2012 (11) TMI 1023 - AT - Central Excise

Waiver of condition of pre-deposit of duty - No source of income declared - clandestine removal of excisable goods without invoices and without payment of duty - Held that - On perusal of the show cause notice as well as order-in-original we find that the impugned order is based only on the ground that there was unexplained income of Rs. 1 crore was detected by the income tax authorities and the Department has presumed that aforesaid income must have been the result of undeclared production and clandestine removal of excisable goods. We may note that since the Department has raised duty demand the onus of proving excess production and clandestine removal of excisable goods is on the Department. The impugned order is prima facie based on assumption and presumption and there is no evidence which may suggest excess production or clandestine removal of excisable goods by the appellant. Therefore in our view the appellant have a strong prima facie case. Accordingly we allow the stay applications and waive condition of pre-deposit of duty demand interest and penalty and recovery thereof stayed till disposal of the appeals - Stay granted.

Summary

Issues:
Waiver of pre-deposit of duty demand and penalty.

Analysis:
The case involved applications seeking waiver of pre-deposit of duty demand amounting to Rs. 2,13,47,150/- along with interest and equal amount of penalty on the appellant firm, as well as a penalty of Rs. 20 lakhs on the partner of the firm. The facts revealed that during an income tax survey, concealed income of Rs. 1 crore was detected from the appellant firm, which was declared as partner's capital account to avoid litigation. The Excise Department issued a show cause notice raising a demand of Rs. 2,13,47,150/- to the appellant firm, alleging clandestine removal of excisable goods without invoices and duty payment. The Commissioner (Adjudication) confirmed the duty demand, imposed penalties, and adjudicated the show cause notice. Feeling aggrieved, the appellant appealed to the Tribunal seeking waiver of pre-deposit of duty demand and penalty.

The appellant argued that the impugned order lacked a rational basis, as the Department did not investigate whether there was excess production of excisable goods or any evidence of goods being transported without invoices. The appellant claimed that the undisclosed income of Rs. 1 crore was explained as the partner's contribution to the capital account, accepted by the Income Tax Department. The appellant contended that they had a strong prima facie case and were likely to succeed in the appeal. On the other hand, the Department argued that the duty demand was justified, as the undisclosed profit indicated clandestine production and removal of excisable goods. The partner of the appellant failed to provide a satisfactory explanation for the income source, even to the income tax department. The Department relied on the partner's statement and argued against waiving the pre-deposit condition.

After considering the contentions and evidence, the Tribunal found that the impugned order was based on the presumption of unexplained income, without concrete evidence of excess production or clandestine removal of goods by the appellant. The Tribunal noted that the burden of proving such allegations rested on the Department. As there was no substantial evidence supporting the Department's claims, the Tribunal concluded that the appellant had a strong prima facie case. Consequently, the Tribunal allowed the stay applications, waived the pre-deposit condition of duty demand, interest, and penalty, and stayed the recovery until the appeal's disposal. The appeals were to be listed for further proceedings.