2016 (7) TMI 1320 - AT - Central Excise

Clandestine removal - whether excise duty can be demanded on the basis of income surrendered before the Income Tax Authorities without adducing any independent evidence with regard to purchase of raw material, manufacture of finished goods and sale thereof or not?? - Held that - reliance placed in the case of Arisudana Industries Ltd. Versus Commissioner of C. Ex., Ludhiana 2016 (2) TMI 986 - CESTAT CHANDIGARH , where it was held that duty is payable on manufacture of goods and no evidence has been produced by the Revenue to that extent, therefore, without manufacturing the excisable goods and clearance the duty cannot be demanded from the appellants - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of excise duty based on income surrendered before Income Tax Authorities without independent evidence.

The judgment pertains to an appeal against an order demanding duty, interest, and penalty on the appellants. The facts reveal that the appellants surrendered a sum of ?5.5 Cr before the income tax authorities during a survey conducted in their business premises. Subsequently, a show cause notice was issued demanding duty, interest, and penalty based on the income surrendered. The Revenue calculated deemed sale and excise duty thereon, leading to an enhanced demand. The appellants contested the demand, arguing that excise duty is payable on the manufacture and clearance of goods, and without evidence of raw material purchase, manufacturing, and sale, duty cannot be imposed solely based on surrendered income. The appellants cited a previous tribunal case where a similar demand was set aside. The Revenue, however, supported the impugned order.

After hearing both parties, the Tribunal identified the central issue: whether excise duty can be demanded solely based on income surrendered before the Income Tax Authorities without independent evidence of manufacturing and clearance of goods. The Tribunal referred to a prior case where it was held that duty is payable on the actual manufacture and clearance of excisable goods, and in the absence of evidence supporting these activities, duty cannot be imposed. Given the lack of evidence presented by the Revenue in the current case, the Tribunal concluded that duty cannot be demanded from the appellants without proof of manufacturing and clearance. Consequently, the impugned order was set aside, and the appeals were allowed with any consequential relief.

In conclusion, the Tribunal's decision revolved around the fundamental principle that excise duty is levied on the manufacture and clearance of goods, requiring concrete evidence to support such claims. The judgment underscored the importance of substantiating duty demands with factual proof of manufacturing activities, thereby setting a precedent for similar cases where duty imposition is solely based on surrendered income without corroborating evidence.