2015 (4) TMI 773 - AT - Central Excise

Clandestine removal of goods - Bogus transactions - Department was of the view that the transactions of commodity trading shown by the respondent are bogus transactions and represent clandestine removal of manufactured goods - difference between the sales declared in the ER-1 returns and sales figures as reflected in their books of accounts - Held that - Moreover merely on the basis that the respondent had shown some bogus transactions regarding trading in commodities through commodity exchange and had shown an income of ₹ 35,05,614/- from these transactions, it cannot be presumed that this income was from their manufacturing activity. Merely because their electricity consumption for production of per M.T. of their finished products MS Flats, MS Squares, MS Rounds etc. had varied from 150 units per M.T. to 786 units per M.T. it cannot be presumed that they have under reported their production. In view of this, the duty demand of ₹ 5,77,725/- has been correctly set aside by the Commissioner (Appeals). As regards, duty demand of ₹ 1,05,611/- based on the difference between the value of sales as reflected in their ER-1 returns for 2006-2007 and as reflected in their books of accounts, we have find that the Commissioner (Appals) has discussed this matter in detail and we agree with the findings of the Commissioner (Appeals) that merely on the basis of this difference, it cannot be presumed that the same represents either the value of the clandestinely cleared goods or the value of the goods cleared under the invoices which has been received over and above the invoice amount. - Decided against Revenue.

Summary

Issues: Allegation of duty evasion based on commodity trading income, difference in sales figures, electricity consumption, capacity utilization, and value addition.

Allegation of Duty Evasion based on Commodity Trading Income:
The case involved the respondent, manufacturers of rolled products, showing income from commodity trading on MCX. The Department alleged that the income was actually from clandestine removal of finished goods. The Department relied on a letter from MCX stating the respondent was not registered with their Member, indicating bogus transactions. The duty demand of Rs. 5,77,725 was set aside by the Commissioner (Appeals) as the cross-examination of MCX officials was not allowed, and it couldn't be presumed that the income was from manufacturing activity based solely on the trading transactions.

Difference in Sales Figures:
Another issue was the difference between sales figures in ER-1 returns and books of accounts, leading to a duty demand of Rs. 1,05,611. The Commissioner (Appeals) found no basis to presume that this difference represented clandestinely cleared goods or goods cleared under invoices above the invoice amount. The Tribunal agreed with this finding, dismissing the Revenue's appeal.

Electricity Consumption, Capacity Utilization, and Value Addition:
The investigation also highlighted variations in electricity consumption, low capacity utilization, and abnormal value addition percentages. The Department argued these factors indicated underreporting of production and undervaluation of goods. However, the Tribunal found no sufficient evidence to support these allegations, stating that variations in electricity consumption alone couldn't prove underreporting of production. The Tribunal upheld the Commissioner (Appeals) decision, dismissing the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, finding no infirmity in the impugned order. The judgment emphasized the importance of substantial evidence to support duty evasion allegations, especially in cases involving complex financial transactions and production data.