2014 (10) TMI 865 - AT - Central Excise

Clandestine manufacture - Held that - Facts in the present case are identical to the facts of R A Castings 2011 (1) TMI 1302 - Supreme Court of India wherein held that in the absence of any evidence to show procurement of raw material, mode of transport of the raw material to the factory, transport documents, details of payment identity of buyers receipt of sales receipt from the buyers and the transporters of the final product, the entire case of the Revenue is based upon assumption and presumption. It was also held that Central Excise authorities have no jurisdiction to examine the appellants statutory records which stand audited and reflected in the income tax returns.and there is virtually no other evidence reflecting upon clandestine manufacture and clearance of the appellants product, we, by following the above decision, set aside the impugned orders and allow all the appeals with consequential relief to the appellants. - Decided in favour of assessee

Summary

Issues:
- Confirmation of demand of duty and imposition of penalty
- Allegations of suppression of production and clandestine clearance
- Technical opinion on electricity consumption
- Scrutiny of balance sheet and other income
- Jurisdiction of Central Excise authorities to examine statutory records

Confirmation of demand of duty and imposition of penalty:
The judgment addresses the confirmation of demand of duty amounting to Rupees 3,69,41,602 along with an identical penalty imposed by the Commissioner. The appeals arising from the same impugned order are disposed of collectively.

Allegations of suppression of production and clandestine clearance:
The Revenue conducted investigations based on suspicions of suppression of production and clandestine clearance of the final product by the appellant, M/s. Charu Steel. These suspicions were fueled by discrepancies in electricity consumption, excess production, and unusual entries in the balance sheet related to share trading and sales commission.

Technical opinion on electricity consumption:
Dr. N K Batra, from IIT Kanpur, provided a technical opinion indicating the expected range of electricity consumption for the production of MS ingots. The excessive electricity consumption by the appellant, as highlighted in the investigation, raised concerns regarding clandestine activities and duty evasion.

Scrutiny of balance sheet and other income:
The investigation revealed discrepancies in the balance sheet of the appellant, particularly in the categorization of other income related to share trading and sales commission. The Revenue suspected these entries to be fictitious, further strengthening the allegations of clandestine activities and duty evasion.

Jurisdiction of Central Excise authorities to examine statutory records:
The judgment references a previous Tribunal decision involving M/s. R A Castings, where it was established that Central Excise authorities lack jurisdiction to scrutinize statutory records audited and reflected in income tax returns. This precedent played a crucial role in the decision regarding the present case, leading to the dismissal of the Revenue's claims.

In conclusion, the Tribunal, following the precedent set in the case of R A Castings, overturned the impugned orders and allowed all the appeals due to the lack of substantial evidence supporting the allegations of clandestine manufacture and clearance. The judgment emphasized the importance of concrete evidence and statutory limitations on the jurisdiction of Central Excise authorities in cases of this nature.