2017 (11) TMI 1177 - AT - Central Excise

Clandestine removal - discrepancy in figures between ER-1, ER-4 and ER-6 returns - Held that - Revenue has not undertaken any investigation to see whether such raw materials have actually been received in the factory, used in the manufactured finished goods and cleared clandestinely - Clandestine clearance is a serious charge and Revenue is required to establish the same on the basis of tangible evidence - demand set aside. The second part of the demand to the tune of ₹ 9,96,385/- has been made for the quarter ending June, 2008 on the basis of allegation that the cost of production in CAS-4 certificates was wrongly worked-out since production figures had been taken wrongly - Held that - Since the entire goods cleared from the Santoor unit is received by their own Abu Road unit, no malafide intention is manifest in the discrepancies seen in the returns - since clearances have been made from one unit to the other of the same company, the principle of revenue neutrality will come into play which is a settled position of law. Any duty paid in Santoor unit will be available as credit in the Abu Road unit. Appeal allowed - decided in favor of appellant.

Issues:
1. Discrepancy in raw material consumption figures between various returns.
2. Allegation of clearance of finished goods without payment of duty.
3. Under-reporting of consumption of raw materials leading to duty evasion.
4. Submission of revised certificates after audit and its admissibility.
5. Application of the principle of revenue neutrality in inter-unit transfers within the same company.

Analysis:

Issue 1: Discrepancy in raw material consumption figures
The appellant had under-reported the consumption of raw materials in various returns, leading to discrepancies in figures between ER-1, ER-4, and ER-6 returns. The central excise officers observed these differences and raised concerns regarding the accuracy of the reported data, especially in the context of manufacturing ABS Polymers. Statements from authorized signatories highlighted the errors in preparation of returns due to different personnel handling them at different locations.

Issue 2: Allegation of clearance of finished goods without duty payment
The department alleged that the under-reported consumption of raw materials was used in manufacturing finished goods, which were then cleared without payment of excise duty. However, the tribunal noted that the revenue failed to provide concrete evidence of clandestine clearance. Mere discrepancies in returns were deemed insufficient to support the charge of duty evasion without tangible proof of goods being cleared without payment.

Issue 3: Under-reporting of consumption leading to duty evasion
The demand for excise duty was based on the assumption that the under-reported consumption of raw materials resulted in the clearance of finished goods without duty payment. However, the tribunal emphasized the need for substantial evidence to prove such allegations of duty evasion, especially in cases of inter-unit transfers within the same company.

Issue 4: Submission of revised certificates after audit
The appellant submitted revised certificates correcting the discrepancies in raw material consumption figures after the audit. The admissibility of these revised certificates was contested by the department, citing a delay of five years in their submission. The tribunal considered the revised certificates valid as they aligned with ER-1, ER-4, and ER-6 returns, indicating rectification of errors.

Issue 5: Application of revenue neutrality principle
The tribunal applied the principle of revenue neutrality in the context of inter-unit transfers within the same company. It emphasized that any duty paid in one unit would be available as credit in another unit, promoting a neutral revenue impact within the company. Precedents and decisions supporting this principle were cited to justify the view taken by the tribunal.

In conclusion, the tribunal set aside the impugned order, noting the lack of concrete evidence supporting the allegations of duty evasion and emphasizing the importance of substantiated claims in excise duty matters. The appeal was allowed, highlighting the significance of accurate reporting, timely submissions of revised certificates, and the application of established legal principles like revenue neutrality in inter-unit transactions.

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