2018 (10) TMI 1005 - AT - Central Excise

Demand of Central Excise duty - Income surrendered to the Income Tax Department - Held that - Tribunal in the case of CCE, LUDHIANA VERSUS THAKUR STEEL & AGRO INDUSTRIES 2018 (5) TMI 1780 - CESTAT CHANDIGARH , examined the issue and held that as Revenue has not come up with any evidence to show that the appellant were engaged in the activity of under valuation and manufacturing of the goods and the case has been made out only on the income surrendered to the Income Tax Department in that circumstances, central excise duty cannot be demanded as Central Excise duty is payable on goods manufactured by the assessee. Admittedly, no evidence has been produced by the Revenue how the goods were manufactured, how the inputs were procured, how the final goods were sold by the appellants - demand not sustainable - penalty also not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against demand of duty based on income surrendered to Income Tax Department.
- Validity of demand of duty and penalty imposed on appellants.
- Lack of evidence by Revenue to prove under-valuation and manufacturing of goods by appellants.

Analysis:
The appellants challenged an order confirming duty demand based on the income surrendered to the Income Tax Department. The Revenue presumed the surrendered income to be the profit from undervalued goods manufactured by the appellants. The impugned show cause notice demanded duty and imposed penalties on both appellants. After adjudication, the income surrendered to the Income Tax Department was considered as the income from undervalued goods, leading to duty demand, interest, and penalties. The appellants appealed this decision.

During the hearing, the Tribunal considered the precedent set in the case of Thakur Steel and Agro Industries, where it was established that Central Excise duty cannot be demanded solely based on income surrendered to the Income Tax Department. The Tribunal noted the lack of evidence from the Revenue proving under-valuation and manufacturing of goods by the appellants. Without evidence on how the goods were manufactured, inputs procured, or final goods sold, the demand for Central Excise duty was deemed unsustainable. Citing previous cases like Kipps Education Centre and M/s Godawari Spherocast Ltd., the Tribunal concluded that the demand against the appellants was not justified, and no penalty could be imposed on them.

Therefore, the impugned order was set aside, and the appeals were allowed with consequential relief. The Tribunal emphasized the importance of evidence in establishing duty demands and penalties, highlighting the necessity for proof of manufacturing activities and under-valuation to support such claims.