2017 (3) TMI 358 - AT - Central Excise

Clandestine removal - Income surrendered before income tax Department - survey u/s 133-A of Income Tax Act, 1962 - The said income has been presumed by the Revenue that the same is profit of the manufacturing business of the appellant - Held that - the income surrendered before the income tax department cannot be presumed as profit of manufactured goods without any cogent evidence that the said income is out of manufacturing activity of the assessee - As Revenue failed to discharge their onus to prove that the income surrendered before the income tax authorities is as profit of goods manufactured by the appellant with cogent evidence, the demand of duty is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of duty, interest, and penalty based on income surrendered during income tax survey - Allegation of clandestine removal of goods without payment of duty - Presumption by Revenue that surrendered income is profit from manufacturing business - Adjudication confirming proposals in show cause notice - Appeal challenging sustainability of demand.

Analysis:
The appellant, engaged in manufacturing auto components, appealed against an order demanding duty, interest, and penalty based on income surrendered during an income tax survey. The Revenue alleged clandestine removal of goods without duty payment, presuming the surrendered income as profit from the manufacturing business. The appellant's counsel argued that the demand was unsustainable as there was no evidence of manufacturing excess goods without duty payment. The Revenue contended that differences in stock indicated unexplained income earned from the business. The Tribunal noted that duty is payable on manufactured goods but emphasized the lack of cogent evidence linking the surrendered income to manufacturing excess goods without duty payment.

The Tribunal referred to precedents like Mayfair Resorts and Ramesh Studio & Color Lab, where it was held that income disclosed voluntarily before income tax authorities cannot be added to taxable value without evidence. In the case of Kipps Education Centre, Bathinda v. CCE, Chandigarh, it was established that disclosed income must be proven with evidence to be taxable. Additionally, the case of Jai Bhawani Con-Cast Pvt. Ltd. highlighted the need for verification and evidence to support allegations of unaccounted manufacturing activities. The Tribunal concluded that without evidence linking the surrendered income to unaccounted manufacturing activity, the demand for duty was unsustainable.

Therefore, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The decision emphasized the necessity of cogent evidence to establish a link between surrendered income and unaccounted manufacturing activities for duty demands to be sustainable under the Central Excise Act.