2009 (7) TMI 410 - AT - Central Excise

Clandestine clearance of goods - Value of clearances shown in the balance sheet etc. did not tally with those mentioned in the Central Excise returns submitted by the assessee to the Department. It has been, therefore, alleged that the assessees had manufactured and cleared goods clandestinely without accountal and without payment of duty - As regards the plea that the value of trading activity was also included in the figure shown in the value of clearances reflected in the balance sheet, I reject this argument as not tenable for the reason that the assessee being manufacturer was required to be registered for carrying trading activity for which he was not able to produce any proof of registration. - Secondly the balance sheet does not show any value of trading activity separately and the figure of little over Rs. 67 lakhs represented value of clearances as a composite/consolidated figure and therefore the assessee has not been able to substantiate the plea that they were also carrying on trading activity and had included the value of such activity in the total figure of little over Rs. 67 lakhs in the balance sheet. I, therefore, hold that the charge of clandestine clearance has been correctly made out by the Revenue Demand is justified

Summary

Issues: Alleged clandestine clearance without accountal and duty payment during financial year 2002-03.

In this case, the Appellate Tribunal CESTAT, Chennai dealt with the issue of alleged clandestine clearance by registered manufacturers of plywood and compreg boards during the financial year 2002-03. The officers found discrepancies between the value of clearances shown in the balance sheet and the Central Excise returns submitted by the assessees. The Department issued a Show Cause Notice proposing duty recovery invoking the extended period of limitation for suppression of facts. The adjudicating authority confirmed a demand for duty, interest, and penalties, which was set aside by the Commissioner (Appeals), leading to the Revenue's appeal.

The main contention was the variance of around Rs. 11 lakhs between the values in the balance sheet and Central Excise returns. The assessees argued that the difference was due to rounding of figures and inclusion of trading activity value in the balance sheet. However, the Tribunal rejected these arguments. It held that the assessees failed to prove registration for trading activity and that the balance sheet did not separately reflect trading activity value. Consequently, the Tribunal concluded that the charge of clandestine clearance was established, setting aside the Commissioner's order and allowing the Revenue's appeal.

Additionally, a cross-objection was filed by the assessees, which was dismissed by the Tribunal. The judgment emphasized the importance of accurate reporting and registration compliance in manufacturing and trading activities to avoid allegations of clandestine clearance and duty evasion. The decision reinforced the significance of maintaining consistent and verifiable records to substantiate business activities and financial disclosures in compliance with Central Excise regulations.