2015 (10) TMI 131 - AT - Central Excise

Demand of differential duty - SSI exemption - Held that - Once the diary entries are not found reliable and on this basis, the duty demand of ₹ 70,65,182/- has been dropped, the Commissioner cannot consider those diary entries for calculation of the differential duty by denying SSI exemption as has been done by him in para-43 of the impugned order. On perusal of the calculation of differential duty of ₹ 8,70,402 confirmed by him in para-43 of the impugned order, it is seen that he has compared the higher of the two figures - sales value declared by the appellant during the financial year in the sales tax returns and the sales figures as per diary entries and has compared the higher of these two figures with the value of the sales figures including duty in the RT-12 Returns and, the duty has been demanded on the difference. Once the diary entries have not been found reliable, the Commissioner can compare only the sales value including duty as declared in the RT-Returns and the sales figures in the Sales Tax Return. Though there is some small difference in the sales figures declared in the Sales Tax Return and the figures declared in the RT-12 Return, according to the appellant, there are valid reasons for the same like the Sales Tax Return figures also includes the export sales and in some cases, the value of the returned goods has also been included twice. - the impugned order is not sustainable. The same is set aside and the matter is remanded to the Commissioner for de novo adjudication - Decided in favour of assessee.

Summary

Issues:
1. Allegation of clandestine removals and denial of SSI exemption.
2. Adjudication of duty demand, imposition of penalties, and appeal against the Commissioner's order.

Analysis:
1. The case involved the appellants, manufacturers of inductors, transformers, etc., chargeable to central excise duty, whose factory was searched in 2003 leading to a show cause notice for demand of differential duty and penalties. The notice alleged clandestine removals based on diary entries, leading to denial of SSI exemption for the period from 1999 to January 2002.

2. The Commissioner, in the order-in-original, dropped duty demand of &8377; 70,65,182 based on clandestine removal allegations but confirmed a demand of &8377; 8,70,402 for denial of SSI exemption. Penalties were imposed on the appellant company and its directors. The appeals challenged this order.

3. During the hearing, the appellant's counsel argued that the Commissioner erred in denying SSI exemption based on unreliable diary entries. They contended that once the duty demand based on diary entries was dropped, there was no justification for denying the SSI exemption. The appellant provided explanations for discrepancies in sales figures declared in various returns, which were not considered by the Commissioner.

4. The Departmental Representative defended the Commissioner's order, reiterating the findings. After considering submissions from both sides and examining the records, the Tribunal concluded that the Commissioner erred in considering diary entries for calculating differential duty after dropping the duty demand based on those entries.

5. The Tribunal held that once diary entries were deemed unreliable, the Commissioner should have compared sales values declared in different returns to determine the duty liability. As the explanations provided by the appellant for discrepancies were not addressed in the impugned order, the Tribunal set aside the order and remanded the matter to the Commissioner for fresh adjudication.

6. In the de novo proceedings, the Commissioner was directed to compare sales values in the RT-12 Returns with those in the ST-3 Returns, considering the appellant's explanations. If the differences were satisfactorily explained, no further duty demand would be justified. The appeals were disposed of accordingly, setting aside the impugned order.