2021 (9) TMI 26 - AT - Central Excise

Clandestine removal - quantities of the finished goods shown as excess clearance in 3CD form on comparison with the same shown in ER 1 return by the Appellant - demand is based only on the figures reported in the annexure of the tax audit report - other substantive allegations or not - burden to prove - demand on the basis of assumptions and presumptions or not - HELD THAT - In the instant case, it is seen that the Adjudicating Authority has confirmed the demand of excise duty only on the ground that there are differences in quantity of clearance of goods as per ER 1 and form 3CD as filed by the Appellant, even after accepting that the differences are on account of trading of goods which does not form part of clearance as per ER 1 return of the Appellant - The Appellant has produced their tax auditors certificate certifying the reconciliation which was also produced by the Appellant before adjudicating authority and we find that the said reconciliation clearly establishes the reconciliation between the figures of clearance as per 3CD and ER 1. Alternatively, it is also on record that the adjudicating authority has not given any cognizance to the submission of the Appellants as regards allegation of clandestine removal and the burden to prove the same - no investigation has been conducted by the department to prove the allegation of clandestine removal in the case and thus the demand of excise duty merely based on differences in figures of consumption cannot be sustained. The Department has failed to discharge the burden of proof to prove the allegation of clandestine removal in the case and thus, the demand of excise duty merely based on differences in figures of consumption, cannot be sustained - demand of excise duty only on assumption and presumptions in quantity of clearance of finished goods figures of tax audit form 3CD and ER 1 cannot be sustained on merits - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of excise duty based on alleged clandestine removal without substantive evidence and the applicability of the extended period of limitation.

Analysis:
The Appellant, engaged in the manufacture of aerated water and fruit-based beverages, challenged the Order-in-Original confirming a demand of excise duty for the period 2012-13 to 2015-16. The demand was based on alleged excess clearance of goods without payment of excise duty. The Appellant contended that the demand lacked substantive evidence of clandestine removal and was substantially barred by limitation.

The Appellant argued that the demand was unsustainable as it relied solely on figures from the tax audit report without additional allegations. They highlighted that the ER 1 form only covers manufacturing details, while the 3CD form includes traded goods, leading to discrepancies. The Appellant provided detailed reconciliation, emphasizing that the demand lacked proof of clandestine removal, which was essential to establish liability.

The Tribunal noted that the Adjudicating Authority confirmed the demand based on differences in clearance figures between ER 1 and form 3CD, without concrete evidence of clandestine removal. The Appellant presented reconciliations, supported by a tax auditor's certificate, to clarify the discrepancies. Citing legal precedents, including judgments from the Hon'ble Patna High Court and the Supreme Court, the Tribunal emphasized the need for substantive evidence to prove clandestine removal.

Referring to a specific Tribunal judgment, the Tribunal highlighted that the burden of proof regarding clandestine removal rested with the Revenue, which failed to provide corroborative evidence in this case. Consequently, the demand of excise duty, solely based on consumption figure differences, was deemed unsustainable. The Tribunal set aside the demand, along with associated penalties and interest, based on the lack of substantial evidence supporting the allegation of clandestine removal.

In conclusion, the Tribunal allowed the appeal, emphasizing that the demand of excise duty, solely based on assumptions and presumptions regarding clearance figures, lacked merit and was not sustainable. The decision was made in accordance with legal precedents and statutory provisions, setting aside the demand and associated penalties and interest.