2016 (3) TMI 668 - AT - Central Excise

Loss to revenue - difference between the stock figure in the Balance Sheet as on 31.03.2009 and ER-1 returns of that date - Held that - The appellate authority has not at all examined as to whether there was really a discrepancy under the accounting system. He has also not looked into whether there was any unaccounted removal of goods of aforesaid value done to cause loss to Revenue. ER-1 returns disclosed the stock position. But that was reconcilable with the reason of difference in respect of the figure appeared in Balance Sheet. That was not examined by appellate authority. The case was booked against the appellant on the basis of audit finding. They neither found any discrepancy in the clearance of goods nor in the accounts of the appellant, as well as stock. Therefore the order passed by learned Commissioner (Appeals) is set aside and appeal on this court allowed in favour of assessee

Summary

Issues: Discrepancy in stock figures between Balance Sheet and ER-1 returns leading to loss of revenue.

Analysis:
1. The appellant argued that the difference in stock figures between the Balance Sheet and ER-1 returns on a specific date did not result in any revenue loss. However, the Revenue contended that such a situation did cause a loss of revenue.

2. The Adjudicating Authority analyzed the reason for the discrepancy of &8377; 66,33,220/-, attributing it to stock in unpacked condition not considered by the audit party for valuing the closing stock under Excise law. The Authority concluded that there was no actual discrepancy in the stock, but a misunderstanding in the valuation process. It was clarified that the removal of excisable goods without duty payment would lead to revenue loss, but in this case, there was no such removal of unaccounted goods.

3. The Adjudicating Authority's reasoning was deemed satisfactory compared to the appellate authority's decision. The appellate authority failed to investigate whether there was a genuine discrepancy in the accounting system or any unaccounted removal of goods causing revenue loss.

4. The ER-1 returns accurately reflected the stock position, which was reconcilable with the difference in the Balance Sheet figure. However, the appellate authority did not delve into this reconciliation. The case against the appellant was based on audit findings, which did not reveal any discrepancies in goods clearance, appellant's accounts, or stock. Consequently, the order by the Commissioner (Appeals) was overturned, and the appeal was allowed by the court.