2023 (3) TMI 433 - AT - Central Excise

Clandestine removal - Corroborative evidences - case of the Department is that the stock of raw material and scrap which was earlier not recorded and the same was recorded on the investigation of the Income Tax Department, the said goods may have been used to produce finished goods which may have been cleared clandestinely - HELD THAT - The demand was raised in the present case on the basis of IT search according to which the appellant had allegedly on account for some quantity of raw material and scrap which was duly accounted for in the excise records of the appellant. Once the unaccounted stock of raw material and scrap was accounted for obviously the same would be cleared on payment of duty. In this fact the department s case is of no basis that goods might have been cleared clandestinely. Moreover except relying on the IT Search the revenue has not independently investigated the case, no evidence of clandestine manufacture and removal and transportation of the goods was investigated or brought on record. Therefore, merely, on this IT Search demand cannot be confirmed. The department has demanded duty assuming that goods have been cleared clandestinely is without any basis. Even, the accounting made by the appellant on the instance of IT Search does not show that the goods have been cleared clandestinely. The difference which was pointed out by the income tax department is very negligible i.e. raw material 0.6 % and scrap of 0.21% against the total raw material and scrap dealt by the appellant. For this reason also it cannot be assumed that the goods have been cleared clandestinely. As regard the reliance placed on the IT search, it is settled law that on the basis of Income Tax demand of Central Excise Duty cannot be confirmed without independent investigation and bringing tangible evidence on records. In absolutely identical facts of the present case in the case of CCE., RAIPUR VERSUS M/S. SAINI INDUSTRIES LTD. 2014 (7) TMI 617 - CESTAT NEW DELHI this Tribunal has held that even though stock verification received from Income Tax Department but nothing on record that assessee had actually manufactured and removed the goods clandestinely . The stock verification done of Income Tax Authorities cannot be accepted on its face value in view of doubts raised by assessee and in the absence of corroborative evidence, hence, no duty of excise can be confirmed. The Tribunal has taken a consistence view that merely on the basis of income tax investigation the case of clandestine removal under the Central Excise Act cannot be confirmed without bringing independent tangible evidence on record - the department could not establish the case of clandestine removal. Hence, the impugned order is not sustainable and the same is set aside. Appeal allowed.

Summary

Issues Involved:
Demand of excise duty based on discrepancies found during an income tax department search regarding unaccounted stock of raw material and scrap.

Detailed Analysis:
1. Appellant's Submission:
- The appellant argued that the demand was unjustified as the unaccounted stock was duly recorded in the excise records and cleared upon payment of duty.
- They contended that the department's presumption of clandestine clearance lacked independent evidence and was based on hypothetical grounds.
- The appellant highlighted the negligible percentage of unaccounted stock compared to the total volume handled, emphasizing the lack of substantial impact.
- They cited various judgments to support their argument, emphasizing the need for tangible evidence to confirm demands.

2. Revenue's Response:
- The revenue reiterated the findings of the impugned order, standing by the demand based on the discrepancies revealed during the income tax search.

3. Tribunal's Decision:
- The tribunal carefully considered both sides' submissions and examined the records.
- It noted that the demand was solely based on the income tax search, without independent investigation or concrete evidence of clandestine activities.
- The tribunal emphasized that the mere accounting of previously unrecorded stock did not indicate clandestine removal, especially given the negligible percentage of the discrepancies.
- Referring to precedent judgments, the tribunal highlighted the necessity of tangible evidence beyond income tax findings to confirm demands related to clandestine activities.
- Ultimately, the tribunal concluded that the department failed to establish a case of clandestine removal, leading to the setting aside of the impugned order and allowing the appeals with consequential relief.

In conclusion, the judgment centered on the lack of substantial evidence beyond income tax search results to support the demand for excise duty based on discrepancies in stock recording. The tribunal stressed the importance of independent investigation and tangible evidence in cases involving allegations of clandestine activities, ultimately ruling in favor of the appellant due to the absence of concrete proof supporting the revenue's claims.