2022 (7) TMI 1430 - AT - Central Excise

Clandestine Removal - difference in figures of audit report and ER-1 return for the year 2006-07 - suppression of production of 1455.205 MT of steel ingots and 395.160 MT of steel rolled products in the daily stock accounts - evasion of Central Excise Duty - Extended period of limitation - HELD THAT - The appellant being a public limited company the financial records are available on net all the times. But, the show cause notice has been issued on 01.03.2011 by invoking extended period of limitation. Apart from difference in figures of financial records and ER-1 return, no investigation was conducted to establish clandestine removal of goods which is serious allegation. No statement of has been recorded. In that circumstances the charge of clandestine removal of goods not sustainable as similar issue came up before this Tribunal in the case of M/S CHANDUKA HI-TECH STEEL PVT. LTD. VERSUS CESTAT, KOLKATA 2017 (11) TMI 2026 - CESTAT KOLKATA where Tribunal has observed that the allegation of clandestine activities are serious allegation and are required to be based upon the evidences, which reflected upon the same. In the present case, the Revenue has not made any investigation as regards the clandestine manufacture and clearance of the appellant s final product. In such a scenario, the said finding is neither warranted nor justified. Time and again it is held by the judicial pronouncements that merely on the basis of difference in the figures of audit report and ER-1 return without establishing the parameters of clandestine manufacture and removal of goods, the charge of clandestine removal is not sustainable. Therefore, on merits also, we hold that in the absence of any statement or investigation against the appellant with corroborative evidence, the impugned order is not sustainable. Accordingly, the same is set aside. Appeal allowed.

Summary

Issues:
Challenge to demand of central excise duty, interest, and penalty for alleged clandestine removal of goods.

Analysis:
1. The appellant was alleged to have suppressed production and evaded central excise duty by manipulating records. Discrepancies were found between the financial records and daily stock accounts, indicating suppression of production and clearance of goods without payment of duty.

2. The appellant was accused of not disclosing production and clearance in central excise statutory returns, leading to the evasion of duty. The show cause notice was issued after discrepancies were noted in the audit report and ER-1 filings for the year 2006-07.

3. The appellant argued that the demand was based solely on variations in figures without evidence of clandestine clearance. The appellant contended that the extended period of limitation should not apply as the audit report was a public document available to the authorities.

4. The Tribunal noted that no investigation was conducted to establish clandestine removal of goods beyond the discrepancies in financial records. Citing precedents, it emphasized the need for concrete evidence to support allegations of clandestine activities.

5. Referring to judicial decisions, the Tribunal highlighted that mere differences in figures without evidence of clandestine activities are insufficient to sustain charges of evasion. Lack of investigation and corroborative evidence rendered the allegations unsustainable.

6. Relying on legal precedents, the Tribunal concluded that the demand based on discrepancies in audit reports and ER-1 filings, without concrete evidence of clandestine activities, was not tenable. The impugned order was set aside, and the appeal was allowed with consequential relief.

7. The Tribunal emphasized the importance of concrete evidence and investigations to substantiate allegations of clandestine activities, as highlighted in previous legal judgments. The decision underscored the necessity for thorough scrutiny and evidence before confirming demands for duty evasion.