2018 (2) TMI 622 - AT - Central Excise

Short payment of Central Excise Duty - It appeared to Revenue that the said difference was on account of under valuation on account of clandestine clearance of goods manufactured - Held that - Since the revenue was making allegations of clandestine manufacture and clandestine removal of goods and evasion the Central Excise duty, the burden was on Revenue to establish that the said goods allegedly/clandestinely manufactured by relying on such evidence which could establish manufacture in clandestine manner. There is no evidence in the said SCN in respect of procurement of raw materials consumptions of electricity, excess employee employed, transportation of goods, purchasers of said allegedly/clandestinely removed goods and recovery of sale proceeds. Appeal allowed - decided in favor of appellant.

Summary

Issues: Allegations of clandestine manufacture and removal leading to underpayment of Central Excise duty.

Analysis:
1. The appeal challenged an Order-in-Original passed by the Commissioner of Central Excise, Allahabad, alleging underpayment of Central Excise duty by the appellants, who were engaged in manufacturing Disposable Syringes and Syringe Components.

2. The Revenue suspected under-valuation and clandestine clearance of goods based on discrepancies between sales figures in the balance sheet and assessable values in ER-1 returns for the financial years 2005-06, 2006-07, and 2007-08, amounting to a difference of ?18,51,25,518. A show cause notice was issued, demanding ?1,51,80,695 as allegedly short-paid duty.

3. The appellant contested the notice, attributing the discrepancies to job work charges, fabric sales, trading activities, and Central Excise duty payments. The original authority upheld the demand and imposed a penalty, prompting the appeal to the Tribunal.

4. The appellant argued that allegations of clandestine manufacture require positive evidence like excessive raw material procurement, labor, and power consumption, which the Revenue failed to provide. No employee statements or evidence of raw material procurement for clandestine manufacture were presented.

5. Upon review, the Tribunal found the show cause notice lacked evidence to support allegations of clandestine manufacture and removal, as no proof of raw material procurement, electricity consumption, excess labor, transportation, buyers, or sale proceeds recovery was provided. Consequently, the notice was deemed unsustainable.

6. The Tribunal set aside the Order-in-Original, allowing the appeal and entitling the appellant to consequential relief as per law. The decision highlighted the necessity for Revenue to substantiate allegations of clandestine activities with concrete evidence to justify duty demands.