35-36 ADC 2011.doc · Web viewShiv Finance, M/s. Ganesh Agencies, M/s. J.B. Enterprises, M/s....

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RACE COURSE RING ROAD, RAJKOT-360001 Phone No: (0281) 2442030/2456233 FAX:

(0281)2452967F.No.: V-69/15-156/Adj/2008 BY R.P.A.D. / HAND

DELIVERY

Ekwy vkns”k Lka.Order in Original NO. 38-39/ADC/2011

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15.11.2011

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29.11.2011

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M/s. Amrut Ceramic, 8-A, National Highway, Dhuva, Tahsil - Wankaner, Dist: Rajkot.

dkj.k crkvksa uksfVl la- &frfFk Show Cause Notice No. & Date.

SCN. NO. DGCEI/AZU/12(4)77/2008-09 Dated:01.07.2008SCN NO. DGCEI/AZU/36-43/2008-09 Dated 24.10.2008

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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. Star Ceramic having their factory situated at 8-A, National Highway, Makansar,

Morbi, Distt. Rajkot (here-in-after referred to as “M/s. Star” for the sake of brevity) are

engaged in manufacture of “Monalisa” brand ordinary and luster wall tiles falling

under Chapter 69 of First Schedule to the Central Excise Tariff Act, 1985 and holding

Central Excise Registration for the manufacture and clearance of Ceramic Tiles.

Central Excise duty is leviable on Ceramic tiles, including floor tiles, wall tiles and

vetrified tiles as per the provisions of Section 4-A of the Central Excise Act, 1944.

Accordingly, duty is required to be paid on the basis of the MRP which is affixed on the

packages intended for retail sale to ultimate consumers in terms of the provisions of

the Standards of Weights and Measures Act, 1976. Sr. Nos. 53 and 54 of Notification

No. 13/2002-CE (NT) dated 01.03.2002 as amended; provide an abatement of 45%

from such MRP for the purpose of determining the assessable value of ceramic tiles.

As per Sr. No. 275 of Notification No. 6/2002-CE dated 01.03.2002 as amended,

Ceramic tiles manufactured in a factory not using electricity for firing the kiln are

attracting Central Excise duty at the rate of 8% subject to the condition that no credit

of the duty paid on the inputs used in or in relation to the manufacture of such ceramic

tiles has been taken under Rule 3 or Rule 11 of the CENVAT Credit Rules, 2002 [now

CENVAT Credit Rules, 2004]. Thus Central Excise duty is leviable at the rate of 8%

adv. on the value which is determined after allowing an abatement of 45% of the MRP

which is affixed on the packages of tiles. Accordingly, M/s. Star were clearing their

Excisable finished goods on payment of duty at the rate of 8% adv. on the value

determined by them after availing an abatement of 45% of the MRP declared in their

Central Excise invoices.

2.1. 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 Floor Tiles, including Ceramic Wall and

Vitrified tiles of Morbi and other parts of the State of Gujarat, including M/s. Star are

engaged in large-scale evasion of Central Excise duty by adopting the following

modus operandi:-

(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

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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. Tiles of each size are manufactured in different designs and

colours. The sale rates of tiles of different designs and colours are

different. Similarly, tiles of light colours are cheaper and dark colours are

costlier. The rates also depend upon the size of the tiles. The wall tiles

of size 12”x8” and floor tiles of size 12”x12” are cheaper while the tiles of

size 8”x8”, 16”x16”, etc. are costlier. The manufacturers were not

declaring size, designs and colours in their invoices and they were

declaring same MRP for tiles of a particular grade, irrespective of size,

colours and designs.

(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 to

evade Service Tax.

(vi) The recipient dealers and distributors were also not showing on record

the actual expenses incurred by them towards local transportation,

transit insurance, loading and unloading expenses, actual margin of

profit etc. These expenses were also incurred 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

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consumers in cash. Thus the dealers evaded VAT on the tiles sold by

them.

(viii) While part of the cash amount 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 amount

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 amount 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 controlled by the shroffs

who opened bank accounts in different private banks, mostly ICICI Bank,

in the name of a large number 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-slips 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

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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.

2.2. DGCEI conducted a detailed study on the aforesaid points of intelligence, and

collected discreet information from the market which substantiated the information. It

was also 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 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 practice across the country and it

was running as a 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 Union of India as well as all the State

Governments, DGCEI decided to conduct a detailed investigation in the matter

2.3.1. DGCEI observed that over 200 manufacturers of tiles situated in different parts

of the State of Gujarat are evading duty of excise and other taxes in the aforesaid

manner. It was found to be an impossible task to simultaneously search all these

manufacturers and their 1000s of dealers, depots, distributors and godowns situated

across the country, as well as a large number of shroffs and angadias, transporters,

shipping companies etc. Therefore, DGCEI selected 11 manufacturers of tiles situated

in Morbi, and several transporters, shroffs, angadias, shipping companies, dealers and

depots situated in 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.

M/S.Star ceramic, Morbi (Noticee No1), Shri Pravinbhai Devkaranbhai Bhimani

Noticee No.2) were served with Show Cause Notice No.DGCEI/AZU/12(4)55/2007-08

dated 22/04/2009 demanding duty of Rs.30,21,431/- and M/S.Star Ceramic,Morbi and

Shri Thangavelan,Proprietor of M/S.T.Lakshmi Kanthan & sons,Chennai were served

with SCN No.DGCEI/AZU/12(4)55/2007-08 dated 27/06/2008 for confiscation of 243

boxes seized from M/S.T.Laxmikanthan & Sons Chennai on 18/01/2008. Since issue

involved is common and arises from the same facts both SCN are taken for

adjudication under this order.

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Brief facts of both cases are summarized as under:

2.4. 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, even

in the heavy security provided by large presence of armed police, the officers of

DGCEI feared for their lives and security, and hence decided not to conduct further

search operations at over 200 manufacturing units of Morbi, who were also evading

duties and taxes in the aforesaid manner. Meanwhile, evidences of such large-scale

evasion of duty by under-valuation by all these manufacturers had been recovered by

DGCEI from the premises of a large number of dealers, depots, godowns, regional

marketing offices, transporters, shipping agents, shroffs, angadias, banks etc. All such

manufacturers were actively involved in creating the aforesaid panicky situation on

24.01.2008 and 18.03.2008. Therefore, DGCEI decided to conduct investigations

against the remaining units by calling upon the official documents and books of

accounts under summons proceedings.

2.5. In view of the above circumstances, no searches were conducted in the

premises of M/s. Star and documents were called from them under Summons dated

12.04.2008. The results of investigation from the dealers and the aforesaid M/s. Star

are discussed in the following paras.

2.7.1.1 The invoices issued by M/s Star for the years 2004-05 to 2007-08 were

obtained under summons. They submitted the hard copies of the invoices as well as

the soft copy in a CD. The scrutiny of invoices reveals that they were not declaring

even size of the tiles in their invoices.

2.7.1.2. On Scrutiny of the invoices further reveals that during the year 2004-05, they were

manufacturing ceramic wall tiles of Standard, Silver and DD grades. The quantity cleared under each

grade and the MRP declared in the invoices in respect of all the clearances during the period

01.04.2004 to 31.03.2005 are tabulated as under:-

S.No. Grade MRP No of boxes

1 STANDARD 127.00 400

2 STANDARD 100.00 1,26,184

3 SILVER 80.00 34,304

4 DD 80.00 25

5 DD 60.00 13,051

TOTAL 1,73,964

2.7.1.3. Further the above table reveals that M/s Star during the year 2004-05

have declared the grades of wall tiles as STANDARD, SILVER and DD. Out of total

clearances of 1,26,584 boxes of STANDARD grade wall tiles, they had cleared 400

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boxes with MRP of Rs.127/- per box and the remaining 1,26,184 boxes with MRP of

Rs.100/- per box. They had declared MRPs of Silver grade as Rs.80/- per box.

However, out of total clearance of 13,076 boxes of DD grade, 25 boxes of DD grade

wall tiles were cleared with MRP of Rs.80/- and the remaining 13,051 boxes with MRP

of Rs.60/- per box.

2.7.2.1. The quantity of wall tiles cleared under each grade and the MRPs declared in the invoices in

respect of all the clearances during 01.04.2005 to 31.03.2006 are tabulated as under:-

S.No. Grade MRP No of boxes1 STANDARD 109 400

2 STANDARD 100 79,571

3 STANDARD 90.00 2,58,423

4 SILVER 80.00 24,003

5 SILVER 70.00 1,02,568

6 DD 60.00 7,855

7 DD 50.00 27,634

TOTAL 5,00,454

2.7.2.2. Therefore, its evident from the above table and the invoices issued by

M/s Star that during the financial year 2005-06, they had declared three different

MRPs of Rs.109/-, Rs.100/- and Rs.90/- per box for the clearances of STANDARD

grade wall tiles. Similarly, they had declared two different MRPs of Rs.80/- and

Rs.70/- per box for the clearances of SILVER grade and Rs.60/- and Rs.50/- for DD

grade wall tiles. It is further evident that maximum quantity of STANDARD grade tiles

was cleared by them by declaring MRP of Rs.90/- per box. However, 79,571 boxes

were cleared as STANDARD grade by declaring MRP of Rs.100/- and 400 boxes of

STANDARD grade cleared with MRP of Rs.109/- per box. Out of the total quantity of

1,26,571 boxes of SILVER grade tiles, M/s. Star had cleared 1,02,568 boxes by

declaring MRP of Rs.70/- and the remaining 24,003 boxes cleared with MRP of

Rs.80/- per box. They had also cleared 7,855 boxes of DD grade wall tiles by

declaring MRP of Rs.60/- whereas the remaining quantity of 27,634 boxes of DD

grade tiles were cleared with MRP of Rs.50/- per box.

2.7.3.1. The number of boxes of wall tiles cleared by M/s. Star under different

grades and the MRPs declared in the invoices for each such grades in the financial

year 2006-07 are tabulated as under:-

S.No. Grade MRP No of boxes

1 STANDARD 100.00 6,147

2 STANDARD 90.00 3,30,590

3 SILVER 80.00 3,547

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4 SILVER 70.00 97,250

5 GOLD/DD 60.00 2,307

6 GOLD/DD 50.00 21,496

TOTAL 4,61,337

2.7.3.2. On Perusal of above table reveals that during the financial year 2006-07, M/s Star have cleared most of their tiles by declaring grades as STANDARD, SILVER and GOLD/DD with two different MRPs of Rs.100/- and Rs.90/- for STANDARD grade, Rs.80/- and Rs.70/- for SILVER grade and Rs.60/- and Rs.50/- for GOLD/DD grade of tiles per box. These MRPs were same as during the year 2005-06. 2.7.4.1. The MRPs declared in the invoices and the number of boxes of each grade cleared during the period 01.04.2007 to 28.02.2008 is tabulated as under:-

S.No. GRADE MRP No of boxes1 STANDARD 100.00 3,57,540

2 SILVER 80.00 27,407

3 SILVER 60.00 62,576

4 GOLD/DD 60.00 7,791

TOTAL 4,55,314

2.7.4.2. Perusal of above table reveals that during the period from 01.04.07 to 28.02.2008, M/s Star have cleared their tiles by declaring grades as STANDARD, SILVER AND GOLD/DD with MRP of Rs.100/- for STANDARD grade, two different MRPs of Rs.80/- and Rs.60/- for SILVER grade and Rs.60/- for GOLD/DD grade wall tiles. These MRPs of the above grades were same as during the year 2006-07. 2.7.5.1. DGCEI searched the premises of some tile manufacturers and several dealers throughout India during the months of January and February, 2008. The dealers of M/s. Star were also searched and evidence regarding large scale undervaluation by M/s. Star was recovered. Accordingly, M/s. Star with effect from 04.03.08 increased the MRPs of tiles manufactured and cleared by them. They started declaring sizes of tiles as 8x12. They declared that the tiles of sizes 8x12 were of two different quality viz., Ordinary Wall Tiles and Luster Wall Tiles and different grades, viz., Standard, Silver and Gold/D.D. They declared same MRPs in respect of the wall tiles cleared through out the country. The MRPs declared by M/s. Star with effect from 04.03.2008 for the clearances of tiles of different quality and grades are tabulated as under:-

S.No. Size

MRPs for different quality

Ordinary Wall Tiles Luster Wall Tiles

Standard SP Silver D.D. Standard SP Silver

1 8x12 140.00 110.00 50.00 160.00 120.00

2.7.5.2. It is evident from the new MRPs declared with effect from 04.03.08 after searches by DGCEI that M/s. Star was manufacturing tiles of different qualities and grades. The sale rates were depending upon the quality and grades of the tiles. However, M/s. Star were not declaring even size of the tiles what to say of different qualities and grades. They increased MRP of Standard grade tiles from Rs.100/- to as high as Rs.160/- for the tiles of Luster Wall Tiles. The MRP of cheapest Standard Ordinary tiles were increased from Rs.90/- to Rs.140/- in respect of 8x12 size tiles. The scrutiny of invoices prior to 04.03.08 and thereafter reveal that M/s. Star were evading duty of excise by way of gross undervaluation.3.1.1. The premises of M/s. T. Lakshmi Kanthan & Sons, No. 37, Anna Main Road, MGR Nagar, Chennai-78

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were searched on 18.01.2008 by the officers of DGCEI, Chennai Zonal Unit. During the course of search, certain records/documents were seized as recorded in the mahazar/panchanama dated 18.01.2008 drawn at the above business premises. Shri Thangavelan, Proprietor of above firm was present during panchnama proceedings. During the course of search proceedings, certain tiles as mentioned in Annexure bearing the brand names “Vrundavan, Face, Amrut (KAG), Monalisa, Akruti, Nice, Metro, Perfect” were found in stock. On being inquired about the bills of the above products, Shri Thangavelan could not produce any valid documents in support of the purchase of ceramic tiles in question. As the officers did not find bills in respect of the above goods, 243 boxes of “Monalisa” brand wall tiles along with other goods were placed under detention, with a reasonable belief that appropriate Central Excise duty has not been paid on the above goods. During the course of panchnama, Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons informed that he does trading activities of Ceramic products; that the ceramic products are floor tiles, wall tiles bearing brand name Vrundavan, Monalisa, Akruti, etc.; that all these products are manufactured in Gujarat as per details available in the cartons; that he is purchasing the ceramic tiles from M/s. Nobel Ceramics, M/s. Chennai Marketing, M/s. Ayyan Ceramics of Chennai and he has not purchased any tiles directly from the manufacturers in Gujarat.

3.1.3. Investigations conducted by DGCEI in respect of M/s. Star revealed that they have cleared “Monalisa” brand wall tiles by declaring the MRP, much lower than the actual MRP of the said tiles and thereby not determining the appropriate assessable value and not paying appropriate Central Excise duty in contravention of the provisions of the Central Excise Act and Rules made there under, ibid. Therefore, the above said goods were liable for confiscation under Rule 25 of the Central Excise Rules, 2002 read with Section 4-A of the Central Excise Act, 1944. Thus, the aforesaid quantity of 243 boxes of “Monalisa” brand wall tiles valued at Rs.24,300/- manufactured by M/s. Star were subsequently placed under seizure under panchnama dated 14.05.2008, which were handed over to Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons under a supratnama along with other seized goods for keeping in their safe custody till further communication from the department. Subsequently, a show cause notice containing investigation in respect of the manufacture and clearance of 243 boxes of “Monalisa” brand tiles valued at Rs.24,300/- in contravention of the provisions of the Central Excise Act, 1944 and the rules made thereunder, which were seized at the

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premises of M/s. T. Lakshmi Kanthan & Sons, Chennai, has since been issued vide F.No.DGCEI/AZU/12(4)55/2007-08 dated 27.06.2008.

3.2. The documents and records seized from the premises of M/s. T. Lakshmi Kanthan & Sons were scrutinized. Scrutiny of documents and records revealed that the same contain evidences indicating large scale undervaluation of ceramic tiles manufactured and removed by M/s. Star. The evidences contained in the seized records are discussed in the following paragraphs:-

3.2.2.1. Scrutiny of the made up file mentioned at Sr. No. 1 reveals that the said file contain documents such as stock statements, ledgers account, documents under which the tiles were received by M/s. T. Lakshmi Kanthan & Sons from M/s. Noble Marketing, M/s. Chennai Marketing and M/s. Ayyan Ceramics etc. Further scrutiny of the documents, under which the tiles were received by M/s. T. Lakshmi Kanthan & Sons, revealed that the tiles have been received under manually written loose papers from M/s. Noble marketing, showing details such as size, product code, brand and quantity. It is further revealed that the tiles have been received under manually prepared printed estimates from M/s. Ayyan Ceramics, showing details such as size, product code, brand and quantity. It is further revealed that the tiles from M/s. Chennai Marketing have been received under manually prepared as well as computerized estimations, showing details such as brand, type of tiles, size, product code, etc. Scrutiny of these documents further revealed that only in the case of computerized estimates, rates of the tiles have been mentioned in addition to other details. In the cases of manually prepared estimates/papers/slips, rates of tiles have not been mentioned. They have received fifteen consignments of “Monalisa” brand wall tiles from M/s. Ayyan Ceramics, Chennai vide their estimations kept at page Nos. 13, 14, 15, 16, 43, 44, 46, 55, 56, 70, 72, 74, 75, 82 and 83 of the made up file. In order to easily understand the contents of such estimation, the scanned image of the “Estimation”, as mentioned herein above are reproduced herein below:-

3.2.2.2. Details contained in the above estimation slips pertaining to M/s. Star are summarized in the table below:-

Estimation Sr.No./File Sr.No.

Date Description Size Design No.

Quantity Total Value

861/13 22.12.07 Monalisa 12x8 1185 20 Box 4800.00861/13 22.12.07 Monalisa 12x8 1106 20 Box903/14 25.12.07 Monalisa 12x8 3056 8 Box 960.00927/15 26.12.07 Monalisa 12x8 Ivory 8 Box 960.00

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936/16 26.12.07 Monalisa 12x8 Ivory 13 Box

8760.00936/16 26.12.07 Monalisa 12x8 1301 20 Box936/16 26.12.07 Monalisa 12x8 1401 20 Box936/16 26.12.07 Monalisa 12x8 1138 10 Box936/16 26.12.07 Monalisa 12x8 1183 10 Box33/43 31.12.07 Monalisa 12x8 7003 25 Box --52/44 31.12.07 Monalisa 12x8 2173 33 Box --680/46 13.12.07 Monalisa 12x8 1162 50 Box --440/55 05.12.07 Monalisa 12x8 1167 30 Box --635/56 11.12.07 Monalisa 12x8 4003 15 Box --635/56 11.12.07 Monalisa 12x8 1501 15 Box --635/56 11.12.07 Monalisa 12x8 1029 15 Box --635/56 11.12.07 Monalisa 12x8 1162 3 Box --635/56 11.12.07 Monalisa 12x12 103 5 Box --635/56 11.12.07 Monalisa 12x8 5009 5 Box --861/75 22.12.07 Monalisa 12x8 1185 20 Box --861/75 22.12.07 Monalisa 12x8 1106 20 Box --903/74 25.12.07 Monalisa 12x8 3056 8 Box --84/70 03.01.08 Monalisa 12x8 1184 20 Box --84/70 03.01.08 Monalisa 12x8 1185 20 Box --84/70 03.01.08 Monalisa 12x8 1186 20 Box --84/70 03.01.08 Monalisa 12x8 1106 20 Box --84/70 03.01.08 Monalisa 12x8 3056 20 Box --84/70 03.01.08 Monalisa 12x8 2154 25 Box --84/70 03.01.08 Monalisa 12x8 3007 15 Box --84/70 03.01.08 Monalisa 12x8 1139 15 Box --211/72 08.01.08 Monalisa 12x8 1501 20 Box --259/82 09.01.08 Monalisa 12x8 1162 15 Box --259/82 09.01.08 Monalisa 12x8 2175 15 Box --181/83 07.01.08 Monalisa 12x8 3007 20 Box --

3.2.2.3.Perusal of the above record reveal that M/s. Ayyan Ceramics, Chennai have sold “Monalisa” brand having different design numbers and size of 12x8 wall tiles at the rate of Rs.120/- per box. Though, in majority of the cases, they have not shown the value of the wall tiles in their estimation slips. Scrutiny of sales invoices of M/s. Star Ceramic reveals that ten consignments of wall tiles of 12x8 size of STD grades and silver grades were sold to M/s. Ayyan Ceramics, Chennai by M/s. Star vide their invoice Nos. 320 dated 22.10.07, 571 dated 02.02.08, 595 dated 21.02.08, 598 dated 22.02.08, 601 dated 24.02.08, 616 dated 03.03.08, 625 dated 05.03.08, 639 dated 10.03.08, 661 dated 15.03.08 and 678 dated 20.03.08. In order to easily understand the system of preparing invoice, the scanned image of an invoice is reproduced below:-

zNo. 12

12

3.2.2 .4. Scrutiny of the above invoices reveal that M/s Star Ceramic have sold wall tiles having size of 12x8 and STD and SIL grade to M/s. Ayyan Ceramics at the rate of Rs.100/- and Rs.60/- respectively per box. Comparison of the MRP declared by M/s. Star while clearing the goods in their Central Excise invoices and the maximum retails price at which the same goods were sold by the dealer viz., M/s Ayyan Ceramics, Chennai to M/s. T. Lakshmi Kanthan & Sons reveals that as against the MRP of Rs.100/- per box declared by M/s. Star, 12x8 wall tiles of different designs have been sold at Rs.120/- per box. It is pertinent to note that M/s. Ayyan Ceramics, Chennai have sold the said tiles at above rates not to the ultimate consumer but to a sub dealer viz. M/s. T. Lakshmi Kanthan & Sons. It is obvious that the said tiles might have been sold even at higher rates by M/s. T. Lakshmi Kanthan & Sons to the ultimate consumer. Thus, even considering the said tiles are of STD grade, there is considerable valuation. In fact, the actual quantum of undervaluation would be more than this as the rates taken into account are of sale to the dealer, viz., M/s. T. Lakshmi Kanthan & Sons. If the profit and other expenses are included in the above rates, the difference will be more than the above one. The rates at which the said dealer has subsequently sold the tiles to the ultimate consumer have been discussed in the paragraphs to follow.

3.2.3 .1 Scrutiny of seized note books containing information of sales details, buyer’s details etc., as mentioned at Sr. No. 2 of the panchnama dated 18.01.2008, reveals that the same contain details of date-wise sales, estimates etc. of the transactions of ceramic tiles by M/s. T. Lakshmi Kanthan & Sons for different periods. Scrutiny of Note Book mentioned at Sr. No. 2-3/3 reveals that it contains the details of purchase, sales estimates etc. of tiles covering period from 20.09.07 to 06.01.08. Scanned images of few pages are reproduced below:-

zNo. 13

13

3.2.3.2. Perusal of the above page reveals that M/s. T. Lakshmi Kanthan & Sons, Chennai had sold 9 boxes of “Monalisa” brand tiles having design No. 2173 for Rs.1,350/- to one of their customer. In addition to above amount, the said dealer has also charged Rs.26/- towards VAT @ 2% and transportation charges from the said customer. Similarly, they had further sold 12x8 size “Monalisa” brand wall tiles having design No.3007 – 7 boxes and design No.2154 – 17 boxes at the rate of Rs.150/- per box on 02.01.08 to another customer. In this case too, the said dealer has charged Rs.60/- towards vat and Rs.200/- towards transportation charges from the customer.

zNo. 14

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3.2.3.3. Details contained in the above note book pages are summarized in the table below:-

Date BrandDesign No.

No of Boxes Value RST TC Total Rate Per

Box

11.12.07 Monalisa 1162 26 3770 75 122 3967 152.5802.01.08 Monalisa 3007 7 1050 36 175 3811 158.7902.01.08 Monalisa 2154 17 255005.01.08 Monalisa 2173 9 1350 26 50 1426 158.45

From the above table, it is evident that M/s. T. Lakshmi Kanthan & Sons have sold the tiles of ‘Monalisa’ brand at Rs.152.58 to Rs.158.79 per box depending on the quality of wall tiles indicated by the design number as against the MRP of Rs.100/- per box declared by M/s. Star in their Central Excise invoices.3.2.3.4. Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons in his statement dated 18.01.2008 stated that they purchase ceramic tiles of various brands from M/s. Nobel Ceramics, M/s. Chennai Marketing and M/s. Ayyan Ceramics, Chennai. Scrutiny of sales invoices of M/s. Star Ceramic reveal that out of the above three dealers, M/s. Star Ceramic have sold the goods to M/s. Ayyan Ceramics, Chennai. M/s. Star Ceramic have sold the tiles of 12x8 size of different grades to M/s. Ayyan Ceramics, Chennai vide their different invoices, as mentioned in the foregoing para No.3.2.2.3. 3.2.3.5. Scrutiny of the above invoices reveal that the manufacturer has sold the tiles of 12x8 size of STD and SIL grade to M/s. Ayyan Ceramics showing MRP of Rs.100 and Rs.60/- per box respectively. Comparison of the MRP declared by the manufacturer in their Central Excise invoices and the maximum retail price at which the same goods were being sold to the ultimate consumers reveal that there is huge difference in both the prices. As against MRP of Rs.60/- to Rs.100/- shown in the manufacturer’s invoice, goods have been sold at the rate of Rs.152/- to Rs.159/- per box. Thus, even considering the highest MRP declared for STD Grade, there is undervaluation to the tune of Rs.59/- per box. 3.2.4. The aforesaid evidences established that the tiles manufactured and cleared by M/s. Star Ceramic were actually attracting a much higher MRP than the MRP declared by them in their Central Excise invoices. M/s. Ayyan Ceramics, Chennai, a dealer, was selling the tiles, manufactured by M/s. Star Ceramic at a price much more than the MRP, declared by the manufacturer. Subsequently, M/s. T. Lakshmi Kanthan & Sons, a sub-dealer, has sold the tiles to the ultimate consumers, even at higher rates, which should be the actual price to be considered as MRP, for the purpose of assessment and charging to Central Excise duty by M/s. Star, at the time of removal from the factory. 3.3.1 Statement of Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons was recorded on 18.01.2008, under Section 14 of the Central Excise Act, 1944, wherein he stated that M/s. T. Lakshmi Kanthan & Sons was started around Jan 2005; that were basically traders; that initially they were trading building materials like cement and sand; that then they started trading in ceramics; that presently were dealing with ceramics only; that they purchase ceramic tiles of the brands Vrundavan, Face, Amrut (KAG), Monalisa, Akruti, Nice, Metro, Perfect from M/s. Nobel Ceramics, M/s. Chennai Marketing, M/s. Ayyan Ceramics, Chennai; that they have never purchased ceramics directly from Gujarat; that normally they never stock ceramics received from the above marketing companies; that they sell the ceramic tiles as soon as they receive; that they normally purchase based on the market requirement; that the goods are sold immediately; and that however, sometimes they do maintain stock.

3.3.2 He was shown page No. 8, 9, 10, 47, 50, 51, 52, 53, 59, 63, 78, 79, 85 of made up file mentioned at Sr. No. 1 recovered under panchnama dated 18.01.2008. On perusal of the same he stated that page No. 8, 9, 10, 47, 50, 51, 52, 53, 59, 63, 78, 79 represent the tiles received from Nobel Ceramics. He further explained that for example in page No. 8 is a sheet of paper wherein, it is mentioned 16X16 VRU 4704-25 box, 16X16 5401-3 box total (28 box); that these documents were issued by M/s. Nobel Ceramics and they do not provide any invoice for the said documents; that M/s. Nobel Ceramics bring the goods under these documents and they have not received any invoice in respect of the above documents (i.e. page No. 8, 9, 10, 47, 50, 51, 52, 53, 59, 63, 78, 79); that they have also sold the same without any documents; that page No. 85 is the counterfoil of bank cheque book wherein the details of cheques issued to various persons are available; that here also they have issued cheques to M/s. Nobel Ceramics; that they have issued the cheques without filling the payee name as requested by M/s. Nobel Ceramics; that they have bank account (current account) in Indian Bank, MGR Nagar, Chennai and the account No. is 421578711.

zNo. 15

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3.3.3. He was also shown page Nos. 11, 12, 29, 30, 31, 32, 33, 34, 36, 37, 38, 39, 40, 41, 60, 61, 62, 64, 65, 66, 67, 68, 69, 71, 73, 76, 77, 80, 81 of made up file mentioned at Sr. No. 1 recovered under panchnama dated 18.01.2008. On perusal of the same he stated that page No. 11, 12, 29, 30, 31, 32, 33, 34, 36, 37, 38, 39, 40, 41, 60, 61, 62, 64, 65, 66, 67, 68, 69, 71, 73, 76, 77, 80, 81 represent the details of tiles received from Chennai Marketing (Near MMDA); that these documents were issued by M/s. Chennai marketing and they do not provide any invoice for the said documents. He further explained that for example page No. 11 contains Credit and Debit transactions with them; that the credit in the said entry namely Rs.7000/-, Rs.8000/-, Rs.7000/- totaling Rs.22000/- relates to the amount given to them for the purchase of ceramics made from them; that the credit entries relate to the purchase value; that the pages 11, 12, 29, 30, 31, 32, 33, 34, 36, 37, 38, 39, 40, 41, 60, 61, 62, 64, 65, 66, 67, 68, 69, 71, 73, 76, 77, 80, 81 all are of the same nature of transactions; that no supporting invoices are available for the above; that all the payments to M/s. Chennai marketing are settled through cash transactions.

3.3.4. He was also shown page Nos. 13, 14, 15, 16, 17 of made up file mentioned at Sr. No. 1 recovered under panchnama dated 18.01.2008. After perusal of the same, he stated that page No. 13, 14, 15, 16, 17, all are documents pertaining to the tiles received from M/s. Ayyan Ceramics, Madipakkam, Chennai. He further explained that for example page 14 contains a paper showing 8 boxes of ‘Monalisa’ brand tiles; that these documents were issued by M/s. Ayyan Ceramics and they do not provide any invoice for the said documents; that all the payments to M/s. Ayyan Ceramics are settled through cash transactions.

3.3.5 The aforesaid facts and evidences conclusively establish that M/s. Star was not mentioning the correct MRP of the tiles in their Central Excise invoices. Both the MRP as well as ex-factory prices were manipulated by them by declaring price in the invoices which was lower than the actual price of the tiles. This has been intentionally done in order to evade the payment of duty of excise, which is assessed on the basis of MRP declared in the invoices.

3.3.6 Comparison of the MRP declared by the manufacturer in their Central Excise invoices and the price at which M/s. T. Lakshmi Kanthan & Sons have sold the goods to the ultimate consumer appears to reveal that there is huge difference in the price. The dealer has sold the tiles in the range of Rs.152/- to 159/-, as against the MRP of Rs.60/- to Rs.100/-, declared by the manufacturer. Thus, considering the highest MRP, there is undervaluation to the tune of Rs.59/- per box.

3.3.7. The aforesaid evidences appear to conclusively establish that M/s. Star have manufactured and removed excisable goods, viz. ceramic glazed tiles by declaring MRP in their Central Excise invoices which was much lower than the actual MRP and consequently not discharging appropriate duty. While issuing their sale bills, M/s. T. Lakshmi Kanthan & Sons were artificially working out the selling price with a view to match the various cost factors which are recorded in the books of accounts. M/s. T. Lakshmi Kanthan & Sons were collecting differential amounts over and above the bill value in cash, and after spending part of such cash amounts towards various unaccounted expenses, they were sending such cash amounts to M/s. Ayyan Ceramics and subsequently to M/s. Star towards the value of tiles, over and above, the value declared in the Central Excise invoices.

4.1.1. The officers of Central Excise & Customs Commissionerate, Tiruvananthpuram searched the premises of M/s. N.K.Trading Co., Near Manalil Siva Temple, Mamootikadavu Road, Manalil, Kollam under Mahazar (panchnama) dated 17.01.2008 in the presence of Shri M. P. V. Noble, General Manager of the firm. Shri Noble informed during the panchnama that the records of the previous years were under the safe custody of Shri V. Satheesan, Managing Partner of the firm who was out for the funeral of the Grand Mother of his wife. The documents required for further investigation were seized under the Mahazar. During the search, the tiles of one other manufacturer were seized having discrepancies with the covering documents. During the search in another adjacent go-down, Shri Satheesan also reached and enabled the officers to obtain the other records also. The records resumed from the said premises are enlisted in Annexure-I of the panchnama.

4.1.2. During the search, the personal computer of Shri Noble was accessed and it was found that Shri Noble was maintaining separate accounts for each manufacturer of Ceramic tiles showing details of cheques and cash payments made to them. Print outs of the ledgers of some of them could be obtained. Several other files were found in computer of Shri Noble based on SOWARE software and the same could not be opened as the contract with the software company had expired and the access was denied. Hence, the hard disc of Seagate brand bearing Sr. No. 5JVEE7KL of the said computer was seized under the reasonable belief that the same would be useful for further investigation.

zNo. 16

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4.2.1. A statement dated 17.01.2008 of Shri M. P. V. Noble, S/o. Late Mr. M.P. Verghese, General Manager of M/s. N.K. Trading Co. was recorded under Section 14 of the Central Excise Act, 1944 wherein he, inter-alia stated that he had joined the firm on 15.07.2001 as Marketing/ General Manager; that his role was to look after the day to day affairs of the firm which included purchase and sales of Ceramic/vitrified tiles and sanitary ware by the firm; and that they were purchasing tiles mainly from the manufacturers located at Morbi and Himmatnagar in Gujarat. He gave the names of such manufacturers of Gujarat as under:-

(i) M/s Ajanta Manufacturing Co. Ltd.(ii) M/s Angel Ceramics Pvt. Ltd.(iii) M/s Famous Ceramic Industries(iv) M/s Italica Floor Tiles Ltd.(v) M/s Sakar Glazed Tiles Pvt. Ltd.(vi) M/s Sterling Glazed Tiles(vii) M/s Sunbeam Ceramics Pvt. Ltd.(viii) M/s Star Ceramic.

4.2.2. On being asked, he stated that he was not purchasing tiles from any of the dealers and all are purchased from manufacturers only; that they were placing the orders directly to the manufacturers and the goods were delivered by the transporters under the cover of excisable invoices, coastal cargo bills and bills of entry for consumption, transport documents, etc.; that except M/s. Ajanta Manufacturing Ltd., all the other manufacturers were being paid in cheques as well as in cash; that the cash payments were made to the manufacturers as per their directions through various banks and in specified accounts communicated to them over SMS from time to time; that different account Nos. are communicated at different occasions by these manufacturers; that some of the manufacturers supplied excess quantity and the payments there against were made in cash through various banks such as ICICI, HDFC, UTI.

4.2.3. On being asked to produce the details of cash payments to various manufacturers in last five years, he stated that he did not maintain full and complete transaction details but consequent to some disputes raised by some manufacturers, he maintained details of some transactions in computer system with regard to some of the parties; that hard copy of the same was obtained from the system and was submitted by him; that in such transactions, the practice followed by him was that on receipt of the instructions from the manufacturers, required amounts were mobilized/ withdrawn from their accounts of Punjab National Bank and then remitted to the referred accounts of the manufacturers; that the details of payments and accounts of recipients were neither maintained nor he was able to recall the same; that some of the counterfoils received from the banks were kept in the office premises; that such counterfoils more than one year old were soiled due to repair and maintenance of building.

4.2.4. He was shown a file named DD file wherein counter foils of HDFC, ICICI, UTI, etc. Banks are kept wherein huge amounts were remitted in the name of certain firms such as M/s Shree Bhagwati Enterprises, M/s Shri Maruti Enterprises, M/s Shreeji Enterprises etc. He was asked to explain about the same as they were not having any official transactions of purchase and sales with these firms. Shri Noble admitted that the cash payments in the accounts of such firms were the unaccounted payments for excess supply of tiles manufactured and supplied to them and he was unaware of the seriousness involved from the point of view of Central Excise law.

4.3.1. Another statement dated 21.01.2008 of Shri M. P. V. Noble, S/o. Late Mr. M.P. Verghese; General Manager of M/s. N.K. Trading Co. was recorded under Section 14 of the Central Excise Act, 1944. He was shown a chart prepared on the basis of pay-in-slips recovered during the searches on 17.1.2008. The said chart shows details of payments made by way of cash in various Bank accounts maintained in ICICI bank consisting of 129 entries and was asked to explain the transactions involved. In this regard, he stated that these transactions represented the cash settlement for the purchase of vitrified/ceramic tiles from various manufacturers at Morbi/Ahmedabad; that these payments are made in cash on receipt of instructions from various manufacturers; that the cash payments are made through ICICI, Kollam to various accounts of interest of the tile manufacturers; that M/s Shree Maruti Enterprises, M/s Shree Bhagwati Enterprises, M/s. Shreeji Enterprises, M/s. Sagar Enterprises, Shree Bharath Enterprises, M/s. Shiv Finance, M/s. Ganesh Agencies, M/s. J.B. Enterprises, M/s. Panchwati Enterprises etc. are such accounts which were told to them by different tile manufacturers; that through these accounts excess payments are made; that entries at Sr. No. 6 and 102 are the payments made to his best friends for their personal help. On being asked a SMS found in the mobile phone of Mr. Satheesan, he stated that the said SMS relates to M/s. Delta Ceramics from whom they had not made any purchase.

zNo. 17

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4.3.2. On being asked about the information available in the hard disc seized on 17.01.2008, he stated that the same contained day to day affairs, sales information, payments made to the suppliers and all kinds of financial dealings and analysis; that these accounts are maintained in a software named SOWARE; that there is no code or pass word but to open the package in the menu, the word “SUPER” is to be entered. On being asked the account Nos. held by M/s. N.K.Trading Co., its partners and the Managing Partner, he stated the account No. CC-434400870300180 for M/s. N.K. Trading Co. and 3090 with Punjab National Bank for Shri Satheesan, Managing Partner.

4.4.1. A statement dated 17.01.2008 of Shri V. Satheesan, Partner of M/s N.K.Trading Co. was recorded under Section 14 of the Central Excise Act, 1944 wherein he, inter-alia, stated that he started the firm in 1996 with his wife as the other partner; that initially they were trading in Paints and later they started dealing in Ceramic Floor and Wall tiles; that he was looking after the day to day affairs of the company with the assistance of Shri Noble, General Manager; that they were purchasing tiles generally from various manufacturers of tiles in Gujarat and preferably in Morbi; that they were normally placing orders through telephone and on receipt of the material, they were making payments to the suppliers; that normally, they were making payments through bank by DD drawn in the favour of manufacturers; that sometimes they were receiving directions from the manufacturers to deposit cash in their A/c through various banks like ICICI, UTI, HDFC etc. On being asked as to how they were placing orders and how the goods were received at their premises, he stated that normally, the General Manager was taking care of the above activities; that the goods were received in sealed containers under the cover of excisable invoices, coastal bill of entry/shipping bill, transport documents etc; that the payments were normally made through DD; that sometimes, they were receiving directions to deposit cash in the A/c. No. given by the tile manufacturers with various banks. On being asked about the cash payment modalities, he stated that normally 80 to 85 % of the quantity received were shown in the invoices; that in other words full quantity was not being shown in the invoices; that the value of the excess quantity received by them was sent in cash by depositing in the specified accounts communicated to them through SMS from time to time; that the value of the quantity shown in the invoices was sent through DD and the value of the quantity received in excess was sent by cash deposits in the specified accounts with ICICI, HDFC and UTI banks.

4.4.2. On being asked about the details of cash payments made to various manufacturers during last five years, he stated that the full details of cash payments were not readily available as they were not maintaining the A/c. of cash transactions; that however, as a result of some dispute, the details of cash payments were being prepared in the computer by their General Manager in respect of payments made on behalf of M/s. Sterling Glazed Tiles, M/s Omega Ceramics etc.; that the print outs of the details taken from computer were handed over by him; that he was reiterating that as per the instructions from the manufacturers, amounts were being drawn from their account with Punjab National Bank and were remitted to the accounts communicated by the supplier; that however, the details of such cash deposits for one year were not maintained by him; that the counter foils of such cash deposits were kept in their office premises; that the counter foils more than one year old got soiled during the painting of the building and are not readily available.

4.4.3. On being asked as to whether any excess quantity was noticed in the cases of receipt of goods in containers, he stated that some of the containers carried excess quantity; that the value of this excess quantity is paid through cash in the specified accounts given to them.

4.4.4. Seized file No.10 was shown to him, which contained counter foils of cash deposits in different banks like HDFC, UTI, ICICI etc. showing huge transactions. On being asked to explain, he stated that the amounts were deposited in the above bank accounts on the directions from the manufacturers; that the value of excess quantity was deposited in to the account number given by the manufacturer. He was asked that he had connived with the manufacturers in evading the Central Excise duty and suppressed the facts of receipt of the quantity more than the quantity shown in the invoices. In this regard, he stated that he has been a less educated person and was not aware of the seriousness of evasion of Central Excise duty and related law and requested to pardon for the lapse if any, on his part.

4.5.1. The scrutiny of the counter foils contained in the seized file No. 10 reveals that there are several pay-in-slips showing payments made by M/s N.K.Trading Co. through cheques in the accounts of the manufacturers of tiles towards the amounts shown in the invoices. There are several pay-in-slips showing cash deposits in the accounts of different firms managed by the shroffs. In some of the cash deposit pay-in-slips, the names of the tile manufacturers on whose behalf the cash amounts have been deposited are mentioned. The cash amounts have been deposited in the accounts of firms namely M/s. Shreeji Enterprises, M/s. Sagar Enterprises, M/s. Shree Maruti Enterprises, M/s. Ganesh Agency, M/s. Shiv Enterprise, M/s.

zNo. 18

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Shree Bhagwati Enterprise, M/s. Shiv Finance, M/s. J.B. Enterprise and M/s. Shree Bharat Enterprise. On the basis of the aforesaid pay-in- slips, a chart in the form of ANNEXURE A - has been prepared showing payments made through cheques as well as payments made in cash in different accounts. In respect of cash deposit pay-in-slips, the name of the tile manufacturer has been mentioned in the said Annexure on the basis of entries available on such pay-in-slip. However, the said column has been kept blank in respect of those pay-in-slips where the name of tile manufacturer is not mentioned. The said chart arranged manufacturer-wise is enclosed as Annexure - A to this show cause notice.

4.5.2. The scrutiny of aforesaid chart reveals that M/s. N.K.Trading Co. has deposited an amount of Rs. 19 Lakhs in cash on behalf of M/s. Star Ceramic using the bank accounts of the firms namely M/s. Shree Maruti Enterprises, M/s. Ganesh Agency, M/s. Shree Bhagwati Enterprise, M/s. Sagar Enterprise and M/s. Shiv Enterprises as under:-

Sr.No. Date Name of

Bank Account No. Name of Account holder

Amount (in Rs.)

1 07.04.06 ICICI 15305003241 Shree Bhagwati Enterprise 100000




5 10.07.06 ICICI 624805010644 Sagar Enterprise 100000



8 09.08.06 ICICI 624805010772 Shiv Finance 1000009 19.10.06 ICICI 624805010772 Shiv Finance 100000

10 06.11.06 ICICI 624805010772 Shiv Finance 10000011 23.11.06 ICICI 624805010772 Shiv Finance 10000012 28.11.06 ICICI 624805010772 Shiv Finance 10000013 09.12.06 ICICI 624805010772 Shiv Finance 10000014 16.12.06 ICICI 624805010772 Shiv Finance 10000015 23.01.07 ICICI 015305005479 Ganesh Agency 20000016 01.02.07 ICICI 624805010772 Shiv Finance 100000

17 25.06.07 ICICI 015305006741 Shree Maruti Enterprise 100000


TOTAL 1900000

4.5.3. All the aforesaid accounts are with the ICICI bank and used mainly to transfer the cash. These accounts are managed by Shroffs, who are subsequently remitting the amount in cash to the manufacturers on consideration of commissions. The eighteen pay-in-slips where under the aforesaid amounts have been deposited by M/s. N.K.Trading Co. in the accounts of the aforesaid firms are bearing the endorsements of the name of M/s Star. M/s. N.K.Trading Company is not having direct purchase or sale with the aforesaid firms. Shri Noble and Shri Satheesan, in their respective statements have confirmed that they were being informed by the tile manufacturers through SMS, the name and account numbers of the firms in whose accounts the cash was to be deposited. From the chart, it is evident that the cheques were got deposited directly in the bank accounts of M/s. Star Ceramic. However, for transferring the amounts, over and above the invoice value, the amounts were deposited in cash in the aforesaid bank accounts and such cash amounts were subsequently transferred to M/s. Star Ceramic by the shroffs who operated said bank accounts.

4.5.4. The scrutiny of aforesaid Annexure-A reveals that M/s N.K.Trading Company deposited cheques worth Rs.3,19,64,814/- in the accounts of different tile manufacturers and cash of Rs.1,62,74,814/- in the accounts of different fictitious firms. In respect of 27 cash deposit slips at page Nos. 69, 160, 168, 196, 201, 241, 255, 259, 272, 285, 309, 313, 338, 343, 361, 367, 369, 400, 402, 423, 451, 455, 460, 472, 477, 492 and 504 of the file No.10, the name of the tile manufacturer on whose accounts, the cash was deposited is not mentioned. An amount of Rs.36,24,814/- has been deposited in cash on the basis of such 27 pay-in-slips. It is quite possible that some of these 27 pay-in-slips may be belonging to M/s Star Ceramic.

zNo. 19

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4.6.1. The scrutiny of the invoices of M/s. Star available in seized box file for the year 2005-06 of the panchnama reveals that M/s. Star have cleared 30,800 boxes of wall tiles of Standard grade with MRP of Rs.90/- per box to M/s. N.K. Trading Co., Kollam during the year 2005-06. However, out of the total clearances of 56,600 boxes of wall tiles during the year 2006-07, they have cleared 53,700 boxes of tiles to M/s. N.K. Trading Co., Kollam by declaring MRP of Rs.90/- and the remaining quantity of 2,900 boxes with MRP of Rs.100/- per box. In the year 2007-08, they have cleared two consignments of wall tiles of 5,500 boxes with MRP of Rs.100/- per box to M/s. N.K. Trading Co., Kollam.

4.7.1. The officers of DGCEI, in presence of two independent witnesses opened the hard disk seized from M/s N.K.Trading Company under panchnama dated 12.5.2008. The data contained in the said hard disk was printed out and filed in a folder containing page Nos.1 to 155. The data contained in the seized hard disk is having several evidences regarding undervaluation of tiles manufactured by different tile manufacturers of Gujarat including M/s Star Ceramic. The evidences in respect of M/s Star Ceramic are discussed in following paras.

4.7.2. Page 78 is a letter dated 04.11.2006 addressed to the Managing Director, The Quilon Hotels & Resorts Pvt. Ltd., Kollam, quoting price @ Rs.12/- per Sq. feet piece for wall tiles having “Monalisa Brand” manufactured by M/s Star Ceramic. As one box contains 15 pieces, the price quoted works out to Rs.120/- per box.

4.7.3. Page No.93 of the said folder is a pricelist in respect of Monalisa white body wall tiles manufactured by M/s Star Ceramic. The rates are quoted per piece as well as per box depending upon terms of payment, viz. credit rate, cheque rate and cash rate. On the basis of per piece rates in terms of credit, cheque and cash, the MRP works out to Rs.130.95, Rs. 127.05 and Rs.124.95 per box for Plain & Print colour tiles and Rs.145.95, Rs.142.05 and Rs.139.95 for Black colour tiles respectively. Page No.89 is a pricelist of Monalisa white body wall tiles manufactured by M/s Star Ceramic. The rates for Plain & Print, Black, ORD, SPL and SSPL Colour tiles for size 12”x8” and 8”x8” are given in the said pricelist depending upon terms of payment viz. credit rate, current date cheque rate and cash rate. It is evident from the said pricelist that current date cheque rate for 12”x8” size of tiles were Rs.127/- and Rs.142/- per box in respect of Plain & Print and Black colour tiles. Similarly, current date cheque rates for tiles of size 8”x8” for ORD, SPL and SSPL colour tiles were Rs.168/-, Rs.204/- and Rs.244/- per box, respectively. The cash payment rates for tiles of size 12”x8” were Rs.125/- and Rs.140/- per box for the tiles of Plain & Print and Black colour tiles. The cash payment rates for tiles of size 8”x8” were Rs.160/-, Rs.196/- and Rs.236/- per box for ORD, SPL and SSPL colour of tiles.

4.7.4. Page Nos.22 and 2 of said folder are a pricelists in respect of Monalisa brand tiles manufactured by M/s Star Ceramic. The rates are given in per piece for Print & Plain, Special Print and Black colour tiles of size 12”x 8” on the basis of terms of payment viz. cheque and cash. As one box of tiles of M/s Star Ceramic contains 15 pieces of tiles, the rate per box works out as under:-

S.No. Type of tiles Rate per box (Rs.)Cheque

1 Plain/Print 132.002 Special Print 135.753 Black 147.00

It is evident from the aforesaid pricelist that even on cash payment basis, the MRP of tiles manufactured by M/s Star Ceramic was Rs.123.75, Rs.127.50 and Rs.138.75 for tiles of Print/Plain, Special Print and Black colour tiles respectively.

4.7.5. The scrutiny of invoices of M/s Star Ceramic reveals that they were clearing tiles of size 12”x8” by declaring description of tiles as STD at the MRP of Rs.90/- during the year 2006-07 and STD tiles @ Rs.100/- per box for 2007-08. The pricelist available at page No.89 makes it abundantly clear that M/s N.K. Trading Co. were showing sale rates of tiles of size 8”x8” as Rs.160/-, Rs.196/- and Rs.236/- per box as against cash payment basis in respect of ORD, SPL and SSPL Colour of tiles, respectively. Thus M/s Star Ceramic were declaring less than 50% of actual MRP in their invoices. The lower MRP was being declared with clear intent to evade duty of excise by way of gross undervaluation.

4.7.6. Page Nos.12, 13 and 14 of the file containing printouts taken from the seized hard disc contain the details such as Order date, Invoice No., Suppliers Name, Invoice Amount, Discount Amount, Tax Amount etc. Similarly, page Nos. 15, 16 and 17 contain the

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details like Order No., Invoice No., Invoice Date, Suppliers Name, Invoice Amount, Discount Amount and Tax Amount in respect of the suppliers of M/s. N.K. Trading Co., Kollam. The details related to M/s. Star have been extracted from the said pages 12 to 17 and reproduced as under:-

Extract of page Nos.12 to 17 of Printouts from Hard Disk of M/s. N.K. Trading Co., Kollam in respect of M/s. Star Ceramic, Morbi.ORDER INV.

NO.INV. DATE

SUPPLIER NAME INV. AMOUNT

DISC. AMOUNT

Page Nos.12, 13 and 14 of Printouts

136 0206 08.11.07 STAR CERAMIC 1.68.264.00 0102 0183 13.07.07 STAR CERAMICS 1.68.624.00 0

TOTAL 3,36,888.00Page Nos.15, 16 and 17 of Printouts

135 0206 27.07.07 STAR CERAMIC 2.12.380.50 0101 0183 13.07.07 STAR CERAMIC 2,14,590.00 0

TOTAL 4,26,970.50

4.7.7. The verification of Central Excise invoices issued by M/s. Star reveals that the correct date of issue of invoice Nos.0183 and 0206 is 27.06.07 and 27.07.07 and not 13.07.07 and 08.11.07 respectively, as mentioned herein above. However, the amounts shown in the printouts available at page Nos.12, 13 and 14 exactly match with the amount shown on the invoices. The scrutiny of above table reveals that the amount shown on the computer printouts available at page Nos.15, 16 and 17 are much more than the amounts shown on the printouts at page Nos.12, 13 and 14 as well as those shown on the invoices. As an example, the amount against invoice No.0206 dated 27.07.07 appearing on page No.12 is Rs.1,68,264/- while the amount shown against said invoice at page No.15 is Rs.2,12,380.50. It thus appears that M/s. N.K. Trading Co. in the said computer maintained two types of details. Page Nos.12 to 14 contained the price at which invoices were issued by M/s. Star and the amounts which M/s. N.K. Trading Co. were required to pay through cheques. However, the printouts at page Nos.15 to 17 contain the total value of the tiles supplied by M/s. Star against each invoice. It is evident from the above table that the invoice value shown for two invoices at page Nos.12 and 13 is Rs. 3,36,888/- while actual value of tiles shown against the same two invoices in the printouts available at page Nos.15 to 17 is Rs.4,26,970.50. It is thus evident that M/s. Star in aforesaid two invoices declared sale value of Rs.3,36,888/- while actually they charged an amount of Rs.4,26,970.50 from M/s. N.K. Trading Co., Kollam. The amount of Rs.3,36,888/- was paid by M/s. N.K. Trading Co. through cheques while balance amount of Rs.90,082.50 was paid by them in cash through the ICICI Bank account of M/s. Shree Maruti Enterprise, M/s. Shree Bhagwati Enterprise, M/s. Ganesh Agency, M/s. Shiv Finance or M/s. Sagar Enterprise.

4.7.8. The data contained in the hard disc thus reveals that against actual sale price of Rs. 4,26,970.50 for above two consignments, M/s. Star declared sale value of only Rs.3,36,888/- on their Central Excise invoices. This amount mentioned on the invoices was collected through cheques and reflected in the books of accounts. The balance amount of Rs. 90,082.50 was unaccounted portion of sale proceeds and was collected by M/s. Star through the ICICI Bank account of the above mentioned shroffs.

5.1. The business premises of M/s. Amit Ceramics, Gaekawadmala. Nashik Road, Nashik was searched by the officers of DGCEI, Regional Unit, Vapi and Central Excise Commissionerate, Nashik on 22.12.2008. During the course of such search, incriminating records/documents which were found relevant for further investigations, as mentioned in Annexure – A to the panchnama dated 22.12.2008, were placed under seizure.

5.2.1. A statement of Shri Bumtaria Pravin Panchabhai, Proprietor of M/s. Amit Ceramics, Nashik was recorded under Section 14 of the Central Excise Act, 1944 by the Superintendent, DGCEI, Regional Unit, Vapi on 22.12.2008 wherein he inter alia stated that he is the proprietor of M/s. Amit Ceramics, Nashik, which is engaged in the trading of Ceramic tiles and Sanitarywares since 1998; that he looked after all the day to day work of his firm such as purchase, sales, marketing, accounts and overall supervision of his firm; that his firm is engaged in the trading business of Ceramic tiles and Sanitarywares manufactured by different manufacturers of Morbi, Gujarat.

5.2.2. His further statement is recorded in question-answer form. The questions asked and answers given by him are reproduced as under:-

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Que.1: Give the names of manufacturers of ceramic tiles, from whom you purchase the tiles.

Ans.1: I purchase the ceramic tiles from the following manufacturers:-

Sr.No.

Name of the manufacturer Description & size of tiles purchased

(i) M/s. Suncity Ceramics, Trajpal, Morbi 16”x16” [Floor](ii) M/S.Star Ceramics, Morbi 12”x8”, 10”x13” [Wall](iii) M/s. Real Ceramics Pvt. Ltd., Morbi 12”x12”and 16”x16” [Floor Tiles](iv) M/s. Ideal Cera Products, Morbi 12”x8” [Floor](v) M/s. Vraj Oreva Marketing, Nashik 2”x2” [Wall Tiles](vi) M/s. Hilti Ceratech Pvt. Ltd., Wankaner 12”x8”, 10”x13” Wall(vii) M/s. Leo Ceramics, Morbi 12”x8” Wall(viii) M/s. Hirani Ceramic, Wankaner 12”x8” Wall(ix) M/s. Star Ceramic, Wankaner 12”x8” Wall(x) M/s. Sacmi Ceramic Pvt. Ltd. 12”x8” Wall

In addition to above manufacturers, sometimes, we also purchase the tiles from local dealers and through agent of the manufacturers also.

Que.2: Who are the buyers of the tiles sold by you?Ans.2: Almost all the tiles purchased by us from the aforesaid manufacturers were

sold to retail buyers, ultimate customers and builders of Nashik and surrounding area.

Que.3: How do you place the orders?Ans.3: Normally, we place the orders over telephone. We place the orders for specific

colour/design of the tiles to the Directors/Partners/Representatives of the manufacturers.

Que.4: Which grade tiles do you purchase?Ans.4: We have mostly purchased Ist and IInd grade tiles. However, in some cases,

we purchased IIIrd grade tiles also.

Que.5: Which documents did you receive along with the tiles?Ans.5: At the time of receipt of the tiles, we normally received the Central Excise

invoices. In the invoices, the manufacturers were showing general description of the tiles alongwith the grade & Quantity in boxes. At the time of receipt of tiles, we compare the physical quantity of the tiles with that of mentioned in the invoices.

Que.6: Who arranged the transportation of the tiles from Morbi to Nashik? Who was paying the freight charges and who borne the same?

Ans.6: Normally, the transportation of the goods from the factory premises to our premises was arranged by us and we have utilized different transporters for transportation of the tiles from Morbi to Nashik. The freight charges from Morbi to our premises were paid and borne by us.

Que.7: What were the freight charges for transporting the tiles from Morbi to Nashik?Ans.7: The freight charges for transporting the tiles from Morbi to Nashik were

different for different size tiles. The freight charges were Rs.800/- to Rs.900/- per MT of tiles.

Que.8 : Do you have any price lists of tiles of past period?Ans.8: We do not have the price lists of the tiles for the past period.

Que.9: How did you work out the selling price of different type of tiles?Ans.9: Our sale prices were worked out according to purchase prices shown in the

invoices issued by the respective manufacturers. We add the cost of transportation and loading/unloading charges from Morbi to Nashik and profit margin + VAT @ 12.5% on the bill value. Our profit margin varies from Rs.10/- to Rs.20/- per box for wall/floor tiles and Rs.1.50 to Rs.2/- per Sq. feet for vitrified tiles, depending upon the customer, terms of payment, quantity required and demand of the product.

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Que.10: What were the MRPs declared by different manufacturers? What were selling price of the tiles sold by you?

Ans.10: Earlier, prior to February/March 2008, the manufacturers were not showing the actual MRP and price of the tiles in the Central Excise invoices. The MRP and sale price shown in the invoices was lower than actual MRP and price of the tiles. The differential amount, over and above invoice value, was collected by the manufacturers in cash from us. We were preparing the invoices according to the price shown by the manufacturers by adding freight, VAT and our profit margin etc. In some cases, we were preparing our sales bill so as to remain the price of the tiles below MRP, declared by the manufacturers. However, generally we were preparing the invoices showing actual sale price of the tiles. In the cases, where we have prepared invoice to remain the sales price in line with the MRP, we were collecting amounts, over and above invoice value from the customers. The amount shown in the invoices were accounted for in our books of accounts whereas the amounts collected, over and above the invoice value, were not accounted for in our books of accounts. The unaccounted amounts collected from the buyers were used for cash payment to the manufacturers, over and above invoice value.

Que.11: How are you paying such cash, over and above invoice value to the manufacturers?

Ans.11: Generally, we are paying cash, over and above invoice value, to the manufacturers through Angadia viz. Ashok Kantilal Patel, having their office near Panchvati Karanja, Opposite Dave Sweets, Nashik. We do hand over cash personally to the representative of the manufacturers at the time of our visit to Morbi.

Que.12: You have been shown the panchnama dated 22.12.2008 drawn at the premises of M/s. Amit Ceramic, Gaikawad Mala, Nashik Road and a diary marked A/19 seized vide the said panchnama. Please peruse the same and explain the reasons for showing such huge amounts in the said Diary?

Ans.11: I have perused the panchnama dated 22.12.2008 drawn at our premises M/s. Amit Ceramic, Gaikawad Mala, Nashik Road, Nashik and a diary marked A/19 seized vide the said panchnama. I have perused the same and have put my dated signature on same. This diary contains the following details:-

Sr.No.

Page Number of

Diary

Date on which the amount sent

through AngadiaAmount Name of the Party to whom the amount

paid

1 7 07.04.2007 100000 “Monalisa” Ceramics2 7 07.04.2007 50000 Monalisa (Star Ceramic)3 16 16.04.2007 100000 Real Ceramics4 26 267.04.2007 100000 “Monalisa” Ceramics5 27 27.04.2007 100000 “Monalisa” Ceramics6 29 29.04.2007 50000 Star Ceramic7 42 12.05.2007 100000 Suncity Ceramics8 48 18.05.2007 100000 “Monalisa” Ceramics9 53 23.05.2007 100000 Galaxy Senetary Works10 53 23.05.2007 100000 Suncity Ceramics11 56 26.05.2007 100000 “Monalisa” Ceramics12 62 01.06.2007 100000 Suncity Ceramics13 65 04.06.2007 50000 Star Ceramic14 69 08.06.2007 100000 “Monalisa” Ceramics15 76 15.06.2007 100000 Real Ceramics16 81 20.06.2007 100000 Galaxy Senetary Works17 84 23.06.2007 100000 Suncity Ceramics18 89 28.06.2007 100000 Real Ceramics19 100 09.07.2007 100000 “Monalisa” Ceramics20 101 10.07.2007 100000 Suncity Ceramics21 111 20.07.2007 100000 Real Ceramics22 117 26.07.2007 100000 “Monalisa” Ceramics23 121 30.07.2007 50000 Star Ceramic24 124 02.08.2007 100000 Galaxy Senetary Works25 131 09.08.2007 100000 Suncity Ceramics26 137 15.08.2007 100000 Real Ceramics27 139 17.08.2007 100000 “Monalisa” Ceramics28 147 25.08.2007 100000 Suncity Ceramics

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29 149 27.08.2007 50000 Galaxy Senetary Works30 160 07.09.2007 100000 Real Ceramics31 170 17.09.2007 100000 “Monalisa” Ceramics32 175 22.09.2007 100000 Suncity Ceramics33 187 07.10.2007 75000 Galaxy Senetary Works34 198 15.10.2007 40000 Monalisa (Star Ceramic)35 198 15.10.2007 60000 Sonery ( Ideal Cera Products)36 201 18.10.2007 100000 Real Ceramics37 207 24.10.2007 100000 “Monalisa” Ceramics38 215 01.11.2007 100000 Suncity Ceramics39 219 05.11.2007 50000 Sonery ( Ideal Cera Products)40 235 21.11.2007 50000 “Monalisa” Ceramics41 235 21.11.2007 50000 Galaxy Senetary Works42 235 21.11.2007 50000 Suncity Ceramics43 245 01.12.2007 50000 Sonery ( Ideal Cera Products)44 249 05.12.2007 100000 Real Ceramics45 254 10.12.2007 50000 Galaxy Senetary Works46 258 14.12.2007 60000 “Monalisa” Ceramics47 261 17.12.2007 100000 Real Ceramics48 266 22.12.2007 50000 Sonery ( Ideal Cera Products)49 266 22.12.2007 30000 Monalisa (Star Ceramic)50 280 05.01.2008 75000 “Monalisa” Ceramics51 286 11.01.2008 40000 Sonery ( Ideal Cera Products)52 291 16.01.2008 50000 Suncity Ceramics53 311 05.02.2008 75000 “Monalisa” Ceramics54 313 07.02.2008 63000 Sonery ( Ideal Cera Products)55 317 11.02.2008 100000 Real Ceramics56 318 12.02.2008 59000 Leo Ceramics57 319 13.02.2008 50000 Galaxy Senetary Works58 329 23.02.2008 50000 Suncity Ceramics59 329 23.02.2008 20000 Monalisa (Star Ceramic)60 334 28.02.2008 100000 “Monalisa” Ceramics61 335 29.02.2008 100000 Real Ceramics62 345 10.03.2008 100000 Galaxy Senetary Works63 350 15.03.2008 35000 Leo Ceramics64 353 18.03.2008 100000 “Monalisa” Ceramics65 359 24.03.2008 100000 Real Ceramics66 360 25.03.2008 50000 Suncity Ceramics67 366 31.03.2008 50000 “Monalisa” Ceramics68 366 31.03.2008 50000 Leo Ceramics

In the above chart, the columns like Sr.No. Page No., dates, amount and the name of the parties have been shown. The amounts mentioned in the said columns are the difference of the value mentioned in the invoices of the tiles manufacturers and the actual sale prices which have been collected from our customers. The said substantial difference is due to gross under valuation/under invoicing by the tile manufacturers.

Que.13: You have been also shown the diary marked A/20 seized vide the said panchnama. Please peruse the same and explain the mention of such huge amounts in the said Diary?

Ans.13: I have perused the diary marked A/20 seized vide the said panchnama dated 22.12.2008. I have perused the same and have put my dated signature on same. This diary contains the following details:-

Sr.No.

Page Number of


Amount Name of the Party to whom the amount paid

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Diary through Angadia1 15 15.04.2008 100000 Real Ceramics2 15 15.04.2008 75000 Galaxy Sanitary Works3 15 15.04.2008 75000 “Monalisa” Ceramics4 21 21.04.2008 45000 “Monalisa” Ceramics5 28 28.04.2008 100000 Real Ceramics6 33 03.05.2008 50000 Galaxy Sanitary Works7 36 06.05.2008 50000 Suncity Ceramics8 45 15.05.2008 100000 Real Ceramics9 52 22.05.2008 50000 Soneri (Ideal Ceramics)10 57 27.05.2008 50000 “Monalisa” Ceramics11 57 27.05.2008 33000 Soneri (Ideal Ceramics)12 70 09.06.2008 50000 Galaxy Sanitary Works13 72 11.06.2008 50000 “Monalisa” Ceramics14 77 16.06.2008 44000 Suncity Ceramics15 80 19.06.2008 100000 Real Ceramics16 84 23.06.2008 50000 Suncity Ceramics17 84 23.06.2008 50000 “Monalisa” Ceramics18 87 26.06.2008 50000 “Monalisa” Ceramics19 89 28.06.2008 50000 Soneri (Ideal Ceramics)20 94 03.07.2008 50000 Leo Ceramics21 96 05.07.2008 50000 Hilti Ceramics22 108 17.07.2008 50000 Suncity Ceramics23 112 21.07.2008 50000 Hilti Ceramics24 115 24.07.2008 50000 Leo Ceramics25 117 26.07.2008 50000 “Monalisa” Ceramics26 120 29.07.2008 50000 Soneri (Ideal Ceramics)27 124 02.08.2008 75000 Real Ceramics28 133 11.08.2008 50000 Real Ceramics29 133 11.08.2008 60000 Leo Ceramics30 142 20.08.2008 75000 Real Ceramics31 152 30.08.2008 100000 Real Ceramics32 157 04.09.2008 50000 Hilti Ceramics33 157 04.09.2008 60000 Leo Ceramics34 165 12.09.2008 50000 Suncity Ceramics35 168 15.09.2008 75000 Real Ceramics36 173 20.09.2008 50000 Hilti Ceramics37 178 25.09.2008 100000 Real Ceramics38 180 27.09.2008 75000 Galaxy Sanitary Works39 183 30.09.2008 55000 Suncity Ceramics40 189 06.10.2008 100000 “Monalisa” Ceramics41 193 10.10.2008 50000 Hilti Ceramics42 197 14.10.2008 50000 Galaxy Sanitary Works43 199 16.10.2008 75000 Real Ceramics44 206 23.10.2008 50000 Hilti Ceramics45 223 09.11.2008 100000 Real Ceramics46 224 10.11.2008 75000 Real Ceramics47 224 10.11.2008 50000 Galaxy Sanitary Works48 228 14.11.2008 50000 Hilti Ceramics49 243 29.11.2008 50000 Hilti Ceramics50 250 06.12.2008 50000 Soneri (Ideal Ceramics)51 256 12.12.2008 50000 Galaxy Sanitary Works52 257 13.12.2008 50000 Hilti Ceramics53 264 20.12.2008 50000 Real Ceramics

In the above chart, the columns like Sr.No., page No., dates, amount and name of the parties have been shown. The amounts mentioned in the said column are the difference of the value mentioned in the invoices of the tile manufacturers and the actual sale prices which have been

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collected from our customers. The said substantial difference is due to gross undervaluation/under invoicing by the tile manufacturers. In many cases, the invoices are raised for 50% of the actual value of the tiles. Further, I also submit that the manufacturers of the tiles issued the sale invoices in the name of the various builders and other parties and the amount is collected by us in cash and same amounts were also sent to the manufacturers in cash through said angadias by me. We had purchased the tiles from the said manufacturers in the name of fictitious builders; however, such tiles were received by us and sold in cash without any bill. On being asked, I state that the total amount of the purchase bill/Invoice is sent to the tile manufacturers in cash through angadias.

Que.14: Where are the similar diaries for the period prior to 2007-08. Please give your clarifications.

Ans.14: For the period prior to the year 2007-08, I did maintain such diaries but I have destroyed the same.

Que.15: Please peruse the file marked A/25 seized vide the said panchnama dated 22.12.2008 drawn at the premises of M/s. Amit Ceramic, Gaikawad Mala, Nashik Road, Nashik. Particularly, your attention is drawn to the pages from 16 to 20, titled ABC Trading, Morbi. Please explain the details mentioned thereon.

Ans.15: I have perused the said file marked A/25 seized vide the said panchnama dated 22.12.2008 drawn at our premises of M/s. Amit Ceramic, Gaikawad Mala, Nashik Road, Nashik. Particularly, I have seen the pages 16 to 20 and I have put the dated signature on these pages. I state that in fact it is a summary of the goods purchased from M/s. Suncity Ceramics, Morbi. The goods have been purchased by us in cash and no bills have been provided to us. But suppressing the purchase as well sales, we have prepared summary in the name of the fictitious firm i.e. ABC Trading, Morbi. The amounts mentioned in the said summary are written in coded form and by multiplying the figures mentioned in the diary by hundred will represent the actual amounts. For example, the amount mentioned at page marked 20 is Rs.57,995/- and not Rs.579.95. Similarly, on other pages marked 16, 17, 18 and 19 also the amounts are mentioned.

Que.16. Please peruse the file marked A/24 seized vide the said panchnama dated 22.12.2008 drawn at the premises of M/s. Amit Ceramic, Gaikawad Mala, Nashik Road, Nashik.

Ans.16: I state that M/s. Avinash Traders at Sinde, Tal & Dist. Nashik, Near Bangal Baba Dargah is a bogus firm created by me to suppress the actual transaction to minimize my tax liability.

5.3.1. During the course of search in the business premises of M/s. Amit Ceramic, Nashik on 22.12.2008, certain records/documents were seized as recorded in Annexure-A to the panchnama dated 22.12.2008. The scrutiny of records seized from the aforesaid premises revealed that same contained evidences regarding clandestine clearances and undervaluation by M/s. Star Ceramic as well as other tile manufacturers of Morbi.

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5.3.2. The scrutiny of the Central Excise invoices issued by M/s. Star reveals that they have cleared two consignments of wall tiles to M/s. Amit Ceramic, Nashik during the period 20.12.04 to 19.05.05. The clearances to the said dealer are summarized in the following table:-

Invoice No. Date Grade Size No. of boxes MRP

343 20.12.04 STD NA 480 100.00SIL NA 50 80.00

75 19.05.05 STD NA 400 100.00

5.3.3. From the above, it is evident that they have not cleared any consignment of wall tiles to M/s.Amit Ceramic, Nashik during the years 2006-07 and 2007-08. Whereas M/s. Amit Ceramic, Nashik have transferred following cash amounts to M/s. Star through their confident angadia, viz., M/s. Patel Ashokkumar Kantilal Ni Company, Nashik during the period 07.04.07 to 23.02.08:-

Sr.No.

Page Number of Diary

Date on which the amount sent through Angadia Amount

1 7 07.04.07 50,000.002 29 29.04.07 50,000.003 65 04.06.07 50,000.004 121 30.07.07 50,000.005 198 15.10.07 40,000.006 266 22.12.07 30,000.007 329 23.02.08 20,000.00

Total 2,90,000.00 5.3.4. As substantial cash amounts have been paid by M/s Amit Ceramics to M/s Star during the period 07.04.07 to 23.02.08, it appears that M/s Star supplied tiles to other buyers of Nashik through M/s Amit Ceramics and collected differential amounts between the actual value and value declared on invoices issued to other buyers of Nashik through M/s Amit Ceramics, in cash. Shri Bhumtaria Pravin Panchabhai, Proprietor of M/s Amit Ceramics in his statement dated 22.12.2008 inter-alia admitted that he was getting tile in the names of different fictitious builders of Nashik and was selling the same to other buyers. It is thus evident that the aforesaid cash amount of Rs.2,90,000/- was paid by M/s Amit Ceramics to M/s Star for the under-valued portion of tiles cleared in the names of builders of Nashik and surrounding area.

5.3.5. The scrutiny of the records of M/s. Amit Ceramics, Nashik reveals that M/s. Amit Ceramics were showing wrong sale price in their sale bills. They were showing correct price in their delivery slips but were mis-declaring the sale price in their sale bills. This was done by M/s. Amit Ceramics to match the MRP mentioned on the invoices of M/s. Star and other tile manufacturers and also to evade VAT. Page No.147 of seized made up file A/25 under panchnama dated22.12.08 from the premises of M/s. Amit Ceramics, Nashik is a dispatch slip dated 02.03.07, which shows the sale of tiles of different manufacturers. According to the above said delivery slip, M/s. Amit Ceramics, Nashik sold 35 boxes and 2 boxes of Monalisa brand wall tiles of 12”x8” size Ivory and white colours to Shri Dhipubhai at Rs.120/- per box, respectively. Similarly, as per delivery slip No.71 dated 09.05.07, M/s. Amit Ceramics, Nashik sold 7 boxes of Monalisa brand wall tiles of 12”x8” size of white colour to M/s. Satguru Ceramics at sale rate of Rs.125/- per box. Thus it appears that M/s. Amit Ceramics were issuing a delivery slip with their sale bills. In the sale bill, they were mentioning the suppressed value of tiles sold by them while they are mentioning correct value of tiles recoverable from their customers in their delivery slip. They are keeping only the sale bills in their records and the delivery slips were destroyed. In the aforesaid cases, it is evident that M/s. Amit Ceramics have sold the tiles of M/s. Star at a higher price than the price shown in their sale bills. The differential amount is obviously collected by M/s. Amit Ceramics in cash and transferred to the aforesaid M/s. Star towards the actual value of the tiles purchased by them. It is thus evident that M/s. Star was mentioning suppressed MRP and wrong description of tiles in their sale invoices. They were collecting the amount over and above the invoice value from M/s. Amit Ceramics in cash and escaping the Central Excise duty incidence on such element of value of tiles.

5.3.6. The seized diaries at S.Nos.A/19 reveal that M/s Amit Ceramics have paid an amount of Rs.2.90,000/- to M/s Star in cash through angadias during the period 07.04.07 to 23.02.08. The amount of Rs.2,90,000/- paid in cash, was differential amount on account of

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suppressed MRP and ex-factory rate in respect of clearances made to M/s. Amit Ceramics and other buyers of Nashik and surrounding areas. Thus the documents contained in seized diaries marked as A/19 and Misc file at S.No.A/25 reveal that M/s Star were evading duty of excise by way of gross-undervaluation.

5.4.1. Shri Bumtaria Pravin Panchabhai, Proprietor of M/s Amit Ceramics, Nashik in his statement dated 22.12.2008 inter-alia stated that he was sending cash amounts, over and above the invoice value, to the ceramic tile manufacturers including M/s Star through M/s Patel Ashok Kumar Kantilal Ni Co., an angadia firm. Therefore, in order to ascertain the actual facts, the officers of DGCEI conducted an inquiry from the said angadia firm and statement of the Proprietor of said firm was recorded on 27.12.2008.

5.4.2. A statement of Shri Chimanbhai Babaldas Patel, Proprietor of M/s. Patel Ashokkumar Kantilal Ni Company, Nashik was recorded under Section 14 of the Central Excise Act, 1944 by the Superintendent, DGCEI, Regional Unit, Vapi on 27.12.2008 wherein he inter alia stated that he is the proprietor of M/s. Patel Ashokkumar Kantilal Ni Company, which is engaged in angadia services since December, 2005; that they were delivering the documents, goods and cash to their customers located all over the India; that they used to issue receipts for receiving documents which were to be delivered as per the instructions of the parties; that in the case of delivering cash, the transactions were carried out on trust; that they did not issue receipts for receiving the cash; that their customers have to telephonically confirm the delivery of cash from the parties which they sent through his angadia firm; that they had charged Rs.100/- to Rs.150/- per lakh for such cash transactions and that they did not preserve any records and destroyed their records after completion of the cash transactions with the parties.

5.4.3. On being asked to explain the cash transactions done on behalf of M/s. Amit Ceramic, Nashik, Shri Chimanbhai Babaldas Patel stated that M/s. Amit Ceramics is one of their regular customer and regularly sending cash amount to their tile manufacturers at Morbi and Himatnagar. He was shown a statement dated 22.12.2008 of Shri Bumtaria Pravin Panchalbhai, Proprietor of M/s. Amit Ceramic, Nashik. In token of his perusal and understanding the contents, he willingly placed his dated signature on the above statement. He has further stated that in reply to the question Nos.12 and 13, Shri Bumtaria Pravin Panchabhai deposed that he had perused the contents of the diaries marked as A/19 and A/20 seized from his premises under panchnama dated 22.12.2008, which contained the following details:-

Seized Diary marked as A/19:

Sr.No.

Page Number of

Diary

Date on which the amount sent through Angadia


1 7 07.04.2007 100000 “Monalisa” Ceramics2 7 07.04.2007 50000 Monalisa (Star Ceramic)3 16 16.04.2007 100000 Real Ceramics4 26 267.04.2007 100000 “Monalisa” Ceramics5 27 27.04.2007 100000 “Monalisa” Ceramics6 29 29.04.2007 50000 Star Ceramic7 42 12.05.2007 100000 Suncity Ceramics8 48 18.05.2007 100000 “Monalisa” Ceramics9 53 23.05.2007 100000 Galaxy Senetary Works

10 53 23.05.2007 100000 Suncity Ceramics11 56 26.05.2007 100000 “Monalisa” Ceramics12 62 01.06.2007 100000 Suncity Ceramics13 65 04.06.2007 50000 Star Ceramic14 69 08.06.2007 100000 “Monalisa” Ceramics15 76 15.06.2007 100000 Real Ceramics16 81 20.06.2007 100000 Galaxy Senetary Works17 84 23.06.2007 100000 Suncity Ceramics18 89 28.06.2007 100000 Real Ceramics19 100 09.07.2007 100000 “Monalisa” Ceramics20 101 10.07.2007 100000 Suncity Ceramics21 111 20.07.2007 100000 Real Ceramics22 117 26.07.2007 100000 “Monalisa” Ceramics23 121 30.07.2007 50000 Star Ceramic24 124 02.08.2007 100000 Galaxy Senetary Works25 131 09.08.2007 100000 Suncity Ceramics

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26 137 15.08.2007 100000 Real Ceramics27 139 17.08.2007 100000 “Monalisa” Ceramics28 147 25.08.2007 100000 Suncity Ceramics29 149 27.08.2007 50000 Galaxy Senetary Works30 160 07.09.2007 100000 Real Ceramics31 170 17.09.2007 100000 “Monalisa” Ceramics32 175 22.09.2007 100000 Suncity Ceramics33 187 07.10.2007 75000 Galaxy Senetary Works34 198 15.10.2007 40000 Monalisa (Star Ceramic)35 198 15.10.2007 60000 Sonery ( Ideal Cera Products)36 201 18.10.2007 100000 Real Ceramics37 207 24.10.2007 100000 “Monalisa” Ceramics38 215 01.11.2007 100000 Suncity Ceramics39 219 05.11.2007 50000 Sonery ( Ideal Cera Products)40 235 21.11.2007 50000 “Monalisa” Ceramics41 235 21.11.2007 50000 Galaxy Senetary Works42 235 21.11.2007 50000 Suncity Ceramics43 245 01.12.2007 50000 Sonery ( Ideal Cera Products)44 249 05.12.2007 100000 Real Ceramics45 254 10.12.2007 50000 Galaxy Senetary Works46 258 14.12.2007 60000 “Monalisa” Ceramics47 261 17.12.2007 100000 Real Ceramics48 266 22.12.2007 50000 Sonery ( Ideal Cera Products)49 266 22.12.2007 30000 Monalisa (Star Ceramic)50 280 05.01.2008 75000 “Monalisa” Ceramics51 286 11.01.2008 40000 Sonery ( Ideal Cera Products)52 291 16.01.2008 50000 Suncity Ceramics53 311 05.02.2008 75000 “Monalisa” Ceramics54 313 07.02.2008 63000 Sonery ( Ideal Cera Products)55 317 11.02.2008 100000 Real Ceramics56 318 12.02.2008 59000 Leo Ceramics57 319 13.02.2008 50000 Galaxy Senetary Works58 329 23.02.2008 50000 Suncity Ceramics59 329 23.02.2008 20000 Monalisa (Star Ceramic)60 334 28.02.2008 100000 “Monalisa” Ceramics61 335 29.02.2008 100000 Real Ceramics62 345 10.03.2008 100000 Galaxy Senetary Works63 350 15.03.2008 35000 Leo Ceramics64 353 18.03.2008 100000 “Monalisa” Ceramics65 359 24.03.2008 100000 Real Ceramics66 360 25.03.2008 50000 Suncity Ceramics67 366 31.03.2008 50000 “Monalisa” Ceramics68 366 31.03.2008 50000 Leo Ceramics

Seized diary marked as A/20:

Sr.No.



through AngadiaAmount Name of the Party to whom the

amount paid

1 15 15.04.2008 100000 Real Ceramics2 15 15.04.2008 75000 Galaxy Sanitary Works3 15 15.04.2008 75000 “Monalisa” Ceramics4 21 21.04.2008 45000 “Monalisa” Ceramics5 28 28.04.2008 100000 Real Ceramics6 33 03.05.2008 50000 Galaxy Sanitary Works7 36 06.05.2008 50000 Suncity Ceramics8 45 15.05.2008 100000 Real Ceramics9 52 22.05.2008 50000 Soneri (Ideal Ceramics)

10 57 27.05.2008 50000 “Monalisa” Ceramics11 57 27.05.2008 33000 Soneri (Ideal Ceramics)12 70 09.06.2008 50000 Galaxy Sanitary Works

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13 72 11.06.2008 50000 “Monalisa” Ceramics14 77 16.06.2008 44000 Suncity Ceramics15 80 19.06.2008 100000 Real Ceramics16 84 23.06.2008 50000 Suncity Ceramics17 84 23.06.2008 50000 “Monalisa” Ceramics18 87 26.06.2008 50000 “Monalisa” Ceramics19 89 28.06.2008 50000 Soneri (Ideal Ceramics)20 94 03.07.2008 50000 Leo Ceramics21 96 05.07.2008 50000 Hilti Ceramics22 108 17.07.2008 50000 Suncity Ceramics23 112 21.07.2008 50000 Hilti Ceramics24 115 24.07.2008 50000 Leo Ceramics25 117 26.07.2008 50000 “Monalisa” Ceramics26 120 29.07.2008 50000 Soneri (Ideal Ceramics)27 124 02.08.2008 75000 Real Ceramics28 133 11.08.2008 50000 Real Ceramics29 133 11.08.2008 60000 Leo Ceramics30 142 20.08.2008 75000 Real Ceramics31 152 30.08.2008 100000 Real Ceramics32 157 04.09.2008 50000 Hilti Ceramics33 157 04.09.2008 60000 Leo Ceramics34 165 12.09.2008 50000 Suncity Ceramics35 168 15.09.2008 75000 Real Ceramics36 173 20.09.2008 50000 Hilti Ceramics37 178 25.09.2008 100000 Real Ceramics38 180 27.09.2008 75000 Galaxy Sanitary Works39 183 30.09.2008 55000 Suncity Ceramics40 189 06.10.2008 100000 “Monalisa” Ceramics41 193 10.10.2008 50000 Hilti Ceramics42 197 14.10.2008 50000 Galaxy Sanitary Works43 199 16.10.2008 75000 Real Ceramics44 206 23.10.2008 50000 Hilti Ceramics45 223 09.11.2008 100000 Real Ceramics46 224 10.11.2008 75000 Real Ceramics47 224 10.11.2008 50000 Galaxy Sanitary Works48 228 14.11.2008 50000 Hilti Ceramics49 243 29.11.2008 50000 Hilti Ceramics50 250 06.12.2008 50000 Soneri (Ideal Ceramics)51 256 12.12.2008 50000 Galaxy Sanitary Works52 257 13.12.2008 50000 Hilti Ceramics53 264 20.12.2008 50000 Real Ceramics

5.4.4. Shri Bumtaria Pravin Panchabhai has categorically deposed that the above mentioned

amounts were sent through his angadia firm viz., M/s. Patel Ashokkumar Kantilal Ni Company,

Nashik. On being asked to state and clarify the facts, Shri Chimanbhai Babaldas Patel,

Proprietor of M/s. Patel Ashokkumar Kantilal Ni Company confirmed that they had delivered

these cash amounts to the tile manufacturers of Morbi and Himatnagar. On being asked

regarding the frequency of sending cash amounts by M/s. Amit Ceramic, Nashik to the tile

manufacturers at Morbi and Himatnagar, he further stated that once or twice in a week, Shri

Pravin Bumtaria used to send cash amounts in the sum of Rs.50000 or Rs.100000/-. He

further stated that Shri Pravin Bumtaria himself used to deliver cash amounts in his Nashik

branch office for sending the same to the parties located at Morbi or Himatnagar and

accordingly his branch office at Morbi or Himatnagar delivered the cash amounts in question

to the respective tile manufacturers.

5.5. The documentary evidences recovered from M/s Amit Ceramics, Nashik duly

corroborated by statements of Shri Bumtaria Pravin Panchabhai, Proprietor of said firm and

Shri Chimanbhai Babaldas Patel, Proprietor of the angadia firm clearly reveal that M/s Star

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were evading duty of excise by way of undervaluation. They were not declaring designs,

colours and even size of tiles in their invoices. The tiles of different sizes were sold at different

rates depending upon the colour and design. They were not declaring said colours, designs as

well as sizes in their invoices, only to declare lower MRP and to evade duty of excise. The

documentary evidences reveal that M/s Star have received substantial amounts in cash from

M/s Amit Ceramics, Nashik. This fact has been confirmed by the Proprietor of the said firm as

well as the concerned angadia. The seized documents further reveal that the ex-factory rates

of first grade tiles of size 12”x8” were as high as Rs.155/- per box while M/s Star were

declaring MRP of Rs.100/- for their Ist grade i.e. STD grade. Thus the whole modus operandi

of evasion of central excise duty by way of gross-undervaluation is evident from the

documentary as well as oral evidences collected from M/s Amit Ceramics, Nashik.

6.1.1. The officers of DGCEI, Madurai visited 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 and conducted search under a panchnama dated

17.01.2008. Shri C. Rajasekaran, Manager of M/s. Glazeware was present during the

panchnama proceedings. The search resulted in recovery of certain documents and records

which appeared relevant for further investigation of the case against M/s. Star. 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.

6.2.1. The scrutiny of the invoices issued by M/s. Star during the period from 2004-05 to

2007-08 reveals that M/s. Star have not directly cleared any consignment of wall tiles to M/s.

Glazeware Trading Co., Madurai. However, it appeared that they have cleared two

consignments of wall tiles of 2,778 boxes of SILVER grade to M/s. Burma Hardware Store,

Pudukkottai and one consignment of SILVER grade tiles to M/s. Starwares, Arni during the

year 2007-08 through M/s. Glazeware Trading Co., Madurai.

6.2.2.1. 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 such as

M/s. Ocean, Anand, Himat, Opal, Kalyan, Manish, Santosh, Varmora brand 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.

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6.2.2.2 The right side of Page No. 17 of the said diary shows the details of cash payments

made by M/s. Glazeware to various tile manufacturers of Morbi, including M/s. Star. A scanned

image of the said page is shown below:

6.2.2.3. The above document indicates that out of the total cash amount of Rs.

5,43,000/- paid to different tile manufacturers, Shri C. Rajasekaran of M/s. Glazeware paid

cash amounting to Rs. 69,000/- to M/s. Star on 20.05.2007. The said payments were made

out of the cash amount of Rs.2, 93,950/- collected by Shri C. Rajasekaran from the buyers of

matches at Mehsana and other places on 20.05.07 and Rs.2,50,000/- collected from Shri

Arumughan of Madurai who is transferring cash amounts from Madurai to Ahmedabad. It is

clear that such cash payments are not reflected in the books of account of M/s. Glazeware

and M/s. Star and the same constitutes the undervalued cost of wall tiles cleared from the

factory of M/s. Star.

6.2.2.4. 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 Rajasekahran, which is discussed later in this part of the notice, he had 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. 69,000/- to M/s. Star.

6.2.2.5. 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:

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6.2.2.6 Shri C. Rajasekaran, owner of M/s. Glazeware in his statement dated 31.05.2008, which is discussed later in this notice, 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/-.

6.2.2.7 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:

zNo. 33

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Image No. 1

ImageNo.2

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6.2.2.8. 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. In few cases, the paid amounts were shown in 000’s. Thus the cash paid to M/s. Star on 19.07.2007 is written as Rs. 23,550/-, 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. M/s. Glazeware were also facilitating direct clearance of tiles to several buyers in the State of Tamil Nadu and as such the said quantity of tiles cleared to a particular dealer could not be matched with the invoices issued by the respective manufacturer. 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. Star, towards settlement of the undervalued cost of tiles cleared from their factories.

6.2.2.9. 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:

6.2.2.10.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. 20,000/- is payable to M/s. Star. Shri Rajasekaran in his aforesaid statement stated that the pending amount included both official invoice value as well as unofficial cash portion of their suppliers. 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.

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6.2.2.11. 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. Star is shown as Rs.20,000/-

6.2.3. Seized file Nos. 7 and 8 contain copies of central excise invoices issued by different tile manufacturers. Most of these invoices are attached with transport documents showing transportation of floor and wall 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 later in Para 12.4 of this notice.

6.2.4. 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 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.

6.2.5. One full truckload of consignment weighs 16 MTs. The weight per box of 12”x8” size wall tiles is Rs. 10 kgs. Thus one truck carrying full truckload of tiles could carry 1600 boxes of 12x8 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 Rs28/- for size 12x8 size wall tiles.

6.2.6. M/s. Star have cleared 1,028 boxes of SILVER grade wall tiles to M/s. Burma Hardware Store, Pudukkottai and 1,600 boxes of SILVER grade tiles to M/s. Starwares, Arni (T.N.) by declaring MRP of Rs.80/- per box. They have also cleared another consignment of 1,750 boxes of SILVER grade wall tiles to M/s. Burma Hardware Store, Pudukkottai with MRP of Rs.60/- per box. The tiles of the same quality were cleared at different MRP of Rs. 80/- and Rs.60/- per box. 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 SILVER grade of wall tiles at Madurai would be as under, if the said dealer was paying only amounts as per the invoices issued by M/s. Star:-

Sr. No

Description SILVER12”X8”

SILVER12”X8”

1 MRP declared in the invoice 80.00 60.002 Amount charged after 45%

abatement 44.00 33.00

3 Excise duty paid @ 8.24% 3.63 2.724 CST paid @ 3% 1.43 1.075 Freight paid @ Rs. 45,000/- per

container 28.00 28.00

6 Margin of profit @ 10% 7.70 6.487 VAT payable @ 12.5% 10.60 8.908 Cost of tiles at Madurai 95.36 80.17

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6.2.7. The above illustration makes it abundantly clear that the tiles of SILVER grade of size 12”x8” actually cost more than the MRPs declared by M/s. Star in their Central Excise invoices at the premises of their dealer at Madurai. They have declared MRPs of SILVER grade tiles of size 12”x8” as Rs.80/- and Rs.60/- per box while landed cost of such tiles at Madurai works out to Rs. 95.36 and Rs.80.17 per box, respectively. 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 Star, 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. Star in their central excise invoices were not actual.

6.3.1. A statement of Shri C. Rajasekaran, Manager of M/s. Glazeware was recorded on 17.01.2008 wherein he, inter alia, stated that he is looking after the day-to-day affairs of the said firm; that M/s. Glazeware were procuring floor tiles and wall tiles from different manufacturers of Bangalore, Hyderabad and Gujarat; and that presently were dealing in Anand, Manish, Star, Ocean, Varmora and Foram brands of tiles which they sell to various dealers and consumers across Tamil Nadu. He stated that the payments for the purchase of such tiles are made in both cheques and cash. He also stated that they have never paid any amount over and above the invoice value 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.

6.3.2. 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. Star. 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.

6.4.1. 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 purchase vitrified tiles only from M/s. Varmora Granito and do not purchase vitrified tiles from any other companies. They also do not purchase any wall tiles or floor tiles from any other group companies of Varmora Group and deal with only M/s. Varmora Granito. He named the suppliers of such floor tiles and wall tiles as 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, M/s. Star etc.

6.4.2. 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 Tamil Nadu. They sell tiles to both dealers as well as wholesale consumers. He was shown a chart prepared on the basis of the Central Excise invoices issued by M/s. Varmora Granito which indicate the details of VARMORA brand vitrified tiles purchased by M/s. Glazeware from the said company as under, and confirmed that they have so far purchased only these 4 consignments of vitrified tiles from M/s. Varmora.

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6.4.3 Shri Rajasekaran was shown the aforesaid panchnama dated 17.01.2008 wherein 502 boxes of VARMORA brand vitrified tiles were placed under seizure by the DGCEI officers on the ground that these tiles carried an MRP more than the MRP declared by M/s. Varmora Granito in their aforesaid Central Excise invoices. On being asked, he confirmed and admitted that the MRP which was affixed on the boxes containing the seized tiles was Rs. 280/-, Rs. 450/- and Rs. 590/-, as against the MRP of Rs. 200/-, Rs. 350/- and Rs. 490/- declared by M/s. Varmora Granito in their corresponding Central Excise invoices. These invoices were produced by him before the DGCEI officers during the panchnama proceedings. On being asked about the reasons for such difference in the MRP, he stated 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. On being again asked about the reasons for such variation in the MRP, 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.

6.4.4. 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 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. 6.4.5. 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. He was particularly shown the LRs and bills of M/s. Pushpak Logistics attached to all the invoices. After scrutiny of these documents, he stated that all transportation by containers was carried out by M/s. Pushpak Logistics and therefore, the bills of this company are in respect of such container transports. While transport by sea is for full container load of 28 MTs of tiles, transport by road in truck are for 16 MTs of tiles. Further, he stated that all the bills of the said M/s. Pushpak Logistics show the total transportation cost from Mundra to Tuticorin as Rs. 19,500/- maximum per consignment. Similarly, the LRs of various transporters available in these files indicate the freight amount ranging from Rs. 6,000/- to Rs. 16,000/- per truck load. In this regard, on being asked, he stated that he has got transported mostly half-container load of tiles by sea through M/s. Pushpak Logistics and hence their bills are for half load of 14 MTs of tiles. Now, on being asked about the per tonne rate for transporting by road and by sea, he stated that for transportation by sea the freight from Mundra or Kandla to Tuticorin is Rs. 2,300/- per MT and for transportation by road from Morbi to Madurai is Rs. 2,800/- per MT. Accordingly, 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, on being specifically asked, 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]. On being asked, 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. On being asked, he stated that

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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.

6.4. 6. 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.

6.4.7. He was also shown a LIC Diary No. 6 which was seized from his business premises and in token of having seen the same, he put his dated signature on the first and last page of the said diary. On being asked, he confirmed 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 further stated that he was also doing some business of trading matches manufactured by various manufacturers of Madurai and surrounding areas. He purchased assorted type of matches from the open market and sell the same to various parties situated in Mehsana, Sarkhej, Himatnagar etc. of Gujarat. Therefore, details of such business carried out by him for matches are also appearing in the said diary No. 6.

6.4.8. During the statement proceedings, the aforesaid seized diary was given page numbers serially, and Shri Rajasekaran was asked to explain the contents of each page of the said diary on the basis of such page numbers. Accordingly, he explained the contents of the said diary. Relevant portion of his statement is reproduced as under: -

“Page 1-2 : These pages indicate the details of addresses and contact number of the persons with whom I was doing business in matches.

Page-3 : On left side, details of supplies made by M/s. Anand Industries, Morbi to M/s. AGM Agencies, Annanagar, Madurai are written. I 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 me to obtain kutcha receipts from M/s. Anand Industries for these payments, and I have written these details for this purpose, during my 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-4 : Left side contains the details of price which I had finalized with M/s. Varmora Granito. The prices for premium grade was fixed as Rs. 30/- per sq.ft, standard at Rs. 27/- and commercial at Rs. 24/-. Thereafter, I have calculated the landed cost of such tiles at Madurai as Rs. 40.50, Rs. 37.30 and Rs. 34/- per sq. ft respectively for each of the 3 grades.

On the right side of Page-4, the rates obtained from Shri Harshad Patel of M/s. Regent Granito, Himatnagar are written. They are providing their tiles at Rs. 42/- per sq. ft. for premium and Rs. 37/- per sq. ft for standard grades at Madurai. I was comparing the rates of M/s. Varmora Granito with the rates of M/s. Regent.

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Page-5 : Left side shows the details of orders given to various companies of Morbi and the number of boxes ordered is written therein. On the right side, the details of cash collection of Rs. 65,000/- and Rs. 6,000/- from two parties of Ahmedabad against my supplies of matches to them. The said cash amount of Rs. 71,000/- was sent by me 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/- totalling Rs. 1,10,000/- to M/s. Himat Glazed Tiles on 17.03.2006 by angadia. This was done on my camp at Ahmedabad. Thereafter I 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 costings are written.

Page-8 : All details are regarding my matches business.

Page-9 : On right side, details regarding discussion of prices with Shri Bhaveshbhai of M/s. Varmora Granito are written. The price for premium grade vitrified tiles was given as Rs. 28/- per sq. ft. net and we added all expenses and taxes and the landed cost was worked out as Rs. 39.17 per sq. ft. Similarly, the net rate of standard grade was given as Rs. 26/-. For Terracotta and Jaisalmer series, Rs. 10/- and Rs. 20/- was to be added to the aforesaid rates.

Page-11 : On the right side, we have paid cash of Rs. 39,500/- to M/s. Vasant Ceramics on 22.04.2007 for their sanitary item supplies, out of which Rs. 19,500/- was collected by me from a buyer of matches at Wankaner. It also shows the details of cash payment of Rs. 28,080/- to Shri Pragjibhai of M/s. Kalyan Tiles on the same date. On the lower portion, receipt of cash of Rs. 70,800/- from an Idar based buyer of matches is written.

Page-12 : Details written on the right side are with regard to the collection of payments from Sarkhej party towards supply of matches.

Page-13 : on the right side of this page, the details of purchases which I had made from M/s. Foram Glaze Tiles on behalf of M/s. Sreenivasa, a dealer from Madurai are written. 1229 boxes of non-luster tiles @ Rs. 122.50, 200 boxes of

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special tiles @ Rs. 142.50 and 303 boxes of non-luster commercial tiles @ Rs. 112.50 totalling 1732 boxes at a total cost of Rs. 2,13,140/- was purchased on 17.05.2007 from the said company. On the side of these details the actual billing details for this purchase is written. The goods were dispatched by Truck No. TN-28-260 on 17.05.2007. Accordingly, the aforesaid 1229 boxes were shown in the bill for Rs. 70/- MRP, 200 boxes @ Rs. 80/- MRP and 303/- boxes Rs. 60/- MRP, thus the total bill value was Rs. 1,33,071/-. By showing a value of free sampling the bill was made for Rs. 1,74,671/-. The remaining amount of the aforesaid actual value was paid by me in cash to M/s. Forum Glaze Tiles.

Page-14 : All details written are regarding my business in matches except an order placed with M/s. Manish Industries is written on the right side.

Page-15 : All details are regarding my business in matches.

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 I was getting commission.

Page-17 : On the right side, the details of receipt of cash of Rs. 2,93,950/- from my buyers of matches at Mehsana and other places on 20.05.2007 are written. Thereafter, I have obtained Rs. 2,50,000/- at Ahmedabad through Shri Arumugham of Madurai who is transferring cash amounts from Madurai to Ahmedabad. Thus I was having a total cash of Rs. 5,43,950/- with me on 20.05.2007. Out of this amount, I have 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, I have paid Rs. 5,43,000/- personally to these parties.

Page-18 : On this page, an order given to M/s. Foram and M/s. Manish are written.

Page-19 : On this page, the details of my discussion with Shri Patchirajan, a dealer and Shri Vasant, another dealer both situated at Tuticorin. I have finalized the rates of Varmora tiles for supplying to these parties as Rs. 39/- per sq. ft for V-Series, Rs. 50/- for A-Series and Rs. 62/- per sq. ft for R-Series.

Page-20 : On the left side, the details of telephonic talk with Shri Punit of M/s. Varmora is written wherein he had given me 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.

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Page-21 : On this page, details of orders given to M/s. Manish, M/s. Santosh etc. are written.

Page-22 : On the left side, cash receipt of Rs. 68,250/- from a trader for matches in Himatnagar on 07.06.2007 is written. On the right side, details of an order confirmation for supply of 15000 sq. ft. of Varmora tiles @ Rs. 35/- ex-Tuticorin are written. Following confirmation from Varmora for supply of Rs. 24/- net, I have confirmed the order to Shri Parchi of Tuticorin for supplies, against payment of 50% immediate and 50% against delivery.

Page-23 : On the left side details of purchase made on 08.06.2007 from M/s. Manish for 1321 boxes @ Rs. 118/- and 348 boxes @ Rs. 108/- are written with the total value of purchase as Rs. 1,93,462/-.

Page-24 : Details of pending payments for matches supplies are written.

Page-25 : On the left side, rates of M/s. Foram are written. Page-26 : On right side, details of official and unofficial payments in

respect of the 3 purchases made by me 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 me 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-27 : On the left side, I have prepared the details of supplies made to M/s. KSMT Traders, Sheranmadevi for 789 boxes of floor tiles @ Rs. 210/- per box, 100 boxes of Antiskid floor tiles @ Rs. 200/- per box alongwith some sanitary items. Adding freight of Rs. 43,990/- and after deducting some cash discount etc. the final amount was fixed as Rs. 1,81,000/-. The floor tiles and antiskid tiles were purchased from M/s. Ocean Ceramics.

Page-28-30 : These are the details of matches supplies. Page-31 : Left side shows confirmation of payment of Rs. 60,000/- on

behalf of M/s. Varmora for advertisement display by Madurai Tiles Association. Right side shows details of collection and payment for matches

Page-32 : Left side shows dispatch details of 1900 boxes for a value of Rs. 1,98,709/- for Shri Srinivasan from M/s. Ocean Ceramics. Right side shows dispatch of 1593 boxes of tiles from M/s. Ocean for Shri Patchi, Tuticorin for a value of Rs. 1,68,277/-.

Page-33-37 : Miscellaneous details and details of match supplies. 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.

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41 : Details of orders and details of match business. Page-42 : Right side shows details of cash collected from matches

buyers. Page-43 : Left side shows details of an estimate given by me to M/s.

Annai Parasakthi, Karakudi for M/s. KKD, Madurai for 1335 boxes of STD grade and 396 boxes of COM grade tiles. Left column shows our estimated selling price of such tiles to this party, which the right side shows the price which is applicable if the tiles are directly dispatched from the factory in their name.

Page-45 : Shows details of matches payments received. Page-46-48 : Miscellaneous details of orders placed with various tile

manufacturers and details of business for matches. Page-49 : Left side of this page shows the details of cash payments

received by me 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 our firm to various companies of Morbi as on 19.09.2007. Accordingly, Rs. 8,60,000/- 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. 20,000/- to M/s. Star [border] totalling Rs. 26 lakhs was to be paid by us 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 us in Madurai on behalf of M/s. Varmora. This amount was deducted by us from the cash portion which was to be paid by us to them.

Page-51 : Right side shows the revised net rates of Varmora tiles, V-Series as Rs. 27/- Rs. 25/- and Rs. 22/- for premium, standard and commercial grades, Rs. 38/- and Rs. 36/- for terracotta premium and standard grades and Rs. 48/- and Rs. 36/- for premium and standard grades of jaisalmer tiles. All these are net prices per sq. ft. basis.

Page-52 : It contains details of cash collection for matches business. Page-53 : Left side contains a quotation given by me to M/s.

Patchirajan of Tuticorin for tiles of M/s. Manish and M/s. Santosh. Accordingly, the net ex-factory rate of 12x8 STD grade tiles of M/s. Manish was costing Rs. 90/- per box and

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Sil grade 8x8 tiles was quoted at Rs. 68/-, Rs. 60/- and Rs. 87/- per box. In these cases, freight was extra. Calculation shown below these figures indicates the landed cost of tiles at Tuticorin which was Rs. 145/- for luster tiles and Rs. 121/- for non-luster tiles. VAT and other charges are extra on these rates. Right side shows the details of cash in transit with Shri Ravi, LPL Transports, Narol, Ahmedabad. The said cash was handed over to him to transfer to Madurai.

Page-54 : This page shows misc details of orders placed with M/s. Santosh, M/s. Foram etc.

Page-55 : Right side bottom portion shows the details of cash amounts paid to different companies on 12.10.2007. Accordingly, I have 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.

Page-57 : On the right side ICICI Bank Account No. 624805010644 of M/s. Sagar Enterprises is written alongwith a fax No. 02822-22363. I was depositing cash amounts into the said accounts as the directions received from M/s. Opal, M/s. Sakar, The said fax number was given by M/s. Sakar Tiles.

Page-58-60 : My personal LIC policy details, sanitary details, etc. Page-78, 81 : Similar details for matches business.”

6.4.9.In token of his absolute confirmation of the facts explained by him as above, Shri Rajasekaran put his dated signature on each page of the said diary No. 6. On being asked, he stated that since he is having regular business of matches, he visited Gujarat atleast once in a month. Then he is collecting cash amounts in respect of the sales of matches from various traders situated in different parts of the State and out of such cash payments, he was handing over the cash amounts to the aforesaid manufacturers including M/s. Varmora Granito. 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.

6.4.10. 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. Varmora.

6.4.11.On being asked about the consumer sale price of various brands of tiles purchased by him as above, 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.

6.5. The above investigation from M/s. Glazeware conclusively establishes that M/s. Star was engaged in large-scale evasion of excise duty by undervaluation. The simple calculations reveal that they MRPs declared by them in the invoices were not even

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equivalent to the actual landed cost of tiles at the destination, even if the said dealer was not paying any cash to M/s. Star. 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.

7.1. The scrutiny of Central Excise invoices of M/s. Star revealed that they had sold wall tiles to M/s. Shreeji Marketing, Door No.11-15-10/A, Plot No.12, Doctor’s Colony, Opp: NTR Nagar, Vijayawada Road, Hyderabad. Therefore, an inquiry was conducted from the said dealer under the summons proceedings by recording statement of Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad.

7.2.1. A statement of Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad was recorded under Section 14 of the Central Excise Act, 1944 wherein he interalia stated that the above said firm is engaged in the trading business of ceramic tiles manufactured by different manufacturers of Gujarat; that being the partner of the said firm, he is looking after all the day today activities of the firm; and that they have purchased ceramic tiles mainly from the following suppliers of Gujarat:-

Sr.No. Name of the Manufacturer(i) M/s. Ajita Silchem, Kadi, Kalol (Brand Safari Gold)(ii) M/s. Sonata Ceramics Pvt. Ltd., Himatnagar(iii) M/s. Digital Ceramics Pvt. Ltd., Morbi(iv) M/s. Star Ceramic, Morbi (Brand Monalisa)(v) M/s. Glory Ceramics, Morbi(vi) M/s. Gladder Ceramics, Himatnagar(vii) M/s. Apex Ceramics, Morbi

7.2.2. He has further stated that they had purchased wall tiles from M/s. Star Ceramic at different point of time; that the tiles purchased from all the above manufacturers were of various designs and colours and of different grades; that almost all the tiles purchased by them from the aforesaid manufacturers were sold by them to sub dealers and retail buyers of Hyderabad; that they were placing the orders to the manufacturers for supply of ceramic tiles over phone to the Directors/Partners/Representatives of the manufacturers concerned; that the transportation of the goods from Morbi to Hyderabad was arranged by them; that they have utilized different transporters for transportation of goods from Morbi to Hyderabad; that the transportation freight from Morbi to their premises was borne by them; that the LRs were prepared by the transporters for about 50% to 60% of the actual freight paid by them; that the remaining freight amount, over and above the freight mentioned in the LRs were paid by them in cash to the transporters for which they have not kept any details and have not reflected in their books of accounts; that they have paid Rs.2,500/- per M.T. approximately; and that the freight per box for each size of tiles works out as under:-

Description of goods Freight per Box (Approx.)12”x12” floor Rs.20/- to Rs.25/-16”x16” floor Rs.22/- to Rs.28/-12”x8” wall Rs.20/- to Rs.25/-8”x8” wall Rs.20/- to Rs.25/-

7.2.3. He further stated that the pricelists available with them were destroyed by them; and

that their sale price was worked out as per the purchase price mentioned in the invoices

issued by the respective manufacturer and by adding the cost of transportation from Morbi to

Hyderabad, profit margin and VAT at the rate of 12.5%. He further stated that the profit

margin varies from Rs.5/- to Rs.10/- per box for wall tiles, depending upon the customer,

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terms of payment, quantity required and demand of the product; that the actual price which

they paid to the manufacturer was more than what manufacturers have declared in their

invoices and since their selling invoices were issued only for covering up the freight, VAT and

their profit margin, the remaining amount was collected in cash; that due to market compulsion

and general trade practice, the manufacturers had been suppressing the MRP and paying

less Central Excise duty and collecting the differential amount, over and above the bill amount

from them in cash; that the amount so collected in cash, over and above the bill amount, was

sent through angadias to all the above said tile manufacturers; that they were paying cash

amount, over and above bill amount, to M/s. Divya Engineering on behalf of M/s. Sonata

Ceramics; and that M/s. Divya Engineering and other angadias were not accounted for the

cash amount paid to them in their books of accounts.

Sr.No. Name of the Manufacturer Amount of Cash

paid (Rs.)

Name of the Angadia/person to whom cash over and above bill amount was paid

(iv) M/s. Star Ceramic, Morbi (Brand Monalisa) Rs.15/- to Rs.20/-

ANGADIAS:(i)M/s. New Payal & Co., Hayat Nagar, Hyderabad. Contact Person – Shri Lalit - Mobile No.9394203304(ii)M/s.J.J. Patel & Co., Near Radhika Talkies Contact Person – Shri Laljibhai, Phone No.040 65914523(iii)Ramesh Kanti, Begam Bazar, Hyderabad

7.2.4. He has further stated that they have never transferred cash amount through the accounts of finance firms in ICICI Bank; that they have not maintained any records of the cash amount transactions with the tile manufacturers; and that the cheque amount was deposited in their respective official bank accounts and cash amount, over and above the cheque amount, was sent through angadias to the above tile manufacturers by them.

7.3.1. Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad had stated that the cash amount, over and above invoice value, was handed over to Shri Lalit Kumar V. Patel, Partner of M/s New Payal & Co. Therefore, an inquiry was conducted from Shri Lalit Kumar V. Patel, Partner of M/s New Payal & Co., Hyderabad.

7.3.2. M/s New Payal & Co., Bhagyalata Bus Stop, Vijaywada Highway, Hyderabad (here-in-after referred to as “M/s New Payal.” for the sake of brevity) is cash collection Agent of different tile manufacturers including M/s. Star. Therefore, Partner of M/s New Payal & Co., was summoned by the officers of DGCEI on 19.12.08 and his statement was recorded under Section 14 of the Central Excise Act, 1944.

7.4.1. A statement of Shri Lalit Kumar V. Patel, Partner was recorded on 19.12.2008 wherein he, inter-alia stated that their firm is a trading firm engaged in the trading of Ceramic tiles manufactured by different manufacturers of Gujarat and other articles; and that they were purchasing tiles from local market and not purchasing directly from the manufactures.

7.4.2. He has stated that one and half year back, his business was not doing well and he was looking for a new avenue to earn money; that during his visit to Morbi, Gujarat, he came in touch with Shri Shaileshbhai Odhavjibhai Marvania, Proprietor of M/s. Shakti Enterprices, C/o. Sarvodaya Medicine, Ram Chowk, Sasur Plot, Morbi through one of his friend; that Shri Saleshbhai Odhavjibhai Marvania informed him that he was functioning as shroff for transferring cash amounts and suggested that as he was staying at Hyderabad, he could join them as their commission agent at Hyderabad; that Shri Shaileshbhai Odhavjibhai Marvania informed him that buyers/ depots/dealers/representatives of ceramic tiles located in various parts of the country were depositing cash, which was collected, over and above the invoice value, in the accounts of M/s Shree Maruti Enterprise and M/s

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Shree Bhagwati Enterprise; that thereafter, they were sending a copy of the relevant pay-in-slip by fax to the respective manufacturers, the manufacturers were then communicating the details of such cash deposits to him and providing him such fax copies of pay-in-slips; that these details were verified by him with the cash deposited in the respective bank accounts and after verification, the cash amount was withdrawn from the bank and sent to the respective manufacturers; that Shri Purshottambhai, a person of M/s Shree Martui Enterprise and M/s Shree Bhagwati Enterprise used to go to Morbi to disburse the cash to the respective manufacturers; that Shri Shaileshbhai Odhavjibhai Marvania wanted to make this transfer of cash more confidential and hence he requested him to act as his agent in Hyderabad and told him that he would pay a commission of Rs.100/- per Lac for collecting the cash from various dealers /depots of tiles and depositing the same in bank accounts of various finance firms which he would provide him from time to time; that he agreed to this business deal and thereafter, he (Shaileshbhai Odhavjibhai Marvania) provided him account Nos. of two firm namely M/s Shree Bhagwati Enterprises and Shree Maruti Enterprises through phone and asked him to deposit the unaccounted cash in such accounts.7.4.3. On being asked, he stated that the Ceramic tile manufacturers of Morbi used to contact Shri Shaileshbhai Marvania and provide him details regarding the unaccounted cash to be collected from the respective traders; that Shri Shaileshbhai Marvania then used to communicate on phone the respective traders and ask them to hand over unaccounted cash to him alongwith the name of the ceramic tile manufacturer to whom the cash belonged; that this cash was then deposited by him in the ICICI Bank accounts; that the cash was deposited by him in the accounts of M/s Shree Maruti Enterprise and M/s Shree Bhagwati Enterprise, account numbers and PAN Nos. of which were provided to him by Shri Shaileshbhai Marvania and he used to deposit the cash after deducting his commission; that after depositing the cash amounts in banks, he used to convey Shri Shaileshbhai Odhavjibhai Marvania about the amount of cash deposited by him and the name of the ceramic tile manufacturer to whom it was given.

7.4.4. On being asked, He stated that he deposited the cash amounts in the following accounts:-

Sr.No Account No. Bank Name Name of the Finance Firm

1 0-15305003457 ICICI M/s Shree Bhagwati Enterprises



4 0-15305003241 ICICI M/s Shree Bhagwati Enterprises5 0-15305003240 ICICI M/s Shree Bhagwati Enterprises6 0-15305006741 ICICI M/s Shree Maruti Enterprise

7 0-15305003505 ICICI M/s Shree Maruti Enterprise

7.4.5. On being asked, He stated that once the amount was credited in the bank account and confirmed by Shaileshbhai Odhavjibhai Marvania, he destroyed the Pay-in-Slips; that he has collected unaccounted cash on behalf of the following ceramic tile manufacturers from the various dealers such as M/s Shreeji Marketing, Hyderabad, M/s National Sanitary Depot, Hyderabad, etc.; that these cash amounts have been deposited by him in the ICICI bank accounts mentioned above in this statement; that the unaccounted cash collected and transferred by him to Shaileshbhai Odhavjibhai Marvania, belonged to the following ceramic tile manufacturers:

Sr.No. Name and Address of Ceramics Tile Manufacturer,1 M/s Digital Ceramics Pvt. Ltd., Morbi.2 M/s Star Ceramic, Morbi (Brand - Monalisa)3 M/s Glory Ceramics, Morbi,4 M/s Digital Ceramics, Morbi5 M/s Coral Ceramics, Morbi6 M/s Manish Ceramics (Industries), Morbi.

7.4.6. He further, stated that he had been depositing the unaccounted cash in the Vanasthalipuram branch of ICICI Bank and not kept any accounts regarding the amount of

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cash deposited, hence unable to tell about how much unaccounted cash was deposited by him for the above said tile manufacturers.7.5. The inquiry from Shri Lalit Kumar V. Patel thus reveals that the cash amounts, over and above invoice amounts, were collected by M/s. Star from their buyers through ICICI Bank accounts of the shroff firms’ viz., M/s Shree Bhagwati Enterprises, M/s Shree Maruti Enterprise etc.7.6.1. Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad had stated that the cash amount, over and above invoice value was handed over to Shri Laljibhai Motibhai Patel of M/s J.J.Patel & Co., therefore a summon was issued to Shri Laljibhai Motibhai Patel.7.6.2. M/s J.J. Patel & Co., 30-266/25, Opp. Bharat Petrol Bunk, Gokul Nagar, Sanikpuri, Secundrabad (here-in-after referred to as “M/s.J.J. Patel” for the sake of brevity) is cash collection Agent of different tile manufacturers including M/s. Star. Therefore, Shri Laljibhai Motibhai Patel, Proprietor of M/s. J.J. Patel was summoned by the officers of DGCEI on 29.12.08 and his statement was recorded under Section 14 of the Central Excise Act, 1944.7.7.1. A statement of Shri LaljibhaI Motibhai Patel was recorded on 29.12.2008 wherein he, inter alia stated that M/s. J.J. Patel & Co., is in existence since last four years; that previously he was serving at M/s Patel & Co., Allawal, Hyderabad. He was shown statement dated 19.12.2008 of Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad, recorded by the officers of DGCEI, Ahmedabad.7.7.2. He explained that Shri Babulal Dharamshibhai Patel and Shri Ganesh Dharmshibhai Patel, two real brothers, were previously working with M/s Patel & Co, the firm dealing with Ceramic Tiles; that few years back, Shri Babulal Dharamshibhai Patel had started his own business of Purchase and Sales of Ceramic Tiles; that he was also working with M/s. Patel & Co., and known to them. 7.8. The inquiry from M/s. J.J. Patel & Co. thus reveals that the cash amounts, over and above invoice amounts, were collected by M/s. Star from their buyers through ICICI Bank accounts of the shroff firms’ viz., M/s. Shiv Enterprise, M/s. Shiv Finance, M/s. Shree Bharat Enterprise etc. Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad in his statement has categorically mentioned that M/s. J.J. Patel & Co. was one of the angadia through which cash amounts over and above invoice amount pertaining to M/s. Star were being sent to them.8.1. As discussed in para 2 supra, the intelligence indicated that the manufacturers of ceramic tiles are removing finished goods from their registered factory premises by not declaring the actual MRP of their products in the Central Excise Invoices and consequently evading payment of duty of excise by determining a lower assessable value after availing abatement of 45% on such lower MRP. The differential amount, 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. 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, 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. 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. The most common method used for collection of cash amounts was through the bank accounts of ICICI, Indusind Bank, PNB etc. Shroffs opened bank accounts in different private banks, mostly ICICI Bank, in the name of large number fictitious 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 were 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.

8.2.1. The scrutiny of bank statements revealed that the accounts of M/s Shree Bhagwati Enterprise, M/s Shree Maruti Enterprise, M/s Ganesh Agency, M/s Balaji

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Enterprise and M/s Jay Enterprise, all of Rajkot were used for routing unaccounted cash from various locations in India to the several Ceramic Tile manufacturers, including M/s.Star Ceramic. Therefore, investigation was conducted from the shroffs who controlled the said accounts.

8.2.2. The premises of M/s Shree Bhagwati Enterprise and M/s Shree Maruti Enterprise both located at 1st Floor, Mahalaxmi Chambers, Danapith, Rajkot were searched by the officers of DGCEI, Ahmedabad on 22.01.2008 in presence of the proprietor of the firm, Shri Lalitbhai Asumal Gangwani. During the course of search, Shri Lalitbhai informed that M/s Shree Bhagwati Enterprise was established in 2001 and was engaged in cheque discounting and issuing Demand Drafts/Cheques against cash received from the Customers. He further informed that another firm in the name of M/s Shree Maruti Enterprise was also functioning from the same premises and that the said firm was also in the same business. During the course of search, certain records which were of evidential value against the Ceramic Tile manufacturers were found. These documents were segregated and seized for further investigation. The list of documents seized is appearing in Annexure A to the said panchnama. However, during the course of search, no records pertaining to M/s Shree Maruti Enterprise were found. On being asked about the whereabouts of the said records, Shri Lalitbhai A. Gangwani informed that Shri Sureshbhai of M/s Shakti Enterprise, Ram Chowk, Morbi had taken the same two three days back.

8.3.1. Statement of Shri Lalit Asumal Gangwani, Proprietor of M/s Shree Bhagwati Enterprise, Rajkot was recorded under Section 14 of the Central Excise Act, 1944 on 23.01.2008 wherein he inter-alia stated that he is the proprietor of M/s Shree Bhagwati Enterprise & M/s Shree Maruti Enterprise; that M/s Shree Bhagwati Enterprise was engaged in the business since the year 2001 and M/s Shree Maruti Enterprise was functioning since the year 2007. He further stated that both these firms are engaged in the business of cheque discounting, issuing cheques/DDs against cash to the customers and transferring cash from different locations in India to the respective Ceramic tile manufacturers in and around Morbi and are charging commission for the said services.

8.3.2. On being asked, he stated that for cheque discounting, were charging @ Rs.50/- per Rs.one Lakh and for issue of cheques against cash, were charging commission of Rs. 30/- per Rs. One Lakh. He further stated that for transfer of cash from different locations in India to the respective Ceramic Tile Manufacturers through their ICICI Bank Accounts, they were charging Rs. 300/- per Rs. One Lakh as commission; that Rs. 300/- included the commission charges of Rs. 200/- charged by ICICI bank Per One Lakh and Rs.30/- per One Lakh charged by the cooperative Banks.

8.3.3. On being asked regarding the whereabouts of the records of M/s Shree Maruti Enterprises, he stated that 2-3 days before the search, the same had been taken away by Shri Sureshbhai of M/s Shakti Enterprise, Ram Chowk, Morbi. On being asked, he further stated that Shri Sureshbhai/Shaileshbhai of M/s Shakti Enterprise, Ram Chowk, Morbi had introduced him to the business of transferring cash from different locations in India to the respective Ceramic Tile Manufacturers. On being asked, he stated that the records contained details regarding deposition of cash in their ICICI Bank accounts by the various customers of Ceramic Tiles.

8.3.4. He was shown ICICI Bank account statement in respect of account No 015305006741 of M/s Shree Maruti Enterprise for the period November 2007 to 21.01.2008. In token of having seen the same, he had signed on first and last page of the statement. On being asked, he stated that the deposits in cash in the above account were made by the customers of the following Ceramic tile manufacturers:

Sr.No. Name of Ceramics Tile Manufacturers.1 Italica Floor Tiles Ltd., Makansar, Morbi2 Maruti Gold Industries, Lalpar, Morbi3 Bhimani Industries, Makansar, Morbi4 Nice Ceramics Pvt.Ltd., Lalpar, Morbi5 Ramco Ceramics Limited, Dhuva, Morbi6 Deco Gold Glazed Tiles Ltd., Ghuntu Road, Morbi7 Decolite Ceramics Ltd, 8-A National Highway, Old Ghuntu Road,Morbi8 Gangotri Glazed Tiles, Dhuva , Wankaner, Morbi9 Vrundvan Ceramics Pvt.Ltd Pvt.Ltd, Dhuva, Wankaner, Morbi

10 Boss Ceramics, Rafaleshwar, Morbi11 Sobar Ceramics, Rafaleshwar, Morbi

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12 Major Ceramics, Lalpar road, Morbi13 Sogo Ceramics Pvt.Ltd., 8-A National Highway, Old Ghuntu Road, Morbi14 Sonica Ceramics, Lalpar, Morbi15 Sulzur Sanitoryware, Dhuva, Wankaner Road, Morbi16 Pengvin Ceramics, Dhuva, Wankaner17 Jayson Ceramics, Dhuva, Wankaner18 Sunshine Ceramics, Dhuva, Wankaner19 Varmora Granito Pvt.Ltd., Wankaner20 Star Ceramic, Morbi

8.3.5. He was shown statement of Account of ICICI Bank Account No 015305003241 in respect of M/s Shree Bhagwati Enterprise for the period May 2006 to July 2006. He put his dated signature on the same. On being asked, he stated that the said account had been closed on 10.08.06. He further stated that eventhough the account belonged to him, the same was operated by Dr. Paresh Patel, Amin Marg, Besides Peoples Bank, Rajkot and that he (Dr. Paresh Patel) would be the right person to provide information for the same.

8.3.6. He was shown copies of following documents: (i) Letter No INV/DGCEI/KRU/CE/12/2008-09 dated 18.01.08 of Assistant Director,

DGCEI, Kochi alongwith statement dated 17.01.08 of Assistant General Manager of M/s Varmora Granito, Morbi, Kochi Branch, and Statement dated 17.01.08 of Senior Sales Manager of M/s Italica Floor Tiles Ltd, Kochi Branch. The letter further informed deposition of cash in ICICI Bank Account No 015305006741 belonging to M/s Shree Maruti Enterprise;

(ii) Letter No IVN/DGCEI/KRU/CE/14/2008 dated 21.01.2008 of Assistant Director, DGCEI, Kochi informing deposition of cash of M/s Varmora Granito Pvt.Ltd in ICICI Bank Account No 015305006741 belonging to M/s Shree Maruti Enterprise;

(iii) Letter No IV/16-03/2008/prev dated 18.01.08 of the Assistant Commissioner (Preventive), Central Excise, Thiruvantpuram.

He admitted the facts narrated in the above mentioned documents and confirmed the fact that unaccounted cash was being deposited in ICICI Bank Account No 015305006741 belonging to M/s Shree Maruti Enterprise. He further admitted that the transactions of M/s Shree Maruti Enterprise were not declared to the Income Tax Department nor any returns were filed. The said transactions were not reported in his personal Income Tax return also.8.3.7. He was shown a statement dated 23.01.08 of Shri Mahesh A Gangwani Proprietor of M/s Balaji Agency, Rajkot. He perused the same and in token of having gone through the same, he put his dated signature on the said statement. He confirmed the fact that even though Shri Mahesh A Gangwani was a proprietor of M/s Ganesh Agency, 8 Lati Plot, Kuvadva Road, Rajkot , he (Shri Lalit Gangwani) was managing the affairs of the said firm. He further stated that M/s Ganesh Agency had two accounts in the ICICI Bank viz: account Nos. 015305005479 and 029605003954. On being asked, he stated that both the accounts had been closed on 06.10.07 and that he did not have any records relating to the various transactions shown in the above mentioned accounts. On being asked regarding the whereabouts of the said records, he stated that Shri Sureshbhai /Shaileshbhai of M/s Shakti Enterprise of Morbi were aware of the same.

8.3.8. On being asked to give details of residential address, phone numbers of Shri Sureshbhai, Shaileshbhai and Shri Kamleshbhai Vyas of M/s Shakti Enterprise, he deposed that he does not have such information; however their office was situated at Ram Chowk, Morbi. He further stated that the mobile number of Shri Sureshbhai was 9825342383.

8.4.1. Another statement of Shri Lalitbhai Ashumal Gangwani, Proprietor of M/s Shree Bhagwati Enterprise & M/s Shree Maruti Enterprise, was recorded on 17.03.08. Shri Lalitbhai Ashumal Gangwani has at the time of recording of the statement submitted a chart showing location wise details of cash deposited by various customers of Ceramic Tile manufacturers in ICICI Bank Account No. 015305003457 belonging to M/s Shree Bhagwati Enterprise and Account No. 015305006741 belonging to M/s Shree Maruti Enterprises.

8.4.2. On being asked, he stated that on request of Shri Mehulbhai Narsinhbhai Kalria, he had provided him Bank account No 015305003457 belonging to M/s Shree Bhagwati Enterprise alongwith the PAN No. as the same was to be provided to various Ceramic Tile Manufacturers based at Morbi. On being asked, he stated that the Ceramic Tile Manufacturers forwarded the account No. and PAN No. to their buyers/ depots/ dealers/ representatives located in various parts of the country for deposition of unaccounted cash in the said account and thereby facilitating the transfer of cash from such destinations to the respective ceramic tile manufacturer. He further stated that the cash which was deposited was

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later on withdrawn by him and handed over to the respective manufacturer. He further stated that the said account in ICICI Bank was opened by them for such exclusive use.

8.4.3. On being asked, he stated that as informed by Shri Mehulbhai Narsinhbhai Kalria, following Ceramic Tile manufacturers were getting the cash deposited in the account of M/s Shree Bhagwati Enterprise:-

Sr.No Name and address of the Ceramics Tiles manufacturers

1 M/s Face Ceramics Limited, Lakhdhirpur Road, Morbi 22 M/s Selvenia Ceramics Industries, Ghuntu Road Morbi 23 M/s Simco Tiles, Lakhdhirpur Road, Morbi 24 M/s Suzuki Ceramics, Ghuntu Road, Morbi 25 M/s Sogo Ceramics Pvt.Ltd., NH-8A, Ghuntu Road Morbi 26 M/s Solar Ceramics Industries(Rainbow), NH-8A, Dhuva, Wankaner 7 M/s Opera Ceramics, at Shanala, Tal.Morbi8 M/s Ornate ceramics Ltd., Shakat Sanala, Rajpur, Morbi9 M/s Opel Ceramics at Makansar, Tal.Morbi.

10 M/s. Star Ceramic, Morbi

8.4.4. On being asked about the disposal of the Cash deposited in the said account, he stated that Shri Mehulbhai Narsinhbhai Kalria, Proprietor of M/s Mehul Enterprise, residing at Sausar Plot, Main Road, Morbi (having contact No.223271 & Mobile 9825223388) used to come to collect the cash. This cash was later on disbursed by him (Shri Mehul N. Kalria) to the respective Ceramic Tile manufacturers based at Morbi. On being asked, he stated that an amount of Rs.5,06,03,480/- was deposited in Cash during the period 03.04.2007 to 22.01.2008 at various locations in India in their ICICI Bank Account No. 015305003457. This cash was deposited by the customers/representatives of manufacturers of Ceramic Tiles and subsequently collected by Shri Mehulbhai Narsinhbhai Kalria from M/s Shree Bhagwati Enterprise, Rajkot, for further disbursement to the respective ceramic tile manufacturer. On being asked, he stated that they had never dealt with any Ceramic Tile manufacturer directly and all the Transactions of Ceramic Tile manufacturers had taken place through Shri Mehulbhai Narsinhbhai Kalria and Shri Kamlesh Vyas, a person of M/s Mehul Enterprise.

8.4.5. On being asked as to why he had provided the names of Shri Sureshbhai/Shaileshbhai of M/s Shakti Enterprise in his earlier statement dated 23.01.2008, he clarified that Shri Sureshbhai/Shaileshbhai of M/s Shakti Enterprise were responsible for collection of cash and disbursement thereof from the account of M/s Shree Maruti Enterprise while Shri Mehulbhai Narsinhbhai Kalria and Shri Kamlesh Vyas of M/s Mehul Enterprise were responsible for collection of cash and disbursement thereof from the account of M/s Shree Bhagwati Enterprises.

8.4.6. On being asked, he stated that on request by Shri Shailesh Marvania or Shri Sureshbhai Marvania of M/s Shakti Enterprise, he had provided him Bank Account No 015305006471 belonging to M/s Shree Maruti Enterprise alongwith the PAN No. as the same was to be provided to various Ceramics Tile Manufacturers based at Morbi. These details were later on forwarded by the Ceramics Tile Manufacturers to their buyers/ depots/ dealers/ representatives located in various parts of the country for deposition of unaccounted cash in the said account and thereby routing the transfer of cash from such destinations to the respective ceramic tile manufacturer. The deposited amount was later on withdrawn in Cash and handed over to the respective manufacturer. He further stated that the said account in ICICI Bank was opened by them for such exclusive use.

8.4.7. On being asked, he stated that an amount of Rs.84,27,05,455/- was deposited in cash during the period May 2007 to January 2008 (except July 2007, as the details were not available with him) at various locations in India in ICICI Bank Account No. 015305006741 of M/s Shree Maruti Enterprise, Rajkot by the customers/representatives of the following Ceramic Tile manufacturers:-

Sr.No. Name and Address of Ceramics Tiles Manufacturer.1 M/s Soriso Ceramics Pvt.Ltd., Lakhdhir Road, Morbi 2 2 M/s Himsun Ceramics, Lalpar, Tal Morbi3 M/s Deepson Ceramics, Lalpar, Morbi,4 M/s Deco Gold Glaze Tiles Limited, Ghuntu Road, Morbi 25 M/s Vermora Granito Pvt.Ltd., N.H.8A, Dhuva, Wankaner 6 M/s Jayson Ceramics Dhuva, Wankaner

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7 M/s Sun Hill Ceramics Pvt.Ltd., Dhuva, Wankaner 8 M/s Sunshine Ceramics, Dhuva, Wankaner 9 M/s Sulzur Sanitary Ware, Dhuva, Wankaner

10 M/s Vrundavan Ceramics Pvt.Ltd., NH-8A, Dhuva, Wankaner 11 M/s Gangotri Glazed Pvt.Ltd, NH-8A, Dhuva, Wankaner 12 M/s Ganga Glazes Pvt.Ltd . 13 M/s Gokul Ceramics Pvt.Ltd., Dhuva, Wankaner 14 M/s Comet Ceramics Pvt.Ltd. at Jambudiya, Tal Morbi15 M/s Perfect Ceramics, NH-8A, Lakhdhirpur Road, Morbi,16 M/s Deco Light Ceramics Ltd., NH-8A, old Ghuntu Road, Morbi,17 M/s Sunbeam Ceramics Pvt.Ltd., at Dhuva, Wankaner , 18 M/s Ornate Ceramics Sanala ,Morbi,19 M/s Caption Ceramics P. Ltd., NH-8A, Dhuva, Lalpar, Morbi20 M/s Italica Floor Tiles Ltd. Makansar Morbi,21 M/s Gujarat Ceramics Tiles, NH-8A, opp. Omkar Petroleum, Lalpar, Morbi22 M/s Suncity Ceramics Trajpar Morbi,23 M/s Fresco Ceramics Pvt.Ltd., Ghuntu Road Morbi 224 M/s Maruti Gold Industries NH-8A, Omkar Petroleum Lalpar Morbi,25 M/s Priya Gold Ceramics at Lalpar Morbi ,26 M/s Sterling Glaze Tiles at Makansar Tal Morbi,27 M/s Opal Ceramics at Makansar Tal Morbi 28 M/s Ocean Ceramics Ltd. at Makansar Tal.Morbi29 M/s Nice Ceramics Pvt. Ltd. at Lalpar Morbi 230 M/s Boss Ceramics, NH-8A, Dhuva, Plot No.207/26 Rafaleshwar Morbi31 M/s Major Ceramic, Opp. Divyang Paper Mills, Lalpar Road, Morbi32 M/s Sonica Ceramics, NH-8A, Dhuva, Lalpar, Morbi 33 M/s Pengvin Ceramics, NH-8A, Bandhunagar, Morbi 34 M/s. Star Ceramic, Morbi

8.4.8. On being asked, he stated that Shri Shailesh Marvania or Shri Sureshbhai Marvania of M/s Shakti Enterprise, used to collect the cash from them on behalf of above named Ceramic Tile manufacturers. On being asked to provide the whereabouts of Shri Shailesh Marvania (Patel), Proprietor of M/s Shakti Enterprise, he stated that they were located at Ram Chowk and residing at Vivekanand Society, Patel Pan Gali, Rawapar Road, Morbi.

8.5.1. A statement of Shri Shaileshbhai Odhavjibhai Marvania, Proprietor of M/s Shakti Enterprise, C/o. Sarvodaya Medicine, Ram Chowk, Sausar Plot, Morbi and residing at Vivakanand Nagar, Ravapar Road, Morbi, was recorded on the 29th of May, 2008 under section 14 of Central Excise Act, 1944 wherein he inter-alia stated that he is running a proprietor ship firm in the name of M/s Sarvodaya Medicine situated at Ram Chowk, Sausar Plot, Morbi for selling medicines in retail to the customers. He further stated that since the medical store was not doing well and he was in shortage of income, he was looking for a new business; that a year back, his elder brother Shri Gopalbhai Odhavjibhai Marvania introduced him to Shri Lalitbhai Ashumal Gangwani of M/s Shree Bhagwati Enterprise and M/s Shree Maruti Enterprise, Rajkot. Shri Lalitbhai Gangwani informed him that buyers/ depots/ dealers/ representatives of ceramic tiles located in various parts of the country were depositing cash in the accounts of M/s Shree Maruti Enterprise and M/s Shree Bhagwati Enterprise; that thereafter, they were sending a copy of the relevant pay-in-slip by fax to the respective manufacturers; that the manufacturers were then communicating the details of such cash deposits to him and providing him such fax copies of pay-in-slips; that these details were verified by him with the cash deposited in the respective bank accounts and after verification, the cash amount was withdrawn from the bank and sent to the respective manufacturers; that Shri Purshottambhai, a person of M/s Shree Martui Enterprise and M/s Shree Bhagwati Enterprise used to go to Morbi to disburse the cash to the respective manufacturers.

8.5.2. He further stated that Shri Lalitbhai Gangwani wanted him to facilitate the disbursement of cash brought to Morbi by Shri Purshottambhai by remaining present during the disbursement of cash and keep the cash in case some cash remained to be disbursed. Thus, on the advice of Shri Lalitbhai Gangwani, he opened a firm named as M/s Shakti Enterprise. This firm did not have any account in any of the Bank. M/s Shakti Enterprise was required to collect the copies of pay-in-slips from the manufacturers, prepare a list of such cash deposits and provide the same to Shri Lalitbhai Ashumal Gangwani. Shri Lalitbhai Ashumal Gangwani used to verify the details of the list with the amount deposited in the accounts and after verification, used to send the cash along with list of the manufacturers to whom cash was to be disbursed. The cash which was brought by Shri Pursottambhai was

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disbursed by him in his (Shri Purshottambhai) presence and if any amount which remained to be paid to the manufacturers, the same was handed to him (Shri Shailesh O. Marvania) for disbursement at a later date. Later on, he used to disburse the cash and provide the details to Shri Lalitbhai Ashumal Gangwani. On being asked, he stated that for such services, he was being paid Rs. 8000/- per month.

8.5.3. He was shown the statements dated 23.1.2008 and 17.3.2008 of Shri Lalitbhai Ashumal Gangwani. He had gone through both the statements and put his dated signature on the same. On being asked, he once again confirmed that the cash which was deposited at various locations in the ICICI bank accounts was disbursed to the respective manufacturers in his presence.

8.5.4. On being asked to provide the names of the manufacturers to whom the cash was delivered during the period since opening of his firm M/s Shakti Enterprise, he stated that such details were already given by Shri Lalitbhai Ashumal Gangwani in his statements dated 23.1.2008 and 17.3.2008 and that the cash deposited belonged to the following manufacturers:-

Sr.No. Name and Address of Ceramics Tile Manufacturer.1 M/s Soriso Ceramics Pvt.Ltd., Lakhdhir Road, Morbi 2 2 M/s Himsun Ceramics, Lalpar, Tal Morbi3 M/s Deepson Ceramics, Lalpar, Morbi,4 M/s Deco Gold Glaze Tiles Limited, Ghuntu Road, Morbi 25 M/s Vermora Granito Pvt.Ltd., N.H.8A, Dhuva, Wankaner 6 M/s Jayson Ceramics, Dhuva, Wankaner7 M/s Sun Hill Ceramics Pvt.Ltd., Dhuva, Wankaner8 M/s Sunshine Ceramics, Dhuva, Wankaner9 M/s Sulzur Sanitary Ware, Dhuva, Wankaner

10 M/s Vrundavan Ceramics Pvt.Ltd., NH-8A, Dhuva, Wankaner 11 M/s Gangotri Glazed Pvt.Ltd., NH-8A, Dhuva, Wankaner12 M/s Ganga Glazes Pvt.Ltd. 13 M/s Gokul Ceramics Pvt.Ltd. Dhuva, Wankaner. 14 M/s Comet Ceramics Pvt.Ltd., at Jambudiya, Tal Morbi15 M/s Perfect Ceramics, NH-8A, Lakhdhirpur Road, Morbi,16 M/s Deco Light Ceramics Ltd., NH-8A, old Ghuntu Road, Morbi,17 M/s Sunbeam Ceramics Pvt.Ltd at Dhuva, Wankaner , 18 M/s Ornate Ceramics, Sanala, Morbi,19 M/s Caption Ceramics P. Ltd., NH-8A, Lalpar, Morbi20 M/s Italica Floor Tiles Ltd. Makansar, Morbi,21 M/s Gujarat Ceramics Tiles, NH-8A, opp. Omkar Petroleum, Lalpar, Morbi22 M/s Suncity Ceramics, Trajpar, Morbi,23 M/s Fresco Ceramics Pvt.Ltd., Ghuntu Road, Morbi 224 M/s Maruti Gold Industries, NH-8A, Omkar Petroleum, Lalpar, Morbi.25 M/s Priya Gold Ceramics at Lalpar, Morbi.26 M/s Sterling Glaze Tiles at Makansar, Tal Morbi,27 M/s Opal Ceramics at Makansar, Tal Morbi 28 M/s Ocean Ceramics Ltd. at Makansar, Tal.Morbi29 M/s Nice Ceramics Pvt. Ltd. at Lalpar, Morbi 230 M/s Boss Ceramics, NH-8A, Plot No.207/26, Rafaleshwar, Morbi31 M/s Major Ceramic, Opp.Divyang Paper Mills, Lalpar Road, Morbi32 M/s Sonica Ceramics, NH-8A, Lalpar, Morbi 33 M/s Pengvin Ceramics, NH-8A, Bandhunagar, Morbi 34 M/s. Star Ceramic, Morbi

8.5.5. On being asked to give details of documents maintained by him at the time of delivery of cash, he deposed that Shri Purshottambhai of M/s Shree Maruti Enterprise was keeping all the records in connection with cash deposited and distributed to the manufacturers. On being specifically shown last para of page No. 6 of the statement dated 23.1.2008 of Shri Lalitbhai Ashumal Gangwani, he stated that the contention of Shri Lalitbhai Ashumal Gangwani regarding bringing the documents of M/s Shree Maruti Enterprise during his visit to Rajkot two three days prior to 22.1.2008, was not correct, as whatever records maintained by them, were always in possession of Shri Purshottambhai of M/s Shree Maruti Enterprise.

8.6.1. A statement of Shri Mehulbhai Narshibhai Kalaria was recorded by the officer of DGCEI on 31.5.2008 under Section 14 of the Central Excise Act, 1944 wherein he interalia

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stated that he was proprietor of M/s Mehul Enterprise situated at Sausar Plot, Main Road, Nr. Juna Bus stand, Morbi. He further stated that M/s Mehul Enterprise was a shroff firm and it did not have any account in any of the Banks.

8.6.2. On being asked regarding his business, he stated that in the year of 2002, he worked for two years in a medical store viz: M/s Shivam Medical Store, Morbi which was owned by his uncle. There he came in contact with Shri Lalitbhai Ashumal Gangwani, owner of M/s Shree Bhagwati Enterprise, Rajkot, who proposed him to start a business, if he could open a shroff firm. Shri Lalitbhai explained that he (Shri Mehulbhai Narshibhai Kalaria) was to collect Demand Drafts from the various ceramic tile manufacturers in Morbi and get the same discounted at M/s Shree Bhagwati Enterprise. Apart from this, Shri Lalitbhai Ashumal Gangwani further explained to him that the cash of various Morbi based Ceramic Tile manufacturers which was deposited in the account of M/s Shree Bhagwati Enterprise, Rajkot was required to be disbursed to the respective ceramic tile manufacturers in Morbi and since he (Shri Mehulbhai Narshibhai Kalariya) was a local person, it would be feasible for him to disburse the cash. Shri Lalitbhai Ashumal Gangwani offered to give him commission for the above services. Accordingly, he opened a firm named M/s Mehul Enterprise in the month of July 2006. 8.6.3. On being asked, he stated that he got following commission for the services provided by him:

(i) In case demand drafts were to be discounted, he would collect Rs. 150/- per lakh from the concerned manufacturer, out of which, he had to give Rs. 50/- to Shri Lalitbhai Ashumal Gangwani and balance Rs. 100/- was to be retained by him.

(ii) In case of collection of cash from M/s Shree Bhagwati Enterprise, Rajkot and disbursement of the same to the respective ceramic tile manufacturers, he would collect a commission of Rs.400/- per Lakh from the manufacturer, out which, he will give Rs.300 to Shri Lalitbhai Ashumal Gangwani, and balance of Rs.100/- was retained by him.

8.6.4. On being asked, he stated that normally Shri Kamlesh Vyas was collecting cash from M/s Shree Bhagwati Enterprise, Rajkot and bringing it to Morbi, but sometimes he also went to collect cash. He further stated that he was paying Rs. 100/- per trip to Shri Kamlesh Vyas.

8.6.5. On being asked regarding the procedure adopted for Cash deposited in the account of M/s Shree Bhagwati Enterprise and disbursement thereof, he stated that buyers/ depots/ dealers/ representatives of ceramic tiles located in various parts of the country were depositing cash in the accounts of M/s Shree Bhagwati Enterprise. Thereafter, they were sending a copy of the relevant pay-in-slip by fax to the respective manufacturers. The manufacturers were then communicating the details of such cash deposits to him and providing him such fax copies of pay-in-slips. These details were then forwarded by him to Shri Lalitbhai Ashumal Gangwani, which were verified by him with the cash deposited in the respective bank accounts. After verification, the cash amount was withdrawn from the bank and sent to him through Shri Kamleshbhai Vyas for disbursement to the respective ceramic tile manufacturers. On being asked, he stated that once the cash was disbursed by him, he used to destroy all the records.

8.6.6. On being shown the statements dated 23.1.2008 and 17.3.2008 of Shri Lalitbhai Ashumal Gangwani, he gone through the same and in confirmation of the facts narrated by Shri Lalitbhai A Gangwani relating to his name and his firm, put his dated signature on the said statements.8.6.7. On being asked to provide the names of the manufacturers to whom the cash were delivered during the period since the opening of his firm M/s Mehul Enterprise, Morbi, he stated that the details had already been provided by Shri Lalitbhai Ashumal Gangwani in his statements dated 23.1.2008 and 17.3.2008 and that he totally agreed with the same. He confirmed that he disbursed cash to the following manufacturers:-

Sr.No Name and address of the Ceramics Tiles manufacturers

1 M/s Face Ceramics Limited, Lakhdhirpur Road, Morbi 22 M/s Selvenia Ceramics Industries, Ghuntu Road Morbi 23 M/s Simco Tiles, Lakhdhirpur Road, Morbi 24 M/s Suzuki Ceramics, Ghuntu Road Morbi 25 M/s Sogo Ceramics Pvt.Ltd., NH-8A, Ghuntu Road Morbi 2

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6 M/s Solar Ceramics Industries(Rainbow NH-8A, Dhuva, Wankaner 7 M/s Opera Ceramics at Shanala Tal.Morbi8 M/s Ornate ceramics Ltd.,Shakat Sanala, Rajpur, Morbi9 M/s Opel Ceramics at Makansar, Tal.Morbi.

10 M/s. Star Ceramic, Morbi.

8.6.8. He further stated that apart from the above manufacturers, he had also carried out transactions with M/s Swagat Ceramics whose name did not appear in above table. On being asked with regards to transactions with Deco group of Morbi through M/s Shree Bhagwati Enterprise, he stated that no transaction was handled by him on behalf of Deco Group with M/s Shree Bhagwati Enterprise but the same might have been carried out by Shri Shaileshbhai of M/s Shakti Enterprise, Morbi as he was dealing with Deco Group. 8.6.9. On being asked, he stated that he knew all the above manufacturers and in particular the persons who used to receive cash form him. He provided the names of the person alongwith manufacturer as follows:-

Sr. No

Name and address of the Ceramics Tiles manufacturers Name of the person

1 M/s Face Ceramics Limited, Lakhdhirpur Road, Morbi 2

S/ Shri Dhavalbhai Anilbhai / Manojbhai Kakasaniya

2 M/s Selvenia Ceramics Industries Ghuntu Road Morbi 2 S/Shri Kapilbhai, Manshukhbhai

3 M/s Simco Tiles Lakhdhirpur Road, Morbi 2 S/Shri Vishalbhai, Rameshbhai4 M/s Suzuki Ceramics Ghuntu Road Morbi 2 S/Shri Chandubhai , Prakashbhai

5 M/s Sogo Ceramics Pvt.LtdNH-8A, Ghuntu Road Morbi 2 S/Shri Rameshbhai Patel / Vinitbhai

6 M/s Solar Ceramics Industries(Rainbow) 8ANHway Dhuva, Wankaner Shri Kishorbhai

7 M/s Opera Ceramics, at Shanala Tal.Morbi Casual transaction hence, did not remember the name.

8 M/s Ornate ceramics Ltd., Shakat Sanala, Rajpur, Morbi Shri Sagarbhai Maniyarbhai

9 M/s Opal Ceramics at Makansar Tal.Morbi. Shri Arvindbhai/ Jaiprakashbhai 10 M/s. Star Ceramic, Morbi Shri Pravinchandrabhai

8.6.10. On being asked to give details of documents maintained by him at the time of delivery of cash, he stated that he used to write name of the manufacturer on the copy of Pay-in-slips which were being sent to him by the manufacturers. Such pay-in- slips used to be sent to Shri Lalitbhai Ashumal Gangwani for verification and withdrawl of the amount in cash. Thereafter, Shri Kamleshbhai Vyas was sent to M/s Shree Bhagwati Enterprise, Rajkot to collect cash. This cash was later on disbursed to the respective ceramic tile manufacturer. After disbursement of cash, the said pay-in-slips were destroyed as per instructions of the manufacturers.

8.6.11. As regards the demand drafts got issued from M/s Shree Bhagwati Enterprise against cash, he stated that he was getting instructions of the manufacturers regarding the name in whose favour the demand draft was to be issued from the cash balance available with M/s Shree Bhagwati Enterprise or from the cash given to him by that particular ceramic tile manufacturer. Accordingly, he used to prepare a voucher mentioning the amount and details of the person or firm in whose favour the Demand Draft was to be issued.

8.6.12. He was shown a worksheet prepared on the basis of files at S.Nos.A/4, A/13 and A/14 seized from the premises of M/s Shree Bhagwati Enterprise. He had gone through the same and explained the entries pertained to transactions undertaken through him or the person of the manufacturer for whom he was working. On being asked, he marked the entries where the transaction had taken place through him and put his dated signature on the said markings. Based on this, a separate work sheet was prepared for such entries and his clarification was taken and mentioned in the remarks column.

8.7.1. Another statement of Shri Lalit Asumal Gangwani was recorded on 3.6.2008 under Section 14 of Central Excise Act, 1944. Shri Lalitbhai Ashumal Gangwani while recording his statement dated 3.6.2008, was shown the following statements:

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(i). his earlier statement recorded on 17.03.2008 (ii). Statement of Shri Shaileshbhai Odhavjibhai Marvania of M/s Shakti Enterprise, Morbi

dated 29.05.2008, (iii). Statement of Shri Mehulbhai Narshibhai Kalaria of M/s Mehul Enterprise, Morbi dated

30.05.2008 (iv). Statement dated 31.05.2008 of Shri Thakarshibhai Premjibhai Kasundra of M/s Shree

Somnath Agency, Morbi He had gone through all the above statements and in confirmation to the details mentioned therein, he had put his dated signature on all the statements.

8.7.2. On being asked, he stated that he did not want to disclose the name of his employee Shri Purshottambhai on the day of recording his statement dated 23.01.2008 as Shri Purshottambhai was the person who used to carry cash alongwith details for disbursement of the same from Rajkot to Morbi. He further stated that since the cash was disbursed by Shri Purshottambhai in presence of Shri Shaileshbhai Odhavjibhai Marvania of M/s Shakti Enterprise, he had in his statement dated 23.01.2008 stated that the documents of M/s Shree Maruti Enterprises were taken away by Shri Shaileshbhai Odhavjibhai Marvania. Infact, the documents had been destroyed as it was a normal practice of destroying the documents after disbursement of cash.8.7.3. He was asked to give the details of all the Bank accounts of M/s Shree Bhagwati Enterprise, Rajkot which he was running alongwith the types of transactions made in each account. He gave the details as under:

Sr.No Account No. Bank

Name Remarks Purpose of Account

1 15305003457 ICICI

This account exclusively dealt with deposits by Customers of Morbi

based Ceramics Units

Amounts are transferred in to account no. 1770 with ICICI

Bank

2 15305001770 ICICI

This account used for getting DD issued

including Ceramic Units of Morbi

Since cash deposits/ withdrawal are high, this

account normally does not reflect cash transactions.

3 624805009250 ICICI



The Cheques are transferred from M/s Shree Maruti

Enterprise.

4 87010200015589 UTIThis account used for

getting DD / pay orders only



5 420200000985 DCB





6 0079-155019-060 Indusind





7 8312000000094 KMBL





8 87010200001328 UTIThis account used for




9 2914 UCO

For depositing cash and issuing cheque against

cash to the customers of Rajkot

Cash reduced in Rojmel

10 87010100245746 AxisThis account used for




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11 30269779825 SBI



12 1813

The Karur Vysya

Bank Ltd

For depositing cash and issuing cheque against cash to the customers

Cash generated and reduced in Rojmel

13 10570 Central Bank

For depositing cash and issuing cheque against cash to the customers

Cash generated and reduced in Rojmel

14 372320000629 HDFC





15 6076Vijay

Comm. Co. Bank

Cash withdrawn after transferring cheque. Cash Generated in Rojmel

16 8710200015589

Rajkot Commerc

ial Co.OP. Bank

Cash withdrawn after transferring cheques.DD discounted are deposited

in the Bank

Cash generated in Rojmel are used in DD Discounting and

payment to the Morbi Ceramic Tile Manufacturers through Shri Mehulbhai Narshibhai Kalariya

of M/s Mehul Enterprise

17 1456

Rajkot Peoples Co.Op.

Bank Ltd

Cash withdrawn after transferring cheques

DD Discounting. Cash Generated in Rojmel

18 294

Gondal Nagkrik Sahakari Bank Ltd

Cash withdrawn after transferring cheque




19 4635

The Co.Op. Bank of Rajkot

Cash withdrawn after transferring cheque. DD discounted are deposited

in the Bank




20 11094

Rajkot Nagrik

Sahakari Bank Ltd.

Cash withdrawn after transferring cheque. DD discounted are deposited

in the Bank




21 6163

Jivan Commercial co. Op Bank Ltd.

For issuing cheques against /Cash Cheque

As good as non functional account

8.7.4. On being asked to give the names of other firms, he was running for the above purposes, he provided the details as under.

(i) M/s Shree Maruti Enterprise: he is the Proprietor of the said firm. The firm was having only one account with ICICI Bank. Its Account No. was 015305006741. This

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account was exclusively used for depositing cash by the Customers (Located all over India) of Morbi based Ceramic Tile Manufacturers.

(ii) M/s Ganesh Agency, 10, Lati Plot, Rajkot: Eventhough the proprietor of this firm

was his younger Brother Shri Mahesh A. Gangwani, he was looking after the entire business activities of this firm. M/s Ganesh Agency is having an account in ICICI Bank. Its account No. is 15305005479. This account is exclusively used for depositing cash by the Customers (Located all over India) of Morbi based Ceramic Tile Manufacturers.

(iii) M/s Jay Enterprise, 10, Lati Plot, Kuvada Road, Rajkot: Eventhough the proprietor of this firm was his younger Brother Shri Mahesh A. Gangwani, he was looking after the entire business activities of this firm. M/s Jay Enterprise is having an account in ICICI Bank. Its account No. is 15305007637. This account is exclusively used for depositing cash by the Customers (Located all over India) of Morbi based Ceramic Tile Manufacturers.

8.7.5. On being asked to explain the disposal of Cash deposited by the customers of Morbi based Ceramic Tile manufacturers from all their firms, he stated that the Cash deposited in M/s Shree Bhagwati Enterprise ICICI Account No. 15305003457 was mostly transferred to their ICICI Bank account 15305001770 or in their other accounts with the cooperative banks. Once the amount was credited in the respective accounts, the same was withdrawn in cash.

8.7.6. He further stated that similarly in cases of M/s Shree Maruti Enterprise and M/s Ganesh Agency, the amount deposited in cash in their ICICI Bank Accounts was transferred to the account of M/s Shree Bhagwati Enterprise ICICI Account NO. 624805009250. Thereafter, the same was again transferred to the account in Co-operative Bank of M/s Shree Bhagwati Enterprise. Once the amount was credited in the respective accounts, the same was withdrawn in cash and disbursed to the respective Ceramic Tile Manufacturers located at Morbi/Himmatnagar.

8.7.7. On being asked, he further stated that during regular course of business in M/s Shree Bhagwati Enterprise, they used to receive cash against D.D. to be issued to the Customers. Thus, cash so available in the books was being given to Shri Shaileshbhai Marvania of M/s Shakti Enterprise for distribution to the respective tile manufacturers of Morbi whose customers have deposited cash at different locations in India in the account of M/s Shree Maruti Enterprise and M/s Ganesh Agency. As regards, M/s Jay Enterprise, cash was delivered directly by them to the respective tile manufacturers through their employees.

8.7.8. On being asked about what was the system of deposition and disbursement of such huge amount of cash deposited at various locations by the different customers of various Morbi Based Ceramic Units, he deposed that since ICICI bank was having a facility of deposition of cash in any part of the country, they had provided all the four ICICI Bank account Numbers of their firms alongwith their respective PAN numbers to various manufacturers of Ceramic tiles in Morbi and Himatnagar. These details were later on conveyed by these tile manufacturers to their customers for depositions of cash in these accounts. The cash was deposited in these accounts, through Pay-in-slips. Once the cash was deposited in the account, the depositor used to fax the said Pay-in-slips to the manufacturer. The manufacturer would then provide the copies of such Pay-in-slips to Shri Shaileshbhai or Shri Mehulbhai on day to day basis. Based on these copies of pay-in-slips, Shri Shaileshbhai or Shri Mehulbhai used to prepare a list showing deposition of cash at a particular location and send the same to him for verification and withdrawl of cash. After verification of the pay-in-slips with the account statements, cash was withdrawn from the bank and sent along with list indicating amount to be distributed to Morbi through Shri Purusottambhai. After completion of the transaction, records related to distribution of cash were destroyed as per the instructions of the manufacturers.

8.7.9. He further stated that sometimes the manufacturers wanted demand drafts to be issued to a particular raw material supplier. In such cases, they used to issue demand drafts from the cash balance of the said manufacturer available with them.

8.7.10 On being asked to provide the names of the manufacturers for whom they had collected the cash through bank Accounts of his firms and paid to the tile manufacturers or their suppliers of raw materials. He provided the names of each manufacturer on whose account cash amount was deposited in the accounts of each firm controlled by him as under:

(I) M/s Shree Bhagwati Enterprise:-

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Sr.No. Name and address of the Ceramics Tiles manufacturers

1 M/s Face Ceramics Limited, Lakhdhirpur Road, Morbi 22 M/s Selvenia Ceramics Industries, Ghuntu Road, Morbi 23 M/s Simco Tiles, Lakhdhirpur Road, Morbi 24 M/s Suzuki Ceramics, Ghuntu Road, Morbi 25 M/s Sogo Ceramics Pvt.Ltd., NH-8A, Ghuntu Road, Morbi 26 M/s Solar Ceramics Industries(Rainbow), NH-8A, Dhuva, Wankaner 7 M/s Opera Ceramics at Shanala, Tal.Morbi8 M/s Ornate ceramics Ltd., Shakat Sanala, Rajpur, Morbi9 M/s Opal Ceramics at Makansar, Tal.Morbi.

10 Deco Group of companies, Morbi11 M/s Swagat Ceramics, Morbi12 M/s Star Ceramic, Morbi13 M/s Land Mark Ceramics, Morbi14 M/s Comet Ceramics, Morbi15 M/s Square Ceramics , Morbi16 M/s Samay Tiles Ltd. , Morbi17 M/s Sapphire Ceramics, Morbi

(II) M/s Shree Maruti Enterprise, Jay Enterprise & M/s Ganesh Agency :-

Sr.No. Name and Address of Ceramics Tiles Manufacturer.1 M/s Soriso Ceramics Pvt.Ltd., Lakhdhir Road, Morbi 2 2 M/s Himsun Ceramics, Lalpar, Tal Morbi3 M/s Deepson Ceramics, Lalpar, Morbi,4 M/s Deco Gold Galze Tiles Limited, Ghuntu Road Morbi 25 M/s Vermora Granito Pvt.Ltd N.H.8A, Dhuva, Wankaner 6 M/s Jayson Ceramics Dhuva, Wankaner 7 M/s Sun Hill Ceramics Pvt.Ltd Dhuva, Wankaner 8 M/s Sunshine Ceramics Dhuva, Wankaner 9 M/s Sulzur Sanitary Ware ,Dhuva, Wankaner

10 M/s Vrundavan Ceramics Pvt.Ltd ,NH-8A, Dhuva, Wankaner 11 M/s Gangotri Glazed Pvt.Ltd, NH-8A, Dhuva, Wankaner 12 M/s Ganga Glazes Pvt.Ltd , 13 M/s Gokul Ceramics Pvt.Ltd. Dhuva, Wankaner 14 M/s Comet Ceramics Pvt.Ltd at Jambudiya Tal Morbi15 M/s Perfect Ceramics NH-8A, Lakhdhirpur Road Morbi,16 M/s Deco Light Ceramics Ltd NH-8A, old Ghuntu Road Morbi,17 M/s Sunbeam Ceramics Pvt.Ltd at Dhuva, Wankaner , 18 M/s Ornate Ceramics Sanala ,Morbi,19 M/s Caption Ceramics P. Ltd NH-8A, DhuvaLalpar Morbi20 M/s Italica Floor Tiles Ltd. Makansar Morbi,21 M/s Gujarat Ceramics Tiles, NH-8A, Opp. Omkar Petrolium Lalpar Morbi22 M/s Suncity Ceramics Trajpar Morbi,23 M/s Fresco Ceramics Pvt.Ltd., Ghuntu Road, Morbi 224 M/s Maruti Gold Industries, NH-8A, Omkar Petroleum, Lalpar, Morbi,25 M/s Priya Gold Ceramics at Lalpar, Morbi ,26 M/s Sterling Glaze Tiles at Makansar, Tal Morbi,27 M/s Opal Ceramics at Makansar, Tal, Morbi 28 M/s Ocean Ceramics Ltd., at Makansar, Tal.Morbi29 M/s Nice Ceramics, Pvt. Ltd., at Lalpar, Morbi 230 M/s Boss Ceramics, NH-8A, Dhuva, Plot No.207/26, Rafaleshwar, Morbi31 M/s Major Ceramic, Opp.Divyang Paper Mills, Lalpar Road, Morbi32 M/s Sonica Ceramics, NH-8A, Dhuva, Lalpar, Morbi 33 M/s Pengvin Ceramics, NH-8A, Bandhunagar, Morbi 34 M/s Simco Ceramics, Morbi35 M/s Famous Ceramics, Morbi36 M/s Marsal Ceramics, Morbi37 M/s Sagun Ceramics, Morbi38 M/s Diveyash Ceramics, Morbi39 M/s Swagat Ceramics, Morbi40 M/s Star Ceramic, Morbi41 M/s Cyber Ceramics, Morbi42 M/s Gladder Ceramics , Himatnagar43 M/s Aakash Ceramics , Mansa

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44 M/s Seron Ceramics Pvt.Ltd., Morbi45 M/s Ambani Ceramics, Morbi

8.8.1. Another statement of Shri Lalitbhai Ashumal Gangwani, Proprietor of M/s Shree Bhagwati Enterprise and M/s Shree Maruti Enterprise was recorded on 11.06.08. He was confronted with his earlier statement dated 23.01.08 wherein he deposed that shroff firm M/s Balaji Enterprise was owned by Shri Dr.Paresh Patel. He admitted his mistake that it was a wrong statement and further clarified that in fact he owned M/s Balaji Enterprise, at 10, Mahalaxmi Chambers, Danapith, Rajkot, having its bank account No. 015305005232 in ICICI Bank. He further deposed that the said firm was also engaged in the same activities as in the case of M/s Shree Bhagwati Enterprise, M/s Shree Maruti Enterprise, M/s Jay Enterprise and M/s Ganesh Agency.

8.8.3. Shri Lalitbhai Ashumal Gangwani was further confronted with his statement dated 23.01.08, wherein he stated that the ICICI Bank account 015305003241 of M/s Shree Bhagwati Enterprises was operated by Dr. Paresh Patel. He was also shown statement dated 17.03.08 of Dr. Paresh Patel, wherein he denied to have operated account NO. 015305003241 of M/s Shree Bhagwati Enterprise. On being asked, he deposed that though Dr. Paresh Patel in his statement dated 17.03.08 denied to had operated any account of M/s Shree Bhagwati Enterprise, he (Shri Lalitbhai Ashumal Gangwani) firmly stated that it is a fact that the ICICI Bank account No 015305003241 of M/s Shree Bhagwati Enterprises was opened by him, however, the same was operated by Dr. Paresh Patel. The said account was never reflected in the books maintained by his firm M/s Shree Bhagwati Enterprise.

8.8.4. Dr. Paresh Dhanjibhai Patel and Shri Bharatbhai Ihswarbhai Patel in their statements dated 17.03.08 and 04.03.08 respectively stated that they were discounting their cheques at M/s Shree Bhagwati Enterprise. Shri Lalitbhai Ashumal Gangwani was shown these two statements and after going through the said statements, he put his dated signatures on both the statements. He confirmed that they were sending cheques from their various firms having account in ICICI Banks for discounting in M/s Shree Bhagwati Enterprise. M/s Shree Bhagwati Enterprise used to deposit these cheques in its cooperative banks. These cheques are accounted in their books maintained by M/s Shree Bhagwati Enterprise.

8.8.5. He was shown statement dated 11.05.08 of Shri Prakash Kishanchand Gangwani, Proprietor of M/s Khodiyar Agency and other firm operated by Shri Prakash Kishanchand Gangwani. After having gone through said statement, understanding the contents of the same, he put his dated signature on the same. He deposed that Shri Prakash is his nephew; that he introduced him to the Ceramics Tile manufacturers/ their representatives for carrying out the activities narrated by Shri Prakashbhai in his statement; that he admitted that Shri Prakash Kishanchand Gangwani used to send cheques of ICICI bank for discounting in M/s Shree Bhagwati Enterprise; that he used to deposit such cheques in their Co-operative bank account; that he used to give cash against such cheques by discounting the same; that the cash was available in M/s Shree Bhagwati Enterprise as it was their regular business to get Demand drafts issued against Cash received from their customers who were other than related to above mentioned ceramic tile manufacturers; that the deficit cash was being managed by withdrawal from the Co-operative banks.

8.8.6. On being asked with regards to the entries related to cheque discounting in their books of accounts of M/s Shree Bhagwati Enterprise, he deposed that entries of such discounting were shown on the right side Rojmel i.e cash book. On being asked with regards to the names of the shroffs who were sending cheques/Drafts for discounting, he deposed that names of the shroffs who had sent cheques for discounting were available on the right side of the Rojmel of the respective years.

8.8.7. On being asked, he stated that following shroffs were regularly sending cheques/ drafts for discounting in M/s Shree Bhagwati Enterprise:-

Sr.No Name of Shroff Instruments sent for discounting.

Place

1 Vinayak Enterprise Cheque Rajkot2 Somnath Enterprise Demand Drafts-Bearer demand

DraftMorbi

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3 Shyam Enterprise Cheque Morbi4 Siddhnath Enterprise Cheque Rajkot5 Jyoti Commercial Services Demand Drafts-Bearer demand

DraftThangadh

6 Shakti Enterprise Demand Drafts-Bearer demand Draft

Morbi

7 Mehul Enterprise ( Kamlesh Vyas)

Demand Drafts-Bearer demand Draft

Morbi

8 Khodiyar Agency/KR Agency

Cheque Rajkot

9 Balaji Agency Cheque Rajkot10 Shree Maruti Agency Cheque Rajkot11 Ganesh Agency Cheque Rajkot12 Shiv Finance/ Enterprise Cheque Rajkot13 Rachna Enterprise Cheque Rajkot14 Shree Eharat Enterprise Cheque Rajkot15 Mehak Enterprise Cheque Rajkot16 Eagle & co. Cheque Rajkot17 Yesh Enterprise Cheque Rajkot18 Shyam Agency Cheque Rajkot19 Shree Ram Enterprise Cheque Rajkot20 Jagani & Co. Demand Drafts-Bearer demand

DraftRajkot

8.8.8. On being asked as to who were the shroffs, discounting the Demand Drafts of Morbi based Ceramic Tile Manufacturers, Shri Lalitbhai Ashumal Gangwani referring the above table, deposed that M/s Somnath Agency, M/s Mehul Enterprise (Kamlesh Vyas), M/s Shakti Enterprise, Morbi based shroffs used to discount bearer demand drafts which were pertaining to Ceramic Tile Manufacturers; that discount vouchers were filled in with the name of respective shroff and draft particulars.

8.8.9. On being asked with regards to remaining shroffs referred in the table above, he deposed that they were engaged in transfer of cash from the Customers of Ceramic Tile Manufacturers and its delivery to the concerned manufacturers; that they were not having account in Co-operative bank. (Except M/s Siddhnath Enterprise and M/s Balaji Agency); that withdrawal to them from their ICICI bank is subjected to BCTT charges @ Rs. 100/- per lakh; that if they discounted with him, he used to charge @ Rs. 50/- per lakh only. Thus were benefited. Moreover, M/s Shree Bhagwati Enterprise, was receiving huge amount of cash from local traders/ manufacturers for getting Demand drafts, the reason being that most of the banks are charging @ Rs. 200/- per lakh for cash deposits, whereas they issued drafts against cash deposited with them by charging @ Rs. 100/- per lakh only. Thus it created huge cash flow in their books. This cash they utilized towards the payment to the Ceramics Tile Manufacturers whose customers have deposited the cash in to their various ICICI bank Accounts.

8.8.10. He was asked as to why the names the customers of Ceramic Tile Manufacturers are not reflected in their cash books. However, in the cash books, deposits on the right side (meant for disposal of cash) ICICI bank account No 015305003457, 015305001770, 624805009250 reflect cash deposits but no corresponding names of depositors were reflected in the Rojmel on respective dates. He admitted that the cash deposited by the customers of Ceramic Tile Manufacturers located at all over India were not to be reflected in the books as per the instructions of Manufactures; that the cash against the deposits which were to be delivered to the manufacturers were also not to be shown in their books; that the cash received by them against issue of demand drafts are adjusted in the cash book. Similarly, the delivery of cash to the Ceramic Tile Manufacturers is also not reflected in the Rojmel/cash book and was adjusted against deposits shown in ICICI bank account. In fact, whatever deposits shown in ICICI Bank account in Rojmel were delivered to Morbi based tile manufacturers on the dates shown in the Rojmel, however names were not reflected in Rojmel.

8.8.11. The scrutiny of the documents recovered from the dealers of tiles revealed that the cash amounts were deposited in two other Accounts in ICICI Bank viz: Account Nos. 015305001770 and 624805009250 of M/s Shree Bhagwati Enterprise. On being asked with regards to the cash deposits by the customers of ceramic tiles in the ICICI Bank account No. 015305001770 and Account No. 624805009250 of M/s Shree Bhagwati Enterprise, he deposed that in his statement dated 03.06.08 in Answer No 1 reflecting bank account at Sr.No. 2 & 3, cash deposits by the Customers of Ceramic tile manufacturers were not

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mentioned by him. However, the cash was also being deposited in the said accounts of ICICI Bank and requested to modify his answer accordingly.

8.11.1. Statement of Shri Mahesh Ashumal Gangwani, Proprietor of M/s Balaji Agency, 10, Ruparale Chambers, Danapith, Rajkot was recorded by the officers of DGCEI on 23.1.2008 under Section 14 of the Central Excise Act, 1944 wherein he interalia deposed that their firm is engaged in the business of shroff and its main business is cheque/Demand draft discounting i.e. to give cash against Cheques/Demand Drafts to the customers; that they charge Rs.50/- per lakh for such discounting; that they are also issuing Pay orders, Cheques, Demand Drafts from their banks to the customers who bring cash; that they charge Rs.50/- per lakh for said services; that he commenced the business on 20.07.2007 at the above address; that his PAN No is ADPMG8269L; that he is also running one other firm viz M/s Bhagwati Cattle Feed, engaged in the business of cattle feed. He interalia deposed that M/s Balaji Agency is not at all dealing with Ceramic Tile Industries.

8.11.2. On being asked about the customers who wanted to deposit cash in the above accounts, he deposed that the customers of above said firms are situated at different locations like Ahmedabad, Hyderabad, Kolkota, Ahmednagar, Banglore, Goa, Mumbai, Baroda, Indore, Chittore-Rajasthan, Gawhati, Karnataka, Thaltej – Maharashtra; that apart from these places, their customers may have been located at any place, however he did not remember the same; that he had given the ICICI Bank account Numbers of their firms to Shri Bharat G Aghara, who may have transmitted the same to the customers of the above said manufacturers; that cash was deposited in their bank accounts mainly from above mentioned places; that as and when cash was deposited in the said accounts at various places, Shri Bharat G Aghara was contacting him for withdrawing cash from ICICI Bank and as per the requirements, he used to withdraw the cash by self cheques and handing over the cash so withdrawn to him. He further deposed that as and when cash is to be withdrawn from the aforesaid bank accounts, he used to transfer the same first in to the four savings accounts of a person named Shuresh Virumal Rangkor, who is his maternal uncle and subsequently withdrawn from these savings accounts; that the reason for such an arrangement was that if the cash is withdrawn from the current accounts of ICICI Bank, the bank was charging Rs. 100/- per lakh whereas they get commission of only Rs. 50/- per lakh and hence they were losing money; that if the cash is withdrawn from the savings account, no charge is payable by them; that he was keeping cheque books and ATM cards of Suresh V. Rangkor for his four savings accounts with him. He further stated that these accounts are closed on 10.1.2008.

8.11.6. On being asked about the records related to deposits of cash and its distribution, he deposed that from the process of transaction it is seen that the cash was being deposited from different places by different parties, pay-in-slips were remaining with them and not with him, and he was withdrawing cash from the account of Shri Suresh V. Rangkor by self cheques. Therefore, he did not maintain any other documentary records. Meaning thereby that the details of cash deposits and its withdrawal can be found out only from his seven current accounts and four savings accounts of Suresh V. Rangkor. Since such transactions took place four months back, he did not keep the other accounts books for the same. On being asked about the name of the persons of the manufacturers to whom cash was delivered, he deposed that he did not know any of the persons of Ceramic tile Manufacturers of Morbi. However, the names of the manufacturers were given by him as per the discussions that he had with Shri Bharat G Aghara through whom these transactions had taken place. 8.11.7. He produced a Bank Account statement of ICICI Bank in respect of M/s Sonu Enterprise. On perusing the said account statement, he was asked in respect of some of the transactions appearing in the name of M/s Balaji Agency. In this regard, he explained that the same are related to requirement in the business. The detailed explanation for transactions in all the above accounts can be taken only from Shri Bharat G Aghara. He was shown ICICI Bank account statement in respect of M/s Ganesh Agency, 8, Lati Plot, Ramdev Trading Co., Rajkot which was obtained from ICICI Bank Ltd, JMC House, Ahmedabad. The said Bank Account Statement was seen by him and he put his dated signature on the same. On being asked to explain the details contained therein, he stated that as he was not looking after this account, the information in this regard could be obtained from his elder brother Shri Lalitbhai A Gangwani who is running two firms viz. M/s Shree Bhagwati Enterprise and M/s Shree Maruti Enterprise. 8.12.1. From the above investigations, it is proved beyond any doubt that Shri Lalit Ashumal Gangwani had played a vital role for mobilizing huge amount of illicit cash which was deposited at the various locations by the Customers of various Ceramic Tile manufacturers and managed delivery of the same to the respective manufacturer. He in connivance with various manufacturers and so called shroffs of Morbi, masterminded a fool proof design for the mobilization of huge cash by using multi location network provided by the ICICI Bank to their Customers. He opened / operated seven ICICI Bank accounts for the mobilizing cash

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deposited at various locations by the customers of Ceramic Tile Manufacturers. He also used various Cooperative Bank accounts for withdrawal of cash and distribution of the same to the manufacturers against the deposits by their customers. However, names of customers who had deposited the cash in the ICICI Bank and names of manufacturers to whom cash was delivered, were not shown in their cash book and he concealed the identity of depositors and receivers of the cash. Shri Lalitbhai Ashumal Gangwani used 9 bank accounts for transfer of cash from the buyers of tiles to the manufacturers. As per the bank account statements provided by ICICI Bank Ltd., the amounts deposited in each account during the period indicated in Column No. 4 is also given in Column No. 5 of the following table:-

Sr. No.

Name of the Shroff

firmICICI Bank

Account No.

PeriodAmount deposited as per Bank

statementFrom To

1Shree Maruti Enterprise

01530500674121.12.2006 21.12.2007 924379998

22.12.2007 19.01.2008 137814244

2Shree Maruti Enterprise

015305003505 7.11.05 22.7.05 303254285

Total 1365448527

3Shree Bhagwati Enterprise

015305003457

26.10.2005 26.10.2006 333496340

27.10.2006 27.10.2007 246227947

27.10.2007 17.03.2008 87755648

Total 667479935


015305001770

03.09.2004 03.09.2005 38113973

04.09.2005 04.09.2006 6219958304.09.2006 01.09.2007 11580570

Total 111894126


015305009250 07.02.2005 31.01.2006352918576

015305009250 01.02.2007 21.01.2008 47415750

015305009250 01.02.2008 31.01.2008 2310026

Total 402644352

6 Ganesh Agency 015305005479

22.06.2006 31.05.2007925802633

01.06.2007 04.10.2007 70789964

Total 996592597

7 Jay Enterprise 015305007637 14.07.2007 24.01.2008 35917884

Total 35917884

8 Balaji Enterprise 015305005232

08.05.2006 08.05.2007 32915510409.05.2007 22.06.2007 5185308

Total 3343404129 Shree 624805011746 15.3.07 2.2.08 451662795

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Ram Enterprise

Grand Total4365980628

8.12.2. It is evident from the above table that an amount of Rs.436.60 Crores was deposited by the dealers of Ceramic Tile manufacturers in aforesaid nine bank accounts operated by Shri Lalit Ashumal Gangwani. The extent of undervaluation of tiles and generation of black money is evident from the amounts deposited in aforesaid seven bank accounts. In addition, Shri Lalit Asumal Gangwani also discounted bearer demand drafts sent by the dealers of ceramic tiles to the manufacturers for the amounts over and above the invoice amounts. Such bearer demand drafts sent by the dealers were given by the manufacturers to the raw material suppliers, transporters, etc because the manufacturers obtained bills for raw materials, freight, etc at lower rates to justify lower MRP declared by them.

8.13.1. As discussed in para 3.2.4 supra, Shri Lalit A. Gangwani categorically stated that his Account No.015305006741 of M/s Shree Maruti Enterprise, No.15305003241 of M/s.Shree Bhagwati Enterprise and No.015305005479 of M/s. Ganesh Agency were used for transfer of cash from customers of M/s Star. The documents recovered from the premises of M/s. N.K. Trading Co., Kollam, as discussed in para 4 supra, reveal that an amount of Rs.10,00,000/- was deposited at Kollam in the aforesaid accounts of M/s Shree Maruti Enterprise, M/s. Shree Bhagwati Enterprise and M/s. Ganesh Agency. The scrutiny of bank account statement of the said account as provided by ICICI Bank Ltd. reveals that an amount of Rs.10,00,000/- was deposited by cash on different dates, as shown in para 4 supra, at Kollam branch of ICICI Bank Ltd.

8.13.2. As discussed in para 4 supra, the officers of DGCEI recovered evidences regarding cash deposit in the account No.15305005479 of M/s Ganesh Agency, controlled by Shri Lalit A. Gangwani. Shri Lalit A. Gangwani in his statement dated 03.06.08 discussed in para 3.7.10 supra, categorically confirmed that the account of M/s Ganesh Agency was used for transfer of cash of M/s Star. From the premises of M/s. N.K. Trading Co., Kollam, evidences regarding deposit of cash amounting to Rs.2,00,000/- in the account of M/s Ganesh Agency on 23.01.2007 was recovered. 8.13.3. The scrutiny of bank account statement of A/c No.15305005479 of M/s Ganesh Agency, as submitted by ICICI Bank Ltd. for the said account reveals that the above said amount was deposited in cash in ICICI Bank Ltd., Kollam Branch, in cash on the same date.These documentary evidences alongwith statements of Shri Lalit A. Gangwani prove that account of M/s Ganesh Agency was being used by M/s Star for transfer of cash from their dealers.

9.1. Investigations at various dealers, who were purchasing Ceramic Tiles from various manufacturers of Morbi / Himmatnagar based Ceramics units revealed that they were also depositing under invoiced cash portion of the invoice value in the ICICI Bank Accounts of M/s Shree Bharat Enterprise, M/s Rachna Enterprise, M/s Vinayak Enterprise, M/s Shiv Enterprise, M/s Shiv Finance, M/s Mahek Enterprise and M/s Sadashiv Enterprise and M/s Ronak Enterprise, all of Rajkot. These deposits were made by the dealers as per the instructions from the concerned manufacturers. The bank account statements of the aforesaid firms with ICICI bank were obtained. The addresses of the owners of aforesaid accounts were obtained from the bank account statements and investigations were conducted from them, the details of which are discussed in following paras.

9.2.1. Statement dated 17.03.08 of Dr. Pareshbhai Dhanjibhai Patel, who runs the business of M/s Vinayak Enterprise, 10, Mahalaxmi Chambers, Danapith, Rajkot was recorded under Section 14 of Central Excise Act, 1944 wherein he interalia deposed that he was running the business affairs of the aforesaid M/s. Vinayak Enterprise for the past about 1 year; that Shri Neelesh Gangwani, nephew of Shri Lalit Gangwani, who is having his business premises at the aforesaid address, is the proprietor of the said M/s. Vinayak Enterprise. The ICICI bank account of M/s. Vinayak Enterprise No. 015305006173 was opened in the name of Shri Neelesh Gangwani and he (Dr. Pareshbhai Dhanjibhai Patel) was operating the said bank account in the past. On being asked, he stated that apart from the said M/s. Vinayak Enterprise, he was also running the ICICI Bank Account No. 015305005806 of M/s. Shree Bharat Enterprise, which was opened by Shri Bharatbhai Ishwarbhai Patel alias Bhatia, Rajkot. Apart from these two firms, he was not operating any other firm or bank account. On being asked, he stated and confirmed that except operating these two bank accounts, he is not having any official position in the aforesaid two firms and his name or signature was not

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appearing anywhere in the records of these two firms. The bank accounts were opened by the aforesaid two persons by using their PAN numbers and addresses and thereafter, cheque books bearing their respective signatures were obtained from them. By using these cheque books, he was operating these bank accounts for carrying out his business activities.

9.2.2. On being asked to explain the nature of his business activities, he stated that he was operating the aforesaid two bank accounts for the various manufacturers of ceramic and vitrified tiles of Gujarat i.e. Morbi and Himmatnagar. After effecting sales of such tiles to their dealers situated in different parts of the country, these manufacturers were getting the cash portion of such sales deposited into the multi-city accounts of the aforesaid two firms. Once the cash amount was deposited into their accounts by their dealers, they were intimating the details of such deposits either by faxing a copy of the pay-in-slip or by sending SMS message. Thereafter, the authorized persons of the respective manufacturers were visiting him as per the pre-determined schedule. Accordingly, he withdrew the cash amounts from the respective bank accounts and handed over such cash to the visiting person. Sometimes, the tile manufacturers were asking him to hand over the cash to some of their suppliers, and after proper identification of the persons, he was also handing over the cash amounts to such persons. In order to enable the dealers to deposit such cash amounts into their bank accounts, they were informing the concerned manufacturing units about the bank account numbers and PAN numbers of M/s. Vinayak Enterprise or M/s. Shree Bharat Enterprise, and the fax numbers to which the pay-in-slips are required to be faxed for confirmation of deposits. Such cash amounts were directly withdrawn from the respective ICICI bank accounts and handed over to the manufacturers of ceramic tiles.

9.2.3 He further stated that they were also transferring such deposited cash amounts to the ICICI Bank Accounts of M/s. Siddhnath Enterprise or M/s. Shree Bhagwati Enterprise. On being asked about the account numbers of M/s Siddhnath Enterprise and M/s Shree Bhagwati Enterprise, he stated that M/s. Shree Bhagwati Enterprise is having account number 015305003457 and he does not remember the account number of M/s. Siddhnath Enterprise. However, he stated that the same might be either 624805010192 or 624805010137. He further deposed that these two firms i.e. M/s. Shree Bhagwati Enterprise and M/s. Siddhnath Enterprise are owned and operated by Shri Girdhar Gangwani and Shri Lalit Gangwani, i.e. father and uncle of Shri Neelesh Gangwani; that sometimes, they were transferring such deposited cash amounts to the bank accounts of the said two firms having accounts with Rajkot Credit Co-operative Bank Ltd., Rajkot. On being asked, he stated that he did not operate the bank accounts of M/s. Shree Bhagwati Enterprise or M/s. Siddhnath Enterprise and the cash amounts transferred to ICICI Bank or Co-operative Bank as mentioned above, are withdrawn and handed over to him by Shri Girdhar Gangwani or Shri Lalit Gangwani, as the case may be. On being asked, he stated that Shri Girdhar Gangwani is having his office at Bardhan Gali, Danapeeth, Rajkot. On being asked about the reasons for such transfer of deposits to the accounts of the aforesaid two persons before its withdrawal in cash, he stated that such transfer will help them to save the cash withdrawal tax.

9.2.9. On being asked about his commission, remuneration etc for providing the aforesaid services, he stated that from the manufacturers of Morbi, he was getting a total commission of Rs. 100/- per lakh rupees, out of which, he retained Rs. 50/- and handed over the remaining Rs. 50/- to Shri Neelesh Gangwani or his father, uncle, as the case may be. As regards the manufacturers of Himmatnagar, he stated that the total commission was only Rs. 50/- per lakh, which Shri Sureshbhai or Shri Shaileshbhai and he had equally divided. On being asked as to why he was receiving such low commission from Himmatnagar parties, he stated that every day, Shri Sureshbhai or Shri Shaileshbhai were sending special person with cash amounts to Himmatnagar, and considering the expenses in this regard, the commission was kept low.

9.2.10. He was shown the ICICI bank account statement of M/s. Vinayak Enterprise and M/s. Shree Bharat Enterprise, and after carefully examining the same, he put his dated signature on the said statements. He was asked about the following firms into whose accounts, the amounts deposited in the accounts of M/s. Vinayak Enterprise and M/s. Shree Bharat Enterprise was transferred:-

(i) M/s. Yesh Enterprise(ii) M/s. Shiv Finance(iii) M/s. Shiv Enterprise(iv) M/s. Vijay Enterprise(v) M/s. Ronak Enterprise(vi) M/s. Sadashiv Enterprise(vii) M/s. RK Agency

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9.2.11. In this regard, he stated that apart from withdrawing cash amounts directly from the accounts of M/s. Vinayak Enterprise and M/s. Shree Bharat Enterprise, he had also transferred such funds to various other bank accounts before withdrawing the same in cash. Apart from transferring such amounts to the accounts of Shri Lalit Gangwani, he had made such fund transfers to the aforesaid firms. On being further asked, he stated that out of the above, M/s. Shiv Finance and M/s. Shiv Enterprise were run by him before opening the account in the name of M/s. Shree Bharat Enterprise. Shri Bharat Patel, Proprietor of M/s. Shree Bharat Enterprise was the proprietor of the said M/s. Shiv Finance and M/s. Shiv Enterprise. M/s. Sadashiv Enterprise and M/s. Ronak Enterprise were run by him before opening the account in the name of M/s. Mahek Enterprise and M/s. Rachna Enterprise. Both these accounts were opened in his name and he was the proprietor of these firms. Since these firms were also owned by Shri Bharat Patel and himself, they had transferred funds to the accounts of these firms before its withdrawal in cash. As regards M/s. Yesh Enterprise, M/s. Vijay Enterprise and M/s. RK Agency, he stated that they are separate independent shroffs, and they had transferred funds to said shroffs for encashing the same.

9.2.12. On being asked about the names of the companies for whom they have earlier operated the accounts of M/s. Shiv Finance, M/s. Shiv Enterprise, M/s. Sadashiv Enterprise and M/s. Ronak Enterprise, he stated that apart from changing the name and account, there is no change in the nature of functions; that he had operated the accounts of M/s. Ronak Enterprise and M/s. Sadashiv Enterprise for all the aforesaid 8 companies of Morbi and 2 companies of Himmatnagar in the same way as he had done from M/s. Shree Bharat Enterprise and M/s. Vinayak Enterprise. Similarly, the accounts of M/s. Shiv Enterprise and M/s. Shiv Finance were also operated in the same way as done later for M/s. Rachna Enterprise and M/s. Mahek Enterprise.

9.2.13. On being asked about his relationship with Shri Bharat Patel of M/s. Mahek Enterprise and M/s. Rachna Enterprise, he stated that he had distant relationship with him. However, they were sitting together and operating all the aforesaid accounts together. They were not separating their business and all matters relating to the aforesaid activities were done by them in partnership.

9.3. During the course of investigation from the dealers of the Ceramics Tiles manufacturers, it was found that such dealers were also depositing cash in the accounts of M/s Rachna Enterprise, M/s Mahek Enterprise, M/s Ronak Enterprise, M/s Shiv Enterprise, M/s Shiv Finance and M/s Sadashiv Enterprise. Moreover, investigations from dealers revealed that the dealers of the manufacturers other than ten manufacturers mentioned by Dr. Paresh Patel were also depositing cash in these accounts. However, in the statement dated 17.3.2008 of Dr. Paresh Patel, the names of such manufacturers on whose behalf dealers were depositing cash did not appear. Therefore, another statement of Dr. Paresh Patel was recorded on 5.6.2008.

9.4.2. On being asked, the names of the manufacturers, whose cash were deposited in the aforesaid shroff firms, he deposed that on the date of recording his statement dt 17.3.08, the names of the manufacturers were given out of his memory only. However, there may be other manufacturers whose above types of transaction would have also taken place in the said accounts. On being asked, he further gave the names of other manufacturers as under:-

S.No. Name of the manufacturers whose cash were deposited by the Customers in the ICICI bank account of the firms, mentioned in the adjacent Column.

Names of the firms

ICICI Account No.

1 “Monalisa” Ronak Enterprise 6248050061742 Deco Groups of Companies Ronak Enterprise 6248050061743 Samay Tiles Ltd Ronak Enterprise 624805006174

4 Comet Ceramics Pvt. LtdSadashiv Enterprise

015305008383

5 Deco Groups of Companies Shiv Enterprise 0153050067736 Ganga Glaze Tiles Pvt. Ltd Shiv Enterprise 0153050067737 Gangotri Glaze Tiles Pvt. Shiv Enterprise 0153050067738 Gokul Ceramics Ltd Shiv Enterprise 0153050067739 Italica Floor Tiles Ltd Shiv Enterprise 015305006773

10 Vrudavan Ceramics Pvt. Ltd Shiv Enterprise 01530500677311 Star Ceramic Shiv Finance 62480501077212 Deco Group of Companies Shiv Finance 624805010772

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13 Deco Group of CompaniesShree Bharat Enterprise

015305005806

14 Fashion CeramicsShree Bharat Enterprise

015305005806

15 Gladder Ceramics Ltd., HimmatnagarShree Bharat Enterprise

015305005806

16 Italica Floor Tiles LtdShree Bharat Enterprise

015305005806

17 OracleShree Bharat Enterprise

015305005806

18 Nice Ceramics Pvt. LtdShree Bharat Enterprise

015305005806

19 Comet Ceramics Pvt. LtdVinayak Enterprise

015305006173

20 Italica Floor Tiles LtdVinayak Enterprise

015305006173

21 Saint Ceramics Pvt.LtdVinayak Enterprise

015305006173

22 Pengvin CeramicsShree Bharat Enterprise

015305005806

23 Crystal Glazes, KadiShree Bharat Enterprise

015305005806

9.4.3 He further stated that apart from cash deposits by the customers of aforesaid manufacturers, sometimes customers come with third party Demand drafts payable at Rajkot and in such cases, they also give cash against such demand drafts after charging their commission. On being specifically asked whether any cheques/demand draft were got encashed by Shri Sanyaybhai Narshibhai Patel of M/s Hardwar Potteries, Lalpar, Morbi in any of his firm, he stated, yes he did. He further deposed that it is also their business of draft discounting for other manufacturers / customers.

9.4.4 On being asked as to whether for any other manufacturer, his firms had carried out above types of transactions, he stated that there may be some other manufactures, however at present he does not recollect the names.

9.4.5. On being asked specifically as to how the cash deposited by the customers of Ceramics Tile manufacturers in above accounts was distributed, he stated that all the above ICICI Bank account Numbers of their firms were being given to the tile manufacturers who conveyed these account numbers and name of their firms to their customers for depositions of cash in these accounts. Since ICICI bank is multi-locational Bank, any person can deposit cash anywhere in India through Pay-in-slips. Customers of a particular manufacturer were sending Pay-in-slips through fax to the manufacturers. Simultaneously, the customers who deposited the cash were also sending fax to them incorporating name of the manufacturer for whom cash was deposited. Then the manufacturers were sending their person or owner of the unit was visiting alongwith copy of pay-in-slips to their premises for collecting the cash so deposited on day to day basis. After online verifications with respective bank account No., they used to deliver the cash to them. 9.4.6. On being asked, he further deposed that they had followed above practice for last one and half year. Prior to that, one Shri Shaileshbhai Marvania of M/s Shakti Enterprise, Morbi, used to come with total details alongwith pay-in-slips, manufacturer wise amount to be received from their firms on behalf of the above manufacturers. After verification with pay-in-slips received by them and corresponding deposits in the respective accounts of respective firms, they used to issue consolidated cheques for discounting from the other shroffs as named in his earlier statement. Cash so received by cheque discounting was delivered to Shri Shaileshbhai Marvania of M/s Shakti Enterprise for onward distribution to the respective manufacturers.

9.4.7. On being asked about nature of transactions in the above accounts, he stated that mostly they used to carry out only above types of transactions. However, casually they used to discount DDs against cash. On being asked about any other bank accounts of their firms, apart from those given above, he stated that there was no other account in any of the bank. On being asked about his relationship with Shri Bharatbhai Ishwarbhai Patel, he stated that he is his friend and they both together had carried out above business.

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9.5.1. Another statement of Dr.Pareshbhai Dhanjibhai Patel of M/s Vinayak Enterprise and other firms was recorded on 12.6.2008 wherein he was shown his earlier statements recorded on 17.03.08 & 05.06.08 and statements dated 23.01.08 & 11.06.08 of Shri Lalitbhai Ashumal Gangwani of M/s Shree Bhagwati Enterprise. He went through the aforesaid statements and put his dated signatures on all these statements. In the statements dated 23.01.08 and 11.06.08, Shri Lalitbhai Ashumal Gangwani, deposed that ICICI Bank A/c No.015305003241 of M/s Shree Bhagwati Enterprise was being operated by Dr. Paresh Patel while Dr. Paresh Patel in his statement dated 17.03.08 had denied to have operated any account of M/s Shree Bhagwati Enterprise. On being asked, admitting his mistake, he deposed that the account No. 015305003241 of ICICI Bank of M/s Shree Bhagwati Enterprise was being operated by him during the period 22.09.05 to 29.07.06. Subsequently, the said account was closed. In this regard, he mentioned that it was his beginning of business. Since Shri Lalitbhai being in this business since long, he asked his help for carrying out the business. Therefore, Shri Lalitbhai got opened the said account in ICICI Bank and gave him the details of bank alongwith the cheque book duly signed. As regards, the transactions carried out in this account, he stated that the transactions were same as deposed by him in his statements dated 17.03.08 and 05.06.08. In the said account also, the cash was deposited by the customers of Ceramic Tile manufacturers from various locations of India and was delivered by them to the concerned manufacturer in the manner as detailed in his statement referred above. He stated that the manufacturers whose cash was distributed through this account were as under:-

(i) “Monalisa” (xii) Deco Group of Companies(ii) Deco Groups of Companies (xiii) Fashion Ceramics(iii) Samay Tiles Ltd (xiv) Gladder Ceramics Ltd, Himatnagar(iv) Comet Ceramics Pvt. Ltd (xv) Italica Floor Tiles Ltd(v) Deco Groups of Companies (xvi) Oracle, Himatnagar(vi) Ganga Glaze Tiles Pvt. Ltd (xvii) Nice Ceramics Pvt. Ltd(vii) Gangotri Glaze Tiles Pvt. (xviii) Comet Ceramics Pvt. Ltd(viii) Gokul Ceramics Ltd (xix) Italica Floor Tiles Ltd(ix) Italica Floor Tiles Ltd (xx) Saint Ceramics Pvt.Ltd(x) Vrudavan Ceramics Pvt. Ltd (xxi) Pengvin Ceramics(xi) Star Ceramic (xxii) Crystal Glazes, Kadi

9.5.2. On being asked with regard to commission charged from the manufacturers for providing above services from this account, he deposed that he was charging Rs. 300/- per lakh, out of which ICICI Bank used to charge Rs. 100/- and out of remaining Rs. 200/-, he used to give Rs. 100/- to Shri Lalitbhai Gangwani, and balance of Rs. 100/-was being kept by him. On being asked about the records maintained for deposits and distribution of cash deposited in this account, he deposed that his earlier statement holds equally good for this account also.

9.5.3 He was shown ICICI Bank account statement in respect of A/c No.015305003241 of M/s Shree Bhagwati Enterprise. After perusing, he put his dated signature on the first and last page of the same i.e. on page 1 and 92 of the statement. On being asked to identify the names of the persons who had deposited cash on various dates in this account from different locations, he stated that the pay-in-slips of the deposits were being faxed by the customers to their respective manufacturers as well as to them. On the basis of copy of such pay-in-slips produced by the manufacturers/ their representatives, they used to deliver cash as per pay- in-slips. After the transactions were settled, they used to destroy the same and no other records were maintained by him.

9.6.1. Statement of Shri Bharatbhai Ishwarbhai Patel, Proprietor of M/s Mahek Enterprise and M/s Rachna Enterprise was recorded on 4.3.2008 under Section 14 of Central Excise Act, 1944 where in he interalia deposed that he is the Proprietor of M/s. Mahek Enterprise and M/s. Rachna Enterprise; that he was running the business affairs of the aforesaid M/s. Mahek Enterprise and M/s. Rachna Enterprise for the past about 1 year; that both these firms are having accounts only with ICICI Bank, and he has personally opened both these accounts by using his own PAN number; that M/s. Mahek Enterprise is having account number 624805011014 and M/s. Rachna Enterprise is having account No. 624805012005; that the bank documents and cheque books are bearing his signatures only. Apart from these two firms, he was not operating any other firm or bank account.

9.6.2. On being asked to explain the nature of his business activities, he stated that he was operating the aforesaid two bank accounts for the various manufacturers of ceramic and vitrified tiles of Gujarat i.e. Morbi and Himatnagar. After effecting sales of such tiles to their dealers situated in different parts of the country, these manufacturers were getting the cash portion of such sales deposited into the multi-city accounts of the aforesaid two firms. Once

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the cash amount was deposited into their accounts by their dealers, they were intimating the details of such deposits either by faxing a copy of the pay-in-slips or by sending SMS message, directly to the respective manufacturers. Thereafter, the authorized persons of the respective company was visiting him alongwith their daily cash deposit statements. Accordingly, he withdrew the cash amounts from the respective bank accounts and handed over such cash to the visiting person. Sometimes, the companies were asking him to hand over the cash to some of their suppliers, and after proper identification of the persons, he was also handing over the cash amounts to such persons. In order to enable the dealers to deposit such cash amounts into his bank accounts, he was informing the concerned manufacturing unit about the bank account numbers and PAN numbers of M/s. Mahek Enterprise or M/s. Rachna Enterprise. Mostly, cash amounts were directly withdrawn from the respective ICICI bank accounts only. However, sometimes, they were also transferring such deposited cash amounts to the ICICI Bank Accounts of M/s. Siddhnath Enterprise or M/s. Shree Bhagwati Enterprise. On being asked about their account numbers, he stated that M/s. Shree Bhagwati Enterprise is having account number 015305003457 and he does not remember the account number of M/s. Siddhnath Enterprise. These two firms i.e. M/s. Shree Bhagwati Enterprise and M/s. Siddhnath Enterprise are owned and operated by Shri Girdhar Gangwani and Shri Lalit Gangwani, who are having their business in the similar kind of activities and are having their office at Danapeeth, Rajkot. Similarly, sometimes, they were transferring such deposited cash amounts to the bank accounts of the said two firms having accounts with Rajkot Credit Co-operative Bank Ltd., Rajkot. On being asked, he stated that he does not operate the bank accounts of M/s. Shree Bhagwati Enterprise or M/s. Siddhnath Enterprise and the cash amounts transferred to ICICI Bank or Co-operative Bank as mentioned above, were withdrawn and handed over to him by Shri Girdhar Gangwani or Shri Lalit Gangwani, as the case may be. On being asked about the reasons for such transfer of deposits to the accounts of the aforesaid two persons before its withdrawals in cash, he stated that such transfer helped them to save the cash withdrawal tax.

9.6.3. On being asked, he confirmed that except the manufacturers of tiles, they had not undertaken the aforesaid type of business activities for any other companies or persons. As regards operating bank accounts in any other banks apart from ICICI Banks in the name of the aforesaid M/s. Mahek Enterprise or M/s. Rachna Enterprise, he stated that except the ICICI Bank accounts mentioned above, he was not operating any other accounts in any other banks for the aforesaid two firms. Similarly, he had also not operated any other bank accounts for any other firms except the aforesaid two firms.

9.6.5. On being further asked, he stated that although he had provided regular services to the manufacturers of tiles of morbi have also availed such cash deposit services at times and he did not remember all such details. On being asked about the names of such manufacturers of Himmatnagar, he stated that he was not having any direct business with the manufacturers of Himmatnagar. However, one Shri Shaileshbhai and his brother Shri Sureshbhai who are having a medical shop i.e. Sarvodaya Medicals at Ram Chowk, Morbi were doing such business for the companies of Himmatnagar. Shri Sureshbhai and Shaileshbhai were also running a shroff firm in the name of M/s. Shakti Enterprise and were doing the same kind of business for the manufacturers of tiles from Morbi and Himmatnagar. They had approached him for providing such services from his aforesaid firms i.e. M/s. Mahek Enterprise and M/s. Rachna Enterprise. Accordingly, he had given them the details of bank account numbers, PAN numbers etc of his firms. They had passed on such details to their clients at Himmatnagar and accordingly, M/s. Regent Granito Ltd., Himmatnagar had used the bank accounts of M/s. Mahek Enterprise and M/s. Rachna Enterprise for aforesaid type of cash deposits. After deposits of cash amounts into the account of M/s. Mahek Enterprise or M/s. Rachna Enterprise, Shri Sureshbhai or Shri Shaileshbhai of Morbi were intimating him the transaction details. Accordingly, he withdrew the cash amounts and handed over to Shri Sureshbhai of M/s. Shakti Enterprise. Therefore, he had no direct relationship with the manufacturers of Himmatnagar and all such dealings were made through Shri Sureshbhai and Shaileshbhai only. On being asked about any other manufacturer except M/s. Regent, from Himmatnagar, he stated that since he had no direct relationship with the parties from Himmatnagar, he did not know any other names.

9.6.6. On being asked about any registers, records maintained by him for such cash deposits and payments made to the various manufacturers as explained by him above, he stated that subsequent to the Central Excise raids at Morbi on 17.01.2008, a number of bank accounts were freezed by the Department which included their bank accounts also. Immediately after this operation, they expected further raids at their premises. Therefore, all the registers and records maintained by them in this regard were burnt and destroyed by them. Therefore, presently, he does not have any records or documents relating to the aforesaid business activities carried out by him. On being asked, he stated that on an average, they were handling such cash transaction of about Rs. 15-20 lakhs per day. On being further asked, he

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explained the average cash transaction in respect of each of the following manufacturers is as under:

(i) M/s. Varmora Group of Companies – Rs. 2.50 lakhs Per day (ii) M/s. Vrundavan Group of Companies – Rs. 3 lakhs Per day(iii) M/s. Kaveri Ceramics – Rs. 1 lakhs Per day(iv) M/s. Solar Ceramics – Rs. 3 lakhs Per day(v) M/s. Cosmo Ceramics – Rs. 1.50 lakhs Per day(vi) M/s. Shagun Ceramics – Rs. 50,000/- Per day(vii)M/s. Italica Floor Tiles – Rs. 5 lakhs Per day(viii) M/s. Prime Ceramics – Rs. 4 lakhs Per day(ix) M/s. Saffron Ceramics - Rs. 1 lakh Per day.

9.6.7. On being asked about his commission, remuneration etc for providing the aforesaid services, he stated that from the manufacturers of Morbi, he was getting a total commission of Rs. 100/- per lakh rupees. As regards the manufacturers of Himmatnagar, he stated that the total commission was only Rs. 50/- per lakh, which Shri Sureshbhai or Shri Shaileshnhai and he had equally divided. On being asked as to why he was receiving such low commission from Himmatnagar parties, he stated that every day, Shri Sureshbhai or Shri Shaileshbhai were sending special person with cash amounts to Himmatnagar, and considering the expenses in this regard, the commission was kept low.

9.7. The investigations from the dealers of the Ceramics Tiles manufacturers revealed that the dealers of the manufacturers other than mentioned by Shri Bharat I. Patel in his statement dt 4.3.08 were also depositing cash in the accounts of M/s Mahek Enterprise and M/s Rachna Enterprise. However, in the above statement dated 4.3.2008 of Shri Bharat Patel, the names of such manufacturers on whose behalf dealers were depositing cash were not included. Therefore, another statement of Shri Bharat I. Patel was recorded on 5.6.2008.

9.8.1. Another statement dated 05.06.08 of Shri Bharatbhai Ishwarbhai Patel, of M/s Mahek Enterprise and M/s Rachna Enterprise was recorded wherein he was shown his earlier statement recorded on 4.03.08. Having gone through and in confirmation to the facts mentioned therein to be true, he put his dated signature on the same.

9.8.2. In his earlier statement he had given the details of various firms run by him and the names of the Morbi Based Ceramic Tile Manufacturers whose cash was deposited by their customers located all over India in the said firms having their accounts in ICICI Bank. As per the said statement, names of the firms run by him and the names of manufacturers on whose behalf cash was deposited in the said firms were as under:-

S.No. Name of the manufacturers whose cash was deposited by

the Customers in the ICICI bank accounts of his firms

Name of the firmsICICI Account

No.

1 Varmora Group Mahak Enterprise 6248050110142 Vrundavan Group Rachna Enterprise 6248050120053 Italica Floor Tiles Shiv Finance 6248050107724 Solar Ceramics Shiv Enterprise 0153050067735 Cosmo Ceramic Sadashiv Enterprise 0153050083836 Prime Ceramics Ronak Enterprise 6248050061747 Saffron Ceramics8 Shagun Ceramics 9 Kavari Ceramics 10 Regent Granito, Himatnagar

On being asked to intimate the names of other manufacturers, whose cash was deposited in the aforesaid shroff firms, he deposed that on the date of recording his statement dt 4.3.08, the names of the manufacturers were given out of his memory only. However, there may be other manufacturers whose above types of transactions would have also taken place in the said accounts. On being asked, he gave the names of other manufacturers as under:-

S.NoName of the manufacturers whose cash was deposited by the Customers in ICICI bank account of the firms mentioned in the adjacent Column.

Name of the firms

ICICI Account No.

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1 Samay Tiles Ltd Mahek Enterprise 6248050110142 Santro Tiles Ltd, Prantij Mahek Enterprise 6248050110143 Santro Mahek Enterprise 6248050110144 “Monalisa” Ronak Enterprise 6248050061745 Deco Groups of Companies Ronak Enterprise 6248050061746 Samay Tiles Ltd Ronak Enterprise 6248050061747 Comet Ceramics Pvt. Ltd Sadashiv Enterprise 0153050083838 Deco Groups of Companies Shiv Enterprise 0153050067739 Ganga Glaze Tiles Pvt. Ltd Shiv Enterprise 015305006773

10 Gangotri Glaze Tiles Pvt. Shiv Enterprise 01530500677311 Gokul Ceramics Ltd Shiv Enterprise 01530500677312 Italica Floor Tiles Ltd Shiv Enterprise 01530500677313 Vrudavan Ceramics Pvt. Ltd Shiv Enterprise 01530500677314 Star Ceramic Shiv Finance 62480501077215 Deco Group of Companies Shiv Finance 62480501077216 Deco Group of Companies Shree Bharat Enterprise 01530500580617 Fashion Ceramics Shree Bharat Enterprise 01530500580618 Gladder Ceramics Ltd, Himatnagar Shree Bharat Enterprise 01530500580619 Italica Floor Tiles Ltd Shree Bharat Enterprise 01530500580620 Oracle Shree Bharat Enterprise 01530500580621 Nice Ceramics Pvt. Ltd Shree Bharat Enterprise 01530500580622 Comet Ceramics Pvt. Ltd Vinayak Enterprise 01530500617323 Italica Floor Tiles Ltd Vinayak Enterprise 01530500617324 Saint Ceramics Pvt. Ltd Vinayak Enterprise 01530500617325 Pengvin Ceramics Shree Bharat Enterprise 01530500580626 Crystal Glazes, Kadi Shree Bharat Enterprise 015305005806

9.8.4. On being asked further, he deposed that some times whenever customers come with third party Demand drafts payable at Rajkot, they also give cash against such demand drafts after charging their commission.

9.8.5. On being asked specifically as to how the cash deposited in the aforesaid accounts was distributed to the concerned manufacturers, he stated that all the above ICICI Bank account Numbers of their firms were given to the tile manufacturers who conveyed these account numbers and name of their firms to their customers for depositions of cash in these accounts. Since ICICI bank is multi-locational Bank, any person can deposit cash any where in India through pay-in-slips. Customers of particular manufacturer were sending pay-in-slips through fax to the manufacturers. Simultaneously, the customer who deposited the cash were also sending fax of pay-in-slips to them incorporating name of the manufacturer for whom cash was deposited. Then the manufacturers were sending their person or owner of the unit was visiting alongwith copy of pay-in-slips to their premises for collecting the cash so deposited on day to day basis. After on line verifications with respective bank account, they used to distribute the cash to them.

9.8.6. On being asked, he further deposed that they had followed above practice for last one and half year. Prior to that one Shri Shaileshbhai Marvania of M/s Shakti Enterprise, Morbi used to come with total details alongwith Pay-in-slips and manufacturer wise amount to be received from his firms on behalf of the manufacturers. After verification with pay-in-slips received by them and corresponding deposits on line in the accounts of respective firms, they used to issue consolidated cheques for discounting from the other shroffs as named in his earlier statement. Cash so received by cheque discounting was delivered to Shri Shaileshbhai Marvania of M/s Shakti Enterprise for onward distribution to the respective manufacturers.

9.9.1. Another statement of Shri Shailesh Odhavji Marvania was recorded on 18.6.08 under Section 14 of Central Excise Act, 1944. He was shown statements dated 17.3.08 and 5.6.08 of Dr.Paresh Patel and statement dt 5.6.08 of Shri Bharat I. Patel, discussed in foregoing paras. He went through the aforesaid statements and signed on the same in token of having seen and read.

9.9.2. On being asked about his role narrated in the statements of Dr. Paresh Dhanjibhai Patel and Shri Bharatbhai Ishwarlal Patel, in their respective statements, he stated that whatever details have been given by them in their statements with regard to delivery of cash to Himatnagar units, he confirmed that the same is correct. As regards delivery of cash to

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Morbi Ceramic Tile manufacturers, it is correct that he used to visit Dr. Paresh Patel and Shri Bharat I. Patel for receiving cash for disposal to the concerned manufacturers.

9.9.3. On being asked, he stated that the cash deposited by the various Customers of Ceramics Tiles Manufacturers of Morbi and Himatnagar in the various accounts operated by Dr. Paresh Dhanjibhai Patel and Shri Bharatbhai Ishwarbhai Patel was pertaining to the following manufacturers and the cash after withdrawal was delivered by him to the following manufacturer/ representatives of the manufacturers:-

S.No Name of the ManufacturersName of Shroff firms operated by Dr. Paresh Dhanjibhai Patel and

Shri Bharat Ishwarbhai Patel

1 “Monalisa”

M/s Mehak Enterprise,M/s Rachna Enterprise, M/s Shree Bharat Enterprise, M/s Shiv Finance, M/s Shiv Enterprise, M/s Sadashiv Enterprise, M/s Ronak Enterprise, M/s Vinayak Enterprise

2 Angel Ceramics3 A-One Ceramics4 Bajaj Ceramics Himatnagar5 Comet Ceramics Pvt. Ltd6 Cosmo Ceramic7 Crystal Glazes, Kadi8 Deco Group of Companies9 Fashion Ceramics

10 Ganesh Ceramics11 Ganga Glaze Tiles Pvt. Ltd12 Gangotri Glaze Tiles Pvt.13 Gladder Ceramics Ltd, Himatnagar14 Gokul Ceramics Ltd15 Italica Floor Tiles Ltd16 Kavari Ceramics17 Kohinoor Ceramics18 Nice Ceramics Pvt. Ltd19 Oracle20 Oracle Granito Ltd. Himatnagar21 Pengvin Ceramics22 Prime Ceramics23 Regent Granito ,Himatnagar24 Saffron Ceramics25 Saint Ceramics Pvt. Ltd26 Samay Tiles Ltd27 Santro28 Santro Tiles Ltd, Prantij29 Saushtra Ceramics30 Shagun Ceramics31 Solar Ceramics32 Star Ceramic33 Varmora Group34 Vrudavan Ceramics Pvt. Ltd35 Vrundavan Group

9.9.4. Shri Shailesh Odhavji Marvania was distributing cash deposited by the dealers of tiles in the accounts of M/s Dev Enterprise, M/s Eagle & Co., M/s Shree Maruti Enterprise and the various firms managed/operated by Dr.Paresh Patel and Shri Bharatbhai Ishwarbhai Patel. On being asked to give the names of concerned persons of the all the tiles manufacturers to whom he was making cash payments, he stated that he does not recollect all the names, however he gave some of names as under:-

S.No Name of the manufacturer The person to whom cash were delivered.

1M/s Italica Floor tiles Shri Amitbhai, Shri Dilipbhai

2 M/s Vermora Group of Shri Rajdeep

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Companies

3M/s Vrundvan Group of Companies

Shri Shantubhai

4 M/s A-One Ceramics Shri Subhasbhai, Shri Dhermendrabhai5 M/s Comet Ceramics Pvt.Ltd Shri Pareshbhai

6M/s Deco Group of Companies

Shri Neeleshbhai

7M/s Himat Glaze Tiles Shri Harshadbhai (Through Shree

Maruti Enterprise)8 M/s Cosmo Ceramics Shri Munnabhai9 M/s Radiant Ceramics Shri Mehulbhai10 M/s Radiant Floor Tiles Shri Mehulbhai11 M/s Saushtra Ceramics Shri Subhasbhai12 M/s Delta Tiles Limited Shri Darshanbahi

13M/s Seron Ceramics Pvt.Ltd Shree Neeleshbhai (Through Shree

Maruti Enterprise)14 M/s Kohinoor Ceramics Shri Hirenbhai Zhalavadia 15 M/s Yera Ceramics Shri Rajubhai16 M/s Sony Ceramics Shri Shantibhai/ Shri Parshottambhai17 M/s Starware Ceramics Shri Gopalbhai18 M/s Pengvin Ceramics Shri Sureshbhai

19M/s Opal Ceramics Industries Shri Arvindbhai (Shree Maruti

Enterprise)

20M/s Ocean Ceramics Shri Arvindbhai (Shree Maruti

Enterprise)

21M/s Rome Tiles Shri Kalpeshbhai (Shree Maruti

Enterprise)22 M/s Sagun Ceramics Shri Bharatbhai23 M/s Sunbeam Shri Bharatbhai

24M/s Soriso Ceramics Pvt.Ltd Shri Rameshbhai/Manojbhai Kakasania

(Shree Maruti Enterprise)25 M/s Marsal Ceramics Shri Dharmendrabhai26 M/s Salon Ceramics Shri Hiteshbhai27 M/s Saint Ceramics Pvt.Ltd. Shri Ravibhai and Shri Sanjaybhai28 M/s Silk Ceramics Shri Kapilbhai

29M/s Atlas Ceramics Shri Jayendrabhai/Shri Sureshbhai

(through Shree Maruti Enterprise)

30M/s Morbi Ceramics Shri Prakashbhai (through Shree

Maruti Enterprise

31M/s Maruti Ceramics Shri Ashokbhai (Shree Maruti

Enterprise32 M/s Nice Ceramics Pvt. Ltd Shri Dharmendrabhai33 M/s Ambani Ceramics Shri Bhaveshbhai34 M/s Apex Ceramics Shri Nitinbhai35 M/s Anex Ceramics Shri Nitinbhai/his brother36 M/s Arrow Ceramics Shri Damjibhai/Kesuhbhai37 M/s Foton Ceramic Shri Bhaveshbhai38 M/s Major Ceramics Shri Laxmanbhai39 M/s Option Ceramics Shri Ashikbhai40 M/s Opwell Ceramics Shri Tusharbhai41 M/s Priya Gold Ceramics Shri Kishorbhai42 M/s Shyam Ceramics Shri Karamshibhai43 M/s Sukan Ceramics Shri Anilbhai44 M/s Sonata Ceramics Shri Dilipbhai/Shri Munnabhai45 M/s Sonex Ceramics Shri Mahadevbhai/ Shri Valjibhai46 M/s Swagat Ceramics Shri Laljibhai / Shri Hiteshbhai47 M/s Icon Ceramics Shri Bhaveshbhai48 M/s Ramco Ceramics Shri Bhagwanjibhai49 M/s Simco Ceramics Shri Jagdishbhai /Shri Pankajbhai50 M/s Ornet Ceramics Shri Milanbhai

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9.10.1 The scrutiny of the documents recovered from the dealers of ceramic tiles revealed that there are some more account numbers in the names of M/s Vinayak Enterprise, M/s Shree Bharat Enterprise,, M/s Shiv Enterprise and M/s Shiv Finance, in which the dealers of ceramic tiles have deposited amounts in cash but names of such accounts were not stated by Dr.Paresh Patel and Shri Bharat I. Patel. Therefore, another statement of Shri Bharat I.Patel was recorded on 19.6.2008.

9.10.2. In his statement dated 19.6.2008, Shri Bharat I. Patel interalia stated that in the statements recorded so far, he and Dr.Pareshbhai Dhanjibhai Patel have given the details like, names of shroff firms operated by Dr. Paresh Dhanjibhai Patel wherein he also jointly worked with him. In fact, they worked together and were sharing profit together from the said firms. Names of the proprietor of the firms and Bank account numbers of their different firms given earlier were as under:-

S.No Name of Shroff firms

Proprietor Person operating ICICI Bank Account No.

1 Vinayak Enterprise Shri Neelesh Gangwani Dr.Paresh D Patel 15305006173

2 Shree BharatEnterprise

Shri Bharatbhi Ishwarbhai Patel Dr.Paresh D Patel 15305005806

3 Rachna Enterprise Dr.Paresh D Patel Dr.Paresh D Patel 6248050120054 Mehak Enterprise Dr.Paresh D Patel Dr.Paresh D Patel 624805011014

5 Ronak Enterprise Shri Bharatbhi Ishwarbhai Patel Dr.Paresh D Patel 624805009174

6 Shiv Enterprise Shri Bharatbhi Ishwarbhai Patel Dr.Paresh D Patel 15305006773

7 Shiv Finance Shri Bharatbhi Ishwarbhai Patel Dr.Paresh D Patel 624805010772

8 SadashivEnterpirise


9.10.3. On being asked as to whether any account numbers of any of the above mentioned firms remained to be included in the above table, he stated that in addition to above account, they had opened and used following accounts in respect of their firms:-

S.No Name of Shrofffirms Proprietor Person operating ICICI Bank

Account No.1 Shree Bharat

EnterpriseShri Bharatbhi Ishwarbhai Patel Dr.Paresh D Patel 015305007285

2 Shree BharatEnterprise




5 Shiv Finance Shri Bharatbhi Ishwarbhai Patel Dr.Paresh D Patel 015305007286

9.10.4. On being asked as to why the said accounts were not disclosed earlier, he stated that these all accounts were pertaining to old period, and they forget to mention the details thereof. He extremely regretted for the same.

9.10.5. On being asked as to what type of activities took place in the said accounts, he stated that in fact the purpose of opening the said accounts was the same as stated by them in their previous statements. The said accounts were used for deposits of cash at various locations from India by the Customers Ceramic Tile Manufacturers of Morbi and Himatnagar. After deposits of cash, the said cash was being disposed off in the manner stated by them in their earlier statements to the concerned manufacturers. On being asked to give names of the manufacturers to whom they have delivered the cash after withdrawal from the accounts mentioned in the above table, he stated that the same was delivered to the same

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manufacturers as mentioned in their earlier statements. He gave the consolidated details of the manufacturers to whom payment received in all the above mentioned accounts was delivered as under:-

S. No. Name of the Manufacturers S.

No. Name of the Manufacturers

1 “Monalisa” 20 Nice Ceramics Pvt. Ltd2 Angel Ceramics 21 Oracle3 A-One Ceramics 22

Oracle Granito Ltd. Himatnagar4

Bajaj Ceramics Himatnagar23 Pengvin Ceramics

5 Comet Ceramics Pvt. Ltd 24 Prime Ceramics6 Comet Ceramics Pvt. Ltd 25 Regent Granito ,Himatnagar7 Commet Ceramics 26 Saffron Ceramics8 Cosmo Ceramic 27 Saint Ceramics Pvt. Ltd9 Crystal Glazes, Kadi 28 Samay Tiles Ltd

10 Deco Group of Companies 29 Santro11 Fashion Ceramics 30 Santro Tiles Ltd, Prantij12 Ganesh Ceramics 31 Saushtra Ceramics13 Ganga Glaze Tiles Pvt. Ltd 32 Shagun Ceramics14 Gangotri Glaze Tiles Pvt. 33 Solar Ceramics15 Gladder Ceramics Ltd,

Himatnagar34 Star Ceramic

16 Gokul Ceramics Ltd 35 Varmora Group17 Italica Floor Tiles Ltd 36 Vrudavan Ceramics Pvt. Ltd18 Kavari Ceramics 37 Vrundavan Group19 Kohinoor Ceramics

9.11.1. Dr. Paresh D. Patel in the aforesaid statement deposed that the A/c No. of M/s Ronak Enterprise was operated by him. However, ICICI Bank Ltd. informed that there is no such account No. in the name of M/s Ronak Enterprise. Therefore, to clarify the facts, a statement dated 27.6.08 of Dr. Paresh Dhanjibhai Patel was recorded. He was shown his earlier statements dated 17.3.08 and 5.6.08. After having gone through and in confirmation of the facts recorded to be true, was put his dated signature on both the statements. He further stated that in his earlier statement, he had given an A/c No.624805006174 in respect of M/s Ronak Enterprise, however, he clarified that the correct ICICI Bank A/c No. of M/s Ranak Enterprise was 624805009174 instead of 624805006174, as given earlier. Apart from that account, M/s Ronak Enterprise was also having another ICICI Bank A/c No.624805009623.9.12.1. The scrutiny of the Bank Account Statements obtained from ICICI Bank Ltd. revealed that in the aforesaid accounts, amounts were deposited at different locations all over India only in cash. The Account No., period of operation of aforesaid accounts and amounts deposited in the said accounts in cash is given in the following table:-

S.No. Name of firm ICICI Bank

Account No. Period of operation Amount deposited

1 2 3 4 5

1 M/s Vinayak Enterprise, Rajkot

15305006173 25.09.06 to 01.03.08 895838435

2 M/s Shree Bharat Enterprise, Rajkot

15305005806 08.08.06 to 19.01.08 826607582


624805010058 17.01.06 to 15.09.06 161615750


15305007285 21.04.07 to 20.12.07 17699285

5 M/s Rachna Enterprise, Rajkot

624805012005 01.07.07 to 21.01.08 340198824

6 M/s Mahek Enterprise, Rajkot

624805011014 08.08.06 to 20.10.07 814807382

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7 M/s Ronak Enterprise, Rajkot

624805009623 11.10.05 to 07.09.06 378367642

8 M/s Ronak Enterprise, Rajkot

624805009174 21.12.04 to 15.12.05 236019428

9 Shiv Enterprise, Rajkot 15305006773 29.12.06 to 21.01.08 491115369

10 M/s Shiv Enterprise 624805011117 08.09.06 to 13.04..07 151644472

11 M/s Shiv Enterprise 15305001934 26.10.04 to 31.03.08 146420883

12 M/s Shiv Finance, Rajkot 624805010772 10.06.06 to 31.03.08 461984415

13 M/s Shiv Finance, Rajkot 15305007286 21.04.07 to 30.04.08 31117558

14 M/s Sadashiv Enterprise, Rajkot

15305008383 11.12.07 to 17.03.08 17162189

15 M/s Shree Bhagwati Enterprise, Rajkot.

15305003241 22.09.05 to 29.07.06 328359062

Total529895827

6

9.12.2. From the above investigation, it is proved beyond any doubt that Dr. Paresh Dhanjibhai Patel and Shri Bharatbahi Ishwarbhai Patel opened fifteen ICICI bank accounts, operated the same and played vital role in mobilizing huge amounts of illicit cash which was deposited at the various locations by the customers of various Ceramic Tile manufacturers and managed delivery of the same to the respective manufacturer. It is evident from the above table that Dr. Paresh D. Patel and Shri Bharat I Patel opened three accounts in the name of M/s Shree Bharat Enterprise, three accounts in the name of M/s Shiv Enterprise and two accounts in the name of M/s Shiv Finance. Such multiple accounts in the name of same firms in ICICI Bank only were opened and operated to mis-lead and confuse the investigating agencies. The cash so deposited in the various accounts of ICICI bank was withdrawn in cash or they had discounted ICICI Bank cheques with M/s Siddhnath Enterprise, Rajkot and M/s Shree Bhagwati Enterprise, Rajkot and managed cash for delivery to the concerned manufacturer. They did not maintain/destroy the records indicating delivery of cash to the concerned manufacturers and thus managed to conceal the identity of the manufacturer to whom the cash was delivered. They could siphon an amount of Rs.529.89 Crores from the dealers of the ceramic tiles to the concerned manufacturers.

9.13.1. It is evident from the investigations from Dr. Paresh Patel that dealers of M/s Star were receiving cash deposited by their dealers in the account of M/s Shiv Finance and Dr. Paresh Patel has admitted the same. As discussed in para 4 supra, M/s N.K. Trading Co., Kollam deposited cash amounts in the account of M/s Shiv Finance as under:-

S.No Amount Deposited on S.No Amount Deposited on1 Rs.1,00,000/- 09.08.06 5 Rs.1,00,000/- 28.11.062 Rs.1,00,000/- 19.10.06 6 Rs.1,00,000/- 16.12.063 Rs.1,00,000/- 06.11.06 7 Rs.1,00,000/- 01.02.074 Rs.1,00,000/- 23.11.06 8 Rs.1,00,000/- 09.12.06

9.13.2. The scrutiny of bank account statement of A/c No.624805010772 of M/s Shiv Finance reveals that the aforesaid cash amounts on the dates indicated against each were deposited in Kollam branch of ICICI Bank Ltd. As discussed in para 4 supra, Shri N. M.P.V. Noble, General Manager and Shri V. Satheesan, Partner of M/s N.K. Trading Co., Kollam in their statements dated 17.01.08 and 21.01.08 categorically confirmed that they were depositing cash in the account of M/s Shiv Finance on behalf of M/s Star.

9.13.3. The account statement of M/s Shiv Finance, documentary evidences collected from M/s N.K. Trading Co., Kollam, oral evidences of the dealers of M/s Star and statements of Dr. Paresh Patel conclusively prove that M/s Star used account of M/s Shiv Finance for transfer of cash from their dealers. The said account of M/s Shiv Finance was used by Dr. Paresh Patel for collection of cash from different dealers of several manufacturers but he destroyed all the documents after searches by DGCEI on 17.1.2008. However, scrutiny of bank account statement of M/s Shiv Finance reveals that huge cash amounts were deposited at the places where M/s Star are having their dealers. It is thus evident that M/s Star received cash from all the dealers in respect of sales of tiles made by them. Thus the documentary evidences recovered from the dealers, bank statements of both the accounts of M/s Shiv Enterprise,

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statements of dealers of M/s Star and statements of Dr. Patesh Patel prove beyond any shadow of doubt that M/s Star used A/c of M/s Shiv Finance for transfer of cash from their dealers.

10.1.1. Shri Bahadurali Hyderali Hemani in his statement dated 6.6.08, referred in para 9.3 supra stated that in addition to M/s Dev Enterprise and M/s J.B. Enterprise, he is having another account in the name of M/s Sagar Enterprise. Shri Bahadurali Hyderali Hemani deposed that he had opened an account, in the year 2006 with ICICI Bank in the name of M/s Sagar Enterprise; that its account number is 624805010644; that while opening the said account his name was given as Proprietor and his PAN card number was used. On being asked about use of this account, he deposed that the said account was used for collection of cash of Morbi based Tile manufacturers; that he was delivering cash deposited in this account to Shri Rajubhai and Shri Pravinbhai of M/s Sahab Enterprise of Morbi for further distribution to the concerned Ceramic Tile manufacturers of Morbi; that he was getting Rs.100/- per lakh for carrying out above transactions, out of which he used to give Rs.50/- per lakh to Shri Rajubhai or Pravinbhai.10.4.1. It is evident from the investigations from Shri Bahadurali Hyderali Hemani that dealers of M/s Star were receiving cash deposited by their dealers in the account of M/s Sagar Enterprise. As discussed in para 4 supra, M/s N.K. Trading Co., Kollam deposited cash amount of Rs.1,00,000/- in the account No.624805010644 held by M/s Sagar Enterprise on 10.07.06 on behalf of M/s. Star towards the actual cost of the tiles, over and above the amount shown in the bills.

10.4.2. The scrutiny of bank account statement of A/c No. 624805010644 of M/s Sagar Enterprise reveals that the aforesaid cash amount on the date indicated against each was deposited in Kollam branch of ICICI Bank Ltd. As discussed in para 4 supra, Shri N. M.P.V. Noble, General Manager and Shri V. Satheesan, Partner of M/s N.K. Trading Co., Kollam in their statements dated 17.01.08 and 21.01.08 categorically confirmed that they were depositing cash in the account of M/s Sagar Enterprise on behalf of M/s Star.10.4.3. The account statement of M/s Sagar Enterprise, documentary evidences collected from M/s N.K. Trading Co., Kollam, oral evidences of the dealers of M/s Star and statements of Shri Bahadurali Hyderali Hemani conclusively prove that M/s Star used account of M/s Sagar Enterprise for transfer of cash from their dealers. The said account of M/s Sagar Enterprise was used by Shri Bahadurali Hyderali Hemani for collection of cash from different dealers of several manufacturers but he destroyed all the documents after searches by DGCEI on 17.1.2008. However, scrutiny of bank account statement of M/s Sagar Enterprise reveals that huge cash amounts were deposited at the places where M/s Star are having their dealers. It is thus evident that M/s Star received cash from all the dealers in respect of sales of tiles made by them. Thus the documentary evidences recovered from the dealers, bank statements of both the accounts of M/s Sagar Enterprise, statements of dealers of M/s Star and statements of Shri Bahadurali Hyderali Hemani prove beyond any shadow of doubt that M/s Star used A/c of M/s Sagar Enterprise for transfer of cash from their dealers.

11.1. The investigations discussed in foregoing paras reveal that the manufacturers of ceramic tiles have taken services of several shroffs of Morbi and Rajkot for transfer of cash from their dealers. Such shroffs obtained PAN Nos, opened accounts in banks having multi-locational deposit facility. Some accounts were opened in the names of the firms with such persons as proprietors who after opening accounts, gave signed cheque books to shroffs. Thereafter, the accounts were operated by the shroffs and the proprietors were paid only lumpsum amounts on monthly basis. The shroffs communicated such accounts to the manufacturers who in turn communicated the same to their buyers. The buyers deposited cash in such accounts and used to fax the pay-in-slips to the concerned manufacturers. On the basis of such pay-in-slips, the manufacturers were receiving cash from the shroffs.

11.2. The shroffs did not maintain detailed accounts in respect of cash payments to the manufacturers. On the basis of pay-in-slips brought by the manufacturers, the shroffs were verifying the details of deposits in their account and making payments to the concerned manufacturers. In order to avoid cash withdrawal tax, the shroffs transferred the amount either to Co-Op Banks or to Savings Bank Accounts and thereafter, withdrew the amounts in cash from such accounts. The Morbi based shroffs were handing over cash to the manufacturers themselves without involving any other person. However, some of the Rajkot shroffs have taken services of some Morbi based shroffs for collection of pay-in-slips from the manufacturers of tiles and disbursement of cash to the manufacturers. The investigations further reveal that the shroffs operated one particular account for a short period so that same is not detected by any agency. After a short period, they closed such account and opened new accounts. Thus a particular account was operated only for a short period. The shroffs also opened several bank accounts in the name of one firm only. As an example, four accounts

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were opened in the name of M/s Shree Bhagwati Enterprise. Similar is the position in respect of other firms also. Several accounts in the name of same firm were operated during different periods only to confuse the investigating agencies.

11.3. The investigations further reveal that apart from cash deposits in the bank accounts operated by shroffs, the manufacturers of tiles were also getting bearer cheques/bearer DDs from their dealers. Such bearer cheques/bearer DDs were got discounted by the shroffs and thus the differential amount between the actual value of tiles and the invoice value was collected through bearer cheques/bearer DDs. The investigations further revealed that the ceramic tile manufacturers were purchasing raw materials either without bill or at reduced rates. This was done to ensure that their manufacturing cost on paper remains below the actual cost so that they are able to under-invoice the tiles manufactured by them. Similarly, in order to ensure that their dealers are able to issue sale bills at the rate of less than MRP declared by them, the tile manufacturers were obtaining freight bills for transportation at reduced rates. The differential amounts to raw material suppliers and transporters were being paid by them in cash. The investigations from shroffs further revealed that the bearer cheques/bearer DDs received from dealers were being given to the raw material suppliers, transporters, etc who got the same discounted from the shroffs. Thus in order to avoid duty of excise and VAT, the tile manufacturers obtained bills for raw materials, freight, etc at lower rates and issued invoices for their tiles at lower rates. However, they recovered the differential amounts for sale of tiles from their dealers in cash or bearer cheques/DDs and the differential amounts to raw material suppliers, transporters etc were paid out of such cash or by way of bearer cheques/bearer DDs, received from the dealers. Thus the whole chain of under-invoicing and collection of cash was done by raw material suppliers, transporters and manufacturers of tiles only to avoid excise duty and VAT.

11.4. The officers of DGCEI during the searches in the premises of several dealers could find out only 78 bank accounts of the firms in which cash amounts were being deposited on behalf of the ceramic tile manufacturers. On the basis of the cash deposited in said 78 accounts, as per bank account statements provided by the respective Banks, a chart has been prepared as follows:-

Chart Showing Amounts deposited in cash by the dealers of Ceramics Tile Manufacturers in the accounts operated by Shroffs.

Sr. No. Name of the firm Account No.

Period

From To

1 A.P. Enterprise 00-5205003063 01.02.06 31.03.08

2 Balaji Enterprise 0-15305005232 08.05.06 22.06.07

3 Dev Enterprise 400001600000027 13.08.07 15.02.08

4 Eagle & Co. 0-15305005167 18.04.06 18.01.08

5 Ganesh Agency 0-15305005479 22.06.06 04.10.07

6 Ganesh Agency 0-29605003954 01.09.07 16.06.08

7 Gajanand Enterprise 0-15305002088 03.12.04 14.12.05

8 Harsiddh Finance 00-2405006363 09.09.04 28.03.05

9 Jay Enterprise 0-15305007637 14.07.07 24.01.08

10 Jay Jalaram Traders 00-2405013113 31.08.07 31.01.08

11 Jayeshkumar P. Kalria 00-2401517106 26.09.06 26.03.07

12 J.B.Enterprise 624805010664 06.05.06 16.01.08

13 J V Patel 2405007471 02.03.05 12.08.05

14 Khodiyar Agency 0-15305007297 24.04.07 18.01.08

15 K.R. Agency 0-15305007325 02.05.07 18.01.08

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16 Kum kum Enterprise 624805011209 28.09.06 29.06.07

17 Mahek Enterprises 624805011014 08.08.06 20.10.07

18 Rachna Enterprise 624805012005 28.06.07 21.01.08

19 Ravi Agency 0-15305008188 01.11.07 18.06.08

20 Ronak Enterprise 624805009623 11.10.05 07.09.06

21 Ronak Enterprise 624805009174 21.12.04 15.12.05

22 Sadashiv Enterprise 0-15305008383 11.12.07 17.03.08

23 Sagar Enterprise 624805010644 28.04.06 18.01.08

24 Shiv Enterprise 0-15305006773 29.12.06 21.01.08

25 Shiv Enterprise 0-15305001934 23.10.04 31.03.08

26 Shiv Enterprise 624805011117 08.09.06 13.04.07

27 Shiv Finance 624805010772 10.06.06 31.03.08

28 Shiv Finance 0-15305007286 21.04.07 31.03.08

29 Shree Bhagwati Enterprise 0-15305003457 26.10.05 17.03.08




33 Shree Bhagwati Trading 0-15305002340 08.02.05 01.02.06

34Shree Bhagwati Trading (except period Nov-05 to Feb--06 & Dec-06 to May-07)

87010200001328 01.04.03 31.01.08

35 Shree Bharat Enterprise 0-15305005806 08.08.06 19.01.08

36 Shree Bharat Enterprise 624805010058 17.01.06 15.09.06

37 Shree Bharat Enterprise 0-15305007285 21.04.07 20.12.07

38 Shree Laxmi Enterprise 624805012628 26.12.07 18.02.08

39 Shree Panchnath Enterprise 624805009255 01.02.07 31.03.08



42 Shree Ram Enterprise 624805011746 15.03.07 02.02.08

43 Shreeji Enterprise 0-15305001905 01.10.05 07.11.06



46 Shreeji Traders 00-2405012371 10.05.07 23.01.08

47 Shri Balaji Agency 0-15305007826 18.08.07 17.03.08

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48 Shree Maruti Enterprise 0-15305006741 21.12.06 19.01.08

49 Shri Saikrupa Enterprise 624805011259 07.10.06 17.01.08

50 Shree Maruti Enterprise 0-15305003505 07.11.05 22.07.06

51 Shital Corpoaration 45205000340 22.02.07 31.12.06

52 Shubh Enterprise 0-15305007439 01.06.07 26.03.08

53 Shubh Enterprise 2532001500000310 17.01.07 31.01.08

54 Shubham Agency 0-15305008127 19.10.07 01.03.08

55 Shyam Agency 0-15305008502 10.01.08 31.01.08

56 Shyam Enterprise 624805011474 13.12.06 24.10.07

57 Siddhnath Enterprise 624805009708 01.11.05 31.03.06

58 Simandhar Finance 00-2405003611 31.03.04 29.03.05

59 Sonu Enterprise 624805012599 19.12.07 20.06.08

60 Subham Agency 0-15305008127 19.10.07 01.03.08

61 Tulsi Agency 624805012405 26.10.07 18.01.08

62 Vinayak Enterprise 0-15305006173 25.09.06 01.03.08

63 Vinayak Enterprise 0-15305006946 31.01.07 31.05.07

64 Yash Enterprises 0-15305003528 14.11.05 02.02.07

65 Sagar Enterprise 15305008332 03.12.07 18.04.08

66 Om Enterprise 624805012955 01.05.08 08.07.08

67 Akshar Enterprise 624805011069 30.09.06 30.06.08

68 Siddhnath Enterprise 8312000006692 01.04.03 25.04.08

69 Shiv Enterprise 624805009586 24.09.05 25.08.06

70 Eagle & Co. 15305002632 26.04.05 30.06.06

71 Gajanand Enterprise 87010200010919 31.10.05 29.01.07

72 Ashok Enterprise 15305001220 01.04.04 07.01.05

73 Shree Maruti Enterprise 15305006679 13.12.06 02.05.07

74 K.J.Pathak 00-2405008514 19.09.05 31.03.08

75 Sanandihya Infotech 0-1535008721 01.10.04 31.12.06

76 Tajesh Enterprise 62485013078 01.09.08 15.01.09

77 Sun Corporation 002405005096 01.04.04 14.03.05

78 Harsiddh Finance 002405006363 01.12.04 28.02.05

GRAND TOTAL

11.5. It is evident from the said chart that an amount of Rs. 1951.41 Crores was deposited in said accounts in cash by the dealers of ceramic tile manufacturers . The investigations from othe shroffs are in progress and concerned banks have been requested to give bank account statements of said accounts covering the entire periods. Thus the actual amounts deposited in

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cash by the dealers of ceramic tiles in different accounts shall increase. There may be several such other accounts which are not known to DGCEI. The inquiries from the dealers as well as shroffs reveal that the account numbers into which cash amounts were being deposited were frequently changed to avoid detection by any Enforcement Agencies. Thus there may be several other such bank accounts which could not be obtained during the investigations. In addition, the amounts were also being transferred through Angadias, through bearer demand drafts/bearer cheques and through personal visits of the dealers to Morbi or the manufacturers to the dealers. Thus, the total amounts collected through channels other than the official channels shall be much more. Thus the ceramic tile manufacturers were running a parallel economy to evade excise duty, VAT and Income Tax.

11.6. Investigations reveal that M/s Star used services of several shroffs and angadias for transfer of cash from their dealers. Such evidences have been recovered from several dealers during the investigations as discussed in the foregoing paras. These evidences further substantiate that M/s. Star were under-invoicing the ceramic tiles manufactured by them and were collecting the differential amounts through shroffs, angadias as well as through their representatives and the representatives of dealers. Thus evasion of central excise duty by M/s Star by way of undervaluation is established beyond doubt. 12.1. The documentary evidences, duly corroborated by statements of the concerned persons which are discussed in detail hereinabove, clearly appeared to indicate that M/s Star were indulging in large scale evasion of central excise duty, by resorting to gross undervaluation of the retail sales price with intent to evade payment of central excise duty. Therefore, in order to ascertain the extension of evasion, Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star was summoned under Section 14 of the Central Excise Act, 1944 on 12.4.08 and was called upon to produce all the documents maintained by them regarding production, clearances of ceramic wall tiles, the payments and collection realized by them. Accordingly, Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star appeared before the investigating officer on 01.05.08 and produced the documents such as central excise invoices, ledger accounts, cash books, etc. maintained by them since April, 2004 till March, 2008. All such documents were examined with reference to other documentary evidences gathered from the ends of the dealers of M/s Star, recorded the statements of Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star to obtain his clarifications. The statements as recorded are discussed in the following paras.

12.2.1. Statement of Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star was recorded under Section 14 of the Central Excise Act, 1944 on 01.05.2008. During the course of recording his statement, he admitted about the undervaluation of ceramic wall tiles cleared from his factory and also confirmed that the MRP declared in their invoices did not include transportation charges, loading and unloading charges, breakage during transit, wholesaler’s profit margin, dealers’ profit margin, VAT element, etc. which resulted in undervaluation of ceramic wall tiles. He further stated that earlier their factory, viz., M/s. Star Ceramic was constituted as partnership firm having thirteen partners. The said Partnership deed was subsequently amended in the month of March, 2007 and executed the same with six partners, who looked after different responsibilities relating to manufacture and clearance of ceramic wall tiles in the said factory. He further stated that though there were six partners in the said factory, he was mainly looking after the entire day to day work and overall supervision over the production, maintenance of all the statutory records and marketing of their finished goods. In other words, he stated that the work related to receipt of raw materials, consumption of raw materials, production, sorting, packing, storage, dispatch of excisable goods, payments to raw material suppliers, marketing of the finished goods and collection of payments from various dealers took place under his knowledge and supervision.

12.2.2. On being asked, he further stated that in their factory, they were manufacturing ceramic ordinary wall tiles of 12”x8” size only having different grades, viz., Standard, Silver and Gold/D.D. which are marketed through out the country. However, during the month of August, 2007, they have installed new Roller Kiln in the said factory and started manufacturing of Ceramic Luster wall tiles of 12”x8” size having grades of Standard SP, Silver and Gold/D.D. The above grades of ceramic ordinary wall tiles were cleared in the market on paymentof Central Excise duty by declaring MRP of Rs.100/- [Standard], Rs.80/- [Silver] and Rs.60/- [Gold/D.D.]. However, with effect from 04.03.2008, they have revised MRPs of all varieties of wall tiles and accordingly Ordinary Standard grade tiles were cleared at MRP of Rs.140/- per box, Silver grade at MRP of Rs.110/- and Gold/D.D. grade tiles at MRP of Rs.50/- per box. Similarly, luster variety of wall tiles were cleared by declaring MRP of Rs.160/- [Standard SP], Rs.120/- [Silver] and Rs.50/- [D.D.] grades per box. On being asked about the system of fixing MRP, he stated that MRP was earlier fixed without consideration of taxes and transportation charges involved on it. In fact, the transportation charges and taxes were paid by the buyers in addition to their invoice value of the goods.

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12.2.3. On his request, the rest of the statement was recorded in question answer form. The questions asked and the answers given by him are reproduced

hereunder:- Que.1:- Please tell us about the marketing pattern for sale of your

finished goods viz., ceramic glazed wall tiles?Ans.1:- We are selling our finished Ceramic glazed wall tiles at our

factory gate only. We are selling the goods to all types of buyers, viz., individuals, dealers, traders etc. We do not have any marketing set-up as such like depot etc.

Que.2:- How do you receive or record the requirements received from your Customers? Do you have any system of receiving orders, in written form – fax courier etc, or oral form through telephone etc.?

Ans.2:- Normally all the orders are placed to me/or to the person present in the factory over phone. The buyers at nearby places visit our factory in person to place their orders. Long distance buyers would place their orders over phone, or fax orders. However, after execution of the orders we do not keep or maintain the copies of such order.

Que.3:- Do you have any depot, warehouse, of branch offices of your firm, and if so, please give us the details such as addresses, phone numbers, key persons incharge of running such establishment?

Ans.3:- We do not have any depot, warehouse or branch offices any where in India.

Que.4:- Do you have any Stockiests, Consignment / Commission agents, Clearing & Forwarding Agents, Whole-sale dealers etc., and if so, please give us the details such as addresses, phone numbers, key persons incharge of running such establishment?

Ans.4:- We do not have any Consignment / Commission agents, Clearing & Forwarding agents, Stockists etc. However, we do sell through our whole-sale dealers on central excise invoices, on payment of duty from our factory end. The names and addresses of such whole sale dealers are available on the invoices

Que.5:- What is the system of documentation at the time of dispatch of the goods from your factory? Whether any delivery challan, packing slip, weighment slip, Central Excise invoice, Commercial / Tax-invoice etc., are prepared?

Ans.5:- At the time of dispatch, the Central Excise invoice, commercial tax forms, as may be required depending upon the local requirement of such Sales Tax / Commercial Tax authorities. For example, for goods going out of Gujarat State Form 402 is prepared and sent alongwith the consignment. Some times Packing lists are prepared in one copy and send along with the dispatch documents. In many cases we communicate details related to design colours over phone also.

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Que.6:- Who prepares such documents at your factory end at the time of dispatch?

Ans.6:- Normally the supervisor of the packing department of our firm looks after loading and dispatch of the finished goods. However, Shri Sachinbhai, an employee is used to prepare all Central Excise invoices and other documentation work at our aforesaid factory. The over all supervision and authentication of the documents related to dispatch of the goods are attended by the undersigned

Que.7:- How do you make arrangements for the transportation of the consignments? Do you have any specified transporters through whom your goods are dispatched? If so, please give us the details such as addresses, phone numbers, and key persons in-charge of running such transport firm.

Ans.7:- Normally, for out station consignees, transportation arrangements are made by our buyers who inform us about the details of transporters to whom we should contact and deliver the goods for transportation. As per order placed/received, after confirming from the consignee, we load the goods with the specific transporters. Whenever container is arranged for loading of tiles from our factory, the same may go through sea or rail route. In some cases our goods are transported by road in the trucks. As far as local sale is concerned the transportation are also arranged by the consignee only.

Que.8:- What is the system for making the payments for out-ward freight, viz., freight payment for carriage of finished goods from your factory to that of the consignee? Whether the freight is paid by you, or it is borne by the consignee?

Ans.8:- The out-ward freight payable on the consignments of tiles cleared from our factory are always borne and paid by our buyers.

Que.9:- What is the relationship of your firm with M/s. N.K. Trading Co., Kollam whether they are your Stockists, Consignment Agents, or a whole-sale dealer selling your finished Ceramic Glazed Tiles to ultimate customers?

Ans.9:- M/s N.K. Trading Co., Kollam is one of our dealers and they have neither related to us nor having any other relations other than dealer and manufacturers for the business of our products.

Que.10:- What is the system of receipt of orders from the above named dealer for supply of tiles from your factory? Who is normally contacting you from their end for placing the orders and how the order is executed?

Ans.10:- We used to receive purchase orders from the aforesaid dealer either on telephone or through fax medium. On receipt of the orders, we execute and dispatch the required sizes and grades of wall/glaze tiles to the immediately through their intimated transport medium. After the dispatch of the consignments, we inform them about dispatch on phone.

Que.11:- You are hereby shown the following evidences gathered from the following dealers’ premises, who are dealing in the

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ceramic glaze/wall tiles manufactured and cleared by you, which you may go through carefully, and place your dated signatures thereon.

(i) Mahazar dated 17.01.2008 drawn at the premises of M/s. N.K. Trading Co., Adjacent to Manalil Shiva Temple, Mamootikadavu Road, Manlil, Kollam

(ii) Mahazar dated 17.01.2008 drawn at the premises of M/s. N.K. Trading Co., N.K. Building, Raman Kulangara, Kollam

(iii) Statement dated 21..01.08 of Shri MPV Noble, General Manager of M/s. N.K. Trading Co., Kollam

(iv) Statement dated 17.01.08 of Shri V. Satheesan, Managing Partner of M/s. N.K. Trading Co., Kollam

(v) Worksheet prepared by the department showing receipt of cash amounts from M/s. N.K. Trading Co., Kollam by the aforesaid manufacturer, viz., M/s. Star Ceramic, Morbi.

(vi) Paying in slips file seized from the above deaaler’s premises [N.K. Trading Co., Kollam] showing transferring of cash amount to M/s. Star Ceramic.

Ans.11:- I carefully gone through the contents of the above documents and after understanding the same, I willingly placed my dated signature on the above documents today. In this connection, I further state and confirm that we had collected Rs.19.00 lakhs in cash from the above said M/s. N.K. Trading Co., Kollam through different shroffs, viz., Shree Bhagwati Enterprise, M/s. Shiv Finance, M/s. Ganesh Agency, M/s. Shree Maruti Enterprise and M/s. Sagar Enterprise

Que.12:- Have you colleted extra money per box if yes what was the quantum and how that amount was received by you?

Ans.12:- Yes. We used to charge and collect Rs. 10/- to Rs.15/- per box, in addition to the bill amount from all our customers. The said extra amount is mainly received/collected by us either personally visiting to our buyers or sometimes through the shroffs, as mentioned herein above.

Que. 13:- Have you ever increased your MRP recently? If so, state the present MRP fixed by you.

Ans.13:- Recently we have revised our MRP for STD, SILVER AND DD grades wall tiles from Rs.100/- to Rs.140/-; SILVER from Rs.80/- to Rs.110/- and DD from Rs.60/- to Rs. 80.00 per box.

12.3.1. Another statement of Shri Pravindhandra Devkaranbhai Bhimani,Partner of M/s. Star Ceramic was recorded under Section 14 of the Central ExciseAct, 1944 on 16.04.2009 in question answer form. The questions asked and the Answers given by him are reproduced hereunder:-

Que.1:- Please see your earlier statement dated 01.05.08 recorded under Section 14 of the Central Excise Act, 1944. Do you agree with the facts stated by you in your above statement?

Ans.1:- I have gone through the above statement and I fully agree to the facts stated in my earlier statement. In token of my

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confirmation of correctness of facts stated in my above statement, I put my dated signature on the aforesaid statement today.

Que.2:- Whether your above statement was recorded under threat, duress, coercion, pressure or allurement?

Ans.2 :- No. I was not given any kind of threat, duress, coercion, pressure or allurement while recording my aforesaid statement.

Que.3:- 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, your employees and dealers. On the said stamp papers, you are making affidavits of yours, your employees 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 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.3 :- No. I have not prepared any notarized affidavit. I have never retracted to statement of mine recorded before the Superintendent, DGCEI, Ahmedabad. My dealers have also not retracted any statement given by them. No kind of threat, duress, coercion, pressure or allurement was given while recording my aforesaid statement and hence there did not arise any question of filing such affidavit.

Que.4:- Please go through the panchnama dated 17.01.08 drawn at the premises of M/s. N.K. Trading Co., Near Manalil Shiva Temple, Mamootikadavu Road, Manalil, Kollam by the officers of Central Excise & Customs Comissionerate, Thiruvananthapuram and give your comments.

Ans.4:- I have gone through the aforesaid panchnama dated 17.01.08 drawn at the premises of M/s. N.K. Trading Co., Kollam and in confirmation to the facts recorded therein as correct and true, I put my dated signature on the same.

Que.5:- Please go through the Statements of Shri M.P.V. Noble, General Manager of M/s. N.K. Trading Co., Kollam recorded on 17.01.08 and 21.01.2008 and give your comments thereon.

Ans.5:- I have gone through the above said two statements dated 17.01.08 and 21.01.08 of Shri M.P.V. Noble, General Manager of M/s. N.K. Trading Co., Kollam. In token of my perusal of the above statements and in confirmation of the facts mentioned by him on the said statements as correct and true, I put my dated signature on the both the said statements.

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Que.6:- Please go through the Statement of Shri V. Satheesan, Partner of M/s. N.K. Trading Co., Kollam recorded on 17.01.08 and give your comments thereon.

Ans.6:- I have gone through the above said statement dated 17.01.08 of Shri V. Satheesan, Partner of M/s. N.K. Trading Co., Kollam. In token of my perusal of the above statement and in confirmation of the facts mentioned by him on the said statement as correct and true, I put my dated signature on the last page of the said statement.

Que.7:- You are being shown two seized files marked at Sr.No.9 and 10 of the Annexure to the panchnama dated 17.01.08 from the premises of M/s. N.K. Trading Co., Kollam wherein several counterfoils of Bank remittance slips were kept. You are also being shown a statement of accounts, prepared by the officers of DGCEI, Regional Unit, Kochi, on the strength of the above two seized files, wherein 129 entries of payment of cash amounts to the accounts of ICICI Bank held by different shroffs on behalf of tile manufacturers, including M/s. Star Ceramic, were shown. Please go through the above seized documents from the premises of M/s. N.K. Trading Co., Kollam and the statement of accounts and offer your comments thereon.

Ans.7:- I have gone through the aforesaid two seized files marked at Sr.No.9 and 10 of the Annexure to the panchnama dated 17.01.08 from the premises of M/s. N.K. Trading Co., Kollam and in token of my perusal of the said documents, I place my dated signature on the first and last pages of the above documents today. I have also gone through the statement of accounts, consisting of 129 entries of cash payments made by M/s. N.K. Trading Co. to the accounts of ICICI Bank held by different shroffs on behalf of tile manufacturers, including M/s. Star Ceramic. In token of my perusal and confirmation of understanding the contents therein, I place my dated signature on the first and last pages of the said statement of accounts today. I confirm that the facts narrated by Shri M.P.V. Noble, General Manager of M/s. N.K. Trading Co. with regard to cash payments, as above, are correct and true and as such acceptable to us. In other words, I state and confirm that as per our directions, M/s. N.K. Trading Co., Kollam has collected part amount in cash from their customers and paid the same to us in lieu of the cost of the wall tiles supplied by us, over and above the bill amount, through our designated shroffs, viz., M/s. Shree Maruti Enterprise, M/s. Shree Bhagwati Enterprise, M/s. Shiv Finance, M/s. Ganesh Agency and M/s. Sagar Enterprise. Thus, as per above said statement of accounts, we had received cash amounts of Rs.19,00,000/- from M/s. N.K. Trading Co., Kollam, over and above the bill amount, in lieu of part amount of the actual cost of tiles supplied by us, through the shroffs whose names are mentioned in the said chart.

Que.8:- You are being shown an Annexure-A prepared by the officers of DGCEI, Ahmedabad ZU, on the strength of the above mentioned two seized files at Sr.No.9 and 10 of the Annexure to

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the panchnama dated 17.01.08 from the premises of M/s. N.K. Trading Co., Kollam wherein 347 entries, showing payments by cheques to the accounts held by different tile manufacturers and payments by cash to the accounts held by different shroffs were indicated. Please go through the contents of the above Annexure-A and offer your comments on the same.

Ans.8:- I have gone through the contents of the entries appearing in the above said Annexure-A prepared by the department and in token of my perusal and confirmation of the same as correct and true, I place my dated signature on the last page of the said Annexure-A. In this regard, I state and confirm that as per above Annexure-A, M/s. N.K. Trading Co., Kollam have deposited/paid Rs.3,19,64,814/- through cheques or demand drafts into the accounts of different tile manufacturers held in HDFC, UTI and Bank of India. Out of the above said amount, M/s. N.K. Trading Co. have deposited about Rs.30.00 lakhs in our account No.3072560002396 held in HDFC Bank. Similarly, they had also transferred cash amounts worth Rs.1,62,74.814/- to different tile manufacturers, over and above the bill amounts, through different shroffs’ firm. As mentioned herein above, I confirm that cash amounts of Rs.19.00 lakhs, over and above the bills amount, were received by us from M/s. N.K. Trading Co., Kollam during the period from 20.04.06 to 25.10.07.

Que.9:- You are being shown a panchnama dated 19.04.08 and

12.05.08 under which the seized hard disc from the premises of M/s. N.K. Trading Co., Kollam was opened and printouts of the data available in the said hard disc obtained. Please go through the printouts filed in two files, which are being shown to you, and offer your comments thereon.

Ans.9:- I have gone through the printouts obtained from the seized hard disc of M/s. N.K. Trading Co., Kollam and in token of my confirmation of the same, I place my dated signature on the first and last pages of the above documents.

Que.10:- You are being shown page No.78 of the printouts file, which is a letter dated 04.11.2006 of M/s. N.K. Trading Co. addressed to the Managing Director, The Quilon Hotels & Resorts Pvt. Ltd., Kollam, quoting the sale rate @ Rs.12/- per Sq. feet piece for wall tiles having Monalisa Brand manufactured by M/s. Star Ceramic. Please go through the said letter dated 04.11.2006 of M/s. N.K. Trading Co. and offer your comments for the same.

Ans.10:- I have gone through the above said letter dated 04.11.2006 of M/s. N.K. Trading Co., quoting the sale rate for Monalisa Brand wall tiles manufactured by us as Rs.12/- per Sq. feet. In this connection, I confirm that M/s. N.K. Trading Co. have quoted the sale rate of our wall tiles as Rs.12/- per Sq. feet, as the said tiles were sold in the market at the rate of Rs.120/- and above per box. In token of my perusal and confirmation of the same, I place my dated signature on the said letter dated 04.11.2006.

Que.11:- You are being shown page No.93 of the printouts file, which is a pricelist in respect of Monalisa White body wall tiles manufactured by M/s. Star Ceramic. As per the said pricelist,

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the sale rate for Plain & Print Colour tiles of Monalisa Brand in terms of credit, cheque and cash works out to Rs.130.95, Rs.127.05 and Rs.124.95 per box. Similarly, the sale rate for Black Colour tiles in terms of credit, cheque and cash was shown as Rs.145.95, Rs.142.05 and Rs.139.95 per box. Please go through the above price list and offer your comments.

Ans.11:- I have gone through the contents of page No.93 of the printouts file, as mentioned herein above, wherein the sale rate of our wall tiles of Plain & Print Colour and Black Colour was shown. I confirm that our wall tiles of Plain & Print colour were sold by M/s. N.K. Trading Co. at sale rate of Rs.124.95 to Rs.130.95. Similarly, Monalisa Brand wall tiles of Black colour were sold at the rate ranging Rs.139.95 to Rs.145.95 per box. In token of my perusal and confirmation of the above facts, I place my dated signature on the above said pricelist.

Que.12:- You are being shown page No.89 of the printouts file, which is a pricelist of Monalisa brand white body wall tiles manufactured by M/s. Star Ceramic. The sale rate for Plain & Print, Black, ORD, SPL and SSPL colour tiles of 12”x8” and 8”x8” sizes are shown in the said pricelist, depending upon the terms of payment. According to the said pricelist, the sale rate by cheque for 12”x8” size tiles is shown as Rs.127/- for Plain & Print colour and Rs.142/- for Black colour. Similarly, sale rate for tiles of 8”x8” size of ORD, SPL and SSPL colour is shown as Rs.168/-, Rs.204/- and Rs.244/-, per box respectively. The cash payment rates for tiles of 12”x8” size are shown as Rs.125/- and Rs.140/- per box for the tiles of Plain & Print and Black colours respectively. The cash payment rates for tiles of size 8”x8” are shown as Rs.160/-, Rs.196/- and Rs.236/- per box for ORD, SPL and SSPL colour of tiles respectively. Please go through the above said pricelist and offer your comments.

Ans.12:- I have gone through the pricelist filed at page No.89 of the printouts file. In light of the above pricelist, I confirm that sale rates quoted by M/s. N.K. Trading Co. in the above pricelist in respect of Monalisa Brand wall tiles of 12”x8” and 8”x8” sizes of different colours are correct, depending upon the terms of payment i.e. by cheque and by cash, as we were collecting part amount in cash from M/s. N.K. Trading Co., Kollam, over and above our bill amounts and as such our tiles were sold in the market at the rate mentioned herein above.

Que.13:- You are being shown page Nos.12 to 14 of the printouts file, wherein the total value of two consignments of Monalisa Brand wall tiles cleared vide your invoice No.0183 and 0206 to M/s. N.K. Trading Co. was shown as Rs.3,36,888/- whereas the total value of the same consignments, as appearing in page Nos.15 to 17 of the printouts file, shown as Rs.4,26,970.50. Please go through the above documents and offer your comments.

Ans.13:- I have gone through the page Nos.12 to 14 and 15 to 17 of the printouts file, as mentioned herein above. In this regard, I state and confirm that as per our invoice Nos.0183 and 0206, the total value of the wall tiles cleared by us to M/s. N.K. Trading Co. comes to Rs.3,36,888/- whereas the actual cost of the

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same tiles was Rs.4,26,970.50, which we have collected from M/s. N.K. Trading Co., Kollam. In token of my perusal and confirmation of the above facts, I place my dated signature on all the above pages today.

Que.14:- Please go through the panchnama dated 22.12.08 drawn at the premises of M/s. Amit Ceramics, Gaekawadmala, Nashik Road, Nashik by the officers of DGCEI, Regional Unit, Vapi and Central Excise Commissionerate, Nashik and give your comments.

Ans.14:- I have gone through the contents of the panchnama dated 22.12.08 drawn at the premises of M/s. Amit Ceramics, Nashik. In token of my perusal and confirmation of the facts mentioned therein as correct and true, I place my dated signature on the last page of the said panchnama dated 22.12.08.

Que.15:- You are being shown statement dated 22.12.08 of Shri Bumtaria Pravin Panchabhai, Proprietor of M/s. Amit Ceramics, Nashik. Please go through the contents of the said statement and give your comments.

Ans.15:- I have gone through the above statement dated 22.12.08 of Shri Bumtaria Pravin Panchabhai, Proprietor of M/s. Amit Ceramics, Nashik. I state that the facts mentioned in the above said statement are correct and true and as such acceptable to us. In token of my perusal and confirmation of the facts mentioned in the said statement, I place my dated signature on the last page of the statement.

Que.16:- You are being shown a seized A/19 diary under panchnama dated 22.12.08 from the premises of M/s. Amit Ceramics, Nashik, wherein payment of huge amounts were shown to different tile manufacturers on day today basis. Please go through the said seized diary and explain the reason for showing cash payments of such huge amounts to different tile manufacturers.

Ans.16:- I have carefully gone through the contents of the seized A/19 diary from the premises of M/s. Amit Ceramics, Nashik. In this regard, I state that the explanation given by Shri Bumtaria Pravin Panchabhai, Proprietor of M/s. Amit Ceramics is self explanatory and acceptable to us. I further state and confirm that as per the above said seized A/19 diary, cash amounts of Rs.2,90,000/- were received by us on different dates, over and above our bill amounts, from M/s. Amit Ceramics, Nashik, as mentioned herein below:-

Sr.No. Page No. of A/19 Diary

Date on which the amount sent Amount

1 7 07.04.2007 50,000.002 29 29.04.2007 50,000.003 65 04.06.2007 50,000.004 121 30.07.2007 50,000.005 198 15.10.2007 40,000.006 266 22.12.2007 30,000.007 329 23.02.2008 20,000.00

TOTAL 2,90,000.00

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In token of my perusal and confirmation of the receipt of above said cash amounts from M/s. Amit Ceramics, over and above the bill amounts, I place my dated signature on pages, 7, 29, 65, 121, 198, 266 and 329 of the seized A/19 diary.

Que.17:- While verifying the Central Excise invoices issued by you for the period20.12.04 to 19.05.05, it is found that 880 boxes of STD grade and 50 boxes of SIL grade were cleared by you to M/s. Amit Ceramics, Nashik vide invoice Nos.343 dated 20.12.04 and 75 dated 19.05.05 and not sold any consignments during the years 200607 and 2007-08. However, from the seized A/19 diary, it is found that M/s. Amit Ceramics, Nashik have transferred cash amounts of Rs.2,90,000/- to M/s. Star Ceramic through angadia M/s. Ashokkumar Kantilal & Co., Nashik. Please go through the above documents and give comments on the receipt of cash amounts of Rs.2,90,000/- from M/s. Amit Ceramics.

Ans.17:- I have gone through the Central Excise invoices issued by us during the years 2004-05 to 2007-08 and seized A/19 diary, as mentioned herein above. Regarding receipt of cash amounts of Rs.2,90,000/- from M/s. Amit Ceramics, Nashik, as stated in my answer No.17 above, I state that as per the direction received from them we have directly dispatched several consignments of wall tiles to fictitious builders and developers situated at Nashik and surrounding area during the year 2007-08. However, delivery of such consignments was taken by M/s. Amit Ceramics, Nashik and payments thereof, both bill amount and over and above the bill amount, made to us by them.

Que.18:- You are being shown page No.147 of a seized file marked as A/25 under panchnama dated 22.12.08 from the premises of M/s. Amit Ceramics, Nashik, which is a dispatch slip dated 02.03.07 of M/s. Amit Ceramics. According to the above delivery slip, M/s. Amit Ceramics have sold 37 boxes of Monalisa Brand wall tiles of 12”x8” size of Ivory and white colour to Shri Dhipubhai at sale rate of Rs.120/- per box. You are also shown delivery slip No.71 dated 09.05.07 of M/s. Amit Ceramics under which they had sold 7 boxes of Monalisa brand wall tiles of 12x8 size of white colour to M/s. Satguru Ceramics at sale rate of Rs.125/- per box. Please go through the above delivery slips and give your comments.

Ans.18:- I have gone through the delivery slips of M/s. Amit Ceramics, Nashik, as mentioned herein above. I state and confirm that Monalisa Brand wall tiles were sold by M/s. Amit Ceramics, Nashik at sale rate of Rs.125/- per box, as we have not shown the actual MRP on the Central Excise invoice but collected part amount in cash from them, over and above the bill amount. In token of my perusal and confirmation of the facts mentioned herein above, I place my dated signature thereon.

Que.19:- You are being shown the statement dated 22.12.08 of Shri Chimanbhai Babaldas Patel, Proprietor of M/s. Patel Ashokkumar Kantilal & Co., Nashik, wherein he confirmed the receipt of cash amount of Rs.2,90,000/- from M/s. Amit Ceramics, Nashik and delivery of the same cash amount to M/s. Star Ceramic, as mentioned in seized A/19 diary of M/s.

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Amit Ceramics. Please go through the above statement and offer your comments.

Ans.19:- I have gone through the statement dated 22.12.08 of Shri Chimanbhai Babaldas Patel, Proprietor of M/s. Patel Ashokkumar Kantilal & Co., Nashik. I confirm the receipt of cash amounts of Rs.2,90,000/-from M/s. Patel Ashokkumar Kantilal & Co., an angadia firm, on behalf of M/s. Amit Ceramics, Nashik. In token of my perusal and confirmation of the facts mentioned in the above statement, I place my dated signature thereon.

Que.20:- Please go through the panchnama dated 17.01.08 drawn at the premises of M/s. Glazeware Trading Co., Madurai by the officers of DGCEI, Madurai and offer your comments.

Ans.20:- I have gone through the panchnama dated 17.01.08 drawn at the premises of M/s. Glazeware Trading Co., Madurai. I confirm that the facts mentioned in the said panchnama are correct and as such acceptable to us. In token of my perusal and confirmation of the facts as correct, I place my dated signature on the last page of the document.

Que.21:- You are being shown two statements dated 17.01.08 and 31.05.08 of Shri C. Rajasekaran, Manager of M/s. Glazeware Trading Co., Madurai. Please go through the facts mentioned in the said statements and offer your comments.

Ans.21.:- I have gone through the statements dated 17.01.08 and 31.05.08 of Shri C. Rajasekaran, Manager of M/s. Glazeware Trading Co., Madurai. I state that the facts mentioned in the above said statements are correct and as such acceptable to us. In token of my perusal and confirmation of the facts mentioned therein as correct, I place my dated signature on the last page of both the above statements today.

Que.22:- You are being shown a seized diary marked as A/6 under panchnama dated 17.01.08 from the premises of M/s.Glazeware Trading Co., Madurai. Please go through the contents of the above diary and offer your comments.

Ans.22:- I have gone through the contents of seized diary marked as A/6 from the premises of M/s. Glazeware Trading Co., Madurai. I state that it is a personal diary of Shri C. Rajasekaran of M/s. Glazeware. In token of my perusal and understanding the contents, I place my dated signature on the first and last pages of the said seized diary today.

Que.23:- You are being specifically shown page No.17 of the above said seized A/6 diary, where cash payment of Rs.69,000/- was shown by him to M/s. Star Ceramic. While interrogating about the entries made on this page, Shri C. Rajasekaran in his statement dated 31.05.08 stated that on the left side of the page, the details of receipt of cash of Rs.2,93,950/- from his buyers of matches at Mehsana and other places on 20.05.07 are written. Thereafter, he obtained Rs.2,50,000/- at Ahmedabad through Shri Arumugham of Madurai. Thus, he was having cash of Rs.5,43,950/- on 20.05.07. Out of the said amount, he personally visited and paid Rs.25,000/- to M/s. Ocean, Rs.42,000/- to M/s.Anand, Rs.69,000/- to M/s.Star, Rs.55,000/- to M/s. Sakar Tiles, Rs. 27,000/- to M/s. Sri

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Ceramics and Rs.90,000/- to M/s. Himat Glazed Tiles. Please go through the above documents and statement of ShriC.Rajasekaran and offer your comments at least for the payment of Rs.69,000/- made to M/s. Star Ceramic by him.

Ans.23:- I have gone through the contents of page No.17 of the said seized A/6 diary and statement dated 31.05.08 of Shri C. Rajasekaran. I confirm that the explanation given by him about the cash payment of Rs,.69,000/- to us on 20.05.07 is correct, as he visited our factory on the said date and made cash payment of Rs.69,000/- towards the cost of our tiles. In token of my confirmation of the above facts, I place my dated signature on page 17 of the said diary.

Que.24:- You are being shown page Nos.49 and 55 of the above seized A/6 diary from the premises of M/s. Glazeware Trading Co., Madurai wherein cash payments of Rs.23,550/- and Rs.20,000/- to M/s. Star Ceramic were shown. Shri C. Rajasekaran during the course of recording his statement dated 31.05.08 admitted that he has personally made payment of Rs.23,550/- and Rs.20,000/- to M/s. Star Ceramic on 19.07.07and 12.10.07 respectively. Please go through the above entries of cash payments to you by M/s. Glazeware Trading Co. and offer your comments thereon.

Ans.24:- I have gone through the contents of page Nos.49 and 55 of the above said seized A/6 diary from the premises of M/s. Glazeware Trading Co. and in token of my perusal of the said pages, I place my dated signature on both the pages. In this regard, I confirm that cash amount of Rs.23,550/- and Rs.20,000/- were received by us from Shri C. Rajasekaran on 19.07.07and 12.10.07, respectively towards the actual cost of our tiles, over and above the bill amounts.

Que.25:- You are being shown seized files marked as A/7 and A/8 under panchnama dated 17.01.08 from the premises of M/s. Glazeware Trading Co., Madurai, wherein transport documents meant for transportation of tiles from Morbi to Madurai were filed. Scrutiny of LRs available on the records indicates that transportation charges ranging from Rs.10,000/- to Rs.16,000/- were shown in the said LRs. You are also shown page No.27 of the above said seized A/6 diary, wherein Rs.43,990/- was shown as transportation charges for a consignment of tiles sent to M/s. KSMT Traders on 25.06.07. Please go through the above documents and give your comments thereon.

Ans.25:- I have gone through the LRs files in seized A/6 diary and files marked as A/7 and A/8 from the premises of M/s.Glazeware Trading Co., Madurai. In token of my perusal of the above documents, I place my dated signature on the same. In this connection, I state that the actual transportation charges from Morbi to Madurai is about Rs.45,000/- but such cost was declared as less than Rs.20,000/- in LRs as per the understanding of transporter and dealer. The remaining part of amount is paid by the dealer in cash to the transporter at the time of delivery of the goods.

Que. 26:- While verifying the Central Excise invoices issued by M/s. Star Ceramic, it appeared that they have not cleared any

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consignment of wall tiles to M/s. Glazeware Trading Co., Madurai during the year 2007-08. Please explain on what account you were receiving cash amount from Shri C. Rajasekaran, Manager of M/s. Glassware Trading Co., Madurai, as mentioned herein above.

Ans. 26:- I state that though we have not cleared any consignments of tiles directly to M/s. Glazeware Trading Co. during the year 2007-08, we have cleared few consignments of tiles to the buyers of M/s. Glazeware Trading Co., viz. M/s. Burma Hardware Store, Pudukkotai, M/s. Starwares, Arni etc. as per their direction. Thus, we have received payments from M/s. Glazeware Trading Co., Madurai, as mentioned herein above.

Que.27:- You are being shown a statement dated 19.12.08 of Shri Ramesh P. Patel, Partner of M/s. Shreeji Marketing, Hyderabad. In his above statement, Shri Patel stated that cash amount of Rs.15/- to Rs.20/- per box is paid to M/s. Star Ceramic, over above the bill amount, as the said manufacturer is not showing the actual MRP in the invoice. He further stated that cash part of amount is sent to you through angadia M/s. New Payal & Co., M/s. J.J. Patel & Co. and M/s.Ramesh Kanti all of Hyderabad. Please go through the above statement and offer your comments.

Ans.27:- I have gone through the statement dated 19.12.08 of Shri Ramesh P. Patel, Partner of M/s. Shreeji Marketing, Hyderabad. I confirm that the facts mentioned in the above statement are correct. We have received part amount in cash at the rate of Rs.15/- to Rs.20/- per box towards the actual cost of the tiles supplied by us from M/s. Shreeji Marketing, Hyderabad.

Que.28:- Please go through the statements dated 19.12.08 of Shri Lalitkumar V. Patel, Partner of M/s. New Payal & Co. and dated 29.12.08 of Shri Laljibhai Motibhai Patel, Proprietor of M/s. J.J. Patel & Co., two Angadia firms of Hyderabad. They have stated in their respective statements that they were regularly transferring cash amounts received from M/s. Shreeji Marketing, Hyderabad to the tile manufacturer, viz., M/s. Star Ceramic.

Ans. 28:- I have gone through the statements dated 19.12.08 of Shri Lalitkumar V. Patel, Partner of M/s. New Payal & Co. and dated 29.12.08 of Shri Laljibhai Motibhai Patel, Proprietor of M/s. J.J. Patel & Co. of Hyderabad. In this connection, I state and confirm that certain amounts were received by us in cash through angadias viz., M/s. New Payal & Co. and M/s. J.J. Patel & Co., Hyderabad on account of our dealer M/s. Shreeji Marketing, Hyderabad, over and above our bill amount. In token of my perusal and confirmation of the above stated facts, I place my dated signature on the last page of both the above statements.

Que. 29:- Please go through the panchnamas dated 18.01.08 and 14.05.2008 drawn at the premises of M/s. T. Lakshmi Kanthan & Sons, No.37, Anna Main Road, MGR Nagar, Chennai and give your comments thereon.

Ans. 29:- I have carefully gone through the facts mentioned in the above two panchnamas dated 18.01.08 and 14.05.08 drawn at the

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premises of M/s. T. Lakshmi Kanthan & Sons, Chennai and confirm that the facts mentioned in both the above panchnamas are correct and as such acceptable to us. In token of my perusal and confirmation of the facts mentioned therein as correct, I place my dated signature on the last pages of both the panchnamas today.

Que. 30:- You are being shown a statement dated 18.01.08 of Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons, Chennai. Please go through the facts mentioned in the above statement and offer your comments.

Ans. 30:- I have gone through the facts mentioned in the statement dated 18.01.08 of Shri Thangavelan, Proprietor of M/s. T. Lakshi Kanthan & Sons, Chennai. In token of my perusal and confirmation of the facts mentioned in the above statement as correct, I place my dated signature on the last page of the statement dated 18.01.08.

Que. 31:- You are being shown page Nos.13, 14, 15, 16, 43, 44, 46, 55, 56, 70, 72, 74, 75, 82 and 83 of seized made up file marked as A/1 under panchnama dated 18.01.08 from the premises of M/s. T. Lakshi Kanthan & Sons, Chennai, wherein “Estimation slips” under which Monalisa Brand tiles were received by them from M/s. Ayyan Ceramics, Chennai. Please go through the contents of the above pages and offer your comments.

Ans. 31:- I have gone through the contents of the above mentioned Estimation slips issued by M/s. Ayyan Ceramics, Chennai under which they have sold Monalisa Brand tiles to M/s. T. Lakshmi Kanthan & Sons, Chennai. In token of my perusal and understand the contents thereon, I place my dated signature on all the above Estimation slips today.

Que. 32:- You are being shown seized Note Book marked as 2-3/3 under panchnama dated 18.01.08 from the premises of M/s. T. Lakshmi Kanthan & Sons, Chennai wherein it was mentioned that M/s. T. Lakshmi Kanthan & Sons have sold 24 boxes of Monalisa brand tiles of design Nos.3007 and 2154 on 02.01.08 at sale rate of Rs.150/- per box plus VAT amount of Rs.36/- @ 1% and transportation charges of Rs.200/-. Similarly, they have sold 9 boxes of Monalisa brand tiles on 05.01.08 at the sale rate of Rs.150/- per box plus VAT at the rate of 2% and transportation charges of Rs.50/-. Please go through the above and give your comments.

Ans. 32:- I have gone through the above mentioned seized document 2-3/3 under panchnama dated 18.01.08 from the premises of M/s. T. Lakshmi Kanthan & Sons, Chennai. In this regard, I confirm that Monalisa brand tiles manufactured by us were sold in the market at the sale rate of Rs.150/- per box plus VAT and transportation charges, as mentioned herein above, by M/s. T. Lakshmi Kanthan & Sons, Chennai. In token of my perusal and conformation of the same, I place my dated signature on the above pages of the seized 2-3/3 document.

Que. 33:- Please go through the following statements of the partner/proprietor of the shroffs’ firm who have stated that they have delivered cash amounts to M/s. Star Ceramic, which were

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received from their dealers located at different places of the country through their account held in ICICI Bank. Please give your comments thereon:-(i) Statement dated 23.01.08 of Shri Lalit Asumal Gangwani,

Proprietor of M/s. Shree Maruti Enterprise and M/s. Shree Bhagwati Enterprise, Rajkot

(ii) Statement dated 17.03.08 of Shri Lalit Asumal Gangwani, Proprietor of M/s. Shree Maruti Enterprise and M/s. Shree Bhagwati Enterprise, Rajkot

(iii) Statement dated 03.06.08 of Shri Lalit Asumal Gangwani, Proprietor of M/s. Shree Maruti Enterprise and M/s. Shree Bhagwati Enterprise, Rajkot

(iv) Statement dated 11.06.08 of Shri Lalit Asumal Gangwani, Proprietor of M/s. Shree Maruti Enterprise and M/s. Shree Bhagwati Enterprise, Rajkot

(v) Statement dated 27.06.08 of Shri Lalit Asumal Gangwani, Proprietor of M/s. Shree Maruti Enterprise and M/s. Shree Bhagwati Enterprise, Rajkot

(vi) Statement dated 17.03.08 of Dr. Paresh Devjibhai Patel, Rajkot

(vii) Statement dated 05.06.08 of Dr. Paresh Devjibhai Patel, Rajkot

(viii) Statement dated 12.06.08 of Dr. Paresh Devjibhai Patel, Rajkot

(ix) Statement dated 27.06.08 of Dr. Paresh Devjibhai Patel, Rajkot

(x) Statement dated 04.03.08 of Shri Bharat I. Patel, Proprietor of M/s. Shiv Finance, Rajkot

(xi) Statement dated 05.06.08 of Shri Bharat I. Patel, Proprietor of M/s. Shiv Finance, Rajkot

(xii) Statement dated 19.06.08 of Shri Bharat I. Patel, Proprietor of M/s. Shiv Finance, Rajkot

(xiii) Statement dated 29.05.08 of Shri Shailesh Odhavji Marvania, Proprietor of M/s. Shakti Enterprise, Morbi

(xiv) Statement dated 18.06.08 of Shri Shailesh Odhavji Marvania, Proprietor of M/s. Shakti Enterprise, Morbi

(xv) Statement dated 31.05.08 of Shri Mehul Narshi Kalaria, Proprietor of M/s. Mehul Enterprise, Morbi

(xvi) Statement dated 06.06.08 of Shri Bahadurali Hyderali Hemani, Proprietor of M/s. Sagar Enterprise, Rajkot

Ans. 33:- I have carefully gone through the statements mentioned at Sr. No.(i) to (xvi) above shroffs. In token of my perusal and understanding the contents of the above statements, I place my dated signature on the last pages of all the statements today. I further confirm that through the above mentioned shroff firms, we have received cash amounts deposited by our dealers, over and above our bill amount, in lieu of actual cost of the tiles supplied by us on different dates.

Que.34:- Have you maintained design-wise/colour-wise Accounts for the wall tiles cleared during the period 01.04.2004 to 31.03.08? If so please give such accounts.

Ans.34:- No. We have not maintained such accounts for the period 01.04.2004 to 31.03.08. I further confirm that in our Central

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Excise Invoices, we were not mentioning size, colours/designs etc. We were giving only general description “Ceramic Glazed Tiles” in our invoices. I further state that we have manufactured only 12x8 size of wall tiles from the beginning. However, we have on trial basis manufactured 8x8 size but stopped immediately as there was no demand for such tiles.

Que.35:- Please state whether you have revised MRPs of your tiles after initiation of Investigations by DGCEI against Ceramic Tile manufacturers, if so, please give the details.

Ans.35:- Yes. We have revised MRPs of our wall tiles after initiation of investigation by the DGCEI. We have revised MRP of our tiles with effect from 04.03.08. I produce herewith a copy of our letter dated 04.03.2008 under which we have given an intimation to the department regarding revision of the price of ceramic tiles. The prevailing MRPs of different sizes of tiles manufactured by M/s Star Ceramic w.e.f 04.03.2008 to 31.12.2008 are as under:-

ITEM GRADE MRP ASS. VALUEORDINARY WALL TILES STD SP 140.00 79.80ORDINARY WALL TILES SIL 110.00 62.70ORDINARY WALL TILES D.D. 50.00 28.50

LUSTER WALL TILES STD SP 160.00 91.20LUSTER WALL TILES SIL 120.00 68.40

LUSTERF WALL TILES D.D. 50.00 28.50 Que.36:- Please state the name of 1st grade, 2nd grade and 3rd grade of

tiles manufactured and cleared by you earlier to revision of MRP and after revision of MRPs i.e. 01.03.2008.

Ans.36:- Prior to revision of MRPs i.e. on 04.03.2008, we have generally cleared our tiles of 12X8size as 1st quality tiles under the grade of Standard, 2nd quality tiles under the grade of Silver and 3rd quality under the grade of Gold/DD by declaring of MRPs of Rs. 90/- to Rs.100/- for Standard Ordinary Grade, Rs.60/- to Rs.80/- for Silver Ordinary Grade and Rs.40/- to Rs.50/- for Gold/DD Ordinary grade tiles. However, after installation of new Roller Kiln in the month of August, 2007, we have started manufacturing Luster and Special wall tiles of 12x8 size, which were cleared at higher MRP, viz., Rs.120/- to Rs.140/- for Standard Luster Grade, Rs.80/- to Rs.120/- for Silver Luster Grade and Rs.60/- Gold/DD Luster Grade tiles.

After revision of MRPs with effect from 04.03.2008, we have classified our 1st quality tiles as Standard Ordinary Grade and Standard Luster Grade with MRP ranging from Rs.140/- and Rs.160/- respectively. Similarly, quality of Silver Ordinary Grade and Silver Luster Grade tiles are cleared by declaring MRP of Rs.110/- and Rs.120/- respectively. Similarly, 3rd

quality of tiles of Gold/D.D. grade in both Ordinary grade and Luster grade was cleared by declaring MRP of Rs.50/- per box.

Que.37:- From the above, you can seen a wide variation in existing MRPs for the period prior to March, 2008 and after revision of

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the MRPs on 04.03.2208. Please explain the reasons for such wide variation in MRPs of the tiles manufactured by you.

Ans.37:- During the period from 01.04.2004 to 31.03.2007, we have manufactured and cleared only wall tiles of 12x8 size of Ordinary quality. Thus our wall tiles were cleared under the grades of Standard with MRP of Rs.100/-, Silver with MRP of Rs.80/- and Gold/D.D. with MRP of Rs.60/- per box. Thus, I request that MRP for Ordinary Grade tiles may please be considered on all the clearances of tiles upto July, 2007, as we were not manufacturing Luster/Special Grade tiles earlier to July, 2007. In support of my submission for installation of new Roller Kiln, I produce herewith a fax copy of ledger account for the year 2006-07, showing the purchase of plant and parts of new Roller Kiln from Ahmedabad Fabricators for your consideration.

Que.38:- You are being again shown page No.89 of the printouts file, which is a pricelist of Monalisa brand white body wall tiles manufactured by M/s. Star Ceramic. The sale rate for Plain & Print, Black, ORD, SPL and SSPL colour tiles of 12”x8” and 8”x8” sizes are shown in the said pricelist, depending upon the terms of payment. According to the said pricelist, it appeared that you have manufactured and cleared wall tiles of 8”x8” size and sold in the market at sale rate of Rs.160/- to Rs.236/- per box against cash payment. Please go through the above said pricelist and offer your comments in respect of manufacture and clearance of 8”x8” size tiles.

Ans.38:- I have again gone through the pricelist filed at page No.89 of the printouts file. On being asked to specifically state about the manufacture and clearance of 8”x8” size tiles, I state that we have on trial basis manufactured and cleared the above said 8”x8” wall tiles during the first quarter of 2007-08. I further state that we have cleared about 8000-10000 boxes of such 8”x8” size tiles by declaring MRP of Rs.100/-, being the trial production. We are presently not manufacturing tiles of 8”x8”size.

Que.39:- Please go through your answer No.36 wherein you have stated that after installation of new roller kiln, you have started production of Luster variety of wall tiles in the month of August, 2007. Please give the ratio of production of Luster and Ordinary varieties of wall tiles in your factory after installation of new roller kiln in the said factory.

Ans.39:- Since we were quite new in the production of luster variety of wall tiles, we have taken less production of such variety tiles. In terms of ratio of production of Ordinary and Luster varieties of tiles, I state that out of the total production, about 15 to 16% of our total production could be treated as Luster Standard and Luster Silver grades and 80% production be treated as Standard Ordinary and Silver Ordinary grade tiles. The remaining 4 to 5% could be the rejected variety of tiles, which were cleared by us under the grade of Gold/D.D.

13.1. Investigations as discussed in the foregoing paras reveal that M/s Star have evaded Central Excise duty by way of gross under-valuation of the ceramic wall tiles manufactured and cleared from their factory. The nature of evidences collected from

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their dealers situated in different parts of the country, transporters and shipping agents, shroffs and other persons connected with the business of shroffs, ICICI Bank and oral evidences recorded from Shri Pravinchandra Devkaranbhai Bhimani, as discussed in the foregoing paras, conclusively establish the entire modus operandi adopted by M/s Star for large scale evasion of duty of excise. Evidences collected by DGCEI during the investigation, are briefly summarized in the following paragraphs:-

13.2.1. During the investigation of the case, DGCEI conducted searches at the premises of a few dealers of M/s Star situated in different parts of the country. Documentary as well as oral evidences recovered by DGCEI from all these dealers established that M/s. Star mainly manufactured 12”x8” size of wall tiles of different colours and designs, each of which attract different prices. The pricelists recovered from the premises of M/s. N.K. Trading Co., Kollam, as discussed in para 4 supra reveals that they were receiving Monalisa brand tiles of different sizes, viz., 12”x8” each having different designs and colours. They have also manufactured some quantity of 8x8 size tiles. The said pricelists indicate the sale rates of tiles of 12”x8” size of Plain or Printed colours as Rs.125/- and Black colours as Rs.140/- per box against cash payment. The sale rates in terms of cheque payment for the wall tiles of 12”x8” of Plain and Printed colours was shown as Rs.127/- and Black colours as Rs.142/- per box. Similarly sale rates in respect of wall tiles of 8”x8” size having Ordinary, Special and SSPL colours were ranging from Rs.160/-, Rs.196/- and Rs.236/- against cash payments and Rs.168/-, Rs.204/- and Rs.244/- in terms of cheque payment per box respectively. Thus these documentary evidences reveal that M/s. Star were selling their tiles at different rates depending upon size, colour, design and grade and their dealers were also selling the same at different rates.

13.2.2 However, scrutiny of the Central Excise invoices issued by M/s Star reveals that they have declared same MRP and ex-factory sale price for tiles of different grades, irrespective of the size of tiles, variety of tiles and the place to which it is cleared. The said unit during the year 2004-05 has declared MRPs as Rs.100/- for STD grade, Rs.80/- for SILVER grade and Rs.60/- for DD grade. However, the sale rates of such wall tiles during the years 2005-06 and 2006-07 were reduced and MRPs for the same declared as Rs.90/- for Standard grade, Rs.70/- for Silver grade and Rs.50/- for D.D. grade. Thereafter, the MRPs of the wall tiles were revised and declared as Rs.100/- for Standard grade, Rs.80/- for Silver grade and Rs.60/- for Gold/D.D. grade during the year 2007-08 [upto February, 2008]. After initiation of investigations by DGCEI, M/s Star has again revised their MRPs w.e.f. 04.03.08 and declared as Rs.160/- for Standard Luster grade tiles, Rs.140/- for Standard Ordinary grade tiles, Rs.120/- for Silver Luster grade tiles, Rs.110/- for Silver Ordinary grade tiles and Rs.50/- for D.D. grade tiles. M/s. Star was declaring same MRPs for the tiles of all the designs and colours for the buyers of all the destinations with intent to evade duty of excise.

13.2.3. Investigations as discussed in the foregoing paras clearly establish that each size and design of tiles attracts a different price in the market. However, by not separately showing such sizes or designs in their Central Excise invoices, as discussed above, M/s Star 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 all the sizes of wall tiles are the same. Documentary evidences recovered from the various premises, as discussed in the foregoing paras conclusively establish that M/s Star were collecting differential prices of each such design and size of tiles, over and above their declared invoice value, by cash.

13.3.1. Investigations from all the aforesaid dealers conclusively establish that M/s. Star was not showing the actual MRP in their Central Excise invoices. All these dealers, in their respective statements, have categorically explained that M/s Star 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. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s Star has also confirmed in his statements that the invoices of M/s Star contained only part of the actual value of tiles and the value, over and above the invoice value, was collected in cash by them from all their dealers.

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13.3.2 DGCEI recovered irrefutable evidences from several premises which establish that the MRPs declared by M/s Star in their invoices were not actual. The documents recovered from their dealers conclusively establish that the tiles manufactured by them are sold in the market at much higher rates than the MRP declared by M/s. Star. Quotation, delivery slips, and pricelists issued by dealers also indicate that the prices charged by them from their buyers were in excess of the MRP declared in the invoices of M/s. Star. The owners of these dealer firms have categorically admitted that the prices mentioned in these documents were the actual prices at which wall tiles manufactured by M/s Star were sold in the market. They have also admitted of collecting the differential value of tiles, over and above the declared bill value, in cash from their buyers.

13.3.3.The pricelists recovered from M/s. N.K. Trading Co., Kollam, as discussed in para 4 supra, reveals that the sale rates of tiles of 12”x8” and 8x8” of M/s. Star were ranging from Rs.125/- to Rs.236/-, depending upon colour and designs. Further, the delivery challans/Estimation slips of M/s. Ayyan Ceramics, Chennai recovered from the premises of M/s. T. Lakshmi Kanthan & Sons, Chennai, indicating the sale rate of Monalisa brand wall tiles manufactured by M/s. Star as Rs.125/- per box. In addition to the above amount, M/s. T. Lakshmi Kanthan & Sons have charged VAT @ 2% and transportation charges while selling the above said Monalisa brand wall tiles from their customers. However, M/s. Star were declaring MRP of Rs.100/- for STD grade tiles of size 12”x8” for the tiles of all the designs and colours. The sale rates by different dealers were also more than the declared MRPs, as discussed in foregoing paras. Thus the investigations reveal that M/s. Star were not declaring correct MRPs in their invoices and were evading duty of excise.

13.3.4. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star in his statements recorded on 01.05.2008 and 16.04.2009 categorically admitted under-valuation of tiles by mis-declaring the MRP of tiles, as mentioned above. The aforesaid documentary and oral evidences conclusively establish evasion of Central Excise duty by undervaluation. Moreover, he has also admitted of receiving cash amounts, over and above their declared invoice value through the shroffs and angadias.

13.4.1. Investigation conducted by DGCEI from the dealers and transporter, as discussed in the foregoing paras, revealed that M/s Star 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 atleast Rs. 48,000/- for the Southern States. Similarly, transportation cost by sea in coastal vessels from Mundra or Kandla to Kochi is atleast Rs. 66,000/- per container load of 28 MT of tiles. Freight amount by sea is shown by all dealers of Kerala as maximum Rs. 40,000/- per container and by road as Rs.20,000/- for 16 MT capacity truck. Investigation from the container forwarders revealed that the charges for leasing the container alone in fact cost Rs.40,000/-.

13.4.2. 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. In the entire deal, M/s Star 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 of Income Tax and Service Tax. Similarly, the dealers were also benefited by reducing their liability of VAT.

13.4.3 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, toll gate 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 Star 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.

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13.4.4. 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 as provided under the statute evidently covers duty, taxes and other post-clearance expenses. In the instant case, after availing abatement of 45% from the mis-declared MRP, M/s Star 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 Star 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 Star from their statutory records.

13.5.1.The investigations from the dealers as discussed in foregoing paras reveal that M/s Star were actually 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 the representative of M/s Star 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. Star 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. Star. M/s. Star collected cash from M/s. N.K. Trading Co., Kollam through different shroffs’ firms, viz., M/s. Shree Bhagwati Enterprise, M/s. Shree Maruti Enterprise, M/s. Sagar Enterprise, M/s. Shiv Finance and M/s. Ganesh Agency, as discussed in para 4 supra. They have also collected cash amounts from M/s. Amit Ceramics, Nashik through angadia firm, viz., M/s. Ashokkumar Kantilal Patel & Co., Nashik, as discussed in para 5 supra and M/s. Shreeji Marketing, Hyderabad through angadias M/s. New Payal & Co. and M/s. J.J. Patel & Co., Hyderabad, as discussed in para 7 supra. They have also directly collected cash amounts from Shri C. Rajasekaran, owner of M/s. Glazeware Trading Co., Madurai, as discussed in para 6 supra.

13.5.2. The scrutiny of the records seized from M/s. Shree Maruti Enterprise and M/s. Bhagwati Enterprise, Rajkot and oral evidences of the responsible person of the shroff firms recorded under Section 14 of the Central Excise Act, 1944 during the course of investigation of the case, as discussed in para 8 supra, evidences retrieved prove beyond doubt that the dealers of M/s. Star had deposited cash, over and above invoice value, in the accounts of M/s. Shree Maruti Enterprise, M/s. Shree Bhagwati Enterprise, M/s. Ganesh Agency, M/s. Shiv Finance and M/s. Sagar Enterprise of Rajkot. All these receipts have been admitted by Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star. Besides, oral evidences recorded from all the dealers from where DGCEI conducted investigations, as discussed aforesaid, indicated transfer of cash amounts to M/s Star by various means.

13.5.3. Out of the various methods of transferring cash amounts from different locations of the country to the owners of M/s Star, the most common method was by getting the cash amounts deposited into the ICICI Bank accounts operated by various shroffs in different names and through selected angadias. Investigations conducted at shroff end provide irrefutable documentary evidences showing that the ICICI Bank accounts of M/s. Shree Maruti Enterprise, M/s. Shree Bhagwati Enterprise, M/s. Ganesh Agency, M/s. Shiv Finance and M/s. Sagar Enterprise were utilized by M/s. Star for getting such cash transfers from their buyers/dealers. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s.Star Ceramic in his statements dated 01.05.08 and 16.04.09 has categorically admitted to have utilized the ICICI Bank accounts of above mentioned shroffs for collecting cash amounts from their dealers located through out the country. He has also admitted to have utilized the services of selected angadias, viz., M/s. Ashokkumar Kantilal Patel & Co., Nashik, M/s. New Payal & Co. and M/s. J.J. & Co., Hyderabad for collecting cash amounts from their dealers located at Nashik and Hyderabad.

13.5.4. The investigations from the dealers reveal that they have no business with the firms in whose accounts they deposited cash amounts; that the cash was deposited in such accounts at the behest of M/s Star; that the amounts deposited in cash were the amounts over and above the invoice amounts declared by M/s Star towards the purchase of tiles by them; that

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the name of the firm, account No., Name of the bank and PAN No. were intimated to them by the concerned persons of M/s Star 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 Star.

13.5.5. The officers of DGCEI obtained the Account statements of the aforesaid shroff firms from the concerned banks. The scrutiny of the Account statements reveals that the amounts shown as deposited as per the documents seized from the premises of the dealers of M/s Star are reflected in the Account statements of the aforesaid firms. Thus the deposit of the amounts in the accounts of the firms controlled by the shroffs is confirmed through the Account statements.

13.5.6. The inquiries from the shroffs who controlled the accounts of the aforesaid firms, as discussed in para 8 supra, reveal that they 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 Star on production of fax copy of the pay-in-slip and confirmation of deposit of cash in their account. The investigations from the shroffs further reveal that M/s Star was getting drafts from their dealers and such bearer drafts were given to the suppliers of raw materials who got the same discounted from the shroffs. Thus in order to keep their manufacturing cost upto the under-declared MRP, M/s Star were taking bills of raw materials at reduced rates and were paying the differential amounts either in cash or through the bearer demand drafts, obtained from their dealers. Thus the investigations reveals that in order to evade duty of excise, VAT etc., M/s Star were purchasing raw materials at reduced rates to keep lower cost of production, were mis-declaring MRP and collecting cash /bearer demand drafts from the buyers, a part of which was paid to the raw material suppliers.

13.5.7. The statements of the dealers regarding deposit of cash amounts into such bank accounts, the entry of such payments in the bank statements of the aforesaid firms, categorical admission of withdrawal of cash amounts from the said accounts by the shroffs and payments to representative of M/s Star thus prove that M/s Star were collecting amounts, over and above the invoice value, in cash from their buyers.

13.5.8. The cash amounts collected by M/s Star, 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.

14.1.1. Inquiries conducted by DGCEI as discussed in the foregoing paras indicate that M/s. Star was manufacturing mainly wall tiles of 12”x8”size. They have also manufactutred wall tiles of 8”x8” size on trial basis. Records including the pricelists, delivery challans/Estimation slips etc. as discussed in the forgoing paras also contain details of these sizes. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star, in his statements discussed herein above, confirmed that M/s. Star have been manufacturing wall tiles of aforesaid sizes. Scrutiny of the invoices issued by M/s. Star during the period from April, 2004 to February, 2008 reveals that they have not declared different MRPs for the buyers or dealers situated in different parts of the country. Thus M/s. Star have declared same MRP for all the buyers throughout India.

14.1.2. Inquiries from M/s N.K. Trading Co., Kollam and other dealers of M/s Star revealed that M/s. Star was manufacturing mainly 12”x8” size of wall tiles of different colours and designs. They have manufactured some quantity of 8x8 size tiles also. The documents which were recovered from various premises of dealers as referred to in the foregoing paras, irrefutably revealed that each size, design, colour and grade of wall tiles manufactured by M/s. Star is sold at widely varied selling prices. However, scrutiny of the invoices issued by M/s. Star reveals that during the period from 01.04.2004 to 29.02.2008, they have not declared details of such sizes, colours and designs in the invoices. All sizes and designs of wall tiles were cleared by them by declaring the description as “Ceramic Glazed Tiles”, without indicating the size, colour and design of the tiles. In most of the clearances, they were showing same MRPs of Rs.90/- to Rs.100/- for Standard grade, Rs.70/- to Rs.80/- for Silver grade and Rs.50/- to Rs.60/- for Gold/D.D. grade tiles, irrespective of size, colour and design of tiles.

14.1.3. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star, in his aforesaid statements, has stated that they have only manufactured ordinary wall tiles based on white/ivory printed and black colour designs during the years 2004-05 till July, 2007. He has further stated that they have installed new Roller Kiln in the above said factory in the month of August, 2007 and as such started manufacture and clearance of luster variety of wall tiles. In

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support of his above submission, he produced a Photostat copy of ledger account maintained by them for the period from 01.04.07 to 09.05.07 wherein purchase of parts meant for new roller kiln was mentioned. He has also produced a copy of the revised pricelist with effect from 04.03.2008, according to which, the MRP declared for ordinary and luster Standard wall tiles was Rs.140/- and Rs.160/- per box respectively. He further stated that it would not be possible for him to produce any records indicating size-wise and design-wise clearances of wall tiles made during the previous years. Although records seized from several premises indicate receipt of different designs of tiles by them, since it does not contain enough quantities which could be considered as representative samples, such records also could not be made basis for computation of differential duty in respect of all designs of tiles cleared by M/s. Star at undervalued MRPs. He further stated that the ratio of clearance of Luster grade tiles could be 15 to 16% percent of the total production, as they have manufactured and cleared mainly Ordinary grade tiles. Ratio of clearances of Luster grade tiles during April, 2008 to December, 2008 also reveals that about 15% of tiles were luster grade. Therefore, computation of differential duty in respect of the undervalued clearances is to be worked out on the basis of above records and evidences.

14.1.4. Taking into consideration of the ledger copy submitted by Shri Pravinchandra

Devkaranbhai Bhimani, Partner of M/s. Star, indicating the purchase of parts meant for

installation of new roller kiln for manufacture of luster quality of wall tiles, it is evident that they

have only manufactured and cleared Ordinary grade wall tiles during the period from 01.04.04

to 31.07.07, as they were having installed machines of old and locally made roller kiln and

coal fired gassifire plant. Thereafter they have started manufacture and clearance of luster

grade wall tiles on account of the installation of newly purchased Roller kiln in the month of

August, 2007. During the period 01.04.04 to 31.07.07, M/s. Star have cleared wall tiles by

declaring grade Standard at MRP of Rs.90/- to Rs.100/-, Silver at MRPs of Rs.70/- to Rs.80/-

and Gold/D.D. at MRP of Rs.50/- to Rs.60/- per box. It is thus evident that during the financial

year 2004-05 to 31.07.07, M/s. Star have manufactured only ordinary grade of wall tiles of

Standard, Silver and D.D. grades. M/s. Star w.e.f. 04.03.08 for 12”x8” size tiles have

declared minimum MRP of Rs.160/- for Luster wall tiles of Standard SP grade and Rs.140/- for

Ordinary wall tiles of Standard SP grade. The MRPs of erstwhile Silver grades have been

declared as Rs.120/- for Luster wall tiles and Rs.110/- for Ordinary wall tiles per box

respectively. Similarly, the MRP for Gold/D.D. grade tiles has been declared as Rs.50/- per

box, irrespective of luster and ordinary grades. Therefore, the above said MRPs w.e.f.

04.03.2008 has been taken for calculating the differential duty for the period from 01.04.2004

to 28.02.2008.

14.2.1. The investigations as discussed here-in-above in detail, duly supported by the

seized documentary evidences such as delivery slips/estimation slips/pricelists recovered

from the dealers have clearly established that the ‘maximum retail sale price’ of the ceramic

wall tiles of different grades & varities for different sizes were different. The sale rate of tiles of

M/s Star as per the evidences collected from different dealers was as under:-

Name of the Dealer Size of the Tiles

MRP per box declared by M/s

Star

Selling Rate of the dealer per box

M/s. N.K. Trading Co., Kollam

12” x 8” Rs. 100/-Rs. 140/- by cash and Rs. 142/- by cheque per box

8”x8” Rs.100/-Rs. 160/- to Rs.236/- by cash and Rs.168/- to 244/- by cheque

M/s. T. Lakshmi Kanthan & Sons, Chennai 12”x8” Rs.100/- Rs.152/- to Rs. 159/-

14.2.2. Selling rates mentioned in the above table pertain to southern States. Freight rates for southern States were between Rs.25/- to Rs.35/- per box of tiles. Freight rates for Madhya

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Pradesh, Delhi,and Maharashtra were varying between Rs.10/- to Rs.15/- per box and for Gujarat the same were about Rs.5/- per box. M/s. Star has declared uniform MRP for whole of the country. Therefore, equalized freight amount would affect uniform MRP for whole of India.

14.2.3. M/s. Star with effect from 04.03.08 have declared MRP of Rs.140/- for Standard Ordinary wall tiles and Rs.160/- for Standard Luster wall tiles of sizes 12”x8”. As per pricelist recovered from M/s. N.K. Trading Co., Kollam, the sales rates of such tiles were ranging Rs.140/- to Rs.142/- per box for 12x8 size Standard Ordinary grade and Rs.160/- to Rs.236/- for 8x8 size Standard Ordinary grade. M/s. T. Lakshmi Kanthan & Sons, Chennai sold 12”x8” size tiles at Rs.152/- to Rs.158.79/- per box. The comparison of prices declared by M/s Star w.e.f. March 2008 to December, 2008 and the sale prices of tiles as per evidences recovered from their dealers, reveal that the tiles of M/s Star were being sold by different dealers at the rates not less than the MRPs declared by them w.e.f. March 2008.

14.2.4. With effect from 04.03.08, M/s Star declared correct MRPs in respect of tiles of different sizes, designs and grades. During the period from 04.03.2008 to 31.12.2008, M/s. Star have cleared wall tiles of sizes 12”X8” to various dealers, by showing size, grade and colour/design of the tiles in the invoices. The documentary evidences discussed in foregoing paras reveal that upto 29.02.08, M/s. Star were manufacturing mostly tiles of size 12”x8”. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star contended that they started manufacturing luster variety of tiles only after July 2007. There is no contrary evidence to this contention. It therefore appears that upto 31.07.2007, M/s. Star were manufacturing tiles of size 12”x8” of Ordinary grade only. They have manufactured very small quantity of 8x8 size tiles. As the sale rates of tiles of different sizes, designs, colours and grades were different and details of actual clearances of tiles of different sizes, designs and colours are not known, the duty on past clearances has been calculated on the basis of revised MRPs declared by M/s. Star. 14.2.5. Pricelists recovered from M/s. N.K. Trading Co., Kollam revealed that tiles of size 8x8 manufactured by M/s. Star have also been sold in the market. M/s. Star has not mentioned the size of tiles on the Central Excise invoices. They are not manufacturing 8x8 size tiles presently. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star in his statement dated 16.04.09, on being asked, stated that they had made only trial production of size 8x8 and had manufactured only 8000 – 10000 boxes of size 8x8. Accordingly quantity of 10,000 boxes has been taken as production and clearance quantity of size 8x8 tiles. MRP of tiles 8x8 size was at least Rs.25 – Rs.40 higher than the MRP of 12x8 size tiles. Accordingly, MRP of 8x8 size tiles is taken as Rs.175/- per box.

14.3. The MRPs declared by M/s Star during the period from 04.03.2008 to 31.12.2008 have been taken for calculating duty short paid by them during the period April, 2004 to February, 2008. The MRPs declared during the preceding period were never less than the MRPs declared during the year 2008-09. The officers of DGCEI have conducted an inquiry about the MRP pattern of the reputed brands during the financial years 2004-05 to 2007-08. Even considering the MRP pattern for wall tiles, floor tiles and vitrified tiles manufactured by various reputed manufacturers, which was prevailing in the market during the period from 2004-05 to 2007-08, it is evident that prices were at a maximum during the year August, 04 to Dec,2005 and thereafter, the same were consistently decreased over the period upto 2007-08. Results of an inquiry conducted by DGCEI on the MRP pattern for the past period are discussed in the following paras:-

14.4.1. M/s SPL Ltd are manufactures of “Somany” brand of ceramic wall tiles. Part of their requirement was being got manufactured from different manufacturers, some of which are located in Gujarat. They are selling ceramic wall tiles of different variety of 8”x8”, 12”x8”and 12”x18” sizes.

14.4.2. M/s SPL Ltd are having zone-wise MRPs of their ceramic wall tiles. Entire country has been divided into four zones, North, South, East and West. MRPs of ceramic wall tiles of M/s SPL Ltd effective from 01.05.2003 and for subsequent period were obtained from them. These MRPs have been consolidated in a chart attached as Annexure – B.1 to this notice.

14.4.3. Perusal of the above chart reveals that M/s SPL Ltd were having MRP of Rs 336/- per box for 8”x8” size plain variety wall tiles during 2003-04, and MRP of Rs 310/- per box during current year for the same tiles. MRPs of these tiles, during the past years from 2003-04 onwards, have never come below the current MRPs of the same tiles. Similar Maximum Retail pricing pattern of ceramic wall tiles for other zones and other varieties is clearly evident from the above chart.

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14.5.1. M/s SPL Ltd are manufactures of “Somany” brand of ceramic floor tiles. Part of their requirement was being got manufactured from different manufacturers, some of which are located in Gujarat. They are selling ceramic floor tiles of different variety of 12”x12”, 16”x16” and 17”x17” sizes.

14.5.2. M/s SPL Ltd are having zone-wise MRPs of their ceramic floor tiles. Entire country has been divided into four zones, North, South, East and West. MRPs of ceramic floor tiles of M/s SPL Ltd effective from 07.01.2004 and for subsequent period were obtained from them. These MRPs have been consolidated in a chart attached as Annexure –B.2 to this notice.

14.5.3. Perusal of the above chart reveals that M/s SPL Ltd were having MRP of Rs 501/- per box for 16”x16” size Radiance variety floor tiles during 2004-05, and MRP of Rs 415/- per box during current year for the same tiles. MRPs of these tiles, during the past years from 2004-05 onwards, have never come below the current MRPs of the same tiles. Similar Maximum Retail pricing pattern of ceramic floor tiles for other zones and other varieties is clearly evident from the above chart.

14.6.1. M/s H & R Johnson (I) Ltd are manufactures of “Johnson” brand of ceramic wall tiles. Part of their requirement was being got manufactured from different manufacturers, some of which are located in Gujarat. They are selling ceramic wall tiles of 12”x8” size.

14.6.2. M/s H & R Johanson (I) Ltd are having zone-wise MRPs of their ceramic wall tiles. Entire country has been divided into four zones, North, South, East and West. MRPs of ceramic wall tiles of M/s H & R Johanson (I) Ltd effective from 29.11.2004 and for subsequent period were obtained from them. These MRPs have been consolidated in a chart attached as Annexure – B.3 to this notice.

14.6.3. Perusal of the above chart reveals that M/s H & R Johanson (I) Ltd were having MRP of Rs 230/- per box for 12”x8” size plain/print variety wall tiles during 2004-05, and MRP of Rs 205/- per box during current year for the same tiles. MRPs of these tiles, during the past years from 2004-05 onwards, have never come below the current MRPs of the same tiles. Similar Maximum Retail pricing pattern of ceramic wall tiles for other zones and other varieties is clearly evident from the above chart.

14.6.4. Thus above facts and aforesaid discussion reveal that current MRPs are not on higher side when compared to actual MRPs of past period of about five years. Therefore Central Excise duty based on current MRPs of ceramic tiles would be the minimum amount of evasion by M/s. Star.

14.7. Thus, the MRPs ascertained for different quality, grade and size of tiles are tabulated as under:-

Size ORDINARY WALL TILES LUSTER WALL TILES12”X8” STANDARD SILVER STANDARD

Rs.140.00 Rs.110.00 Rs.160.008”x8” Rs.175.00 Rs.135.00 --

14.8.1. The officers of DGCEI have worked out duty short paid by M/s. Star, as detailed in Annexures-C.1 to C.4 enclosed to this notice. It is evident from said Annexures that during the period 01.04.2004 to 29.02.2008, M/s. Star have short paid duty amounting to Rs.30,21, 431.29 by way of under-valuation.

15.1. M/s. Star Ceramic, 8-A, National Highway, Makansar, Morbi, Distt. Rajkot has 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 payment of appropriate Central Excise duty;

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(ii) They have manufactured and cleared the ceramic wall 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 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 details of manufacture and clearance of such finished goods cleared;

15.2. In view of aforesaid violations of Central Excise Act, 1944 and Rules made thereunder, M/s Star Ceramic is liable for 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 Star is liable to penal action under Section 11AC of the Act, ibid. The duty not paid on clandestinely cleared goods and 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 11A of the Act, ibid. They are also liable to pay interest under Section 11AB of the Act, ibid on duty short paid.

15.3. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star Ceramic appears to have masterminded the evasion of Central Excise duty on the finished excisable goods, viz., ceramic wall tiles, manufactured and cleared by M/s. Star in as much as all the day to day transactions are closely monitored and supervised by him. All the dealer firms appear to have contacted him over phone or fax for placing their orders, and he appears to be the person who has passed on required instructions for loading and dispatch of the consignments. He further appears to have closely handled the realization of unaccounted portion of sale proceeds, as the remittances of such unaccounted amounts in to the bank accounts of third parties were immediately brought to his attention by the dealer firms by way of fax / phone. He appears to be the key person in arranging purchase of required raw materials, production, storage, dispatch, and to transport and supply the subject goods to the dealer firms. His active connivance in the commission of offence appears to have been clearly established from the statements of various dealers recorded under Section 14 of the CEA’1944 wherein they have inter-alia stated that they were in contact with Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star. 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., appears to be closely monitored and appropriate decisions and actions are taken by Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star since all the other directors of the company were reporting to him. Further it is established beyond doubt that he is in-charge of all the daily business being transacted by M/s. Star. He admitted that the sale proceeds in respect of excisable goods by resorting to undervaluation were realized in the form of cash through bank accounts of third parties. Thus, he has concerned himself in manufacturing, storing, depositing, concealing, removing, selling and in all such manners dealt with excisable goods on which short payment of Central Excise duty has been made. Thus he had reasons to believe that such goods so removed are liable for confiscation. Yet he dealt with such goods in contravention of the Central Excise Act and the Rules made there-under. It therefore, appears that Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star liable to penal action under Rule 26 of Central Excise Rules, 2002.

16.1. During the course of investigations, M/s. Star admitting to the evasion of Central Excise duty have voluntarily submitted the following post-dated cheques for total amount of Rs.10,00,000/- pending further investigations. The following cheques were deposited in the bank on due dates and got the amount realized into the Govt. Account:-

Cheque No.& Date Amount (Rs.) GAR Date Date of Credit to Govt

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912119 dated 08.05.08 2,00,000/- 08.05.08 13.05.08912120 dated 08.06.08 2,00,000/ 08.06.08 13.06.08912121 dated 08.07.08 2,00,000/ 08.07.08 09.07.08912122 dated 08.08.08 2,00,000/ 08.08.08 09.08.08912123 dated 08.09.08 2,00,000/- 08.09.08 09.09.08

TOTAL 10,00,000/-

16.2. This voluntary payment of Rs.10,00,000/- was made by them towards the Central Excise duty liability on the finished excisable goods cleared by them. Hence, the amount voluntarily deposited is required to be appropriated against the Central Excise duty demanded in this Show cause notice.

17. THEREFORE, M/s Star Ceramic, situated at 8A, National Highway, Makansar, Morbi, Distt. Rajkot was called upon to show cause as to why:-

(i) The Central Excise duty amounting to Rs. 30,21,431.00 (Rupees Thirty lakhs Twenty one thousand Four hundred and Thirty one only) (Cenvat Rs.29,53,668/-, Edu. Cess Rs.58,480/- and H. Edu. Cess Rs.9,283/-), short paid by them by way of undervaluation, as detailed in Annexure-C.1 to C.4 to this SCN, 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;

(ii) Amount of Rs.10,00,000/- (Rupees Ten lakhs only) paid by them during the inquiry 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.

18. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star Ceramic, 8-A, National Highway, Makansar, Morbi, Distt. Rajkot was also called upon to show cause to as to why penalty, should not be imposed upon him under Rule 26 of the Central Excise Rules, 2002.

Personal hearing

19. M/s. Star was granted personal hearing on 7.09.11. Shri P.D.Rachchh, Advocate appeared for M/s. Star Ceramic and its partner Shri Pravinchandra D Bhimani and submitted written submission as above and requested for cross-examination of the witnesses, which was not acceded to. He also submitted copies of the all the provisions and case laws cited during the course of hearing. He categorically cited the decision of Hon. High Court of Madras in case of Rajam Industries (P) Ltd., 2010 (255) ELT 161(Mad.). He requested for another date for making further submissions. The request was acceded to and hearing was granted on 25.10.2011.Again On 25.10.2011, Shri P.D.Rachchh Advocates appeared for personal hearing. They referred to the various paragraphs of the Show Cause Notice and pointed out certain inconsistencies in the investigation and also pleaded that the price taken for calculation of the demand is the weighted average, which is untenable. They have submitted final detailed written submission.

Defence and submission:

The Star ceramic through his partner has submitted that, they deny all the allegations and insinuations levelled against them in the show-cause notices as if each of them were set out herein-below and urged without prejudice to one another.1. The noticee has contested that the factual aspect of the matter, and has requested for grant of an 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

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person who is being jointly tried with them, there is no presumption in law regarding the truth of the contents of such documents. In sofar as the statements of their partner/employee, are concerned, the same are neither true nor voluntary and have been recorded under duress. 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, the noticee further stated that while awaiting these documents, they are submitting their defence reply and appearing for hearing solely as an interim measure. The interim reply only sets out their legal submissions and they crave leave to make further submissions in the matter after the documents being requested for are furnished and after their request for cross examination has been granted.

Determination of RSP being untenable in the absence of Rule having been prescribed for the said purpose .

2. They have further submitted that the notice basically seeks to re-compute the RSP on an ad hoc basis for reasons set out in the show-cause notice. The moot question which arises for consideration is whether in the absence of manner being prescribed for determining RSP during the relevant period, is department justified to compute retail sale price on an ad hoc basis?

3. While dealing with this issue, it will be relevant to focus on the following extracts:

(i) The provision of Section 4A as it stood during the relevant period;

(ii) Understanding of the legislature conveyed in the Memorandum regarding Delegated Legislation when sub-section (4) of Section 4A was amended to provide for the determination of RSP in certain situation;

(iii) Explanatory Notes (Clarification) issued by the CBEC, conveying budgetary changes of 2003-04.

Extract of Section 4A of Central Excise Act, 1944, as it stood during relevant period.

“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, sales 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

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(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 purposes of this section.

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 sale 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.” (emphasis provided) “

Extract of Memorandum Regarding Delegated Legislation

“Clause 129 of the Bill seeks to substitute sub-section (4) of Section 4A of the Central Excise Act, 1944. The said sub-section (4), inter alia, proposes to empower the Central Government to make rules laying down the manner of ascertaining retail sale price of excisable goods specified under sub-section (1) of that section.” Extract from EXPLANATORY NOTE (Circular) explaining Budget Changes - 2003-2004.

(4) Changes in definition of RSP

(i) The definition of Retail Sale Price (RSP), as mentioned in Explanation I to section 4A of the Central Excise Act has been modified so as to extend it also to cases where the governing law on such goods permits declaration of retail sale prices exclusive of any tax, local or otherwise. For illustration, Drug Price Control Order (DPCO) prescribes for declaration of retail sale price excluding local taxes in respect of certain medicines falling in its ambit. The proposed amendment will enable the Government to prescribe RSP based assessment to goods on which retail sale price is required to be declared under such Act or rules, requiring declaration of retail sale price exclusive of any tax local, or otherwise.

(ii) Section 2 (f) of Central Excise Act is being amended so as to provide that for goods presently covered under the provisions of section 4A, any process of packing, re-packing, labelling or re-labelling of goods, putting them into unit containers or any subsequent declaration of RSP on goods or alteration thereof, shall amount to manufacture.

(iii) Provisions of section 4A of the Central Excise Act are being amended so as to

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(a) Provide that in case of affixing higher RSP subsequent to clearance of goods on payment of duty on a lower RSP, the excise duty would be leviable on the basis of such higher RSP affixed later on.

(b)assume powers to ascertain the RSP of goods having no RSP declared or the declared RSP being tampered with, obliterated or altered; and

(c) assume powers to make rules for such ascertainment.

For illustration, on an excisable goods covered under RSP based assessment, RSP declared at the time of removal is Rs. 100. However, subsequently after removal of goods from factory of manufacture the RSP declared on package is amended to Rs. 110 for whatever reason. This activity would amount to manufacture and duty would be leviable on the basis of amended RSP. In a case where the manufacturer does not declare RSP or tampers or obliterates it, the proposed amendment will enable the Government to prescribe manner of ascertaining the RSP. In this regard, manners for ascertaining the RSP in such case (Rules for ascertaining RSP) will be prescribed subsequent to enactment of Finance Bill, 2003. “ (emphasis provided)”

5. It can be seen from the clarification issued by CBEC, that the legislature had empowered the Central government to frame Rules prescribing manner for ascertaining the RSP. The CBEC has, in its circular, further clarified that consequent to the enactment of the Finance Bill 2003, rules for ascertaining the RSP would be prescribed. However, for the relevant period in dispute, the Central Government has not prescribed any rules for ascertaining the RSP. This crucial reality cannot be lost sight of. This being the case, it is not open to the DGCEI to determine the RSP in an ad hoc manner in the absence of there being any rule having been prescribed for ascertaining the RSP during the relevant period.

6. The proposal in the notice to determine the RSP on an ad hoc basis is clearly contrary to the explicit provision of sub-section (4) of Section 4A which states in unequivocal terms that in the situation specified therein, RSP of the goods shall be ascertained in the prescribed manner and that such price shall be deemed to be RSP for the purpose of this section. The expression “prescribed” has been defined in Section 2(g) of the Central Excise Act, 1944 to mean prescribed by the rules made under this Act. In the absence of there being any rules framed during the relevant period, there was no manner prescribed for computing the RSP and consequently sub-section (4) of Section 4A could not have been enforced during the relevant period. The impugned notice which seeks to determine RSP in an ad hoc manner is clearly contrary to sub-section (4) of Section 4A and thus deserves to be quashed and set aside on this ground alone.

7. The noticee also rely on the decision of the Hon’ble Supreme Court in the case of CIT, Bangalore vs. B.C. Srinivasa Shetty reported in 1981 2 SCC 460, wherein the Hon’ble Supreme Court held that when the provision regarding computing a tax liability cannot apply at all, then it should be taken as that the transaction was never intended to be to during said period. The dispute in the said case was whether the capital gain tax under Section 45 of the Income Tax Act, 1961 could be levied on the transfer by an assessee firm of its goodwill to a newly constituted firm. While dealing with this issue, the Hon’ble Supreme court held that Section 48 of the Income Tax Act provides for the mode of computation and deduction of income chargeable under the head ‘’capital gains‘’. The said section provides that capital gains shall be computed by deducting from the full consideration received as a result of transfer of capital asset, cost of acquisition of the capital asset. In case of goodwill generated in the new business, it is not possible to determine the cost of acquisition mentioned in Section 48. Since the cost of acquisition cannot be determined, its transfer cannot be subject to income tax under the head ‘’capital gains.’’ In the instant case, the department seeks to revise the retail sale price, however, in the absence of there being any method prescribed for computing the same, RSP cannot be revised

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8. The Noticee also place reliance on the decision of the Hon’ble Supreme Court in the case of P. Kasilingam and Ors vs PSG College of Technology reported in 1995 SUPP (2) SCC-348, wherein the Hon’ble Supreme Court held that the Act and the Rules form a composite scheme and that main provisions of the Act can be put into operation only if relevant provisions or form is prescribed under the rule. In the absence of the rule, the Act cannot be enforced. The ratio laid down by the Hon’ble Supreme Court in the said case applies in all force to the facts of the present case in as much as in the absence of rule being prescribed during the relevant period for determination of RSP, the same could not have been ascertained in an ad hoc manner.

Condition precedent to invoking sub-section (4) of Section 4A not being met with

9. Without prejudice to the above, we respectfully submit that in terms of sub-section (4) of Section 4A, the declared RSP could have been re-computed only;

a) If the manufacturer removes excisable goods without declaring RSP of such goods on the package, or

b) The declared RSP was not the RSP as required to be declared under the provisions of Section 4A, or

c) The RSP declared on the package is tampered with/ obliterated/ altered the RSP after removal from the place of manufacture.

Only in the above situations, the RSP could have been determined in the manner prescribed by the rules. We humbly submit that the notice does not contain any allegation regarding infringement of any of these conditions, infringement of which would have attracted the ascertainment of RSP in the prescribed manner in terms of sub-section (4) of Section 4A. Expression “in the prescribed manner” appearing under Section 4A (4) of the Central Excise Act, 1944, cast a legal obligation on DGCEI to re-ascertain retail sale price only in the prescribed manner.

10. Noticee further submit that even if the allegation in the notice that the tiles were sold by the dealers/distributors at a price higher than RSP was assumed to be correct for the sake of argument, 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 CEA, 1944, the declared RSP could not have been discarded. The impugned notice does not state as to how and why the RSP was required to be recomputed in terms of sub-section 4 of Section 4A and as to what was the infringement for which the same was being recomputed.

Declared value being the RSP .

11. The noticee further submit that Section 4A (2) of the Act, stipulates that retail sale price declared on the package less abatement shall be deemed to be assessable value. The said section does not stipulate that-

a) Actual price of the goods received/ realized less abatement shall be deemed to be assessable value;

b) Actual price at which the goods are sold by the dealers less abatement shall be deemed to be assessable value;

c) Price shown in the Price List or Estimation or quotations less abatement shall be deemed to be assessable value.

d) Weighted retail sale price less abatement shall be deemed to be assessable value.

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12. Noticee further stated that DGCEI has failed to adduce any evidence to establish that Revised Weighted MRP shown in ANNEXURE C-1, C-2, C-3, and C-4 has been physically declared on the package cleared by M/s. Star Ceramics, Morbi, at the time of removal of tiles from the factory as mandated under sub-section (2) of Section 4A of the Act. Noticee further submitted that sub-sections (1), (2), (3) and 4 of Section 4A of the Act, cannot be read in isolation, thus in the absence of declaration of RSP proposed in the notice on the package, the same could not have been adopted as the basis for computing duty liability.

13. The noticee further submitted that the ad hoc RSP determined by the DGCEI in the notice is not the RSP declared on the package in terms of Section 4A(2), in their submission, it is only a price declared on the package which has to be reckoned as the RSP. It is also submitted that in the absence of RSP proposed by the DGCEI having not been declared on the package, the same cannot be adopted for computing the assessable value.

14. Noticee further submitted that the present notice issued to them is an offshoot of certain investigations which were carried out against the tile manufacturers in the Morbi area as a whole, which fact is accepted in Para 2.3.1 of the Show Cause Notice which is reproduced hereinbelow for the ease of reference.

“2.3.1. DGCEI observed that an estimated number of 200 manufacturers of tiles, situated in different parts of the state of Gujarat, are evading duty of excise and other taxes in the aforesaid manner. It was found to be an impossible tasks to simultaneously search all these manufacturers and their 1000s of dealers, depot, distributors and godowns, situated across the country as well as a large number of shroffs and angadias, transporters, shipping companies etc. Therefore, DGCEI selected 11 manufacturers of tiles situated in Morbi and several transporters, shroffs, angadias, shipping companies and dealers and depots, situated at different locations and conducted a coordinated search operation on 17.01.2008. Information regarding details of consignments shipped in coastal vessels was also collected from the Customs House at Kandla and Mundra Ports. Similarly, statements of various bank accounts held by different shroffs in ICICI Bank were also collected.”

Therefore,the Notice issued to them is not based on any specific evidence against them but mainly based on the evidence/confession against the tile manufacturers in the entire Morbi, which was gathered in the course of investigation done by the DGCEI. Thus it is settled law that demands cannot be confirmed based on surmises and conjectures and 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. The law in this regard is well settled by the following amongst other decisions of the Tribunal:

COMMISSIONER OF CENTRAL EXCISE, RAJKOT Versus SURYA CERAMICS - 2006 (201) E.L.T. 392 (Tri. - Del.)

“Demand - Undervaluation, evidence – Under invoicing in relation to goods cleared to specific parties - Buyers stated to have paid over and above the invoiced price with method of remittance being explained in detail - Sufficient evidence to prove undervaluation - Revenue’s appeal allowed and matter remanded for re quantification of demand - Section 11A of Central Excise Act, 1944. [para 6]

Demand - Computation of - Undervaluation with regard to clearance to certain parties - No evidence indicating practice of undervaluation in relation to clearance to dealers all over the country - Demand to be restricted to clearances made to parties/regions receiving undervalued goods - Section 11A of Central Excise Act, 1944. [para 7]

Penalty, Quantum of - Remand to original authority for fresh quantification of duty demands - Penalty inter alia depends upon amount of duty involved - Adjudicating authority to determine quantum of penalty also - Section 11AC of Central Excise Act, 1944. [para 8] Appeals allowed”

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15. The noticee further submitted that ,Without prejudice to the above, we wish to point out that as per the Notice, search and investigation was conducted in the premises of the following 7 dealers:

1. M/s. T. Lakshmi Kanthan & Sons, Chennai.

2. M/s. N. K. Trading Co., Kollam.

3. M/s. Amit Ceramics, Nashik.

4. M/s. Glazeware Trading Co., Madurai.

5. M/s. Shreeji Marketing, Hyderabad.

6. M/s. New Payal & Co, Hyderabad.

7. M/s. J.J. Patel & Co., Secundrabad.

And certain incriminating documents concerning tiles cleared by M/s. Star Ceramic, Morbi, were seized which, according to the department established that;

a) M/s. Star Ceramic, Morbi, was not showing the actual MRP in Central Excise Invoices. or

b) M/s. Star Ceramics, Morbi, were showing only part of the value of tiles in Invoices, or

c) Tiles were actually sold to the consumers at a much higher price than the MRP declared in the invoices. or

d) Tiles were cleared at retail sale price which is not the retail sale price as required under the provisions of Standards of Weights and Measures Act, 1976 or rules made thereunder or any other law for the time being in force, or

e) Differential value of tiles was paid to the manufacturer in cash, by the buyers.

16. The noticee further submits that It is significant to note here that they have not been subjected to interrogation by the DGCEI. DGCEI has not adduced any evidence to establish that dealers other than those who were interrogated have also indulged in the same modus operandi adopted by dealers who were subjected to interrogation. This explicitly acknowledges that clearances made by M/s. Star Ceramics to other dealers are unquestionable, unchallengeable and strictly in accordance with Section 4A of Central Excise Act, 1944. Therefore, re-ascertainment of retail sale price is unwarranted. Consequently, clearance made to the dealers other than those interrogated by the DGCEI are outside the purview of impugned show cause notice.

They have further stated that the allegations made in the Show Cause Notice are based on the statements of certain dealers/distributors and on records seized from / furnished by the said dealers in the course of investigation. In our humble submissions, there is no statutory presumption regarding the truth of contents of these documents as, the same have not been produced by us or seized from our premises but from the premises of third parties who are not being tried jointly with us. No notice has been issued to said dealers from whose premises the documents were seized and other witnesses whose statements have been recorded in the course of investigation based on which adverse inference has been drawn against them.

The star has further stated after an opportunity of cross examination is granted to them is a part of principles of natural justice.

17. Meanwhile, as a matter of record, the star has further submitted that that investigation is only in respect of a small number of our dealers and allegations made are all based on overall investigations made by the DGCEI.

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Therefore, they do not subscribe to the correctness of such generalization and submit that such generalization cannot be a basis for fastening the liability on them.

18. The star has further argued that without prejudice to the above, they also wish to point out that contention of DGCEI that it found it impossible to simultaneously search thousands of dealers’ depots, distributors’ godowns spread all over the Country as well as shops, shipping companies and angadias and hence the investigation was confined to few of the manufacturers of tiles and several of the angadias, shops and shipping companies, this admission it is submitted that, enough for discharging the Notice as admittedly complete investigation have not been carried out and Notices have been issued based on the half backed facts. Therefore, it is one of the basic tenets of law that any action therein cannot be based on surmises and conjectures. The impugned Notice being based on the whims and fancies of the investigating officials rather than on specific and concrete evidences, cannot be sustained and deserves to be set aside on this ground alone.

Ad-hoc basis on which RSP has been determined in the Show Cause Notice 19. In reply to Para 14 of the Show Cause Notice M/s. Star Ceramics has submited, the said ad-hoc computation of RSP by taking MRP declared during the period from 04.03.2008 to 31.12.2008 is clearly untenable and is not based on any legal backing recognized by Section 4A of the Central Excise Act, 1944. Adoption of MRP of subsequent period is neither defined in Central Excise Act, 1944, nor Central Excise Rules, 2002. The star has further submitted that since there is no legal basis for the RSP computed in the Show Cause Notice on the basis of “MRP for the subsequent period”. Notice, therefore, cannot be sustained and has to be quashed and set aside solely on this ground. Further determination of assessable value has to be in terms of the Act and the Rules made there under. Until and unless the computation of assessable value meets with this basic fundamental requirement of the Act, the assessable value cannot be accepted and any proceeding which seeks to adopt such an assessable value will have to be set aside as being beyond the scope of the Act and as such bad in law. Under Paragraphs No: 14.4 to 14.6, MRP of M/s. Star Ceramics, Morbi has been compared with that of other leading manufacturers of India viz. M/s. SPL LTD., and M/s. H. & R. Johnson (I) Ltd. During the relevant period, such comparison is not in sync with provisions of sub-section (4) of Section 4A of Central Excise Act, 1944. No evidence of Laboratory Test has been adduced so as to establish that tiles manufactured by M/s. SPL Ltd. and M/s. H. R. Johnson (I) Ltd. and those cleared by us are similar and identical.

20. REDRAWAL OF BOUNDARIES OF SECTION 4A OF CENTRAL EXCISE ACT, 1944, BY DGCEI IN RE-ASCERTAINING RETAIL SALE PRICE .

Without prejudice to our above it is further stated that even the RSP determined on an Ad-hoc basis is completely untenable, illogical and incorrect to say the least for the following other reasons because DGCEI has overstepped boundaries of Section 4A. :

i) RSP has been defined in Section 4A to mean that maximum price at which excisable goods in packaged form may be sold to ultimate consumer and included tax local or otherwise, freight, transport charges, commission payable to dealers and all charges towards advertisement, delivery, packing, printing and like and the price is the sole consideration for such sale.

ii) The Notice while working out the ad-hoc RSP has taken RSP of the period March, 2008 to December, 2008 as a base applied such RSP to the period 01.04.2004 to 29.02.2008 is completely illegal and arbitrary.

iii) The Notice while working out the ad-hoc RSP has also made reference to the MRP declared by M/s. SPL and M/s. H & R Johnson (I)

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Ltd. As per the provisions of Section 4A ibid each retail sale price declared on goods minus abatement is assessable value for the purpose of assessment of duty of excise, question of referring & relying on other manufacturers Maximum Retail Sale price does not arise. Law does not provide to even refer and rely upon Maximum Retail Sale price other than declared on the goods of the same manufacturers. It is an admitted facts in the SCN that we are engaged in manufacture of Floor tiles but in Annexure B-1 and B-3 price of wall tiles of other manufacturers are referred and relied upon.

(iv) The Notice while working out the ad-hoc RSP has also made reference to the so called price list, quotations and estimate, scanned copies of which have been annexed to the Show Cause Notice. None of these documents have been seized from our premises nor are the documents belonging to us or issued or sent by us. As stated above, there is no presumption about the correctness of the documents under Section 36A, the same having been collected from the premises of other dealers who are not being jointly tried with us, the RSP worked out by the department on the basis of said quotations, price list and estimates is completely illegal and arbitrary.

20.1 RE-ASCERTAINMENT OF RETAIL SALE PRICE under Paragraph No: 14.7 of Show Cause Notice IS DONE IN arbitrary and irrational manner.

In reply to para No: 14.2.4 of the Show Cause Notice, the star has submitted that, Section 4A of the Central Excise Act, 1944, does not stipulate that upward /downward revision of retail sale price by a manufacturer at a later date would automatically and ipso facto apply to all past clearances and assessment of the past clearances would be done accordingly. Such logic is replete with far reaching legal complications. Kindly permit us to cite an example. Suppose a manufacturer reduces retail sale price on a particular date, then as per concept of DGCEI, his reduced retail sale price will automatically apply to his past clearances, thereby he would be eligible to refund of excise duty already paid by him in terms of reduced retail sale price. Such methodology cannot but create chaotic conditions in the arena of taxes. Such approach smacks of arbitrariness and irrationality.

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21. General denials.

The star has further argued that having made legal submissions and while awaiting copies of all the documents which have been relied upon in the Notice and the return of all the unrelied documents, they wish to deny all the allegations and insinuations levelled against them in the Show Cause Notice. Based on documents available with them, and making the denials as mentioned below and crave leave to add to, alter, amend, delete, withdraw any or all of our submissions based on the further documents to be furnished and after an opportunity of cross examination of the witnesses is granted to us.

21.1 ANNEXURE – “A”

This annexure contains a chart showing cash payments made by M/s. N.K. Trading Co., Kollam. to different manufacturers of ceramic tiles, their transporters, raw material suppliers etc., during the period from 20.04.2006 to 25.10.2007. It is not in dispute that we 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. They stated that during the relevant period covered by the impugned show cause notice there was no legal and valid mechanism in existence to re-ascertain retail sale price on the basis of amount received in cash from the dealers through Shroffs. Rupees 30,00,000/- have been shown “as received by us.” This annexure has maintained silence over specific amount, and specific invoice issued by us.Therefore, this Annexure pales into insignificance.

21.2 Annexure “B-1”:

This Annexure shows Maximum Retail Price of STD Grade Wall Tiles manufactured by M/s. SPL Ltd. As already explained we 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. They further stated that during the relevant period covered by the above Annexure, there was no legal and valid mechanism in existence to ascertain MRP calculated on the basis of MRP of tiles manufactured by another manufacturer. No test report from laboratory is adduced so as to establish that tiles manufactured by M/s. SPL Ltd. and M/s. Star Ceramics, are similar and identical in quality, size, colour and grade. Therefore, this annexure has become irrelevant.

21.3 ANNEXURE “B-2”:.

This annexure shows maximum retail sale price of premium grade floor tiles manufactured by M/s. SPL Ltd. Show Cause Notice has categorically confirmed that M/s. Star Ceramics, Morbi, has manufactured only wall Tiles during relevant period. Wall Tiles and Floor Tiles are different products. Comparison between Wall Tiles with Floor tiles is a futile exercise so far as ascertainment of retail sale price of floor tiles is concerned. As already explained we 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. They further stated that during the relevant period covered under above Annexure, there was no legal and valid mechanism in existence to ascertain MRP calculated on the basis of MRP of tiles cleared by another manufacturer. No test report from laboratory is adduced so as to establish that tiles manufactured by M/s. SPL Ltd. and Coral Ceramics Pvt. Ltd., are similar and identical in quality, size, colour and grade. Therefore, this annexure has become irrelevant and reliance on this annexure is mis-placed.

21.4 ANNEXURE “B-3”:

This annexure shows maximum retail sale prices of Premium Grade Wall Tiles of M/s H. R. Johnson (I) Ltd. As already explained we 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. They stated that during the relevant period covered under this Annexure, there was no legal and valid mechanism in existence to ascertain MRP calculated on the basis of MRP of tiles cleared by another manufacturer. No test

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report from laboratory is adduced so as to establish that tiles manufactured by M/s. H.R. Johnson (I) Ltd.., and M/s. Star Ceramics, Morbi, are similar and identical in quality, size, colour and grade. Therefore, this annexure has become irrelevant and reliance on this annexure is mis-placed.

21.5 ANNEXURE “C-1”

This annexure contains Worksheet showing differential duty payable on account of mis-declaration of MRP by M/s. Star Ceramics, Morbi, during the period from 01.04.04 to 08.07.2004.

As already explained, we 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. They stated that during the relevant period covered under above Annexure, there was no legal and valid mechanism in existence to ascertain MRP calculated on the basis of MRP declared in subsequent period i.e. period after disputed period which is alien to Section 4A of Central Excise Act, 1944. Spadework done by DGCEI for computation of duty liability is ultra vires Section 4A of Central Excise Act, 1944.Therefore, reliance on this Annexure is mis-placed.

21.6 ANNEXURE “C-2” :

This annexure contains Worksheet showing differential duty payable on account of mis-declaration of MRP by M/s. Star Ceramic, Morbi, during the period from 09.07.2004 to 28.02.2007. As already explained, 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., further during the relevant period covered under above Annexure, there was no legal and valid mechanism in existence to ascertain MRP calculated on the basis of MRP declared during subsequent period i.e. period after disputed period which is alien to Section 4A of Central Excise Act, 1944. Spadework done by DGCEI for computation of duty liability is ultra vires Section 4A of Central Excise Act, 1944.Therefore, reliance on this Annexure is mis-placed.

21.7. ANNEXURE “C-3” :

This annexure contains Worksheet showing differential duty payable on account of mis-declaration of MRP by M/s. Star Ceramic, Morbi, during the period from 1.3.2007 to 31.07.2007. In this regard the M/S.Star has 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. Futher that during the relevant period covered under above Annexure, there was no legal and valid mechanism in existence to ascertain MRP calculated on the basis of MRP declared during the subsequent period i.e. period after disputed period which is alien to Section 4A of Central Excise Act, 1944. Spadework done by DGCEI for computation of duty liability is ultra vires Section 4A of Central Excise Act, 1944.Therefore, reliance on this Annexure is mis-placed.

21.8 ANNEXURE “C-4” :

This annexure contains Worksheet showing differential duty payable on accountof mis-declaration of MRP by M/s. Star Ceramic, Morbi, during the period from 1.8.2007 to 29.02.2008. In this connection the Star has reaitred the contention as bove.

22. NITTY-GRITTY OF ASSESSMENT - MAJOR INGRADIANTS OF ASSESSMENT.

The star has further stated that as per Para No: 2 of Chapter 3 – PART-I of CBEC’s Excise Manual which is reproduced below:-

“2.Major ingredients of assessment.

2.1 before each removal, whether outside the factory of manufacture or production or for captive consumption, duty has to be assessed on the excisable goods. The main ingredients of assessment are :

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(i) Classification and rate of duty. ---------------------(ii) Valuation: Where rate of duty is dependent on value of the goods (ad valorem

duty), value has to be determined in accordance with the provisions of Central Excise Act, 1944, as follows:

(i) Valuation under Section 4.(ii) Value based on retail sale price under section 4A, if applicable.” (emphasis provided) Use of words “before each removal” sends clearest and loudest signals that assessment has to be done in respect of each removal of consignment only. Therefore, each Invoice issued by us during the relevant period should be treated as a separate transaction / consignment and the assessable value should be arrived at for each such transaction / consignment in terms of guidelines given in the Central Excise Manual. “ If manufacturer has declared the retail sale price which is not the retail sale price as required, then Determination of RSP Rules have laid down following principles to be applied sequentially for re-ascertainment of retail sale price under Section 4A (4) of the Act :-

(i) if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price, then, the said declared retail sale price shall be taken as the retail sale price of such goods :(ii) if the retail sale price cannot be ascertained in terms of clause (i), the retail sale price of such goods shall be ascertained by conducting the enquiries in the retail market where such goods have normally been sold at or about the same time of the removal of such goods from the place of manufacture : It is significant to note that in the above principles emphasis has been laid on words “removal of goods” from the place of manufacture. The above guiding principles lend support to our contention that re-assessment in terms of Section 4A (4) of the Act, should be done only consignment-wise / invoice-wise basis.

While working out excise duty in ANNEXURE “C-1”, “C-2”, “C-3” and “C-4” to the show cause notice, DGCEI has disregarded the above cardinal principles. Instead of working out duty liability consignment / transaction wise / Invoice-wise, DGCEI has arbitrarily worked out duty liability on the basis of different sizes of floor tiles cleared by us during different periods as shown in the above Annexures. This does not demonstrate healthy approach by DGCEI. Invoice wise re-assessment has been intentionally avoided, apparently because it was difficult, if not impossible, to ascertain exact amount allegedly received from each buyer in cash by us in respect of each invoice on the basis of documents resumed and statements of the dealers, bankers, transporters, shippers, shroffs etc. recorded by DGCEI. Else, DGCEI would have no hesitation to resort to invoice wise reassessment. In order to camouflage its inability, DGCEI has deliberately avoided consignment-wise / invoice-wise assessment.

“23.Contravention of provisions of Central Excise Act, 1944, and rules made thereunder:-

The star has further stated that so far as impugned show cause notice is concerned, duty is to be levied and collected in a prescribed manner as laid down in sub-section (2) and (4) of Section 4A of the Act, read with Section 3 of the Act. As already explained hereinabove, DGCEI has not worked out duty in a prescribed manner. What cannot be done directly has been done indirectly by DGCEI with scant respect to existing laws. As a natural corollary, 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, 1944. They have further submitted that, at the very outset they strongly disown the allegation made against them. And 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. The intention to discuss so called general practice prevailing in the tiles industries (Paragraph 2.1 and 2.2 of the SCN), concocted facts of hostile atmosphere created by the tiles manufacturers (Paragraph 2.3 of the SCN), Arrest of Directors of Deco Group and Comet Ceramics (Paragraph 2.4 of the SCN), General investigation from the Shroff/angadia (Paragraph 8 from page 59 to 111 of the SCN), clearly shows the

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prejudice of the investigation and we feel that intention behind such an attempt is to make prejudice not only to the adjudicating but also appellate authorities.

4. M/S.Star has further submitted that, it is admitted facts on record that no search was carried out at our factory premises (Paragraph 2.6 at page 8 of the SCN). The entire demand show cause notice is issued based on the investigation made at 5 dealers and their statements. The said 5 dealers are departmental witnesses and we have vide our various letters including interim reply date 07.09.2011 followed by reminders date 13.09.2011, 23.09.2011 supported with various decision of Hon’ble High Court and CESTAT prayed for cross examination of the said witness since they are not jointly tried with them..

4.2 Noticee has 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.C.E.I., Chennai reported in 2010 (255) ELT 161 (Mad) and ones a requested for cross examine all the witnesses following principle of natural justice.

4.3 M/S.Star has further 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 it was submitted that 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. It was also submitted that impugned show cause notice alleged about Mis-declaration of MRP in the Central Excise Invoices at paragraph 13.3 at page 129 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. It was further 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.

Further 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 also case 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 good shall be liable to confiscation 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.

Without prejudice to above, in any case, for the sake of argument it is assumed that in the instant case we 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 is not prescribed during the period under dispute i.e. 01.04.2004 to 29.02.2008, 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 14 from page 132 to 135 of the SCN is not maintainable. Thus, demand of differential duty said to have been short paid by applying such re-ascertained RSP in column No. 5 in Annexure C-1 to C-4 is not maintainable at all.

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M/S.Star has further 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 it was submitted that 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 – C-1 to C-4. 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 was 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.In support of above submission attention of your kind honour was also drawn towards 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 and Tribunal decision in the case of Ravi Foods Pvt. Ltd. Vs. Commissioner of C. Ex., Hyderabad reported in 2011 (266) ELT 399 (Tri. Bang).

It was also submitted that impugned demand is not maintainable and further submitted that without admitting anything as per decision of tribunal in the case of Commissioner of Central Excise, Rajkot Vs. Surya Ceramics reported in 2006 (201) ELT 392 (Tri. Del.), 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. Even photocopy of the all the provisions, citations etc referred were submitted.

5. Noticee has further submitted that during the course of investigation 5 Dealers were searched/examined and based on such inquiry it was 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. It was also alleged that 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.”

It is 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 us. It is also nowhere found or alleged that retail sale price at which goods were sold to ultimate consumer and was not sole consideration for sale.

Noticee has further submitted that 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.

5.1 Noticee further submitted that result of investigation was discussed at paragraph 13 from page 127 to 132 and alleged that M/s Star have not declared actual size, design as well as difference in the prices of various qualities, mis declaration of MRP in the Central Excise Invoices; that mis-declared freight amounts and other expenses and collected cash amounts.

Noticee has stated that the said allegations were without any base not even relied upon for working out duty liability, Retail Sale Price was ascertained for the said purpose in totally different method which was discussed at paragraph 14.3 at page 135 of the show cause notice. Differential duty was worked out by taking difference between MRP declared during the period 04.03.2008 to 31.12.2008 minus declared MRP on goods less permissible abatement. Since, this method was not recognised under Section 4A of the Central Excise Act, 1944, demand was liable to be quashed on this ground too.

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Without prejudice to anything stated above it was further submitted that though in paragraph 14.3 at page 135 of the SCN it was stated that the MRP declared by M/s. Star during the period from 04.03.2008 to 31.12.2008 have been taken for calculating duty short paid during the period April, 2004 to February, 2008 but details how actual MRP that should have been adopted by us applied in column No.5 of Annexure – C-1 to C-4 is not known. Therefore, it was prayed that before passing any order such details may please be made available to them.

5.3. M/S.Star further submitted that while demanding differential duty of Rs.30,21,431/- as worked out in Annexure C-1 to C-4 to the SCN department has not worked out any differential duty invoice wise.It is not made known to them that how number of boxes, 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 submitterd 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 interest, invoice wise and month wise duty payable figures are required to be furnished to them.

6. They have further 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 neither jointly tired with us nor allowed to cross examined by them.

Even statements of one of Partners Shri Pravinchandra Devkaranbhai Bhimani (date 01.05.2008, 16.04.2009) are also based on such evidence collected from the third party premises and statement of concerned person of said parties. Without cross examination of witnesses who are not jointly tired with us presumption to truth is not available for such statements also.

Therefore, statement of partner is recorded said to have been showing such evidences and statement of 5 dealers, same also cannot be used as evidence against them.

6.1.1 Further stated that it is alleged at paragraph 3.3.7 of page 18 of the SCN that they have manufactured and removed ceramic glazed tiles by declaring MRP in Central Excise Invoices which was much lower than the actual MRP and consequently not discharging appropriate duty. M/s. T. Lakshmi Kanthan & Sons, Chennai, while issuing their sale bill, were artificially working out the selling price with a view to match the various cost factors which are recorded in the books of accounts, collecting differential amounts over and above the bill value in cash, and after spending part of such cash amounts towards various unaccounted expenses, they were sending such cash amounts to M/s Ayyan Ceramics and subsequently to us towards the value of tiles, over and above, the value declared in our Central Excise invoices. For the above allegation investigation has relied upon documents recovered during the course of search of business premises of M/s. T. Lakshmi Kanthan & Sons, Chennai and statement of Shri Thangavelan, its Proprietor recorded under section 14 of Central Excise Act, 1944 on 18.01.2008. It is revealed form the investigation that M/s. T. Lakshmi Kanthan & Sons, Chennai are engaged in trading of Ceramic Products and being a sub dealer purchases it from M/s. Nobel Ceramics, M/s Chennai Marketing and M/s Ayyan Ceramics of Chennai and never purchased directly from the manufacturers of Gujarat. In other words it is admitted fact that we have never cleared any tiles to M/s. T. Lakshmi Kanthan & Sons, Chennai. Therefore,they straight way reject and deny the allegations. The so called evidence is nothing but a handwritten note book containing information of sales details, buyer’s details, etc., as mentioned at Sr. No. 2 of the panchnama dated 18.01.2008, and has been recovered from the third party premises with whom we did not have any transaction during the period of dispute. There is no evidence that M/s. T. Lakshmi Kanthan & Sons, Chennai have paid any cash amount to us or our representative. Hence, without cross examination

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person giving such statement and of the author of such documents we are not in a position to defend the matter further.

6.1.2 Further,It is alleged at paragraph 4.7.8 of page 25 of the SCN that actual sale value of tiles cleared by us through invoice no 183 and 206 is Rs. 4,26,970.50 against sale value of Rs.3,36,888/- on their Central Excise invoices; that difference amount of Rs. 90,082.50 was paid to in cash through the ICICI Bank account of M/s Shree Maruti Enterprise, M/s. Shri Bhagwati Enterprise , M/s Ganesh Agency , M/s. Shiv Finance or M/s. Sagar Enterprise (para 4.7.8). For the above allegation investigation has relied upon documents recovered during the course of search carried out on 17.01.2008 at business premises of M/s N. K. Trading Co., Kollam, Statement of Shri M. P. V. Noble and Shri V. Satheesan, its General Manager and partner respectively which are of general nature and there is no specific allegation against us in those paras. M/S.Star has further stated that there is no specific evidence about any amount paid to them though which shroff, to whom they have paid, in absence of any specific evidence no reliance can be placed on such documents as well as statements especially when cross examination is not allowed. Further even otherwise, without admitting anything it is submitted that as per SCN total clearance of wall tiles during the disputed period were 15,06,801 Boxes were as total number of boxes of tiles cleared to said dealer during the period was only 92,900 Boxes, which was only 6.17% of total clearance. And submitted 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.

6.1.3 M/S.Star has further stated that,It is alleged that they were not declaring designs, colours and even size of tiles in our invoices only to declare lower MRP and to evade duty of excise and as per statement of Shri Bhumtaria Pravin Panchabhai, Proprietor of M/s. Amit Ceramics during the period 07.04.2007 to 23.02.2008 cash amount of Rs.2,90,000/- was paid by M/s. Amit Ceramic to them.For the above allegations investigation has relied upon documents viz. Page No. 7, 29, 65, 121, 198, 266, 329 of Diary referred at Sr. No. A/19 and seized records and documents as per annexure ‘A’ of Panchnama date 22.12.2008 drawn at the business premises of M/s. Amit Ceramic. Inspite of our repeated request copies of aforesaid documents are not made available. Further there is no documentary evidence about payment made in cash by said M/s. Amit Ceramics to M/s. Patel Ashokkumar Kantilalni Company and in turn such amount paid by M/s. Patel Ashokkumar Kantilalni Company to them. Even their name does not reflect in the seized diary marked as A/20 i.e., in the list of party to whom the amounts were paid through shroffs and deny the allegations. The so called evidence in the form of diary and file are recovered from the third party premises and without cross examination of the author of such documents, they are not in a position to defend the matter further. Without cross examination of authors of such documents viz. Shri Bhumtaria Pravin Panchabhai, proprietor M/s. Amit Ceramic and Shri Chimanbhai Babaldas Patel, Proprietor of M/s. Patel Ashokkumar Kantilalni Company (Angadia). Further even otherwise, without admitting anything it is submitted that as per SCN total clearance of wall tiles during the disputed period were 15,06,801 Boxes were as total number of boxes of tiles cleared to said dealer during the period was only 930 Boxes, which was only 0.06% 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.

6.1.4 M/S Star has further stated that, inquiry was conducted from M/s Shreeji Marketing, Hyderabad under summons proceedings by recording the statement of Shri Ramesh Prabhulal Patel its managing partner. According to Shri Ramesh Prabhulal Patel they were purchasing ceramic tiles mainly from 7 tiles manufacturers mentioned in para 7.2.1 including M/s Star Ceramic of Morbi. He stated that all most all the tiles purchased by them were sold to sub-dealers and retails buyers of Hyderabad; that they were placing the order to the manufacturers for the supply of ceramic tiles over phone directly to the manufacturers; that the transportation of the goods from Morbi to Hyderabad was arranged by them; that freight from Morbi to their premise was paid by them ; that the LR were prepared by the transporters for about

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50% to 60% of the actual freight paid by them; that the remaining freight amount, over and above the freight mentioned in LR’s were paid by them in cash to the transporters; that the actual price which they paid to the manufacturers was more than what manufacturers have declared in their invoices and since their selling invoices were issued only for covering up the freight , VAT and their profit margin ,the remaining amount was collected in cash ; that the manufacturers had been suppressing the MRP and collecting the differential amount, over and above the bill amount from them in cash through angadias or their representatives : that they have were paying cash amount over and above the bill amount to M/s New Payal & Co., Hyderabad , M/s J. J. Patel & co., Secunderabad and Ramesh Kanti , Begum Bazar , Hyderabad on behalf of M/s Star Ceramic, Morbi. He further stated that they have never transferred cash amounts through the accounts of finance firms in ICICI Bank; that they have not maintained any records of the cash transactions with the tile manufacturers and that the cash amounts, over and above the cheque mount, was sent through angadias to the above tiles manufacturers by them. The investigation did not record any statement of Shri Ramesh Kanti for reasons best known to them. However they recorded the statement of Shri Lalit Kumar V. Patel, Partner of /s New Payal & Co. on 19.12.2008 and that of Shri Laljibhai Motibhai Patel of M/s J. J. Patel on 29.12.2008. In his statement Shri Lalit Kumar V. Patel stated that he working as an agent of Shri Shaileshbhai Marvania, a shroff from Morbi in Hyderabad and has been collecting cash from dealers of tiles and depositing it into the ICICI Bank accounts of M/s Shree Maruti Enterprise and M/s Shree Bhagwati Enterprise as per his instructions. Similarly Shri Laljibhai Motibhai Patel also stated that he was collecting cash from the dealers of tiles and depositing it the ICICI Bank accounts of Shroffs as per instruction of Dr. Paresh Patel. Based on this oral evidence it has alleged that we were indulged in undervaluation of tiles cleared from our factory by suppressing their MRP and getting the cash over and above the invoice value in cash through shroffs / angadias and deny the allegations. Further stated that they cannot be held responsible even dealers had sold tiles at a price higher than declared on the package. Investigation did not have any evidence that tiles cleared from our factory was sold at a price higher than declared on the package. In the name of evidence DGCIE has nothing more than some statement that too obtained under pressure and hence is not voluntary. Statement of Shri Ramesh Prabhulal Patel of Shreeji Marketing, Hyderabad, and that of Shri Lalit Kumar V. Patel, Partner of /s New Payal & Co. were recorded on 19.12.2008, which means that DGCIE knew that in his statement Shri Ramesh Prabhulal Patel will indicate the name of Shri Lalit Kumar V. Patel. This raises our suspicion about the way statements were recorded by the DGCEI. Moreover the statements are full of contradictions and irrelevant facts. We would like to cross examine Shri Ramesh Prabhulal Patel of M/s Shreeji Marketing, Hyderabad, Shri Lalit Kumar V. Patel, Partner of /s New Payal & Co., Shri Laljibhai Motibhai Patel of M/s J. J. Patel and others before defending the matter further. Further,even otherwise, without admitting anything they have submitted that as per SCN total clearance of wall tiles during the disputed period were 15,06,801 Boxes were as total number of boxes of tiles cleared to said dealer during the period was only 1,00,477 Boxes, which was only 6.67% of total clearance. Further submit that most of the statements are of general nature and without any specific deposition against them. As submitted in para supra that contradictory and factually incorrect statements are shown to the partners and stated that he agrees with such statements. These clearly show that statements were not voluntary but prepared by the officer as per their whims. Our above contentions also get weightage from the question and answer No.3 of statement date 16.04.2009 at page 115 of the SCN about not prepared any notarized affidavit, never retracted statements by parner and dealers.

6.2 Star has further submitted 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 is 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 declared by us w.e.f. 04.03.2008 to

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31.12.2008 (para 14.3. of the SCN) which is also without any legal basis. Therefore, by any means demand is not maintainable.

7. GENERAL INVESTIGATION AT SHROFF / ANGADIA END.

In reply to Paragraph 8 from page 59 to 111 statements of various Shroffs is discussed has submitted that Based on such statements it is alleged in paragraph 13.5 at page 130 that we had used services of several shroffs for transfer of cash from our dealers; that they were under invoicing the ceramic tiles and were collecting the differential amount through shroffs, angadias as well as their representative. Thus, evasion of central excise duty by M/s. Star by way of undervaluation is established beyond doubt. For the above allegation investigation has relied upon statement dated 23.01.2008, 17.03.2008, 03.06.2008, 11.06.2008, 27.06.2008 of Shri Lalit Asumal Gangwani of M/s Bhagwati Enterprise, M/s Shree Maruti Enterprise, M/s Ganesh Agency, M/s Balaji Enterprise, M/s Jay Enterprise; Statement dated 29.05.2008 of Shri Shailesh Odhavji Marvania of M/s Shakti Enterprises, Morbi; Statement dated 27.06.2008 of Shri Sameer Kamrudin Makhani of Shree Bhagwati Enterprise, Rajkot; Statement dated 31.05.2008 of Shri Mehul Narshi Kalaria of M/s Mehul Enterprise, Morbi ; Statement dated 23.01.2008 of Shri Mahesh A. Gangwani of M/s Balaji Agency, Rajkot and alleged that we were under invoicing the ceramic tiles manufactured by them and were collecting the differential amounts through shroffs, angadias as well as through our representatives and representatives of dealers. There is no specific evidence produced or relied upon by the investigation about deposit of particular amount in the particular account of particular shroff which was in turn paid to M/s. Star or their representative. DGECI has neither recorded statement of any of our representative alleged to have taken cash from shroffs & angadias nor has any evidence that Shroffs & angadias have paid to them. The investigation against shroff has been described in length in the SCN but most of it even does not relate to them. The allegations against them are nothing but projection of DGCEI that since other are doing it, we must be doing it. In such projected allegations without cross examination of witnesses reliance cannot be placed on their statements.

8. M/S.Star has further submitted that impugned show cause notice demanding differential duty for the period 01.04.2004 to 29.02.2008 was issued on 22.04.2009 invoking proviso to Section 11A of the Central Excise Act, 1944.

Though impugned show cause notice mechanically alleged suppression, mis-declaration etc., we submit that we had paid duty of excise on declared Maximum Retail Sale Price on the goods less permissible deduction. It is not the case of the department that we were required to pay duty of excise on not paid. It is also not the case of the department that we have suppressed anything from the department or we have mis-declared anything to the department. The Central Excise law does not provide to declare something which we either 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.

9. It is further submitted 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.

10. It is further submitted that under the caption show cause notice penalty under Section 11AC is proposed to be imposed there cannot be any proposal to impose penalty under 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 attention is invited toward 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.”

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Kind attention is also invited towards 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.

11. Even otherwise Penalty under Rule 25 of the Central Excise Rules, 2002 cannot be imposed for goods liable to confiscation under Section 4A of the Central Excise Act, 1944.

Without admitting anything we further submit that even otherwise proposal to impose penalty under Rule 25 of the Central Excise Rules, 2002 upon us in show cause notice date 27.06.2008 proposing confiscation of 243 Boxes valued at Rs.24,300/- under sub-section (4) of Section 4A of the Central Excise Act, 1944 to M/s. T.Lakshim Kanthan & Sons, Chennai, is not maintainable on the following grounds apart from the ground discussed in paragraph 4.3:

The show cause notice date 01.07.2008 proposes imposition of penalty under Rule 25 of the Central Excise Rules, 2002. Rule 25 of Central Excise Rules, 2002 reads as under:-

“RULE 25. Confiscation and penalty. — (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, - (a) Removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or(b) does not account for any excisable goods produced or manufactured or stored by him; or(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty,then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupees two thousand], whichever is greater.

(2) An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.”

And submitted that it is not the case of the department that goods were removed in contravention of any of the provisions of Central Excise Rules, 2002 or does not account for or manufacture or produce without having applied for the registration certificate or contravenes any of the provisions of Central Excise Rules, 2002 or notification issued there under with intent to evade payment of duty.

In terms of Rule 25 of Central Excise Rules, 2002, penalty is imposable only if subject goods are liable to confiscation. Confiscation is precedent condition for imposition of penalty.

Therefore, as per above discussion confiscation is unjustified, uncalled for and unwanted, therefore, no penalty can be imposed upon us. As such, question of penalty under Rule 25 of Central Excise Rules, 2002, does not arise at all, as no duty is payable on seized goods. If anybody does or dealt in the manner provided under clause (a) to (d) of sub-rule (1) of Rule 25 then such goods are liable to confiscation and such person is liable to penalty.

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As submitted that goods are not liable to confiscation under Rule 25 no penalty can be imposed under Rule 25 upon us. Goods are not liable to confiscation under Rule 25 ibid but even for the sake of argument it is assumed that goods were removed without declaring correct MRP then also same are liable to confiscation under Section 4A(4) of the Central Excise Act, 1944. For such violation and rendering goods liable to confiscation Rule 25 does not provide to impose penalty upon manufacturer.

Without prejudice to above and without admitting anything just for the sake of argument suppose provisions of Rule 25 can be made applicable in the instant case then also as per provisions of Rule 25 penalty cannot exceed the duty on such excisable goods. The amount of duty involved will be as follows if declared MRP is taken or Ascertain MRP is taken:

No. of Boxes MRP per box Gross MRP Assessable Value Duty @ 8% + 2% + 1%= 8.24%

243 Rs. 100/- declared Rs. 24,300/- Rs.13,365/ - Rs.1 ,101/ -

243 140 Ascer ta ined

Rs.34,020/ - Rs.18,711/ - Rs.1 ,542/

The Shri Pravinchandra D.Bhimani partner of the firm has also submitted his reply, and pray that reply filed by M/s.Star (the firm) may please be considered as part of his reply. He has furthrer submitted that the show cause notice for firm, the impugned show cause notice is not maintainable, so no penalty is imposable upon him.He has further submitted that the impugned show cause notice proposes to impose penalty under Rule 26 of the Central Excise Rules, 2002 which reads as under:

“Rule 26. Penalty for certain offences. (1) Any person who acquires possession of, or is in any way concerned in transporting, removing depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees which is greater.(2) Any person, who issues –

(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice, or

(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act of the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2004, or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.”As per the provisions of aforesaid rule penalty can be impose upon as person who dealt with the excisable goods in the manner provided in the said rule that too with reason to believe that such are liable to confiscation, then and then penalty under this rule can be imposed. While making allegation department has mechanically reproduced language used in the said rule.

He has further submitted that It is not the case of the department that goods is liable for confiscation.There is no proposal of confiscation of goods in the impugned show cause notice. The impugned show cause notice nowhere proposes or alleged that goods were liable to confiscation under Section 4A of the Central Excise Act, 1944.Once the department by not making any proposal for confiscation of goods or alleged about liable to confiscation of goods, it is crystal clear that department itself is of the opinion that goods are not liable to confiscation, no penalty can be imposed upon under singed under Rule 26 of the Central Excise Rules, 2002. Once as per the department goods are not liable to confiscation how I can have reason to believe that goods are liable to confiscation.

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He has further submitted that without admitting anything but for the sake of argument it is presumed that penalty can be imposed upon under signed then also as per the provisions of said rule penalty cannot be exceed the duty on such goods or two thousand whichever is greater.

As per the provisions of said rule such goods means excisable goods which are liable to confiscation.Since, there is no proposal of confiscation of goods or allegation about goods are liable to confiscation under any provisions of the Act or Rules not to speak of Section 4A of the Central Excise Act, 1944, amount of duty of such goods cannot be ascertained. In other words duty on such goods is zero in the instant case. Therefore, as per provisions of the said rule penalty amount can be zero or two thousand whichever is higher. Thus, in the instant case, in any case penalty amount cannot be more than rupees two thousand.

Further, Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons, Chennai. Has submitted his reply on 25/10/2011 interalia, stated that 243 Boxes of ceramic tiles valued at Rs.24,300/- were seized from M/s. T. Lakshim Kanthan & Sons, Cheanni were cleared from the factory of M/s. Star Ceramic Morbi.

He has further submitted that without prejudice to above he prayed that reply filed for manufacturing firm may please be considered as part of this reply. As submitted in detailed in reply to the show cause notice for manufacturing firm, the impugned show cause notice is not maintainable, so goods are not liable to confiscation and no penalty is imposable upon me.he has further submitted that, that even otherwise proposal to impose penalty under Rule 25 of the Central Excise Rules, 2002 upon us in show cause notice date 27.06.2008 proposing confiscation of 243 Boxes valued at Rs.24,300/- under Rule 25 of the Central Excise Rule, 2002 to M/s. T. Lakshmi Kanthan & Sons, Chennai, is not maintainable on the following grounds apart from the ground discussed in paragraph 4.3 of the reply date 25.10.2011 filed by said M/s. Star.

Rule 25 of Central Excise Rules, 2002 reads as under:-

“RULE 25. Confiscation and penalty. — (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, -

(a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or

(b) does not account for any excisable goods produced or manufactured or stored by him; or

(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or

(d) Contravenes any of the provisions of these rules or the notifications issued un-der these rules with intent to evade payment of duty,

then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupees two thousand], whichever is greater.

(2) An order under sub-rule (1) shall be issued by the Central Excise Officer, follow-ing the principles of natural justice.”

He has further submitted that it is not the case of the department that goods were removed in contravention of any of the provisions of Central Excise Rules, 2002 or does not account for or manufacture or produce without having applied for the registration certificate or contravenes any of the provisions of Central Excise Rules, 2002 or notification issued there under with intent to evade payment of duty.In terms of

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Rule 25 of Central Excise Rules, 2002, goods are liable to confiscation only if subject goods are liable to confiscation in the situation discussed in clause (a) to (d) of the said rule. Therefore, as per above discussion confiscation is unjustified, uncalled for and unwanted. As such, question of confiscation under Rule 25 of Central Excise Rules, 2002, does not arise at all, as no duty is payable on seized goods. If anybody does or dealt in the manner provided under clause (a) to (d) of sub-rule (1) of Rule 25 then such goods are liable to confiscation.

He has further submitted that the impugned show cause notice proposes to impose penalty under Rule 26 of the Central Excise Rules, 2002 which reads as under:

“Rule 26. Penalty for certain offences. (1) Any person who acquires possession of, or is in any way concerned in transporting, removing depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees which is greater.

(2) Any person, who issues –

(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice, or

(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act of the rules made thereunder like claiming of CENVAT credit under the CEN-VAT Credit Rules, 2004, or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.”

As per the provisions of aforesaid rule penalty can be impose upon as person who dealt with the excisable goods in the manner provided in the said rule that too with reason to believe that such are liable to confiscation, then and then penalty under this rule can be imposed. While making allegation department has mechanically reproduced language used in the said rule. He has further stated that it is not the case of the department that goods are liable to confiscation except 243 boxes seized at the business premises of M/s. T. Lakshmi Kanthan & Sons. The impugned show cause notice nowhere proposes or alleged that goods were liable to confiscation under Section 4A of the Central Excise Act, 1944. Once the department by not making any proposal for confiscation of goods or alleged about liable to confiscation of goods, it is crystal clear that department itself is of the opinion that goods are not liable to confiscation, no penalty can be imposed upon under singed under Rule 26 of the Central Excise Rules, 2002. Once as per the department goods are not liable to confiscation how I can have reason to believe that goods are liable to confiscation.

He has further submitted that without admitting anything but for the sake of argument it is presumed that penalty can be imposed upon under signed then also as per the provisions of said rule penalty cannot be exceed the duty on such goods or two thousand whichever is greater.

The amount of duty involved will be as follows if declared MRP is taken or Ascertain MRP is taken:

No. of Boxes

MRP per box Gross MRP Assessable Value Duty @ 8% + 2% + 1%= 8.24%

243 Rs. 100/- declared

Rs. 24,300/- Rs.13,365/ - Rs.1 ,101/ -

243 140 Ascer ta ine

Rs.34,020/ - Rs.18,711/ - Rs.1 ,542/ -

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d

Thus, as per provisions of Rule 26 ibid if any penalty is to be imposed upon it cannot be more than Rs.2,000/- as duty on such goods is less than Rs.2000/-.

Final all the noticee of aforesaid two show cause notice have prayed that no penalty is imposable upon them requested to drop the proceeding initiated under impugned show cause notices.

Discussion and finding:

I have carefully gone through the facts of the case and the various submissions advanced by M/S.Starand Shri Dipakkumar M. Patel, Partner of M/s. “Monalisa”, from time to time during the course of adjudication proceedings.

40.2 The issues to be decided by this order are as under:

(a) Whether M/S.Star is liable to pay Central Excise duty amounting to Rs. 30, 21,431/- (Cenvat credit of Rs. 29,53,668/-, S&HEdu. Cess of Rs. 58,480/- and H.Ed.Cess of Rs. 9,283/-) on ceramic tiles cleared by them, as per details given in Annexures G-1 to G-3 to the Show Cause Notice, under proviso to section 11A of Central Excise Act, 1944.

(b) Whether the amount of Rs. 10,00,000/- paid by M/S.Star during investigation is liable for appropriation on account of above demand.

(c) Whether M/S.Star is liable to pay interest under Section 11AB of Central Excise Act, 1944 on the duty amounts mentioned above.

(d) Whether M/S.Star is liable to penalty unde Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules.

(e) Whether 243 boxes of ceramic tiles valued Rs.24,300/-manufactured and cleared from the factory of M/S.star Ceramic and seized under panchnama dasted 18/01/2008 should not be confiscated under rule 25 of the Central Excise Ruless 2002.

(f) Whether Shri Thangavelan prop.of M/S.T.Lakshmi Kanthan & Sons, Chennai is liable for penalty under rule 26 of CCR 2002

(g) Whether Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/S.Star is liable to penalty under Rule 26 of Central Excise Rules, 2002.

40.3 It is observed that the main noticee – M/S.Star is 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.

40.4 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.

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(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.

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 al-tered 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.”

41. It has been argued by M/S.Star 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 place 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. 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

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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.Starhave 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.

41.1 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 –

advertisement, delivery, packing, forwarding and the like and

the price is the sole consideration for such sale.

41.2 I find that during the course of investigation, several dealers/entities who dealt with and engaged themselves in trading of the tiles manufactured by M/S.Star were searched and based upon the documentary evidence recovered from them, statements of respective Proprietors/Partners/in-charge persons, etc. were recorded under Section 14 of Central Excise Act, 1944.

41.3 Scrutiny of the invoices further reveals that during the year 2004-05, they were manufacturing ceramic wall tiles of Standard, Silver and DD grades. The quantity cleared under each grade and the MRP declared in the invoices in respect of all the clearances during the period 01.04.2004 to 31.03.2005 are tabulated as under:-

S.No. Grade MRP No of boxes1 STANDARD 127.00 4002 STANDARD 100.00 1,26,1843 SILVER 80.00 34,3044 DD 80.00 255 DD 60.00 13,051

TOTAL 1,73,964

From the above table I find that M/s Star during the year 2004-05 have declared the grades of wall tiles as STANDARD, SILVER and DD. Out of total clearances of 1,26,584 boxes of STANDARD grade wall tiles, they had cleared 400 boxes with MRP of Rs.127/- per box and the remaining 1,26,184 boxes with MRP of Rs.100/- per box. They had declared MRPs of Silver grade as Rs.80/- per box. However, out of total clearance of 13,076 boxes of DD grade, 25 boxes of DD grade wall tiles were cleared with MRP of Rs.80/- and the remaining 13,051 boxes with MRP of Rs.60/- per box.

I further find that the quantity of wall tiles cleared under each grade and the MRPs declared in the invoices in respect of all the clearances during 01.04.2005 to 31.03.2006 are tabulated as under:-

S.No. Grade MRP No of boxes1 STANDARD 109 4002 STANDARD 100 79,5713 STANDARD 90.00 2,58,4234 SILVER 80.00 24,0035 SILVER 70.00 1,02,5686 DD 60.00 7,8557 DD 50.00 27,634

TOTAL 5,00,454

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41.4. Further I find that it is evident from the above table and the invoices issued by M/s Star that during the financial year 2005-06, they had declared three different MRPs of Rs.109/-, Rs.100/- and Rs.90/- per box for the clearances of STANDARD grade wall tiles. Similarly, they had declared two different MRPs of Rs.80/- and Rs.70/- per box for the clearances of SILVER grade and Rs.60/- and Rs.50/- for DD grade wall tiles. It is further evident that maximum quantity of STANDARD grade tiles was cleared by them by declaring MRP of Rs.90/- per box. However, 79,571 boxes were cleared as STANDARD grade by declaring MRP of Rs.100/- and 400 boxes of STANDARD grade cleared with MRP of Rs.109/- per box. Out of the total quantity of 1,26,571 boxes of SILVER grade tiles, M/s. Star had cleared 1,02,568 boxes by declaring MRP of Rs.70/- and the remaining 24,003 boxes cleared with MRP of Rs.80/- per box. They had also cleared 7,855 boxes of DD grade wall tiles by declaring MRP of Rs.60/- whereas the remaining quantity of 27,634 boxes of DD grade tiles were cleared with MRP of Rs.50/- per box.

41.5 The number of boxes of wall tiles cleared by M/s. Star under different grades and the MRPs declared in the invoices for each such grades in the financial year 2006-07 are tabulated as under:-

S.No. Grade MRP No of boxes1 STANDARD 100.00 6,1472 STANDARD 90.00 3,30,5903 SILVER 80.00 3,5474 SILVER 70.00 97,2505 GOLD/DD 60.00 2,3076 GOLD/DD 50.00 21,496

TOTAL 4,61,337

41.6 On Perusal of above table reveals that during the financial year 2006-07, M/s Star have cleared most of their tiles by declaring grades as STANDARD, SILVER and GOLD/DD with two different MRPs of Rs.100/- and Rs.90/- for STANDARD grade, Rs.80/- and Rs.70/- for SILVER grade and Rs.60/- and Rs.50/- for GOLD/DD grade of tiles per box. These MRPs were same as during the year 2005-06. 41.7 The MRPs declared in the invoices and the number of boxes of each grade cleared during the period 01.04.2007 to 28.02.2008 is tabulated as under:-

S.No. GRADE MRP No of boxes1 STANDARD 100.00 3,57,5402 SILVER 80.00 27,4073 SILVER 60.00 62,5764 GOLD/DD 60.00 7,791

TOTAL 4,55,314

41.8 From the above table I find that during the period from 01.04.07 to 28.02.2008, M/s Star have cleared their tiles by declaring grades as STANDARD, SILVER AND GOLD/DD with MRP of Rs.100/- for STANDARD grade, two different MRPs of Rs.80/- and Rs.60/- for SILVER grade and Rs.60/- for GOLD/DD grade wall tiles. These MRPs of the above grades were same as during the year 2006-07.

41.9 DGCEI searched the premises of some tile manufacturers and several dealers throughout India during the months of January and February, 2008. The dealers of M/s. Star were also searched and evidence regarding large scale undervaluation by M/s. Star was recovered. Accordingly, M/s. Star with effect from 04.03.08 increased the MRPs of tiles manufactured and cleared by them. They started declaring sizes of tiles as 8x12. They declared that the tiles of sizes 8x12 were of two different quality viz., Ordinary Wall Tiles and Luster Wall Tiles and different grades, viz., Standard, Silver and Gold/D.D. They declared same MRPs in respect of the wall tiles cleared through out the country. The MRPs declared by M/s. Star with effect from 04.03.2008 for the clearances of tiles of different quality and grades are tabulated as under:-

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S.No. SizeMRPs for different quality

Ordinary Wall Tiles Luster Wall TilesStandard SP Silver D.D. Standard SP Silver

1 8x12 140.00 110.00 50.00 160.00 120.00

41.10 Therefore, I find that from the new MRPs declared with effect from 04.03.08 after searches by DGCEI that M/s. Star was manufacturing tiles of different qualities and grades. The sale rates were depending upon the quality and grades of the tiles. However, M/s. Star were not declaring even size of the tiles what to say of different qualities and grades. They increased MRP of Standard grade tiles from Rs.100/- to as high as Rs.160/- for the tiles of Luster Wall Tiles. The MRP of cheapest Standard Ordinary tiles were increased from Rs.90/- to Rs.140/- in respect of 8x12 size tiles. The scrutiny of invoices prior to 04.03.08 and thereafter reveal that M/s. Star were evading duty of excise by way of gross undervaluation.

42.1. The premises of M/s. T. Lakshmi Kanthan & Sons, No. 37, Anna Main Road, MGR Nagar, Chennai-78 were searched on 18.01.2008 by the officers of DGCEI, Chennai Zonal Unit. During the course of search, certain records/documents were seized as recorded in the mahazar/panchanama dated 18.01.2008 drawn at the above business premises. Shri Thangavelan, Proprietor of above firm was present during panchnama proceedings. During the course of search proceedings, certain tiles as mentioned in Annexure bearing the brand names “Vrundavan, Face, Amrut (KAG), Monalisa, Akruti, Nice, Metro, Perfect” were found in stock. On being inquired about the bills of the above products, Shri Thangavelan could not produce any valid documents in support of the purchase of ceramic tiles in question. As the officers did not find bills in respect of the above goods, 243 boxes of “Monalisa” brand wall tiles along with other goods were placed under detention, with a reasonable belief that appropriate Central Excise duty has not been paid on the above goods. During the course of panchnama, Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons informed that he does trading activities of Ceramic products; that the ceramic products are floor tiles, wall tiles bearing brand name Vrundavan, Monalisa, Akruti, etc.; that all these products are manufactured in Gujarat as per details available in the cartons; that he is purchasing the ceramic tiles from M/s. Nobel Ceramics, M/s. Chennai Marketing, M/s. Ayyan Ceramics of Chennai and he has not purchased any tiles

42.2 Further I find that M/s. Star have cleared “Monalisa” brand wall tiles by declaring the MRP, much lower than the actual MRP of the said tiles and thereby not determining the appropriate assessable value and not paying appropriate Central Excise duty in contravention of the provisions of the Central Excise Act and Rules made there under, ibid. Therefore, the above said goods were liable for confiscation under Rule 25 of the Central Excise Rules, 2002 read with Section 4-A of the Central Excise Act, 1944. Thus, the aforesaid quantity of 243 boxes of “Monalisa” brand wall tiles valued at Rs.24,300/- manufactured by M/s. Star were subsequently placed under seizure under panchnama dated 14.05.2008, which were handed over to Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons under a supratnama along with other seized goods for keeping in their safe custody till further communication from the department. Subsequently, a show cause notice containing investigation in respect of the manufacture and clearance of 243 boxes of “Monalisa” brand tiles valued at Rs.24,300/- in contravention of the provisions of the Central Excise Act, 1944 and the rules made thereunder, which were seized at the premises of M/s. T. Lakshmi Kanthan & Sons, Chennai, has since been issued vide F.No.DGCEI/AZU/12(4)55/2007-08 dated 27.06.2008.

43.1 The documents and records seized from the premises of M/s. T. Lakshmi Kanthan & Sons were scrutinizedand I find that the same contain evidences indicating large scale undervaluation of ceramic tiles manufactured and removed by M/s. Star. The evidences contained in the seized records are discussed in the following paragraphs:-

43.2.1. Scrutiny of the made up file mentioned at Sr. No. 1 I find that the said file contain documents such as stock statements, ledgers account, documents under which the tiles were received by M/s. T. Lakshmi Kanthan & Sons from M/s. Noble Marketing, M/s. Chennai Marketing and M/s. Ayyan Ceramics etc. Further scrutiny of the documents, under which the tiles were received by M/s. T. Lakshmi Kanthan & Sons, revealed that the tiles have been received under manually written loose papers from M/s. Noble marketing, showing details

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such as size, product code, brand and quantity. It is further revealed that the tiles have been received under manually prepared printed estimates from M/s. Ayyan Ceramics, showing details such as size, product code, brand and quantity. It is further revealed that the tiles from M/s. Chennai Marketing have been received under manually prepared as well as computerized estimations, showing details such as brand, type of tiles, size, product code, etc. Scrutiny of these documents further revealed that only in the case of computerized estimates, rates of the tiles have been mentioned in addition to other details. In the cases of manually prepared estimates/papers/slips, rates of tiles have not been mentioned. They have received fifteen consignments of “Monalisa” brand wall tiles from M/s. Ayyan Ceramics, Chennai vide their estimations kept at page Nos. 13, 14, 15, 16, 43, 44, 46, 55, 56, 70, 72, 74, 75, 82 and 83 of the made up file. In order to easily understand the contents of such estimation, the scanned image of the “Estimation”, as mentioned herein above are reproduced herein below:-

43.2.2. Details contained in the above estimation slips pertaining to M/s. Star are summarized in the table below:-

Estimation Sr.No./File Sr.No.

Date Description Size Design No.

Quantity Total Value

861/13 22.12.07 Monalisa 12x8 1185 20 Box 4800.00861/13 22.12.07 Monalisa 12x8 1106 20 Box903/14 25.12.07 Monalisa 12x8 3056 8 Box 960.00927/15 26.12.07 Monalisa 12x8 Ivory 8 Box 960.00936/16 26.12.07 Monalisa 12x8 Ivory 13 Box

8760.00936/16 26.12.07 Monalisa 12x8 1301 20 Box936/16 26.12.07 Monalisa 12x8 1401 20 Box936/16 26.12.07 Monalisa 12x8 1138 10 Box936/16 26.12.07 Monalisa 12x8 1183 10 Box33/43 31.12.07 Monalisa 12x8 7003 25 Box --52/44 31.12.07 Monalisa 12x8 2173 33 Box --680/46 13.12.07 Monalisa 12x8 1162 50 Box --440/55 05.12.07 Monalisa 12x8 1167 30 Box --635/56 11.12.07 Monalisa 12x8 4003 15 Box --635/56 11.12.07 Monalisa 12x8 1501 15 Box --635/56 11.12.07 Monalisa 12x8 1029 15 Box --635/56 11.12.07 Monalisa 12x8 1162 3 Box --635/56 11.12.07 Monalisa 12x12 103 5 Box --635/56 11.12.07 Monalisa 12x8 5009 5 Box --861/75 22.12.07 Monalisa 12x8 1185 20 Box --861/75 22.12.07 Monalisa 12x8 1106 20 Box --903/74 25.12.07 Monalisa 12x8 3056 8 Box --

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84/70 03.01.08 Monalisa 12x8 1184 20 Box --84/70 03.01.08 Monalisa 12x8 1185 20 Box --84/70 03.01.08 Monalisa 12x8 1186 20 Box --84/70 03.01.08 Monalisa 12x8 1106 20 Box --84/70 03.01.08 Monalisa 12x8 3056 20 Box --84/70 03.01.08 Monalisa 12x8 2154 25 Box --84/70 03.01.08 Monalisa 12x8 3007 15 Box --84/70 03.01.08 Monalisa 12x8 1139 15 Box --211/72 08.01.08 Monalisa 12x8 1501 20 Box --259/82 09.01.08 Monalisa 12x8 1162 15 Box --259/82 09.01.08 Monalisa 12x8 2175 15 Box --181/83 07.01.08 Monalisa 12x8 3007 20 Box --

43.2.3.Perusal of the above record reveal that M/s. Ayyan Ceramics, Chennai have sold “Monalisa” brand having different design numbers and size of 12x8 wall tiles at the rate of Rs.120/- per box. Though, in majority of the cases, they have not shown the value of the wall tiles in their estimation slips. Scrutiny of sales invoices of M/s. Star Ceramic reveals that ten consignments of wall tiles of 12x8 size of STD grades and silver grades were sold to M/s. Ayyan Ceramics, Chennai by M/s. Star vide their invoice Nos. 320 dated 22.10.07, 571 dated 02.02.08, 595 dated 21.02.08, 598 dated 22.02.08, 601 dated 24.02.08, 616 dated 03.03.08, 625 dated 05.03.08, 639 dated 10.03.08, 661 dated 15.03.08 and 678 dated 20.03.08. In order to easily understand the system of preparing invoice, the scanned image of an invoice is reproduced below:-

43.2.4. On further scrutiny of the above invoices I find that M/s Star Ceramic have sold wall tiles having size of 12x8 and STD and SIL grade to M/s. Ayyan Ceramics at the rate of Rs.100/- and Rs.60/- respectively per box. Comparison of the MRP declared by M/s. Star while clearing the goods in their Central Excise invoices and the maximum retails price at which the same goods were sold by the dealer viz., M/s Ayyan Ceramics, Chennai to M/s. T. Lakshmi Kanthan & Sons reveals that as against the MRP of Rs.100/- per box declared by M/s. Star, 12x8 wall tiles of different designs have been sold at Rs.120/- per box. It is pertinent to note that M/s. Ayyan Ceramics, Chennai have sold the said tiles at above rates not to the ultimate consumer but to a sub dealer viz. M/s. T. Lakshmi Kanthan & Sons. It is obvious that the said tiles might have been sold even at higher rates by M/s. T. Lakshmi Kanthan & Sons to the ultimate consumer. Thus, even considering the said tiles are of STD grade, there is considerable valuation. In fact, the actual quantum of undervaluation would be more than this as the rates taken into account are of sale to the dealer, viz., M/s. T. Lakshmi Kanthan & Sons. If the profit and other expenses are included in the

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above rates, the difference will be more than the above one. The rates at which the said dealer has subsequently sold the tiles to the ultimate consumer have been discussed in the paragraphs to follow.43.2.5 Further I find that of seized note books containing information of sales details, buyer’s details etc., as mentioned at Sr. No. 2 of the panchnama dated 18.01.2008, reveals that the same contain details of date-wise sales, estimates etc. of the transactions of ceramic tiles by M/s. T. Lakshmi Kanthan & Sons for different periods. Scrutiny of Note Book mentioned at Sr. No. 2-3/3 reveals that it contains the details of purchase, sales estimates etc. of tiles covering period from 20.09.07 to 06.01.08. Scanned images of few pages are reproduced below:-

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43.2.6 Perusal of the above page I find that M/s. T. Lakshmi Kanthan & Sons, Chennai had sold 9 boxes of “Monalisa” brand tiles having design No. 2173 for Rs.1,350/- to one of their customer. In addition to above amount, the said dealer has also charged Rs.26/- towards VAT @ 2% and transportation charges from the said customer. Similarly, they had further sold 12x8 size “Monalisa” brand wall tiles having design No.3007 – 7 boxes and design No.2154 – 17 boxes at the rate of Rs.150/- per box on 02.01.08 to another customer. In this case too, the said dealer has charged Rs.60/- towards vat and Rs.200/- towards transportation charges from the customer.

43.2.7. Details contained in the above note book pages are summarized in the table below:-

Date Brand Design No.

No of Boxes Value RST TC Total Rate Per

Box11.12.07 Monalisa 1162 26 3770 75 122 3967 152.5802.01.0

8 Monalisa 3007 7 105036 175 3811 158.7902.01.0

8 Monalisa 2154 17 2550

05.01.08 Monalisa 2173 9 1350 26 50 1426 158.45

From the above table, it is evident that M/s. T. Lakshmi Kanthan & Sons have sold the tiles of ‘Monalisa’ brand at Rs.152.58 to Rs.158.79 per box depending on the quality of wall tiles indicated by the design number as against the MRP of Rs.100/- per box declared by M/s. Star in their Central Excise invoices.

43.2.8. Further I find that Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons in his statement dated 18.01.2008 stated that they purchase ceramic tiles of various brands from M/s. Nobel Ceramics, M/s. Chennai Marketing and M/s. Ayyan Ceramics, Chennai. Scrutiny of sales invoices of M/s. Star Ceramic reveal that out of the above three dealers, M/s. Star Ceramic have sold the goods to M/s. Ayyan Ceramics, Chennai. M/s. Star Ceramic have sold the tiles of 12x8 size of different grades to M/s. Ayyan Ceramics, Chennai vide their different invoices, as mentioned in the foregoing para No.3.2.2.3.

43.2.9. On further Scrutiny of the above invoices I find that the manufacturer has sold the tiles of 12x8 size of STD and SIL grade to M/s. Ayyan Ceramics showing MRP of Rs.100 and Rs.60/- per box respectively. Comparison of the MRP declared by the manufacturer in their Central Excise invoices and the maximum retail price at which the same goods were being sold to the ultimate consumers reveal that there is huge difference in both the prices. As against MRP of Rs.60/- to Rs.100/- shown in the manufacturer’s invoice, goods have been sold at the rate of Rs.152/- to Rs.159/- per box. Thus, even considering the highest MRP declared for STD Grade, there is undervaluation to the tune of Rs.59/- per box.

43.2.10.Further I find that the aforesaid evidences established that the tiles manufactured and cleared by M/s. Star Ceramic were actually attracting a much higher MRP than the MRP declared by them in their Central Excise invoices. M/s. Ayyan Ceramics, Chennai, a dealer, was selling the tiles, manufactured by M/s. Star Ceramic at a price much more than the MRP, declared by the manufacturer. Subsequently, M/s. T. Lakshmi Kanthan & Sons, a sub-dealer, has sold the tiles to the ultimate consumers, even at higher rates, which should be the actual price to be considered as MRP, for the purpose of assessment and charging to Central Excise duty by M/s. Star, at the time of removal from the factory.

44.1 Furtherf I find from the statement of Shri Thangavelan, Proprietor of M/s. T. Lakshmi Kanthan & Sons was recorded on 18.01.2008, under Section 14 of the Central Excise Act, 1944, wherein he stated that M/s. T. Lakshmi Kanthan & Sons was started around Jan 2005; that they are basically traders; that initially they were trading building materials like cement and sand; that then they started trading in ceramics; that presently they are dealing with ceramics only; that they purchase ceramic tiles of the brands Vrundavan, Face, Amrut (KAG), Monalisa, Akruti, Nice, Metro, Perfect from M/s. Nobel Ceramics, M/s. Chennai Marketing, M/s. Ayyan Ceramics, Chennai; that they have never purchased ceramics directly from Gujarat; that normally they never stock ceramics received from the above marketing companies; that they sell the ceramic tiles as soon as they receive; that they normally purchase based on the market requirement; that the goods are sold immediately; and that however, sometimes they do maintain stock.

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44.2 Further I find that during ther statement he was shown page No. 8, 9, 10, 47, 50, 51, 52, 53, 59, 63, 78, 79, 85 of made up file mentioned at Sr. No. 1 recovered under panchnama dated 18.01.2008. On perusal of the same he stated that page No. 8, 9, 10, 47, 50, 51, 52, 53, 59, 63, 78, 79 represent the tiles received from Nobel Ceramics. He further explained that for example in page No. 8 is a sheet of paper wherein, it is mentioned 16X16 VRU 4704-25 box, 16X16 5401-3 box total (28 box); that these documents were issued by M/s. Nobel Ceramics and they do not provide any invoice for the said documents; that M/s. Nobel Ceramics bring the goods under these documents and they have not received any invoice in respect of the above documents (i.e. page No. 8, 9, 10, 47, 50, 51, 52, 53, 59, 63, 78, 79); that they have also sold the same without any documents; that page No. 85 is the counterfoil of bank cheque book wherein the details of cheques issued to various persons are available; that here also they have issued cheques to M/s. Nobel Ceramics; that they have issued the cheques without filling the payee name as requested by M/s. Nobel Ceramics; that they have bank account (current account) in Indian Bank, MGR Nagar, Chennai and the account No. is 421578711.

43.3. Further he was also shown page Nos. 11, 12, 29, 30, 31, 32, 33, 34, 36, 37, 38, 39, 40, 41, 60, 61, 62, 64, 65, 66, 67, 68, 69, 71, 73, 76, 77, 80, 81 of made up file mentioned at Sr. No. 1 recovered under panchnama dated 18.01.2008. On perusal of the same he stated that page No. 11, 12, 29, 30, 31, 32, 33, 34, 36, 37, 38, 39, 40, 41, 60, 61, 62, 64, 65, 66, 67, 68, 69, 71, 73, 76, 77, 80, 81 represent the details of tiles received from Chennai Marketing (Near MMDA); that these documents were issued by M/s. Chennai marketing and they do not provide any invoice for the said documents. He further explained that for example page No. 11 contains Credit and Debit transactions with them; that the credit in the said entry namely Rs.7000/-, Rs.8000/-, Rs.7000/- totaling Rs.22000/- relates to the amount given to them for the purchase of ceramics made from them; that the credit entries relate to the purchase value; that the pages 11, 12, 29, 30, 31, 32, 33, 34, 36, 37, 38, 39, 40, 41, 60, 61, 62, 64, 65, 66, 67, 68, 69, 71, 73, 76, 77, 80, 81 all are of the same nature of transactions; that no supporting invoices are available for the above; that all the payments to M/s. Chennai marketing are settled through cash transactions.

43.4. Further he was also shown page Nos. 13, 14, 15, 16, 17 of made up file mentioned at Sr. No. 1 recovered under panchnama dated 18.01.2008. After perusal of the same, he stated that page No. 13, 14, 15, 16, 17, all are documents pertaining to the tiles received from M/s. Ayyan Ceramics, Madipakkam, Chennai. He further explained that for example page 14 contains a paper showing 8 boxes of ‘Monalisa’ brand tiles; that these documents were issued by M/s. Ayyan Ceramics and they do not provide any invoice for the said documents; that all the payments to M/s. Ayyan Ceramics are settled through cash transactions.

43.5 Therfore, I find that the aforesaid facts and evidences conclusively establish that M/s. Star was not mentioning the correct MRP of the tiles in their Central Excise invoices. Both the MRP as well as ex-factory prices were manipulated by them by declaring price in the invoices which was lower than the actual price of the tiles. This has been intentionally done in order to evade the payment of duty of excise, which is assessed on the basis of MRP declared in the invoices.

43.6 I further find that comparison of the MRP declared by the manufacturer in their Central Excise invoices and the price at which M/s. T. Lakshmi Kanthan & Sons have sold the goods to the ultimate consumer appears to reveal that there is huge difference in the price. The dealer has sold the tiles in the range of Rs.152/- to 159/-, as against the MRP of Rs.60/- to Rs.100/-, declared by the manufacturer. Thus, considering the highest MRP, I find that there is undervaluation to the tune of Rs.59/- per box.

43.7. Therefore, I find that the aforesaid evidences appear to conclusively establish that M/s. Star have manufactured and removed excisable goods, viz. ceramic glazed tiles by declaring MRP in their Central Excise invoices which was much lower than the actual MRP and consequently not discharging appropriate duty. While issuing their sale bills, M/s. T. Lakshmi Kanthan & Sons were artificially working out the selling price with a view to match the various cost factors which are recorded in the books of accounts. M/s. T. Lakshmi Kanthan & Sons were collecting differential amounts over and above the bill value in cash, and after spending part of such cash amounts towards various unaccounted expenses, they were sending such cash amounts to M/s. Ayyan Ceramics and subsequently to M/s. Star towards the value of tiles, over and above, the value declared in the Central Excise invoices.

44.1. Further I find that, the officers of Central Excise & Customs Commissionerate, Tiruvananthpuram searched the premises of M/s. N.K.Trading Co., Near Manalil Siva Temple, Mamootikadavu Road, Manalil, Kollam under Mahazar (panchnama) dated 17.01.2008 in the

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presence of Shri M. P. V. Noble, General Manager of the firm. Shri Noble informed during the panchnama that the records of the previous years were under the safe custody of Shri V. Satheesan, Managing Partner of the firm who was out for the funeral of the Grand Mother of his wife. The documents required for further investigation were seized under the Mahazar. During the search, the tiles of one other manufacturer were seized having discrepancies with the covering documents. During the search in another adjacent go-down, Shri Satheesan also reached and enabled the officers to obtain the other records also. The records resumed from the said premises are enlisted in Annexure-I of the panchnama.

44.2. Further during the search, the personal computer of Shri Noble was accessed and it was found that Shri Noble was maintaining separate accounts for each manufacturer of Ceramic tiles showing details of cheques and cash payments made to them. Print outs of the ledgers of some of them could be obtained. Several other files were found in computer of Shri Noble based on SOWARE software and the same could not be opened as the contract with the software company had expired and the access was denied. Hence, the hard disc of Seagate brand bearing Sr. No. 5JVEE7KL of the said computer was seized under the reasonable belief that the same would be useful for further investigation.

44.3 Further a statement dated 17.01.2008 of Shri M. P. V. Noble, S/o. Late Mr. M.P. Verghese, General Manager of M/s. N.K. Trading Co. was recorded under Section 14 of the Central Excise Act, 1944 wherein he, inter-alia stated that he had joined the firm on 15.07.2001 as Marketing/ General Manager; that his role was to look after the day to day affairs of the firm which included purchase and sales of Ceramic/vitrified tiles and sanitary ware by the firm; and that they were purchasing tiles mainly from the manufacturers located at Morbi and Himmatnagar in Gujarat. He gave the names of such manufacturers of Gujarat as under:-

(ix) M/s Ajanta Manufacturing Co. Ltd.(x) M/s Angel Ceramics Pvt. Ltd.(xi) M/s Famous Ceramic Industries(xii) M/s Italica Floor Tiles Ltd.(xiii) M/s Sakar Glazed Tiles Pvt. Ltd.(xiv) M/s Sterling Glazed Tiles(xv) M/s Sunbeam Ceramics Pvt. Ltd.(xvi) M/s Star Ceramic.

44.4. Further I find that , he has stated that he was not purchasing tiles from any of the dealers and all are purchased from manufacturers only; that they were placing the orders directly to the manufacturers and the goods were delivered by the transporters under the cover of excisable invoices, coastal cargo bills and bills of entry for consumption, transport documents, etc.; that except M/s. Ajanta Manufacturing Ltd., all the other manufacturers were being paid in cheques as well as in cash; that the cash payments were made to the manufacturers as per their directions through various banks and in specified accounts communicated to them over SMS from time to time; that different account Nos. are communicated at different occasions by these manufacturers; that some of the manufacturers supplied excess quantity and the payments there against were made in cash through various banks such as ICICI, HDFC, UTI.

44.3. Further I find that in reply to produce the details of cash payments to various manufacturers in last five years, he has stated that he did not maintain full and complete transaction details but consequent to some disputes raised by some manufacturers, he maintained details of some transactions in computer system with regard to some of the parties; that hard copy of the same was obtained from the system and was submitted by him; that in such transactions, the practice followed by him was that on receipt of the instructions from the manufacturers, required amounts were mobilized/ withdrawn from their accounts of Punjab National Bank and then remitted to the referred accounts of the manufacturers; that the details of payments and accounts of recipients were neither maintained nor he was able to recall the same; that some of the counterfoils received from the banks were kept in the office premises; that such counterfoils more than one year old were soiled due to repair and maintenance of building.

44.4. He was shown a file named DD file wherein counter foils of HDFC, ICICI, UTI, etc. Banks are kept wherein huge amounts were remitted in the name of certain firms such as M/s Shree Bhagwati Enterprises, M/s Shri Maruti Enterprises, M/s Shreeji Enterprises etc. He was asked to explain about the same as they were not having any official transactions of purchase and sales with these firms. Shri Noble admitted that the cash payments in the accounts of such firms were the unaccounted payments for excess supply of tiles manufactured and supplied to them and he was unaware of the seriousness involved from the point of view of Central Excise law.

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45.1. I further find that in furtherance of invesatigation further statement dated 21.01.2008 of Shri M. P. V. Noble, S/o. Late Mr. M.P. Verghese, General Manager of M/s. N.K. Trading Co. was recorded under Section 14 of the Central Excise Act, 1944. He was shown a chart prepared on the basis of pay-in-slips recovered during the searches on 17.1.2008. The said chart shows details of payments made by way of cash in various Bank accounts maintained in ICICI bank consisting of 129 entries and was asked to explain the transactions involved. In this regard, he stated that these transactions represented the cash settlement for the purchase of vitrified/ceramic tiles from various manufacturers at Morbi/Ahmedabad; that these payments are made in cash on receipt of instructions from various manufacturers; that the cash payments are made through ICICI, Kollam to various accounts of interest of the tile manufacturers; that M/s Shree Maruti Enterprises, M/s Shree Bhagwati Enterprises, M/s. Shreeji Enterprises, M/s. Sagar Enterprises, Shree Bharath Enterprises, M/s. Shiv Finance, M/s. Ganesh Agencies, M/s. J.B. Enterprises, M/s. Panchwati Enterprises etc. are such accounts which were told to them by different tile manufacturers; that through these accounts excess payments are made; that entries at Sr. No. 6 and 102 are the payments made to his best friends for their personal help. On being asked a SMS found in the mobile phone of Mr. Satheesan, he stated that the said SMS relates to M/s. Delta Ceramics from whom they had not made any purchase.

45.2. Further I find that, on being futher asked about the information available in the hard disc. seized on 17.01.2008, he stated that the same contained day to day affairs, sales information, payments made to the suppliers and all kinds of financial dealings and analysis; that these accounts are maintained in a software named SOWARE; that there is no code or pass word but to open the package in the menu, the word “SUPER” is to be entered. On being asked the account Nos. held by M/s. N.K.Trading Co., its partners and the Managing Partner, he stated the account No. CC-434400870300180 for M/s. N.K. Trading Co. and 3090 with Punjab National Bank for Shri Satheesan, Managing Partner.

45.3 Further statement dated 17.01.2008 of Shri V. Satheesan, Partner of M/s N.K.Trading Co. was recorded under Section 14 of the Central Excise Act, 1944 wherein he, inter-alia, stated that he started the firm in 1996 with his wife as the other partner; that initially they were trading in Paints and later they started dealing in Ceramic Floor and Wall tiles; that he was looking after the day to day affairs of the company with the assistance of Shri Noble, General Manager; that they were purchasing tiles generally from various manufacturers of tiles in Gujarat and preferably in Morbi; that they were normally placing orders through telephone and on receipt of the material, they were making payments to the suppliers; that normally, they were making payments through bank by DD drawn in the favour of manufacturers; that sometimes they were receiving directions from the manufacturers to deposit cash in their A/c through various banks like ICICI, UTI, HDFC etc. On being asked as to how they were placing orders and how the goods were received at their premises, he stated that normally, the General Manager was taking care of the above activities; that the goods were received in sealed containers under the cover of excisable invoices, coastal bill of entry/shipping bill, transport documents etc; that the payments were normally made through DD; that sometimes, they were receiving directions to deposit cash in the A/c. No. given by the tile manufacturers with various banks. On being asked about the cash payment modalities, he stated that normally 80 to 85 % of the quantity received were shown in the invoices; that in other words full quantity was not being shown in the invoices; that the value of the excess quantity received by them was sent in cash by depositing in the specified accounts communicated to them through SMS from time to time; that the value of the quantity shown in the invoices was sent through DD and the value of the quantity received in excess was sent by cash deposits in the specified accounts with ICICI, HDFC and UTI banks.

45.4 Further I find that on being asked about the details of cash payments made to various manufacturers during last five years, he stated that the full details of cash payments were not readily available as they were not maintaining the A/c. of cash transactions; that however, as a result of some dispute, the details of cash payments were being prepared in the computer by their General Manager in respect of payments made on behalf of M/s. Sterling Glazed Tiles, M/s Omega Ceramics etc.; that the print outs of the details taken from computer were handed over by him; that he was reiterating that as per the instructions from the manufacturers, amounts were being drawn from their account with Punjab National Bank and were remitted to the accounts communicated by the supplier; that however, the details of such cash deposits for one year were not maintained by him; that the counter foils of such cash deposits were kept in their office premises; that the counter foils more than one year old got soiled during the painting of the building and are not readily available.

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45.5 Further I find that on being asked as to whether any excess quantity was noticed in the cases of receipt of goods in containers, he stated that some of the containers carried excess quantity; that the value of this excess quantity is paid through cash in the specified accounts given to them.

45.6 Further I find that from the seized file No.10 which was shown to him, which contained counter foils of cash deposits in different banks like HDFC, UTI, ICICI etc. showing huge transactions. On being asked to explain, he stated that the amounts were deposited in the above bank accounts on the directions from the manufacturers; that the value of excess quantity was deposited in to the account number given by the manufacturer. He was asked that he had connived with the manufacturers in evading the Central Excise duty and suppressed the facts of receipt of the quantity more than the quantity shown in the invoices. In this regard, he stated that he has been a less educated person and was not aware of the seriousness of evasion of Central Excise duty and related law and requested to pardon for the lapse if any, on his part.

45.6. Further on scrutiny of the counter foils contained in the seized file No. 10 I find that there are several pay-in-slips showing payments made by M/s N.K.Trading Co. through cheques in the accounts of the manufacturers of tiles towards the amounts shown in the invoices. There are several pay-in-slips showing cash deposits in the accounts of different firms managed by the shroffs. In some of the cash deposit pay-in-slips, the names of the tile manufacturers on whose behalf the cash amounts have been deposited are mentioned. The cash amounts have been deposited in the accounts of firms namely M/s. Shreeji Enterprises, M/s. Sagar Enterprises, M/s. Shree Maruti Enterprises, M/s. Ganesh Agency, M/s. Shiv Enterprise, M/s. Shree Bhagwati Enterprise, M/s. Shiv Finance, M/s. J.B. Enterprise and M/s. Shree Bharat Enterprise. On the basis of the aforesaid pay-in- slips, a chart in the form of ANNEXURE A - has been prepared showing payments made through cheques as well as payments made in cash in different accounts. In respect of cash deposit pay-in-slips, the name of the tile manufacturer has been mentioned in the said Annexure on the basis of entries available on such pay-in-slip. However, the said column has been kept blank in respect of those pay-in-slips where the name of tile manufacturer is not mentioned. The said chart arranged manufacturer-wise is enclosed as Annexure - A to this show cause notice.

45.7 Further on scrutiny of aforesaid chart I find that M/s. N.K.Trading Co. has deposited an amount of Rs. 19 Lakhs in cash on behalf of M/s. Star Ceramic using the bank accounts of the firms namely M/s. Shree Maruti Enterprises, M/s. Ganesh Agency, M/s. Shree Bhagwati Enterprise, M/s. Sagar Enterprise and M/s. Shiv Enterprises as under:-

Sr.No. Date Name of

Bank Account No. Name of Account holder

Amount (in Rs.)





5 10.07.06 ICICI 624805010644 Sagar Enterprise 100000



8 09.08.06 ICICI 624805010772 Shiv Finance 1000009 19.10.06 ICICI 624805010772 Shiv Finance 100000

10 06.11.06 ICICI 624805010772 Shiv Finance 10000011 23.11.06 ICICI 624805010772 Shiv Finance 10000012 28.11.06 ICICI 624805010772 Shiv Finance 10000013 09.12.06 ICICI 624805010772 Shiv Finance 10000014 16.12.06 ICICI 624805010772 Shiv Finance 10000015 23.01.07 ICICI 015305005479 Ganesh Agency 20000016 01.02.07 ICICI 624805010772 Shiv Finance 100000



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TOTAL 1900000

45.8. Therefore, I find that all the aforesaid accounts are with the ICICI bank and used mainly to transfer the cash. These accounts are managed by Shroffs, who are subsequently remitting the amount in cash to the manufacturers on consideration of commissions. The eighteen pay-in-slips where under the aforesaid amounts have been deposited by M/s. N.K.Trading Co. in the accounts of the aforesaid firms are bearing the endorsements of the name of M/s Star. M/s. N.K.Trading Company is not having direct purchase or sale with the aforesaid firms. Shri Noble and Shri Satheesan, in their respective statements have confirmed that they were being informed by the tile manufacturers through SMS, the name and account numbers of the firms in whose accounts the cash was to be deposited. From the chart, it is evident that the cheques were got deposited directly in the bank accounts of M/s. Star Ceramic. However, for transferring the amounts, over and above the invoice value, the amounts were deposited in cash in the aforesaid bank accounts and such cash amounts were subsequently transferred to M/s. Star Ceramic by the shroffs who operated said bank accounts.

45.9. Further on scrutiny of aforesaid Annexure-A I find that M/s N.K.Trading Company deposited cheques worth Rs.3,19,64,814/- in the accounts of different tile manufacturers and cash of Rs.1,62,74,814/- in the accounts of different fictitious firms. In respect of 27 cash deposit slips at page Nos. 69, 160, 168, 196, 201, 241, 255, 259, 272, 285, 309, 313, 338, 343, 361, 367, 369, 400, 402, 423, 451, 455, 460, 472, 477, 492 and 504 of the file No.10, the name of the tile manufacturer on whose accounts, the cash was deposited is not mentioned. An amount of Rs.36,24,814/- has been deposited in cash on the basis of such 27 pay-in-slips. It is quite possible that some of these 27 pay-in-slips may be belonging to M/s Star Ceramic.

46.1. Further on scrutiny of the invoices of M/s. Star available in seized box file for the year 2005-06 of the panchnama I find that, M/s. Star have cleared 30,800 boxes of wall tiles of Standard grade with MRP of Rs.90/- per box to M/s. N.K. Trading Co., Kollam during the year 2005-06. However, out of the total clearances of 56,600 boxes of wall tiles during the year 2006-07, they have cleared 53,700 boxes of tiles to M/s. N.K. Trading Co., Kollam by declaring MRP of Rs.90/- and the remaining quantity of 2,900 boxes with MRP of Rs.100/- per box. In the year 2007-08, they have cleared two consignments of wall tiles of 5,500 boxes with MRP of Rs.100/- per box to M/s. N.K. Trading Co., Kollam.

47.1. Further the officers of DGCEI, in presence of two independent witnesses opened the hard disk seized from M/s N.K.Trading Company under panchnama dated 12.5.2008. The data contained in the said hard disk was printed out and filed in a folder containing page Nos.1 to 155. The data contained in the seized hard disk is having several evidences regarding undervaluation of tiles manufactured by different tile manufacturers of Gujarat including M/s Star Ceramic. The evidences in respect of M/s Star Ceramic are discussed in following paras.

47.2. Further I find that page 78 is a letter dated 04.11.2006 addressed to the Managing Director, The Quilon Hotels & Resorts Pvt. Ltd., Kollam, quoting price @ Rs.12/- per Sq. feet piece for wall tiles having “Monalisa Brand” manufactured by M/s Star Ceramic. As one box contains 15 pieces, the price quoted works out to Rs.120/- per box.

47.3. Further I find that Page No.93 of the said folder is a pricelist in respect of Monalisa white body wall tiles manufactured by M/s Star Ceramic. The rates are quoted per piece as well as per box depending upon terms of payment, viz. credit rate, cheque rate and cash rate. On the basis of per piece rates in terms of credit, cheque and cash, the MRP works out to Rs.130.95, Rs. 127.05 and Rs.124.95 per box for Plain & Print colour tiles and Rs.145.95, Rs.142.05 and Rs.139.95 for Black colour tiles respectively. Page No.89 is a pricelist of Monalisa white body wall tiles manufactured by M/s Star Ceramic. The rates for Plain & Print, Black, ORD, SPL and SSPL Colour tiles for size 12”x8” and 8”x8” are given in the said pricelist depending upon terms of payment viz. credit rate, current date cheque rate and cash rate. It is evident from the said pricelist that current date cheque rate for 12”x8” size of tiles were Rs.127/- and Rs.142/- per box in respect of Plain & Print and Black colour tiles. Similarly, current date cheque rates for tiles of size 8”x8” for ORD, SPL and SSPL colour tiles were Rs.168/-, Rs.204/- and Rs.244/- per box, respectively. The cash payment rates for tiles of size 12”x8” were Rs.125/- and Rs.140/- per box for the tiles of Plain & Print and Black colour tiles. The cash payment rates for tiles of size 8”x8” were Rs.160/-, Rs.196/- and Rs.236/- per box for ORD, SPL and SSPL colour of tiles.

47.4. Further I find that Page Nos.22 and 2 of said folder are a pricelists in respect of Monalisa brand tiles manufactured by M/s Star Ceramic. The rates are given in per piece for Print & Plain, Special Print and Black colour tiles of size 12”x 8” on the basis of terms of

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payment viz. cheque and cash. As one box of tiles of M/s Star Ceramic contains 15 pieces of tiles, the rate per box works out as under:-

S.No. Type of tiles Rate per box (Rs.)Cheque

1 Plain/Print 132.002 Special Print 135.753 Black 147.00

It is evident from the aforesaid pricelist that even on cash payment basis, the MRP of tiles manufactured by M/s Star Ceramic was Rs.123.75, Rs.127.50 and Rs.138.75 for tiles of Print/Plain, Special Print and Black colour tiles respectively.

47.5. Further on scrutiny of invoices of M/s Star Ceramic I find that they were clearing tiles of size 12”x8” by declaring description of tiles as STD at the MRP of Rs.90/- during the year 2006-07 and STD tiles @ Rs.100/- per box for 2007-08. The pricelist available at page No.89 makes it abundantly clear that M/s N.K. Trading Co. were showing sale rates of tiles of size 8”x8” as Rs.160/-, Rs.196/- and Rs.236/- per box as against cash payment basis in respect of ORD, SPL and SSPL Colour of tiles, respectively. Thus M/s Star Ceramic were declaring less than 50% of actual MRP in their invoices. The lower MRP was being declared with clear intent to evade duty of excise by way of gross undervaluation.

47.6. Further I find that Page Nos.12, 13 and 14 of the file containing printouts taken from the seized hard disc contain the details such as Order date, Invoice No., Suppliers Name, Invoice Amount, Discount Amount, Tax Amount etc. Similarly, page Nos. 15, 16 and 17 contain the details like Order No., Invoice No., Invoice Date, Suppliers Name, Invoice Amount, Discount Amount and Tax Amount in respect of the suppliers of M/s. N.K. Trading Co., Kollam. The details related to M/s. Star have been extracted from the said pages 12 to 17 and reproduced as under:-

Extract of page Nos.12 to 17 of Printouts from Hard Disk of M/s. N.K. Trading Co., Kollam in respect of M/s. Star Ceramic, Morbi.ORDER INV.

NO.INV. DATE

SUPPLIER NAME INV. AMOUNT

DISC. AMOUNT

Page Nos.12, 13 and 14 of Printouts

136 0206 08.11.07 STAR CERAMIC 1.68.264.00 0102 0183 13.07.07 STAR CERAMICS 1.68.624.00 0

TOTAL 3,36,888.00Page Nos.15, 16 and 17 of Printouts

135 0206 27.07.07 STAR CERAMIC 2.12.380.50 0101 0183 13.07.07 STAR CERAMIC 2,14,590.00 0

TOTAL 4,26,970.50

47.7. Further on verification of Central Excise invoices issued by M/s. Star I find that the correct date of issue of invoice Nos.0183 and 0206 is 27.06.07 and 27.07.07 and not 13.07.07 and 08.11.07 respectively, as mentioned herein above. However, the amounts shown in the printouts available at page Nos.12, 13 and 14 exactly match with the amount shown on the invoices. The scrutiny of above table reveals that the amount shown on the computer printouts available at page Nos.15, 16 and 17 are much more than the amounts shown on the printouts at page Nos.12, 13 and 14 as well as those shown on the invoices. As an example, the amount against invoice No.0206 dated 27.07.07 appearing on page No.12 is Rs.1,68,264/- while the amount shown against said invoice at page No.15 is Rs.2,12,380.50. It thus appears that M/s. N.K. Trading Co. in the said computer maintained two types of details. Page Nos.12 to 14 contained the price at which invoices were issued by M/s. Star and the amounts which M/s. N.K. Trading Co. were required to pay through cheques. However, the printouts at page Nos.15 to 17 contain the total value of the tiles supplied by M/s. Star against each invoice. It is evident from the above table that the invoice value shown for two invoices at page Nos.12 and 13 is Rs. 3,36,888/- while actual value of tiles shown against the same two invoices in the printouts available at page Nos.15 to 17 is Rs.4,26,970.50. It is thus evident that M/s. Star in aforesaid two invoices declared sale value of Rs.3,36,888/- while actually they charged an amount of Rs.4,26,970.50 from M/s. N.K. Trading Co., Kollam. The amount of Rs.3,36,888/- was paid by M/s. N.K. Trading Co. through cheques while balance amount of Rs.90,082.50 was paid by them in cash through the ICICI

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bank account of M/S.Shree Maruti Enterprise,M/S.Shree Bhagvati Enterprise,M/S.Ganesh Agency,M/S.Shiv Fianance or M/S.Sagar Enterprise.

47.8. Further I find that the data contained in the hard disc thus reveals that against actual sale price of Rs. 4,26,970.50 for above two consignments, M/s. Star declared sale value of only Rs.3,36,888/- on their Central Excise invoices. This amount mentioned on the invoices was collected through cheques and reflected in the books of accounts. The balance amount of Rs. 90,082.50 was unaccounted portion of sale proceeds and was collected by M/s. Star through the ICICI Bank account of the above mentioned shroffs.

48.1. Further I find that the business premises of M/s. Amit Ceramics, Gaekawadmala. Nashik Road, Nashik was searched by the officers of DGCEI, Regional Unit, Vapi and Central Excise Commissionerate, Nashik on 22.12.2008. During the course of such search, incriminating records/documents which were found relevant for further investigations, as mentioned in Annexure – A to the panchnama dated 22.12.2008, were placed under seizure.

48.2. further I find that a statement of Shri Bumtaria Pravin Panchabhai, Proprietor of M/s. Amit Ceramics, Nashik was recorded under Section 14 of the Central Excise Act, 1944 by the Superintendent, DGCEI, Regional Unit, Vapi on 22.12.2008 wherein he inter alia stated that he is the proprietor of M/s. Amit Ceramics, Nashik, which is engaged in the trading of Ceramic tiles and Sanitarywares since 1998; that he looked after all the day to day work of his firm such as purchase, sales, marketing, accounts and overall supervision of his firm; that his firm is engaged in the trading business of Ceramic tiles and Sanitarywares manufactured by different manufacturers of Morbi, Gujarat.

48.3. His further statement was recorded in question-answer form. The questions asked and answers given by him are reproduced as under:-

Que.1: Give the names of manufacturers of ceramic tiles, from whom you purchase the tiles.

Ans.1: I purchase the ceramic tiles from the following manufacturers:-

Sr.No.

Name of the manufacturer Description & size of tiles purchased

(i) M/s. Suncity Ceramics, Trajpal, Morbi 16”x16” [Floor](ii) M/S.StarCeramics, Morbi 12”x8”, 10”x13” [Wall](iii) M/s. Real Ceramics Pvt. Ltd., Morbi 12”x12”and 16”x16” [Floor Tiles](iv) M/s. Ideal Cera Products, Morbi 12”x8” [Floor](v) M/s. Vraj Oreva Marketing, Nashik 2”x2” [Wall Tiles](vi) M/s. Hilti Ceratech Pvt. Ltd., Wankaner 12”x8”, 10”x13” Wall(vii) M/s. Leo Ceramics, Morbi 12”x8” Wall(viii) M/s. Hirani Ceramic, Wankaner 12”x8” Wall(ix) M/s. Star Ceramic, Wankaner 12”x8” Wall(x) M/s. Sacmi Ceramic Pvt. Ltd. 12”x8” Wall

In addition to above manufacturers, sometimes, we also purchase the tiles from local dealers and through agent of the manufacturers also.

Que.2: Who are the buyers of the tiles sold by you?Ans.2: Almost all the tiles purchased by us from the aforesaid

manufacturers were sold to retail buyers, ultimate customers and builders of Nashik and surrounding area.

Que.3: How do you place the orders?Ans.3: Normally, we place the orders over telephone. We place the

orders for specific colour/design of the tiles to the Directors/Partners/Representatives of the manufacturers.

Que.4: Which grade tiles do you purchase?Ans.4: We have mostly purchased Ist and IInd grade tiles. However,

in some cases, we purchased IIIrd grade tiles also.

Que.5: Which documents did you receive along with the tiles?

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Ans.5: At the time of receipt of the tiles, we normally received the Central Excise invoices. In the invoices, the manufacturers were showing general description of the tiles alongwith the grade & Quantity in boxes. At the time of receipt of tiles, we compare the physical quantity of the tiles with that of mentioned in the invoices.

Que.6: Who arranged the transportation of the tiles from Morbi to Nashik? Who was paying the freight charges and who borne the same?

Ans.6: Normally, the transportation of the goods from the factory premises to our premises was arranged by us and we have utilized different transporters for transportation of the tiles from Morbi to Nashik. The freight charges from Morbi to our premises were paid and borne by us.

Que.7: What were the freight charges for transporting the tiles from Morbi to Nashik?

Ans.7: The freight charges for transporting the tiles from Morbi to Nashik were different for different size tiles. The freight charges were Rs.800/- to Rs.900/- per MT of tiles.

Que.8: Do you have any price lists of tiles of past period?Ans.8: We do not have the price lists of the tiles for the past period.Que.9: How did you work out the selling price of different type of tiles?Ans.9: Our sale prices were worked out according to purchase prices

shown in the invoices issued by the respective manufacturers. We add the cost of transportation and loading/unloading charges from Morbi to Nashik and profit margin + VAT @ 12.5% on the bill value. Our profit margin varies from Rs.10/- to Rs.20/- per box for wall/floor tiles and Rs.1.50 to Rs.2/- per Sq. feet for vitrified tiles, depending upon the customer, terms of payment, quantity required and demand of the product.

Que.10: What were the MRPs declared by different manufacturers? What were selling price of the tiles sold by you?

Ans.10: Earlier, prior to February/March 2008, the manufacturers were not showing the actual MRP and price of the tiles in the Central Excise invoices. The MRP and sale price shown in the invoices was lower than actual MRP and price of the tiles. The differential amount, over and above invoice value, was collected by the manufacturers in cash from us. We were preparing the invoices according to the price shown by the manufacturers by adding freight, VAT and our profit margin etc. In some cases, we were preparing our sales bill so as to remain the price of the tiles below MRP, declared by the manufacturers. However, generally we were preparing the invoices showing actual sale price of the tiles. In the cases, where we have prepared invoice to remain the sales price in line with the MRP, we were collecting amounts, over and above invoice value from the customers. The amount shown in the invoices were accounted for in our books of accounts whereas the amounts collected, over and above the invoice value, were not accounted for in our books of accounts. The unaccounted amounts collected from the buyers were used for

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cash payment to the manufacturers, over and above invoice value.

Que.11: How are you paying such cash, over and above invoice value to the manufacturers?

Ans.11: Generally, we are paying cash, over and above invoice value, to the manufacturers through Angadia viz. Ashok Kantilal Patel, having their office near Panchvati Karanja, Opposite Dave Sweets, Nashik. We do hand over cash personally to the representative of the manufacturers at the time of our visit to Morbi.

Que.12: You have been shown the panchnama dated 22.12.2008 drawn at the premises of M/s. Amit Ceramic, Gaikawad Mala, Nashik Road and a diary marked A/19 seized vide the said panchnama. Please peruse the same and explain the reasons for showing such huge amounts in the said Diary?

Ans.11: I have perused the panchnama dated 22.12.2008 drawn at our premises M/s. Amit Ceramic, Gaikawad Mala, Nashik Road, Nashik and a diary marked A/19 seized vide the said panchnama. I have perused the same and have put my dated signature on same. This diary contains the following details:-

Sr.No.

Page Number of

Diary


through AngadiaAmount Name of the Party to whom the

amount paid

1 7 07.04.2007 100000 “Monalisa” Ceramics2 7 07.04.2007 50000 Monalisa (Star Ceramic)3 16 16.04.2007 100000 Real Ceramics4 26 267.04.2007 100000 “Monalisa” Ceramics5 27 27.04.2007 100000 “Monalisa” Ceramics6 29 29.04.2007 50000 Star Ceramic7 42 12.05.2007 100000 Suncity Ceramics8 48 18.05.2007 100000 “Monalisa” Ceramics9 53 23.05.2007 100000 Galaxy Senetary Works10 53 23.05.2007 100000 Suncity Ceramics11 56 26.05.2007 100000 “Monalisa” Ceramics12 62 01.06.2007 100000 Suncity Ceramics13 65 04.06.2007 50000 Star Ceramic14 69 08.06.2007 100000 “Monalisa” Ceramics15 76 15.06.2007 100000 Real Ceramics16 81 20.06.2007 100000 Galaxy Senetary Works17 84 23.06.2007 100000 Suncity Ceramics18 89 28.06.2007 100000 Real Ceramics19 100 09.07.2007 100000 “Monalisa” Ceramics20 101 10.07.2007 100000 Suncity Ceramics21 111 20.07.2007 100000 Real Ceramics22 117 26.07.2007 100000 “Monalisa” Ceramics23 121 30.07.2007 50000 Star Ceramic24 124 02.08.2007 100000 Galaxy Senetary Works25 131 09.08.2007 100000 Suncity Ceramics26 137 15.08.2007 100000 Real Ceramics27 139 17.08.2007 100000 “Monalisa” Ceramics28 147 25.08.2007 100000 Suncity Ceramics29 149 27.08.2007 50000 Galaxy Senetary Works30 160 07.09.2007 100000 Real Ceramics31 170 17.09.2007 100000 “Monalisa” Ceramics32 175 22.09.2007 100000 Suncity Ceramics

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33 187 07.10.2007 75000 Galaxy Senetary Works34 198 15.10.2007 40000 Monalisa (Star Ceramic)35 198 15.10.2007 60000 Sonery ( Ideal Cera Products)36 201 18.10.2007 100000 Real Ceramics37 207 24.10.2007 100000 “Monalisa” Ceramics38 215 01.11.2007 100000 Suncity Ceramics39 219 05.11.2007 50000 Sonery ( Ideal Cera Products)40 235 21.11.2007 50000 “Monalisa” Ceramics41 235 21.11.2007 50000 Galaxy Senetary Works42 235 21.11.2007 50000 Suncity Ceramics43 245 01.12.2007 50000 Sonery ( Ideal Cera Products)44 249 05.12.2007 100000 Real Ceramics45 254 10.12.2007 50000 Galaxy Senetary Works46 258 14.12.2007 60000 “Monalisa” Ceramics47 261 17.12.2007 100000 Real Ceramics48 266 22.12.2007 50000 Sonery ( Ideal Cera Products)49 266 22.12.2007 30000 Monalisa (Star Ceramic)50 280 05.01.2008 75000 “Monalisa” Ceramics51 286 11.01.2008 40000 Sonery ( Ideal Cera Products)52 291 16.01.2008 50000 Suncity Ceramics53 311 05.02.2008 75000 “Monalisa” Ceramics54 313 07.02.2008 63000 Sonery ( Ideal Cera Products)55 317 11.02.2008 100000 Real Ceramics56 318 12.02.2008 59000 Leo Ceramics57 319 13.02.2008 50000 Galaxy Senetary Works58 329 23.02.2008 50000 Suncity Ceramics59 329 23.02.2008 20000 Monalisa (Star Ceramic)60 334 28.02.2008 100000 “Monalisa” Ceramics61 335 29.02.2008 100000 Real Ceramics62 345 10.03.2008 100000 Galaxy Senetary Works63 350 15.03.2008 35000 Leo Ceramics64 353 18.03.2008 100000 “Monalisa” Ceramics65 359 24.03.2008 100000 Real Ceramics66 360 25.03.2008 50000 Suncity Ceramics67 366 31.03.2008 50000 “Monalisa” Ceramics68 366 31.03.2008 50000 Leo Ceramics

In the above chart, the columns like Sr.No., Page No., dates, amount and the name of the parties have been shown. The amounts mentioned in the said columns are the difference of the value mentioned in the invoices of the tiles manufacturers and the actual sale prices which have been collected from our customers. The said substantial difference is due to gross under valuation/under invoicing by the tile manufacturers.

Que.13: You have been also shown the diary marked A/20 seized vide the said panchnama. Please peruse the same and explain the mention of such huge amounts in the said Diary?

Ans.13: I have perused the diary marked A/20 seized vide the said panchnama dated 22.12.2008. I have perused the same and have put my dated signature on same. This diary contains the following details:-

Sr.No.

Page Number of

Diary



1 15 15.04.2008 100000 Real Ceramics2 15 15.04.2008 75000 Galaxy Sanitary Works3 15 15.04.2008 75000 “Monalisa” Ceramics4 21 21.04.2008 45000 “Monalisa” Ceramics5 28 28.04.2008 100000 Real Ceramics6 33 03.05.2008 50000 Galaxy Sanitary Works7 36 06.05.2008 50000 Suncity Ceramics

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8 45 15.05.2008 100000 Real Ceramics9 52 22.05.2008 50000 Soneri (Ideal Ceramics)10 57 27.05.2008 50000 “Monalisa” Ceramics11 57 27.05.2008 33000 Soneri (Ideal Ceramics)12 70 09.06.2008 50000 Galaxy Sanitary Works13 72 11.06.2008 50000 “Monalisa” Ceramics14 77 16.06.2008 44000 Suncity Ceramics15 80 19.06.2008 100000 Real Ceramics16 84 23.06.2008 50000 Suncity Ceramics17 84 23.06.2008 50000 “Monalisa” Ceramics18 87 26.06.2008 50000 “Monalisa” Ceramics19 89 28.06.2008 50000 Soneri (Ideal Ceramics)20 94 03.07.2008 50000 Leo Ceramics21 96 05.07.2008 50000 Hilti Ceramics22 108 17.07.2008 50000 Suncity Ceramics23 112 21.07.2008 50000 Hilti Ceramics24 115 24.07.2008 50000 Leo Ceramics25 117 26.07.2008 50000 “Monalisa” Ceramics26 120 29.07.2008 50000 Soneri (Ideal Ceramics)27 124 02.08.2008 75000 Real Ceramics28 133 11.08.2008 50000 Real Ceramics29 133 11.08.2008 60000 Leo Ceramics30 142 20.08.2008 75000 Real Ceramics31 152 30.08.2008 100000 Real Ceramics32 157 04.09.2008 50000 Hilti Ceramics33 157 04.09.2008 60000 Leo Ceramics34 165 12.09.2008 50000 Suncity Ceramics35 168 15.09.2008 75000 Real Ceramics36 173 20.09.2008 50000 Hilti Ceramics37 178 25.09.2008 100000 Real Ceramics38 180 27.09.2008 75000 Galaxy Sanitary Works39 183 30.09.2008 55000 Suncity Ceramics40 189 06.10.2008 100000 “Monalisa” Ceramics41 193 10.10.2008 50000 Hilti Ceramics42 197 14.10.2008 50000 Galaxy Sanitary Works43 199 16.10.2008 75000 Real Ceramics44 206 23.10.2008 50000 Hilti Ceramics45 223 09.11.2008 100000 Real Ceramics46 224 10.11.2008 75000 Real Ceramics47 224 10.11.2008 50000 Galaxy Sanitary Works48 228 14.11.2008 50000 Hilti Ceramics49 243 29.11.2008 50000 Hilti Ceramics50 250 06.12.2008 50000 Soneri (Ideal Ceramics)51 256 12.12.2008 50000 Galaxy Sanitary Works52 257 13.12.2008 50000 Hilti Ceramics53 264 20.12.2008 50000 Real Ceramics

In the above chart, the columns like Sr.No. page No., dates, amount and name of the parties have been shown. The amounts mentioned in the said column are the difference of the value mentioned in the invoices of the tile manufacturers and the actual sale prices which have been collected from our customers. The said substantial difference is due to gross undervaluation/under invoicing by the tile manufacturers. In many cases, the invoices are raised for 50% of the actual value of the tiles. Further, I also submit that the manufacturers of the tiles issued the sale invoices in the name of the various builders and other parties and the amount is collected by us in cash and same amounts were also sent to the manufacturers in cash through said angadias by me. We had

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purchased the tiles from the said manufacturers in the name of fictitious builders; however, such tiles were received by us and sold in cash without any bill. On being asked, I state that the total amount of the purchase bill/Invoice is sent to the tile manufacturers in cash through angadias.

Que.14: Where are the similar diaries for the period prior to 2007-08. Please give your clarifications.

Ans.14: For the period prior to the year 2007-08, I did maintain such diaries but I have destroyed the same.

Que.15: Please peruse the file marked A/25 seized vide the said panchnama dated 22.12.2008 drawn at the premises of M/s. Amit Ceramic, Gaikawad Mala, Nashik Road, Nashik. Particularly, your attention is drawn to the pages from 16 to 20, titled ABC Trading, Morbi. Please explain the details mentioned thereon.

Ans.15: I have perused the said file marked A/25 seized vide the said panchnama dated 22.12.2008 drawn at our premises of M/s. Amit Ceramic, Gaikawad Mala, Nashik Road, Nashik. Particularly, I have seen the pages 16 to 20 and I have put the dated signature on these pages. I state that in fact it is a summary of the goods purchased from M/s. Suncity Ceramics, Morbi. The goods have been purchased by us in cash and no bills have been provided to us. But suppressing the purchase as well sales, we have prepared summary in the name of the fictitious firm i.e. ABC Trading, Morbi. The amounts mentioned in the said summary are written in coded form and by multiplying the figures mentioned in the diary by hundred will represent the actual amounts. For example, the amount mentioned at page marked 20 is Rs.57,995/- and not Rs.579.95. Similarly, on other pages marked 16, 17, 18 and 19 also the amounts are mentioned.

Que.16. Please peruse the file marked A/24 seized vide the said panchnama dated 22.12.2008 drawn at the premises of M/s. Amit Ceramic, Gaikawad Mala, Nashik Road, Nashik.

Ans.16: I state that M/s. Avinash Traders at Sinde, Tal & Dist. Nashik, Near Bangal Baba Dargah is a bogus firm created by me to suppress the actual transaction to minimize my tax liability.

48.4. Further I find that during the course of search in the business premises of M/s. Amit Ceramic, Nashik on 22.12.2008, certain records/documents were seized as recorded in Annexure-A to the panchnama dated 22.12.2008. The scrutiny of records seized from the aforesaid premises revealed that same contained evidences regarding clandestine clearances and undervaluation by M/s. Star Ceramic as well as other tile manufacturers of Morbi.

48.5 Further I find that the Central Excise invoices issued by M/s. Star reveals that they have cleared two consignments of wall tiles to M/s. Amit Ceramic, Nashik during the period 20.12.04 to 19.05.05. The clearances to the said dealer are summarized in the following table:-

Invoice No. Date Grade Size No. of boxes MRP

343 20.12.04 STD NA 480 100.00SIL NA 50 80.00

75 19.05.05 STD NA 400 100.00

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48.6 Therefore, from the above I find that , it is evident that they have not cleared any consignment of wall tiles to M/s.Amit Ceramic, Nashik during the years 2006-07 and 2007-08. Whereas M/s. Amit Ceramic, Nashik have transferred following cash amounts to M/s. Star through their confident angadia, viz., M/s. Patel Ashokkumar Kantilal Ni Company, Nashik during the period 07.04.07 to 23.02.08:-

Sr.No.


Date on which the amount sent through Angadia Amount

1 7 07.04.07 50,000.002 29 29.04.07 50,000.003 65 04.06.07 50,000.004 121 30.07.07 50,000.005 198 15.10.07 40,000.006 266 22.12.07 30,000.007 329 23.02.08 20,000.00

Total 2,90,000.00 49.1. Further I find that as substantial cash amounts have been paid by M/s Amit Ceramics to M/s Star during the period 07.04.07 to 23.02.08, it appears that M/s Star supplied tiles to other buyers of Nashik through M/s Amit Ceramics and collected differential amounts between the actual value and value declared on invoices issued to other buyers of Nashik through M/s Amit Ceramics, in cash. Shri Bhumtaria Pravin Panchabhai, Proprietor of M/s Amit Ceramics in his statement dated 22.12.2008 inter-alia admitted that he was getting tile in the names of different fictitious builders of Nashik and was selling the same to other buyers. It is thus evident that the aforesaid cash amount of Rs.2,90,000/- was paid by M/s Amit Ceramics to M/s Star for the under-valued portion of tiles cleared in the names of builders of Nashik and surrounding area.

49.2 Further on scrutiny of the records of M/s. Amit Ceramics, Nashik I find that M/s. Amit Ceramics were showing wrong sale price in their sale bills. They were showing correct price in their delivery slips but were mis-declaring the sale price in their sale bills. This was done by M/s. Amit Ceramics to match the MRP mentioned on the invoices of M/s. Star and other tile manufacturers and also to evade VAT. Page No.147 of seized made up file A/25 under panchnama dated22.12.08 from the premises of M/s. Amit Ceramics, Nashik is a dispatch slip dated 02.03.07, which shows the sale of tiles of different manufacturers. According to the above said delivery slip, M/s. Amit Ceramics, Nashik sold 35 boxes and 2 boxes of Monalisa brand wall tiles of 12”x8” size Ivory and white colours to Shri Dhipubhai at Rs.120/- per box, respectively. Similarly, as per delivery slip No.71 dated 09.05.07, M/s. Amit Ceramics, Nashik sold 7 boxes of Monalisa brand wall tiles of 12”x8” size of white colour to M/s. Satguru Ceramics at sale rate of Rs.125/- per box. Thus it appears that M/s. Amit Ceramics were issuing a delivery slip with their sale bills. In the sale bill, they were mentioning the suppressed value of tiles sold by them while they are mentioning correct value of tiles recoverable from their customers in their delivery slip. They are keeping only the sale bills in their records and the delivery slips were destroyed. In the aforesaid cases, it is evident that M/s. Amit Ceramics have sold the tiles of M/s. Star at a higher price than the price shown in their sale bills. The differential amount is obviously collected by M/s. Amit Ceramics in cash and transferred to the aforesaid M/s. Star towards the actual value of the tiles purchased by them. It is thus evident that M/s. Star were mentioning suppressed MRP and wrong description of tiles in their sale invoices. They were collecting the amount over and above the invoice value from M/s. Amit Ceramics in cash and escaping the Central Excise duty incidence on such element of value of tiles.

49.3. Further I find from the seized diaries at S.Nos.A/19 that M/s Amit Ceramics have paid an amount of Rs.2.90,000/- to M/s Star in cash through angadias during the period 07.04.07 to 23.02.08. The amount of Rs.2,90,000/- paid in cash, was differential amount on account of suppressed MRP and ex-factory rate in respect of clearances made to M/s. Amit Ceramics and other buyers of Nashik and surrounding areas. Thus the documents contained in seized diaries marked as A/19 and Misc file at S.No.A/25 reveal that M/s Star were evading duty of excise by way of gross-undervaluation.

49.4. Further I find that Shri Bumtaria Pravin Panchabhai, Proprietor of M/s Amit Ceramics, Nashik in his statement dated 22.12.2008 inter-alia stated that he was sending cash amounts, over and above the invoice value, to the ceramic tile manufacturers including M/s Star through M/s Patel Ashok Kumar Kantilal Ni Co., an angadia firm. Therefore, in order to ascertain the

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actual facts, the officers of DGCEI conducted an inquiry from the said angadia firm and statement of the Proprietor of said firm was recorded on 27.12.2008.

50.1 Further I find that from the statement of Shri Chimanbhai Babaldas Patel, Proprietor of M/s. Patel Ashokkumar Kantilal Ni Company, Nashik was recorded under Section 14 of the Central Excise Act, 1944 by the Superintendent, DGCEI, Regional Unit, Vapi on 27.12.2008 wherein he inter alia stated that he is the proprietor of M/s. Patel Ashokkumar Kantilal Ni Company, which is engaged in angadia services since December, 2005; that they were delivering the documents, goods and cash to their customers located all over the India; that they used to issue receipts for receiving documents which were to be delivered as per the instructions of the parties; that in the case of delivering cash, the transactions were carried out on trust; that they did not issue receipts for receiving the cash; that their customers have to telephonically confirm the delivery of cash from the parties which they sent through his angadia firm; that they had charged Rs.100/- to Rs.150/- per lakh for such cash transactions and that they did not preserve any records and destroyed their records after completion of the cash transactions with the parties.

50.2. On being asked to explain the cash transactions done on behalf of M/s. Amit Ceramic, Nashik, Shri Chimanbhai Babaldas Patel stated that M/s. Amit Ceramics is one of their regular customer and regularly sending cash amount to their tile manufacturers at Morbi and Himatnagar. He was shown a statement dated 22.12.2008 of Shri Bumtaria Pravin Panchalbhai, Proprietor of M/s. Amit Ceramic, Nashik. In token of his perusal and understanding the contents, he willingly placed his dated signature on the above statement. He has further stated that in reply to the question Nos.12 and 13, Shri Bumtaria Pravin Panchabhai deposed that he had perused the contents of the diaries marked as A/19 and A/20 seized from his premises under panchnama dated 22.12.2008, which contained the following details:-Seized Diary marked as A/19:

Sr.No.

Page Number of

Diary



1 7 07.04.2007 100000 “Monalisa” Ceramics2 7 07.04.2007 50000 Monalisa (Star Ceramic)3 16 16.04.2007 100000 Real Ceramics4 26 267.04.2007 100000 “Monalisa” Ceramics5 27 27.04.2007 100000 “Monalisa” Ceramics6 29 29.04.2007 50000 Star Ceramic7 42 12.05.2007 100000 Suncity Ceramics8 48 18.05.2007 100000 “Monalisa” Ceramics9 53 23.05.2007 100000 Galaxy Senetary Works

10 53 23.05.2007 100000 Suncity Ceramics11 56 26.05.2007 100000 “Monalisa” Ceramics12 62 01.06.2007 100000 Suncity Ceramics13 65 04.06.2007 50000 Star Ceramic14 69 08.06.2007 100000 “Monalisa” Ceramics15 76 15.06.2007 100000 Real Ceramics16 81 20.06.2007 100000 Galaxy Senetary Works17 84 23.06.2007 100000 Suncity Ceramics18 89 28.06.2007 100000 Real Ceramics19 100 09.07.2007 100000 “Monalisa” Ceramics20 101 10.07.2007 100000 Suncity Ceramics21 111 20.07.2007 100000 Real Ceramics22 117 26.07.2007 100000 “Monalisa” Ceramics23 121 30.07.2007 50000 Star Ceramic24 124 02.08.2007 100000 Galaxy Senetary Works25 131 09.08.2007 100000 Suncity Ceramics26 137 15.08.2007 100000 Real Ceramics27 139 17.08.2007 100000 “Monalisa” Ceramics28 147 25.08.2007 100000 Suncity Ceramics29 149 27.08.2007 50000 Galaxy Senetary Works30 160 07.09.2007 100000 Real Ceramics31 170 17.09.2007 100000 “Monalisa” Ceramics32 175 22.09.2007 100000 Suncity Ceramics33 187 07.10.2007 75000 Galaxy Senetary Works34 198 15.10.2007 40000 Monalisa (Star Ceramic)35 198 15.10.2007 60000 Sonery ( Ideal Cera Products)

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36 201 18.10.2007 100000 Real Ceramics37 207 24.10.2007 100000 “Monalisa” Ceramics38 215 01.11.2007 100000 Suncity Ceramics39 219 05.11.2007 50000 Sonery ( Ideal Cera Products)40 235 21.11.2007 50000 “Monalisa” Ceramics41 235 21.11.2007 50000 Galaxy Senetary Works42 235 21.11.2007 50000 Suncity Ceramics43 245 01.12.2007 50000 Sonery ( Ideal Cera Products)44 249 05.12.2007 100000 Real Ceramics45 254 10.12.2007 50000 Galaxy Senetary Works46 258 14.12.2007 60000 “Monalisa” Ceramics47 261 17.12.2007 100000 Real Ceramics48 266 22.12.2007 50000 Sonery ( Ideal Cera Products)49 266 22.12.2007 30000 Monalisa (Star Ceramic)50 280 05.01.2008 75000 “Monalisa” Ceramics51 286 11.01.2008 40000 Sonery ( Ideal Cera Products)52 291 16.01.2008 50000 Suncity Ceramics53 311 05.02.2008 75000 “Monalisa” Ceramics54 313 07.02.2008 63000 Sonery ( Ideal Cera Products)55 317 11.02.2008 100000 Real Ceramics56 318 12.02.2008 59000 Leo Ceramics57 319 13.02.2008 50000 Galaxy Senetary Works58 329 23.02.2008 50000 Suncity Ceramics59 329 23.02.2008 20000 Monalisa (Star Ceramic)60 334 28.02.2008 100000 “Monalisa” Ceramics61 335 29.02.2008 100000 Real Ceramics62 345 10.03.2008 100000 Galaxy Senetary Works63 350 15.03.2008 35000 Leo Ceramics64 353 18.03.2008 100000 “Monalisa” Ceramics65 359 24.03.2008 100000 Real Ceramics66 360 25.03.2008 50000 Suncity Ceramics67 366 31.03.2008 50000 “Monalisa” Ceramics68 366 31.03.2008 50000 Leo Ceramics

Seized diary marked as A/20:

Sr.No.

Page Number of

Diary

Date on which the amount sent through

AngadiaAmount Name of the Party to whom the

amount paid

1 15 15.04.2008 100000 Real Ceramics2 15 15.04.2008 75000 Galaxy Sanitary Works3 15 15.04.2008 75000 “Monalisa” Ceramics4 21 21.04.2008 45000 “Monalisa” Ceramics5 28 28.04.2008 100000 Real Ceramics6 33 03.05.2008 50000 Galaxy Sanitary Works7 36 06.05.2008 50000 Suncity Ceramics8 45 15.05.2008 100000 Real Ceramics9 52 22.05.2008 50000 Soneri (Ideal Ceramics)

10 57 27.05.2008 50000 “Monalisa” Ceramics11 57 27.05.2008 33000 Soneri (Ideal Ceramics)12 70 09.06.2008 50000 Galaxy Sanitary Works13 72 11.06.2008 50000 “Monalisa” Ceramics14 77 16.06.2008 44000 Suncity Ceramics15 80 19.06.2008 100000 Real Ceramics16 84 23.06.2008 50000 Suncity Ceramics17 84 23.06.2008 50000 “Monalisa” Ceramics18 87 26.06.2008 50000 “Monalisa” Ceramics19 89 28.06.2008 50000 Soneri (Ideal Ceramics)20 94 03.07.2008 50000 Leo Ceramics21 96 05.07.2008 50000 Hilti Ceramics22 108 17.07.2008 50000 Suncity Ceramics23 112 21.07.2008 50000 Hilti Ceramics24 115 24.07.2008 50000 Leo Ceramics25 117 26.07.2008 50000 “Monalisa” Ceramics26 120 29.07.2008 50000 Soneri (Ideal Ceramics)27 124 02.08.2008 75000 Real Ceramics28 133 11.08.2008 50000 Real Ceramics29 133 11.08.2008 60000 Leo Ceramics30 142 20.08.2008 75000 Real Ceramics

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31 152 30.08.2008 100000 Real Ceramics32 157 04.09.2008 50000 Hilti Ceramics33 157 04.09.2008 60000 Leo Ceramics34 165 12.09.2008 50000 Suncity Ceramics35 168 15.09.2008 75000 Real Ceramics36 173 20.09.2008 50000 Hilti Ceramics37 178 25.09.2008 100000 Real Ceramics38 180 27.09.2008 75000 Galaxy Sanitary Works39 183 30.09.2008 55000 Suncity Ceramics40 189 06.10.2008 100000 “Monalisa” Ceramics41 193 10.10.2008 50000 Hilti Ceramics42 197 14.10.2008 50000 Galaxy Sanitary Works43 199 16.10.2008 75000 Real Ceramics44 206 23.10.2008 50000 Hilti Ceramics45 223 09.11.2008 100000 Real Ceramics46 224 10.11.2008 75000 Real Ceramics47 224 10.11.2008 50000 Galaxy Sanitary Works48 228 14.11.2008 50000 Hilti Ceramics49 243 29.11.2008 50000 Hilti Ceramics50 250 06.12.2008 50000 Soneri (Ideal Ceramics)51 256 12.12.2008 50000 Galaxy Sanitary Works52 257 13.12.2008 50000 Hilti Ceramics53 264 20.12.2008 50000 Real Ceramics

50.3 Further I find that Shri Bumtaria Pravin Panchabhai has categorically deposed that the above mentioned amounts were sent through his angadia firm viz., M/s. Patel Ashokkumar Kantilal Ni Company, Nashik. On being asked to state and clarify the facts, Shri Chimanbhai Babaldas Patel, Proprietor of M/s. Patel Ashokkumar Kantilal Ni Company confirmed that they had delivered these cash amounts to the tile manufacturers of Morbi and Himatnagar. On being asked regarding the frequency of sending cash amounts by M/s. Amit Ceramic, Nashik to the tile manufacturers at Morbi and Himatnagar, he further stated that once or twice in a week, Shri Pravin Bumtaria used to send cash amounts in the sum of Rs.50000 or Rs.100000/-. He further stated that Shri Pravin Bumtaria himself used to deliver cash amounts in his Nashik branch office for sending the same to the parties located at Morbi or Himatnagar and accordingly his branch office at Morbi or Himatnagar delivered the cash amounts in question to the respective tile manufacturers.

50.4 Therefore,the documentary evidences recovered from M/s Amit Ceramics, Nashik duly corroborated by statements of Shri Bumtaria Pravin Panchabhai, Proprietor of said firm and Shri Chimanbhai Babaldas Patel, Proprietor of the angadia firm I find that M/s Star were evading duty of excise by way of undervaluation. They were not declaring designs, colours and even size of tiles in their invoices. The tiles of different sizes were sold at different rates depending upon the colour and design. They were not declaring said colours, designs as well as sizes in their invoices, only to declare lower MRP and to evade duty of excise. The documentary evidences reveal that M/s Star have received substantial amounts in cash from M/s Amit Ceramics, Nashik. This fact has been confirmed by the Proprietor of the said firm as well as the concerned angadia. The seized documents further reveal that the ex-factory rates of first grade tiles of size 12”x8” were as high as Rs.155/- per box while M/s Star were declaring MRP of Rs.100/- for their Ist grade i.e. STD grade. Thus the whole modus operandi of evasion of central excise duty by way of gross-undervaluation is evident from the documentary as well as oral evidences collected from M/s Amit Ceramics, Nashik.

51.1. The officers of DGCEI, Madurai visited 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 and conducted search under a panchnama dated 17.01.2008. Shri C. Rajasekaran, Manager of M/s. Glazeware was present during the panchnama proceedings. The search resulted in recovery of certain documents and records which appeared relevant for further investigation of the case against M/s. Star. 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. 51.2. Further I find that the invoices issued by M/s. Star during the period from 2004-05 to 2007-08 M/s. Star have not directly cleared any consignment of wall tiles to M/s. Glazeware Trading Co., Madurai. But I find that they have cleared two consignments of wall tiles of 2,778 boxes of SILVER grade to M/s. Burma Hardware Store, Pudukkottai and one consignment of SILVER grade tiles to M/s. Starwares, Arni during the year 2007-08 through M/s. Glazeware Trading Co., Madurai.

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51.3. Further from the Seized record No. 6 of 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 and I find 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 such as M/s. Ocean, Anand, Himat, Opal, Kalyan, Manish, Santosh, Varmora brand 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.

51.4. Further I find that the right side of Page No. 17 of the said diary shows the details of cash payments made by M/s. Glazeware to various tile manufacturers of Morbi, including M/s. Star. A scanned image of the said page is shown below:

51.5 Further I find that the above document indicates that out of the total cash amount of Rs. 5,43,000/- paid to different tile manufacturers, Shri C. Rajasekaran of M/s. Glazeware paid cash amounting to Rs. 69,000/- to M/s. Star on 20.05.2007. The said payments were made out of the cash amount of Rs.2,93,950/- collected by Shri C. Rajasekaran from the buyers of matches at Mehsana and other places on 20.05.07 and Rs.2,50,000/- collected from Shri Arumughan of Madurai who is transferring cash amounts from Madurai to Ahmedabad. It is clear that such cash payments are not reflected in the books of account of M/s. Glazeware and M/s. Star and the same constitutes the undervalued cost of wall tiles cleared from the factory of M/s. Star.

51.6 Further Investigation conducted by DGCEI I find 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 Rajasekahran, which is discussed later in this part of the notice, he had 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. 69,000/- to M/s. Star.

1.7 Further I find that 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:

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51.8. Further from the statement of Shri C. Rajasekaran, owner of M/s. Glazeware in

his dated 31.05.2008, I find that he has confirmed that 789 boxes of floor tiles and 100

boxes of antis’ kid 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/-.

51.9 Further I find at 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:

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Image No. 1

ImageNo.2

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51.10 Further I find that 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. In few cases, the paid amounts were shown in 000’s. Thus the cash paid to M/s. Star on 19.07.2007 is written as Rs. 23,550/-, 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. M/s. Glazeware were also facilitating direct clearance of tiles to several buyers in the State of Tamil Nadu and as such the said quantity of tiles cleared to a particular dealer could not be matched with the invoices issued by the respective manufacturer. 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. Star, towards settlement of the undervalued cost of tiles cleared from their factories.

51.11. Further I find at 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:

51.12 Therefore, from the above document I find that out of the total payment of Rs. 26 lakhs to be paid to various tile manufacturers of Morbi, an amount of Rs. 20,000/- is payable to M/s. Star. Shri Rajasekaran in his aforesaid statement stated that the pending amount included both official invoice value as well as unofficial cash portion of their suppliers. 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.

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51.13 Further at 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. Star is shown as Rs.20,000/51.13. Further fromSeized file Nos. 7 and 8 contain copies of central excise invoices issued by different tile manufacturers. Most of these invoices are attached with transport documents showing transportation of floor and wall 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 later in Para 12.4 of this notice.

51.14 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 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.

51.15. Further I find that one full truckload of consignment weighs 16 MTs. The weight per box of 12”x8” size wall tiles is Rs. 10 kgs. Carrying full truckload of tiles could carry 1600 boxes of 12x8 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 Rs28/- for size 12x8 size wall tiles.

52.1 Further I find that M/s. Star have cleared 1,028 boxes of SILVER grade wall tiles to M/s. Burma Hardware Store, Pudukkottai and 1,600 boxes of SILVER grade tiles to M/s. Starwares, Arni (T.N.) by declaring MRP of Rs.80/- per box. They have also cleared another consignment of 1,750 boxes of SILVER grade wall tiles to M/s. Burma Hardware Store, Pudukkottai with MRP of Rs.60/- per box. The tiles of the same quality were cleared at different MRP of Rs. 80/- and Rs.60/- per box. 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 SILVER grade of wall tiles at Madurai would be as under, if the said dealer was paying only amounts as per the invoices issued by M/s. Star:-

Sr. No

Description SILVER12”X8”

SILVER12”X8”

1 MRP declared in the invoice 80.00 60.002 Amount charged after 45%

abatement 44.00 33.00

3 Excise duty paid @ 8.24% 3.63 2.724 CST paid @ 3% 1.43 1.075 Freight paid @ Rs. 45,000/- per

container 28.00 28.00

6 Margin of profit @ 10% 7.70 6.487 VAT payable @ 12.5% 10.60 8.908 Cost of tiles at Madurai 95.36 80.17

52.2. Therefore, from the above illustration I find that the tiles of SILVER grade of size 12”x8” actually cost more than the MRPs declared by M/s. Star in their Central Excise invoices at the premises of their dealer at Madurai. They have declared MRPs of SILVER grade tiles of size

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12”x8” as Rs.80/- and Rs.60/- per box while landed cost of such tiles at Madurai works out to Rs. 95.36 and Rs.80.17 per box, respectively. 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 Star, 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. Star in their central excise invoices were not actual.

52.3. From the statement of Shri C. Rajasekaran, Manager of M/s. Glazeware was recorded on 17.01.2008 I find that he, has, stated that he is looking after the day-to-day affairs of the said firm; that M/s. Glazeware were procuring floor tiles and wall tiles from different manufacturers of Bangalore, Hyderabad and Gujarat; and that presently they are dealing in Anand, Manish, Star, Ocean, Varmora and Foram brands of tiles which they sell to various dealers and consumers across Tamil Nadu. He stated that the payments for the purchase of such tiles are made in both cheques and cash. He also stated that they have never paid any amount over and above the invoice value 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.

52.4. Therefore,I find that the aforesaid statement of Shri C. Rajasekaran 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. Star. 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.

52.5. Thereforfe, 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 purchase vitrified tiles only from M/s. Varmora Granito and do not purchase vitrified tiles from any other companies. They also do not purchase any wall tiles or floor tiles from any other group companies of Varmora Group and deal with only M/s. Varmora Granito. He named the suppliers of such floor tiles and wall tiles as 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, M/s. Star etc.

52.3. Further I find that 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 Tamil Nadu. They sell tiles to both dealers as well as wholesale consumers. He was shown a chart prepared on the basis of the Central Excise invoices issued by M/s. Varmora Granito which indicate the details of VARMORA brand vitrified tiles purchased by M/s. Glazeware from the said company as under, and confirmed that they have so far purchased only these 4 consignments of vitrified tiles from M/s. Varmora.

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52.4. Further he was shown a LIC Diary No. 6 which was seized from his business premises and in token of having seen the same, he put his dated signature on the first and last page of the said diary. On being asked, he confirmed 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 further stated that he was also doing some business of trading matches manufactured by various manufacturers of Madurai and surrounding areas. He purchased assorted type of matches from the open market and sell the same to various parties situated in Mehsana, Sarkhej, Himatnagar etc. of Gujarat. Therefore, details of such business carried out by him for matches are also appearing in the said diary No. 6.

52.5 Further I find that during the statement proceedings, the aforesaid seized diary was given page numbers serially, and Shri Rajasekaran was asked to explain the contents of each page of the said diary on the basis of such page numbers. Accordingly, he explained the contents of the said diary. Relevant portion of his statement is reproduced as under: -

Page-17:On the right side, the details of receipt of cash of Rs. 2,93,950/- from my buyers of matches at Mehsana and other places on 20.05.2007 are written. Thereafter, I have obtained Rs. 2,50,000/- at Ahmedabad through Shri Arumugham of Madurai who is transferring cash amounts from Madurai to Ahmedabad. Thus I was having a total cash of Rs. 5,43,950/- with me on 20.05.2007. Out of this amount, I have 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, I have paid Rs. 5,43,000/- personally to these parties.

Page-50:Left side of the page contains the details of pending payment position of our firm to various companies of Morbi as on 19.09.2007. Accordingly, Rs. 8,60,000/- 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. 20,000/- to M/s. Star [border] totalling Rs. 26 lakhs was to be paid by us to Morbi companies as on 19.09.2007. This amount included both bill amounts and cash amounts due to these companies.

Page-55: Right side bottom portion shows the details of cash amounts paid to different companies on 12.10.2007. Accordingly, I have 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.

52.6. Further I find that on being asked about the consumer sale price of various brands of tiles purchased by him as above, 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.

53.1. Therefore from the above investigation from M/s. Glazeware conclusively establishes that M/s. Star was engaged in large-scale evasion of excise duty by undervaluation. The simple calculations reveal that they MRPs declared by them in the invoices were 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. Star. 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.

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54.1. Further on scrutiny of Central Excise invoices of M/s. Star I find that they had sold wall tiles to M/s. Shreeji Marketing, Door No.11-15-10/A, Plot No.12, Doctor’s Colony, Opp: NTR Nagar, Vijayawada Road, Hyderabad. Therefore, an inquiry was conducted from the said dealer under the summons proceedings by recording statement of Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad.

55.1. A statement of Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad was recorded under Section 14 of the Central Excise Act, 1944 wherein he interalia stated that the above said firm is engaged in the trading business of ceramic tiles manufactured by different manufacturers of Gujarat; that being the partner of the said firm, he is looking after all the day today activities of the firm; and that they have purchased ceramic tiles mainly from the following suppliers of Gujarat:-

Sr.No. Name of the Manufacturer(i) M/s. Ajita Silchem, Kadi, Kalol (Brand Safari Gold)(ii) M/s. Sonata Ceramics Pvt. Ltd., Himatnagar(iii) M/s. Digital Ceramics Pvt. Ltd., Morbi(iv) M/s. Star Ceramic, Morbi (Brand Monalisa)(v) M/s. Glory Ceramics, Morbi(vi) M/s. Gladder Ceramics, Himatnagar(vii) M/s. Apex Ceramics, Morbi

55.2. Further he has stated that they had purchased wall tiles from M/s. Star Ceramic at different point of time; that the tiles purchased from all the above manufacturers were of various designs and colours and of different grades; that almost all the tiles purchased by them from the aforesaid manufacturers were sold by them to sub dealers and retail buyers of Hyderabad; that they were placing the orders to the manufacturers for supply of ceramic tiles over phone to the Directors/Partners/Representatives of the manufacturers concerned; that the transportation of the goods from Morbi to Hyderabad was arranged by them; that they have utilized different transporters for transportation of goods from Morbi to Hyderabad; that the transportation freight from Morbi to their premises was borne by them; that the LRs were prepared by the transporters for about 50% to 60% of the actual freight paid by them; that the remaining freight amount, over and above the freight mentioned in the LRs were paid by them in cash to the transporters for which they have not kept any details and have not reflected in their books of accounts; that they have paid Rs.2,500/- per M.T. approximately; and that the freight per box for each size of tiles works out as under:-

Description of goods Freight per Box (Approx.)12”x12” floor Rs.20/- to Rs.25/-16”x16” floor Rs.22/- to Rs.28/-12”x8” wall Rs.20/- to Rs.25/-8”x8” wall Rs.20/- to Rs.25/-

52.3 Further he has admitted that the pricelists available with them were destroyed by them; and that their sale price was worked out as per the purchase price mentioned in the invoices issued by the respective manufacturer and by adding the cost of transportation from Morbi to Hyderabad, profit margin and VAT at the rate of 12.5%. He further stated that the profit margin varies from Rs.5/- to Rs.10/- per box for wall tiles, depending upon the customer, terms of payment, quantity required and demand of the product; that the actual price which they paid to the manufacturer was more than what manufacturers have declared in their invoices and since their selling invoices were issued only for covering up the freight, VAT and their profit margin, the remaining amount was collected in cash; that due to market compulsion and general trade practice, the manufacturers had been suppressing the MRP and paying less Central Excise duty and collecting the differential amount, over and above the bill amount from them in cash; that the amount so collected in cash, over and above the bill amount, was sent through angadias to all the above said tile manufacturers; that they were paying cash amount, over and above bill amount, to M/s. Divya Engineering on behalf of M/s. Sonata Ceramics; and that M/s. Divya Engineering and other angadias were not accounted for the cash amount paid to them in their books of accounts.

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52.4

Sr.No. Name of the Manufacturer Amount of Cash

paid (Rs.)

Name of the Angadia/person to whom cash over and above bill amount was paid

(i) M/s. Ajita Silchem, Kadi, Kalol (Brand Safari Gold) Rs.15/- to Rs.20/-

ANGADIAS:(i)Ramesh Kanti,Begam Bazar, Hyderabad(ii)Magan Madha, Mobile No.9392420743

(ii) M/s. Sonata Ceramics Pvt. Ltd., Himatnagar Rs.15/- to Rs.20/-

M/s. Divya Engineering, Hyderabad. They payments for dyes repaired by M/s. Divya Engineering which are sent by M/s. Sonata Ceramics are made by us in cash. This payment pertains to cash collected by us over and above the bill value.

(iii) M/s. Digital Ceramics Pvt. Ltd., Morbi Rs.15/- to Rs.20/-

ANGADIAS: (I)M/s.New Payal & Co., Hayat Nagar, Hyderabad Contact Person – Shri Lalit – Mobile No.9394203304(ii)M/s. J.J. Patel & Co., Near Radhika Talkies Contact Person – Shri Laljibhai, Phone ANo.040 65914523(iii)Ramesh Kanti, Begam Bazar, Hyderabad

(iv) M/s. Star Ceramic, Morbi (Brand Monalisa) Rs.15/- to Rs.20/-


(v) M/s. Glory Ceramics, Morbi Rs.15/- to Rs.20/-


(vi) M/s. Gladder Ceramics, Himatnagar Rs.15/- to Rs.20/-

ANGADIAS:(i)Ramesh Kanti, Begam Bazar, Hyderabad

(vii) M/s. Apex Ceramics, Morbi Rs.15/- to Rs.20/-ANGADIAS:(i)Ramesh Kanti, Begam Bazar, Hyderabad

52.4. He has further stated that they have never transferred cash amount through the accounts of finance firms in ICICI Bank; that they have not maintained any records of the cash amount transactions with the tile manufacturers; and that the cheque amount was deposited in their respective official bank accounts and cash amount, over and above the cheque amount, was sent through angadias to the above tile manufacturers by them

52.5. Further Shri Ramesh Prabhulal Patel, Partner of M/s. Shreeji Marketing, Hyderabad had admitted that the cash amount, over and above invoice value, was handed over to Shri

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Lalit Kumar V. Patel, Partner of M/s New Payal & Co. Therefore, an inquiry was conducted from Shri Lalit Kumar V. Patel, Partner of M/s New Payal & Co., Hyderabad.

52.6. M/s New Payal & Co., Bhagyalata Bus Stop, Vijaywada Highway, Hyderabad (here-in-after referred to as “M/s New Payal.” for the sake of brevity) is cash collection Agent of different tile manufacturers including M/s. Star. Therefore, Partner of M/s New Payal & Co., was summoned by the officers of DGCEI on 19.12.08 and his statement was recorded under Section 14 of the Central Excise Act, 1944.

52.7. Further from the statement of Shri Lalit Kumar V. Patel, Partner was recorded on 19.12.2008 I find that their firm is a trading firm engaged in the trading of Ceramic tiles manufactured by different manufacturers of Gujarat and other articles; and that they were purchasing tiles from local market and not purchasing directly from the manufactures.

52.8. He has further stated that one and half year back, his business was not doing well and he was looking for a new avenue to earn money; that during his visit to Morbi, Gujarat, he came in touch with Shri Shaileshbhai Odhavjibhai Marvania, Proprietor of M/s. Shakti Enterprices, C/o. Sarvodaya Medicine, Ram Chowk, Sasur Plot, Morbi through one of his friend; that Shri Saleshbhai Odhavjibhai Marvania informed him that he was functioning as shroff for transferring cash amounts and suggested that as he was staying at Hyderabad, he could join them as their commission agent at Hyderabad; that Shri Shaileshbhai Odhavjibhai Marvania informed him that buyers/ depots/dealers/representatives of ceramic tiles located in various parts of the country were depositing cash, which was collected, over and above the invoice value, in the accounts of M/s Shree Maruti Enterprise and M/s Shree Bhagwati Enterprise; that thereafter, they were sending a copy of the relevant pay-in-slip by fax to the respective manufacturers, the manufacturers were then communicating the details of such cash deposits to him and providing him such fax copies of pay-in-slips; that these details were verified by him with the cash deposited in the respective bank accounts and after verification, the cash amount was withdrawn from the bank and sent to the respective manufacturers; that Shri Purshottambhai, a person of M/s Shree Martui Enterprise and M/s Shree Bhagwati Enterprise used to go to Morbi to disburse the cash to the respective manufacturers; that Shri Shaileshbhai Odhavjibhai Marvania wanted to make this transfer of cash more confidential and hence he requested him to act as his agent in Hyderabad and told him that he would pay a commission of Rs.100/- per Lac for collecting the cash from various dealers /depots of tiles and depositing the same in bank accounts of various finance firms which he would provide him from time to time; that he agreed to this business deal and thereafter, he (Shaileshbhai Odhavjibhai Marvania) provided him account Nos. of two firm namely M/s Shree Bhagwati Enterprises and Shree Maruti Enterprises through phone and asked him to deposit the unaccounted cash in such accounts.

52.9. Further On being asked, he stated that the Ceramic tile manufacturers of Morbi used to contact Shri Shaileshbhai Marvania and provide him details regarding the unaccounted cash to be collected from the respective traders; that Shri Shaileshbhai Marvania then used to communicate on phone the respective traders and ask them to hand over unaccounted cash to him alongwith the name of the ceramic tile manufacturer to whom the cash belonged; that this cash was then deposited by him in the ICICI Bank accounts; that the cash was deposited by him in the accounts of M/s Shree Maruti Enterprise and M/s Shree Bhagwati Enterprise, account numbers and PAN Nos. of which were provided to him by Shri Shaileshbhai Marvania and he used to deposit the cash after deducting his commission; that after depositing the cash amounts in banks, he used to convey Shri Shaileshbhai Odhavjibhai Marvania about the amount of cash deposited by him and the name of the ceramic tile manufacturer to whom it was given.52.10. He has admitted the facts that he deposited the cash amounts in the following accounts:-

Sr.No Account No. Bank Name Name of the Finance Firm




4 0-15305003241 ICICI M/s Shree Bhagwati Enterprises5 0-15305003240 ICICI M/s Shree Bhagwati Enterprises6 0-15305006741 ICICI M/s Shree Maruti Enterprise

7 0-15305003505 ICICI M/s Shree Maruti Enterprise

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52.11. He has further admitted that, once the amount was credited in the bank account and confirmed by Shaileshbhai Odhavjibhai Marvania, he destroyed the Pay-in-Slips; that he has collected unaccounted cash on behalf of the following ceramic tile manufacturers from the various dealers such as M/s Shreeji Marketing, Hyderabad, M/s National Sanitary Depot, Hyderabad, etc.; that these cash amounts have been deposited by him in the ICICI bank accounts mentioned above in this statement; that the unaccounted cash collected and transferred by him to Shaileshbhai Odhavjibhai Marvania, belonged to the following ceramic tile manufacturers:

Sr.No. Name and Address of Ceramics Tile Manufacturer,1 M/s Digital Ceramics Pvt. Ltd., Morbi.2 M/s Star Ceramic, Morbi (Brand - Monalisa)3 M/s Glory Ceramics, Morbi,4 M/s Digital Ceramics, Morbi5 M/s Coral Ceramics, Morbi6 M/s Manish Ceramics (Industries), Morbi.

52.11. He further, stated that he had been depositing the unaccounted cash in the Vanasthalipuram branch of ICICI Bank and not kept any accounts regarding the amount of cash deposited, hence unable to tell about how much unaccounted cash was deposited by him for the above said tile manufacturers.

53.1 I also find that search of the business premises of M/s. Amit Ceramics resulted in recovery of several incriminating evidences like private diaries (marked A/19, A/20), files (marked A/24, A/25), etc. Entries made in the private diary marked as A/19 revealed that during the period from 7.4.2007 to 31.3.2008, M/s. Amit Ceramics had remitted total cash amount of Rs. 17,00,000/- to M/S.Staron different dates through angadia. In his statement-dated 22.12.2008, Shri Pravin Bumtaria, Proprietor of M/s. Amit Ceramics has gone on record to state that the aforesaid amount represented the difference between the value mentioned in the invoices issued by M/S.Starand the actual sale price at which M/s. Amit Ceramics sold the tiles to their customers. The search also led to recovery of private diary marked as A/20. Entries made in this diary revealed that during the period from 15.4.2008 to 20.12.2008, M/s. Amit Ceramics had remitted Rs. 4,70,000/- to M/S.Star on different dates through angadia. Shri Pravin Bumtaria has explained this cash payment by stating that this amount represented the difference between the value mentioned in the invoices issued by M/S.Staron fictitious names whereas the tiles were sold by him to various buyers at higher MRP and the differential amount was to M/S.Starin cash. On being asked about similar diaries for the period prior to 2007-08, Shri Pravin Bumtaria stated that they did maintain such diaries but he has destroyed the same. This establishes that similar payment was made by M/s. Amit Ceramics to M/S.Star during the earlier period also.

53.2 Further, file marked as A/25 containing delivery challans issued by M/S.Star was also recovered from the premises of M/s. Amit Ceramics. This file contained sales/delivery challans issued by M/s. Amit Ceramics to their customers for sale of ““Monalisa”” brand tiles. On going through the delivery challan found on page 95 of the said file (reproduced on page 20 of the show cause notice), it can be seen that M/s. Amit Ceramics sold 10”x13” tiles of M/S.Star@ Rs. 180/- per box, 12”x8” tiles @ Rs. 160/- per box, 10”x10” Majenta coloured tiles @ Rs. 220/- per box and 8”x8” S. Blue coloured tiles @ Rs. 21- per box. This file also contained several other delivery challans issued by M/s. Amit Ceramics showing the details of price charges by M/s. Amit Ceramics from their customers on account of sale of tiles manufactured by M/s. “Monalisa”. These details are given in the table contained in paragraph 4.3.4.3 of the show cause notice, which is reproduced below for the ease of ready reference:

Page No. of the seized file A/25

Sales Challan No.

Date Size Design No./Name

Sale price

179 46 24.6.2007 10x10 C. Brown 220

189 71 4.10.2007 12x8 1562 160

189 71 4.10.2007 12x8 1563 160

189 71 4.10.2007 12x8 1564 160

179 46 24.6.2007 12x8 Ivory 150

177 14 1.6.2007 12x8 Ivory 150

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185 32 26.11.2007 12x8 White 150

179 46 24.6.2007 12x8 White 150

177 14 1.6.2007 12x8 White 150

179 46 24.6.2007 13x10 7431 180

179 46 24.6.2007 13x10 7432 180

179 46 24.6.2007 13x10 7433 180

181 53 23.6.2007 8x8 S. Blue 210

53.3 As against the above, it is observed from the details of Central Excise invoices issued by M/S.Starfor clearance of ceramic tiles to M/s. Amit Ceramics (given in the table contained in paragraph 4.3.2. on page 17 of the show cause notice) that the MRP declared by M/S.Starin respect of 10”x13” tiles is Rs. 120/- for premium grade and Rs. 100/- for standard grade (that were sold by M/s. Amit Ceramics @ Rs. 180/- per box). The MRP declared by M/S.Starin Central Excise invoices for 12”x8” tiles is Rs. 100/- for premium grade, Rs. 80/- for standard grade and Rs. 60/- for commerce grade (that were sold by M/s. Amit Ceramics @ Rs. 160/- per box). As for 10”x10” tiles, M/S.Stardeclared MRP of Rs. 100/- for standard grade and Rs. 60/- for commerce grade without mentioning the colour (that were sold by M/s. Amit Ceramics @ Rs. 220/- per box). Similarly, for 8”x8” tiles, M/S.Stardeclared MRP of Rs. 100/- for premium grade, Rs. 80/- for standard grade and Rs. 60/- for commerce grade without mentioning the colour in the Central Excise invoices (that were sold by M/s. Amit Ceramics @ Rs. 210/- per box).

53.4 I find that based on the documentary evidence in the form of delivery challans recovered the premises of M/s. Amit Ceramics and corresponding Central Excise invoices issued by M/s. “Monalisa”, a comparative chart in the form of Annexure A-1 to the show cause notice was prepared. It is observed from this chart that M/S.Starnever declared the details of colour and design no., etc. in the Central Excise invoices although they declared these details, which had a direct bearing on the price of the tiles, in the delivery challans issued by them. Further, Annexure A-2 to the show cause notice has been prepared containing the details of ex-factory rates of the different types of tiles having different colours, designs, grades, quality, etc. This chart reveals that even the ex-factory price charged by M/S.Starwas higher that the MRP declared by them in the Central Excise invoices. According to this –

(i) The ex-factory price of 13”x10” PRE and STD grade tiles was Rs. 125/- and Rs. 115/- per box whereas M/S.Stardeclared MRP for these tiles as Rs. 120/- and Rs. 100/- per box.

(ii) The ex-factory price of 13”x10” Border and Buttas was Rs. 400/- to Rs. 800/- per box whereas M/S.Stardeclared MRP for these tiles as Rs. 100/- per box.

(iii) The ex-factory price of 10”x10” STD grade and COM grade was Rs. 140/- and Rs. 70 per box whereas M/S.Stardeclared MRP for these tiles as Rs. 80/- and Rs. 60 per box respectively.

(iv) The ex-factory price of 8”x8” STD grade of Burgandy colour was Rs. 165/- and that of Automen Yellow, Sorentro Blue, Majenta, Bottle green and Black colours was Rs. 130/- per box whereas M/S.Stardeclared MRP for these tiles as Rs. 80/- per box.

53.5 I further find that enquiry caused with M/s. Maa Sharda Traders, Indore on 4.12.2008 resulted in seizure of files marked as A/1, A/2 and A/3 containing duplicate copy (carbon copy/kuchcha chits) contained details of tiles sold by the said dealer. As per the scanned copy of page 18 of the seized file A/1, the said dealer sold 13 boxes of ““Monalisa”” brand tiles @ Rs. 170/- to M/s. Shankar Traders. As per the scanned copy of page 20 of the seized file A/1, the said dealer sold 1 box & 3 box of ““Monalisa”” brand wall tiles bearing design Nos. 2515 & 2516 for Rs. 170/- per box. As per the scanned copy of page 9 of the seized file A/4, on 4.8.2007, the said dealer sold 8 boxes of 1st grade tiles of 12”x8” size @ Rs. 180/- per box and 3 boxes of 1st grade tiles of 8”x8” @ Rs. 250/- per box. It is observed from the statement of Shankar Agrawal, Proprietor of M/s. Maa Sharda Traders, recorded under Section 14 of Central Excise Act, 1944 on 4.12.2008 that he has stated that cost of transportation amounting to Rs. 8000/- to Rs. 9000/- per truck was borne by them. He further stated that they

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sold “Monalisa” tiles of 1st quality @ Rs. 170/- per box; that they sold 8”x8” tiles of M/S.Star@ Rs. 250/-- per box and “Monalisa” tiles of 8”x12” size @ Rs. 180/- per box; that tiles manufactured by M/S.Starwere sold by them @ Rs. 170/- to Rs. 180/- per box. He has also admitted that they paid an additional amount of Rs. 20/- to Rs. 30/- per box to M/S.Starin cash; that they were told by the manufacturer that amount mentioned in the invoice is not sufficient to cover the price of the tiles and hence, they recovered extra amount in cash from them; that they sold tiles at a price higher than MRP and they paid the amount over and above the invoice price to the manufacturer in cash.

53.6 I also find from the statement-dated 16.2.2008 of Shri Hajaykumar M.K. @ Sanalkumar, Proprietor of M/s. Shalimar Marbles & Granites, Changanacherry, Kerala, who also looked after the day-to-day activities of M/s. Shalimar Mosaic Industries located in the same premises, who were engaged in trading of tiles manufactured by M/S.Star that he also stated that tiles manufacturing company did not follow a uniform policy of affixing the actual MRP on the package and hence, they did not take such MRP as the basis for determining the sale price; that they issued the bills on the basis of invoices issued by the tiles manufacturing company after adding local taxes, freight, VAT and did not take into consideration the MRP affixed on the package; that on an average, manufacturers issued sale invoices for 70% of the actual value and the remaining 30% was paid to them in cash; that they do not quote the rates of ceramic and vitrified tiles on “per box basis” and instead of this, they sold the tiles on “per square feet basis”; that this translated into actual MRP of Rs. 170/-, Rs. 190/- and Rs. 170/- as declared MRP of Rs. 100/-, Rs. 120/- and Rs. 100/- for 8”x8”, 13”x10” and 12”x8” size wall tiles of “Monalisa” respectively; that these selling price is calculated as “inclusive of all taxes” but delivery charges are extra; that while preparing the bills, they adjusted the bill rates as per the gross purchase price mentioned in the invoice of manufacturer by additing freight, profit @ 10% and VAT@12% and the remaining amount is paid to the manufacturer in cash.

53.7 Further, I find that during the course of search of the business premises of M/s. Shalimar Marbles & Granites on 16.2.2008, a private notebook – “Bhavana Vidya Mandir Notebook” marked as Sl. No. 1 was seized from the table drawer of Shri Hajaykumar M. K. @ Sanalkumar. It was found from this diary was hand written by Shri Hajaykumar M. K. @ Sanalkumar and contained the details of the cash payments made to M/S.Starand other tiles’ manufacturer by way of making cash deposits into the bank accounts of trading firms maintained with ICICI bank, as per the instructions received from the said manufacturers. I also find that as per the diary, during the period from 20.5.2006 to 4.12.2007, M/s. Shalimar Marbles & Granites and M/s. Shalimar Mosaic Industries paid a total amount of Rs. 11,84,179/- to M/S.Starby way of depositing cash in the accounts maintained in the name of M/s. Ronak Enterprises, M/s. Vinayak Enterprises and M/s. J. B. Enterprises with ICICI bank. This amount is over and above Rs. 15,69,172/- charged by M/S.Starfor sale of 27794 boxes of ceramic tiles to M/s. Shalimar Marbles & Granites. The Proprietor has also stated that wherever confirmation about the receipt of the cash payment was received from the concerned manufacturer, no entry was made in the notebook. The notebook also did not contain the entries in respect of payment made by them to the person who visited their premises and collected the payment personally.

53.8 I find that during the course of investigation, on 8.2.2008, search was carried out at the premises of M/s. Shreejee Traders, Cochin and several documentary evidences were recovered. I find that file at Sl. No. 16 of the panchanama-dated 8.2.2008 contained print-out of ledger account of M/s. “Monalisa”. It is observed from the table contained in paragraph 7.2.2.2 of the show cause notice (prepared on the basis of entries contained in page 48 of the said file) that during the period from 21.10.2007 to 18.1.2008, the said dealer paid an amount of Rs. 20/- per box to M/S.Starin cash and this amount was paid over and above the invoice price mentioned in the invoice issued by M/s. “Monalisa”. I also find that in most of the invoices issued by M/s. “Monalisa”, the extra amount of Rs. 20/- per box paid to M/S.Starwas written by pencil on the body of the invoice. A specific reference is made in the show cause notice about invoice No. 1184 dated 9.1.2007 issued by M/S.Starin respect of 12”x8” (premium), 8”x8” (premium) and 13”x10” (standard) tiles sold by them to M/s. Shreejee Traders by declaring MRP of Rs. 100/-- per box for all the categories, where, M/s. Shreejee Traders have mentioned Rs. 15/-, Rs. 24/- and Rs. 10/- per box handwritten by pencil on the body of the said invoice. On this basis, I find that during the period from 10.1.2006 to 3.12.2007, M/s. Shreejee Traders have paid an amount of Rs. 13,15,556/- to M/S.Starin cash that was over and above the invoice price. Besides this, the said dealer also paid the freight charges for transporting the tiles purchased by him from M/s. “Monalisa”.

53.9 I further find that Shri Shailesh Narsibhai Godhani, brother of Shri Dilip Godhani, Proprietor of M/s. Shreejee Traders, who looked after the day-to-day affairs of M/s. Shreejee Traders, in his statement-dated 8.2.2008, has inter alia stated that they were receiving bills from the manufacturing factories for only part of the actual value of goods and the remaining amount towards the cost of the goods was paid by them in cash to the tiles’ manufacturers;

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that they sold 12”x8” tiles of “Monalisa” at Rs. 120/- against MRP of Rs. 100/- printed by M/S.Staron the package; that they had made all cash payments representing non-billed amounts to Shri Vijay Patel, relative of the owner of M/S.Starhaving mobile No. 098250 27884, who visited their show room and collected the amount. He also stated that freight charges amounting to Rs. 41,000/- were paid by them. In his further statement-dated 13.10.2008, Shri Shailesh Narshibhai Godhani, who was asked about purchase of tiles covered by invoice No. 1184 dated 9.1.2007 issued by M/s. “Monalisa”, has inter alia stated they had purchased 892 boxes of 12”x8” size premium grade, 1825 boxes of 8”x8” size premium grade and 90 boxes of 13”x10” size standard grade of ceramic glazes tiles; that M/S.Stardeclared MRP for all these grades as Rs. 100/- per box and paid duty on Rs. 55/- per box; that for the purchase of 892 boxes of 12”x8” premium grade, they paid Rs. 13,380 in cash @ Rs. 15/- per box, for the purchase of 1825 boxes of 8”x8” premium grade, they paid Rs. 43,800/- in cash @ Rs. 24/- per box and for the purchase of 90 boxes of 13”x10” size standard grade of ceramic tiles, they paid Rs. 900/- in cash @ Rs. 10/- per box, to M/s. “Monalisa”; that the cash amount, in addition to the billed amount was paid by them to Shri Vijay Patel, brother of Shri Deepak Patel, owner of M/s. “Monalisa”, who used to visit their showroom and collect the cash amount regularly. He also confirmed having paid (i) cash amounts of Rs. 39,000/- (on purchase of 2600 boxes of 12”x8” tiles of premium grade @ Rs. 15/- per box) and Rs. 6000/- (on purchase of 250 boxes of 8”x8” tiles of premium grade @ Rs. 24/- per box) covered by invoice No. 690 dated 15.9.2006 issued by M/S.Star(ii) cash amount of Rs. 27,000/- on 2700 boxes of 13”x10” tiles of standard grade @ Rs. 10/- per box covered by invoice No. 1026 dated 10.12.2006 issued by M/S.Starand (iii) cash amount of Rs. 42,900/- on purchase of 2860 boxes of 12”x8” tiles of premium grade @ Rs. 15/- per box covered by invoice No. 1381 dated 22.2.2007 issued by M/s. “Monalisa”. He also agreed with the contents of page No. 48 of the file No. 16 seized from their premises containing details of cash amount @ Rs. 20/- per box paid by them to M/S.Starover and above the price mentioned in the invoice issued by M/s. “Monalisa”.

53.10 I also find that during investigation, the premises of M/s. Surya Industries and M/s. Surya Marble & Stone Industries, Aurangabad were searched on 23.12.2008 and relevant record was recovered. Scrutiny of seized file B/1 revealed that during the period from 23.6.2006 to 24.1.2008, M/S.Starhad cleared ceramic wall tiles of premium grade having 12”x8”, 13”x10”, 8”x8” and 10”x10” size to M/s. Surya Marble & Stone Industries by declaring MRP of Rs. 100/-, Rs. 120/-, Rs. 100/- and Rs. 120/- per box respectively. They had cleared wall tiles of Standard grade having 12”x8”, 13”x10”, 8”x8” and 10”x10” to the said dealer by declaring MRP of Rs. 80/-, Rs. 100/-, 80/- and 100/- per box respectively. They had also cleared wall tiles of Commercial grade having 12”x8” size to the said dealer by declaring MRP of Rs. 60/- per box. On the other hand, the sales invoices of M/s. Surya Marble & Stone Industries contained in the seized file B/2 revealed that they sold the tiles having 12”x8” size @ Rs. 121/- to Rs. 293/-, 13”x10” size @ Rs. 210/- to Rs. 240/-, and 8”x8” size @ Rs. 175/- to Rs. 325/- per box to their customers.

53.10.1 Further, it is observed from the statement-dated 23.12.2008 of Shri Raju Manilal Patel, Proprietor of M/s. Surya Industries that the manufacturers of tiles were showing general description of the tiles in the invoices; that normally, transportation of the goods from the factory premises to their premises was arranged by them; that the freight charges from the factory premises to their premises ranging between Rs. 900/- to Rs. 1000/- per MT was paid and borne by them; that they determined their sale price by adding the cost of transportation, loading/unloading charges, profit margin, VAT @ 12.5%, their own profit of Rs. 25/- to Rs. 40/- per box for wall/floor tiles; that prior to February/March,2008, the tiles’ manufacturers were not showing the actual MRP and actual price of the tiles in the Central Excise invoices issued by them; that the MRP and sale price shown in the Central Excise invoice was lower than actual MRP and the actual price of the tiles; that the differential amount over and above the invoice value was collected by the manufacturers of tiles from them in cash; that they were preparing the invoices according to the price shown by the manufacturers by adding freight, VAT and profit margin, etc.; that they kept their sale bill below the MRP declared by the manufacturer; that the excess amount over and above the MRP collected by them from the buyers was paid in cash to the manufacturers. He also stated that they destroyed the record of the cash payment made by them to the tiles’ manufacturers.

54.11 On 23.12.2008, statement of Shri Hansraj Manilal, Partner of M/s. Surya Marble and Stone Industries, Aurangabad, was recorded under Section 14 of Central Excise Act, 1944, wherein, he inter alia stated that they purchased 12”x8”, 8”x8” and 13”x10” wall tiles from M/s. “Monalisa”. The remaining facts stated by him are similar to those stated by Shri Raju Manilal Patel, Proprietor of M/s. Surya Industries, Aurangabad.

53.12 I find that on 4.12.2008, the officers carried out search of the premises of M/s. Maheshwari Marketing, Indore and recovered packing slips received by them along with invoices kept in file No. 2. In his statement-dated 4.12.2008, Shri Parmeshwar Maheshwari,

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Proprietor of M/s. Maheshwari Marketing, Indore, stated inter alia that they purchased 12”x8” and 8”x8” wall tiles from M/s. “Monalisa”; that normally, they received Central Excise invoices and packing slip from the manufacturer; that the transportation of the goods from the factory premises to their premises was arranged by them and the transportation charge of Rs. 700/- per tonne was borne by them; that lorry receipt was prepared by the transporter for about 60% to 70% of the actual freight paid by them to the transporter; that the remaining freight amount, over and above the freight amount mentioned in the lorry receipt was paid by them in cash to the transporter for which they have not kept any details and have not accounted for the same in their books of accounts; that sales price is worked out by them by adding the cost of transportation, profit margin @ Rs. 5/- to Rs. 10/- per box for wall tiles & Rs. 10/- to Rs. 20/- per box for floor tiles; VAT @ 12.5% on the bill value, freight, etc.; that the actual price which they paid to the manufacturer was more than the price declared by the manufacturer in the invoice; that due to market compulsion and general trade practice, manufacturers were suppressing the MRP and paying less Central Excise duty and collecting the differential amount over and above the bill amount from them in cash; that cash amount over and above the bill amount was paid by them to M/S.Starand other tiles’ manufacturers of Morvi through their representative; that they paid cash amount of Rs. 15/- to Rs. 20/- per box over and above the invoice price to M/S.Starwhich was collected by Shri Paragbhai; that they have not maintained any record of the cash transaction.

53.13 I further find that M/S.Star have declared MRP of Rs. 60/- and Rs. 40/- per box for COM and REJ grade tiles respectively that were sold to M/s. Maheshwari Marketing. The ex-factory rates charged by M/S.Starfrom the said dealer was Rs. 33/- and Rs. 22/- per box for these grades respectively. On the other hand, the said dealer paid freight @ Rs. 12/- per box, added profit @ Rs. 15/- per box, paid cash to M/S.Star@ Rs. 15/- to Rs. 20/- per box and paid VAT @ 12.5% on the declared value and freight, thereby, taking the sale price beyond the MRP declared by M/s. “Monalisa”.

53.14 I also find that during the investigation, business premises of M/s. Om Ceramic, Ahmedabad was searched on 16.7.2008 and several incriminating documents were recovered. On 16.7.2008, statement of Shri Sanjaybhai Vaghjibhai Thoria, Proprietor of M/s. Om Ceramic was recorded under Section 14 of Central Excise Act, 1944, wherein, he inter alia, stated that tiles’ manufacturers of Morvi were showing lesser MRP and were collecting cash amount over and above the invoice price from the buyers; that over and above the invoice price, they paid Rs. 18/- to Rs. 20/- per box in cash to M/S.Starand other tiles’ manufacturers; that this amount was paid by them to Shri Dipakbhai of M/s. “Monalisa”.

53.15 Further, I find that on 18.12.2008, enquiry was caused with M/s. Jai Ambe Ceramics, Hyderabad and statement of Shri R. Ganesh Kumar, Proprietor of the said dealer was recorded under Section 14 of Central Excise Act, 1944. In his statement, he inter alia, stated that they did not purchase any tiles directly from M/s. “Monalisa”; that the local dealer for the tiles manufactured by M/S.Staris M/s. Megha Home Improvement Pvt. Ltd., that the said dealer was raising sales bill by showing Rs. 15/- to Rs. 20/- less per box than the price mentioned in the price-list; that they used to add Rs. 10/- to Rs. 15/- per box as their profit plus local tax; that the amount of Rs. 15/- to Rs. 20/- that was less shown by the dealer in their sales invoices was paid to the said dealer in cash and was over & above the invoice raised by them; that they used to charge this differential amount from their customers over and above the price shown by them in their invoice; that this differential amount was not shown in their statutory records.

53.16 I find from the price-list dated 25.8.2006 of Megha Home Improvement Pvt. Ltd., dealer of the tiles manufactured by M/s. “Monalisa”, that was placed on record by Shri R. Ganesh Kumar, Proprietor of M/s. Jai Ambe Ceramics, vide letter dated 18.12.2008 that MRP of 12”x8” tiles, 12”x8” dark tiles, 8”x8” regular tiles (white & ivory), 8”x8” special colours (C.Brown, Magenta, S. Blue, Verde, B. Green, Black, R. Brown, A. Marine), 8”x8” super special colours (Candy Roza, Burgundy, R. Blue) and exclusive colours (Blood Red, Orange) was shown as Rs. 160/-, Rs. 180/-, Rs. 185/-, Rs. 210/-, Rs. 265/- and Rs. 315/- per box. As against this, M/S.Stardeclared MRP of Rs. 100/-, Rs. 80/-, Rs. 60/- and Rs. 40/- for 12”x8” size tiles for PRE, STD, COM and REJ grade respectively.

53.17 I further find from the statement-dated 25.11.2008 of Shri Dineshbhai Khimjibhai Savaliya, Proprietor of M/s. Shreeram Enterprise, Rajkot that they had also purchased 12”x8” and 13”x10” size wall tiles from M/S.Starand they paid cash amount of Rs. 15/- to Rs. 20/- per box over and above the invoice price to Shri Deepakbhai/Shri Harshadbhai of M/s. “Monalisa”.

53.18 I also find that during investigation, business premises of M/s. Kairali Granites, Cochin was searched on 12.2.2008 and relevant documentary evidence in the form of seized files bearing No. 1,2,3,4 and 5 was resumed. Statement of Shri Velliylmadam Ramakrishnan Narayanan Emran, Proprietor of M/s. Kairali Granites was recorded under Section 14 of

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Central Excise Act, 1944, wherein, he inter alia stated that they purchased ceramic tiles through Shri Shailesh Patel, Partner of M/s. Shreejee Traders, Cochin; that they paid Rs. 41,000/- by cheque and Rs. 15,000/- to Rs. 18,000/- in cash per container to M/s. Purshpak Logistics Private Limited or M/s. Sea Connect who transported the ceramic tiles in container to their premises; that they did not maintain any account for cash transactions; that all the rough slips written by him were destroyed before one week on being cautioned from Shri Shailesh Patel of M/s. Shreejee Traders; that their average selling price of “Monalisa” Luster tiles having 8”x8”, 12”x8” and 10”x13” size was Rs. 270/- as against MRP of Rs. 100/- declared by M/s. “Monalisa”; that rate shown in the bills issued by them was accounted for in their books of accounts and the remaining amount collected in cash from the retail buyers was adjusted against payment in cash made by them to Shri Shailesh Patel of M/s. Shreejee Traders, Cochin.

53.19 Further, it is observed that on 15.2.2008, the officers searched the business premises of M/s. A. R. Tiles, Kollam and resumed relevant documentary evidence. Statement of Shri Bhargavan Anilkumar, Managing Partner of M/s. A. R. Tiles was recorded on 15.2.2008, wherein, he stated inter alia that as per the direction received from tiles’ manufacturer, they paid Rs. 41,000/- shown in the transport bill by cheque and remaining Rs. 20,600/- in cash against delivery of container at their godown; that amount mentioned in the invoice issued by the manufacturer was paid by cheque while almost equivalent amount was paid by them to the manufacturer in cash; that he confirmed having made part-payment of Rs. 25,000/- in cash to the representative of M/S.Staron 21.5.2004, as per details contained in seized private diary titled “Canara Bank – 2005”, marked as A/3.

53.20 I find that during investigation, statements of persons engaged in transportation of tiles from Morvi to different locations in India were recorded. All these persons, namely, Shri Yunus Ahmed Sherasia, Proprietor of M/s. Raja Roadlines, Shri Narendra Patadia, Proprietor of M/s. Dharamjeet Transports and Shri Kamlesh Mewada, Proprietor of M/s. Tirumala Transports have gone on record to state that lorry receipts were not issued showing full transportation charge; that as against transportation charge of Rs. 38,000/- for Morvi-Bangalore/Hyderabad trip, the lorry receipt was issued for Rs. 17,000/- only; that the remaining amount was collected in cash.

53.21 I further find that during investigation, various statements of shroffs/persons engaged in providing angadia service, etc. namely, Shri Chimanbhai Babaldas Patel – Proprietor of M/s. Patel Ashokkumar Kantilal Ni Company, Nashik (who received cash amounts from M/s. Amit Ceramics), Dr. Paresh Patel, Shri Bharat I. Patel, Shri Shailesh Marvania, Shri Bahadurali Hyderali Hemani and Shri Amarshibhai Bhanjibhai Patel were recorded under Section 14 of Central Excise Act, 1944. The common thread running across their statements is that they provided the avenues in the form of bank accounts opened with ICICI bank in the names of M/s. Ronak Enterprise, M/s. Vinayak Enterprise, M/s. J. B. Enterprise, etc. for transmitting money deposited by the dealers to M/S.Starfor a fixed consideration. They have admitted having paid the cash amounts deposited in the bank accounts of above named firms to the owner/representative of M/S.Starand once the cash was delivered to M/s. “Monalisa”, they destroyed the evidence relating to the transaction.

53.22 I also find the entire set of above evidences comprising of both – documentary and oral evidences was placed before Shri Pravinchandra Devkanbhai Bhimani Partner of M/S.Star 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 Pravinchandra Devkanbhai BhimaniPartner of M/S.Starwere recorded under Section 14 of Central Excise Act, 1944 on two different occasions, i.e. on 7.4.2008 and 20.5.2009. In his statement-dated 20.5.2009, Shri Dipakkumar Patel has inter alia stated that he agreed with the facts recorded in the panchanama-dated 22.12.2008 drawn at the premises of M/s. Amit Ceramics, Nashik, statement-dated 22.12.2008 of Shri Pravin Bumtaria, two diaries marked as A/19 & A/20, page Nos. 46, 50, 59, 65,72,73,77,78 & 95 of the file marked as A/25 that was seized from the premises of M/s. Amit Ceramics, Nashik as well as Exhibit-A & Exhibit-B prepared on the basis of the delivery challans found from the said file marked as A/25, statement-dated 27.12.2008 of Shri Chimanbhai Babaldas Patel, Proprietor of angadia firm M/s. Patel Ashokkumar Kantilal ni Company, Nashik, statement-dated 4.12.2008 of Shri Shankar Agrawal, Proprietor of M/s. Maa Sharda Traders, Indore,, files marked as A/1, A/2 and A/3 seized under panchanama-dated 4.12.2008 resumed from M/s. Maa Sharda Traders, mahazar dated 16.2.2008 drawn at the premises of M/s. Shalimar Marbles & Granites and M/s. Shalimar Mosaic Industries, Changanacherry, Kerala, notebook –“Bhavana Vidya Mandir Notebook” marked as Sl. No. 1 seized from the premises of M/s. Shalimar Marbles & Granites, statement-dated 16.8.2008 of Shri Hajaykumar M. K. @ Sanalkumar, Proprietor of M/s. Shalimar Marbles & Granites, panchanama-dated 8.2.2008 drawn at the premises of M/s. Shreejee Traders, Kochi, File No. 16 & page No. 48 of the said file resumed from the premises of the said M/s. Shreejee Traders, statements-dated 8.2.2008 and 13.10.2008 of Shri Shailesh

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Narsibhai Godhani of M/s. Shreejee Traders; panchanama-dated 23.12.2008 drawn at the premises of M/s. Surya Industries & M/s. Surya Marble and Stone Industries, Aurangabad, statement-dated 23.12.2008 of Shri Raju Manilal Patel, Proprietor of M/s. Surya Industries and statement-dated 23.12.2008 of Shri Hansraj Manilal, Partner of M/s. Surya Marble and Stone Industries, Aurangabad, panchanama-dated 23.12.2008 drawn at the premises of M/s. Maheshwari Marketing, Indore, statement-dated 4.12.2008 of Shri Parmeshwar Maheshwari, Proprietor of M/s. Maheshwari Marketing, Indore, panchanama-dated 16.7.2008 drawn at the premises of M/s. Om Ceramic, Ahmedabad, statement-dated 16.7.2008 of Shri Sanjaybhai Vaghjibhai Thoria, Proprietor of M/s. Om Ceramic, Ahmedabad, statement-dated 18.12.2008 of Shri R. Ganesh Kumar, Proprietor of M/s. Jai Ambe Ceramics, letter-dated 18.12.2008 produced by Shri R. Ganesh Kumar under which he submitted price-list of tiles manufactured by M/s. “Monalisa”, panchanama-dated 12.2.2008 drawn at the premises of M/s. Kairali Granites, Cochin, panchanama-dated 15.2.2008 drawn at the premises of M/s. A. R. Tiles, Kollam as well as statement-dated 15.2.2008 of Shri Bhargavan Anilkumar, Managing Partner of M/s. A. R. Tiles, Kollam. In his statement, Shri Pravinchandra Devkanbhai BhimaniPartner of M/S.Starhas categorically stated that they had declared lower MRP and ex-factory prices in their invoices and they were collecting the differential amounts in cash through their representatives as well as angadias. He also accepted that they had received the cash amounts mentioned in the diaries marked as A/19 & A/20 recovered from the premises of M/s. Amit Ceramics, Nashik; that these cash amounts were received by him on accounts of tiles supplied by them to M/s. Amit Ceramics without issuing Central Excise invoice, by issuing invoices showing lesser quantity and value and also by issuing invoices in the name of fictitious builders; that they had mis-declared the grade, quantity and size in the Central Excise invoices issued to M/s. Amit Ceramics; that they invariably declared MRP less than even the ex-factory prices; that they had received Rs. 20,80,000/- from M/s. Amit Ceramics, Nashik through angadia M/s. Patel Ashokkumar Kantilal Ni Co., Nashik, over and above the invoice price; that they declared lower MRP and collected amounts over and above the invoice price, in cash from M/s. Maa Sharda Traders, Indore, M/s. Shalimar Marbles & Granites and M/s. Shalimar Mosaic Industries, M/s. Shreejee Traders, Cochin, M/s. Surya Industries and M/s. Surya Marble & Stone Industries, M/s. Maheshwari Marketing, M/s. Om Ceramic, M/s. A. R. Tiles as well as all their dealers, as stated by him in reply to Q 45 put to him while recording his statement; that he admitted that M/S.Starhad received Rs. 11,84,179/- that were deposited by M/s. Shalimar Marbles & Granites and M/s. Shalimar Mosaic Industries in the ICICI bank account of M/s. Ronak Enterprise, M/s. J. B. Enterprise and M/s. Vinayak Enterprise; that he admitted having received Rs. 20/- per box in cash over and above the invoice price from M/s. Shreejee Traders; that he also admitted that Shri Vijay Patel collected the cash amount, over and above the invoice price from M/s. Shailesh Godhani of M/s. Shreejee Traders, Cochin; that he further admitted that on their behalf, Shri Paragbhai collected the cash amount over and above the invoice price from M/s. Maheshwari Marketing; that he personally collected the cash amount over and above the invoice price from M/s. Om Ceramic. With regard to the price-list submitted by Shri R. Ganesh Kumar, Proprietor of M/s. Jai Ambe Ceramics, he admitted that tiles manufactured and cleared from their factory were not bearing correct description, quality and MRP; that these tiles were attracting much higher MRP that 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.

53.23. This voluntary payment was made by them towards the Central Excise duty liability on the finished excisable goods cleared by them. Hence, the amount voluntarily deposited is required to be appropriated against the Central Excise duty demanded in this Show cause notice.

54.1 I further find that M/s Star used services of several shroffs and angadias for transfer of cash from their dealers. Such evidences have been recovered from several dealers during the investigations as discussed in the foregoing paras. These evidences further substantiate that M/s. Star were under-invoicing the ceramic tiles manufactured by them and were collecting the differential amounts through shroffs, angadias as well as through their representatives and the representatives of dealers. Thus evasion of central excise duty by M/s Star by way of undervaluation is established beyond doubt.

12.1. Further I find that the documentary evidences, duly corroborated by statements of the concerned persons which are discussed in detail hereinabove, clearly appeared to indicate that M/s Star were indulging in large scale evasion of central excise duty, by resorting to gross undervaluation of the retail sales price with intent to evade payment of central excise duty. Therefore, in order to ascertain the extension of evasion, Shri Pravinchandra Devkaranbhai

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Bhimani, Partner of M/s. Star was summoned under Section 14 of the Central Excise Act, 1944 on 12.4.08 and was called upon to produce all the documents maintained by them regarding production, clearances of ceramic wall tiles, the payments and collection realized by them. Accordingly, Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star appeared before the investigating officer on 01.05.08 and produced the documents such as central excise invoices, ledger accounts, cash books, etc. maintained by them since April, 2004 till March, 2008. All such documents were examined with reference to other documentary evidences gathered from the ends of the dealers of M/s Star, recorded the statements of Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star to obtain his clarifications. The statements as recorded are discussed in the following paras.

54.1.2.. Statement of Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star was recorded under Section 14 of the Central Excise Act, 1944 on 01.05.2008. During the course of recording his statement, he admitted about the undervaluation of ceramic wall tiles cleared from his factory and also confirmed that the MRP declared in their invoices did not include transportation charges, loading and unloading charges, breakage during transit, wholesaler’s profit margin, dealers’ profit margin, VAT element, etc. which resulted in undervaluation of ceramic wall tiles. He further stated that earlier their factory, viz., M/s. Star Ceramic was constituted as partnership firm having thirteen partners. The said Partnership deed was subsequently amended in the month of March, 2007 and executed the same with six partners, who looked after different responsibilities relating to manufacture and clearance of ceramic wall tiles in the said factory. He further stated that though there were six partners in the said factory, he was mainly looking after the entire day to day work and overall supervision over the production, maintenance of all the statutory records and marketing of their finished goods. In other words, he stated that the work related to receipt of raw materials, consumption of raw materials, production, sorting, packing, storage, dispatch of excisable goods, payments to raw material suppliers, marketing of the finished goods and collection of payments from various dealers took place under his knowledge and supervision.54.1.3 He has further admitted that in their factory, they were manufacturing ceramic ordinary wall tiles of 12”x8” size only having different grades, viz., Standard, Silver and Gold/D.D. which are marketed through out the country. However, during the month of August, 2007, they have installed new Roller Kiln in the said factory and started manufacturing of Ceramic Luster wall tiles of 12”x8” size having grades of Standard SP, Silver and Gold/D.D. The above grades of ceramic ordinary wall tiles were cleared in the market on paymentof Central Excise duty by declaring MRP of Rs.100/- [Standard], Rs.80/- [Silver] and Rs.60/- [Gold/D.D.]. However, with effect from 04.03.2008, they have revised MRPs of all varieties of wall tiles and accordingly Ordinary Standard grade tiles were cleared at MRP of Rs.140/- per box, Silver grade at MRP of Rs.110/- and Gold/D.D. grade tiles at MRP of Rs.50/- per box. Similarly, luster variety of wall tiles were cleared by declaring MRP of Rs.160/- [Standard SP], Rs.120/- [Silver] and Rs.50/- [D.D.] grades per box. On being asked about the system of fixing MRP, he stated that MRP was earlier fixed without consideration of taxes and transportation charges involved on it. In fact, the transportation charges and taxes were paid by the buyers in addition to their invoice value of the goods.

54.2. From the Investigations as discussed in the foregoing paras I find that M/s Star have evaded Central Excise duty by way of gross under-valuation of the ceramic wall tiles manufactured and cleared from their factory. The nature of evidences collected from their dealers situated in different parts of the country, transporters and shipping agents, shroffs and other persons connected with the business of shroffs, ICICI Bank and oral evidences recorded from Shri Pravinchandra Devkaranbhai Bhimani, as discussed in the foregoing paras, conclusively establish the entire modus operandi adopted by M/s Star for large scale evasion of duty of excise. Evidences collected by DGCEI during the investigation, are briefly summarized in the following paragraphs:-

54.2.1. Furfther during the investigation of the case, DGCEI conducted searches at the premises of a few dealers of M/s Star situated in different parts of the country. Documentary as well as oral evidences recovered by DGCEI from all these dealers established that M/s. Star mainly manufactured 12”x8” size of wall tiles of different colours and designs, each of which attract different prices. The pricelists recovered from the premises of M/s. N.K. Trading Co., Kollam, as discussed in para 4 supra reveals that they were receiving Monalisa brand tiles of different sizes, viz., 12”x8” each having different designs and colours. They have also manufactured some quantity of 8x8 size tiles. The said pricelists indicate the sale rates of tiles of 12”x8” size of Plain or Printed colours as Rs.125/- and Black colours as Rs.140/- per box against cash payment. The sale rates in terms of cheque payment for the wall tiles of 12”x8” of Plain and Printed colours was shown as Rs.127/- and Black colours as Rs.142/- per box. Similarly sale rates in respect of wall tiles of 8”x8” size having Ordinary, Special and SSPL colours were ranging from Rs.160/-, Rs.196/- and Rs.236/- against cash payments and

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Rs.168/-, Rs.204/- and Rs.244/- in terms of cheque payment per box respectively. Thus these documentary evidences reveal that M/s. Star were selling their tiles at different rates depending upon size, colour, design and grade and their dealers were also selling the same at different rates.

54.2.2 On further scrutiny of the Central Excise invoices issued by M/s Star I find that they have declared same MRP and ex-factory sale price for tiles of different grades, irrespective of the size of tiles, variety of tiles and the place to which it is cleared. The said unit during the year 2004-05 has declared MRPs as Rs.100/- for STD grade, Rs.80/- for SILVER grade and Rs.60/- for DD grade. However, the sale rates of such wall tiles during the years 2005-06 and 2006-07 were reduced and MRPs for the same declared as Rs.90/- for Standard grade, Rs.70/- for Silver grade and Rs.50/- for D.D. grade. Thereafter, the MRPs of the wall tiles were revised and declared as Rs.100/- for Standard grade, Rs.80/- for Silver grade and Rs.60/- for Gold/D.D. grade during the year 2007-08 [upto February, 2008]. After initiation of investigations by DGCEI, M/s Star has again revised their MRPs w.e.f. 04.03.08 and declared as Rs.160/- for Standard Luster grade tiles, Rs.140/- for Standard Ordinary grade tiles, Rs.120/- for Silver Luster grade tiles, Rs.110/- for Silver Ordinary grade tiles and Rs.50/- for D.D. grade tiles. M/s. Star was declaring same MRPs for the tiles of all the designs and colours for the buyers of all the destinations with intent to evade duty of excise.

54.2.3. Therefore, Investigations as discussed in the foregoing paras clearly establish that each size and design of tiles attracts a different price in the market. However, by not separately showing such sizes or designs in their Central Excise invoices, as discussed above, M/s Star 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 all the sizes of wall tiles are the same. Documentary evidences recovered from the various premises, as discussed in the foregoing paras conclusively establish that M/s Star were collecting differential prices of each such design and size of tiles, over and above their declared invoice value, by cash.

54.3.1. Therefore, Investigations from all the aforesaid dealers conclusively establish that M/s. Star was not showing the actual MRP in their Central Excise invoices. All these dealers, in their respective statements, have categorically explained that M/s Star 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. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s Star has also confirmed in his statements that the invoices of M/s Star contained only part of the actual value of tiles and the value, over and above the invoice value, was collected in cash by them from all their dealers.

54.3.2 Further I find that DGCEI recovered irrefutable evidences from several premises which establish that the MRPs declared by M/s Star in their invoices were not actual. The documents recovered from their dealers conclusively establish that the tiles manufactured by them are sold in the market at much higher rates than the MRP declared by M/s. Star. Quotation, delivery slips, and pricelists issued by dealers also indicate that the prices charged by them from their buyers were in excess of the MRP declared in the invoices of M/s. Star. The owners of these dealer firms have categorically admitted that the prices mentioned in these documents were the actual prices at which wall tiles manufactured by M/s Star were sold in the market. They have also admitted of collecting the differential value of tiles, over and above the declared bill value, in cash from their buyers.

54.3.3. Further I find that the pricelists recovered from M/s. N.K. Trading Co., Kollam, as discussed in para 4 supra, reveals that the sale rates of tiles of 12”x8” and 8x8” of M/s. Star were ranging from Rs.125/- to Rs.236/-, depending upon colour and designs. Further, the delivery challans/Estimation slips of M/s. Ayyan Ceramics, Chennai recovered from the premises of M/s. T. Lakshmi Kanthan & Sons, Chennai, indicating the sale rate of Monalisa brand wall tiles manufactured by M/s. Star as Rs.125/- per box. In addition to the above amount, M/s. T. Lakshmi Kanthan & Sons have charged VAT @ 2% and transportation charges while selling the above said Monalisa brand wall tiles from their customers. However, M/s. Star were declaring MRP of Rs.100/- for STD grade tiles of size 12”x8” for the tiles of all the designs and colours. The sale rates by different dealers were also more than the declared MRPs, as discussed in foregoing paras. Thus the investigations reveal that M/s. Star were not declaring correct MRPs in their invoices and were evading duty of excise.54.3.4. Further I find that Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star in his statements recorded on 01.05.2008 and 16.04.2009 categorically admitted under-valuation of tiles by mis-declaring the MRP of tiles, as mentioned above. The aforesaid documentary and oral evidences conclusively establish evasion of Central Excise duty by undervaluation.

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Moreover, he has also admitted of receiving cash amounts, over and above their declared invoice value through the shroffs and angadias.

54.4.1. From the Investigation conducted by DGCEI from the dealers and transporter, as discussed in the foregoing paras, I find that M/s Star 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 atleast Rs. 48,000/- for the Southern States. Similarly, transportation cost by sea in coastal vessels from Mundra or Kandla to Kochi is atleast Rs. 66,000/- per container load of 28 MT of tiles. Freight amount by sea is shown by all dealers of Kerala as maximum Rs. 40,000/- per container and by road as Rs.20,000/- for 16 MT capacity truck. Investigation from the container forwarders revealed that the charges for leasing the container alone in fact cost Rs.40,000/-.

54.4.2. Further I find that 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. In the entire deal, M/s Star 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 of Income Tax and Service Tax. Similarly, the dealers were also benefited by reducing their liability of VAT.

54.4.3 From further Investigation also I find 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, toll gate 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 Star 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.

54.4.4. Further I find that 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 as provided under the statute evidently covers duty, taxes and other post-clearance expenses. In the instant case, after availing abatement of 45% from the mis-declared MRP, M/s Star 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 Star 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 Star from their statutory records.

54.5.1. Further the investigations from the dealers as discussed in foregoing paras reveal that M/s Star were actually 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 the representative of M/s Star 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. Star 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. Star. M/s. Star collected cash from M/s. N.K. Trading Co., Kollam through different shroffs’ firms, viz., M/s. Shree Bhagwati Enterprise, M/s. Shree Maruti Enterprise, M/s. Sagar Enterprise, M/s. Shiv Finance and M/s. Ganesh Agency, as discussed in para 4 supra. They have also collected cash amounts from M/s. Amit Ceramics, Nashik through angadia firm,

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viz., M/s. Ashokkumar Kantilal Patel & Co., Nashik, as discussed in para 5 supra and M/s. Shreeji Marketing, Hyderabad through angadias M/s. New Payal & Co. and M/s. J.J. Patel & Co., Hyderabad, as discussed in para 7 supra. They have also directly collected cash amounts from Shri C. Rajasekaran, owner of M/s. Glazeware Trading Co., Madurai, as discussed in para 6 supra.

54.5.2. Therefore,the scrutiny of the records seized from M/s. Shree Maruti Enterprise and M/s. Bhagwati Enterprise, Rajkot and oral evidences of the responsible person of the shroff firms recorded under Section 14 of the Central Excise Act, 1944 during the course of investigation of the case, as discussed in para 8 supra, evidences retrieved prove beyond doubt that the dealers of M/s. Star had deposited cash, over and above invoice value, in the accounts of M/s. Shree Maruti Enterprise, M/s. Shree Bhagwati Enterprise, M/s. Ganesh Agency, M/s. Shiv Finance and M/s. Sagar Enterprise of Rajkot. All these receipts have been admitted by Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star. Besides, oral evidences recorded from all the dealers from where DGCEI conducted investigations, as discussed aforesaid, indicated transfer of cash amounts to M/s Star by various means.

54.5.3. Out of the various methods of transferring cash amounts from different locations of the country to the owners of M/s Star, the most common method was by getting the cash amounts deposited into the ICICI Bank accounts operated by various shroffs in different names and through selected angadias. Investigations conducted at shroff end provide irrefutable documentary evidences showing that the ICICI Bank accounts of M/s. Shree Maruti Enterprise, M/s. Shree Bhagwati Enterprise, M/s. Ganesh Agency, M/s. Shiv Finance and M/s. Sagar Enterprise were utilized by M/s. Star for getting such cash transfers from their buyers/dealers. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s.Star Ceramic in his statements dated 01.05.08 and 16.04.09 has categorically admitted to have utilized the ICICI Bank accounts of above mentioned shroffs for collecting cash amounts from their dealers located through out the country. He has also admitted to have utilized the services of selected angadias, viz., M/s. Ashokkumar Kantilal Patel & Co., Nashik, M/s. New Payal & Co. and M/s. J.J. & Co., Hyderabad for collecting cash amounts from their dealers located at Nashik and Hyderabad.

54.5.4. From the investigations with the dealers I find that they have no business with the firms in whose accounts they deposited cash amounts; that the cash was deposited in such accounts at the behest of M/s Star; that the amounts deposited in cash were the amounts over and above the invoice amounts declared by M/s Star towards the purchase of tiles by them; that the name of the firm, account No., Name of the bank and PAN No. were intimated to them by the concerned persons of M/s Star 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 Star.

54.5.5. Further the officers of DGCEI obtained the Account statements of the aforesaid shroff firms from the concerned banks. The scrutiny of the Account statements reveals that the amounts shown as deposited as per the documents seized from the premises of the dealers of M/s Star are reflected in the Account statements of the aforesaid firms. Thus the deposit of the amounts in the accounts of the firms controlled by the shroffs is confirmed through the Account statements.

54.5.6. Therefore,the inquiries from the shroffs who controlled the accounts of the aforesaid firms, as discussed in para 8 supra, I find that they 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 Star on production of fax copy of the pay-in-slip and confirmation of deposit of cash in their account. The investigations from the shroffs further reveal that M/s Star was getting drafts from their dealers and such bearer drafts were given to the suppliers of raw materials who got the same discounted from the shroffs. Thus in order to keep their manufacturing cost upto the under-declared MRP, M/s Star were taking bills of raw materials at reduced rates and were paying the differential amounts either in cash or through the bearer demand drafts, obtained from their dealers. Thus the investigations reveals that in

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order to evade duty of excise, VAT etc., M/s Star were purchasing raw materials at reduced rates to keep lower cost of production, were mis-declaring MRP and collecting cash /bearer demand drafts from the buyers, a part of which was paid to the raw material suppliers.

54.5.7. The statements of the dealers regarding deposit of cash amounts into such bank accounts, the entry of such payments in the bank statements of the aforesaid firms, categorical admission of withdrawal of cash amounts from the said accounts by the shroffs and payments to representative of M/s Star thus prove that M/s Star were collecting amounts, over and above the invoice value, in cash from their buyers.

54.5.8. The cash amounts collected by M/s Star, 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.

55.1.1. Inquiries conducted by DGCEI as discussed in the foregoing paras indicate that M/s. Star was manufacturing mainly wall tiles of 12”x8”size. They have also manufactutred wall tiles of 8”x8” size on trial basis. Records including the pricelists, delivery challans/Estimation slips etc. as discussed in the forgoing paras also contain details of these sizes. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star, in his statements discussed herein above, confirmed that M/s. Star have been manufacturing wall tiles of aforesaid sizes. Scrutiny of the invoices issued by M/s. Star during the period from April, 2004 to February, 2008 reveals that they have not declared different MRPs for the buyers or dealers situated in different parts of the country. Thus M/s. Star have declared same MRP for all the buyers throughout India. 55.1.2. Further Inquiries from M/s N.K. Trading Co., Kollam and other dealers of M/s Star I find that M/s. Star was manufacturing mainly 12”x8” size of wall tiles of different colours and designs. They have manufactured some quantity of 8x8 size tiles also. The documents which were recovered from various premises of dealers as referred to in the foregoing paras, irrefutably revealed that each size, design, colour and grade of wall tiles manufactured by M/s. Star is sold at widely varied selling prices. However, scrutiny of the invoices issued by M/s. Star reveals that during the period from 01.04.2004 to 29.02.2008, they have not declared details of such sizes, colours and designs in the invoices. All sizes and designs of wall tiles were cleared by them by declaring the description as “Ceramic Glazed Tiles”, without indicating the size, colour and design of the tiles. In most of the clearances, they were showing same MRPs of Rs.90/- to Rs.100/- for Standard grade, Rs.70/- to Rs.80/- for Silver grade and Rs.50/- to Rs.60/- for Gold/D.D. grade tiles, irrespective of size, colour and design of tiles.

55.1.3. Further Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star, in his aforesaid statements, has stated that they have only manufactured ordinary wall tiles based on white/ivory printed and black colour designs during the years 2004-05 till July, 2007. He has further stated that they have installed new Roller Kiln in the above said factory in the month of August, 2007 and as such started manufacture and clearance of luster variety of wall tiles. In support of his above submission, he produced a Photostat copy of ledger account maintained by them for the period from 01.04.07 to 09.05.07 wherein purchase of parts meant for new roller kiln was mentioned. He has also produced a copy of the revised pricelist with effect from 04.03.2008, according to which, the MRP declared for ordinary and luster Standard wall tiles was Rs.140/- and Rs.160/- per box respectively. He further stated that it would not be possible for him to produce any records indicating size-wise and design-wise clearances of wall tiles made during the previous years. Although records seized from several premises indicate receipt of different designs of tiles by them, since it does not contain enough quantities which could be considered as representative samples, such records also could not be made basis for computation of differential duty in respect of all designs of tiles cleared by M/s. Star at undervalued MRPs. He further stated that the ratio of clearance of Luster grade tiles could be 15 to 16% percent of the total production, as they have manufactured and cleared mainly

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Ordinary grade tiles. Ratio of clearances of Luster grade tiles during April, 2008 to December, 2008 also reveals that about 15% of tiles were luster grade. Therefore, computation of differential duty in respect of the undervalued clearances is to be worked out on the basis of above records and evidences.

55.1.4. Therefore,taking into consideration of the ledger copy submitted by Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star, indicating the purchase of parts meant for installation of new roller kiln for manufacture of luster quality of wall tiles, it is evident that they have only manufactured and cleared Ordinary grade wall tiles during the period from 01.04.04 to 31.07.07, as they were having installed machines of old and locally made roller kiln and coal fired gassifire plant. Thereafter they have started manufacture and clearance of luster grade wall tiles on account of the installation of newly purchased Roller kiln in the month of August, 2007. During the period 01.04.04 to 31.07.07, M/s. Star have cleared wall tiles by declaring grade Standard at MRP of Rs.90/- to Rs.100/-, Silver at MRPs of Rs.70/- to Rs.80/- and Gold/D.D. at MRP of Rs.50/- to Rs.60/- per box. It is thus evident that during the financial year 2004-05 to 31.07.07, M/s. Star have manufactured only ordinary grade of wall tiles of Standard, Silver and D.D. grades. M/s. Star w.e.f. 04.03.08 for 12”x8” size tiles have declared minimum MRP of Rs.160/- for Luster wall tiles of Standard SP grade and Rs.140/- for Ordinary wall tiles of Standard SP grade. The MRPs of erstwhile Silver grades have been declared as Rs.120/- for Luster wall tiles and Rs.110/- for Ordinary wall tiles per box respectively. Similarly, the MRP for Gold/D.D. grade tiles has been declared as Rs.50/- per box, irrespective of luster and ordinary grades. Therefore, the above said MRPs w.e.f. 04.03.2008 has been taken for calculating the differential duty for the period from 01.04.2004 to 28.02.2008.

55.2.1. Further I find that the investigations as discussed here-in-above in detail, duly supported by the seized documentary evidences such as delivery slips/estimation slips/pricelists recovered from the dealers have clearly established that the ‘maximum retail sale price’ of the ceramic wall tiles of different grades & varities for different sizes were different. The sale rate of tiles of M/s Star as per the evidences collected from different dealers was as under:-

Name of the Dealer Size of the Tiles

MRP per box declared by

M/s StarSelling Rate of the

dealer per box

M/s. N.K. Trading Co., Kollam

12” x 8” Rs. 100/-Rs. 140/- by cash and Rs. 142/- by cheque per box

8”x8” Rs.100/-Rs. 160/- to Rs.236/- by cash and Rs.168/- to 244/- by cheque

M/s. T. Lakshmi Kanthan & Sons, Chennai 12”x8” Rs.100/- Rs.152/- to Rs. 159/-

55.2.2. Selling rates mentioned in the above table pertain to southern States. Freight rates for southern States were between Rs.25/- to Rs.35/- per box of tiles. Freight rates for Madhya Pradesh, Delhi,and Maharashtra were varying between Rs.10/- to Rs.15/- per box and for Gujarat the same were about Rs.5/- per box. M/s. Star has declared uniform MRP for whole of the country. Therefore, equalized freight amount would affect uniform MRP for whole of India.

55.2.3. I find that M/s. Star with effect from 04.03.08 have declared MRP of Rs.140/- for Standard Ordinary wall tiles and Rs.160/- for Standard Luster wall tiles of sizes 12”x8”. As per pricelist recovered from M/s. N.K. Trading Co., Kollam, the sales rates of such tiles were ranging Rs.140/- to Rs.142/- per box for 12x8 size Standard Ordinary grade and Rs.160/- to Rs.236/- for 8x8 size Standard Ordinary grade. M/s. T. Lakshmi Kanthan & Sons, Chennai sold 12”x8” size tiles at Rs.152/- to Rs.158.79/- per box. The comparison of prices declared by M/s Star w.e.f. March 2008 to December, 2008 and the sale prices of tiles as per evidences recovered from their dealers, reveal that the tiles of M/s Star were being sold by different dealers at the rates not less than the MRPs declared by them w.e.f. March 2008.

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14.2.4. With effect from 04.03.08, M/s Star declared correct MRPs in respect of tiles of different sizes, designs and grades. During the period from 04.03.2008 to 31.12.2008, M/s. Star have cleared wall tiles of sizes 12”X8” to various dealers, by showing size, grade and colour/design of the tiles in the invoices. The documentary evidences discussed in foregoing paras reveal that upto 29.02.08, M/s. Star were manufacturing mostly tiles of size 12”x8”. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star contended that they started manufacturing luster variety of tiles only after July 2007. There is no contrary evidence to this contention. It therefore appears that upto 31.07.2007, M/s. Star were manufacturing tiles of size 12”x8” of Ordinary grade only. They have manufactured very small quantity of 8x8 size tiles. As the sale rates of tiles of different sizes, designs, colours and grades were different and details of actual clearances of tiles of different sizes, designs and colours are not known, the duty on past clearances has been calculated on the basis of revised MRPs declared by M/s. Star. 55.2.5.Further pricelists recovered from M/s. N.K. Trading Co., Kollam I find that tiles of size 8x8 manufactured by M/s. Star have also been sold in the market. M/s. Star has not mentioned the size of tiles on the Central Excise invoices. They are not manufacturing 8x8 size tiles presently. Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star in his statement dated 16.04.09, on being asked, stated that they had made only trial production of size 8x8 and had manufactured only 8000 – 10000 boxes of size 8x8. Accordingly quantity of 10,000 boxes has been taken as production and clearance quantity of size 8x8 tiles. MRP of tiles 8x8 size was at least Rs.25 – Rs.40 higher than the MRP of 12x8 size tiles. Accordingly, MRP of 8x8 size tiles is taken as Rs.175/- per box.

55.3. Therefore,I find that the MRPs declared by M/s Star during the period from 04.03.2008 to 31.12.2008 have been taken for calculating duty short paid by them during the period April, 2004 to February, 2008. The MRPs declared during the preceeding period were never less than the MRPs declared during the year 2008-09. The officers of DGCEI have conducted an inquiry about the MRP pattern of the reputed brands during the financial years 2004-05 to 2007-08. Even considering the MRP pattern for wall tiles, floor tiles and vitrified tiles manufactured by various reputed manufacturers, which was prevailing in the market during the period from 2004-05 to 2007-08, it is evident that prices were at a maximum during the year August, 04 to Dec,2005 and thereafter, the same were consistently decreased over the period upto 2007-08. Results of an inquiry conducted by DGCEI on the MRP pattern for the past period are discussed in the following paras:-

55.4.1. Further M/s SPL Ltd are manufactures of “Somany” brand of ceramic wall tiles. Part of their requirement was being got manufactured from different manufacturers, some of which are located in Gujarat. They are selling ceramic wall tiles of different variety of 8”x8”, 12”x8”and 12”x18” sizes.

55.4.2. Further M/s SPL Ltd are having zone-wise MRPs of their ceramic wall tiles. Entire country has been divided into four zones, North, South, East and West. MRPs of ceramic wall tiles of M/s SPL Ltd effective from 01.05.2003 and for subsequent period were obtained from them. These MRPs have been consolidated in a chart attached as Annexure – B.1 to this notice.

55.4.3.Further on Perusal of the above chart reveals that M/s SPL Ltd were having MRP of Rs 336/- per box for 8”x8” size plain variety wall tiles during 2003-04, and MRP of Rs 310/- per box during current year for the same tiles. MRPs of these tiles, during the past years from 2003-04 onwards, have never come below the current MRPs of the same tiles. Similar Maximum Retail pricing pattern of ceramic wall tiles for other zones and other varieties is clearly evident from the above chart.

55.5.1. Further M/s SPL Ltd are manufactures of “Somany” brand of ceramic floor tiles. Part of their requirement was being got manufactured from different manufacturers, some of which are located in Gujarat. They are selling ceramic floor tiles of different variety of 12”x12”, 16”x16” and 17”x17” sizes.

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55.5.2. Further M/s SPL Ltd is having zone-wise MRPs of their ceramic floor tiles. Entire country has been divided into four zones, North, South, East and West. MRPs of ceramic floor tiles of M/s SPL Ltd effective from 07.01.2004 and for subsequent period were obtained from them. These MRPs have been consolidated in a chart attached as Annexure –B.2 to this notice.

55.5.3. Further Perusal of the above chart I find that M/s SPL Ltd were having MRP of Rs 501/- per box for 16”x16” size Radiance variety floor tiles during 2004-05, and MRP of Rs 415/- per box during current year for the same tiles. MRPs of these tiles, during the past years from 2004-05 onwards, have never come below the current MRPs of the same tiles. Similar Maximum Retail pricing pattern of ceramic floor tiles for other zones and other varieties is clearly evident from the above chart.

55.6.1.Further M/s H & R Johnson (I) Ltd are manufactures of “Johnson” brand of ceramic wall tiles. Part of their requirement was being got manufactured from different manufacturers, some of which are located in Gujarat. They are selling ceramic wall tiles of 12”x8” size.

55.6.2. Further M/s H & R Johanson (I) Ltd are having zone-wise MRPs of their ceramic wall tiles. Entire country has been divided into four zones, North, South, East and West. MRPs of ceramic wall tiles of M/s H & R Johanson (I) Ltd effective from 29.11.2004 and for subsequent period were obtained from them. These MRPs have been consolidated in a chart attached as Annexure – B.3 to this notice.

55.6.3. Further on Perusal of the above chart I find that M/s H & R Johanson (I) Ltd were having MRP of Rs 230/- per box for 12”x8” size plain/print variety wall tiles during 2004-05, and MRP of Rs 205/- per box during current year for the same tiles. MRPs of these tiles, during the past years from 2004-05 onwards, have never come below the current MRPs of the same tiles. Similar Maximum Retail pricing pattern of ceramic wall tiles for other zones and other varieties is clearly evident from the above chart.

55.6.4. Therefore from above facts and aforesaid discussion I find that current MRPs are not on higher side when compared to actual MRPs of past period of about five years. Therefore Central Excise duty based on current MRPs of ceramic tiles would be the minimum amount of evasion by M/s. Star.

55.7 Thus, the MRPs ascertained for different quality, grade and size of tiles are tabulated as under:-

Size ORDINARY WALL TILES LUSTER WALL TILES

12”X8” STANDARD SILVER STANDARDRs.140.00 Rs.110.00 Rs.160.00

8”x8” Rs.175.00 Rs.135.00 --

55.7.1. Further The officers of DGCEI have worked out duty short paid by M/s. Star, as detailed in Annexures-C.1 to C.4 enclosed to this notice. It is evident from said Annexures that during the period 01.04.2004 to 29.02.2008, M/s. Star have short paid duty amounting to Rs.30,21, 431.29 by way of under-valuation.

56.1. M/s. Star Ceramic, 8-A, National Highway, Makansar, Morbi, Distt. Rajkot has 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 payment of appropriate Central Excise duty;

(ii) They have manufactured and cleared the ceramic wall 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;

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(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 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 details of manufacture and clearance of such finished goods cleared;

56.2. In view of aforesaid violations of Central Excise Act, 1944 and Rules made thereunder, I find that M/s Star Ceramic is liable for 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 Star is liable to penal action under Section 11AC of the Act, ibid. The duty not paid on clandestinely cleared goods and 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 11A of the Act, ibid. They are also liable to pay interest under Section 11AB of the Act, ibid on duty short paid.

56.3 Further I find that Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star Ceramic is masterminded the evasion of Central Excise duty on the finished excisable goods, viz., ceramic wall tiles, manufactured and cleared by M/s. Star in as much as all the day to day transactions are closely monitored and supervised by him. All the dealer firms appear to have contacted him over phone or fax for placing their orders, and he appears to be the person who has passed on required instructions for loading and dispatch of the consignments. He further appears to have closely handled the realization of unaccounted portion of sale proceeds, as the remittances of such unaccounted amounts in to the bank accounts of third parties were immediately brought to his attention by the dealer firms by way of fax / phone. He appears to be the key person in arranging purchase of required raw materials, production, storage, dispatch, and to transport and supply the subject goods to the dealer firms. His active connivance in the commission of offence appears to have been clearly established from the statements of various dealers recorded under Section 14 of the CEA’1944 wherein they have inter-alia stated that they were in contact with Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star. 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., appears to be closely monitored and appropriate decisions and actions are taken by Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star since all the other directors of the company were reporting to him. Further it is established beyond doubt that he is in-charge of all the daily business being transacted by M/s. Star. He admitted that the sale proceeds in respect of excisable goods by resorting to undervaluation were realized in the form of cash through bank accounts of third parties. Thus, he has concerned himself in manufacturing, storing, depositing, concealing, removing, selling and in all such manners dealt with excisable goods on which short payment of Central Excise duty has been made. Thus he had reasons to believe that such goods so removed are liable for confiscation. Yet he dealt with such goods in contravention of the Central Excise Act and the Rules made there-under. It therefore, appears that Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star liable to penal action under Rule 26 of Central Excise Rules, 2002.

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57.1. Further During the course of investigations, M/s. Star admitting to the evasion of Central Excise duty have voluntarily submitted the following post-dated cheques for total amount of Rs.10,00,000/- pending further investigations. The following cheques were deposited in the bank on due dates and got the amount realized into the Govt. Account:-

Cheque No.& Date Amount (Rs.) GAR Date Date of Credit to Govt

912119 dated 08.05.08 2,00,000/- 08.05.08 13.05.08912120 dated 08.06.08 2,00,000/ 08.06.08 13.06.08912121 dated 08.07.08 2,00,000/ 08.07.08 09.07.08912122 dated 08.08.08 2,00,000/ 08.08.08 09.08.08912123 dated 08.09.08 2,00,000/- 08.09.08 09.09.08

TOTAL 10,00,000/-

57.2. This voluntary payment of Rs.10,00,000/- was made by them towards the Central Excise duty liability on the finished excisable goods cleared by them. Hence, the amount voluntarily deposited is required to be appropriated against the Central Excise duty demanded in this Show cause notice.

58 It was noteworthy that none of the persons including Pravinchandra D.Bhimani Partner of M/s.Star, and Shri Thangavelam,proprietor 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.Star from the dealers on account of sale of tiles at higher price than MRP, it was 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.Star 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.Star that they have not violated the provisions of Section 4A (4) of Central Excise Act, 1944 was not acceptable and accordingly, the same was rejected.

59. M/s.Star 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 they all as the oral evidence especially when they are not jointly tried with them; that the entire case was 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 decwasions in Parmarth Iron Pvt. Ltd., 2010 (255) ELT 496 (All.), Videocon International Ltd., 2010(250) elt 553 (Tri.-Mumbai), Nico Extrthemions P. Ltd., 2009 (248) ELT 497 (Tri.-Ahmd.), Silkfab Exports, 2007 (208) ELT 359 (Tri.-Bang.), Aum Aluminium Pvt. Ltd., 2005 (190) ELT 393 (Tri.-Mumbai), Sanket Food Products Pvt. Ltd., 2005 (188) ELT 107 (Tri.-Del.), Trinity Electric Syndicate Pvt. Ltd., 2005 (179) ELT 53 (Tri.-Mumbai), Sai Kripa Exim (P) Ltd., 2003 (156) ELT 225 (Tri.-Bang.), Amrutbhai Vasudevbhai Patel, 2003 (156) ELT 222 (Tri.-Mumbai) and Rajam Indthemtries (P) Ltd., 2010 (255) ELT 161 (Mad.). It has been further argued that since the documents were not seized from their cthemtody or control of any person, who was jointly tried with them, there cannot be any presumption in law regarding the truth of the contents of such documents. They have also cited that the relied upon statements of their partner are neither true nor voluntary and have been recorded under duress and they do not subscribe to the correctness thereof. According to them, the statements of other witnesses have been recorded theming coercive method and their statements are also neither true nor voluntary.

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60. I find that it was a matter of record that before recording the statements of Shri Shri Pravinchandra Devkaranbhai Bhimanidirector of M/s.Star, and 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 persued them before giving testimony about the truth and correctness thereof. It was seen from their 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 persued 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 dwasagreed with the contents thereof. It was 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 Pravinchandra Devkanbhai Bhimaniof M/s.Star or any of the other persons whose statements were perused by Shri Dipakkumar Patel before giving his own statements, have filed any retraction at any point in time. Thus, there was no evidence to support the plea advanced by M/s.Star that statements of the witnesses as also those of Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star were recorded under duress or threat. Moreover, for the reason stated above, this was 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 wassuance of Show Cause Notice, so as to give rwase to the requirement of cross-examination of the author/witnesses.

61. I find that M/s.Star 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 fora. The wassue 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 was entitled to cross-examine the witnesses whose statements were recorded, relied upon and referred to in the Show Cause Notice. Hon. High Court answer ared this question in the negative by holding that there was no right, procedurally or substantively or in compliance with natural jthemtice and fair play, to make available the witnesses whose statements were recorded, for cross-examination before the reply to the Show Cause Notice was filed and before adjudication commences. Hon. High Court further held that it was 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 jthemtice would require in the absence of any statutory provwasion, that the person whose statement was recorded was made available for cross-examination to test the veracity of the statement. On comparison, it appears that the facts in hand are dwastinguwashable from the relied upon judgment inasmuch as the documents and statements collected from the dealers were placed before Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star for verifying its veracity before recording his statement and Shri Pravinchandra Devkanbhai Bhimani partner of M/s.Star has agreed with the contents thereof only after perweing the evidence that was relied upon in the Show Cause Notice. In the relied upon decision in the case of M/s. Videocon International Ltd., 2010 (250) ELT 553 (Tri.-Mumbai), Hon. Tribunal allowed the request cross-examination by observing that the entire case was based on the Panel Report of the Experts, various panchnamas and the statements of the persons recorded. However, it was not clear whether this decision was rendered in the facts and circumstances of the case wherein, akin to the case in hand, the partner of the unit had availed the opportunity to pertheme the entire set of evidences and had agreed with the same by way of his statement recorded under Section 14 of Central Excise Act, 1944. In the relied upon decwasion in Nico Extrthemions P. Ltd., 2009 (248) ELT 497 (Tri.-Ahmd.), Hon. Tribunal has observed that cross-examination cannot be claimed as a matter of right and the request for cross-examination has to be examined in the context of facts and circumstances of that particular case. On finding that Revenue’s case about wrong availment of Cenvat credit without actually receiving the inputs depended upon the statements of the transporters, owners of vehicles and the drivers of the said vehicles and that the said statements are in contradiction to the statements of the

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buyers, Hon. Tribunal allowed the request for cross-examination of the director, driver and employees of their clients. In this case, there was no such contradiction and hence, this decwasion was not applicable to the present case. In the case of Silkfab Exports, 2007 (208) ELT 359 (Tri.-Bang.), Hon. Tribunal disapproved of the order of Commissioner in disallowing cross-examination by observing that he did not give proper reasons for denying the cross-examination. In the context of present case, it was evident from the record that Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star has persued the evidences and has agreed with the contents of the same. Therefore, the relied upon decision was distinguishable on facts and accordingly, the same was not applicable. In the relied upon decision in case of M/s. Aum Aluminium Pvt. Ltd., 2005 (190) ELT 393 (Tri.-Mumbai), Hon. Tribunal directed the adjudicator to summon the witness and put such questions as deemed necessary, even amounting to nature of cross-examination, to establish the truth. In the present case, I find that the Shri Pravinchandra Devkanbhai Bhimani partner of M/s.Star has accepted the documentary and oral evidences placed before him as true and hence, the request for cross-examination of the witnesses was obviated. In the relied upon case of M/s. Sanket Food Products Pvt. Ltd., 2005 (188) ELT 107 (Tri.-Del), Hon. Tribunal observed that the purpose of cross-examination was always to test the correctness of the testimony made by a witness at the back of the other party. Applying this test to the facts in hand, I find that the purpose enunciated by Hon. Tribunal has been duly observed in this case inasmuch as entire set of evidences was perused by Shri Pravinchandra Devkanbhai Bhimani partner of M/s.Star before issuance of Show Cause Notice and he found the same to be correct, as stated by him in his statements recorded under Section 14 of Central Excise Act, 1944. In the case of Trinity Electric Syndicate Pvt. Ltd., 2005 (179) ELT 53 (Tri.-Mumbai), Hon. Tribunal noted that denial of cross-examination deprived the appellants therein of the opportunity to place certain documents on record in connection with import of certain machines. In contrast, during the course of adjudication proceedings, M/s.Star have not sought to refer to any particular document or documents that they propose to bring on record after carrying out cross-examination of the witness, particularly, when Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star has testified the correctness of the documents and statements gathered from the dealers. Therefore, this decision does not advance the cause of M/s.Star. I find that the relied upon decision in the case of M/s. Sai Kripa Exim (P) Ltd., 2003 (156) ELT 225 (Tri.-Bang.) was rendered by Hon. Tribunal by relying on the observation made by Hon. Supreme Court in the case of UOI and Others v. GTC Industries Ltd., reported in [2003 (153) E.L.T. 244 (S.C.) = 2003 (55) RLT 508 (S.C.)] that “an adverse finding could not have been recorded against GTC by relying upon the oral submissions made by a co-noticee at the hearing without any supporting material on record, providing due opportunity to GTC to meet the same”. However, it was seen that the Show Cause Notice does not rely solely on the oral evidences gathered from the dealers inasmuch as statements of dealers were recorded on the basis of documentary evidence resumed from their possession, correctness of which was duly admitted by the partner of M/s.Star. Therefore, this decision was not applicable to the facts of the present case. M/s.Star has also relied upon the decwasion of Hon. Tribunal in the case of Amrutbhai Vasudevbhai Patel, 2003 (156) ELT 222 (Tri.-Mumbai), wherein, it was held that importer had every right to ask for cross-examination those witnesses whose statement, were to be used against them. In this regard, I find that in the case of Nico Extrthemions P. Ltd., 2009 (248) ELT 497 (Tri.-Ahmd.) cited by none other than M/s.Star, Hon. Tribunal has laid down that cross-examination cannot be claimed as a matter of right and the request for cross-examination has to be examined in the context of facts and circumstances of that particular case. In the facts and circumstances germane to the present case, where no evidence was sought to be used against M/s.Star behind their back inasmuch as Shri Pravinchandra Devkanbhai Bhimani partner of M/s.Star had fully availed the opportunity of examining the veracity of the entire set of documentary and oral evidences gathered from the witnesses, namely, dealers, shroffs, etc. and who had only thereafter admitted the correctness of the said evidences, the principles of natural jthemtice have been duly satwasfied. I have also perused the decwasion of Hon. High Court of Chennai in the case of Rajam Industries (P) Ltd., 2010 (255) ELT 161 (Mad.) relied upon by M/s.Star 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

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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 was not maintainable. Hon. High Court further observed that the petitioner would be given opportunity to cross-examine those persons in the adjudicating process. By again referring to the decision of Hon. Tribunal in the case of Nico Extramions P. Ltd., supra, it was clear that the request for cross-examination has to be examined in the context of facts and circumstances of that particular case. I find that in the present case, Shri Pravinchandra Devkanbhai Bhimani partner of M/s.Star 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 contradwastinction, the relied upon decwasion 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 decwasion are on a different footing and cannot be applied in the present case. It thus it appears that none of the decisions relied upon by M/s.Star are of any avail insofar as their request for cross-examination was concerned.

62. 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. They 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 was issued on Augthemt 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 com-plaint of the appellant now was 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 them. In our opinion, the princi-ples of natural jthemtice do not require that in matters like this the per-sons 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 they hold that there was 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

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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.”

63. Further, Hon. Tribunal in case of Fortune Impex v/s Commissioner of Cthemtoms, Calcutta, 2001 (138) ELT 556 (Tri.-Kolkata) [affirmed in 2004 (164) ELT 4 (S.C.) & 2004 (167) ELT A 134 (S.C.)] has held as under:

“12. .... “12. ....The learned Advocate has also emphasised that non-allowing of cross-examination of 26 persons sought by him also vitiates the proceedings. The cross-examination of the witness, wherever necessary, has to be allowed in Departmental Proceedings. But it is not required that in each and every case cross-examination should necessarily be allowed. There is no absolute right of cross-examination provided in the Customs Act. This was the view held by the Calcutta High Court in the case of Tapan Kumar Biswas v. UOI, 1996 (63) ECR 546. Cross-examination of witnesses cannot be demanded as of right. The presumption is that unless M/s. Acme makes out a case for cross-examination he will not be granted cross-examination. The Appellate Tribunal in the case of Debu Saha v. Collector of Customs, 1990 (48) E.L.T. 302 (T) held that “It is no doubt true that in all cases, cross-examination need not be granted, but it all depends on the circumstances of each case.” The Tribunal also observed in that case that if the Collector comes to the conclusion that the cross-examination is not material then by assigning reasons, he can reject the prayer…”

…”64. In the case of Calicut Rubber Company v/s CCE, Cochin, 1996 (81) ELT 320

(Tribunal), Hon. Tribunal has held as under:-

“6. ..It has been pointed out before us that the Collector has mainly proceeded to confirm the duty on the basis of statement recorded by the department. The Learned Collector has held that the statements are given voluntarily. We agree with the Learned Collector that the statements are voluntary and that there has been no coercion in recording the statements as can be seen from the nature of the respective statements. The reply to show cause notice merely states that they are not voluntary statement. However, if there was any coercion or fraud by the officials then the appellants could have immediately reconciled from the statements on the very next day. In the reply to the show cause notice, the appellants themselves have contended that they do not suggest that the department had intentionally foisted a false case against them. Therefore, when there is no allegation of false case having been made out against them and that there is no individual resilement by the witnesses at the earliest point of time, therefore, we have to come to the conclusion that the statements given by the witnesses are voluntary. As regards the plea of denial of opportunity to cross-examine the witnesses, it has to be stated that the appellants are the accused persons and their statements are not held to be false and that the case against them is on the basis of their own statement and hence the question of calling them for cross-examination does not arise..7. …..8. ..That there was no violation of principles of natural

jthemtice in not granting the opportunity to cross-exam-ine the witnesses,..”

64.1 I also find that in Re: G. Subramanian, 2002 (142) ELT 224 (G.O.I.), it was held that –

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““7. Govt. observes that through sustained and well directed investiga-tion the Deptt. 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 evi-dence. 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 evi-dence collected by customs officials under Section 108 of the Customs Act. Hon’ble Supreme Court had also held that the statement made be-fore 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 require-ments as to cross-examination of witnesses etc. governing enquiry un-der Article 311 of the Constitution of India are not equally applicable to proceedings under Section 112 of the Customs Act, 1962. Cross-exami-nation 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-ten-dering 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 state-ments given, corroborative evidences collected, documentary evidences collected during searches conclusively prove, culpability of Shri G. Sub-ramanian beyond doubt. He has not complained about threat or coercion when he was produced before Magistrate immediately after arrest. When the original adjudicating authority questioned him about the nature of tor-ture 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.”

65 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 evi -dences seized from the premises of these witnesses have been affirmed by Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star and the offence of deliberate suppres-sion of MRP to evade payment of Central Excise duty due and payable at the time of clearance follotheyd by receipt of cash amounts arwasing from sale of goods at higher MRP at the hands of dealers (witness) have been confessed by him in detailed state-ments, which have not been retracted at any point of time, the ratio of the following ju-dicial pronouncements of the higher judicial bodies was also applicable:

66.1 In the case of Ashok Trading Company v/s. Commissioner of Central Ex-cise, Surat, 2007 (214) E.L.T. 235 (Tri. - Ahmd.), Hon. Tribunal has observed as un-der: -

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“7. I find that this was a case of admitted diversion of duty free mate-rial received from 100% EOThem. The appellant should have used them for manufacture and further export. The partner has admitted such clan-destine removal in his statement on 12-7-01 and it was noticed that there was no retraction to his statement and further the same was corrobo-rated in his statement nearly after 2 years on 6-6-03. In these circum-stances, the request for cross-examination of recipient of the material appears not really warranted.”

66.2 In the case of Gulabchand Silk Mills Pvt Ltd. v/s Commissioner of Cen-tral Excise, Hyderabad-II, 2005 (184) ELT 263 (Tri.-Bang.), Hon. Tribunal has ob-served as under:-

“10. the adjudicating authority has rightly confirmed the demand based on the quantity of 11 lakh Lmts. of MMF cleared without payment of duty on the basis of admwassion by Shri Gopal Gupta, corroborated by the incriminating documents, unaccounted goods and the statements of all others. When a fact was admitted it doesn’t need further corroboration. They have no reason to believe that the statements have been taken un-der duress. They also hold that the retraction made after two months was an after thought. The denial of cross-examination of the two persons Shri Bhavani Kwashore and Shri Gouri Shanker Gupta does not vitiate the proceedings. These people have not retracted their statements also.

66.3 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 was confirmed on the basis of loose slip shows clearances of the goods in excess of the quantity mentioned in the invoice. Shri D.K. Mwashra, 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 was admitted by the appellants that Shri D.K. Mwashra, 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…”

66.4 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:-

“Denial of Cross examination was grievance of the appellant. No doubt reliance and testimony of a witness calls for cross-examination. The evi-dence in adjudication proceeding need not be like the one in criminal cases. Findings should be on the basis 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, re-ported 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

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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 admissi-ble 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 inculpat-ing portions were made voluntarily or whether it is vitiated on account of any of the premises envisaged in Section 24 of the Evidence Act. Noth-ing 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. Acme 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 tri-bunals 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 be-fore 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 dis-close 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 offi-cers and admission made before them though retracted binds the depo-nent. 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 sur-faced that the witnesses had any enmity with appellants, those were not liable to be discarded nor required to be put to cross examination. Rely-ing upon the decision of the Apex Court in Surjeet Singh Chhabra case (supra) this Tribunal in Jagdish Shanker Trivedi v. Commissioner of Cus-toms, 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 princi-ples of natural justice. It was specifically held that “principles of natural justice do not require that in matters like this, persons who had given in-formation should be allowed to be cross-examined by the co-noticees on the statements made before the customs authorities. If cross-examina-tion 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 of-fences in connection with the contraband goods, they can bring about a situation of failure of natural justice by a joint strategic efforts such co-

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noticees by each one refusing to be cross-examined by resorting to Arti-cle 20(3) of the Constitution and simultaneously claiming cross-examina-tion 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 ap-pellants having been put to notice through SCN in the course of adjudi-cation, 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 suc-cessfully withdrawn or proved erroneous. This is so because an admis-sion by a party is substantive evidence of the fact admitted, and admis-sions 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 ad-mitted must be taken to be established…”

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.”

67 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 adjudi-cating authority in relation to the tax liability that the assessee would be entitled to cross examines the persons whose statements recorded with-out 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 princi-ples of natural justice. Hence, we do not find any substance in the first ground of challenge in the matter.”

67.1 In the case of Sridhar Paints Co. P. Ltd. v/s Commissioner of Customs & Cen-tral 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 admit-ted that they are sole distributors of paints manufactured by SPCPL and also LRs and Kutcha Bills showing details of goods booked and con-signed by ARA from Hyderabad to Vijayawada relates to the paints re-ceived along with the goods. He further stated that as per R. Shankar’s

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instructions they have not rendered the goods in their account. They de-stroyed 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 pe-riod mentioned in the show cause notice. All the persons involved, viz., Shri K. Vijaya Kumar of VE, Shri R. Shankra, MD, Shri R. Sridhra, Direc-tor and V. Radha Krishna of ARA in their statements have admitted that most of the transactions were done without any payment of central ex-cise 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 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 opren-dus has been devised to evade Central Excise duty systematically..”

10. In the case of Computer 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 admwassion 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, was not in violation of principles of natural jthemtice.”

67.2 Based on the facts & circumstances narrated in the foregoing paragraphs and by relying on the decisions of higher appellate foram, as reproduced above, the re-quest made by M/s.Star for cross-examination was rejected.

67.3. It has been argued by M/s.Star 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 es-pecially when they are not jointly tried with them. Section 36A of Central Excise Act, 1944 relied upon by M/s.Star was reproduced below for the ease of ready reference:

“Section 36A. Presumption as to documents in certain cases.

Where any document was produced by any person or has been seized from the cthemtody or control of any person, in either case, under this Act or under any other law and such document was tendered by the prosecution in evidence against him or against him and any other person who was tried jointly with him, the Court shall, -

(a) unless the contrary was proved by such person, presume –(i) the truth of the contents of such document;

(ii) …

(b) ...”

67.4 I find that reliance placed by M/s.Star on this provision of law was misplaced inasmuch as truth of the contents of the documents produced/seized from the cthem-tody/control of dealers, etc. was testified by none other than Shri Pravinchandra De-vkanbhai Bhimaniof M/s.Star in his statements recorded on two different dates. These statements have not been retracted and hence, they are binding on M/s.Star insofar as present proceedings are concerned. Thus, this plea was rejected.

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67.5 Coming to the arguments advanced by M/s.Star relating to MRP based valua-tion, I find that it has been vehemently argued that for the period in dispute, the Cen-tral Government had not prescribed any Rules for ascertaining the MRP; that there-fore, it was 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 pe-riod; that the proposal to determine the MRP on an ad-hoc basis was 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 was not enforceable in the rele-vant 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 argu-ment. 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 of declaration of MRP that was 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 (theyighted average) for the period covered by the show cause notice, MRP for the period from April.2008 to March,2009 has been taken as base, which was illegal and arbitrary. In the same vein, M/s.Star have opposed the comparison with the MRP declared by M/s. SPL and H & R Johnson (I) Ltd. made in the show cause notice.

68 In this regard, I find that it was established by way of detailed findings contained in the foregoing paragraphs that M/s.Star did not declare the actual retail sale price on the retail packages of ceramic tiles sold by them to the dealers. The re-tail 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.Star over and above the price mentioned in the invoice raised by M/s.Star. These differential amounts were always paid in cash to M/s.Star through well-organized network of angadias and shroffs. Sometimes, these amounts were handed over to the representatives of M/s.Star who paid vwasits to the dealers and on some other occasions, the dealers handed over the cash to the partner/representative of M/s, “Monalisa” on their vwasit to Morvi. Once these transactions were concluded and cash changed hands, the record containing the details of such transactions was de-stroyed by all the concerned parties. Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star has admitted that cash amounts received by them from the dealers was on ac-count 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 admit-ted that these cash amounts were not accounted for in their books of accounts. Thus, to evade payment of appropriate Central Excise duty, M/s.Star 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.Star from the dealers on account of sale of ceramic tiles at higher price than the retail sale price.

69. The above notwithstanding M/s.Star have argued that for want of Rules framed under Section 4A at the material time, there was no prescribed manner by which De-partment 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” was defined in clatheme (g) of Section 2 of the Act, which means, prescribed by Rules made under the Act; that therefore, Department was required to work out the duty for

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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 Secton 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 was 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 was unacceptable inasmuch as even as the offence of evasion by M/s.Star 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 was not sustainable inasmuch as while advancing this line of argument, M/s.Star have no where pointed out any legal provwasion contained in Sec-tion 4A of Central Excise Act, 1944 on the basis of which it can be inferred that De-partment was 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.Star themselves. In this case, it was seen that in his statements recorded under Section 14 of Central Excise Act, 1944, Shri Prafulbhai G.Patel Direc-tor of M/s.Star has given a detailed account of the retail sale price of the different vari-eties of ceramic tiles manufactured by M/s.Star and has gone on record to state that the said retail sale prices applied to the goods cleared by them during the period un -der consideration. During the course of adjudication proceedings, it was nowhere shown that this statement was involuntary. It was also nowhere pointed out that the duty demanded by way of the present show cause notice has been worked out by re-lying on any other price than the details of the retail sale price provided by Shri Pravin -chandra Devkanbhai Bhimaniof M/s.Star. Therefore, no fault can be found if the de-tails of retail sale price provided by Shri Pravinchandra Devkanbhai Bhimaniof M/s.S-tar were taken into consideration for the purpose of computing the duty amount.

70 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.Star in this regard. In the relied upon case of B. C. Srinivasa Shetty, the wassue 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 btheminess, 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 legwaslative intent was presumed to run uniformly through the entire conspectthem of provisions pertaining to each head of income; that there was no doubt a qualitative difference bettheyen the charging provwasion and a computation provwasion and ordinarily, the operation of the charging provwasion cannot be affected by the construction of a particular computation provwasion. Having made this observation, Hon. Supreme Court noted that the question was whether it was possible to apply the computation provwasion at all if a certain interpretation was pressed on the charging provwasion, which pertains to the fundamental integrity of the statutory provisions provided for each head. After making this observation, Hon. Apex Court decided the wassue by holding that goodwill generated in a newly commenced btheminess 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 decwasion of Ravi Foods Pvt. Ltd., Hon. Tribunal has observed that demand was raised by extrapolating the amount

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admitted as undwasclosed/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 decwasions are dwastinguwashable from the facts involved in the case in hand. As already held in the above paragraphs, there was a clear admwassion by the Partner of M/s.Star that they had evaded payment of Central Excise duty by suppressing the retail sale price. In his statement-dated 20.5.2009, Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star has supplemented the admwassion 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 Cause Notice by relying on the said information for the purpose of demanding the duty due from M/s.Star. In the case of Sudhir Sharma v/s Commissioner of Cthemtoms, New Delhi, 2011 (265) ELT 243 (Tri.-Del), Hon. Tribunal has observed that an admwassion, if clearly and unequivocally made, was the best evidence against the party making it and shifts the onthem 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 mthemt be taken to be established.” In the context of the case in hand, Shri Pravinchandra Devkaran Bhimani of M/s.Star has admitted the retail sale price applicable to the ceramic tiles cleared by M/s.Star during the period covered by the Show Cause Notice. These facts have not been rebutted. Consequently, the quantum of duty evaded by M/s.Star that was worked out in the Show Cause Notice by applying the admission of fact given by Shri Prafulbhai G.Patel director of M/s.Star does not suffer from any legal infirmity.

71 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 manu-facturer. It was impossible for the department to prove how many cylin-ders 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 manufac-ture being done by it…”

(Emphasis supplied)

72.1 It is also be noted that after the retail packages affixed with lower retail sale prices by M/s.Star were sold out & M/s.Star pocketed the cash amounts representing the difference between the actual price & declared price, when the details of actual

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retail sale price as applicable to the goods under consideration were provided to the Department by M/s.Star , 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.

73. It has been further argued by M/s.Star 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 decwasion 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 establwash 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 decwasion in the case of Surya Ceramics, 2006 (201) ELT 392 (Tri.-Del.), 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.Star adopted the above noted modus operandi for clearances made to all the dealers. This was evident from the following reply given by Shri Praful G.Patel Director of M/s.Star “..As already clarified, they were suppressing MRP of our tiles and were collecting differential amounts in cash from all our dealers. Due to cash payments, the dealers were forced to sell our tiles at the rates higher than the MRP declared by them.”

(Underline Supplied) Therefore, the decision of Hon. Tribunal cited by M/s.Star was distinguishable from the present case. On account of above, the plea advanced by M/s.Star to confine the demand to the clearances made by them to the dealers covered by the show cause notice was rejected.

74. It has been argued by M/s.Star that they had increased the MRP with effect from 1.3.2008 and again from 1.4.2008; that they have been asked to pay differential duty on the goods cleared during March, 2008 based on the sighted average MRP, which was not in accordance with the rules framed under Section 4A of the Act. Therefore, demand for differential duty on goods cleared in March, 2008, was untenable. In this regard, I find that this plea was unacceptable in light of the reply given by Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star to Que. 65 put to him while recording his statement dated 20.5.2009, wherein, he has stated that the average MRP determined on the basis of the clearances of tiles of all the sizes and grades for the period 1.4.2008 to January, 2009 may be applied for calculating differential Central Excise duty on the clearances of tiles from their factory for the period from November,2004 to March,2008. Consequently, this plea was rejected.

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75. M/s.Star have argued that Annexure to Show Cause Notice has been prepared on the basis of record seized from the premises of dealers Ceramics, goods from various places ; was no statutory presumption regarding the truth of the contents of these documents as the same have not been produced by them or seized from their premises but from the premises of third party who was not being tried with them and therefore, no reliance can be placed on this .In this regard, I find that, dealer of M/s.Star , which contained the details of clearances made by M/s.Star to various deales contains size-wise and design-wise ex-factory premises of M/s.Star, prepared on the basis of file seized from the premises of the said dealers. In this regard, I find that the argument advanced by M/s.Star questioning the truthfulness of contents of the documents on the basis of which these Anneuxres have been prepared, was bereft of merit inasmuch as Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star , who was shown these documents and Exhibits, while recording his statement under Section 14 of Central Excise Act, 1944 on 5.5.2008, has admitted the truthfulness of the same by way of giving following answers to Q9, Q10 , Q11 and 13 put to him:

76. It has been further argued that Annexure-B to the Show Cause Notice containing details of payment made by M/s. Shreejee Traders, Cochin to M/s.Star in cash over and above the invoice value, has been compiled from the premises of the third party who was not being jointly tried with them and hence, no reliance can be placed on this annexure. It was also submitted that they have not received any payment over and above the invoice price. In this regard, I find that this annexure containing details of cash payment of Rs. 13,15,556/- made by M/s. Shreejee Traders to M/s.Star was prepared on the basis of hand-written entries made on the body of invoices issued by M/s.Star for tiles sold by them to M/s. Shreejee Traders and represented the differential amount payable (and paid) by the said M/s. Shreejee Traders to M/s.Star . The fact that M/s. Shreejee Traders paid Rs. 15/-, Rs. 24/- and Rs.10/- per box for 12’x8”, 8”x8” and 13”x10” size tiles respectively to M/s.Star in cash over and above the invoice price was duly admitted by Shri Shailesh Narsibhai Godhani, Proprietor of M/s. Shreejee Traders as well as Shri Prafulbhai G.Patel Director of M/s.Star in their respective statements recorded under sectin 14 of Central Excise Act, 1944.

77. M/s.Star have argued that reliance placed in the Show Cause Notice on Annexure E-1, E-2 and E-3 containing details of MRP charged for tiles manufactured by M/s. SPL Limited and M/s. H & R Johnson (I) Ltd. was misplaced inasmuch as during the relevant period, there was no legal and valid mechanwasm in exwastence to ascertain MRP on the basis of MRP of tiles manufactured by any other manufacturer. In this regard, I find from Annexures G-1, G-2 and G-3 to the Show Cause Notice that the demand for differential duty has been quantified by taking into consideration weighted average MRP that was worked out on the basis of facts stated by Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star and mention of M/s. SPL Limited and M/s. H & R Johnson (I) Ltd., who are leading tiles’ manufacturers, in the Show Cause Notice was only indicative of the MRP of ceramic tiles prevailing at the material time. This plea was accordingly disposed of.

78. In view of the above, I do not find any merit in the aforesaid argument of M/s.Star and accordingly, the same was rejected. With regard to Annexure-C to Show Cause Notice, this list contains details of cash amounts deposited by the dealers in the various bank accounts operated by shroff whereas it was established that M/s. Amit Ceramics had paid total amount of Rs. 20,80,000/- to M/s.Star through angadia firm M/s. Patel Ashokkumar Kantilal Ni Company, Nashik. Consequently, this plea advanced by M/s.Star was also rejected.

79. With regard to evidences gathered from M/s. Shreejee Traders, Cochin, M/s.Star have argued that in his statement-dated 8.2.2008, Shri Shailesh Godhani has stated that he was the brother of Shri Dilip Godhani, Proprietor of M/s. Shreejee Traders and in his statement-dated 13.10.2008, Shri Shailesh Godhani has stated that he was the managing partner of M/s. Shreejee Traders; that these statements are contradictory; that no statement of Shri Dilip Godhani was recorded; that no verification about Shri Vijay Patel, relative of the owner of M/s.Star , who was said to have received cash amounts from Shri Shailesh Godhani was recorded. In this regard, I find that the crux of the facts stated by Shri Shailesh Godhani in his statements

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recorded on 8.2.2008 and 13.10.2008 under Section 14 of Central Excise Act, 1944 was that he looked after day-to-day affairs of M/s. Shreejee Traders; that he claimed the ownership of the documents recovered from the premises of M/s. Shreejee Traders on 13.10.2008 and they paid cash amount payable to M/s.Star on account of difference in MRP to Shri Vijay Patel. In his statements recorded under Section 14 of Central Excise Act, 1944, Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star has also admitted that they were collecting Rs. 15/- to Rs. 20/- in cash from M/s. Shreejee Traders towards difference in the MRP. Since both, the payer and payee have admitted the fact that cash amounts representing difference bettheyen the actual MRP and declared MRP were paid to M/s.Star and received by them, the plea advanced by M/s.Star was devoid of merit. Accordingly, the same was rejected.

80. It has been further contended by M/s.Star 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.Star as well as statements of payer (concerned dealers), payee (M/s.Star ) and the persons who extended the facility of shroffs, which has been dwascthemsed at length in the foregoing paragraphs, it was already established that M/s.Star received cash amounts from time to time from the dealers through the shroffs. Thus, this plea has no merit and the same was accordingly rejected.

81. At this point, it was relevant to note that I have already dealt with the plea advanced by M/s.Star 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.

82. 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 following the Determination of MRP Rules for each and every consignment/invoice; that this principle was not follotheyd 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 assesse 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.Star 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

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provisions of Section 11A of Central Excise Act, 1944 to demand the duty non-levied or short-levied. On perthemal 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.Star have nowhere dwasputed 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.Star. The same was accordingly rejected.

83. It has been further argued by M/s.Star 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 mwas-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, commwassion payable to dealers, and all charges towards advertwasement, 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.Star was rejected.

84. M/s.Star have also argued that demand was time-barred on the ground that they had paid duty on the declared MRP less permwassible 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 mwas-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 simultaneothem penalties under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules was not imposable. The demand for interest 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.Star 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.Star 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.Star 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 themers/cthemtomer and difference was recovered by M/s.Star in cash, which was not shown in the books of accounts of M/s.Star. Thus, M/s.Star 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 finwashed 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 was established, thereby rendering the goods, i.e. tiles cleared by M/s.Star during the period covered by Show Cause Notice, as liable to confiscation under Rule 25 of Central Excise Rules, 1944:

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(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.

On account of above, M/s.Star 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.Star 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 rea-sons based on which extended period was found invocable for raising the demand, I find that M/s.Star are liable to mandatory penalty under Section 11AC of the Central Excise Act, 1944. The questions framed at Sl. No. (a), (e) and (f) of paragraph 40.2 above are decided accordingly.

85. M/s.Star have argued that allegation of clandestine removal (as per details given in Annexure F-1) and substitution of grade of the ceramic tiles (as per details given in Annexure F-2) was not sustainable on the ground that documents on the basis of which Annexure A-1 to the Show Cause Notice was prepared are not provided to them; that the details of the chart have been compiled from the documents seized from the party which was not being jointly tried with them that they have not clandestinely cleared any goods nor they have substituted any goods with higher grade. Therefore, they are not liable to pay any differential duty on this account. In this regard, I find that as per paragraph 20.2.2, Annexure F-1 and F-2 containing details of duty amounting to Rs. 29,226/- and Rs. 2,230/- respectively demanded from M/s.Star on the respective grounds of clandestine removal and grade substitution of tiles have been prepared on the basis of documents (delivery challans on page Nos. 46,50,59,65,72,73,75 and 78) contained in file A/25 that was resumed from the premises of M/s Amit Ceramics, Nashik under panchanama-dated 22.12.2008. Shri Deepakkumar Patel, Partner of M/s.Star has confirmed the correctness of the details of tiles covered by these while replying to Q9 and Q10 put to him while recording his statement dated 20.5.2009. This statement has not been retracted or shown to be involuntary by M/s.Star. Therefore, the allegation regarding clandestine removal and grade substitution was proved. Consequently, the plea was rejected. Accordingly, I confirm the demand of duty amounting to Rs. Rs. 29,226/- and Rs. 2,230/- respectively on the said goods under proviso to Section 11A of Central Excise Act, 1944 along with interest payable due and payable thereon under Section 11AB ibid. The questions framed at Sl. Nos. (b), (c) and (e) of paragraph 40.2 above are answered accordingly.

86. Dealing with the arguments advanced by Shri Pravinchandra D.Bhimani Partner of M/s.Star , I find that statements of Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star were recorded section 14 of Central Excise Act, 1944 on 5.5.2008 and 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.Star does not leave any doubt in my mind that Shri Pravinchandra Devkanbhai Bhimaniof M/s.Star was fully involved in the day-to-day affairs of M/s.Star 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 Dipakkumar Patel 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 view of the fact that Shri Dipakkumar Patel has himself stated in his statements that he looked after all the day-to-day work of M/s.Star and overall supervisory in-charge for maintenance of all the

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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.

87.1 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 Pravinchandrs D.Bhimani Partner of M/s.Star is liable to penalty under Rule 26 of Central Excise Rules, 2002.

87.2 Shri Thangavelan, Proprietor, M/s.T.Lakshmi Kanthan & sons MGR Nagar Chennai did not submit his defence separately but Shri P.D.Rachha Advocate submitted common replies and submission and represented him also.

88. I also find that M/s.Star have repeatedly argued that they were not provided certain relied upon documents. In this regard, it was observed from the record that M/s.Star have acknowledged receipt of all the relied upon documents vide acknowledge receipt given by them on 3.6.2009. Notwithstanding this, M/s.Star , vide letter dated 21.7.2010 requeste d to supply copies of documents listed at Sl. No. 6,11,25,28,31,33 and 44 of Annexure-‘H’ (containing the list of relied upon documents) to the Show Cause Notice. All these documents were supplied to M/s.Star vide letter dated 28.9.2010. After one month, M/s.Star, vide letter dated 26.10.2010 again requested to supply copy of documents listed at Sl. No. 25, 28, 31 and 44 of Annexure-“H” by informing that DVD containing documents at Sl. No. 25, 28 and 44 does not open and photocopy of document at Sl. No. 31 was not legible and also cut on the left side. On 4.8.2011, the above documents were handed over to Shri Nitin Bopaliya, Authorized Person, on behalf of M/s.Star. It was also observed that Shri Nitin Bopaliya, Authorized Person of M/s.Star has mentioned in the acknowledgement given by him that he has received legible copies of the documents. Subsequent to this, M/s.Star filed different written submissions dated 13.8.2011 and 19.8.2011, wherein, they have not made any mention about non-supply of any particular relied upon document. Thus, I find that the plea raised by M/s.Star about non-supply of some other documents, in the written submission filed by them on 19.9.2011 was not acceptable.

89. In view of above discussion and findings, I pass the following order:

Order

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(i) I Confirm the demand of Central Excise duty amounting to Rs. 30,21,431 (Thirty lacs twenty one thousand four hundred thirty one only), short paid by them by way of under-valuation, 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;

(ii) I 0rder for appropriation of Rs.10 lakhs voluntarily deposited by M/s. Star Ceramic.

(iii) I impose personal penalty of Rs. Rs. 30,21,431 (Thirty lacs twenty one thousand four hundred thirty one ) M/s. Star Ceramic Morbi under the provisions of Section 11-AC of the Central Excise Act, 1944 and rule 25 of Central Excise Rules, 2002;

(iv) I impose personal Penalty of Rs.15 Lacs on Shri Shri Pravinchandra Devkaranbhai Bhimani, Partner of M/s. Star Ceramic .Morbi. Under rule 26 of CER 2002.

(v) I order for recovery of appropriate interest under the provisions of section 11AB of the Central Excise Act, 1944 from M/S. M/s. Star Ceramic, Morbi

(vi) I order for confiscation of 243 boxes of ceramic tiles seized on 18/1/2008 valued Rs.24,300/- under rule 25 of Cental Excise Rules ,2002 however, I give option Shri Thangavelan, Proprietor, M/s.T.Lakshmi Kanthan & sons MGR Nagar Chennai to redeem the same on payment of redemption fine of Rs.6,500/-(Six thousand five hundred only).

vii) I also impose penalty of Rs.10,000/- on Shri Thangavelan, Proprietor, M/s.T.Lakshmi Kanthan & sons MGR Nagar Chennai.

Additional Commissioner, Central Excise, Rajkot

F.No.V.69/15-144/Adj/09

To,(i) M/s. Star Ceramic, 8-A, National Highway,

Makansar, Morbi,Distt. Rajkot.

(ii) Shri Pravinchandra Devkaranbhai Bhimani,Partner,M/s. Star Ceramic,8-A, National Highway,Makansar, Morbi.

(iii) Shri Thangavelan, Proprietor, M/s.T.Lakshmi Kanthan & sons,

MGR Nagar Chennai.Copy to:- 1.The Additional Directore General, Ahmedabad Zonal Unit,

Ahmedabad. 2. The Asstt.Commissioner, Central Excise, Division-II, Rajkot 3. The Superintendent, Central Excise, Morbi. 4. The Superintendent (RRA), Central Excise, Rajkot.

5. Guard File.

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35-36 ADC 2011.doc · Web viewShiv Finance, M/s. Ganesh Agencies, M/s. J.B. Enterprises, M/s....

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