as Rs. 2,00,000/-, a fact which he has admitted in his aforesaid statement. On this page, Shri Rajasekaran has also written the total quantity of tiles purchased from various tile manufacturers such as M/s. Santosh, M/s. Anand, M/s. Manish, M/s. Ocean and M/s. Opal during the period from April to July 19, 2007. The total quantity purchased from M/s. Anand is written as 19,903 boxes during the period upto 27.08.2007. In view of the fact that M/s. Glazeware were also facilitating direct clearance of tiles to several buyers in the State of Tamilnadu, the said quantity could not
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be matched with the invoices issued by M/s. Anand in the name of the said trading firm. Thus the above document makes it abundantly clear that Shri Rajasekaran was collecting cash amounts from various parties in Gujarat as a part of his trading business of matches, and such cash amounts were paid to the tile manufacturers, including M/s. Anand, towards settlement of the undervalued cost of tiles cleared from their factories.
36. Page No. 50 of the seized diary indicates the details of outstanding amounts payable by M/s. Glazeware to different tile manufacturers of Morbi. A scanned image of this page is shown below:
37. The above document indicates that out of the total payment of Rs. 26 lakhs to be paid to various tile manufacturers of Morbi, an amount of Rs. 2,40,000/- is payable to M/s. Anand . As per the official books of accounts of M/s. Anand, during the period 01.04.07 to 19.09.07, M/s. Anand have cleared them the tiles under four invoices with total invoice value of Rs. 2,29,098/- and M/s. Glazeware have made the official payment
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of Rs. 4,38,000/- there against to M/s. Anand. Thus, M/s. Glazeware have made a surplus payment of Rs. 2,08,902/- to M/s. Anand. Hence, The aforesaid amount of Rs. 2,40,000/- is actually the outstanding cash amount of M/s. Anand with M/s. Glazeware. This document further substantiates that the amounts written in the diary were in 000’s. Because, while the unit-wise pending position is shown in 000’s, the total amounts are written as Rs. 26 lakhs. 38. Page No. 55 of the diary also shows the details of cash collected by M/s. Glazeware from various buyers of matches and the cash payments made to various tile manufacturers. Out of the total cash amount of Rs. 5,28,000/- paid to various tile manufacturers, the amount paid to M/s. Anand is shown as Rs. 50,000/-. 39. Seized file Nos. 7 and 8 contain copies of transport documents attached to the invoices of manufacturers showing transportation of floor tiles from Morbi to Madurai. LRs available on the records indicate that such transportation was done by M/s. SB Transport, M/s. Shreeji Roadlines, M/s. Balaji Roadways, M/s. Shree Patel Transport Co., M/s. Shivkrupa Transports, etc. Scrutiny of these LRs reveals that the freight charges shown in the LRs of all these transporters were ranging between Rs. 10,000/- to Rs. 16,000/- per full truckload consignment. In order to examine the veracity of the aforesaid freight charges, DGCEI conducted inquiry from some of the transporters who were solely engaged in transportation of tiles from Morbi to various locations of the country. Details of such investigation from transporters are discussed in forthcoming paras. 40. The investigation clearly brings out the fact that the transporters were deliberately showing the freight amount as less than Rs. 20,000/- to escape from TDS and service tax as well as to facilitate payments in cash. Remaining freight amount is paid by the manufacturer or their dealer in cash, and such cash payment is not brought in their books of accounts. While such procedure enables the transporter to avoid payment of TDS & Service Tax and receipt of payments in cash, the said procedure has been adopted by the manufacturers of tiles although for a different reason. In their case, tiles are cleared from the factory by declaring only about 50% of the actual MRP, and the differential value over and above the bill amount is collected by them from their dealers in cash. On their part, dealers are required to keep the landed cost of tiles at their premises at the barest minimum to remain within the MRP declared by the manufacturers in their invoices. Thus, as a part of a pre-meditated strategy between the manufacturers and dealers, only a part of the actual transportation cost is declared on records. While selling the tiles to the ultimate buyers, these dealers declare only such part of the value in their sale bills which matches the MRP and officially accounted for landed cost. Remaining amount is collected by them in cash from the buyers. Part of such cash is paid to the transporters towards the differential freight amounts, to meet with other un-declared incidental and ancillary expenses and the remaining cash amounts are transferred to the manufacturers towards the value of tiles, over and above the declared bill value. 41. The facts relating to the actual freight of Rs. 45,000/- for Madurai is substantiated from the seized diary No. 6 as discussed in para supra. Page No. 27 of the seized diary indicates the actual freight of tiles totally weighing 16.600 MTs for transportation from Morbi to Madurai as Rs. 2,650/- per MT, i.e. Rs. 43,990/- per truck. This document fully corroborates the statements of the transporters who stated that the actual freight was Rs. 45,000/- per trip. However, not even a single LR available in the seized records indicates such actual freight. All these LRs show the freight amount as less than Rs. 20,000/-, in the manner as aforesaid. Thus, it is evident that the actual transportation cost for transporting tiles from Morbi to Madurai was Rs. 45,000/- and as a part of a well-orchestrated strategy between the tile manufacturers and their buyers and dealers, such cost was declared as less than Rs. 20,000/-. Remaining amount of freight was paid by the dealers in cash to the transporters, out of the cash amounts collected by them over and above the value declared in their sale bills. Such payment of actual freight of Rs. 45,000/- per truck as well as other cost factors involved in the deal will substantiate the fact that the MRPs declared by M/s. Anand in the Central Excise invoices are grossly undervalued. This is illustrated in the following paragraph.
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42. One full truckload of consignment weighs 16 MTs. The weight per box of 12”x8” size tiles is approx. 10 kgs. Thus one truck carrying full truckload of tiles could carry 1600 boxes of 12”x8” size tiles. As per the above investigation from the transporters, the actual freight amount for carrying one consignment is Rs. 45,000/- per trip between Morbi and Madurai. Thus the freight per box of tiles works out to Rs. 28.13/- for 12”x8” size tiles. The details of clearances available at para supra reveals that M/s. Anand cleared 21567 boxes of STD grade tiles at MRP of Rs. 100/-, 4829 boxes of COM grade tiles at MRP of Rs. 90/-, 6662 boxes of SIL and SIL/REJ tiles at MRP of Rs. 60/- and 300 boxes of REJ grade tiles at MRP of Rs. 30/- per box, respectively to the said dealer. The following calculations show that the landed cost of tiles will exceed the MRPs shown in the Central Excise invoices. The landed cost per box of STD, COM, SIL & SIL/REJ and REJ grade tiles of size 12”8” at Madurai would be as under, if the said dealer was paying only amounts as per the invoices issued by M/s. Anand:-[M/s. Anand had declared same MRPs for both the aforesaid 3 sizes] Sr. No Description STD COM SIL & SIL/REJ REJ
1 MRP declared in the invoice 100 90 60 30
2 Amount charged after 45% abatement 55 49.5 33 16.5
45,000/- per container 28.13 28.13 28.13 28.13 6 Margin of profit @ 10% 8.94 8.33 6.49 4.65 7 VAT payable @ 12.5% 12.3 11.46 8.93 6.40 8 Cost of tiles at Madurai 110.69 103.1 80.34 57.58
43. The above illustration makes it abundantly clear that the tiles of STD, COM, and SIL, SIL/REJ and REJ grades of size 12”X8” actually cost more than the MRPs declared by M/s. Anand in their Central Excise invoices at the premises of their dealer at Madurai. They have declared MRPs of STD, COM, SIL, SIL/REJ and REJ grade tiles of size 12”X8” as Rs. 100/-, Rs. 90/-, Rs. 60/-, Rs. 60/- and Rs. 30/- while landed cost of such tiles at Madurai works out to Rs. 110.69 /- for STD grade, Rs. 103.10 for COM grade and Rs. 80.34 for SIL grade, Rs. 80.34/- for SIL/REJ grade and Rs. 57.58/- for REJ grade. In respect of the REJ grade tiles, the freight is almost equal to MRP than what about value and other costing factors. The aforesaid landed costs have been calculated only on the basis of amounts shown in the invoices. However, the documentary evidences as discussed in foregoing paras reveal that M/s. Glazeware was paying amounts in cash, over and above the invoice value. If such cash payments are taken into account, the landed cost of such tiles at Madurai will further increase. Thus said tiles can not be sold by M/s Glazeware at the MRPs declared by M/s Anand, Morbi. The aforesaid calculation has not taken into consideration various other expenses such as transit insurance, loading & unloading expenses, toll taxes and other expenses in transit, local transportation, overhead expenses for storage etc., margin of profit of dealers and retailers whom the tiles will be sold by M/s. Glazeware, VAT on value addition incurred by the dealers and retailers, etc. Thus if all these expenses are added to the aforesaid minimum landed cost of tiles, the actual MRP at which these tiles are sold to the ultimate consumers will further increase. Thus the above illustration establishes it beyond any iota of doubt that the MRPs declared by M/s. Anand in their central excise invoices were not actual. 44. A statement of Shri C. Rajasekaran, Manager of M/s. Glazeware was recorded on 17.01.2008 wherein he, inter alia, stated that presently they are dealing in Anand, Manish, Ocean, Varmora and Foram brands of tiles; that the payments for the purchase of such tiles are made in both cheques and cash. On being asked about the variations of cost of Varmora brand tiles as appearing in the MRP declared on the boxes and the prices mentioned in the purchase invoices, he admitted that there is variation in the same. He could not explain the reasons for such difference in the prices, although he stated that they are making payments on the basis of the value declared in the invoices. He also stated that they have never paid any amount over and above the invoice value
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for any of their purchases. Shri C. Rajasekaran stated that they purchase tiles directly from the manufacturers and the transportation cost is mostly paid by them, though at times goods are also transported on freight-paid basis; and that goods are dispatched mostly by trucks and sometimes by containers. 45. The aforesaid statement of Shri C. Rajasekaran was totally wrong and far from the actual facts. Documentary evidences discussed supra, conclusively established that M/s. Glazeware were receiving Central Excise invoices only for a part of the actual value of tiles purchased by them from different manufacturers. These documents clearly explain the details of cash amounts paid by M/s. Glazeware over and above the bill value to the respective manufacturers including M/s. Anand. Evidences available on the seized record also revealed that not even 30% of the actual freight amounts paid by them to the transporters in several cases were declared in the books of account of M/s. Glazeware. As against an actual freight of Rs. 49,000/- per consignment, they have obtained LRs from the transporters and declared in records for only Rs. 16,000/-. Differential amounts were always paid by them in cash. In order to confront him with the aforesaid documents, and in the light of conflicting statements given by him under Section-14 of the Act, ibid, further summons was issued to Shri C. Rajasekaran, Manager of M/s. Glazeware calling upon him to remain present for recording his further statement. 46. Accordingly, a further statement of Shri C. Rajasekaran was recorded on 31.05.2008 wherein he, inter alia, stated that he was shown the aforesaid panchnama as well as his earlier statement dated 17.01.2008 and after carefully going through the same, he put his dated signature thereon. He reiterated that the facts explained in these statements are true, correct and based on actual facts. On being asked, he stated that M/s. Glazeware are engaged in the wholesale trading of ceramic glazed tiles and vitrified tiles for the past 3 years. His wife, Smt. Rohini Rajasekaran is the Proprietor of M/s. Glazeware but he is looking after the entire activities of the said firm in the capacity as Manager. They purchased vitrified tiles only from M/s. Varmora Granito. They purchased wall tiles or floor tiles from M/s. Ocean, M/s. Himat, M/s. Anand, M/s. Manish, M/s. Santosh, M/s. Foram, M/s. Kalyan, M/s. Opal, M/s. Sahakar etc. 47. Shri Rajasekaran stated that mostly they procure tiles from the factories by road in full truck load of 16 MTs. Sometimes, they also procure such tiles carried in containers of 28 MTs transported by coastal vessels by sea from Mundra or Kandla Port to Tuticorin Port of Tamilnadu. 48. Shri Rajasekaran was confirmed and admitted that the MRP which was affixed on the boxes containing the seized VARMORA brand vitrified tiles more than the MRP declared by M/s. Varmora Granito in their corresponding Central Excise invoices; he stated the reasons for such difference in the MRP that they have not changed the MRP as appearing in the seized boxes of tiles, and whatever labels affixed on the tiles, were affixed only in the factory of M/s. Varmora Granito; he stated that M/s. Varmora Granito were not showing the actual price of tiles in their central excise invoices, while effecting sales. They declare only a part of the MRP and ex-factory price in their invoices. Actual prices of tiles are negotiated between the manufacturers and him and accordingly, he made purchases. As regards the payments, he stated that while bill portion of the value was paid by him in cheques to all the manufacturers, the cash portion over and above the bill amount was paid to the manufacturers in cash. Therefore, he was not much concerned about the MRP affixed by the manufacturers on the boxes carrying tiles. Tiles are sold by him as per the prevailing market price and they do not compare the same with the MRP affixed on the tiles or the prices declared in the invoices. Such declared prices are considered by them only for the purpose of preparing their account bills, i.e. the prices mentioned in their sale bills are required to be matched with the landed cost of tiles on the basis of the value shown by the manufacturers in their invoices. Remaining amount was collected by him in cash from their buyers. 49. Shri Rajasekaran was shown two registers which are marked as Sr. No. 1 and 2 of the panchnama dated 17.01.2008 and in token of having seen the same, he put his dated signatures on the first page of these registers. He stated that these are the ledgers maintained by them for the purchases and sales and it contains the value
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declared by the manufacturers in their invoices and the value declared by M/s. Glazeware in their official sale bills. He was also shown 2 files of Sr. No. 3 and 4 and after examining the same, he stated that these files contain the bank statements of his firm wherein the official portion of the sale value was deposited by him. On being shown file No. 5, he stated that it contains the pay-in-slips through which he had deposited cheques into the supplier company’s account. 50. He was shown 2 files marked as Sr. No. 7 and 8 and stated that these files contain their purchase invoices issued by the various supplier factories of Morbi including M/s. Varmora Granito. After scrutiny of these documents, he admitted that the actual transportation cost of one full truck load of 16 MT tiles from Morbi to Madurai will be Rs. 45,000/- per trip including Service Tax. Similarly, half-container load of 14 MT from Mundra/Kandla to Tuticorin Port is Rs. 32,500/- including Service Tax. Further, he admitted that the transportation cost of carrying container from Morbi factory to Kandla or Mundra Port by trailer is around Rs. 12,000/- per container [Rs. 6,000/- per half-load container], and from Tuticorin Port to Madurai by trailer is around Rs. 15,000/- per container [Rs. 7,500/- per half-load container]. He agreed that the actual transportation cost of carrying half-container load of 14 MT tiles from Morbi to Madurai will be Rs. 46,000/-. On being asked about the reasons for showing the freight as Rs. 6,000/- to Rs. 16,000/- in respect of truck as against Rs. 45,000/-, and Rs. 19,500/- in respect of containers as against Rs. 46,000/-, as explained by him above, he stated that the transportation is arranged by the manufacturers and while dispatching the consignment, they agree with the transporters for not showing the actual freight amount in their LRs or Bills. Differential amount is paid by them in cash to the transporters or shipping companies. Such half-billing is done with a view to minimize the landed cost of tiles at their premises, so that such landed cost does not exceed the MRP declared by the manufacturers in their central excise invoices. He stated that while working out their actual sale price, M/s. Glazeware include such differential freight amount into the cost of tiles and accordingly collect the cash amounts from the buyers. 51. Shri Rajasekaran was shown one circular dated 01.10.2007 issued by M/s. Varmora Granito which is available in file No. 9 seized from his office. On being asked, he stated that the said circular was issued by the said company for circulating the prices of their entire range of products of premium grade, for supplies to Ministry of Defence. 52. He confirmed after seen a LIC Diary No. 6 which was seized from his business premises, that the said diary was written by him in his own handwriting, and it contains the details of his business dealings carried out by him during the course of his tour to Gujarat. He confirmed that details appeared in the said diary are of business of trading of matches manufactured by various manufacturers of Madurai and surrounding areas and sell the same to various parties situated in Mehsana, Sarkhej, Himatnagar etc. of Gujarat. 53. Shri Rajasekaran was explained the contents of each page of the said diary during the statement proceedings and relevant portion of his statement are reproduced as under: Page-3: On left side, details of supplies made by M/s. Anand Industries, Morbi to M/s. AGM Agencies, Annanagar, Madurai are written. He was getting commission from M/s. Anand Industries on the said supplies to M/s. AGM. In this case, M/s. AGM had paid total Rs. 60,000/- in cash to M/s. Anand on 23.01.2007, 24.01.2007, 25.01.2007 and 26.01.2007 as indicated in the said page. M/s. AGM had asked him to obtain kachcha receipts from M/s. Anand Industries for these payments, and he has written these details for this purpose, during his visit to Morbi. On the right side of the said page, on top portion, matches details are written. On the lower side, details of some orders given to various tile manufacturers are written. These are Manish, Star, Kalyan, Anand, Himat, Opal, Ocean etc. Only number of boxes is written. Page-5: Left side shows the details of orders given to various companies of Morbi and the numbers of boxes ordered are written therein. On the right side, the details of
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cash collection of Rs. 65,000/- and Rs. 6,000/- from two parties of Ahmedabad against his supplies of matches to them. The said cash amount of Rs. 71,000/- was sent by him to M/s. Himat Glaze Tiles, Morbi by angadia from Ahmedabad to Morbi on 13.03.2007. All these figures are written in 000’s. On the lower portion, details of cash collection from the buyers of matches are written. Page-6: Page-6 left side shows cash transfer of Rs. 70,000/- and Rs. 40,000/- totaling Rs. 1,10,000/- to M/s. Himat Glazed Tiles on 17.03.2006 by angadia. This was done on his camp at Ahmedabad. Thereafter he visited Morbi and personally handed over Rs. 1,00,000/- to M/s. Anand Industries, Rs. 88,000/- to M/s. Manish Industries, Rs. 90,000/- to M/s. Ocean Ceramics and deposited Rs. 65,000/- into the HDFC Bank account given by M/s. Anand Industries. Page-7: Left side shows orders placed with various companies. Right side some costing are written. Page-16: The pages show the details of dispatch of 1100 boxes of 1x1 floor tiles from M/s. Ocean and 1100 boxes of 12x8 tiles from M/s. Anand on behalf of M/s. Amman Agencies, a dealer of Kalayarcoil for which he was getting commission. Page-17: On the right side, the details of receipt of cash of Rs. 2,93,950/- from his buyers of matches at Mehsana and other places on 20.05.2007 are written. Thereafter, he has obtained Rs. 2,50,000/- at Ahmedabad through Shri Arumugham of Madurai who is transferring cash amounts from Madurai to Ahmedabad. Thus he was having a total cash of Rs. 5,43,950/- with him on 20.05.2007. Out of this amount, he has paid Rs. 25,000/- to M/s. Ocean, Rs. 42,000/- to M/s. Anand, Rs. 69,000/- to M/s. Star [who manufacture border patties], Rs. 55,000/- to M/s. Sakar Tiles, Rs. 27,000/- to M/s. Sri Ceramics [manufacturers of border tiles] and Rs. 90,000/- to M/s. Himat Glazed Tiles. Thus out of the aforesaid Rs. 5,42,950/- cash, he has paid Rs. 5,43,000/- personally to these parties. Page-20: On the left side, the details of telephonic talk with Shri Punit of M/s. Varmora is written wherein Shri Punit had given him the details of bank account of M/s. Kum Kum Enterprises and the fax number of 02828-287558 to which the pay-in-slip showing deposit of cash into the said bank account was to be given. Page-26: On right side, details of official and unofficial payments in respect of the 3 purchases made by him from M/s. Varmora Granito on 26.04.2007, 05.05.2007 and 02.06.2007 are written. The total bill value for these 3 supplies was Rs. 2,45,960/- as shown here, and an unofficial cash portion of Rs. 3,79,000/-. Thus, the total actual value of supply was Rs. 6,26,000/-. On the bottom of this page, details of official and unofficial payments made by him to M/s. Varmora are written. The cash payments were deposited into the ICICI bank account of M/s. Kum Kum Enterprises on the dates shown therein. Page-38: On right side, details of cash payment of Rs. 1,00,000/- to M/s. Varmora, Rs. 20,000/- to M/s. Sri Ceramics [border tiles] and Rs. 1,500/- to M/s. Anand Industries on 22.07.2007 are written. Page-49: Left side of this page shows the details of cash payments received by him towards supplies of matches, and the payments sent to Madurai through havala route. On the right side of this page, details of cash payments made on 19.07.2007 for Rs. 2,00,000/- to M/s. Anand, Rs. 2,00,000/- to M/s. Ocean, Rs. 2,00,000/- to M/s. Himat, Rs. 1,00,000/- to M/s. Kalyan, Rs. 23,550/- to M/s. Star [border tiles], and Rs. 25,000/- to M/s. Vasant Sanitary. On the bottom portion of this page, details of further cash payments made on 21.09.2007 for Rs. 1,00,000/- to M/s. Himat Glaze Tiles and Rs. 10,000/- to M/s. Sri Ceramics [border tiles] are also written. On this page, details of total boxes purchased from M/s. Santhosh, M/s. Anand, M/s. Manish, M/s. Ocean and M/s. Opal during the period from April, 2007 to 10.09.2007 are also written. Page-50: Left side of the page contains the details of pending payment position of their firm to various companies of Morbi as on 19.09.2007. Accordingly, Rs. 8,60,000/-
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to M/s. Himat/Foram, Rs. 2,90,000/- to M/s. Santosh, Rs. 2,40,000/- to M/s. Anand, Rs. 7,10,000/- to M/s. Ocean, Rs. 3,00,000/- to M/s. Manish, Rs. 1,11,242/- to M/s. Varmora and Rs. 2,000/- to M/s. Star [border] totaling Rs. 26 lakhs was to be paid by them to Morbi companies as on 19.09.2007. This amount included both bill amounts and cash amounts due to these companies. Right side of the said page shows the details of expenses incurred by them in Madurai on behalf of M/s. Varmora. This amount was deducted by them from the cash portion which was to be paid by them to M/s. Varmora. Page-55: Right side bottom portion shows the details of cash amounts paid to different companies on 12.10.2007. Accordingly, he has paid Rs. 1,50,000/- to M/s. Ocean, Rs. 1,85,000/- to M/s. Manish, Rs. 20,000/- to M/s. Star, Rs. 3,000/- to M/s. Santosh, Rs. 50,000/- to M/s. Anand, Rs. 1,20,000/- to M/s. Himat etc. Details of cash received from the buyers of matches are also mentioned on this page. 54. He visited Gujarat at least once in a month for his business of matches, he has collecting cash amounts in respect of the sales of matches from various traders and out of such cash payments, he was handing over the cash amounts to the aforesaid manufacturers of tiles including M/s. Anand. He admitted that all these cash amounts formed part of the value over and above the value declared by these manufacturers in their central excise invoices. 55. As regards deposit of cash amounts into the ICICI bank accounts of any other firms except the aforesaid M/s. Kum Kum Enterprises, details of which are written in the aforesaid diary, he stated that although mostly cash was paid directly by him during his visits as above, sometimes, the manufacturers were communicating to him the details of some trading firms and its bank account numbers. Accordingly, he confirmed to have deposited cash amounts into the ICICI account of M/s. Kum Kum Enterprises towards the value of tiles over and above the value declared in the Central Excise invoices of M/s. Anand. 56. He stated that mostly tiles of all brands are having almost the same prices as under: Wall Tiles 12x8 normal colour = Rs. 130/- per box. Wall Tiles 12x8 Dark colour = Rs. 150/- per box. Floor Tiles 1x1 = Rs. 150/- per box. Luster Tiles 12x8 = Rs. 145/- per box. 57. The above investigation from M/s. Glazeware conclusively establishes that M/s. Anand was engaged in large-scale evasion of excise duty by undervaluation. The simple calculations reveal that the MRPs declared by M/s. Anand in the invoices were artificial and not even equivalent to the actual landed cost of tiles at the destination, even if the said dealer was not paying any cash to M/s. Anand. However, since the said dealer was paying amounts, over and above the invoice value in cash, the actual sale price will further increase. In order to mislead the investigation agencies and to manipulate the actual cost of tiles, they have connived with various transporters and entered into a dubious deal of declaring only a part of the actual freight. This was done by them to ensure that the recorded landed cost does not exceed the lower MRP declared in their invoices. Investigation also reveals that the value of tiles declared in the invoices was collected by cheques and drafts, the undervalued cost of tiles was collected by them in cash. In case of supplies made to M/s. Glazeware, such cash amounts were mostly received by them personally from Shri C. Rajasekaran who frequently visited Gujarat as a part of his trading activities in matches. 58. The premises of M/s. National Sanitary Depo, D.No.3-2-400, Plot No.44, L. B. Nagar, Ring Road, Sagar Road, Hyderabad has been searched by DGCEI on 26.02.2008 and records/documents as per Annexure ‘A’ to the panchnama were seized for further investigation. 59. The premises of M/s. National Agencies, Plot No. 20, Sy. No. 66/5, Near Kamineni Hospital, L. B. Nagar, Hyderabad has been searched by DGCEI on
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26.02.2008 and records/documents as per Annexure ‘A’ to the panchnama were seized for further investigation. 60. M/s National Sanitary Depo and M/s. National Agencies are managed and controlled by one person. Entire record keeping, purchases, sales, collection of money, etc., are looked after by Shri Vasantlal Detroja. Therefore evidences collected from above two dealers are being discussed together. Both the aforesaid dealers are jointly referred to as M/s. National for the sake of brevity. 61. A statement of Smt Bhavana Vasant Detroja, Proprietor of M/s. National Sanitary Depo., Hyderabad was recorded under Section 14 of the Central Excise Act, 1944 on 27.02.2008 wherein she, inter-alia, stated that she is the proprietor of M/s. National Sanitary Depo., Plot No.44, LB Nagar Ring Road, Sagair Road, Hyderabad; that her husband started M/s. National Sanitary Depo. in the year 1992; that their firm deals in purchase and sale of ceramic tiles & sanitary ware; that she is looking after day -to-day activities relating to receipt and dispatch of ceramic tiles etc. from their godown; that her husband Shri Vasantlal Detroja looks after all the activities of the firm including purchases, sales, collection of money and payments and that whatever would be stated by her husband Shri Vasantlal Detroja would be acceptable to her. 62. Statement of Shri Vasant Detroja, Proprietor of M/s, National Agencies, Hyderabad was recorded under Section 14 of the Central Excise Act, 1944 on 26.02.2008 wherein he, inter-alia, stated that he has started M/s. National Sanitary Depo. in 1992 wherein his wife Smt. Bhavana is the proprietor and started another firm M/s. National Agencies in the year 2006 wherein he is the proprietor; that both the firms are engaged in the trading of ceramic floor and wall tiles; that they are purchasing ceramic tiles from different manufacturers of tiles including Vrundavan Group of companies. 63. Further statement of Shri Vasant Detroja, was recorded under Section 14 of the Central Excise Act, 1944 on 27.02.2008 wherein he stated that though his wife Smt. Bhavana V Detroja is the Proprietor of the firm, he was looking after the day to activities as well as sale and purchase of goods; that same practice is being adopted in M/s National Sanitary Depo. for purchase and sale of Ceramic Tiles as discussed here in above. 64. The scrutiny of Telephone Diary seized at Sr. No. 4 and a small diary seized at Sr. No. 5 under the panchnama reveals that the same are containing rates of ceramic tiles of various manufacturers including M/s. Anand. The diary seized at Sr. No. 5 shows the entries on the pages of different rates while the telephone directory seized at Sr. No. 4 shows the entries on various pages pertaining to each alphabet. On the basis of the rates shown on the various pages of the said telephone diary, a chart has been prepared in respect of rates of tiles of M/s. Anand as below:-
Details as per telephone directory seized at Sr. No. A/4 Page of date
Name of the manufacturer Item Size
Rate for premium/STD
Rate for SIL
page for J Anand Ordinary Print 8X12 135 120 page for J Anand Ordinary B. Print 8X12 155 135 Page for R Anand Ordinary Print 135 Page for R Anand Black Print 155 Page for T Anand Ordinary & Print 8X12 120 105 Page for T Anand Black Colour & Print 8X12 135 115
65. It is revealed from the above chart revealed that the 1st grade STD tiles of different designs and colours of M/s. Anand are sold at different rates ranging from Rs. 120/- to Rs. 155/- per box. The 2nd grade SIL tiles of M/s. Anand are having the price ranging from Rs. 105/- to Rs. 135/-. For the ease of reference, the scanned image of one of the pages of the seized telephone diary is reproduced below:-
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66. Perusal of the above chart reveals that the rates for ordinary black and printed tiles were ranging from Rs. 115/- to Rs. 150/- for 1st grade and Rs. 105/- to Rs. 120/- for 2nd grade tiles. The rates for ordinary black color printed and L/s. Black Print tiles was ranging from Rs. 155/- to Rs. 180/- per box for 1st grade and Rs. 135/- per box for 2nd grade tiles. The rates for special colour tiles were as high as Rs. 200/- per box. As per the central excise invoices, M/s. Anand were declaring a single MRP of Rs.100/- for the wall tiles of all the designs of 1st grade i. e. STD grade, Rs. 90/- for 2nd i. e. COM grade and Rs. 60/- for 3rd i.e. SIL grade. Thus, it is evident that the actual sale prices of the ceramic tiles of 8”x12” size of all the designs and colours, manufactured and cleared by M/s. Anand, are much higher than the MRP declared by them in their invoices. The aforesaid price appears the price charged by the dealer from sub-dealers. The sub-dealers are further to add the expenses of loading, unloading, local transportation their profit and VAT thereon. 67. The inquiries from M/s. National Sanitary Depo., and M/s. National Agency, Hyderabad thus reveals that M/s. Anand were mentioning the suppressed MRP in their invoices. M/s. Anand were informing the colour and design of tiles to their dealers but, they were not declaring the colours and designs of tiles in their invoices. The tiles were sold in the market at different rates depending upon colours and designs of tiles. M/s. Anand have shown the clearance of a total of 26023 boxes of STD grade tiles at the MRP of Rs. 100/- and 19490 boxes of tiles at the MRP of Rs. 60/- to M/s. National Sanitary Depo., Hyderabad and 2350 boxes of STD grade tiles declaring the MRPs of Rs. 100/- and 250 boxes of SIL grade tiles declaring the MRP of Rs. 60/- to M/s. National Agency, Hyderabad. M/s. Anand were declaring the MRP of Rs. 100/- for the 1st grade tiles while the dealers were selling such tiles at different rates ranging from Rs. 120/- per box to Rs. 155/- per box according to the colour and design of tiles. Similarly, M/s. Anand were declaring the MRP of Rs. 60/- for their 2nd grade SIL tiles while the said tiles were sold to the sub-dealers at the rates ranging from Rs. 105/- to Rs. 135/- per box according to the design and colours of tiles. The sub-dealer has to further add their profit at least @ 10%, local freight and VAT while selling the tiles to the ultimate
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consumer. The sub-dealers were selling the same at still higher prices considering the different elements of costing and their profit. 68. Thus M/s. Anand were mis-declaring the MRP in their invoices and collecting the cash amount, over and above invoice amount, from M/s. National Sanitary Depo. M/s. Anand were thereby evading the duty of central excise. 69. M/s. Shiv Om Marketing, Morbi, have purchased the wall tiles from M/s Anand and hence investigation was conducted with M/s. Shiv Om Marketing, Dhanraj Chambers, Shop No. 1, 8 A- National Highway, Nr. Kuber Cinema, Morbi -363 642 under summons proceedings by recording a statement of Shri Dineshbhai Avcharbhai Gadara, Partner of M/s Shiv Om Marketing, Morbi under Section 14 of the Central Excise Act,1944. 70. A statement of Shri Dineshbhai Avcharbhai Gadara, Partner of M/s Shiv Om Marketing, Morbi was recorded under Section 14 of the Central Excise Act,1944 on 28.05.08 wherein he inter-alia stated that their firm is a partnership firm and carrying out trading of Ceramics Tiles and Ceramic Wares; that they purchased Ceramics Tiles from various manufacturers of tiles of Morbi including M/s. Anand; that they bear the freight/transportation charges from factory to our godown in case of tiles purchased by them and delivery taken by them; that the fright is borne by the Customers in the case of the order placed by M/s Shiv Om Marketing, Morbi and the delivery of tiles is directly made at the customer’s end by the manufacturers; that whenever they sell Tiles from their Stock, freight charges from their godown to Customer’s place is borne by the Customers; that they prepared Sales Invoice in three copies, first two copies for Customers and third copy is for preservation by us. Apart from this, they also prepare Form No. 402 as prescribed by the Sales Tax authority, for sale to the states other than Gujarat; that they also prepare single copy of list of tiles indicating details of grade, designs and variety wise quantity of boxes of tiles, for the customers; that they are usually selling the goods to their buyer by adding their profit @ Rs. 5 to Rs.10 per box and also taking cash @ Rs 15 to Rs.20 per box which they are passing on to the manufacturers only; that the cash is collected over the counter by them through shroff mainly from M/s. Eagle & Co., Rajkot in case of the customers situated out side Gujarat; that the cash delivers to them by the person of M/s Eagle & Co., Rajkot and sometimes on their instruction the cash delivers to the manufacturer by the person of M/s Eagle & Co., Rajkot. 71. M/s. Shiv Om Marketing has purchased a total of 80 boxes of SIL grade tiles from M/s. Anand during Mar, 07. M/s. Anand have declared the MRP of Rs. 60/- in their invoices and were charging Rs. 33/- (55% of MRP) on invoice. M/s. Anand were collecting an additional amount of Rs. 15/- to Rs. 20/- per box. If the profit of M/s. Shiv Om Marketing and their sub-dealer is considered, local freight and VAT are added, the actual selling price would go higher than the MRP. Thus, the actual MRP declared by M/s. Anand should have been much more than Rs. 60/-. 72. The business premises of M/s. M.R. Ceramics, D.No.V/273, P.K. Plaza, Ayikarappadi, Airport Road, Malappuram was searched on 17.01.2008 and Certain records, which were found relevant and useful in the investigation of the case were seized under panchnama dated 17.01.2008. M/s. M.R. Ceramics have been dealing with the ceramic tiles manufactured by the various manufacturers including M/s. Anand. 73. The tile manufacturers of Gujarat were selling tiles to M/s. Shine Ceramic, Kochi and other various dealers of Cochin and Malappuram. Such dealers were selling tiles to M/s. M. R. Ceramics, Malappuram. The file No. 3 of the seized documents contains price lists of various brands of tiles manufactured by different manufacturers and sold by M/s. M.R. Ceramics. At page No.1 of the said file, Price List of 2008 of different brands and sizes of tiles is available. Scanned image of page No. 1 of the said file is reproduced below:
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74. It is evident from the above scanned page that in the year 2008, M/s M.R. Ceramics have been selling the tiles of various manufacturers of Gujarat which are higher than the MRPs declared by the said manufacturers. The prices shown in the above price lists are duly incorporated in the show cause notices issued to the respective manufacturers. 75. The whole sale price list for the year, 2008 is also available in the said file. The scanned image of the same is as below:-
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76. The prices shown in the above price lists are also duly incorporated in the show cause notices issued to the respective manufacturers. 77. Seized documents at S.No.7 of the Mahazar are the Estimate Books maintained by M/s M.R. Ceramics which reveals that M/s M.R. Ceramics have sold ceramic tiles to their buyers through these estimates. These estimates are serially numbered and contain details like brand, quantity, rate per box and the total selling price and issued for the period from July, 2007 to January, 2008. These estimates reveal that in some cases, they had sold the ceramic glazed wall tiles manufactured and cleared from M/s. Anand, Morbi at a price higher than the MRPs shown in the invoices of M/s. Anand. The sales made through these Estimates have been duly recorded in the Account Book Register maintained by M/s M.R. Ceramics. This Account Book Register was seized under Mahazar dated 17.01.2008 at the premises of M/s M.R. Ceramics and the same is bearing Seized document Sr. No. 5. This register contains details of sales made through the Estimates on day to day basis and also shows the credit and debit side of the actual transactions made by M/s M.R. Ceramics on day to day basis. For illustration, scanned image of Estimate No. 522 dated 18.09.07 is reproduced below:
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78. Scrutiny of the said Estimate No. 522 dated 18.09.07 reveals that M/s M.R. Ceramics sold 2boxes and 11 pcs of Anand brand tiles having design No. 6610 for Rs. 4614/- at the rate of Rs. 145/- per box. This sale transaction has been recorded at page No. 194 of the Seized document at S. No. 5 viz. Account Book Register maintained by M/s M.R. Ceramics. The scanned image of the said page 194 is reproduced as below:-
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79. Similarly, the scanned image of Estimate No. 1367 dated 27.12.07 is reproduced below:
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80. Scrutiny of the said Estimate No. 1367 dated 27.12.07 reveals that M/s M.R. Ceramics sold 4 boxes of 2nd grade Anand brand tiles of design No. 4155 @ Rs. 110/- per box. The said sale is reflected at page No. 311 of the seized record No. 5. For the ease of reference, the scanned image of the page no 311 of the seized record is reproduced as below:-
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81. Similarly, the estimate No. 555 dated 22.09.07, 556 dated 22.09.07 are also evidencing the sales of Anand brand tiles by the said dealer @ Rs. 145/- per box. Thus, it reveals that M/s. M.R. Ceramics are selling the 1st grade Anand brand tiles @ Rs. 145/- per box and the 2nd grade Anand brand tiles @ Rs. 110/- per box. However, the scrutiny of the sales invoices of M/s. Anand reveals that they have shown highest MRP of Rs. 100/- for the clearances of STD tiles and Rs. 90/- for the clearances of COM grade tiles to the dealers of Kerala. These facts clearly reveal that M/s M.R. Ceramics have been selling the tiles of Anand brand at much higher prices to their customers than the MRP declared in the Central Excise invoices issued by M/s. Anand. 82. The document at S.No.6 (b) marked as Stock Book contains detailed account of purchase of tiles from various suppliers and the payments made by M/s M.R. Ceramics in cash and cheque. Scrutiny of the details mentioned in the said register reveals that M/s M.R. Ceramics have been making official payments through cheques and amounts over and above the invoice amount of the supplier dealers/manufacturers were paid in cash or by way of deposition of cash amount in the accounts of various shroffs. For
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illustration, scanned image of page No. 19 of the seized document 6(b) is reproduced below:
83 Scrutiny of the entries made in the aforesaid page reveals that M/s M.R. Ceramics purchased ceramic tiles vide Sales Invoice No. 164 dated 28.07.2007 of M/s Shine Rotopacks. This invoice No. 164 dated 28.07.2007 is available at page No. 25 in the seized file No. 2(b) resumed under Mahazar dated 17.01.2008 from M/s M.R. Ceramics. Vide the said bill, M/s Shine Rotopacks sold 400 boxes of Glazed Floor tiles of Premium grade. The selling rate per box of the tiles is mentioned as Rs. 215/- plus Output Tax (VAT for Kerala State) @12.5%. The said invoice shows the selling price of Rs. 96,750/- [Rs. 86,000/- (value) + Rs. 10,750/- (Output Tax)] for 400 boxes of Glazed Floor tiles of Premium grade. The details pertaining to this transaction are recorded at the first entry in the above scanned image. M/s M.R. Ceramics has shown the total bill amount as Rs. 1,72,260/-. Against the supply of 400 boxes of tiles, 4 boxes got damaged. Thus for the remaining 396 boxes of tiles total bill amount of Rs. 1,72,260/- is reflected at above page. Out of the total amount of Rs. 1,72,260/-, an amount Rs. 96,750/- was paid in cheque while the payments of Rs. 25,000/- and Rs. 50,000/- have been made in cash on 17.08.07 and 25.08.07, respectively as detailed in above page. An amount of Rs.510/- has been shown as balance which is added in balance for next sale. Thus, in respect of transaction pertaining to Invoice No. 164 dated 28.07.2007, an amount of Rs. 96,750/- (invoice amount) has been paid in cheque and Rs. 75510/- has been paid in cash by M/s M.R. Ceramics to M/s Shine Rotopacks. Similar cash transactions are in respect of their other suppliers also. 84. Another entry on said page No. 19 of the seized document 6(b) is in respect of sales invoice No. 206 dated 16.08.2007 of M/s Shine Rotopacks. Entry at page No. 19 shows the Bill No. as 17 against date 18.08.2007 in the scanned image, but Shri Alikunju Abubekker Adambayil, Partner of M/s Shine Ceramics & M/s Shine Rotopacks, Cochin has confirmed in his statement dated 16.06.2008 that the said entry related to sales transactions effected through the invoice No. 206 dated 16.08.2007 of M/s Shine Rotopacks. An amount of Rs. 1,74,000/- has been shown as the bill amount. This invoice No. 206 dated 16.08.2007 is available at page No. 26 in the seized file No. 2(b) resumed under Mahazar dated 17.01.2008 from M/s M.R. Ceramics. Vide the said bill, M/s Shine Rotopacks sold 400 boxes of Glazed Floor tiles of Premium grade. The selling rate per box of the tiles is mentioned as Rs. 215/- plus Output Tax (VAT for Kerala State) @12.5% in the invoice. The said invoice shows the selling price of Rs. 96,750/- [Rs. 86,000/- (value) + Rs. 10,750/- (Output Tax)] for 400 boxes of Glazed Floor tiles of Premium grade. M/s M.R. Ceramics in above scanned page No.19 has shown this sale worth Rs. 1,74,000/-. Against the supply of 400 boxes of tiles, 2 boxes
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got damaged for which discount of Rs.870/- has been recorded. Out of total bill amount of Rs. 1,74,000/-, an amount Rs. 96750/- was paid through cheque on 25.08.2007 while the amounts of Rs. 15,000/- and Rs. 10,000/- have been paid in cash on 07.09.07 and 22.09.07, respectively. The outstanding cash account transaction has been squared off to the extent of Rs. 36,431/- due to the return of 83 boxes and 3 pieces of tiles by M/s M.R. Ceramics to M/s Shine Rotopacks vide Estimate No. 766 dated 19.10.2007. [This estimate is available in the seized document Sr. No. 7 of the Mahazar drawn at M/s M.R. Ceramics on 17.01.2008]. Details of this transaction are also mentioned on page No. 16 of the seized Notebook bearing Sr. No. 8. The cash payments of Rs. 10,000/- and Rs. 4,590/- have been made on 07.11.07. Thus, in respect of the total transaction of Rs.1,74,000/- pertaining to Invoice No. 206 dated 16.08.2007, an amount of only Rs. 96,750/- (invoice amount) has been paid through cheque and Rs. 77,250/- has been paid in cash/squared off against return of goods, etc. The aforesaid documentary evidences clearly reveal that M/s M.R. Ceramics had been paying amounts over and above the invoice amount in cash to M/s Shine Rotopacks. 85. Scrutiny of page No.27 of seized note book marked as Sr.No.8 reveals that M/s. M.R. Ceramics, Malappuram were having knowledge of certain private bank account numbers operated by different shroffs, which were used by them for depositing the excess amounts collected in cash from their buyers. The details of such bank account numbers are shown as under:-
(i) Angel/Shub: 10888244544/045205000215 (ii) Shree Maruthi Enterprise 015305006741 (iii) Shree Sai Kripa 624845011259 (iv) Shubh Enterprises 015305007439
86. Page No.26 of the said note book contains details of payments to different manufacturers of tiles through cheques as well as in cash in the accounts of the shroffs. It is evident from page No.26 of the aforesaid note book that M/s. M.R. Ceramics have deposited cheque/cash amount in the bank accounts of M/s Shree Maruthi Enterprises, M/s. Shreeji Enterprise, M/s. Shree Ram Enterprises, M/s. Eagle & Co. and M/s. Shree Sai Krupa Enterprises as under:-
TOTAL 1512868.00 87. The details of payments in the accounts of various shroffs clearly establish the modus operandi of under-valuation adopted by the tile manufacturers based at Morbi. The shroff firms viz. M/s Shree Maruthi Enterprise, M/s. Shreeji Enterprise, M/s. Shree Ram Enterprise, M/s. Eagle & Co. and M/s. Shree Sai Krupa Enterprise etc. acted as conduits between the dealers and the tile manufacturers to send the cash amounts, over and above the invoice amount, to the tile manufacturers. 88. Prior to initiation of investigations against tile manufacturers by the DGCEI, M/s. Anand have shown clearances to the buyers/ dealers of Kerala at the highest MRPs of Rs. 100/- for STD grade, Rs. 90/- for COM grade and Rs. 60/- for SIL grade tiles. However, as evident from the documents discussed herein above, M/s. M. R. Tiles are selling the Anand brand tiles of 1st grade @ Rs. 145/- per box and 2nd grade @ Rs.
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110/- per box. M/s. M.R. Ceramics have purchased the ceramic floor tiles of ‘Anand’ brand from the local dealers, who had been purchasing these tiles from M/s Anand. M/s. M.R. Ceramics have sold the ceramic tiles of ‘Anand’ brand to their buyers at much higher MRP than the MRP declared by M/s. Anand. M/s M.R. Ceramics issued bills at the rates below the MRP declared by M/s Anand and recovered the balance amounts in cash from the buyers, which were subsequently transferred to the local suppliers of Anand brand tiles who ultimately transferred cash amount over and above the invoice amounts to M/s Anand through the accounts of the shroffs or through the representatives of M/s Anand. Thus, it is evident that the aforesaid manufacturer has grossly undervalued their finished goods viz. ceramic glazed wall tiles with intent to evade payment of Central Excise duty. 89. Statement of Shri Mohammed Rafeeq P., Manager of M/s. M. R. Ceramics, Malappuram was recorded on 17.01.2008 wherein he inter-alia deposed that they had been directly purchasing tiles from the manufacturers of Morbi; that in addition to above, M/s. M.R. Ceramics have been purchasing ceramic tiles from local wholesale dealers M/s. Shine Ceramics, M/s. Shine Rotopacks, M/s. Orange Ceramics Pvt. Ltd. and M/s. Thai Impex Pvt. Ltd.; that the consignments of ceramic tiles were received under the cover of invoices and other transportation documents through sea route and by road with the help of transporters viz., M/s. Transcoastal Cargo Shipping Ltd., Cochin; that the freight charges were paid by them to the said firm; that the payments against the purchase of ceramic tiles have been made by them through demand drafts of State Bank of India, HDFC Bank Ltd., ICICI Bank etc.; that he not aware of the mode of cash payments; that the proprietor of the aforesaid trading firm could only explain the details of such cash payments. 90. Statement of Shri P. P. Jarees, partner of M/s. M.R. Ceramics, Malappuram was recorded on 31.01.2008 wherein he inter alia stated that he confirmed that whatever facts mentioned in the statement of Shri Moideen Haji, Managing Partner of the firm regarding their business with Gujarat based tile manufacturers and dealers is correct; that Shri P.P. Jarees further confirmed that they made excess payments in cash to the manufacturers of tiles through private bank accounts held in ICICI Bank; that the entries at page No.27 of the seized note book were private bank accounts held in ICICI Bank in respect of various tile manufacturers at Morbi; that after making excess payments in the account, they used to courier the counter-foil to the concerned manufacturer; that in respect of dealers (2nd sale), the excess payment was made in cash and the details of such cash payments were shown on page Nos. 3, 10, 14 and 16 of the note book; that he submitted two cartoons each of tiles having brand names “SACMI GOLD’ [Marsal Ceramics Industries] and “ANGEL” [Angel Ceramic Pvt. Ltd.] for further investigation. 91. Statement of Shri Mayakkara Moideen Haji, Managing Partner of M/s. M.R. Ceramics, Malappuram was recorded on 28.01.2008 wherein he stated that their aforesaid firm has purchased ceramic tiles mainly from M/s. Angel Ceramics Pvt. Ltd., M/s. Marsal Ceramic Industries and M/s. Max Granito Pvt. Ltd., all of Morbi and M/s. Shubh Marble of Idar, Himatnagar; that the consignments of ceramic tiles were received either in containers or trucks; that in addition to above, they had purchased ceramic tiles from local wholesalers, viz., M/s. Shine Ceramics, M/s. Shine Rotopacks and M/s. Orange Ceramics Pvt. Ltd.; that all the aforesaid manufacturers of ceramic tiles were declaring less MRP and abated price; that only a part of the actual cost of the ceramic tiles purchased by them was shown in their respective invoices and such bill amounts were accounted for in their books of accounts and paid to the respective manufacturers through cheques; that the payment of the remaining part of the actual cost of the ceramic tiles, as per the directions of the manufacturers, was made by depositing the excess amount in the private Bank Accounts; that the details of the ceramic tiles purchased by them from Gujarat based manufacturers are as under:- Invoice No. Date MRP/Unit Purchase Value Sales Value
MARSAL CERAMICS
168 07.07.07 90 60
93 70
145 105
184 18.07.07 90 60
93 65
145 105
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290 27.09.07 90 93 145 347 23.11.07 60 65 105
ANGEL CERAMICS 777 08.07.07 120 170 to190 235 to 251.50
1095 27.08.07 120 100
170 to 190 130 to 140
235 to 251.50 235 to 251.50
1928 02.01.08 120 170 to 190 265 to 275 MAX GRANITO PVT. LTD.
0028 25.08.07 220 350 315
330 394 475
500 570 600
SHINE CERAMICS 206 16.08.07 215 435 456
SHINE ROTOPACKS
1990 31.12.07 110 102
205 185
245 225
ORANGE CERAMICS 166 17.12.07 303 660 676
92. From the above discussions, based on documentary as well as oral evidences, it is evident that M/s M.R. Ceramics had been selling ceramic glazed floor tiles of Anand brand at the rates much higher than the MRP declared by M/s Anand in their central excise invoices. The MRP declared by M/s Anand in their central excise invoices had been much less than the retail sale prices at which same have been sold to the ultimate consumers. The estimates showing the sales of tiles of M/s. Anand clearly reveal that Anand brand ceramic tiles of 1st and 2nd grades have been sold @ Rs. 145/- and Rs. 110/- per box, respectively to the ultimate customers. 93. The seized document No. 5 viz. Account Book maintained by M/s M.R. Ceramics shows the actual account of sales transactions made by M/s M.R. Ceramics. The seized document No. 7 viz. 16 books of Estimates resumed from M/s M.R. Ceramics clearly show that much higher prices were charged and recovered by the said dealer from their buyers. M/s M.R. Ceramics had been preparing Retail Invoices by showing manipulated selling prices of tiles to the customers. The sale rates were arrived at by them on the basis of the selling price mentioned by the suppliers in their invoices. Undervaluation of tiles is clearly evident from the sale prices of tiles as mentioned in the Estimates and the account of cash and cheque payments as mentioned in the seized note book marked as “Sr.No.8”. 94. Names and various Bank Account Nos. of shroffs available at page No.27 of seized note book marked as Sr. No.8 clearly show that M/s. M.R. Ceramics, Malappuram have been paying amounts over and above the invoice amount to the tile manufacturers from Gujarat through the bank accounts of shroffs. The price lists are available in the seized file No.3 and perusal of the said price lists clearly reveals that tiles of units of Gujarat were being sold by M/s M.R. Ceramics at the rates higher than the MRPs shown in the invoices of the manufacturers. The aforesaid evidences clearly establish that M/s Anand have been undervaluing the ceramic tiles manufactured and cleared by them. 95. The premises of M/s Shalimar Marbles & Granites and M/s Shalimar Mosaic Industries both located at Manackachira AC Road, Changanacherry, Kerala were searched on 16.02.08 and the documents relevant for investigation were resumed as per Mahazar dated 16.02.08. 96. A statement of Shri Hajaykumar M. K. alias Sanalkumar Proprietor of M/s Shalimar Marbles & Granites was recorded under Section 14 of the Central Excise Act,1944 on 16.02.08 wherein he had iner alia stated that they are having a sister concern trading firm in the name of M/s Shalimar Mosaic Industries which is also functioning from the same premises at Manackachira AC Road, Changanacherry, Kerala in which his elder brother Shri Salikumar M.K is the Proprietor, however he is mainly looking after the day-to-day activities of both the firms; that the total turnover of
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M/s Shalimar Marbles & Granites for the year 2006-07 was Rs. 2.18 Crores and for 2007-08 is approx. Rs. 2.49 Crores; that similarly the total turnover of M/s Shalimar Mosaic Industries for the year 2006-07 was Rs. 2.40 Crores and for 2007-08 is approx. Rs. 2.14 Crores ; that they are purchasing ceramic and vitrified tiles from the following suppliers of Gujarat:-
(i) M/s City Tiles, Himatnagar Vitrified 2’X2’ Ceramic2’X2’ Ceramic 20’’X6’’ (ii) M/s Verona Ceramics, Morbi Vitrified 2’ X 2’ (iii) M/s Santro Ceramics, Prantij Porcelain Floor 2’ X 2’ (iv) M/s Sigma Gold, Morbi 12’’X8’’ Floor (v) M/s Shreeji Gold Ceramics Floor 12’’X12’’ (vi) M/s Hilltop Ceramics, Morbi Floor 12’’X12’’ (vii) M/s Fashion Ceramics, Morbi Wall 8’’X8’’ (viii) M/s Acme Ceramics, Morbi Wall 8’’X8’’ (ix) M/s Suncity Ceramics 12’’X12’’ Floor (x) M/s Mark Gold Ceramics 12’’X8’’ Wall (xi) M/s Kaveri Gold Floor 12’’X12’’ (xii) M/s Kalyan Ceramics Wall 12’’X8’’ (xiii) M/s Italica Floor Tiles Porcelain Floor 2’ X 2’ (xiv) M/s Shreeji Ceramics Wall 12’’X8’’ 97. He further stated that apart from the above Morbi/ Himatnagar based companies, they were also purchasing such goods from M/s Bell Ceramics, Vadodara, M/s Nitco Tiles, Mumbai and M/s Orient Ceramics Industries Ltd, Bulandshaher, U.P.; that they deal with all the aforesaid manufacturers directly and obtain the goods in containers transported in coastal vessels and shipped from Mundra Port and discharged through Kochi Port; that for such transportation, all the logistic work is managed by M/s Transcoastal Cargo & Shipping Ltd, M/s Pushpak Logistics and M/s Shiv Carriers. 98. He has no price list as the same has not been provided by the manufacturers to them; that their sales price is worked out as per the purchase prices contained in the invoices issued by the respective manufacturers, by adding 5% profit margin and 12.5% VAT; that the companies don’t keep a uniform policy of affixing the actual MRP on their packages, and therefore, they don’t take such MRP as the basis for their sales price; that they sell the product as per the prevailing market rates only; that since the actual price which they pay to the manufacturer is more than what they have declared in their invoices and since their selling invoices are issued only for covering up their profit margin of 5 %, the remaining amount is collected in cash; that as a matter of practice, on an average, their sale invoices will be 70% of the selling price and the remaining 30% is paid to the manufacturers in cash; that they do not quote the rates of ceramic and vitrified tiles on “per box basis” and instead the goods are sold on square feet basis; that he furnished the present prevailing market rates ( including bill portion and cash portion) for ceramic and vitrified tiles & the MRP actually affixed by the respective manufacturers on their packages, as under:- Brand Description MRP affixed on
the package of goods ( Rs.)
Actual selling price per Sq. Feet (Rs.)
Conversion of actual selling price into per box MRP ( Rs.)
CITI Vitrified 1005mm X 1005 mm
875 62 1350
CITI Vitrified 26” X 26” 425 46 647 CITI Floor 2’ X 2’ 280 35 542 CITI wall 20” X 6” 180 40 335 Verona Vitrified 2’ X 2’ 350 37 575 Santro Porcelain 2’ X 2’ 250 30 480 Sigma Gold wall 12” X 8” 80 13.5 135 Hilltop Floor 12” X 12” 110 20 200 Fashion Wall 8” X 8” 80 14 150 Acme Wall 8” X 8” 100 16 170 Acme Floor 13” X 10” 120 18 190 Acme Wall 12” X 8” 100 16 170 Suncity Floor 12” X 12” 100 15 150
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Mark Gold 12” X 8” 100 14 145 Kaveri Gold 12” X 12” 92 15 150 Shreeji Gold 12” X 12” 92 15 150 Kalyan 12” X 8” 100 16 160 Italica Floor 2’ X 2’ 225 30 480 Bell Ceramics 1’ X 1’ 400 20 300 Bell Ceramics 16” X 16” 425 23 350 Nitco Ceramic 1.5” X 1.5” 650 35 525 Nitco Vitrified 2’ X 2’ 1100 46 715 99. He stated that the aforesaid selling prices are calculated as “inclusive of all taxes” and delivery charges are extra; that while preparing the bills, they adjust the billing rates for the above items as per the gross purchase prices mentioned in the manufacturers’ invoices (by adding freight + 10 % Profit + 12% VAT) and the remaining amount is paid to the manufacturers in cash as per their directions. 100. He was shown a Bhavana Vidya Mandir Notebook marked as Sr. No. 1, which was seized from his table drawer by the officers of DGCEI under a Mahazar dated 16.02.08 recorded at their business premises. On perusal of the said notebook, he confirmed that the said notebook was written by him in his own handwriting and contains the details of the payments made to the respective manufacturers for the cash portion of their purchases from the manufacturers. On being asked to explain the contents of the said seized notebook, he stated that in most of the cases, the manufacturers were intimating them telephonically regarding one bank account held in ICICI bank in the name of some trading firms, and manufacturers were directing them to deposit the cash amount into these accounts; that accordingly the invoiced amount was paid by them to the manufacturers by cheques/drafts; that the cash amount was collected by them from their customers and was deposited by them into the specified ICICI bank accounts in the name of such trading firms. He furnished the names of each manufacturer and their specified trading firms into whose account they had deposited the cash amount on behalf of such manufacturers, as below:-
Brand/ Manufacturer Name of the respective trading firm M/s City Tiles Ltd. M/s Sheetal Corporation M/s Santro Ceramics M/s Mahak Enterprise M/s Sigma Gold Ceramics M/s Khodiyar Agency M/s Hilltop Ceramics M/s Khodiyar Agency M/s Fashion Ceramics M/s Shree Bharat Enterprises M/s Acme Ceramics M/s Ronak Enterprises; M/s Vinayak Enterprises;
M/s J.B. Enterprises; M/s Suncity Floor M/s Khodiyar Agency M/s Mark Gold Ceramics M/s A.P. Enterprises Account No. 005205003063 M/s Kaveri Gold Ceramics M/s Khodiyar Agency M/s Shreeji Ceramics M/s Khodiyar Agency M/s Kalyan Ceramics M/s Khodiyar Agency M/s Italica Floor Tiles M/s Shree Bharat Enterprises; M/s Archana
Enterprises; M/s Rachana Enterprises and M/s Shubh Enterprises
M/s Verona Tiles Only one consignment purchased. Payment not settled till date. Therefore, name of the trading firm not received
M/s Bell Ceramics M/s Nitco Ceramics M/s Nitco Vitrified M/s. Orient Ceramics, Bulandshaher, UP
None of these suppliers undervalue their products in the aforesaid manner. They issue their invoices by showing the actual MRP and value. Therefore, no cash payment is involved and hence no trading firm is involved.
101. On being asked about page Nos. 9 to 12 wherein the amount paid to the concerned trading firm is not written, he stated that these details were kept by him for future business. He further stated that the amounts written on each page of the note book are not complete (full & final) and much more payments have been made by them
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into these accounts. He further stated that wherever confirmation for receipt of cash payments were received from the concerned factory, such details were not written in the said notebook; that besides several payments were made by them personally to the person who visited their premises for collection and such details are also not written in this note book. 102. The Note Book at Sr. No.1 seized from the premises of M/s Shalimar Marbles & Granites and M/s Shalimar Mosaic Industries contains the details of the payments made in the accounts of different firms owned by different Shroffs on different dates on behalf of different manufacturers of Ceramic Tiles of Gujarat, by M/s Shalimar Marbles & Granites and M/s Shalimar Mosaic Industries. Each page of the said notebook at the top contains the names of the tile manufacturer. Thereafter, each page contains the date of payment, name of the firm in whose account the amount has been paid and the amount paid. The details of cash payments by M/s Shalimar Marbles & Granites and M/s Shalimar Mosaic Industries to different tile manufacturers as per the said notebook are given in the following table:-
Sr. No.
Page No.
Name of the party to whom payment has been made
Date of payment
Name of the shroff in whose account the amount has been deposited
103. It is evident from the above table that M/s Shalimar Marbles & Granites and M/s Shalimar Mosaic Industries made cash payment of Rs.1,50,000/- in the ICICI Bank account of M/s Khodiyar Agency on two dates on behalf of M/s Shreeji Ceramics. They have made a cash payment of Rs.2,00,000/- in the ICICI Bank account of Shroff M/s Khodiyar Agency on 07.06.07 and 07.12.07 on behalf of M/s Sigma Gold. The said dealers have made a cash payment of Rs.12,00,000/- in the ICICI Bank account of M/s Sheetal Corporation during the period 21.04.07 to 31.03.08 on behalf of M/s City Tiles Limited, Himatnagar. A cash payment of Rs.75,000/- has been made in the ICICI Bank account of M/s Mahek Enterprise during the month of October, 2006 on behalf of M/s Santro Ceramics. Cash payment of Rs.50,000/- has been made in the ICICI Bank account of M/s AP Enterprise on 28.01.08 on behalf of M/s Mark Glaze. 104. The scrutiny of the aforesaid table reveals that M/s Shalimar Marbles & Granites and M/s Shalimar Mosaic Industries have made a cash payment of Rs.3,86,000/- on behalf of M/s Italica Floor Tiles Ltd during the period from 24.09.07 to 11.01.08 in the account of M/s Shree Bharat Enterprises, M/s Archana Enterprises, M/s Rachna Enterprises and M/s Subh Enterprises. Similarly, an amount of Rs. 11,84,179/- has been deposited in cash on behalf of M/s Acme Ceramics, Morbi during the period 20.5.06 to 04.12.07 in the ICICI Bank Accounts of M/s Ronak Enterprises, M/s J.B. Enterprises and M/s Vinayak. The above table further reveals that during the period 10.04.07 to 19.12.07 M/s Shalimar Marbles & Granites and M/s Shalimar Mosaic Industries have deposited an amount of Rs.7,00,000/- in the ICICI Bank account of M/s Shree Bharat Enterprises on behalf of M/s Fashion Ceramics, Morbi. 105. The note books at Sr. No. 2 & 3 recovered from the said dealers contain details of C Forms given by them to different tile manufacturers and the details of C Forms received by them from their buyers. The files at Sr. No. 4 and 5 of the panchnama contain the purchase invoices of M/s Shalimar Marbles & Granites and M/s Shalimar Mosaic Industries. 106. It thus appears that M/s. Shalimar Marble & Granites, Kerala were purchasing tiles from different tiles manufacturer in Gujarat. Such tiles were purchased under the invoices showing suppressed MRPs. The amount reflected in the invoices was paid to the respective manufacturers in cheques. The differential amount which was accruing due to the mention of suppressed MRP in the invoices was paid to the manufacturers through the ICICI Bank account of different shroffs. Shri Hajaykumar M.K. alias Sanalkumar, Proprietor of M/s Shalimar Marbles & Granites has in his statement dated 16.02.08 gave the details of shroffs whose accounts were used to transfer the cash to the manufacturers of tiles and are also evident from the documents seized from them. 107. Though M/s. Shalimar Marbles have not stated about the transactions with M/s. Anand, but the scrutiny of sales invoices of M/s. Anand showed that they have also shown sales to M/s. Shalimar Mosaic Ind. Further, on scrutiny of the seized file no. 5 of M/s. Shalimar Marbles, there is an invoice no. 275 dated 02.10.07 of M/s. Anand attached to the invoice no. 158 dated 02.10.07 of M/s. Vaishali Traders, Shakti Chambers, 8-A, National Highway, Morbi. The invoice no. 275 dated 02.10.07 of M/s. Anand is issued for 900 boxes of STD grade Ceramic Glazed Tiles with MRP of Rs. 100/- and Ceramic Glazed Tiles of SIL grade with MRP of Rs. 60/- per box. The vehicle number shown in the invoice is GJ 18X 8920. 108. The verification of the invoice no. 158 dated 02.10.07 of M/s. Vaishali Traders, Shakti Chambers, 8-A, National Highway, Morbi issued in the name of M/s. Shalimar Mosaic Ind. reveals that it has shown the sale of 1200 boxes of Ceramic Floor Tiles with the rate of Rs. 65/- per box and 1300 boxes of Ceramic Glazed Tiles with sale rate of Rs. 55/- per box. The vehicle number shown in the invoice no. 158 dated 02.10.07 of M/s. Vaishali Traders is GJ 18X 8920 which is the vehicle no. shown in the invoice no. 275 dated 02.10.07 of M/s. Anand. Thus, it is evident that the vehicle was loaded with 1300 boxes of tiles manufactured at M/s. Anand at the factory of M/s. Anand but M/s. Anand issued invoice in the name of M/s. Vaishali Traders who in turn issued the
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invoice in the name of M/s. Shalimar Mosaic Ind. Under the said invoice of M/s. Vaishali Traders, 1200 boxes of floor tiles which might have been manufactured by some other manufacturer, was also sold by M/s. Vaishali Traders. 109. The another point that is revealed is that M/s. Anand has shown the sale of 1300 boxes of tiles bifurcating in 900 boxes of STD grade tiles with MRP of Rs. 100/- per box and 400 boxes of SIL grade tiles with MRP of Rs. 60/- per box. But M/s. Vaishali Traders have charged the rate of Rs. 55/- per box for this entire 1300 boxes. This fact reveals that M/s. Anand have actually sold the 1300 boxes of tiles of STD grade, but with an intention to evade duty of Central Excise, they showed the sale of 400 boxes of SIL grade tiles mentioning lesser MRP of Rs. 60/-. Thus, M/s. Anand were not only mis-declaring the MRP of tiles, they were also misdeclaring the Grade of tiles in their sales invoices and thereby mentioning very less MRP in their invoices. They were, however, charging the price as per the actual MRP and Grade of tiles. The invoice value was collected in cheque and the value over and above the invoice value was collected in cash. They used the service of M/s. Vaishali Traders, Morbi also for effecting such illicit transactions. 110. The premises of M/s. Delight Ceramics, Flat No. 1, S. No. 14/15/1/1B, Prathmesh Heights, Opp. Santosh Hall, Shinhagad Road, Pune was searched on 19.12.2008 and the documents relevant for inquiry were resumed as per Panchnama dated 19.12.2008 drawn at the said premises. 111. A statement of Shri Rajesh Chunilal Kanabar, Proprietor of M/s. Delight Ceramics, Pune was recorded under Section 14 of the Central Excise Act, 1944 on 19.12.2008 wherein he inter-alia stated that they purchase ceramic tiles from the following manufacturers:- Sr. No. Name of the Manufacturer Description of goods purchased (i) M/s. Nice Ceramics, Morbi 12"xl2" wall tiles (ii) M/s Kaveri Ceramic, Morbi 12"xl2" Floor tiles (iii) M/s Suncity Ceramic, Morbi 12'xl2" Floor tiles (iv) M/s. Veto Ceramics, Morbi 12"X8"and 13"X10" wall tiles (v) M/s. Fame Ceramics, Morbi 8"x8" and 12"X8" wall tiles (v) M/s. Simco Ceramics, Morbi 12"X12" floor tiles (vi) M/s. Anand Industries, Morbi 12"X8" wall tiles (vii) M/s. Sanjay Ceramics, Morbi 12"X12" Floor tiles 112. He stated that they placed orders over mobile regarding specific colour / design of tiles to the manufactures; that they purchased only First grade tiles from the above mentioned manufacturers; that they received the tiles from the manufacturers alongwith invoice, packing slip, Transport documents, sales tax document etc.; that the manufacturers were showing general description of tiles in their invoice, however, in the packing slips, they were showing actual design/colour-wise quantity of the tiles; that at the time of receipt of tiles, they compare the physical quantity of the tiles with that mentioned in the packing slips and after that they destroyed the packing slips; that normally they made arrangement of transportation of the tiles from Morbi to Pune for that they utilized different transporters and the freight charges were borne by them in cases of delivery to their premises and in cases of delivery to buyers, as per the purchase orders entered with the buyers; that the freight charges per box from Morbi to Pune were different for different size of tiles; that the freight charges were Rs.1300/- per MT of tiles and now the same has been increased to Rs. 1800/- per MT and they have paid the entire freight in cash; that In some cases, they had forwarded purchase order of different buyers directly to the manufacturers and the rates were finalized for delivery at site and unloading charges were to be borne by the buyers; that the actual prices were informed on mobile; that their sale prices were worked out according to purchase prices shown in the invoices issued by the respective manufacturers; that they add the cost of transportation and loading/unloading charges from Morbi to Pune and profit margin + VAT @ 12.5% on the bill value; that their profit margin varies from Rs.15 to 20 per box for wall /floor tiles, depending upon the customer, terms of payment, quantity required and demand of the product; that prior to February/March 2008, the manufacturers were not showing the actual MRP and price of the tiles in the Central
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Excise Invoices; that the MRP shown in the invoices was lower than the actual MRP and price of the tiles; that the differential amount, over and above invoice value, was collected by the manufacturers in cash from them; that they were preparing the invoices showing actual value irrespective of the fact that the same were exceeding the MRP shown in the invoices of manufacturers; that such practice of mentioning lesser MRP was adopted by the manufacturers of Morbi; that in respect of other local purchases of tiles of M/s. Kajaria, M/s. Nitco etc., actual MRPs were declared and hence there was no irregularity in our invoices also; that their buyers, mostly builders were paying actual amount in cheques but as per their understanding with the tile manufacturers of Morbi, they were paying part amount in cash and part amount in cheques; that the differential amount, over and above invoice value, was paid in cash by them to the manufactures are reflected on the various pages of file A/6 seized on 19.12.2008; that the cash payments over and above invoice amounts have already been made to M/s. Anand and the said cash was handed over to M/s. Anand by their employee Shri Manish Gami; that the details mentioned in the note books at Sr. No. A/1 to A/5 seized are of private ledger showing cash payments and receipts from banks and parties for the year 2007 an 2008; that the cash amounts of Rs. 13,800/- each on 24/04 (page 30) and 21.04.08 (page 33) were given to Anand, over and above invoice amount; that he has paid the cash amount through M/s. R.R. Angadia; that he further state that they were paying Rs. 15/- to Rs.20/- per box in respect of 12"x8" size wall tiles, Rs. 20/- to Rs. 25/- per box in respect of 12"xl2" size floor tiles and Rs. 15/- to Rs.20/- per box in respect of 8"x8" size wall tiles to the manufacturers of Morbi towards the amount, over and above invoice value upto Feb/March-2008. 113. Scrutiny of the invoices furnished by M/s Anand revealed that they have made the clearance of 2100 boxes of wall tiles to M/s Delight Ceramic, Pune under invoice No. 323 dated 23.10.2007. 114. It is evident from the details of clearances submitted by M/s. Anand that prior to 03.03.2008 they were declaring the MRP of Rs. 100/- for their 1st grade STD tiles. However from 03.03.08, i.e. after the initiation of investigations against tile manufacturers by DGCEI, M/s. Anand started declaring the MRP of R. 140/- for their 1st grade such an increase of MRP by 60% for 1st grade luster tiles and 40% for 1st grade STD ordinary tiles reveals that M/s. Anand were mis-declaring the MRP prior to initiation of investigations by the DGCEI. 115. Seized document No. 6 marked as “Misc. Paper File” resumed from M/s Delight Ceramic, Pune contains several pages relating to cash transactions of the said dealer. Scanned image of page No. 11 of the said file is reproduced below: SCANNED IMAGE OF PAGE NO. 11
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116. It revealed from scrutiny of the said page; statement dated 19.12.2008, Shri Rajesh Chunilal Kanabar, Proprietor of M/s Delight Ceramics, Pune and ledgers of the said manufacturers of tiles that there were several entries of outstanding amounts pertaining to different entities; that out of said outstanding amount, some amounts pertained to cheque amount outstanding (viz. amount outstanding in Books of Account); that, on verification of the ledgers of the said manufacturers, it has revealed that the said outstanding amount includes the cheque as well as the cash amounts. The said facts thus show that M/s. Delight were remitting cash amounts, over and above the invoice amounts, to the tile manufacturers of Gujarat on account of suppressed MRPs declared by the said manufacturers. 117. Shri Rajesh Chunilal Kanabar, Proprietor of M/s Delight Ceramics, Pune has agreed in his statement dated 19.12.2008 that they have paid cash amount, over and above invoice amount, of Rs. 13,800/- each on 24/04 (page 30) and 21.04.08 (page 33) to Anand, revealed from the note-book seized at Sr. No. 5. M/s. Anand had cleared 2100 boxes of STD grade tiles at the MRP of Rs. 100/- per box to M/s. Delight Ceramics, Pune. The assessable value of the said consignment after abatement of 45%
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works out to Rs. 1,15,500/-, C. Ex. Duty @ 8.24 works out to Rs. 9,517/- and CST @ 3% works out to Rs. 3,751/-. Thus, the total invoice value works out to Rs. 1,28,768/-. However, M/s. Delight Ceramics, Pune have paid them Rs. 27,800/- (Rs. 13,800/-+Rs.13,800/-) to M/s. Anand in cash, over and above the said invoice amount. The actual price collected by M/s. Anand for the said consignment works out to Rs. 1,56,568/-. 118. From the aforesaid documentary evidences as well as the oral depositions made by Shri Rajesh Chunilal Kanabar, it evident that M/s. Anand were not declaring actual MRP of tiles cleared by them prior to 03.03.2008 in their Central Excise invoices. M/s. Anand were collecting the cash amounts, over and above invoice amounts as is evident from the note-book seized at Sr. No. 4. The cash amount, over and above invoice amount, was collected by M/s. Anand in order to declare suppressed MRP in their invoices and to pay lesser central excise duty. It thus revealed that M/s. Anand were mis-declaring the MRP in their central excise invoices with an intent to evade the duty of central excise. 119. The premises of M/s Kwality Marbles and M/s Krishna Marble situated at 32/1950, Nr. Hotel Highway Garden, NH Bye Pass, Edappally, Cochin 24 has been searched on 06.02.2008 and the records/Documents related to purchase of Ceramics tiles and the Mobile Phone Brand Nokia Model No 6310 bearing No. 9388602971 of Shri Bagri were seized under proper panchnama for further investigation. The said unit was found purchasing tiles from the following manufacturers:- (i) M/s Delta Tiles, Morbi (ii) M/s Italica Floor Tiles, Morbi, (iii) M/s Max Granito Pvt. Ltd, (iv) M/s Silk Ceramics, Morbi, (v) M/s Uttam Ceramics, Morbi, (vi) M/s Famous Ceramics Morbi, (vii) M/s Ajanta Manufacturing Co., Samakhayali, Kutch, (viii) M/s Oracle Ceramics, Himmatnagar. (ix) M/s. Anand Industries, Morbi. 120. Statement of Shri Manmohan Ghanshyamji Bagri, Owner of M/s Kwality Marbles and M/s Krishna Marble was recorded on 11.02.2008 wherein he iner-alia deposed that they were directly purchasing the ceramic tiles from the aforesaid companies and transport the same to Kochi by coastal Containers through M/s Pushpak Logistics; that Shri Dheranbhai of M/s Pushpak Logistics is arranging all documents and procedures for transportation and delivery of goods till their premises; that they are selling the goods to the ultimate consumers and do not sell goods to any dealers or sub dealers etc.; that the customers are visiting their premises and finalize their purchases personally; that they did not keep any price lists for ceramics tiles. He furnished following purchase and selling prices for various types of ceramics tiles. Sr.No
Name of manufacturer/brand
Item description
Purchase Price per Box (net)
Billing price(net)
Selling price per Box (gross)
MRP printed on box.
1 Delta [2’x2’] Floor tiles 95/- 150/- to 170/-
200/-
2 Italica [2’x2’] Floor tiles 160/- 210/- 250/- 3 Max Granito
9 Ajanta [Oreva] 2’x2’ [only local purchase not from factory]
Vitrified [commercial quality]
400/- 450/- 450/-+Tax 600/-
10 Oracle 2’x2’ Vitrified 250/- 350/- 450/- 350/- 121. On being asked with regards to vast difference in the billing price at which the goods sold by them to their customers and actual selling price which is collected from the customers, he stated that as a matter of practice, the manufacturers/factories of ceramic tiles do not issue their sale bill by showing the full price of goods. For example, if one particular tile is sold to the customers at an actual rate of Rs.200/- per box, the MRP printed by the factory on such box of tiles would be only Rs. 150/-. Accordingly, they prepare their bills after deducting 45% from Rs.150/- i.e. by showing the net price as Rs.82.50 per box. Thereafter, the transportation cost per box will be approx. Rs.30 /- and the landed cost will be Rs. 123/- per box. However, when the said box is actually sold to their customers, they add 10% profit and accordingly workout the net price as Rs. 135/- plus VAT @12.5%, totaling to Rs. 152/- per box. However, the said box is actually sold to the customers for Rs. 200/-. Since the factory does not show the full value of the tiles, they cannot show the full value in their bills. As regards the mode of payment, he stated that while they receive cheque for bill amount, differential amount which is not billed is collected in cash only. On being asked about the actual amount which they pay to the manufacturers/ factories in the above example, he stated that in the above example, they were paying Rs. 93/- by cheque and Rs. 47/- by cash to the manufacturers. Thus the total cost for the above box paid to the factory is Rs.140/-; that the said cash amount is collected from their premises by the representatives of the factories who visit to their premises regularly; that once the goods are dispatched, factory owners intimate the name of the person who is going to visit for collecting payments; that accordingly, they handover cheque and cash amounts to such person; that the names for different units as well as persons are as under:-
(i) M/s Delta- Shri Panchangbhai (ii) M/s Italica- Shri Vinodbhai Patel-Mob.NO.989501419 (iii) M/s Max Granito- Shri Jineshbhai-Mob.No. 9978970670 (iv) M/s Silk Ceramics –Shri Rajubhai [Mob No. not known] or Shri
Jitubhai Mob.NO.09925027701. (v) M/s Uttam – since they had stopped business with this unit, about 1 year
back, he does not have any contact with them for a long. Therefore, unable to give any details.
(vi) M/s Famous Ceramics – [Name and mobile number not remembered].
(vii) M/s Ajanta-In this case, he is sub dealer and purchases goods from M/s Cochin Tiles Marketing who are the main dealers. They give payments to this party against the bills issued by them.
(viii) M/s Oracle- Shri Majo Thomas- Ph. No. 9349004602. 122. He was shown SMS messages available in “INBOX” of the Mobile phone No. 09388602971, Nokia 6310 which was seized from his personal possession. The SMS messages read as under:- Sender & his No. SMS Message description SMS
received date & time
Sender belong to which company
Rangrajan 09447799386
Dhibug 026201509512 05.02.2008 16.59.36
Entry Tax payment
Rangrajan 09447799386
10810100157-064 21.01.2008 10.18.20
Entry tax payment
Santro-09895182293
ICICI Bank Santro Tiles Rachna Enterprise A/c 624805012005 PAN NO.AIRPB2079F Fax
16.01.2008 11.53.46
Santro Ceramics
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NO.02770240623 09413017832 Vijaykumar Birla PNB
0556000100181030 27.12.200712.16.38
Marble Supplier
09820124140 Shree Bharat Enterprise 015305005806 PAN No. AIRPB 2079 ICICI bank
24.12.2007 Not known now
Rohitbhai Marbomax 09978960960
Max Granito P Ltd A/c No 3072320001846 HDFC Bank Fax No 02822220544
25.11.2007 10.52.41
Max Granito
09825899499 Shree Ram Enterprise ICICI bank A/c No. 624805011746 Pan No. AIRPP7551
04.11.2007 10.55.17
Not known now
Dineshbhai -09825621970
ICICI Bank Shree Balaji Trading Co. A/c No 015305007899 Pan No ADMPG82691 Fax NO 02822291370
02.11.2007 17.38.14
Famous Ceramics Morbi
Dineshbhai -09825621970
Shree Sai Krupa Enterprise ICICI Bank A/c No. 624805011259 Pan No ADRPT 5807e
16.10.2007 14.46.16
Famous Ceramics, Morbi
Satishji Hy 9440667168
Kvb ac.No.1440155000023113 TV Hemantkumar
11.10.2007 9.49.33
Granite Supplier
09422414344 UTI ac No. Prajapati Hiraram 292010100020101Sing Asu 292010100020110
10.10.2007 11.59.12
Granite Power
Dineshbhai 09825621970
Sonata Ceramic HDFC 307820000202
20.09.2007 14.02.17
Famous Ceramics
Dineshbhai 09825621970
Sagar Enterprise ICICI A/c No. 624805010644 Pan No. ABFPH 608F
13.09.2007 17.02.18
Famous Ceramics
Satish Ji Hy 6440667168
Malani Granite Ing Vysya ac No. 181011000851
26.07.200711.24.30
Granite Supplier
Bhagawandas Bansware 09414413816
CGH Bhagwan IDBI Bank Ac 094104000023065 National Indust. Bansware
20.07.2007 09.04.59
Marble supplier
123. He explained the details of aforesaid SMSs, that apart from personally collecting the cash amounts from their premises as aforesaid, the manufacturers/factories also communicate the multi city bank accounts of some trading firms through SMS message; they deposit cheque/cash amounts in these accounts against the payment of under – valued portion of the cost of tiles; that such amounts are withdrawn by the manufacturer/factories from the branches situated in Gujarat and the payments are adjusted against their purchases; that the name of some of the factories who had sent such SMS messages have been mentioned in col. No 4 of the above table; that all the payments deposited by them in the accounts of such trading firms are in respect of the undervalued part of the ceramic tiles supplied by the respective manufacturers to them.
124. From the above facts, it appears that the aforesaid manufacturers based at Morbi and Himatnagar, were selling their Ceramic tiles to M/s Kwality Marbles and Krishna Marbles, by declaring very low MRP. It has been explained by Shri Manmohan Ghanshyamji Bagri, Owner of M/s Kwality Marbles and M/s Krishna Marble in his statement recorded on 11.02.2008 as to how the under invoiced portion of the tiles were being remitted to the representatives of the manufacturers or deposited in to the Bank account of the persons/firms nominated/intimated by SMS for further transmission to the manufacturers as tabulated in the following table:-
SrNo
Name of the manufacturer
Name of the person to whom cash payments
were given
Account No Name of the firm
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1 2 3 4 5 1 M/s Delta Tiles, Morbi. Shri Panchangbhai 2 M/s Italica Floor Tiles
Morbi Shri Vinodbhai Patel Mob.NO.989501419
3 M/s Max Granito Pvt. Ltd
Shri Jineshbhai Mob.No. 9978970670
4 M/s Silk Ceramics, Morbi.
Shri Rajubhai or Shri Jitubhai Mob.No.09925027701
5 M/s Famous Ceramics Morbi.
Dineshbhai-09825621970
ICICI Bank A/c 015305007899 PAN No ADMPG82691 Fax. No. 02822291370 ICICI Bank A/c 624805011259 PAN No ADRPT 5807e HDFC 307820000202 ICICI Bank A/c. 624805010644 Pan No. Abfph 608F
7 M/s Santro Ceramics. ICICI Bank A/c 624805012005
Rachna Enterprise
9 Mob. No 09820124140 through message for depositing cash was received.
ICICI bank A/c 015305005806 PAN No. AIRPB 2079
Shree Bharat Enterprise
10 Mob. No 09825899499 through message for depositing cash was received.
ICICI Bank A/c 624805011746 Pan No.AIRPP7551
Shree Ram Enterprise
125. It is revealed from the invoices of M/s. Anand that M/s Anand have cleared 731 boxes of STD grade tiles at the MRP of Rs. 100/- and 125 boxes of COM grade tiles at the MRP of Rs. 90/- to M/s. Kwality Marble and 1250 boxes of STD grade tiles at the MRP of Rs. 100/- to M/s. Krishna Marble, Cochin. Shri Manmohan Ghanshyamji Bagri, Owner of M/s Kwality Marbles and M/s Krishna Marble has in his statement dated 11.02.08 clearly gave the example evidencing payment of two third part of the actual value through cheques and the one third part of the actual value in cash to the tiles manufacturers of Gujarat. It thus, appears that the tile manufacturers of Gujarat, including M/s. Anand were showing only two third of the actual price of tiles in their invoices and collecting the differential amount equal to one third of actual; value of tiles in cash. M/s. Anand were collecting the differential amount equal to one third of the actual value of the tiles from their dealers in cash in order to evade the duty of central excise. 126. Further inquiry was carried out M/s. Satguru Marble & Sanitaryware, Pawta Market, Under Overbridge, Near Bharat Talkies, Bhopal (here-in-after referred to as M/s. Satguru) under the summons proceedings and a statement of Shri Hirendra Asnani, Proprietor of M/s Satguru was recorded under Section 14 of Central Excise Act,
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1944, on 09/01/09 wherein he, inter alia, stated that they have purchased ceramic tiles mainly from the following suppliers of Gujarat:
Sr. No. Name of the Manufacturer 1 M/s. Priya Gold Ceramics 2 M/s. Nijanand Ceramics Pvt. Ltd.
127. He further stated they have also purchased one or two consignments each from M/s. Anand Industries, Morbi, M/s. Ideal Cera Products, Morbi, M/s. Lexus Ceramics, Morbi and M/s. Favourite Ceramics, Morbi; that the tiles purchased from all the manufacturers were of all the grades; that almost all the tiles purchased by them from aforesaid manufacturers were sold by them to shop keepers and customers in retail; that normally all the orders were placed by him over phone to Directors/Partners/Representatives of the manufacturers; that at the time of receipt of goods, they normally maintained a stock register; that no price lists were being supplied to them by the manufacturers of such tiles; that as per prevailing practice during the period 2003-04 to 2007-08, the above manufacturers of tiles have charged 30% to 40% amounts in cash, over and above the invoice value, for the floor/wall tiles supplied by them; that accordingly, they have also sold tiles by charging the amount of 30% to 40% over and above the MRP prices shown on the boxes of the tiles so purchased; that the extra amount was collected by them in cash and the same was transferred to the manufacturers in cash; that such cash payments over and above the invoice prices of aforementioned manufacturers of wall/floor tiles have been made by him to their agents/representatives during their visit to Bhopal; that normally they used to come on monthly basis; that he does not remember the names of these agents/representatives; that they have not maintained any records of the aforesaid cash transactions with aforesaid manufacturers; that it revealed M/s. Anand were collecting 60% to 70% of the actual value of tiles by declaring in the invoices and the differential amount of 30% to 40% were collected in cash from M/s. Satguru. 128. The scrutiny of central excise invoices produced by M/s. Anand revealed that during the period Nov, 04 to Apr, 05, M/s. Anand have cleared 2480 boxes of STD grade tiles at MRP of Rs. 100/-, 974 boxes of COM grade tiles at the MRP of Rs. 90/- and 80 boxes of REJ/SIL grade tiles at the MRP of Rs. 60/- to M/s. Satguru It established from the invoices of M/s Anand and statement of Shri Hirendra Asnani, Proprietor of M/s Satguru, that M/s. Anand were undervaluing the wall tiles manufactured by them. The amounts over and above the invoice price were being collected by them through their representative in cash. M/s Satguru, Bhopal were actually selling the tiles of M/s Anand at a price much higher than the invoice price and the differential amount was paid by them in cash to the representative of M/s. Anand. 129. M/s. Anand have shown the clearances of 39749 boxes of STD and 1000 boxes of SIL tiles to M/s. Royal Floorings & Sanitaryware, Palakkad during the period January, 2006 to November, 2007. Hence, investigation was conducted from M/s. Royal Floorings & Sanitaryware, Karuna Hospital Complex, Melamuri, Palakkad under summons proceedings on 25.8.2008. During the course of investigation, it revealed that the firm had been dissolved and Shri Mohammed Musthafa, Partner, M/s. Royal Floorings & Sanitaryware, Palakkad was working as a manager in another concern named M/s. Ideal Agencies, Paravattani, Trichur. 130. Shri. Mohammed Musthafa has in his statement dated 19.08.2008 recorded under Section 14 of the Central Excise Act, 1944 inter alia stated that he was the Partner of M/s. Royal Floorings & Sanitaryware, Karuna Hospital Complex, Melamuri, Palakkad; that the other partners of the firm were Shri. Abdul Azeez, Shri. Mohammed Ali and Shri. T.T. Kunhabdulla; that they purchased tiles from the following parties during the past 3 years of 2005-06, 2006-07 and 2007-08 (upto January 2008). (i). M/s. Maruti Silver Ceramics, Morbi (ii). M/s. City, Dalpur. (iii) M/s. Crystal Glazes, Kadi (iv) M/s. Decolight Ceramics Ltd., Morbi. (v). M/s. Coral Ceramics Pvt. Ltd., Morbi. (vi) M/s. Decogold Glazed Tiles Ltd., Morbi.
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(vii) M/s. Shyam Ceramics, Morbi. (viii). M/s. Anand Industries, Morbi. (ix) M/s. Suman Ceramics, Dhuva. 131. SI. Nos. (i) to (v) were suppliers of floor tiles and SI. Nos. (vi) to (ix) were suppliers of wall tiles. Majority of the purchases were made from M/s. City; that the orders were placed with M/s. City, M/s. Crystal Glazes, M/s. Decolight Ceramics Ltd., M/s. Decogold Glazed Tiles Ltd. through their representatives; that M/s. City had a depot/office at Calicut and in the case of others, they placed orders over phone directly with the factory; that the ordered quantity, placed over phone or through representatives/depots, used to be sent mainly by containers; that the freight paid for a container load was Rs.2250/- to 2300/- per tonne from factory to their godown; that the transporters were M/s. Transcoastal, M/s. Sea Connect, M/s. Pushpak Logistics, M/s. Shiv Carriers, etc.; that M/s. Shiv Carriers and M/s. Pushpak Logistics did not give them full bill towards transportation charges; that in the case of M/s. Pushpak Logistics and M/s. Shiv Carriers, the sea freight was paid in the form of cheque and road freight was paid in cash; that they had received a few consignments by lorry transport also and the freight paid per tonne was Rs.2600/- during 2007; that in this case also, the transporters would not show the correct freight in their lorry receipts; that all the above parties except M/s. Suman Ceramics did not show the full rate or value in their sales invoices; that the amounts shown in the bills were paid by cheque; that the actual rates were fixed depending upon the packing and quality of tiles and MRP varied from manufacturer to manufacturer and hence he was not remembering the correct rate at which they made payments to such manufacturers; that they stopped purchase of tiles by January 2008 with a view to stop business by March 2008 and settled all the accounts with the said manufacturers by February 2008; that therefore, he did not have any accounts of amounts paid in the form of cash over and above the billed amount; that as the manufacturers had not given them bills showing the actual value, they also did not show the actual value in their sales invoices; that they had sold the tiles considering the actual rate given to the manufacturer, freight paid, VAT/CST paid/payable, overheads and their margin of profit of 4 to 5%; that as the rate per box varied from manufacturer to manufacturer he did not remember the correct MRP for each quality or design of tiles. 132. The investigations from M/s. Royal Floorings & Sanitaryware, Palakkad thus revealed that the tile manufacturers of Gujarat including M/s. Anand were mis-declaring the MRP in their invoices and thereby evading the duty of Central Excise. 133. The scrutiny of the central excise invoices submitted by M/s. Anand reveals that they have cleared consignments of wall tiles of “SIL” grade to their buyers situated in south Indian States viz. Kerala, Tamilnadu, Karnataka, Hyderabad etc. They have declared MRP of such tiles as Rs. 60/- per box during the period April, 2004 to Feb, 08. The quantity of “SIL” grade tiles cleared by M/s. Anand to two buyers of Hyderabad during the period Apr, 2004 to 24.02.08 is tabulated as below:-
Sr. No. Name and Address of the buyer No. of boxes of “SIL” grade cleared 1 M/s. National Sanitary Depo., Hyderabad 19490 2 M/s. Glazeware Trading Co., Madurai 6662
134. The investigation with regard to actual freight charged by various transporters for transporting consignments of tiles of different sizes to different parts of country were carried out by the officers of DGCEI. The statements of various transporters were recorded. The evidences from these transporters are discussed in following paras: 135. The statement of Shri Yunus Ahmed Sherasia, Proprietor of M/s. Raja Roadlines, NH No. 8, Chottila Road, Monali Chambesr, Wankaner was recorded on 16.05.2008 wherein he, inter alia, stated that mostly tiles are transported in full truck load of 16 MTs. Large type of floor tiles of 2’x2’ size is packed four pieces in one packet and each packet weighs about 32.500 Kg. He gave the nature of packing and average weight per packet of different types of tiles as under: Size of tiles No. of pcs per
136. He stated that the average freight amounts for one such full truck load of tiles from Morbi to the aforesaid destinations are as under:
Station Amount of freight [Rs.] Bangalore 38,000
Mumbai 20,800 Hyderabad 38,000
Chennai 45,000 Coimbatore 45,000
Madurai 45,000 Pondicherry 44,000
Salem 42,000 Hosur 38,000 Calicut 45,000
137. He explained that the aforesaid freight amounts are inclusive of service tax but exclusive of any loading, unloading expenses, which are borne by the consignor factory or consignee party. During the statement proceedings, Shri Yunus was shown the LRs issued by his transport company for transportation of tiles from Morbi to Bangalore showing freight charges as Rs. 17,000/-. On being asked as to how these LRs are issued for Rs. 17,000/- when the actual cost of transportation is Rs. 38,000/- as stated by him above, he stated that the aforesaid LRs are issued only for a part of the actual freight amount and the remaining amount is paid to him in cash. He explained that where the goods are transported on freight-to-pay basis, the differential cash amounts are also paid by the consignee at the destination at the time of delivery of consignments at their godown. On being asked as to why such part amount is declared in LRs, Shri Yunus stated that this is done as per the mutual understanding with the factory. In case the amount declared in the LR is more than Rs. 20,000/-, they will have to deduct TDS amounts. Therefore, they always show the freight amount as less than Rs. 20,000/-. 138. A statement of Shri Narendra L. Patadia, Proprietor of M/s. Dharmajeet Transports was recorded on 10.06.2008 wherein he, inter alia, stated that they transported the tiles from Morbi and Wankaner to states on freight – to – pay basis; that as regards the details of full truck load of tiles, on being asked, he reiterated the facts explained by Shri Yunus Sherasia of M/s. Raja Roadlines, and explained the average freight amounts for one such full truck load of tiles from Morbi to the aforesaid destinations as under:
Station Amount of freight [Rs.] Bangalore 38,000 Hyderabad 38,000
Chennai 45,000 Coimbatore 45,000
Madurai 45,000 Pondicherry 44,000
Salem 42,000 Hosur 38,000 Calicut 45,000
Trivandrum 55,000 139. On being asked, he stated that the aforesaid freight amounts are inclusive of service tax but exclusive of any loading, unloading expenses, which are borne by the consignor factory or consignee party. He was shown the LRs issued by M/s. Dharmajeet Transport for transportation of tiles from Morbi to Hyderabad for Rs. 17,000/- as freight amount. On being asked as to how these LRs are issued for Rs. 17,000/- when the actual cost of transportation is Rs. 38,000/- as stated by him above,
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he stated that the aforesaid LRs are issued only for a part of the actual freight amount and the remaining amount is paid to him by cash. Where the goods are dispatched on freight-to-pay basis, the differential cash amounts are also paid by the consignee at the destination while delivery of consignments to their godown. On being asked as to why such part amount is declared in LRs, he also stated that this is done as per the mutual understanding with the factory. In case the amount declared in the LR is more than Rs. 20,000/-, they will have to deduct TDS amounts. Therefore, they always show the freight amount as less than Rs. 20,000/-. 140. A statement of Shri Kamlesh Motilal Mewada, Proprietor of M/s. Tirumala Transports, 8-A, National Highway, Vasundhara Hotel, Morbi was also recorded on 10.06.2008 wherein he, inter alia, stated that the goods are transported from the factories of tiles of Morbi and Wankaner on freight-to-pay basis. As regards the details of full truck load of tiles, on being asked, he stated that mostly tiles are transported in full truck load of 16 MTs. Large type of floor tiles of 2’x2’ size is packed four pieces in one packet and each packet weighs about 32.500 Kg. On being asked, he gave the nature of packing and average weight per packet of different types of tiles as under: Size of tiles No. of pcs per
141. On being asked about the average freight amounts for one such full truck load of tiles from Morbi to the aforesaid destinations, which are transported by them, he stated such freight amounts as under:
Station Amount of freight [Rs.] Bangalore 38,000 Hyderabad 38,000
Chennai 45,000 Hosur 38,000
142. On being asked, he stated that the aforesaid freight amounts are inclusive of service tax but exclusive of any loading, unloading expenses, which are borne by the consignor factory or consignee party. He was shown the LRs issued by his transport company for transportation of tiles from Morbi to Hyderabad for Rs. 17,000/- as freight amount. On being asked as to how these LRs are issued for Rs. 17,000/- when the actual cost of transportation is Rs. 38,000/- as stated by him above, and in this regard, he stated that the aforesaid LRs are issued only for a part of the actual freight amount and the remaining amount is paid to him by cash. Where the goods are dispatched on freight-to-pay basis, the differential cash amounts are also paid by the consignee at the destination while delivery of consignments to their godown. On being asked as to why such part amount is declared in LRs, he stated that this is done as per the mutual understanding with the factory. In case the amount is more than Rs. 20,000/- they will have to deduct TDS amounts. Therefore, he always shows the freight amount as less than Rs. 20,000/-. 143. The above investigation clearly brings out the fact that the transporters are deliberately showing the freight amount as less than Rs. 20,000/- to escape from TDS and service tax as well as to facilitate payments in cash. Remaining freight amount is paid by the manufacturer or their dealer in cash, and such cash payment is not brought in their books of accounts. While such procedure enables the transporter to avoid payment of TDS & Service Tax and receipt of payments in cash, the said procedure has been adopted by the manufacturers of tiles although for a different reason. In their case, tiles are cleared from the factory by declaring only 50% of the actual MRP, and the differential value over and above the bill amount is collected by them from their dealers in cash. On their part, dealers are required to keep the landed cost of tiles at their premises at the barest minimum to remain within the MRP declared by the manufacturers in their invoices. Thus, as a part of a pre-meditated strategy between the manufacturers and dealers, only a part of the actual transportation cost is declared on
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records. While selling the tiles to the ultimate buyers, these dealers declare only such part of the value in their sale bills which matches the MRP and officially accounted for landed cost. Remaining amount is collected by them in cash from the buyers. Part of such cash is paid to the transporters towards the differential freight amounts, to meet with other un-declared incidental and ancillary expenses and the remaining cash amounts are transferred to the manufacturers towards the value of tiles, over and above the declared bill value. 144. Thus, it is evident that the actual transportation cost for transporting tiles from Morbi to Karnataka and Andhra Pradesh was Rs. 38,000/- and Rs. 45,000/- for Tamilnadu. As a part of a well-orchestrated strategy between M/s. Anand and their buyers, such cost was declared as below Rs. 20,000/-. Remaining amount of freight was paid by the buyers in cash to the transporters, out of the cash amounts collected by them over and above the value declared in their sale bills. Such payment of actual freight as well as other cost factors involved in the deal will substantiate the fact that the MRP declared by M/s. Anand in the Central Excise invoices is grossly undervalued. This is illustrated in the following paragraph. 145. One truck carries 16 MTs of tiles and can transport around 1600 boxes of wall tiles of 12”x8” and/or 8”X8” size for which total freight charges are Rs. 38,000/- for Karnataka or Andhra Pradesh and Rs. 45,000/- for Tamilnadu. Thus the actual freight per box of tiles of sizes 12”x8” and or 8”X8” from Morbi to Karnataka/ Andhra Pradesh works out to Rs. 23.75 per box and to Tamilnadu works out to Rs. 28.12/-. As mentioned above, M/s. Anand has cleared various consignments of their 12”x8” sizes tiles of “SIL” grade to their buyers situated in Karnataka, Andhra Pradesh and Tamilnadu by declaring MRP of Rs. 60/- per box. Thus, considering the actual transportation charges payable, the MRP shown in the Central Excise invoices is unfeasible in the normal course of trade. As margin of profit of distributors and retailers and local transportation charges are to be added, it was impossible to sell “SIL” grade of tiles at declared MRP. Other cost factors such as higher profit margin of whole-sellers/distributors, retailers, local levies, onward transportation expenses etc. if added shall further increase the actual MRP. After initiation of investigations by DGCEI, the tile manufacturers of Gujarat including M/s. Anand, has revised their MRP. With effect from 03/03/08, the lowest MRP declared by them for SIL grade ordinary type tiles is Rs. 110/-. It is thus evident that prior to 03.03.08, M/s. Anand were declaring artificial MRPs in their Central Excise invoices. 146. The documentary evidences, duly corroborated by the statements of the concerned persons which are discussed in detail herein above, clearly appeared to indicate that M/s. Anand were indulging in large scale evasion of Central Excise duty, as well as, by resorting to gross undervaluation of the retail sale price, with intent to evade payment of Central Excise duty. Therefore, in order to ascertain the extent of evasion, Shri Narendrabhai Dharamshibhai Patel, Partner of M/s. Anand was summoned under Section 14 of the Central Excise Act, 1944 on 03.05.2008, and was called upon to produce all the documents maintained by them regarding production, clearance of ceramic glazed tiles, the payments and collections realized by them. However, Shri Narendrabhai Dharamshibhai Patel, Partner of M/s. Anand appeared before the investigating officers on 01.05.2008, and produced the documents such as Central Excise invoices, Ledger Accounts, Cash Books etc., maintained by them (Cash-books and ledgers for the period upto 31.03.07 only). All such documents were examined with reference to the other documentary evidences gathered from the ends of the dealers/transporters. 147. A statement of Shri Narendra Dharamsinhbhai Patel, Partner, of M/s. Anand was recorded under Section 14 of the Central Excise Act, 1944, on 1st May, 2008 wherein he, inter-alia, stated that they were manufacturing tiles of size 12”X8”; that they were selling their tiles at their factory gate only to all types of buyers, viz., individuals, dealers, traders etc. and not having any marketing set-up as such; that they received most of orders on phone or fax and after execution of the order, they destroy the order copy; that at the time of dispatch, they prepare the Central Excise invoice, packing slip, commercial tax forms, as may be required depending upon the local requirement of such Sales Tax / Commercial Tax authorities; that for goods going out of Gujarat State,
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Form 402 is prepared and sent alongwith the consignment; that for sales within Gujarat, only the excise invoices and packing lists are given; that Shri Ashwin Kawathia prepares and issues such documents as per his instructions; that they have not fixed transporters and most of the times Customers arrange for the transport; that the out-ward freight are always borne by the customer; that the MRPs of various grades of ceramic tiles manufactured by them as on 29.02.2008 are:- Sr. No. Quality MRP shown on the invoice ( Rs. Per Box) 1 Standard/ ROK 100 2 Commercial 90 3 Silver 60 4 Reject 30 They increased the MRP from 29.2.2008, as under: Sr. No. Quality MRP shown on the invoice ( Rs. Per Box) 1 Standard/ ROK 140 2 Commercial 3 Silver 110 4 Reject 50 148. He submitted that they stopped the production of commercial grade tile from Feb'2008; that the price charged from the customers situated out side Gujarat is the abetted value of the declared MRP + Central Excise duty on the abetted value & Education Cess on C. Ex. duty + CST (at the prevailing rates); that the price charged from the customer situated within Gujarat is the abetted value of the declared MRP + Central Excise duty on the abetted value & Education Cess on C. Ex. duty + VAT; that this was the practice prevailing in the entire Ceramic Tile business; that Lesser MRPs were being mentioned in the invoices however, the tiles were sold at higher price; that in order to stand in the market they were following the same practice; that now after the cases against manufacturers of Ceramic Tiles at Morbi, they have discontinued the production of such quality of Ceramic Tiles cleared by them; that he provided the actual price charged by them from the final customer for such Tiles, the same as follows: Sr. No. Quality MRP shown on the invoice ( Rs. Per Box) 1 Standard/ ROK 140 2 Commercial 3 Silver 110 4 Reject 50 149. He further stated that from March'2008 they have also started production of Ceramic Wall Tiles of size 13" X 10"; that the MRP of Standard grade of such tile is Rs. 200/- pre box; that also, from March'2008 they have started manufacture of qualities such as luster qualities etc.; that the cash against the MRP difference was routed through angadias namely M/s Arvind Kanti, M/s Ishwarbhai Becharbhai and was also being personally handed over to them by their customers; that they have not kept any records for such cash transactions; that since they were showing selling of the entire product manufactured by them at less MRP, they were collecting the differential amount in cash from all their customers; that in this regard, he reconfirm that the actual MRP in respect of Standard, Commercial, Silver, and Reject grades they have charged through out the period from 01.04.03 to 31.03.08 has been much lesser than the actual price charged by them from their final customers; that this was done with an intention to survive in the prevailing practice; that most of the manufacturers at Ceramic tiles were declaring lesser MRPs and recovering the differential amount in cash; that they has loose the customers if they had not followed the said practice; that hence, they had adopted the said practice of collecting differential amount in cash; that however, they accept that the same was the wrong practice and in acceptance of not paying duty according to the correct MRP, he is going to make part payment and would pay the entire duty not paid by them as early as possible; that in this regard, he state that he agreed to the fact that they have short paid the Central Excise duty, however, as regard to the amount of duty evasion, presently he is able to provide an estimated amount of duty evasion which is approx. 25 lacks; that he had gone through the said panchnama and the records seized at Sr. No. 4 and 5; that he stated that they may be selling tiles at
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much higher prices shown in the price lists, they were collecting price as per MRP of Rs. 140/- per box for STD and Rs. 110/-per box for SIL.” 150. Further statement of Shri Narendrabhai Dharamshibhai Patel, Partner of M/s. Anand was recorded on 16.04.09 in questionery format and related portions of the statement are as reproduced below:- “Que.1:- Please see your statement dated 01.05.08. What are the sizes of tiles manufactured by M/s. Anand Industries? Ans:- I have gone through my statement dated 01.05.08 and agree to the facts of the said statement. In token of having gone through and agreed to the facts of the said statement, I put my dated signature thereon. Regarding the size, I state that since the beginning, we were manufacturing the tiles of size 12”X8”. From the month of March, 08, we started manufacturing the tiles of size 8”X8” and 10”X13” also. In the year 2008-09, we started tiles of size 16”X10” also. Que.2:- What are the grades of tiles manufactured by M/s. Anand? Ans:- We were manufacturing tiles of three grades viz. STD. COM, SIL and (also declared as REJ/SIL) grades with MRPs of Rs. 100/-, Rs. 90/-and Rs.60/-. Now, we are manufacturing tiles of only STD, SIL and REJ grades. STD grade tiles are the 1st grade tiles and SIL grade tiles are the 2nd grade tiles. Que.3:- Your sales invoices show the clearances of tiles of COM grade also during the past period. Please explain. Ans:- We have shown the sales of COM grade tiles till 27.06.07. From 28.06.07 we were declaring the grades of STD and SIL only. Que.4:- Are you declaring the correct MRPs now? When from you started declaring correct MRPs? Ans:- I started declaring the actual MRP w. e. f. 03.03.08. Que.5:- What are the new MRPs? Ans:- W. e. f 03.03.08, we are declaring the MRPs of Rs. 160/- and Rs. 140/- for the STD grade tiles of Luster and Ordinary tiles, respectively. For the SIL grade of Luster and Ordinary tiles, the MRPs are Rs. 120/-and Rs. 110/-, respectively. The MRP of REJ grade tiles are fixed at Rs. 50/- for both types of tiles. Que.6:- Have you manufactured the tiles of Luster and Ordinary tiles earlier also? Ans:- We have manufactured ordinary tiles since inception. The luster quality tiles were introduced afterwards. As I recall, we started luster quality of tiles from 1st November, 2007. Que. 7:- Have you maintained the details of clearances of luster and ordinary tiles separately for the period 01.11.07 to 31.03.08? If, yes, please produce the same. Ans:- We have not maintained such details and hence, I am unable to produce the same. As we have introduced luster variety tiles from November, 2007, we have manufactured very less quantity on trial basis during the period November, 2007 to March, 2009. The percentage of luster tiles produced and cleared by us would be 10% of the total production. 90% production was of the tiles of ordinary variety. However, in the year 2008-09, we increased the production of luster tiles due to good response in the market. Que.8:- Please see the panchnama dated 26.02.08 drawn at M/s. National Sanitary Depo., Hyderabad and Statement dated 27.02.08 of Smt Bhavana Vasant Detroja, Proprietor of M/s. National Sanitary Depo. and statement dated 26.02.08 of Shri Vasant Detroja, Proprietor of M/s. National Agencies, Hyderabad. Do you agree to the said panchnama and statements? Ans:- I have gone through the facts mentioned in the said panchnama and statements. In token of having gone through the said panchnama and statements and correctness of the facts therein, I put my dated signature on the same.
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Que.9:- Please see the telephone diary seized at Sr. No. 4 of the panchnama dated 26.02.08 drawn at M/s. National Sanitary Depo. There appears price lists of various manufacturers including M/s. Anand Industries. The rates of the Anand brand tiles shown therein are tabulated as below:-
Details as per telephone directory seized at Sr. No. A/4 Page of
date Name of the manufacturer Item Size
Rate for premium/ STD
Rate for SIL
page for J Anand Ordinary Print 8X12 135 120 page for J Anand Ordinary B. Print 8X12 155 135 Page for R Anand Ordinary Print 135 Page for R Anand Black Print 155 Page for T Anand Ordinary & Print 8X12 120 105
Page for T Anand Black Colour &
Print 8X12 135 115 Please compare the above chart with the aforesaid seized record No. 4 and explain also why the sale rates are so high as compared to the MRPs shown in your invoices? Also explain that the said records are showing different colours and designs of tiles while the said details are not declared in your invoices. The said records further show the sale rates of Luster and Ordinary type of tiles while the said details were not mentioned in your invoices prior to initiation of investigations by DGCEI. Ans:- I have gone through the said seized record No. 4 and put my dated signature thereon. I have also compared the aforesaid chart with the details shown in the seized record No. 4 and find that the aforesaid table is correctly prepared and is based on the details contained in the said seized record No. 4. I have already stated above that we were manufacturing the tiles of luster and ordinary qualities since November,2007. But as per the practice prevailing in the tiles industry, we were not declaring the same in our invoices. Regarding the different rates, I state that it may be seen from the above chart that the rates are different for different colours and designs of tiles. Since the beginning, we have been manufacturing tiles of different designs and colours. Light plain colour tiles are the cheapest. Light printed tiles are costlier, Dark colour tiles are more costlier and the tiles of special colours and super special colours viz. Red, Yellow, Orange etc. are the costliest. The tiles are sold in the market depending upon designs and colours. Hence, the rates are varying from Rs. 120/- per box to Rs. 155/- per box. There has been difference in price in the same colour of tiles of luster and ordinary quality. Luster tiles are costlier while the ordinary tiles are cheaper. Regarding not declaring the designs and colours in our invoices, I said that as per the practice prevailing in tiles industry, the manufacturers of Morbi were declaring the generalized description of “Ceramic glazed tiles” in the invoices and not declaring the design, colour, quality etc. of tiles. Que.10:-Why the same was not declared in invoices. Why different MRPs were not shown in respect of different colour tiles in the invoices? Ans:- As already explained in my earlier statement dated 01.05.08, we were not declaring the correct MRP and description of tiles in our invoices. We were declaring the generalized description and MRP. However, actual rates were finalized with the dealers/ buyers depending upon the colours and designs. While making dispatches we were informing the buyers actual colours and designs of tiles and the actual rate thereof through the packing slips. The dealers were comparing the consignment with the packing slips and there after, they were destroying the same. They were selling the tiles according to the designs and colours of tiles. They were making the payment of invoice value through cheques and the amounts, over and above invoice amounts, were paid in cash through the angadias. On several occasions, the buyers were personally coming to the factory and remitting the cash to me personally. On several occasions, either myself or our representatives visited the premises of the buyers and collected the cash amounts, over and above invoice amounts. Que.11:- Do you agree that the above rates are the actual rates at which the tiles are sold in the market?
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Ans:- Yes. The rates shown in the telephone diary of M/s. National sanitary Depo were written as per our mutual discussion and my consent. They were selling the tiles according to the above price lists. They were paying the invoice amount through cheques and the amounts, over and above invoice amounts, i.e. the difference of amounts shown in the packing slips and the invoice amounts in cash. Que.12:- You have said that you were informing your buyers the actual designs, colours and prices of tiles through packing slips. Please produce the said packing slips. Ans:- The said packing slips were prepared in single copy which we sent to the buyers. They were destroying the same after verifying the consignment. Hence, neither we nor our buyers are having the copies of such packing slips. Hence, we can not produce the same. Que.13: How the differential amount accruing due to mentioning lesser MRPs in the invoices were collected? Ans.: The cash against the MRP difference i.e. the amount over and above the invoice value was being collected through the Angadias or the parties were directly coming to the factory and giving us the cash against the MRP difference. I am unable to recall the name of the angadias. Que14: Who was collecting cash from the Angadias? Have you kept any records for such cash receipts? Ans. : I was personally going to collect cash from the Angadias. Buyers, on our instruction were handing over the cash to the angadias and informing me. Accordingly, I was going and collecting cash from the Angadias. Some of the buyers were coming directly to Morbi and handing over the cash against the MRP difference to me. Sometimes, I personally went or sent our representative to collect the cash from the buyers. Que.15:- Please see the statement dated 19.08.08 of Shri Mohammed Musthafa, Partner, M/s. Royal Floorings & Sanitary ware, Palakkad. Do you agree to the said statements? He has stated that the invoices were not showing actual value of tiles and part of the value of tiles was collected in cash by M/s. Anand. Ans.:- I have gone through the facts mentioned in the said statement. In token of having gone through the said statement and correctness of the facts therein, I put my dated signature on the same. They were paying invoice amount through cheques and amount over and above invoice amount in cash. Que.16:- Please see the statement 09.01.09 of Shri Hirendra Asnani, Proprietor of M/s Satguru Marbles and Sanitaryware, Bhopal. He has stated that they were paying 60% to 70% of value of tiles through cheques and the remaining 30% to 40% in cash. Do you agree? Ans:- I have gone through the facts mentioned in the said statement. In token of having gone through the said statement and correctness of the facts therein, I put my dated signature on the same. They were paying invoice amount which was equal to 60% to 70% of actual value through cheques and remaining amount of 30% to 40% in cash. Que. 17:- Please see the statement dated 11.02.08 of Shri Manmohan Ghanshyamji Bagri, Owner of M/s Kwality Marbles and M/s Krishna Marble. He has stated that they were paying two third of value of tiles through cheques and the remaining one third in cash. Do you agree? Ans:- I have gone through the facts mentioned in the said statement. In token of having gone through the said statement and correctness of the facts therein, I put my dated signature on the same. They were also paying invoice amount which was equal to 60% to 70% of actual value through cheques and remaining amount of 30% to 40% in cash. Que.18:- Please see the panchnama dated 19.12.08 M/s. Delight Ceramics, Flat No. 1, S. No. 14/15/1/1B, Prathmesh Heights, Opp. Santosh Hall, Shinhagad Road, Pune and statement dated 19.12.08 of Shri Rajesh Chunilal Kanabar, Proprietor of M/s. Delight Ceramics, Pune. What would you like to say.
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Ans:- I have gone through the facts mentioned in the said panchnama and statement. In token of having gone through the said panchnama and statement and correctness of the facts therein, I put my dated signature on the same. Que.19:- In reply to the question No. 23 regarding payments of amounts of Rs. 13,800/- each on 24/04 (page 30) and 21.04.08 (page 33) to Anand, revealed from the note-book seized at Sr. No. 5, Shri Rajesh Chunilal Kanabar, Proprietor of M/s Delight Ceramics, Pune has in his statement dated 19.12.2008 clearly explained that the said two cash amounts, each of Rs. 13, 800/- were made to M/s. Anand, over and above invoice amount. Do you agree? Ans:- I have gone through the said pages and put my dated signature thereon. We have sold a single consignment to them. These cash payments were received by me over and above invoice amount as the actual value of tiles collected by us were higher than the invoice amount. Que.20:- Please see the panchnama dated 17.01.08 drawn at M/s. Glazeware Trading Co., 33, Dhanappa Mudali Street, Madurai and statements dated 17.01.2008 and 31.05.08 of Shri C. Rajasekaran, Manager of the said firm. Do you agree? Ans:- I have gone through the facts mentioned in the said panchnama and statements. In token of having gone through the said panchnama and statements and correctness of the facts therein, I put my dated signature on the same. Que.21:- Please see the diary seized at Sr. No. 6 from M/s. Glazeware Trading Co. and explanations given by Shri C. Rajashekharan in his statement dated 31.05.08. Left side of Page No. 3 of the said diary shows the amount of Rs. 60,000/- against M/s. AGM (receipt required), which has been explained by Shri C. Rajashekharan as M/s. AGM had paid total Rs. 60,000/- in cash to M/s. Anand on 23.01.2007, 24.01.2007, 25.01.2007 and 26.01.2007 as indicated in the said page; that M/s. AGM had asked Shri Rajasekaran to obtain kachcha receipts from M/s. Anand Industries for these payments, and hence he had written these details. Do you agree? Ans:- I am fully agreed to the explanations given by Shri C. Rajashekharan. That amounts were received by me. Que.22:- Please see that the left side of Page Nos. 6 is showing the cash payment of Rs. 1,00,000/-, Page No. 17 is showing cash payment of Rs. 42,000/-, Page No. 38 shows the cash payment of Rs. 1,500/-, Page No. 50 shows the cash payment of Rs. 2,40,000/- and page No. 55 shows the cash payments of Rs. 50,000/- to M/s. Anand. Page Nos. 6, 16 and 40 reveals that they were placing you orders for specific design of tiles. What have you to say? Ans:- I have gone through the pages of said diary and put my dated signature on the 1st and last pages of the same. The cash payments to M/s. Anand shown in page nos. 6, 17, 38, 50 and 55 were the amounts, over and above invoice amounts, paid by them to me. Regarding designs Nos., I state that we were manufacturing and clearing tiles of different designs and colours and charging different rates for the same. The invoice amount were received through cheques and the differential amounts were received in cash. Shri Rajashekharan was personally handing over cash to me. Que.23:- Please see that design Nos. 8016, 8013, 1587, 1628, 4129, 4215, 4217 etc. are mentioned in the orders placed to M/s. Anand. Are these the design Nos. manufactured by M/s. Anand. Ans:- Yes. We had manufactured tiles of the said design Nos. Que.24:-Please see the left side of page No. 50 of the diary No.6. seized from M/s. Glazeware Trading Co. The said page shows the amount of figures of 240 against M/s. Anand. Shri Rajashekharan has explained that the amounts mentioned against different manufacturers in the said page were the outstanding amount recoverable from them by the respective manufacturers as on 19.09.07 and are in ‘000’. He has explained that 240 represented the balance of Rs. 2,40,000/- of M/s. Anand with M/s. Glazeware. Please explain. Ans:- I agree with the explanations given by Shri C. Rajashekharan in his statement dated 31.05.08. The said amount is our outstanding cash amount as on 19.09.07 recoverable from M/s. Glazeware Trading Co.
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Que.25:- Have you brought the ledger of M/s. Anand with M/s. Glazeware Trading Co.? Ans:- I am producing the page of the ledger of M/s. Anand with M/s. Glazeware Trading Co. Que.26:- As per the official books of accounts of M/s. Anand produced by you, during the period 01.04.07 to 19.09.07, your unit has cleared them the tiles under four invoices with total invoice value of Rs. 2,29,098/- and M/s. Glazeware have made the official payment of Rs. 4,38,000/- there against to your unit. Thus, M/s. Glazeware have made a surplus payment of Rs. 2,08,902/- to your unit. Then how the said amount of Rs. 2,40,000/- is mentioned? Ans:- The said amount is our outstanding cash amount, over and above invoice amount, recoverable from M/s. Glazeware Trading Co. as on 19.09.07. Que.27:- Please see the Statement dated 25.08.08 of Shri Dineshbhai Avcharbhai Gadara, Partner of M/s. Shiv Om Marketing, Morbi. He has stated that they were paying a cash amount of Rs. 15/- to Rs. 20/- per box, over and above invoice amount to the tile manufacturers. Do you agree? Ans:- I have gone through the facts mentioned in the said statement. In token of having gone through the said statement and correctness of the facts therein, I put my dated signature on the same. He has correctly stated that he was giving a cash amount of Rs. 15/- to Rs. 20/- per box, over and above invoice amount to me. Que.28:- Please see the copy of panchnama dated 17.01.08 drawn at M/s. M. R. Ceramics, Malappuram. Ans:- :- I have gone through the facts mentioned in the said panchnama. In token of having gone through the said Panchnama and correctness of the facts therein, I put my dated signature on the same. Que. 29:- Please see that Estimate No. 522 dated 18.09.07, Estimate No. 1367 dated 27.12.07, estimate No. 555 dated 22.09.07 and 556 dated 22.09.07 available in the estimate books seized at Sr. No. 7 from M/s. M.R. Ceramics. These estimates are showing the sales of 1st and 2nd grade tiles of M/s. Anand @ Rs. 145/- and Rs. 110/- respectively. What would you like to say in this regard? Ans:- I have gone through the said estimates and put my dated signature thereon. As the actual value collected by us was more than the value shown in the invoices, part of freight was paid in cash, the dealer of Malappuram can not sale the Anand brand tiles at a price less than Rs. 145/-. They have correctly shown the sale price of the tiles in their said estimates. This is to mention that M/s. M.R. Ceramic is not my direct dealer. They are sub-dealers purchasing tiles from our dealers situated at Malappuram and nearby. They were sending the cash amount, over and above invoice amount, to the dealers who were in turn remitting such cash to me either in person or through our representatives. Que.30:- Please see page No. 194 and 311 of the seized record No. 5 of M/s. M.R. Ceramic which show the accounting of the sale of estimate No. 522 dated 18.09.07 and 1367 dated 27.12.07. The said documents corroborate the sale of 1st and 2nd grade tiles of M/s. Anand @ Rs. 145/- and Rs. 110/- per box respectively. Ans:- I have gone through the said pages of seized record No. 5 of M/s. M.R. Ceramic and put my dated signature thereon. I have already explained that Rs. 145/- and Rs. 110/- were the actual rate at which the 1st and 2nd grade Anand brand tiles were sold by the dealers of Malappuram. These tiles are of ordinary grade for which we have started declaring MRPs of Rs. 140/- and Rs. 110/- for 1st and 2nd grades, respectively from 03.03.08. Que.31:- An intelligence received by DGCEI reveals that under the advice of an advocate, you have purchased stamp papers on the dates next to the dates of the statements of yours and dealers. On the said stamp papers, you are making affi-davits of yours and dealers to the effect that the statements were recorded under pressure and duress and you have got the same notarized. You are keeping such notarized affidavits with you and obtaining the receipt of UPC from the postal department showing that you
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have sent such affidavits to the office of DGCEI, Ahmedabad Zonal Unit. In fact this office has not received any affidavits till date. You have done this only to show the adjudicating authorities at the time of adjudication that the statements have been retracted and hence should not be relied upon. Is this correct? Ans:- No. I have not prepared any notarized affidavit. I have never retracted to the statement of mine recorded before the Superintendent, DGCEI, Ahmedabad. None of my dealers have retracted any statement given by them. No kind of threat, duress, coercion, pressure or allurement was given while recording my aforesaid statements and hence there did not arise any question of filing such affidavits.” 151. Investigations as discussed in the foregoing paras reveal that M/s. Anand have evaded Central Excise duty by way of gross under-valuation of the wall tiles manufactured and cleared from their factory. 152. The Telephone diary seized at Sr. No. 4 of the panchnama dated 26.02.08 drawn at M/s. National Sanitary Depot, Hyderabad reveals that the tiles of M/s. Anand were having different designs and colours viz. Ordinary Printed, Ordinary B. Print, Black Print, Ordinary & Print, Black Colour & Print, etc. Thus, M/s. Anand were manufacturing tiles of different designs and colours viz. Ordinary Printed, Ordinary B. Print, Black Print, Ordinary & Print, Black Colour & Print, etc. However, the verification of the central excise invoices reveal that the designs and colours of tiles were not being declared by M/s. Anand in their Central Excise invoices. The different colour and design tiles of M/s. Anand were attracting different rates. The table in para supra clearly shows that 1st grade STD tiles of different designs and colours of M/s. Anand were sold at different rates ranging from Rs. 120/- to Rs. 155/- per box. The 2nd grade SIL tiles of M/s. Anand were having the price ranging from Rs. 105/- to Rs. 135/-. Thus it is evident that the tiles of different colours and designs were having different selling rates. Thus in respect of costly design tiles of size 12” X 8”, M/s. Anand declared even two third of actual MRP. Thus, the comparison of the aforesaid selling rates of the tiles of M/s. Anand with the invoices issued by M/s. Anand reveals that even the 2nd grade tiles were sold at the rates 5 to 35% higher than the MRPs declared for the 1st grade tiles. It is thus evident that M/s. Anand have shown suppressed MRPs in their central excise invoices and thus evaded duty of excise by gross undervaluation. The documentary evidences indicate that the actual variety, design of tiles and the actual MRPs of various qualities of tiles was not declared in the Central Excise Invoices of M/s. Anand. 153. Similarly, Page Nos. 6, 16 and 40 of the diary seized at Sr. No. 6 from M/s. Glazeware reveals that M/s. Anand were getting orders for specific design nos. of tiles viz. 8016, 8013, 1587, 1628, 4129, 4215, 4217 etc. M/s. Anand were delivering tiles as per the design nos. and colours ordered by the dealers. However, the verification of invoices of M/s Anand to M/s. Glazeware reveals that M/s Anand were not disclosing the actual colour and design of tiles in their invoices. The said evidences prove beyond doubt that M/s. Anand were not declaring the designs and colures of tiles in their invoices. 154. The estimates available at the seized record No. 7 of M/s. M.R. Ceramic also reveal that the said dealer has sold specific design of tiles. The said sub-dealer has sold the 1st and 2nd grade tiles of Anand brand @ Rs. 145/- and Rs. 110/- respectively. The evidences recovered from M/s. M.R. Ceramic also prove beyond doubt that M/s. Anand were selling the tiles with specific design No. and colour but not disclosing the same in their invoices. 155. Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand has in his statement dated 01.05.08 and 23.04.09 admitted that they were declaring wrong MRPs in their invoices. He has, in his statement dated 23.04.09 also admitted that the tiles manufactured by their unit were of different colours and designs. He has also admitted that they were manufacturing the tiles of Luster quality since November, 2007. However, they were not mentioning such descriptions in their invoices. He deposed that they were undervaluing their products and were collecting a portion in cash, over and above the invoice prices, through angadias, which was not being declared in the sales invoices.
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156. Investigations as discussed in the foregoing paras clearly establish that ordinary plain colour and Luster type tiles attract different prices in the market. However, by not separately showing such variety or designs or colours in their Central Excise invoices, as discussed above, M/s Anand deliberately suppressed the actual sale price and MRP of the tiles at which the same were cleared from their registered factory premises. This was evidently done by them with intent to evade duty of excise by misleading the enforcement agencies to impress upon that the MRP and sale prices of all varieties/designs of a particular grade of wall tiles is the same. Documentary evidences recovered from the various premises, as discussed in the foregoing paras conclusively establish that M/s Anand were collecting differential prices of each such type of tiles, over and above their declared invoice value, by cash. 157. Investigations from all the aforesaid dealers discussed in para supra, conclusively establish that M/s Anand were not showing the actual MRP in their Central Excise invoices. All these dealers, in their respective statements, have categorically explained that M/s Anand were showing only part of the value of tiles in their invoices and tiles were actually sold to the consumers at a much higher price than the MRP declared in the invoices. The sale rates available in the telephone diary seized from M/s. National Sanitary Depo, the estimates seized from M/s. M.R. Ceramic, as discussed in para supra, respectively supra reveal that the said dealers were selling the tiles at the rates higher than MRP declared by M/s. Anand. As per the telephone diary seized from M/s. National Sanitary Depo, the tiles of Anand brand were sold at the rates ranging from Rs. 105/- to Rs. 155/- per box depending upon the design, colour and grade of tiles. Similarly, as per the estimates recovered from M/s. M.R. Ceramic, 1st and the 2nd grade Anand brand tiles were sold at the rates of Rs. 145/- and Rs. 110/-, respectively. However, M/s. Anand had declared MRPs of 1st grade STD tiles as Rs. 100/- and 2nd grade COM tiles as Rs. 90/- and 3rd grade SIL tiles as Rs. 60/- only. The mis-declaration of MRP and collection of under-invoiced portion of invoice value has categorically been admitted by Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand in his statements. Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand in his statements dated 01.0.2008 and 23.04.09 categorically confirmed that he used to collect cash pertaining to under-valued portion of tiles thro’ the angadias or in person. 158. M/s. Anand w. e. f. 03.03.08 increased the MRP of 1st quality Luster type “STD” grade tiles to Rs. 160/- and Ordinary type “STD” grade tiles to Rs. 140/-. Similarly, they increased the MRP of 2nd quality Luster type “SIL” grade tiles to Rs. 120/- and Ordinary type “SIL” grade tiles to Rs. 110/-. Thus, w. e. f. 03.03.08, M/s. Anand resorted to declare the correct MRPs in their invoices. They also started declaring the luster and ordinary types of tiles in their invoices. Though, they still resorted not to declare colours/ designs of tiles in their invoices while the tiles are sold in the market as per their designs and colours. The revision of MRP by M/s. Anand further corroborates the fact that M/s. Anand were mis-declaring the MRP of tiles in their invoices prior to initiation of investigation by the DGCEI. After the initiation of investigations by DGCEI, they were left with no option but to declare the correct MRPs. 159. Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand in his statements recorded on 01.05.08 and 23.04.09 has categorically admitted under-valuation of tiles by mis-declaring the MRP as mentioned above. He further stated that w. e. f. 03.03.08, they are declaring correct MRPs and actual MRPs of their tiles were same during the preceding period. The aforesaid documentary and oral evidences conclusively establish evasion of Central Excise duty by undervaluation. Moreover, Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand has also admitted of receiving cash amounts, over and above their declared invoice value in person from the dealers during their visit at each other’s premises, through the shroffs/ angadias. 160. Investigation conducted by DGCEI from the dealers and transporters, as discussed in the foregoing paras, revealed that M/s Anand has established a syndicate with a network of dedicated transporters and dealers to camouflage part of their undervaluation. Investigation revealed that transportation cost for carrying full truck load of 16 MT of tiles is at least Rs. 35,000/- for the States of Madhya Pradesh, Maharashtra, Uttar Pradesh etc. while the cost will be over Rs. 40,000/- to the Southern States. Similarly, transportation cost by sea in coastal vessels from Mundra or Kandla to Kochi
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is atleast Rs. 59,000/- per container load of 28 MT of tiles. Similarly, freight amount by sea is shown by all dealers of Kerala as maximum Rs. 40,000/- per container. Investigation from the container forwarders revealed that the charges for leasing the container alone infact cost Rs. 40,000/-. 161. All consignments were dispatched on freight-to-pay basis. While receiving the consignments at the destination, the dealers were paying the amounts shown in the LRs from their official accounts and the differential freight, over and above the amount declared in the LRs, were paid by cash without accounting for in the official records. The transporters were showing a fixed amount as freight in their LRs and were not showing the freight on MT basis in their LRs for transportation of goods from Morbi to destination while actually they were charging the freight from the said dealer on per MT basis. The transporters were collecting the amount, over and above the LR amount, in cash from the said dealer. The transporters were not showing the correct amount of freight in the LRs and were collecting differential amount of freight in cash from the consignees. In the entire deal, M/s Anand were benefited by passing on the burden of disposal of a part of the undervalued MRP to their dealers, which facilitated their duty evasion. Investigation from the transporter revealed that they were also benefited in the aforesaid deal, by avoiding TDS payment and Service Tax. Similarly, the dealers were also benefited by reducing their liability of VAT. 162. Investigation also revealed that the dealers were also not declaring various incidental and ancillary expenses involved in the transportation of tiles from Morbi to their premises. None of them were showing any expenses incurred by them towards transit insurance, loading and unloading expenses, tollgate expenses, local transportation charges, etc. in their official records. All such expenses were met with from the cash amounts collected by the dealers from their buyers, over and above the value declared in the sale bills and official books of account. Since M/s Anand were not declaring the actual MRP in their Central Excise invoices, the aforesaid modus operandi ensured that the landed cost of tiles at the destination does not exceed such mis-declared lower MRP. 163. Tiles are assessed to Central Excise duty under Section 4A of the Central Excise Act, 1944 on the basis of MRP. Since ‘maximum retail price’ as per Section 4A ibid, contains the entire cost and expenses of tiles till it reach the ultimate consumer, it is evident that freight amount and the aforesaid allied expenses are a part of such MRP. The abatement of 45% from the MRP (43% w. e. f. 01.03.08) as provided under the statute evidently covers duty, taxes and other post-clearance expenses. In the instant case, after availing abatement of 45% (43% w. e. f. 01.03.08) from the mis-declared MRP, M/s Anand devised a method wherein freight and other expenses were to be borne by their buyers, in addition to the elements of costs covered in the declared MRP. Such expenses were paid out of the cash amounts collected, over and above the value declared by M/s Anand and their buyers/dealers in their official records. Therefore, it is evident that such expenses will form a part of the actual MRP of tiles, which has been suppressed by M/s Anand from their statutory records. 164. The investigations from the dealers as discussed in foregoing paras reveal that M/s Anand were collecting the amounts shown in the invoices through cheques while the amounts, over and above the invoice amounts, were collected in cash. The cash from the dealers of Gujarat was collected through Angadias or the representative of M/s Anand or was paid by the dealers during their visits to Morbi. The cash from outstation dealers was either collected by the representatives of M/s. Anand during their visits or collected through shroffs or was deposited in the bank accounts operated by the shroffs who used to withdraw the cash and pay to the concerned persons of M/s. Anand. 165. During the search at M/s Delight Ceramics, Pune, as discussed in Para supra, documentary evidences establishing undervaluation of tiles and evidences regarding transfer of cash amounts to M/s. Anand, over and above the invoice value declared by M/s. Anand, were recovered. Shri Rajesh Chunilal Kanabar, Partner of M/s. Delight Ceramics has clearly stated that the cash amounts appearing on page Nos. 30 and 33 of the seized record No. A/5 was transferred to M/s. Anand and was over and above invoice amount.
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166. The diary seized at Sr. No. 6 from M/s. Glazeware clearly reveals the cash payments of Rs. 60,000/-, Rs. 1,00,000/-, Rs. 42,000/-, Rs. 1,500/-, Rs. 2,00,000/- and Rs. 50,000/- to M/s. Anand on different dates. In spite of paying such cash amounts, the said diary shows an outstanding cash amount of Rs. 2,40,000/- of M/s. Anand recoverable from M/s. Glazeware as on 19.09.2007. 167. Investigations from the other dealers discussed at para supra and statement of Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand also revealed that cash amounts, over and above invoice amount were also collected by M/s Anand personally from the dealers by deputing their representatives to such dealers or through angadias. These cash amounts were around one third of the actual selling price. The investigations thus reveal that such cash collections were done by Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand. 168. The cash amounts collected by M/s. Anand over and above the declared invoice value of tiles cleared from their factory were not accounted for in their official books of accounts. The said cash amounts were spent towards the undervalued cost of raw materials, unaccounted expenses without accounting for in their books of accounts with intent to minimize the recorded cost of production, so that it does not exceed the mis-declared lower MRP shown in their Central Excise invoices. 169. As discussed herein above, the wall tiles of size 12”X8” manufactured and cleared by M/s Anand were of different designs and colours. However, they were not mentioning the variety/quality of tiles in the Central Excise invoices. After the searches by DGCEI on 17.01.08 in the premises of a few manufacturers and several dealers, M/s Anand w. e. f. 03.03.08 increased the MRPs of all the grades of tiles. The MRP-wise sales by M/s. Anand during the period 01.04.2004 to 31.03.2008 are shown as below:-
Period Grade Qty (Boxes) MRP declared STD 3100 160 STD 29907 100 COM 7813 90
STD 7175 100 SIL 12770 110 LUST-SIL 92 80 SIL 850 60 REJ 2346 50
Total 2103602 170. After the initiation of inquiries against the tile manufacturers by the DGCEI, M/s. Anand revised their MRP from 22.02.08 and subsequently from 03.03.08. They were initially manufacturing the tiles of Ordinary quality and from November, 2007 started manufacturing tiles of Luster type also. The Luster and ordinary tiles were having different designs and colours. 171. W. e. f. 22.02.08 M/s Anand started declaring grades of STD and SIL in both quality of tiles with enhanced MRPs and subsequently enhanced the same w. e. f. 03.03.08. The MRPs shown from 01.04.08 are still higher for certain consignments. They started declaring different MRPs for the STD grade of tiles of luster and ordinary quality. The newly declared MRPs are much higher than the MRPs, declared for the same grades, sizes and qualities of tiles during the past periods. This fact thus reveals that prior to March, 08, M/s Anand were not declaring the quality and design/colours of tiles in their invoices and were also suppressing the actual MRP. The substantial increase in MRP by them from 22.02.08 and 03.03.08 further reveals that prior to such revision, M/s Anand were evading duty of excise by way of gross undervaluation. 172. The normal MRP declared by M/s. Anand w. e. f. 03.03.08 for ordinary plain tiles of size 12”X8” and 8”X8” of STD grade is Rs. 140/- per box and Rs. 160/- for Luster grade. The MRP of 2nd variety tiles of SIL grade has been declared as Rs. 120/- for luster and Rs. 110/- for ordinary tiles of both the sizes 12”X8” and 8”X8”. As per the price lists available in the telephone diary of M/s. National Sanitary Depo. and estimates recovered from M/s. M. R. Ceramic and the statements and explanations given by the other dealers and Shri Narendrabhai Dharamsinhbhai Patel, Partner of M/s. Anand, the sale rates of the tiles of M/s. Anand have been much higher than the MRPs declared during the past period. 173. The estimates recovered from M/s. M. R. Ceramic, Malappuram, a sub-dealer, reveals the selling price of the 1st quality Anand brand tiles as Rs. 145/- per box. The freight for South Indian States were around Rs. 25/- per box. Thus the actual selling price of Rs. 145/- includes the freight of Rs. 25/- per box. The freight rates for the dealers of South India were around Rs. 25/- per box while for the dealers of Madhya Pradesh and Maharashtra, etc. it was around Rs. 10/- per box. The freight for the dealers of Gujarat was around Rs. 5/- per box. Thus the average freight of Rs. 15/- per box for all India is being taken for ascertaining MRP of M/s. Anand. Thus, the actual all India average selling rate for the 1st quality tiles of Anand brand can be arrived at by deducting Rs. 10/- (Freight for south India- average freight) from the said selling price revealed at M/s. M.R. Ceramic, Malappuram. Thus, the average all India MRP for the 1st quality Anand brand tiles works out to Rs. 135/- per box. This rate is for the 1st grade ordinary quality of tiles as the estimates pertains to the period when M/s. Anand were not manufacturing tiles of luster quality. Hence, this MRP of Rs. 135/- is applied to calculate the duty short paid on ordinary type of tiles. 174. Similarly, the estimate dated 27.12.07 recovered from M/s. M.R. Ceramic reveals the actual selling rate of Rs. 110/- for the 2nd grade tiles of M/s. Anand. On applying the average freight, the average all India selling rate for the 2nd grade Anand brand tiles works out to Rs. 100/- per box. As M/s. Anand has discontinued declaring the COM grade from 27.06.07, the aforesaid sale is of the tiles of SIL grade for which M/s. Anand were declaring the MRP of Rs. 60/- during the past period. As M/s. Anand had discontinued declaring the COM grade from 27.06.07 and decaled STD grade for 1st grade tiles and SIL for 2nd grade tiles, it appears that the 2nd grade tiles were declared in two grades of COM and SIL in order to match the requirement of declared MRP as per the mutual agreement with their dealers. Thus, COM and SIL grade tiles are the 2nd
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grade tiles for which a single MRP of Rs. 100/- is applied to calculate the duty short paid by them. 175. They have started the tiles of size 10”X13” and 8”X8” from March, 2008. They have declared the MRP of Rs. 180/- for 22 box of STD grade 10”X13” tiles and MRP of Rs. 100/- for 169 boxes of STD 10”X13” tiles, cleared during March, 08. The MRP of Rs. 180/- appears to be the correct MRP and hence is being applied for the 169 boxes of tiles of size 10”X13” also. In respect of 8”X8” tiles of STD grade cleared during March, 08, M/s. Anand declared the MRP of Rs. 160/-. No discrepancy appears in such clearance. 176. The MRP of REJ grade tiles is declared as Rs. 30/- and Rs. 40/- during the past period. In this regard, the MRP of Rs. 50/- declared by them from 03.03.08 appears to be the correct MRP and hence is being applied for the clearances of REJ grade tiles during the past period. 177. From November, 2007, M/s. Anand started manufacturing luster variety tiles also. However, luster grade was not declared in invoices. The percentage of luster variety tiles manufactured and cleared by M/s. Anand during November, 07 to March, 08 is not available. Partner of M/s. Anand in his statement dated 23.04.09 stated that percentage of luster variety tiles manufactured and cleared by them was 10% of total clearances during November, 07 to March, 08. In the month of March, 2007 they have shown the clearances of Luster quality tiles separately. Hence, the percentage of 10% is applied for the clearances during the period 01.11.07 to 29.02.08 only. MRP of luster variety tiles of STD grade was Rs. 20/- more than the MRP of STD grade ordinary variety tiles. MRP of luster variety tiles of SIL grade was Rs. 10/- more than the MRP of SIL grade tiles of ordinary variety tiles. Accordingly, for the tiles of size 12”X8”, MRPs of luster variety of tiles of STD grade works out to Rs. 155/- per box and SIL grade tiles works out to Rs. 110/- per box for the period October, 07 to March, 08. 178. Thus the MRPs ascertained for different quality, grade and size of tiles are tabulated as below:-
179. M/s. Anand had actually manufactured tiles of Luster quality also w. e. f. November, 2007, in addition to the ordinary quality, but they had declared the same MRPs for both the type of tiles during the period November, 2007 to March, 2008. The costly Luster quality tiles were cleared at the MRPs of cheaper quality ordinary tiles. The qualities and colours of tiles were also not declared with intent to suppress the actual MRPs. Hence, the average MRPs ascertained in para supra is being applied, for demand of duty short paid during the period 01.04.04 to 31.03.08. 180. The Central Excise duty short paid by M/s Anand by way of undervaluation works out to Rs. 30,01,655/- for the period 01.04.2004 to 31.03.2008, as detailed in Annexure A to the show cause notice. 181. M/s. Anand, have contravened the following provisions of Central Excise Act, 1944 and the Rules made thereunder:- (i) Section 3 of the Central Excise Act, 1944 in as much as they cleared the excisable goods without appropriate payment of central excise duty; (ii) They have manufactured and cleared the ceramic glazed tiles, under cover of Central Excise invoices, but did not declare the correct ‘Maximum Retail Price’ on the invoices and boxes of such tiles, thereby, contravened the provisions of Section 4-A of the Central Excise Act, 1944; (iii) Rules 4 & 8 of the Central Excise Rules, 2002 (here-in-after referred to as “CER’2002”), in as much as they failed to calculate and discharge appropriate Central
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Excise duty payable on the finished excisable goods, viz., ceramic wall tiles, cleared to various buyers, at the appropriate time and in the manner prescribed under the said Rule; (iv) Rule 6 of CER’2002, in as much as they have failed to remove the excisable goods on payment of appropriate Central Excise duty and, follow proper procedure regarding self determination of duty as prescribed in the said Rules; (v) Rule 11 of CER’2002, in as much as they failed to prepare appropriate Central Excise Invoice in respect of such goods as prescribed under the said Rules: (vi) Rule 12 of CER’2002, in as much as they furnished false monthly returns without including the correct details of tiles cleared by them and MRPs thereof; 182. In view of aforesaid violations of Central Excise Act, 1944 and Rules made thereunder, M/s Anand liable to penal action under Rule 25 of Central Excise Rules, 1944. The duty was evaded by way of fraud, willful mis-statement, suppression of facts and contravention of the provisions of Central Excise Act, 1944 and Rules made thereunder with intent to evade duty. Therefore, M/s Anand is liable to penal action under Section 11AC of the Act, ibid. The duty short paid by way of undervaluation is recoverable from them by invoking extended period of 5 years as per proviso to Sub-section (1) of Section 11-A of the Act, ibid. They are also liable to pay interest under Section 11AB of the Act, ibid on duty short paid. 183. Shri Narendrabhai Dharamshibhai Patel, Partner of M/s. Anand has masterminded the evasion of Central Excise duty on the finished excisable goods, viz. ceramic wall manufactured and cleared by M/s Anand in as much as all the day to day transactions are closely monitored and supervised by him. All the finance related work such as making payments to suppliers of raw materials, follow-up of payments against supplies made to various buyers, banking etc., closely monitored and appropriate decisions and actions are taken by him. It therefore, Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand is liable to penal action under rule 26 of Central Excise Rules 2002. 184. During the course of investigations, M/s. Anand admitting to the evasion of Central Excise duty on the clandestine clearances of finished excisable goods made by them, have voluntarily submitted post-dated cheques for total amount of Rs. 10,00,000/-, the following cheques were deposited in the Govt. Account, on its due dates, the details of which are as under:- Cheque No.& Date Amount (Rs.) Date of Credit to Govt.
185. This voluntary payment of Rs. 10,00,000/- is required to be appropriated against the Central Excise duty demanded in this Show cause notice. 186. THEREFORE, M/s. Anand Industries, 8-A, National Highway, Rafaleshwar, Opp. Dariyalal Resort, Morbi, Dist. Rajkot were called upon to show cause to the Additional Commissioner, Central Excise & Customs, Rajkot, as to why:-
(i) the Central Excise duty amounting to Rs. 30,01,655/- (Rupees Thirty lakhs one thousand six hundred fifty five only) (CENVAT Rs. 29,35,010/-, Edu. Cess Rs. 57,571/- and H. Ed. Cess Rs. 9,074/-), short paid by them by way of under-valuation, as detailed in Annexure A to the show cause notice, should not be demanded and recovered from them under the provisions of Section 11-A of the Central Excise Act, 1944 by invoking extended period of 5 years as per proviso to sub-Section (1) of said Section 11A;
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(ii) Amount of Rs. 10,00,000/- paid by them during the investigation should not be appropriated against the aforesaid demand.
(iii) penalty should not be imposed upon them under the provisions of Section 11-
AC of the Central Excise Act, 1944 and rule 25 of Central Excise Rules, 2002; (iv) interest under the provisions of Section 11-AB of the Central Excise Act, 1944
should not charged and recovered from them. 187. Shri Narendra Dharamshibhai Patel, Partner of M/s. Anand is also called upon to show cause to the Additional Commissioner, C. Excise & Customs, Rajkot, as to why penalty, should not be imposed upon him under Rule 26 of the Central Excise Rules, 2002. Submission and Defence: 188. M/s. Anand submitted that, at the outset, they deny all the allegations and insinuations leveled against them in the show-cause notice as if each of them were set out herein-below and urged without prejudice to one another. 189. Further the noticee has requested for grant of opportunity to cross examine all the witnesses whose statement has been relied upon in the notice to draw adverse inference against them. They also wish to point out that the entire case made out by the DGCEI is premised solely on the statement and certain alleged documents seized from /produced by the said witnesses. They do not subscribe to the correctness of the statement as also the inference which the notice has sought to draw from the same. They also wish to point out that since the documents were not seized from their custody or control of any person who is being jointly tried with them there is no presumption in law regarding the truth of the contents of such documents. Insofar as the statements of their partner/employee are concerned, the same are neither true nor voluntary and have been recorded under duress. Therefore they do not subscribe to the correctness of any of the averments made therein. Similarly, they also understand that statements of other witnesses have been recorded using coercive method and their statements are also neither true nor voluntary. As the entire case made out by the DGCEI is solely based on inferences based on statements, correctness of which is being disputed by them, and again requested to grant an opportunity to cross examine the witnesses so as to bring the correct facts on record. 190. M/s. Anand strongly disowns the allegation made against them. They also strongly oppose the manner of drafting of show cause notice which has discussed at length irrelevant information/data/incidence which has no direct or indirect relevance with them. These irrelevant discussions clearly show the prejudice of the investigation and they feel that intention behind such an attempt is to make prejudice not only to the adjudicating authority but also appellate authorities too. 191. M/s. Anand submitted that the SCN is issued on the basis of the investigation carried out at 12 distributors / dealers / retailers and their statement and it is admitted facts that no search was carried out at their factory premises. Their request for cross examination of the said 12 distributors / dealers / retailers, who are departmental witnesses since the said 12 dealers are not jointly tried with them, has been turned town without giving any reason. 192. M/s. Anand submitted that presumption to truth is not available for the documents seized and/or produced by the said dealers and their statements recorded under Section 14 of the Central Excise Act, 1944 since they are not jointly tried with us. As per the provisions of Section 36A of the Central Excise Act, 1944 presumption as to the truth of the contents of documents is not available to court, it is needless to mention here that same cannot be available to quasi judicial authority too. Even statements recorded under Section 14 without any corroborative evidences have no value especially when presumption to truth is not available for the documents produced and discussed therein.
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193. M/s. Anand has again prayed to allow cross examination of the said dealers so as to follow principle of natural justice and for that they relied upon decision of Hon’ble Allahabad High Court in the case of Commissioner of Central Excise, Meerut – I Vs. Parmarth Iron Pvt. Ltd. reported in 2010 (260) ELT 514 (All) and Decision of Hon’ble High Court of Madras in the case of Rajam Industries (P) Ltd. Vs. Addl. D.G., D.G.C.E.I., Chennai reported in 2010 (255) ELT 161 (Mad). 194. M/s. Anand submitted that the provisions of Section 4A of the Central Excise Act, 1944 as stood at the material time, Notification No.13/2002-CE (NT) date 01.03.2002 as amended issued under Section 4A ibid and Central Excise (Determination of Retail Sale Price of Excisable goods) Rules, 2008 issued under Notification No.13/2008-CE(NT) date 01.03.2008. Based on the said provisions, the Ceramic Glaze Tiles falling under tariff sub-heading No.6906.10 is notified at Sr.No.54 of the said Notification No.13/2002-CE(NT) date 01.03.2002. As per provisions of sub-Section (2) of Section 4A of the Central Excise Act, 1944 duty of excise was required to be paid on retail sale price declared on goods less abatement and it is not matter of dispute that duty of excise is paid on the declared retail sale price less abatement. They, further, submitted that impugned show cause notice alleged about mis-declaration of MRP in the Central Excise Invoices at paragraph 15.2 at page 105 but it is nowhere alleged that how there was contravention of provisions of Section 4A of the Central Excise Act, 1944 by mis-declaring MRP. They submitted that in any case it is not the case of department that goods were removed without declaring the retail sale price on packages, declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1) or tampered with, obliterates or alters the retail sale price declared on packages after removal. 195. Further, M/s. Anand submitted that though show cause notice does not spell out how they have contravened the provisions of Section 4A by mis-declaration of MRP nor it is the case of the department that they have contravened the provisions of sub-section (4) of Section 4A and the instant case also does not fall under the four corner of the provisions of the Central Excise Act, 1944 especially sub-section (4), without admitting anything even for the sake of argument it is assumed that instant case falls or covers under the provisions of Section 4A(4)(a) of the Central Excise Act, 1944 that the manufacture declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1), then such goods shall be liable to confiscation and retail sale price can be ascertained in the prescribed manner, then also neither Central Excise Act, 1944 nor any Rules framed thereunder nor other law referred to in sub-section (1) viz. the Standards of Weights and Measures Act, 1976 nor rules framed thereunder nor any other law time being in force was providing to declare retail sale price as required to be declared as retail sale price. The Section 4A only gives the meaning of “retail sale price” for the purpose of Section 4A only but nowhere provides what amount should be “retail sale price” required to be declared as retail sale price for the purpose of Section 4A. 196. M/s. Anand, for the sake of argument, assumed that in the instant case they had removed the goods by declaring a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1), then also as per provisions of sub-section (4) of Section 4A, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section. However, in the instant case, there is no proposal for confiscation of goods and even manner of determination of retail sale price was not prescribed during the most of the period under dispute i.e. 01.04.2004 to February, 2008, it was prescribed with effect from 01.03.2008 under said rule vide notification date 01.03.2008 only. In absence of such machinery provisions viz. rule prescribed under the act, re-ascertained Retail Sale Price (Maximum Retail Sale Price) at Paragraph 16 at page 109 to 112 of the SCN is not maintainable. Thus, demand of differential duty said to have been short paid by applying such re-ascertained RSP in Annexure A of the SCN is not maintainable at all.
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197. In support of above submission they mentioned the decisions of Hon’ble Apex Court in the case of CIT, Bangalore Vs. B.C. Srinivasa Setty reported in (1981) 2 Supreme Court Cases 460, P. Kasilingam and Others Vs. P.S.G. College of Technology and Others reported in 1995 Supp (2) Supreme Court Cases 348, Tribunal decision in the case of Ravi Foods Pvt. Ltd. Vs. Commissioner of C. Ex., Hyderabad reported in 2011 (266) ELT 399 (Tri. Bang), ABB Ltd. Vs. CC 2011-TIOL-792 Tri. Bang, Millennium Appliances India Ltd. Vs. CCE 2009 (248) ELT 713 (T – Bang), Indo Farm Tractors & Motors Ltd. Vs. Union of India reported in 2008 (222) ELT 184 (H.P.), Union of India Vs. Indo Farm Tractors & Motors Ltd. – 2008 (230) ELT A85 (SC), Pushpaman Forgings Vs. Commissioner of Central Excise, Mumbai – VII – 2002 (149) ELT 490 (Tri. Mumbai), Commissioner Vs. Pushpaman Forgings – 2003 (153) ELT A89(SC), Eternit Everest Ltd. Vs. UOI – 1997 (89) ELT 28 (Mad), Union of India V. Eternit Everest Ltd. – 2002 (141) ELT A285 (SC). 198. Further, M/s. Anand referred the decision of tribunal in the case of Commissioner of Central Excise, Rajkot Vs. Surya Ceramics reported in 2006 (201) ELT 392 (Tri. Del.), that the demand in excess of evidence of under valuation recovered from certain parties cannot be made applicable for all the transactions during the disputed period, in absence of any evidence against all remaining transactions. 199. They submitted that the sales were at factory gate and therefore MRP was declared for factory gate sale only. As deposed by one of the partners Shri Narendrabhai Dharamsinhbhai Patel, in his statement dated 01.05.2008 in answer to question No. 1 and 6 that goods were sold at factory gate and transportation were arranged by the customers and in each case freight was paid by the customers. 200. Thus, since sale was at factory gate whatever retail sale price declared by M/s. Anand was at factory gate and it was not possible to visualize further expenses up to the stage of actual user made by the buyers/customers. Therefore, whatever retail sale price declared at factory gate was correct Retail Sale Price for the purpose of assessment and duty of excise payable was paid on clearance of the goods. 201. Since goods were sold by the dealer at the price more than the declared MRP and there is no allegation against M/s. Anand that goods were sold at price more than declared by the buyers at the behest of them. It was buyer who had sold the goods at price more than declared on the goods. The investigation had never tried to find out the truth at what price goods were sold to ultimate user/consumer. There is no allegation that MRP declared on goods were altered by anybody. If the MRP declared on the goods were not altered then it is unbelievable that an ultimate user or buyer can pay the amount more than declared on the goods. 202. M/s. Anand submitted that it is alleged that buyer had sold the goods at the price higher than the declared price. It means MRP was altered by the buyer. Therefore, as per the provisions of Section 2(f)(iii) of the Central Excise Act, 1944, alteration of retail sale price amounts to manufacture and duty was required to be demanded from each buyer i.e. dealer/wholesaler/distributor who had bought the goods at factory gate from M/s. Anand. Since, it was very uphill task for the investigation to catch those hundred of buyers; investigation has mis-directed the demand upon M/s. Anand. 203. M/s. Anand relied upon on the following decisions passed by the Hon’ble Tribunal held that such mis-directed demand is liable to be quashed. BHAGYASHALI TEXTILES MILLS (P) LTD. Versus COMMISSIONER OF C. EX., MUMBAI - 2006 (205) E.L.T. 193 (Tri. - Mumbai) “Demand - Clandestine removal - Accountal of goods - Non-account-able in RG-I simply not call for a presumption of clandestine removal, but when complied with evidence of such removal non-accountable in RG-I would be relevant corroboration - Such settled position of law to be applied by determining the removal, if any, from the appellant’s factory and production - No findings having been given by adjudicator on appellant’s plea that demand misdirected on goods manufactured by a job worker - Matter remitted back to adjudicator for a fresh decision - Sections 11A, 11AC, 35C of Central Excise
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Act, 1944 - Rule 173Q(2) of erstwhile Central Excise Rules, 1944 - Rule 25 of Central Excise Rules, 2002. [para 2] Dutiability - Job work - Goods when manufactured on job work, duty demandable from job worker and not from the appellants - Section 3 of Central Excise Act, 1944. [para 2]” COLLECTOR OF CENTRAL EXCISE, PUNE Versus PRINT ORIGIN COMPANY - 1997 (90) E.L.T. 180 (Tribunal) “SSI Exemption - Value of clearances - Clubbing of - Price list filed by assessee who are merely job workers, in Part IV in terms of Section 4(4)(c) of the Central Excise Act, 1944 - Manufacturer not otherwise related to the job worker as no financial flow back or mutuality of interest in each others activity - Manufacturer company not being the dummy company of job worker, clearances of manufacturer not to be clubbed with job worker for the purpose of Notification No. 80/80-C.E. - For purpose of clubbing, it is not necessary to show that one of the units is a dummy unit but the respondents are right in pleading that it must be shown that the criteria laid down in the various orders of the Tribunal for such clubbing are met with. The deptt. has not produced any such evidence. It has not been able to show that the respondents contentions that they were merely job workers was in any way factually incorrect. [1977 (1) E.L.T. (J 168) (SC) distinguished, 1984 (16) E.L.T. 415 (Tribunal); 1994 (70) E.L.T. 273 (Tribunal); 1991 (56) E.L.T. 19 (Mad.) relied upon]. [paras 22, 23, 24] Adjudication - Misdirected proceedings - Action for clubbing the value of clearances, if any due, to be directed against manufacturer and not against job worker. - If M/s. AEL were the manufacturers, the action, if any due, was required to be directed against M/s. AEL and not against M/s. Print Origin who have stated that they were only job workers. In other words, SCN ought to have been issued to M/s. AEL and the question of clubbing exemption w.r.t. them. [paras 21, 24] Precedent - Job worker to be treated as independent manufacturer.” 204. INVESTIGATION NOWHERE FOUND AT WHICH PRICE GOODS WERE SOLD TO ULTIMATE CONSUMER M/s. Anand submitted that during the course of investigation 12 Dealers were searched/examined and based on such inquiry it is alleged that they had sold the goods to further line of sale by addition of cost of transportation and loading /unloading charges, profit margin, VAT @ 12.5% in purchase price shown in the invoices. The over and above invoice price cash amount were collected by the dealers and paid to them. However, investigation failed to found at what price goods were sold to ultimate consumer. “Retail Sale Price” is defined at Explanation – 1 to Section 4A of the Central Excise Act, 1944 which reads as under: “For the purpose of this section, “retail sale price” means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale.” They submitted that nowhere found in the impugned show cause notice that goods were sold to ultimate consumer at what price and same are the retail sale price for the purpose of computing duty if any short paid by them. Further they submitted that also nowhere found or alleged that retail sale price at which goods were sold to ultimate consumer and was not sole consideration for sale. Thus, in absence of such evidence Central Excise duty paid by them on retail sale price declared on goods less abatement as provided under Section 4A(2) ibid was correct and there is no question of short payment of duty. Therefore, no differential duty is required to be recovered from them and demand is liable to be quashed. 205. DIFFERENTIAL DUTY WORKED OUT BY ASCERTAINING MRP BASED IN AN ARBITRARY MANNER They further submitted that result of investigation is discussed at paragraph 16 at page 109 to 112 and alleged that MRP was mis-declared in the Central Excise Invoices; that
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not declared actual seize, variety, design as well as different prices for various qualities; that mis-declared freight amounts and other expenses; that collected cash amounts. Though the said allegations are without any base not even relied upon for working out duty liability. Based on the estimates recovered from the M/s M. R. Ceramic, Malappuram, a sub-dealer, DGCEI has fixed a MRP of Rs.135/- for 1st grade and Rs.100/- for 2nd grade ordinary SIL & COM Variety of tiles manufactured by M/s Anand. For MRP of REJ grade DGCEI the MRP of Rs.50/- declared by them from 03.03.2008 is assumed to be correct one and applied on all past clearances to demand duty from them. For ascertaining MRP of Luster variety of tiles DGCEI has added Rs. 20/- to the MRP of 1st grade ordinary tiles i.e. 135+20=155, Rs. 10/- to the MRP of 2nd grade ordinary tiles i.e. 100+10=110 and ascertained the MRP of Rs.155 & Rs.110 for the 1st and 2nd Grade Luster variety of tiles. Differential duty is worked out by taking difference between such MRP so ascertained minus declared MRP on goods less permissible abatement. Since, this method is not recognised under Section 4A of the Central Excise Act, 1944, demand is liable to be quashed on this ground too. They also submitted that while working out the demand department has taken an arbitrary MRP which has no legal basis. Thus, demand worked out on the basis of hypothetical base is not permissible under the law. In support of above they also relied upon following decisions of Hon’ble Karnataka High Court in the case of VICTORY GLASS AND INDUSTRIES LTD. Versus COLLECTOR OF C. EX. - 1990 (47) E.L.T. 540 ( Kar.) “Demand - Differential duty demanded on hypothetical assumption of undervaluation of all clearances - Show cause notice liable to be quashed - Section 11A of the Central Excises and Salt Act, 1944. - The Department has arrived at the revised assessable value on the presumption that the petitioner “must have undervalued the goods in respect of all clearances made”. The first thing that strikes any one who looks at the figures of clearances as against the total value of realisations is that it is more than ten times the actual realisations, worked out from the invoice and debit notes. That the Department is proceeding on the hypothetical assumption that the petitioner must have undervalued the goods in respect of all clearances, is clearly brought out in its additional statement of objections and the differential duty is demanded on this basis. On these admitted facts in so far as the additional duty demanded, the petitioner’s allegation that the show cause notice is vague, and vexatious and the notice should be quashed even before the adjudication by the Collector, deserves to be upheld. [paras 27 to 30]” 206. DIFFERENTIAL DUTY HAS NOT BEEN WORKED OUT INVOICE WISE – IN ABSENCE OF INVOICE WISE AND MONTH WISE CALCULATION OF DUTY - INTEREST AMOUNT CANNOT BE ASCERTAINED M/s. Anand submitted that the provisions of Section 3 and Section 2(g) of the Central Excise Act, 1944, Rules 2(e) of the Central Excise Rules, 2002 and paragraph 2.1 of Part-I of Chapter 3 of CBEC’s Central Excise Manual and the duty means duty payable under Section 3 and as per provisions of Section 3 it has to be levied and collected in the manner prescribed by rule made thereunder. As per the manner prescribed for the purpose of assessment duty has to be assessed before each removal. In other words each invoice is document for assessment and differential duty is required to be worked out invoice wise but the DGCEI has not worked out differential duty invoice wise in Annexure – A. The DGCEI while demanding differential duty instead of working out invoice wise differential duty simply clubbed clearance of glazed tile zone wise, quality wise and size wise for particular period, which is not as per the manner prescribed under Act and Rules framed there under. It is also submitted that in absence of invoice wise calculation of duty, it is not possible to ascertained interest amount payable if any on such amount under Section 11AB of the Central Excise Act, 1944. As submitted earlier that while demanding differential duty of Rs.30,01,655/- as worked out in Annexure –A to the show cause notice department has not worked out any differential duty invoice wise. It is not made known to us that how number of boxes,
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zone wise, size wise, quality wise arrived at. In absence of such figures they are not in a position to defend the matter properly. They further submitted that in absence of invoice wise and month wise duty payable figures, it is not possible to calculate interest under Section 11AB of the Central Excise Act, 1944. As per the provisions of Section 11AB of the Central Excise Act, 1944 interest is required to be paid from the first day of succeeding month in which duty ought to have been paid to till date of payment. As per the provisions of Rule 8 of the Central Excise Rules, 2002 duty of excise is required to be paid by 5th day of the following month. Thus, for the purpose of calculating invoice wise and month wise duty payable figures are required to be furnished to them. They submitted that adjudicating authority should give an option to pay duty, interest and 25% of penalty within 30 days from the date of order as per first proviso to Section 11AC of the Central Excise Act, 1944. Therefore, in view of the above they prayed that details of how zone wise, size wise, quality wise boxes in Annexure – A are arrived at may please be made known to them before any decision is taken in the matter. They also prayed that in any case if it is not convinced by their submission, invoice wise month wise duty payable under Section 11A(2) of the Central Excise Act, 1944 and monthly interest payable under Section 11AB of the Central Excise Act, 1944 considering amount deposited during the course of investigation may also please be made available to them at least with order. In absence of invoice wise month wise duty calculation they are not in a position to workout interest amount if any payable by them. In absence of such details, in case if they wish to avail benefit of reduced penalty up to 25% of duty amount within 30 days from the date of communication of order as provided under Section 11AC of the Central Excise Act, 1944, they cannot pay duty if any determined under Section 11A(2) alongwith 25% of penalty under Section 11AC and interest under Section 11AB of the Central Excise Act, 1944. 207. As submitted earlier that entire demand is based on the documents recovered from third parties and their statements recorded under Section 14 of the Central Excise Act, 1944. Presumption to truth is not available for such documents and statements under Section 36A ibid as departmental witnesses are not jointly tired with us and even cross examination of such witnessed is denied. 208. Even statements dated 01.05.2008 and 23.04.2009 of Shri Narendrabhai Dharamsinhbhai Patel, one of its partners are also based on such evidence collected from the third party premises and statement of concerned person of said parties. Once cross examination of witnesses who are not jointly tried with us is denied presumption to truth is not available for such statements also. Therefore, statements of the said directors are recorded said to have been showing such evidences and statement of 12 dealers, same also cannot be used as evidence against us. 209. INVESTIGATION FROM M/s GLAZEWARE TRADING COMPANY, MADURAI M/s. Anand submitted that the allegation in the SCN is that they were engaged in large scale evasion of excise duty by undervaluation; that the value of tiles declared in the invoices was collected by cheques and draft, the undervalued cost of tiles was collected by them in cash. The above allegation is stated to be based on the sales invoices of M/s Anand through which they have sold tiles to M/s Glazeware during the period Sept 2004 to Jan 2008. It was revealed during the scrutiny of these sales invoices that M/s Anand irrespective of the colours of tiles have declared a single MRP of Rs.100/-, Rs.90/-, Rs.60/- & Rs.30/- per box for the tiles of STD, COM, SIL & REJ grades of tiles respectively. DGCEI is of the view that M/s Anand should have kept the MRP as per the colures of the tiles also and hence concluded that they were not showing the correct sale prices and MRPs as the colours and designs of tiles manufactured and cleared by them. The above allegation is also stated to be based on the entries in seized file no. 5 and seized record no. 6 a LIC diary. Based on some handwritten notes in these private records recovered
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from the M/s Glazeware, DGCEI has concluded that M/s Glazeware were actually selling tiles of different manufacturer at much higher price and have made cash payments to various tiles manufacturers of Morbi. The allegation is general one directed towards all the tile manufacturers of Morbi including that of M/s Anand but is not supported by any corroborative documentary support. They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further. Even otherwise, without admitting anything they submitted that as per SCN total clearance of wall tiles during the disputed period were 21,03,602 Boxes whereas total number of boxes of tiles cleared to M/s Glazeware Trading Company, during the period was only 29,622 Boxes, which was only 1.41 % of total clearance . In support of above they enclosed self certified sheet showing year wise invoice wise clearance of tiles to said dealer and ledger account from the books of accounts for the period under dispute. 210. INVESTIGATION FROM M/S NATIONAL SANITARY DEPO & M/S NATIONAL AGENCIES, HYDERABAD It is alleged that M/s Anand were mis-declaring the MRP in their invoices and collecting the cash amount, over and above invoice amount, from M/s National Sanitary Depo. and thus were evading the duty of Central Excise. Statement of Shri Vasant Detroja, Proprietor of M/s National Agencies, Hyderabad and Smt. Bhavana Vasant Detroja, Proprietor of M/s National Sanitory Depo, Hyderabad was recorded on 26.02.2008 and 27.02.2008 respectively under Section 14 of the Central Excise Act, 1944. Shri Vasant Detroja in his statement though has stated that they were paying 50% of the actual price in cash in advance , which is not reflected in the purchase invoice but all his allegation are mainly related to Vrundavan group. They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further. Even otherwise, without admitting anything they submitted that as per SCN total clearance of wall tiles during the disputed period were 21,03,602 Boxes whereas total number of boxes of tiles cleared to M/s National Agencies and M/s National Sanitory Depo in total, during the period was only 53,535 Boxes, which was only 2.54 % of total clearance . In support of above they enclosed self certified sheet showing year wise invoice wise clearance of tiles to said dealer and ledger account from the books of accounts for the period under dispute. 211. INVESTIGATION FROM M/S SHIV OM MARKETING, MORBI M/s Shiv Om Marketing, Morbi have purchased wall tiles from M/s Anand and hence investigation was conducted with them under summons proceedings by recording a statement of Shri Dineshbhai Avcharbhai Gadara, its partner. Shri Dineshbhai Avcharbhai Gadara, Partner of M/s Shiv Om Marketing, Morbi, in his answer to question 6 is stated to have said that he was selling the goods to his buyer by adding his profit @ Rs.5 to Rs.10 per box and also taking cash @ Rs.15/- to Rs. 20/- per box which he was passing on to the manufacturer only. From the above submission DGCEI has concluded that actual MRP declared by M/s Anand should have been much more than Rs.60/- the declared MRP.
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They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further. Even otherwise, without admitting anything they submitted that as per SCN total clearance of wall tiles during the disputed period were 21,03,602 Boxes whereas total number of boxes of tiles cleared to M/s Shiv Om Marketing, during the period was only 80 Boxes, which was only 0.0038 % of total clearance . 212. INVESTIGATION FROM M/S M.R. CERAMICS, MALAPPURAM It is alleged that M/s Anand have been undervaluing the ceramic tiles manufactured and cleared by them. The above allegation is stated to be based on estimates , the seized account book and names and various bank accounts nos. of Shroff available at page no. 27 of seized note book marked as Sr. No. 8 as discussed in paragraph 7.6 at page 61 of the SCN. Statements of Shri Mohammed Rafeeq P., Manager, Shri P. P. Jarees, Partner and Shri Mayakkara Moideen Haji, Managing Partner of M. R. Ceramics were respectively recorded on 17.01.2008, 31.01.2008 and 28.01.2008 under Section 14 of the Central Excise Act, 1944. None of them has neither said anything specifically against them nor investigation has given any corroborative documentary evidence in support of its allegation and hence such evidences cannot be relied upon. They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further. Even otherwise, without admitting anything they submitted that they have not sold / cleared tiles to M/s M.R. Ceramics, during the period. 213. INVESTIGATION FROM M/S SHALIMAR MARBLES & GRANITES & M/S SHALIMAR MOSAIC INDUSTRIES, CHANGANACHERRY, KERALA It is alleged that M/s Anand were not only mis-declaring the MRP of tiles, they were also mis-declaring the Grade of tiles in their sales invoices and thereby mentioning very less MRP in their invoices and charging the price as per the actual MRP and Grade of tiles; that the invoice value was collected in cheque and the value over and above the invoice value was collected in cash. It is also alleged that they used the services of M/s Vaishali Traders, Morbi also for effecting such illicit transactions. Investigation has at length discussed the investigation from M/s Shalimar Marbles & Granites & M/s Shalimar Mosaic Industries, Changanacherry, Kerala and also recorded the statement of its proprietor Shri Hajaykumar M. K. alias Sanalkumar on 16.02.2008 under Section 14 of the Central Excise Act, 1944 but there is nothing against them which can be said that it related to them directly and it appears the investigation has discussed it at such a great length with the sole intention to misguide the adjudicating authority. They submitted that they have cleared tiles strictly in terms of Section 4A (2) of Central Excise Act, 1944, i.e. Retail Sale Price declared on package less abatement. If the investigation makes any allegation that too without any corroborative documentary evidence then without the cross examination of the dealer they are not in a position to defend the matter further. They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further.
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Even otherwise, without admitting anything they submitted that they have not sold / cleared tiles to M/s Shalimar Marbles & Granites & M/s Shalimar Mosaic Industries, Changanacherry, Kerala, during the period. Even otherwise, without admitting anything they submitted that as per SCN total clearance of wall tiles during the disputed period were 21,03,602 Boxes whereas total number of boxes of tiles cleared to M/s Shalimar Marbles & Granites & M/s Shalimar Mosaic Industries, Changanacherry, Kerala, during the period was only 4,533 Boxes, which was only 0.22 % of total clearance . 214. INVESTIGATION FROM M/s DELIGHT CERAMICS, PUNE It is alleged that M/s Anand were mis-declaring the MRP in their Central Excise invoices with an intent to evade the duty of Central Excise. The officers of DGCEI, Ahmedabad searched the premises of M/s Delight Ceramics , Pune on 19.12.2008, documents relevant for inquiry were resumed as per panchnama dated 19.12.2008 drawn at it premises and a statement of Shri Rajesh Chunilal Kanabar, its Proprietor was also recorded on 19.12.2008 under Section 14 of the Central Excise Act, 1944. In his statement though Shri Rajesh Chunilal Kanabar has said that cash was handed over to M/s Anand by his employee Shri Manish Gami the investigation has neither recorded statement of his employee Shri Manish Gami nor has given any documentary corroborative statement. Without cross examination of Shri Rajesh Chunilal Kanabar and Shri Manish Gami it is not possible to defend the matter further. Though investigation has discussed seized document no. 6 marked as “Misc. Paper File” resumed from M/s Delight premises and discussed various handwritten notes. But those documents are neither issued by them nor has been recovered from their premises. They once again submit that they have cleared tiles strictly in terms of Section 4A (2) of Central Excise Act, 1944, i.e. Retail Sale Price declared on package less abatement. If the dealer makes any allegation that too without any corroborative documentary evidence then without the cross examination of the dealer they are not in a position to defend the matter further. They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further. Even otherwise, without admitting anything they submitted that as per SCN total clearance of wall tiles during the disputed period were 21,03,602 Boxes whereas total number of boxes of tiles cleared to M/s Delight Ceramics, during the period was only 2,100 Boxes, which was only 0.10 % of total clearance . In support of above they enclosed self certified sheet showing year wise invoice wise clearance of tiles to said dealer and ledger account from the books of accounts for the period under dispute. 215. INVESTIGATION FROM M/s KWALITY MARBLES & M/s KRISHNA MARBLE, COCHIN It is alleged that M/s Kwality Marbles & M/s Krishna Marble, Cochin, reveals that M/s Anand were showing two third of the actual value of tiles in invoices and collecting the same through cheques; that they were collecting the differential amount equal to one third of the actual value of the tiles from their dealers in cash in order to evade the duty of Central Excise.
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The above allegation is stated to be based on the scrutiny of the invoices of M/s Anand which reveals that M/s Anand have cleared 731 boxes of STD grade tiles at the MRP of Rs.100/- and 125 boxes of COM grade tiles at the MRP of Rs.90/- to M/s Kwality Marble and 1250 boxes of STD grade tiles at the MRP of Rs. 100/- to M/s. Krishna Marble Cochin . It is also stated that Shri Manmohan Ghanshyamji Bagri, owner of M/s Kwality Marbles and M/s Krishna Marble has in his statement dated 11.02.2008 clearly gave the example evidencing payment of two third part of the actual value in cash to the tiles manufacturers of Gujarat. Without accepting anything even they assume this statement to be true for the sake of argument then also it is a general allegation against all the tiles manufacturers of Gujarat and without any evidence of how much has been paid by them to the each and every tile manufacturer of Gujarat no reliance can be placed on such evidence. They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further. Even otherwise, without admitting anything they submitted that as per SCN total clearance of wall tiles during the disputed period were 21,03,602 Boxes whereas total number of boxes of tiles cleared to M/s Kwality Marbles & M/s Krishna Marble, during the period was only 2,106 Boxes, which was only 0.10 % of total clearance . In support of above they enclosed self certified sheet showing year wise invoice wise clearance of tiles to said dealer and ledger account from the books of accounts for the period under dispute. 216. INVESTIGATION FROM M/s SADGURU MARBLES & SANITARYWARE, BHOPAL It is alleged that M/s Satguru were actually selling the tiles of M/s Anand at a price much higher than the invoice price and the differential amount was paid by them in cash to the representative of M/s Anand. The above allegation is stated to be based on the scrutiny of Central Excise invoices of M/s Anand through which in total 2480 boxes of tiles has been cleared by the them to M/s Satguru Marbles & Sanitaryware, Bhopal and the statement of Shri Hirendra Asnani, its proprietor, recorded by DGCEI on 09.01.2009 under Section 14 of the Central Excise Act, 1944. It is on record that M/s Anand have sold only 2480 boxes of tiles and that too during the period Nov 2004 to Apr 2005. Shri Hirendra Asnani, its proprietor has also did not named M/s Anand even the list of manufacturer from whom he was purchasing the tiles. They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further. Even otherwise, without admitting anything they submitted that as per SCN total clearance of wall tiles during the disputed period were 21,03,602 Boxes whereas total number of boxes of tiles cleared to M/s Sadguru Marbles & Sanitaryware, during the period was only 3,534 Boxes, which was only 0.17 % of total clearance . In support of above they enclosed self certified sheet showing year wise invoice wise clearance of tiles to said dealer and ledger account from the books of accounts for the period under dispute. 217. INVESTIGATION FROM M/S ROYAL FLOORINGS & SANITARYWARE, PALAKKAD
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It is alleged that tile manufacturers of Gujarat including M/s Anand were mis-declaring the MRP in their invoices and thereby evading the duty of Central Excise. The above allegation is stated to be based on the statement of Shri Mohammed Mustafa, Partner of M/s Royal Floorings & Sanitaryware, Palakkad, recorded on 19.08.2008 under Section 14 of Central Excise Act, 1944. In his statement Shri Mohammed Mustafa has said that most of the parties from whom he was purchasing did not show the full rate or value in their sales invoices; that the amounts shown in the bills were paid by cheque; that in majority of cases, the cheques were deposited in the bank accounts furnished by them; that the actual rates were fixed depending upon the packing and quality of tiles and MRP varied from manufacturer to manufacturer and hence he was not remembering the correct rate at which they made payments to such manufacturers; that he has stopped business by March 2008 and settled all the accounts with said manufacturers by February 2008 and hence he did not have any accounts of amounts paid in the form of cash over and above the billed amount. They straight way reject and deny the allegations. The so called evidence in the form of documents recovered from the third party premises and without cross examination of the author of such documents and said dealer, they are not in a position to defend the matter further. Even otherwise, without admitting anything they submitted that as per SCN total clearance of wall tiles during the disputed period were 21,03,602 Boxes whereas total number of boxes of tiles cleared to M/s Satguru Marbles & Sanitaryware, during the period was only 40,749 Boxes, which was only 1.94 % of total clearance . In support of above they enclosed self certified sheet showing year wise invoice wise clearance of tiles to said dealer and ledger account from the books of accounts for the period under dispute. It can be summed up that total evidence collected by the investigation is representing only 1,36,259 Boxes out of total clearance of 21,03,602 Boxes during the disputed period which is 6.48% only. Therefore, same cannot be applied to entire clearances made during the disputed period. In any case without admitting any thing they further submit that while computing demand, the investigation has completely ignored all these evidences for the reason best known to them and computed demand on some different grounds which are alien to Section 4A of the Central Excise Act, 1944. Thus, by any means even if the so called evidence collected by the investigation is considered as true then also same have no relevance for the purpose of confirming the demand as base of demand is other than such evidence. The base of demand of differential duty is MRP ascertained in an arbitrary manner and that too different for all the different grades and sizes, described in paragraph 16 at page 109 to 112. Therefore, by any means demand is not sustainable. 218. GENERAL INVESTIGATION AT TRANSPORTERS END They submit that Paragraph 13.2.1. to 13.2.3 at page 86 & 90 of the SCN statements of three transporters are discussed but none of the transporter has deposed any specific about transportation of tiles from their factory premises. In absence of any specific allegation against them as well as denial of cross examination of witnesses no reliance can be placed on such statements. Even otherwise, it is on record by way of various statements that in most of the cases goods were sold at factory gate and transportation from factory premises to buyers’ premises were always born by the buyers. They have nothing to do with transportation. Therefore, allegation about mis-declaration of freight has no relevance with the present demand.
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219. DEMAND IS TIME BARRED They further submit that impugned show cause notice demanding differential duty for the period 01.04.2004 to 31.03.2008 was issued on 23.04.2009 invoking proviso to Section 11A of the Central Excise Act, 1944. Though impugned show cause notice mechanically alleged suppression, mis-declaration etc., they submit that they had paid duty of excise on declared Maximum Retail Sale Price on the goods less permissible abatement as provided under notification issued under Section 4A of the Central Excise Act, 1944. It is not the case of the department that they were required to pay duty of excise on not paid by on goods cleared by us. It is also not the case of the department that they have suppressed anything from the department or they have mis-declared anything to the department. The Central Excise law does not provide to declare something which they either said to have been suppressed or mis-declared to the department. Therefore, no such allegation can be made against them. Therefore, demand notice issued under proviso to Section 11A is time barred. 220. NO QUESTION OF SHORT PAYMETN OF DUTY – NO QUESTION OF IMPOSITION OF PENALTY AND RECOVERY OF INTEREST They further submit that based on the submission made till date impugned demand is not maintainable so there is no question of imposition of penalty under Section 11AC of the Central Excise Act, 1944 and recovery of interest under Section 11AB of the Central Excise Act, 1944. 221. NO PENALTY UNDER RULE 25 CAN BE IMPOSED WHEN PENALTY UNDER SECTION 11AC OF THE CENTRAL EXCISE ACT IS IMPOSED They further submit that the show cause notice further proposes to impose penalty under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002. In this regard attention of is invited towards the provisions of Rule 25 which is starting with the words subject to the provisions of Section 11AC ibid. Therefore, proposal to impose both the penalty is illegal. In this regard they submitted the clarification given under CBEC’s Excise Manual Para 2.2 of Part III of Chapter 13 which reads as under: “2.2 If penalty is imposed under Section 11AC, penalty under rule 25 cannot be imposed. This, however, does not preclude the Department from confiscating imposing any fine in lieu of confiscation and prosecuting a person.” They submitted that the fact that said CBEC’s Excise Manual is issued under Rule 31 of the Central Excise Rules, 2002 and therefore binding upon the department. Thus, no penalty can be imposed under Rule 25 ibid in addition to penalty if any, imposed under Section 11AC of the Central Excise Act, 1944. 222. The above submission and submissions made till date may please be considered without prejudice to one another. In view of the above as well as earlier submission the demand show cause notice is not maintainable and liable to be quashed. Therefore, it is prayed that same may please be quashed. 223. M/s. Anand prayed that in view of the above as well as earlier submissions, they are sure that impugned show cause notice will not stand in judicial scrutiny by present adjudicating authority. However, in any case if it is not convinced kindly arrange to furnish copies of above referred documents, details and allow us cross examination of witnesses viz. persons concerned of dealers, transporters, Shroffs/Angadias etc whose statements are relied upon in the show cause notice on the grounds stated in paragraph supra.
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Personal Hearing: 224. A Personal hearing was conducted on 22.1.2013.The noticee was represented by Shri P. D. Rachchh, consultant who briefed their defence reply dated 14.5.2012 and submitted that they will file another reply within a week. They had filed a further reply which was received in this office on 5.2.2013 and which has already been taken into cognizance in the paras above. Discussion and Findings: 225. I have carefully gone through the facts of the case and the various submissions advanced by M/s. Anand and Shri Narendrabhai Dharamsinhbhai Patel, Partner of M/s. Anand, from time to time during the course of adjudication proceedings. 226. The major issue to be decided by this order is as under:-
(v) whether Central Excise duty amounting to Rs. 30,01,655/- (Rupees Thirty lakh one thousand six hundred fifty five only) (CENVAT Rs. 29,35,010/-, Edu. Cess Rs. 57,571/- and H.Ed. Cess Rs. 9,074/-), was short paid by M/s. Anand by way of under-valuation of the Maximum retail sale price of their finished goods or otherwise
227. It is observed that the main noticee – M/s. Anand are engaged in manufacture of excisable goods, namely, ceramic tiles falling under chapter 69 of the Central Excise Tariff Act,1985. There is no dispute over the fact that valuation of ceramic tiles is with reference to retail sale price, as per the provisions contained in Section 4A of Central Excise Act, 1944. 228. For the ease of ready reference, Section 4A of Central Excise Act, 1944, as applicable to the period covered by the Show Cause Notice is reproduced below: “Section 4A. Valuation of excisable goods with reference to retail sale price:-
(1) The Central Government may, by notification, in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or the Rules made thereunder or under any other law for the time being in force, to declare on the package thereof, the retail sale price of such goods, to which the provisions of sub-Section (2) shall apply.
(2) Where the goods specified under sub-Section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in Section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any abatement under sub-Section (2), take into account the amount of duty of excise, sale tax and other taxes, if any, payable on such goods.
(4) Where any goods specified under sub-Section (1) are excisable goods and the manufacturer – (a) removes such goods from the place of manufacture, without
declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, Rules or other law as referred to in sub-Section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture, then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purpose of this Section.
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Explanation 1. -For the purposes of this Section, “retail sale price” means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale. Provided that in case the provisions of the Act, Rules or other law as referred to in sub-Section (1) require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly. Explanation 2. -For the purposes of this Section, - (a) where on the package of any excisable goods more than one retail
sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price;
(b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;
(c) where different retail sale prices are declared on different packages for the sake of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.”
229. It has been argued by M/s. Anand that they have not contravened the provisions of sub-Section (4) of Section 4A of Central Excise Act, 1944. It is further argued that retail sale price declared on the package less abatement shall be deemed to be the assessable value and the Section does not prescribe that assessable value should be the actual price of the goods received/realized less abatement or the actual price at which the goods are sold by the dealers less abatement or the price shown in the price list/estimation/quotations less abatement shall be deemed to be the assessable value or it should be the weighted retail sale price less abatement. They have also argued that the condition precedent to invoking sub-Section (4) of Section 4A is not satisfied inasmuch as declared retail sale price could have been re-computed only if the manufacturer removes excisable goods without declaring retail sale price of such goods on the package, or the declared retail sale price was not the retail sale price as required to be declared under the provisions of Section 4A, or the retail sale price declared on the package is tampered with/obliterated/altered the retail sale price after removal from the place of manufacture. They have added that the Show Cause Notice does not contain any allegation regarding infringement of any of these conditions, which would have attracted the ascertainment of retail sale price in the prescribed manner in terms of sub-Section (4) of Section 4A. On the other hand, it has been argued that even if the allegation in the notice that the tiles were sold by the dealers/distributors at a price higher than retail sale price is assumed to be correct, even then until and unless the department is able to show as to how the same was infringement of one of the three conditions prescribed in sub-Section (4) of Section 4A of the Central Excise Act, 1944, the declared retail sale price could not have been discarded. On this basis, M/s. Anand have contended that the Show Cause Notice does not mention the reason for re-computing the retail sale price in terms of sub-Section 4 of Section 4A of Central Excise Act, 1944. 230. Examining this argument, I find that under sub-Section (1) of Section 4A, a legal obligation is cast upon the manufacturer to declare the retail sale price of the specified goods on the package thereof. The meaning of “retail sale price” is given in the Explanation 1 to Section 4A. According to this, “retail sale price” means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes –
all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and
all charges towards –
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advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale.
230. I find that during investigation, various corroborative evidences found from the dealers of M/s. Anand revealed that the dealers of M/s. Anand have deposited the cash amounts, over and above bill amounts, in the bank accounts in the name of various shroffs namely M/s Shree Maruthi Enterprises, M/s. Shreeji Enterprise, M/s. Shree Ram Enterprises, M/s. Eagle & Co. and M/s. Shree Sai Krupa Enterprises etc. The common thread running across the corroborative evidences is that they provided the avenues in the form of bank accounts opened in the names of M/s Shree Maruthi Enterprises, M/s. Shreeji Enterprise, M/s. Shree Ram Enterprises, M/s. Eagle & Co. and M/s. Shree Sai Krupa Enterprises etc. for transmitting money deposited by the dealers to M/s. Anand for a fixed consideration. 231. I also find the entire set of above evidences comprising of both – documentary and oral evidences was placed before Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand to give him the opportunity to peruse each of these evidences and give deposition about the truth and correctness thereof. In this regard, it is observed that two different statements of Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand were recorded on 01.05.2008 and 16.04.09 under Section 14 of Central Excise Act, 1944. In his statement-dated 16.04.09, Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand has inter alia stated that he agreed with the facts recorded in panchnama dated 26.02.08 drawn at M/s. National Sanitary Depo., Hyderabad; Statement dated 27.02.08 of Smt Bhavana Vasant Detroja, Proprietor of M/s. National Sanitary Depo.; statement dated 26.02.08 of Shri Vasant Detroja, Proprietor of M/s. National Agencies, Hyderabad; telephone diary seized at Sr. No. 4 of the panchnama dated 26.02.08 drawn at M/s. National Sanitary Depo.; statement dated 19.08.08 of Shri Mohammed Musthafa, Partner, M/s. Royal Floorings & Sanitary ware, Palakkad; statement 09.01.09 of Shri Hirendra Asnani, Proprietor of M/s Satguru Marbles and Sanitaryware, Bhopal; statement dated 11.02.08 of Shri Manmohan Ghanshyamji Bagri, Owner of M/s Kwality Marbles and M/s Krishna Marble; panchnama dated 19.12.08 M/s. Delight Ceramics, Flat No. 1, S. No. 14/15/1/1B, Prathmesh Heights, Opp. Santosh Hall, Shinhagad Road, Pune; statement dated 19.12.08 of Shri Rajesh Chunilal Kanabar, Proprietor of M/s. Delight Ceramics, Pune; note-book seized at Sr. No. 5 of panchnama dated 19.12.08; panchnama dated 17.01.08 drawn at M/s. Glazeware Trading Co., 33, Dhanappa Mudali Street, Madurai; statements dated 17.01.2008 and 31.05.08 of Shri C. Rajasekaran, Manager of M/s. Glazeware Trading Co.; diary seized at Sr. No. 6 from M/s. Glazeware Trading Co.; official books of accounts of M/s. Anand ; statement dated 25.08.08 of Shri Dineshbhai Avcharbhai Gadara, Partner of M/s. Shiv Om Marketing, Morbi; panchnama dated 17.01.08 drawn at M/s. M. R .Ceramics, Malappuram; Estimate No. 522 dated 18.09.07, Estimate No. 1367 dated 27.12.07, estimate No. 555 dated 22.09.07 and 556 dated 22.09.07 available in the estimate books seized at Sr. No. 7 from M/s. M.R. Ceramics; seized record No. 5 of M/s. M.R. Ceramic.
232. Further I find that these tiles were attracting much higher MRP than the MRP declared by them in the Central Excise invoices; that their dealers were selling the tiles based on colour, design, etc. but they never declared these parameters in the Central Excise invoices issued by them; that they did not mention correct MRP in the Central Excise invoices with intent to evade payment of duty. He also admitted that they insisted upon the transporters to show lesser freight in the lorry receipt and the differential amount was collected by them from the dealer in cash. Apart from this, he stated that they prepared the packing slip containing all relevant details like colour, design, grade, quality, etc. having a direct bearing on the sale price to be charged from retail customer, in one single copy only, which was sent to the dealer/buyers and who destroyed it after tallying the same with the corresponding invoice. He also stated that they have destroyed the record containing the correct details of colour, design, etc. of tiles and the actual price charged by them from the dealers/buyers. He also accepted the fact that dealers sold the tiles manufactured by them at the price that was higher than the price declared by them in the Central Excise invoice and this was because they declared
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lower MRP and collected higher price from the dealer than the price shown by them in the invoice raised on the dealer. 233. It is noteworthy that none of the persons including Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand, whose depositions have been relied upon in the show cause notice have retracted their statements at any point of time. Therefore, the facts stated by them in their respective statements coupled with the overwhelming evidence regarding monetary flow back to M/s. Anand from the dealers on account of sale of tiles at higher price than MRP, it is clearly established that the price declared in the Central Excise invoice was not the sole consideration for sale. These facts are also sufficient to hold that the retail sale price declared by M/s. Anand on the packages in which tiles were cleared from their factory was not the retail sale price as required to be declared under the provisions of law. In deliberately declaring the artificially low ex-factory prices and leaving out the elements of actual freight borne by the dealers, dealer’s profit, VAT payable by dealer, etc. from the scope of retail sale price, they have not only ignored the criteria laid down in the Explanation 1 to Section 4A of Central Excise Act, 1944 for computing the retail sale price but in recovering cash amounts resulting from sale of goods at higher MRP than MRP declared in the Central Excise invoices as well as MRP affixed on the package, they have brazenly contravened the provisions of Section 4A(4)(a) ibid, giving rise to the requirement to ascertain the MRP of ceramic tiles cleared by them during the period covered by the show cause notice. Thus, the argument advanced by M/s. Anand that they have not violated the provisions of Section 4A(4) of Central Excise Act, 1944 is not acceptable and accordingly, the same is rejected. 234. M/s. Anand have requested for cross-examination of all the witnesses whose statements have been relied upon in the show cause notice. They have submitted that as per Section 36A of the Central Excise Act, 1944, nothing can be presumed as to the truth of the contents of such documents against them which are recovered from the third party as well as the oral evidence especially when they are not jointly tried with them; that the entire case is built up against them based on the documents either recovered or obtained from third party who are not jointly tried with them. In support of this argument, they have cited the decisions in the case of Commissioner of Central Excise, Meerut – I Vs. Parmarth Iron Pvt. Ltd. reported in 2010 (260) ELT 514 (All) and Decision of Hon’ble High Court of Madras in the case of Rajam Industries (P) Ltd. Vs. Addl. D.G., D.G.C.E.I., Chennai reported in 2010 (255) ELT 161 (Mad). It has been further argued that since the documents were not seized from their custody or control of any person, who is jointly tried with them, there cannot be any presumption in law regarding the truth of the contents of such documents. 235. I find that it is a matter of record that before recording the statements of Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand, all the evidences in the form of documents recovered from the premises of various dealers as well as the statements of the said dealers were placed before him and he was given full opportunity to peruse them before giving testimony about the truth and correctness thereof. It is seen from his statements that all these documents that were in the form of private diary, ledger, note-book, etc. maintained by the dealer, Central Excise invoices & packing slips that were kept in the files recovered from the dealers, etc. was perused by him before giving his statement. Thus, he was given full opportunity to examine this documentary evidence corroborated by the oral evidence collected from the dealers and to deny the same, if he disagreed with the contents thereof. It is also evident from his statements that he availed of this opportunity and it was only after he perused the documents and statements placed before him that he gave testimony stating that he agreed with the contents thereof. As already noted above, none of the persons, namely, Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand or any of the other persons whose statements were perused by Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand before giving his own statements, have filed any retraction at any point in time. Thus, there is no evidence to support the plea advanced by M/s. Anand that statements of the witnesses as also those of Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand were recorded under duress or threat. Moreover, for the reason stated above, this is also not a case where Show Cause Notice has been issued by relying upon any particular documentary/oral evidence about which he learnt only after
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issuance of Show Cause Notice, so as to give rise to the requirement of cross-examination of the author/witnesses. 236. I find that M/s. Anand has cited several judicial pronouncements in support of their request for cross-examination of the witnesses. I have carefully gone through these judicial pronouncements passed by higher appellate forum. The issue before Hon. High Court of Allahabad in the relied upon case of M/s. Parmarth Iron Pvt. Ltd., 2010 (260) ELT 514 (All.) was whether, before filing the reply to the Show Cause Notice, an assessee is entitled to cross-examine the witnesses whose statements were recorded, relied upon and referred to in the Show Cause Notice Hon. High Court answered this question in the negative by holding that there is no right, procedurally or substantively or in compliance with natural justice and fair play, to make available the witnesses whose statements were recorded, for cross-examination before the reply to the Show Cause Notice is filed and before adjudication commences. Hon. High Court further held that it is only after the adjudication proceedings have commenced pursuant to the Show Cause Notice that if the Revenue seeks to rely upon the statements or documents, then the principle of natural justice would require in the absence of any statutory provision, that the person whose statement was recorded is made available for cross-examination to test the veracity of the statement. On comparison, it appeared that the facts in hand are distinguishable from the relied upon judgment inasmuch as the documents and statements collected from the dealers were placed before Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand for verifying its veracity before recording his statement and Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand has agreed with the contents thereof only after perusing the evidence that is relied upon in the Show Cause Notice. I have also perused the decision of Hon. High Court of Chennai in the case of Rajam Industries (P) Ltd., 2010 (255) ELT 161 (Mad.) relied upon by M/s. Anand in support of his plea of cross-examination. In this case, by way of filing Writ Petition, challenge was made to the Show Cause Notice on various grounds. According to one of the grounds taken in the petition, the statements from various persons during preliminary investigation were obtained in the absence of the petitioner and therefore, they cannot be relied upon for issuing the Show Cause Notice. Hon. High Court held that this ground is not sustainable. Hon. High Court further observed that the petitioner would be given opportunity to cross-examine those persons in the adjudicating process. I find that in the present case, Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand has categorically admitted the correctness of the documentary evidence resumed from the premises of various dealers as well as corroborative oral evidences gathered from the persons running the dealer- firms. In contradistinction, the relied upon decision does not inform whether statement of any responsible person of the petitioner therein was recorded on the basis of primary evidence gathered from the buyers, etc. Therefore, the facts involved in the relied upon decision are on a different footing and cannot be applied in the present case. It thus appeared that none of the decisions relied upon by M/s. Anand are of any avail insofar as their request for cross-examination is concerned. 237. On the other hand, I find that in the case of Jagdish Shanker Trivedi v/s CC, Kanpur, 2006 (194) ELT 290 (Tri.-Del.), Hon. Tribunal while relying on various judgments of Hon. Supreme Court, has held as under: 7.1 The question as to whether there was any contravention of natural justice by the customs authorities when the persons whose statements were recorded were not produced to enable their cross-examination, came up for consideration by the Supreme Court in Kanungo's case (supra) in the context of the provisions of confiscation made under Section 167(8) of the Sea Customs Act read with Section 3(2) of Imports and Exports (Control) Act, 1947 and the Supreme Court in paragraph 12 of the judgment rejected that contention in the following terms: 12. We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show cause notice issued on August 21, 1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine
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them. In our opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities. Accordingly we hold that there is no force in the third contention of the appellant.” The decision in Kanungo & Co. was followed by the Calcutta High Court in Tapan Kumar Biswas v. Union of India (supra) in paragraph 17 of the judgment and it was held that in a proceeding under the Customs Act the proceedees are not entitled to cross-examine the witnesses. The decision in Ashutosh Ghosh and Another v. Union of India and Others reported in 1977 Criminal Law Journal N.O.C. 67, was also relied upon and it was observed in paragraph 20 of the judgment that the Supreme Court in Ashutosh Ghosh’s case has categorically held that a proceedee is not entitled to cross-examine the witnesses. The decision of the Division Bench of the Calcutta High Court in Kishan Lal case (supra) was also referred in paragraph 18 of the judgment and it was held to be laying down the proposition that cross-examination of the witnesses (in the matter under the Sea Customs Act) was not comprehended. Referring to all these decisions, the Court held, that a proceedee was not entitled to cross-examination of any witnesses under Section 124 of the said Act which lays down the extent of applicability of the principles of natural justice and under which a proceedee was not entitled to cross-examine any witnesses (para 11). Thus in view of the decisions of the Hon’ble Supreme Court in Kanungo & Co., Ashutosh Ghosh and of the Calcutta High Court, in the above two decisions, it is abundantly clear that a noticee cannot claim a right to cross-examine under Section 124 of the said Act.” 238. I also find that in Re: G. Subramanian, 2002 (142) ELT 224 (G.O.I.), it is held that – “7. Govt. observes that through sustained and well directed investigation the Department was able to crack the organized gang which specialized in illegal exportation of foreign currency and import of foreign goods. The role of Shri G. Subramanian in this organized activity is established by the investigation carried out. It has been held by the Hon’ble Supreme Court of India that customs officers are not police officers and therefore statements given before customs officers are valid as substantive evidence. It has been categorically held that the statement made before the customs officials is not a statement recorded under Section 161 of the Criminal Procedure Code, 1973. Therefore, it is a material piece of evidence collected by customs officials under Section 108 of the Customs Act. Hon’ble Supreme Court had also held that the statement made before customs officers though retracted within six days is an admission and binding because it has been made before a customs officer and not a police officer. These aspects have been dealt with in detail by he Hon’ble Supreme Court in the following judgments (i) Surjit Singh Chhabra v. Union of India reported in 1997 (89) E.L.T. 646, Naresh J. Sukhawani v. Union of India - 1996 (83) E.L.T. 258 (S.C.) etc. It has also been held that cross-examination is not compulsory. Procedural requirements as to cross-examination of witnesses etc. governing enquiry under Article 311 of the Constitution of India are not equally applicable to proceedings under Section 112 of the Customs Act, 1962. Cross-examination is not a mandatory procedure to be allowed in all cases Liyakat Shah v. Commr. - 2000 (120) E.L.T. 556 (T). Hon’ble Tribunal has also held that the plea that no opportunity of cross-examination was afforded is not tenable and when confessional statements are given, the non-tendering of witnesses for cross-examination is not violative of principles of natural justice. Cross-examination is not a part of the natural justice but only that of procedural justice and not a ‘Sine qua non’ Poddar Tyres Pvt. Ltd. v. Commissioner - 2000 (126) E.L.T. 737 (Tri.). In Akai Impex v. Commissioner - 2000 (118) E.L.T. 610 (T), Hon’ble Tribunal held that cross-examination of witnesses cannot be demanded as a matter of right. 8. Govt. observes that cross-examination will be allowed only when the proceedings justified. In the present case the confessional statements given, corroborative evidences collected, documentary evidences collected during searches conclusively prove, culpability of Shri G. Subramanian beyond doubt. He has not complained about threat or coercion when he was produced before Magistrate immediately after arrest. When
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the original adjudicating authority questioned him about the nature of torture during personal hearing, he could not answer satisfactorily. In view of the Hon’ble Supreme Court judgment as discussed above and the strong evidences collected by the Deptt. Govt. observes that penalty has been rightly imposed.” 239. Besides above, I find that in the facts and circumstances where the truth and correctness of the statements of the witnesses as well as the documentary evidences seized from the premises of these witnesses have been affirmed by Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand and the offence of deliberate suppression of MRP to evade payment of Central Excise duty due and payable at the time of clearance followed by receipt of cash amounts arising from sale of goods at higher MRP at the hands of dealers (witness) have been confessed by him in detailed statements, which have not been retracted at any point of time, the ratio of the following judicial pronouncements of the higher judicial bodies is also applicable: 240. In the case of Ashok Trading Company v/s. Commissioner of Central Excise, Surat, 2007 (214) E.L.T. 235 (Tri. - Ahmd.), Hon. Tribunal has observed as under: - “7. I find that this is a case of admitted diversion of duty free material received from 100% EOUs. The appellant should have used them for manufacture and further export. The partner has admitted such clandestine removal in his statement on 12-7-01 and it is noticed that there was no retraction to his statement and further the same was corroborated in his statement nearly after 2 years on 6-6-03. In these circumstances, the request for cross-examination of recipient of the material appears not really warranted.” 241. In the case of Gulabchand Silk Mills Pvt Ltd. v/s Commissioner of Central Excise, Hyderabad-II, 2005 (184) ELT 263 (Tri.-Bang.), Hon. Tribunal has observed as under:- “10. the adjudicating authority has rightly confirmed the demand based on the quantity of 11 lakhs Lmts. of MMF cleared without payment of duty on the basis of admission by Shri Gopal Gupta, corroborated by the incriminating documents, unaccounted goods and the statements of all others. When a fact is admitted it doesn’t need further corroboration. We have no reason to believe that the statements have been taken under duress. We also hold that the retraction made after two months is an after thought. The denial of cross-examination of the two persons Shri Bhavani Kishore and Shri Gouri Shanker Gupta does not vitiate the proceedings. These people have not retracted their statements also. 242. In the case of Paras Laminates (P) Limited v/s Commissioner of Central Excise, Jaipur, 2004 (176) ELT 656 (Tri.-Del), Hon. Tribunal has observed as under:- “7. In this case the demand is confirmed on the basis of loose slip shows clearances of the goods in excess of the quantity mentioned in the invoice. Shri D. K. Mishra, Commercial Manager in his statement on 11-1-2000 admitted the recovery of the loose slip from the guard room and also admitted that the loose slip was in the hand writing of the guard and also admitted the fact that the excess goods were cleared and deposited the duty in respect of the excess goods cleared from the factory. He was again summoned on 4-4-2000 by the Revenue Authority where on that day also he admitted the clearances of the excess goods against cash payment.
8. This fact is admitted by the appellants that Shri D.K. Mishra, Commercial Manager has not retracted from his statement. In this situation when a senior officer like Commercial Manager admitted the entries made in the loose slip also admitted the fact that the excess goods were cleared without payment of duty. Mere denial of cross-examination does not call for any interference in the impugned order…” 243. In the case of Sudhir Sharma v/s Commissioner of Customs, New Delhi, 2011 (265) ELT 243 (Tri.-Del.), Hon. Tribunal has observed as under:- “18.8 Denial of Cross examination was grievance of the appellant. No doubt reliance and testimony of a witness calls for cross-examination. The evidence in adjudication proceeding need not be like the one in criminal cases. Findings should be on the basis
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of preponderance of probability. The Adjudicating Authority dealt elaborately why cross examination plea was found to be dilatory tactics. The witnesses were not innocent, but were found to be well conversant with the facts and established their knowledge to such fact. They were also found to be uninfluenced by Revenue and statements were recorded in all fairness. Reference may be made to the decision in the case of Rup Chand Jain v. Collector of Customs (Preventive), Calcutta, reported in 1996 (88) E.L.T. 335 (Cal.) and Santhanam v. Collector of C. Excise & Customs, Madurai-2, reported in 1995 (79) E.L.T. 564 (Mad.). The appellants merely raised flimsy pleas and asked for cross-examination of deponents. Challenge to the impugned order was made on the ground that the same was based on the statements of witnesses which were not been subjected to test by way of cross-examination of the deponent. A statement recorded by Customs Officers under Section 108 of the Customs Act being admissible in evidence as held in CCE v. Duncan Agro Industries, reported in 2000 (120) E.L.T. 280 (S.C.), the court has to test whether the inculpating portions were made voluntarily or whether it is vitiated on account of any of the premises envisaged in Section 24 of the Evidence Act. Nothing could be demonstrated to impeach the statements recorded. 18.9 Though it cannot be denied that the right of cross-examination in any quasi-judicial proceeding is a valuable right given to M/s. Priya Gold as these proceedings may have adverse consequences, at the same time under certain circumstances, this right of cross-examination can be taken away. Hon’ble High Court of Bombay while dealing with the similar issue in the case of Gyan Chand Sant Lal Jain v. UOI, reported in 2001 (136) E.L.T. 9 (Bom.) and taking into consideration the applicability of concept of principles of natural justice in that regard quoted para 76 of Halsbury’s Law of England, Vol. I (4th Edition) which reads thus:- “Natural justice does not impose on administrative and domestic tribunals a duty to observe all the technical Rules of evidence applicable to proceedings before courts of law. Members of tribunals may be entitled to draw on their specialized or local knowledge of the type of, issue before them in order to supplement as well as evaluate evidence to find facts by inquisitorial methods, and inspections and to obtain information from other persons: but it will generally be a denial of justice to fail to disclose to a party specific material relevant to the decision if he is thereby deprived of any opportunity of comment on it.” [Emphasis supplied] The Hon’ble High Court observed thus:- “In other words, it seems to be a fairly settled position in law that it is not necessary that persons whose statements have been previously recorded must be examined in the presence of the party against whom such previous statements are intended to be used. The Rules of natural justice do require that their previous statements must be made available to the party against whom they were intended to be used and such party must be given a fair opportunity to explain the same or comment on them. What would amount to fair opportunity would depend upon the facts and circumstances of each case....” [Emphasis supplied] 18.10 The Apex Court in Surjeet Singh Chhabra v. UOI, reported in 1997 (89) E.L.T. 646 (S.C.) held that Customs officials are not police officers and admission made before them though retracted binds the deponent. In view of voluntary statements recorded and such statements not retracted did not warrant cross examination when other circumstantial provided reliable basis corroborating the statements. When nothing surfaced that the witnesses had any enmity with appellants, those were not liable to be discarded nor required to be put to cross examination. Relying upon the decision of the Apex Court in Surjeet Singh Chhabra case (supra) this Tribunal in Jagdish Shanker Trivedi v. Commissioner of Customs, Kanpur - 2006 (194) E.L.T. 290 (Tri.-Del.) held that admission made by an assessee binds him and, therefore, failure to give him the opportunity to cross-examine the witnesses was not violative of principles of natural justice. It was specifically held that “principles of natural justice do not require that in matters like this, persons who had given information should be allowed to be cross-examined by the co-noticees on the statements made before the customs authorities. If cross-examination is to be allowed as a matter of right then in all cases of conspiracy and joint dealings between the co-noticees in the commission of the offences in connection with the contraband goods, they can bring about a situation of failure of
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natural justice by a joint strategic efforts such co-noticees by each one refusing to be cross-examined by resorting to Article 20(3) of the Constitution and simultaneously claiming cross-examination of the other co-noticees.” It is not a matter of right for any assessee to contend that the statements of witnesses should be discarded. 18.11 Bearing in mind the law laid down by the Apex Court and the appellants having been put to notice through SCN in the course of adjudication, there appears no force on the submissions of appellants that they were deprived of cross examination. It is well-settled that the effect of an alleged admission depends upon the circumstances in which it was made. An admission is the best evidence that an opposing party can rely upon, and though not conclusive, is decisive of the matter, unless successfully withdrawn or proved erroneous. This is so because an admission by a party is substantive evidence of the fact admitted, and admissions duly proved are admissible evidence irrespective whether the party making them appeared in the witness box or not and whether that party when appearing as witness was confronted with those statements in case it made a statement contrary to those admissions. An admission, if clearly and unequivocally made, is the best evidence against the party making it and though not conclusive, shifts the onus to the maker on the principle that “what a party himself admits to be true may reasonably be presumed to be so and until the presumption was rebutted the fact admitted must be taken to be established…” 244. In the case of GTC Industries Ltd. v/s. Commissioner of Customs, New Delhi, 2011 (264) ELT 433 (Tri.-Del.), Hon. Tribunal has observed as under:- “26.2. We are satisfied that the declaration filed before the authorities were full proof of suppression of fact, when all connected evidence proved realisation of higher MRP. Accordingly, the Excise authorities having discharged their burden of proof, the appellants had no right to call for cross-examination on flimsy plea.” 245. In the case of Goodrich Fairwell Exporters v/s CC (Import), Nhava Sheva, 2010 (252) E.L.T. 428 (Tri. - Mumbai), Hon. Tribunal has observed as under:- “16. The law, therefore, on the point of right to cross examine witness is well settled. It is not that in each and every matter before the adjudicating authority in relation to the tax liabilities that the assessee would be entitled to cross examine the persons whose statements recorded without disclosing the purpose for which the same is required. Besides, in a case where the facts which are sought to be established on the basis of the contents of the statements of the witnesses are not only to the knowledge of the assessee but are clearly admitted by the assessee in other documents in the same proceedings, mere rejection of refusal of cross examination of such persons would not result in failure of principles of natural justice. Hence, we do not find any substance in the first ground of challenge in the matter.” 246. In the case of Sridhar Paints Co. P. Ltd. v/s Commissioner of Customs & Central Excise, Hyderabad –III, 2006 (198) E.L.T. 514 (Tri. - Bang.), Hon. Tribunal has observed as under:- “9. ..Shri V. Radha Krishna Proprietor of ARA, Vijayawada has admitted that they are sole distributors of paints manufactured by SPCPL and also LRs and Kutcha Bills showing details of goods booked and consigned by ARA from Hyderabad to Vijayawada relates to the paints received along with the goods. He further stated that as per R. Shankar’s instructions they have not rendered the goods in their account. They destroyed the transport and other documents after receipt of this. The sales proceeds were handed over by him personally to R. Shankar when he visited Hyderabad. As regards, the Chartered Engineer’s certificate, the adjudicating authority has stated that the same does not relate to the period mentioned in the show cause notice. All the persons involved, viz., Shri K. Vijaya Kumar of VE, Shri R. Shankra, MD, Shri R. Sridhra, Director and V. Radha Krishna of ARA in their statements have admitted that most of the transactions were done without any payment of central excise duty from SPCPL through Vandana Enterprises. The Adjudicating Authority has also distinguished each case law cited by the appellants. The Adjudicating Authority has further cited several case laws to show that denial of cross-examination of witnesses/officers is not a violation of the principles of natural justice, We find that the Adjudicating Authority has
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reached his conclusions not only on the basis of the statements of the concerned persons but also the various incriminating records seized. We hold that the statements have been corroborated by the records seized. Even unaccounted raw materials and finished goods have been seized. There is no infirmity in the Adjudication Order. A modus oprendus has been devised to evade Central Excise duty systematically.” 247. In the case of Computer Joint-I v/s Collector of Central Excise, Bombay, 2000 (116) ELT 162 (Tribunal), Hon. Tribunal has held as under: - 10. Further, when the Manager and the owner of the appellants firm, in their initial statements, admitted that the appellants were manufacturing computers at their premises and record was taken into possession and at that time, nothing was shown or stated by the appellants to allege that the computers were actually manufactured by the independent job workers and not the appellants. In view of admission made by Deepak K. Daryani, Proprietor and Deepak Ahuja, Manager in their statements which were not retracted by them, the denial of cross-examination of the persons, who during the investigation, admitted that the computers were actually assembled at the premises of the appellants, is not in violation of principles of natural justice.” 248. Based on the facts & circumstances narrated in the foregoing paragraphs and by relying on the decisions of higher appellate forum as reproduced above, the request made by M/s. Anand for cross-examination is rejected. 249. It has been argued by M/s. Anand that as per Section 36A of the Central Excise Act, 1944, nothing can be presumed as to the truth of the contents of such documents against them which are recovered from the third party as well as the oral evidence especially when they are not jointly tried with them. Section 36A of Central Excise Act, 1944 relied upon by M/s. Anand is reproduced below for the ease of ready reference: “Section 36A. Presumption as to documents in certain cases. Where any document is produced by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law and such document is tendered by the prosecution in evidence against him or against him and any other person who is tried jointly with him, the Court shall, -
(a) unless the contrary is proved by such person, presume – (i) the truth of the contents of such document; (ii) …
(b) ...” 250. Further I find that reliance placed by M/s. Anand on this provision of law is misplaced inasmuch as truth of the contents of the documents produced/seized from the custody/control of dealers, etc. is testified by none other than Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand in his statements recorded on two different dates. These statements have not been retracted and hence, they are binding on M/s. Anand insofar as present proceedings are concerned. Thus, this plea is rejected. 251. Coming to the arguments advanced by M/s. Anand relating to MRP based valuation, I find that it has been vehemently argued that for the period in dispute, the Central Government had not prescribed any Rules for ascertaining the MRP; that therefore, it is not open to the Department to determine the MRP in an ad-hoc manner in the absence of any Rule prescribed for ascertaining the MRP during the relevant period; that the proposal to determine the MRP on an ad-hoc basis is contrary to the explicit provision of sub-Section (4) of Section 4A; that in the absence of any Rules framed during the relevant period, there was no manner prescribed for computing the MRP and consequently, sub-Section (4) of Section 4A is not enforceable in the relevant period. They have also placed reliance on the decisions of Hon. Supreme Court in CIT, Bangalore v/s B. C. Srinivasa Shetty, 1981 2 SCC 460 and P. Kasilingam and Ors v/s PSG College of Technology, 1995 SUPP (2) SCC 348 in support of this argument. They have also argued that Department has failed to adduce any evidence to establish that weighted average MRP shown in Annexure-D to the show cause notice was physically declared on the packages cleared by them, at the time of removal of tiles from the factory as mandated under sub-Section (2) of Section 4A of the Act; that in the absence
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of declaration of MRP that is proposed in the notice on the package, the same cannot be adopted as the basis of computing the duty liability. It has been further argued that while working out the ad- hoc MRP (weighted average) for the period covered by the show cause notice, MRP for the period has been taken an arbitrary MRP, which has no legal basis. 252. In this regard, I find that it is established by way of detailed findings contained in the foregoing paragraphs that M/s. Anand did not declare the actual retail sale price on the retail packages of ceramic tiles sold by them to the dealers. The retail sale price declared by them on the packages was invariably less than the actual retail sale price. They deliberately did not declare the details of colour, design, etc in the Central Excise invoices issued by them although the actual retail sale price was dependent upon these features and they mentioned these features in the packing slips that were sent to the dealers along with goods. The dealers sold the tiles at higher price than the retail sale price declared on the packages and paid fixed amount per box to M/s. Anand over and above the price mentioned in the invoice raised by M/s. Anand. These differential amounts were always paid in cash to M/s. Anand through a well-organized network of angadias and shroffs. Sometimes, these amounts were handed over to the representatives of M/s. Anand who paid visits to the dealers and on some other occasions, the dealers handed over the cash to the partner/representative of M/s. Anand on their visit to Morbi. Once these transactions were concluded and cash changed hands, the record containing the details of such transactions was destroyed by all the concerned parties. Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand has admitted that cash amounts received by them from the dealers was on account of sale of tiles by the dealers at higher price than the retail sale price declared by them on the packages as well as in the Central Excise invoices. He further admitted that these cash amounts were not accounted for in their books of accounts. Thus, to evade payment of appropriate Central Excise duty, M/s. Anand adopted the modus operandi of (i) declaring lesser retail sale price on the retail package and in the Central Excise invoices issued by them (ii) deliberately not including freight, dealer’s profit, VAT, etc. in the retail sale price (ii) generating only one copy of packing slip containing the vital details like colour, design, grade, quality, etc. that was destroyed by the dealer once tiles received by them tallied with the details mentioned therein and (iv) non-accounting the cash amounts received by M/s. Anand from the dealers on account of sale of ceramic tiles at higher price than the retail sale price. 253. The above notwithstanding M/s. Anand have argued that for want of Rules framed under Section 4A at the material time, there was no prescribed manner by which Department could have ascertained the retail sale price for the purpose of demanding the duty due and payable by them on the goods covered by the show cause notice; that as per Section 3(1) of Central Excise Act, 1944, duties of Central Excise are required to be levied and collected in the prescribed manner; that expression “prescribed” is defined in clause (g) of Section 2 of the Act, which means, prescribed by Rules made under the Act; that therefore, Department is required to work out the duty for the purpose of levy and collection under Section 3 of the Act in the manner prescribed under sub-section (4) of Section 4A of the Act; that however, Department has not worked out the duty in the prescribed manner and therefore, duty demanded cannot be termed as “duty” within the meaning of Section 3 of the Act, read with sub-section (4) of Section 4A of the Act. Put plainly, it has been argued that notwithstanding the fact that the offence of evasion is established, no differential duty can be demanded for want of manner prescribed under Section 4A for ascertaining the retail sale price. In the facts and circumstances of the case, the argument is unacceptable inasmuch as even as the offence of evasion by M/s. Anand stand admitted by them and established beyond doubt by way of host of documentary and oral evidences chronicled above, they harbour the intent to deprive the exchequer of its legitimate dues on the ground that revenue had no means to measure the evasion at the relevant time. However, I find that this argument is not sustainable inasmuch as while advancing this line of argument, M/s. Anand have nowhere pointed out any legal provision contained in Section 4A of Central Excise Act, 1944 on the basis of which it can be inferred that Department is prohibited from relying on the information regarding the retail sale price affixed by them during the relevant period that was provided to the Department by none other than M/s. Anand themselves. In this case, it is seen that in his statements recorded under Section
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14 of Central Excise Act, 1944, Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand has given a detailed account of the retail sale price of the different varieties of ceramic tiles manufactured by M/s. Anand and has gone on record. 254. I find from the statements of dealers / sub- dealers of M/s. Anand and corroborative evidences gathered from them that the said dealers were colleted the cash amounts, over and above bill amounts, from their customers and paid to M/s. Anand. The facts of the said statements and corroborative evidences have already been dealt with / discussed in the preceding paras and hence for the sake of brevity I do not wish to repeat the same. 255. I find that reliance placed by M/s. Anand on this provision of law was misplaced inasmuch as truth of the contents of the documents produced/seized from the custody/control of dealers, etc. was testified by none other than Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand in his statements recorded on two different dates. These statements have not been retracted and hence, they are binding on M/s. Anand insofar as present proceedings are concerned. Thus, this plea was rejected. 256. I have gone through the decisions of Hon. Supreme Court in case of CIT, Bangalore v/s B. C. Srinivasa Shetty, 1981 2 SCC 460 and P. Kasilingam and Ors v/s PSG College of Technology, 1995 SUPP (2) SCC 348 and the order of Hon. Tribunal in the case of M/s. Ravi Foods Pvt. Ltd., 2011 (266) ELT 399 (Tri.-Bang) that are cited by M/s. Anand in this regard. In the relied upon case of B. C. Srinivasa Shetty, the issue for consideration before Hon. Supreme Court was whether if the expression “asset” in Section 45 of the Income Tax Act, 1962 was construed as including the goodwill of a new business, it was possible to apply the computation Sections for quantifying the profits and gains on its transfer. In this case, Hon. Supreme Court observed that the charging Section and the computation provisions together constitute an integrated code. When there was a case to which the computation provisions cannot apply, such a case was not intended to fall within the charging Section. It was further observed by the Apex that the legislative intent was presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income; that there was no doubt a qualitative difference between the charging provision and a computation provision and ordinarily, the operation of the charging provision cannot be affected by the construction of a particular computation provision. Having made this observation, Hon. Supreme Court noted that the question was whether it was possible to apply the computation provision at all if a certain interpretation was pressed on the charging provision, which pertains to the fundamental integrity of the statutory provisions provided for each head. After making this observation, Hon. Apex Court decided the issue by holding that goodwill generated in a newly commenced business cannot be described as an “asset” within the terms of Section 45 and therefore, its transfer was not subject to income tax under the head “Capital gains”. In the relied upon case involving P. Kasilingam and others v/s P.S.G. College of Technology and others, 1995 Supp (2) Supreme Court Cases 348, Hon. Supreme Court held that if the Rules [T. N. Private College (Regulation) Rules, 1976] do not apply to technical educational institutions, the provisions of the Act [T. N. Private Colleges (Regulation) Act, 1976] cannot be enforced in respect of such institutions. In the relied upon decision of Ravi Foods Pvt. Ltd., Hon. Tribunal has observed that demand was raised by extrapolating the amount admitted as undisclosed/suppressed sales turnover. It was further held that Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force from 1.3.2008 and these Rules cannot be used to determine value for clearances made prior to 1.3.2008. In this regard, it was observed that the facts involved in the relied upon decisions are distinguishable from the facts involved in the case in hand. As already held in the above paragraphs, there was a clear admission by the Partner of M/s. Anand that they had evaded payment of Central Excise duty by suppressing the retail sale price. In his statements, Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand has supplemented the admission of the offence by providing detailed information about the actual retail sale price that Department ought to take into consideration for the purpose of determining the duty short-paid on the goods already sold out. Since there was no statutory bar against the Department from obtaining this information from the tax evader and rely upon the same for the purpose of computing the tax evaded by him, it cannot be said that any wrong was committed in the Show
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Cause Notice by relying on the said information for the purpose of demanding the duty due from M/s. Anand. In the case of Sudhir Sharma v/s Commissioner of Customs, New Delhi, 2011 (265) ELT 243 (Tri.-Del), Hon. Tribunal has observed that an admission, if clearly and unequivocally made, was the best evidence against the party making it and shifts the anthem to the maker on the principle that “what a party himself admits to be true may reasonably be presumed to be so and until the presumption was rebutted, the fact admitted by them be taken to be established.” In the context of the case in hand, Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand has admitted the retail sale price applicable to the ceramic tiles cleared by M/s. Anand during the period covered by the Show Cause Notice. These facts have not been rebutted. Consequently, the quantum of duty evaded by M/s. Anand that was worked out in the Show Cause Notice by applying the admission of fact given by Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand does not suffer from any legal infirmity. 257. In this regard, it was of utmost relevance to take note of the following observation made by Hon. High Court of Himachal Pradesh in the case of Commissioner of Central Excise v/s International Cylinders Pvt. Ltd., 2010 (255) ELT 68 (H.P.): “10. In our opinion, there can be no manner of doubt that there was some clandestine manufacture of cylinders going on in the factory. What was the extent thereof, and what was the Excise and penalty payable thereon are matters which cannot be decided in this petition. However, they are clearly of the view that the approach of the learned Tribunal was wrong and against the law. Once the department proves that something illegal had been done by the manufacturer which prima facie shows that illegal activities were being carried, the burden would shift to the manufacturer. It was impossible for the department to prove how many cylinders were being carried in the trucks. However, if the department proves that the trucks crossed the barriers carrying some cylinders for which no record was maintained in the factory nor any Excise duty was paid then the presumption can be drawn that the trucks were carrying cylinders as per the capacity of the trucks. The approach of the Tribunal that it was for the department to prove what was the quantity of goods carried in each truck which crossed the barrier and of which there was no entry in the records of the Company was totally illegal. Once the illegal activity was proved, the burden shifted upon the assessee. 11. No law can be interpreted in a manner so as to give premium to illegal and criminal activities. It was a basic common sense that no person will maintain authentic records of the illegal activities or manufacture being done by it…” 258. It is also be noted that after the retail packages affixed with lower retail sale prices by M/s. Anand were sold out & M/s. Anand pocketed the cash amounts representing the difference between the actual price & declared price, when the details of actual retail sale price as applicable to the goods under consideration were provided to the Department by M/s. Anand, it was not open for them to question the demand of duty evaded by them on the ground that Department was required to prove that the packages were affixed with the retail sale price about which they informed the Department post facto. Accordingly, I reject this argument. 259. It has been further argued by M/s. Anand that evidence/confession from a few entities cannot be made applicable to all the clearances; that only direct evidence gathered in the course of investigation can, at the highest be used to demand duty in respect of clearances pertaining to the said evidence and not against all clearances in general. In support of this plea, they have placed reliance on the decision of Hon. Tribunal in the case of Surya Ceramics, 2006 (201) ELT 392 (Tri.-Del.). It has also been contended that they have made clearance to several other dealers during the relevant period but these dealers have not been subjected to interrogation by the Department; that no evidence was adduced to establish that the dealers other than those who were interrogated have also indulged in the same modus operandi adopted by the dealers who were subjected to interrogation; that this shows that clearances made by them to the other dealers were in accordance with Section 4A and re-ascertainment of retail sale price in respect of clearances made to those dealers was not sustainable. In the relied upon decision in the case of Surya Ceramics, 2006 (201) ELT 392 (Tri.-Del.),
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Hon. Tribunal has held that the demand has to be restricted to the clearances made to the parties/regions found to be receiving the undervalued goods. In this regard, it was observed from the record that M/s. Anand adopted the above noted modus operandi for clearances made to all the dealers. This was evident from the following reply given by Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand at the time of recording of his statement dated 01.05.08 and 16.04.09 “…..Que.10:-Why the same was not declared in invoices. Why different MRPs were not shown in respect of different colour tiles in the invoices? Ans:- As already explained in my earlier statement dated 01.05.08, we were not declaring the correct MRP and description of tiles in our invoices. We were declaring the generalized description and MRP. However, actual rates were finalized with the dealers/ buyers depending upon the colours and designs. While making dispatches we were informing the buyers actual colours and designs of tiles and the actual rate thereof through the packing slips. The dealers were comparing the consignment with the packing slips and there after, they were destroying the same. They were selling the tiles according to the designs and colours of tiles. They were making the payment of invoice value through cheques and the amounts, over and above invoice amounts, were paid in cash through the angadias. On several occasions, the buyers were personally coming to the factory and remitting the cash to me personally. On several occasions, either myself or our representatives visited the premises of the buyers and collected the cash amounts, over and above invoice amounts.” 260. Therefore, the decision of Hon. Tribunal cited by M/s. Anand was distinguishable from the present case. On account of above, the plea advanced by M/s. Anand to confine the demand to the clearances made by them to the dealers covered by the show cause notice is rejected. 261. In view of the above, I do not find any merit in the aforesaid argument of M/s. Anand and accordingly, the same is rejected. With regard to details of cash amounts deposited by the dealers in the various bank accounts operated by shroff whereas it was established that the dealers as discussed in foregoing paras reveal that the amounts shown in the invoices were collected by M/s. Anand through cheques while the amounts, over and above the invoice amounts, were collected in cash. The cash from the dealers of Gujarat and neighbouring states was collected through Angadias or was paid by the dealers during their visits to Morbi. The cash from outstation dealers was either collected by the representatives of M/s. Anand during their visits or was deposited in the bank accounts operated by the shroffs who used to withdraw the cash and pay to the concerned persons of M/s. Anand. 262. Further I find that during the search at M/s. Delight Ceramics, Pune, evidences regarding transfer of cash amounts to M/s. Anand, over and above the invoice value declared by M/s. Anand, were recovered. The unofficial account of M/s. Anand, which was seized from M/s. Delight Ceramics, Pune, provided irrefutable evidences regarding the actual value of tiles charged by M/s. Anand form their buyers and also reveals collection of cash amounts by M/s. Anand, over and above their declared invoice value. Besides, oral evidences recorded from all the dealers from where DGCEI conducted investigations, as discussed aforesaid, indicated transfer of cash amounts to M/s. Anand by various means. Further out of the various methods of transferring cash amounts from different locations of the country to the owners of M/s Anand, the most common method was by getting the cash amounts deposited into the ICICI Bank accounts operated by various shroffs in different names. The oral evidences and documentary evidence revealed that the Manager of M/s. Glazeware, mostly he was handing over the cash amounts to M/s. Anand personally; M/s. Shiv Om Marketing was sending cash through Shroff mainly M/s Eagle & Co., Rajkot, the person from M/s Eagle & Co., Rajkot delivers the cash to M/s. Anand; M/s. M. R. Ceramics was sending cash through the bank account of shroffs or representative of M/s. An and; M/s. Delight Ceramics, Pune was sent cash amount through M/s. R. R. Angadia and their employee Shri Manish Gami. Consequently, this plea advanced by M/s. Anand is also rejected. 263. Further I find that the dealers have no business with the firm in whose accounts they deposited cash amounts; that the cash was deposited in such account at the
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behest of M/s. Anand; that the amounts deposited in cash were the amounts over and above the invoice amounts declared by M/s. Anand towards the purchase of tiles by them; that the name of the firm, account No., Name of the bank etc. were intimated to them by the concerned persons of M/s. Anand either personally or through SMS. The dealers also stated that after deposit of cash, they were faxing a copy of the pay-in-slips to the owners of M/s. Anand. 264. Further I find that the shroffs who controlled the accounts of the aforesaid firms, were withdrawing the amounts in cash from the aforesaid accounts and were handing over the cash, after deducting their commission to the nominated persons of M/s Anand on production of fax copy of the pay-in-slip and confirmation of deposit of cash in their account. 265. Further I find that the cash amounts collected by M/s Anand, over and above the declared invoice value of tiles cleared from their factory, were not accounted for in their official books of accounts. The said cash amounts were spent towards the undervalued cost of raw materials, unaccounted expenses without accounting for in their books of accounts with intent to minimize the recorded cost of production, so that it does not exceed the mis-declared lower MRP shown in their Central Excise invoices. 266. Further I find that documentary evidences recovered from various dealers of M/s. Anand as discussed in foregoing paras reveal that M/s. Anand had manufactured and cleared wall tiles of sizes 12”x8” during the period 2004-05 to 2007-08. During the said period, the wall tiles were categorized into different grades i.e. “STD” “COM”, “REJ/SIL”, “SIL” and “REJ”. M/s. Anand had not declared variety of tiles in their central excise invoices. They declared one MRP for tiles of sizes 12”x8”, irrespective of the variety of the tiles being cleared and the location to which it is cleared. 267. Further the evidences gathered during the course of investigations, as discussed in the foregoing paras, reveal that wall tiles of different sizes of M/s. Anand were sold at different rates. The rates also varied depending upon the colour and design of the tiles. The methods of ascertaining MRPs during the period from 2004-05 to 2007-08 for the purpose of computation of Central Excise duty evaded and payable by M/s. Anand are discussed in the following paras. 268. Further I find that, the estimate/price list of M/s. Anand recovered from M/s. M.R. Ceramics, as discussed in para supra reveals the ex-factory rates of tiles of different grades and designs. The said rates were actually charged by M/s. Anand from M/s. M.R. Ceramics. It is evident from said price list that the rates were F.O.R. exclusive of excise duty and other taxes. This price list reveals the actual ex-factory prices for different varieties of tiles manufactured and cleared by M/s. Anand. 269. It has been further contended by M/s. Anand that no specific evidence was produced or relied upon by the investigation showing deposit of any particular amount in any particular account of any particular shroff, which, in turn, was paid to them or their representative; that no statement of any such representative was recorded; that no reliance can be placed on the statement of witness unless they are permitted to cross-examine them. In this regard, I find that based on the overwhelming evidence in the form of record (diaries, notebooks, files, etc) seized from the premises of dealers of M/s. Anand as well as statements of payer (concerned dealers), payee (M/s. Anand) and the persons who extended the facility of shroffs, which has been discussed at length in the foregoing paragraphs, it was already established that M/s. Anand received cash amounts from time to time from the dealers through the shroffs. Thus, this plea has no merit and the same is accordingly rejected. 270. At this point, it is relevant to note that I have already dealt with the plea advanced by M/s. Anand regarding cross-examination of concerned witnesses while making the above pleas, in the earlier paragraphs and have rejected the same after giving detailed reasoning. Therefore, to avoid repetition, the same reasons have not been reproduced while dealing with the above pleas in an individual manner.
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271. It has been further argued that theme of words “before each removal” in para 2 of chapter 3 contained in part I of CBEC Excise Manual would mean that assessment has to be done in respect of each and every removal of consignment; that therefore, each invoice issued by them should be treated as a separate transaction/consignment and the assessable value should be arrived at for each and every transaction/consignment; that if they declared the MRP which was not the MRP as required, then MRP has to be determined by the Determination following MRP Rules for each and every consignment/invoice; that this principle was not followed while working out the demand. It was also submitted that in the absence of invoice-wise and month-wise duty payable figures, interest amount under Section 11AB of the Act cannot be ascertained. In this regard, I find that as per Rule 6 of Central Excise Rules, 2002, as reiterated in para 3 of chapter 3, part I of CBEC Excise Manual of Supplementary Instructions, 2005 (“Manual”), Central Excise assessee was himself (self-assessment) required to determine the duty liability at the time of removal of Excisable goods and discharge the same. As per Rule 12 of the Rules, as reiterated in para 2.1, part II, chapter 6 of the Manual, the assessee was required to submit a monthly return (E.R.-1/E.R.-3) which are consolidated returns, containing the details of goods manufactured, cleared, duty paid thereon as well as details of the CENVAT credit availed on input and capital goods and input services and so utilized. It was also relevant to take note of para 2.5 ibid wherein it was clarified that duties payable on individual consignments need not be paid at the time of removal from the factory and the sum total of this duty liability can be discharged on monthly basis and the assessee was required to provide the details of duty payable and the manner in which the actual duty payments are effected by the assessee, the interest payment – if any, where duties paid beyond permitted dates, etc. are required to be declared by him in the E.R.-1 and E.R.-3 Returns. A conjoint reading of the above provisions and clarifications does not advance the cause of M/s. Anand inasmuch as in the self-assessment scheme, the responsibility to assess the duty on the Excisable goods before each removal from the factory of manufacture lies on the assessee and he has to pay the duty and provide the details of duty payable and the manner in which the actual duty payments, etc. on a monthly basis. In the event where any non-levy or short-levy was noticed, Department was equipped with the machinery contained in the provisions of Section 11A of Central Excise Act, 1944 to demand the duty non-levied or short-levied. On perusal of Section 11A, it was observed that it does not cast any statutory obligation upon the Department that demand for non-levied or short-levied duty should be invoice-wise and not in any other manner. On the other hand, I find that M/s. Anand have nowhere disputed the quantity of goods on which differential duty was demanded from them. In view of this, I do not find any merit in the argument of M/s. Anand. The same is accordingly rejected. 272. It has been further argued by M/s. Anand that in most of the cases, goods were sold at factory gate and transportation from the factory premises to buyer’s premises was always borne by the buyers; that they had nothing to do with transportation and therefore, the allegation regarding mis-declaration of freight has no relevance with the demand. In this regard, I find that as per the meaning assigned to the expression “retail sale price” in Explanation 1 to Section 4A of Central Excise Act, 1944, “retail sale price” means the maximum price at which the Excisable goods in packaged form are sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, compassion payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like. Thus, in the scheme where valuation of Excisable goods was governed by Section 4A of Central Excise Act, 1944, the element of freight was required to be taken into consideration for the purpose of computing the retail sale price and it was immaterial as to who shall bear the freight. In view of this, the plea advanced by M/s. Anand is rejected. 273. M/s. Anand have also argued that demand is time-barred on the ground that they had paid duty on the declared MRP less permissible deduction; that this was not the case where they did not pay the duty which they were required to pay; that this was not the case where they had suppressed anything from the Department or mis-declaration anything before the Department. For the same reason, it was submitted that were not liable to penalty under Section 11AC of Central Excise Act, 1944. In the alternative, they have submitted that simultaneous penalties under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules was not imposable. The demand for interest
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was opposed on the ground that demand was unsustainable. In this regard, it does not require any further elaboration than the findings given in the preceding paragraphs that M/s. Anand evaded payment of proper Central Excise duty in a pre-planned and systematic manner. They deliberately issued invoices without mentioning the vital details which actually governed the MRP. They mentioned these details in the corresponding packing-slip. This packing-slip was generated by them in one single copy that was sent to the dealers. The dealers would tally the specific details of tiles mentioned by M/s. Anand in the packing-slip and once goods were found tallying with such details, dealers destroyed the packing-slip then and there itself. Since both sides, i.e. M/s. Anand and dealers had prior knowledge that MRP declared in the invoice was suppressed and goods were required to be sold by the dealers at higher MRP, goods were sold by recovering the actual MRP from the end users/customers and difference was recovered by M/s. Anand in cash, which was not shown in the books of accounts of M/s. Anand. Thus, M/s. Anand cleared the goods without appropriate payment of Central Excise duty. They declared false MRP in the Central Excise invoices as well as on the boxes (wherever declared) and failed to calculate and discharge appropriate Central Excise duty payable on the goods at the time and in the manner prescribed under the law. They also failed to follow the proper procedure laid down in law for self-determination of MRP. They intentionally did not maintain the account of stock of finished excisable goods, i.e. tiles by showing correct and proper description, i.e., colour, design, grade and quality which were actually meant for sale at different MRP. They also failed to prepare proper Central Excise invoice issued by them for clearance of the goods under consideration. They also furnished false monthly returns. In order to suppress the MRP, they deliberately did not maintain proper account of inputs and raw material consumed in the manufacture of tiles cleared during the period covered by the Show Cause Notice. Thus, contravention of the following provisions with intent to evade payment of duty is established, thereby rendering the goods, i.e. tiles cleared by M/s. Anand during the period covered by Show Cause Notice, as liable to confiscation under Rule 25 of Central Excise Rules, 1944:
(i) Section 3 of Central Excise Act, 1944 read with Rule 4 and Rule 8 of Central Excise Rules, 2002;
(ii) Section 4A of the Central Excise Act, 1944; (i) Rule 6 and Rule 11 of Central Excise Rules; (ii) Rule 10 of Central Excise Rules; and (iii) Rule 12 of Central Excise Rules.
274. On account of above, M/s. Anand are not only found liable for penalty under Rule 25 of Central Excise Rules, 2002 but considering that these contraventions were on account of deliberate and willful acts perpetrated by M/s. Anand with a clear intention to evade Central Excise duty, I find that demand for duty was rightly made by invoking extended period. As a corollary to this, demand for interest payable under Section 11AB of Central Excise Act, 1944 on this duty amount was also upheld. For the reasons based on which extended period was found invocable for raising the demand, I find that M/s. Anand are liable to mandatory penalty under Section 11AC of the Central Excise Act, 1944. 275. Dealing with the arguments advanced by Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand, I find that statements of Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand were recorded Section 14 of Central Excise Act, 1944 on 01.05.2008 and 16.04.2009 together with the incriminating evidence in the form of statements of dealers and documentary evidences resumed from the premises of the dealers of M/s. Anand does not leave any doubt in my mind that Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand was fully involved in the day-to-day affairs of M/s. Anand and had full knowledge of the modus operandi adopted by their unit in order to suppress the actual MRP and thereby, evade payment of Central Excise duty in a well-orchestrated manner. He also not only admitted that his unit suppressed MRP by deliberately determining the same in a wrongful manner but also admitted that they received extra amounts representing the differential MRP from the dealers and ensured that no record of such cash transactions was maintained. Thus, there was sufficient evidence to hold that Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand was aware of the contravention of different provisions of law that took place every time they cleared goods and the liability of confiscation arwasing out of this contravention. In
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view of the fact that Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand has himself stated in his statements that he looked after all the day-to-day work of M/s. Anand and overall supervisory in-charge for maintenance of all the statutory records relating to receipt, consumption, production and dispatch of Excisable goods from their factory and looking after the day-to-day works relating to procurement, production, sorting, packing, storage, dispatch, payment, account and collection, etc. of the firm, he cannot escape the responsibility of the offence connected with the clearance of Excisable goods intentionally without proper valuation and proper payment of duty. He being the main person looking after the day-to-day working including production, removal, clearance, sale of Excisable goods and purchase of raw material and also having admitted about intentional evasion of duty, it was obvious that he was fully aware of the consequences of such acts/omission or offence on their part including the liability of the goods to confiscation under the Central Excise Act, 1944 and Central Excise Rules, 2002. Therefore, he having concerned himself in removing, keeping, selling and in any other manner dealing with the Excisable goods which were intentionally cleared without payment of appropriate duty, with the knowledge that goods are liable to confiscation would correctly attract penalty under Rule 26 of the Central Excise Rules, 2002. 276. It has been argued that Show Cause Notice no where proposes or alleges that the goods are liable to confiscation under Section 4A of Central Excise Act, 1944; that once the Department has not made any proposal for confiscation of the goods and has also not alleged that goods are liable to confiscation, it was clear that Department was of the opinion that goods are not liable to confiscation; that therefore, no penalty can be imposed on him under Rule 26 of Central Excise Rules, 2002. This argument was not acceptable inasmuch as he has been clearly put to notice about the contravention of the provisions of Section 4A of Central Excise Act, 1944, which per se renders the goods liable to confiscation, as laid down in the Section itself. Therefore, I hold that Shri Narendrabhai Dharamshibhai Patel, Partner of M/s Anand is liable to penalty under Rule 26 of Central Excise Rules, 2002. 277. I also find that M/s. Anand vide letter dated 06.01.2012 has requested to supply copies of documents listed at Sl. No. 10, 11, 14, 18, 22, 24, 28, 31, 35 and 38 of Annexure – B to the Show Cause Notice. In this regard, it was observed from the record that M/s. Anand have acknowledged receipt of all the relied upon documents vide acknowledge receipt given by them on 23.01.2013. Thus, all relied upon documents were supplied to M/s. Anand. 278. In view of above discussion and findings, I pass the following order:
ORDER
(i) I confirm the demand of Central Excise duty amounting to Rs. 30,01,655/-
(Rupees thirty lacks one thousand six hundred fifty five only) (Cenvat Rs. 29,35,010/- +
Ed. Cess Rs. 57,571/- + H. Ed. Cess Rs. 9,074/-), short paid by way of under-valuation,
and for recovery from M/s. Anand under the provisions of Section 11-A of the Central
Excise Act, 1944 by invoking the extended period of 5 years as per proviso to sub-
Section (1) of said Section 11A;
(ii) I order to appropriate an amount of Rs. 10,00,000/- paid by M/S. Anand during
the investigation against the demand confirmed at sl no (i) above.
(iii) I impose a penalty of Rs. 30,01,655/- (Rupees thirty lacks one thousand six
hundred fifty five only) upon M/s. Anand under the provisions of Section 11-AC of the
Central Excise Act, 1944 read with rule 25 of Central Excise Rules, 2002;
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(iv) I order to recover the Interest under the provisions of Section 11-AB of the
Central Excise Act, 1944 from M/s. Anand at appropriate rate.
(v) I impose Penalty of Rs. 10,00,000/- (Rupees Ten lakhs only) on Shri
Narendrabhai Dharamshibhai Patel, Partner of M/s Anand under Rule 26 of the Central
Excise Rules, 2002.
(M.GNANASUNDARAM) JOINT COMMISSIONER F. No. V.69/15-325/Adj/2009 By. Regd. Post A.D. To, 1. M/s. Anand Industries, 8-A, National Highway, Rafaleshwar, Opp. Dariyalal Resort, Morbi, Dist. Rajkot 2. Shri Narendrabhai Dharamshibhai Patel, Partner of M/s. Anand Industries, 8-A, National Highway, Rafaleshwar, Opp. Dariyalal Resort, Morbi, Dist. Rajkot Copy to: 1. The Additional Director, DGCEI, Ahmedabad Zonal Unit, Ahmedabad. 2. The Commissioner, Customs & Central Excise, Rajkot. 3. The Assistant Commissioner (RRA), Central Excise, Rajkot. 4. The Assistant Commissioner, Central Excise Division-II, Rajkot. 5. The Deputy Commissioner, Tax Recovery Cell, HQ, Rajkot. 6. The Superintendent, Central Excise Range-Morbi. 7. Guard file.
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