2016 (9) TMI 34 - AT - Central Excise

Demand and redemption fine in lieu of confiscation - duty on difference between closing stocks recorded in the Balance sheet of the year 2006-07, 2007-08 and 2008-09 with reference to the closing stock reported in the ER-1 returns - Held that - it is found that the demand is solely based on comparison of the data of financial accounts appearing in the Balance-sheet with ER-1 returns. The appellants have contended that the stage at which the goods are recorded as finished goods in the Excise records is different from the stage at which the goods are recorded in the financial records. There is no other evidence of clandestine removal produced by the Revenue. Moreover the closing balance of one year in the financial record is appearing in the opening balance in the next financial year. In these circumstances, I find that there is no evidence whatsoever to sustain the demand of duty and redemption fine in lieu of confiscation. - Decided in favour of appellant

Summary

Issues: Demand based on difference in closing stocks between Balance sheet and ER-1 returns.

Analysis:
The case involved an appeal by M/s Suma Pharmaceuticals Pvt. Ltd. against a show-cause notice demanding duty on various issues, with the only remaining issue being the demand based on the variance between the closing stocks recorded in the Balance sheet and the ER-1 returns for the years 2006-07, 2007-08, and 2008-09. The appellant argued that the comparison was flawed as the criteria for recording finished goods in the Balance sheet differed significantly from those required under the Excise Law. The appellant cited relevant case laws to support this argument. Additionally, the appellant contended that there was no evidence of clandestine clearance, and therefore, the demand could not be confirmed. The appellant also challenged the order for confiscation of goods and imposition of a redemption fine in the absence of any seized goods.

The Tribunal, after considering the submissions, found that the demand was solely based on comparing financial accounts data in the Balance sheet with ER-1 returns. It noted the difference in the stage at which goods were recorded in the Excise records compared to the financial records. The Tribunal emphasized the lack of evidence of clandestine removal provided by the Revenue. Furthermore, it highlighted that the closing balance in the financial records of one year appeared as the opening balance in the next year. Consequently, the Tribunal concluded that there was insufficient evidence to support the demand for duty and redemption fine. As a result, the impugned order was set aside, and the appeal was allowed by the Tribunal.

In conclusion, the Tribunal ruled in favor of the appellant, M/s Suma Pharmaceuticals Pvt. Ltd., by setting aside the demand based on the difference in closing stocks between the Balance sheet and ER-1 returns. The Tribunal emphasized the lack of evidence of clandestine removal and the differing criteria for recording finished goods in financial and Excise records, leading to the decision to allow the appeal and overturn the impugned order.