2018 (1) TMI 914 - AT - Central Excise

Clandestine removal - M.S. Ingots - the Revenue s entire case is based upon the investigations conducted by them in respect of entries made in the balance-sheet - Held that - It is not disputed on record that income reflected in the balance-sheet stands included by the assessee for payment of Income Tax. Such Income Tax Returns have also been assessed by the Income Tax Department. The said returns have also been audited by their statutory auditor. We would like to observe that Central Excise authorities have no jurisdiction to interfere in the orders passed by Income Tax authorities and to hold that transactions which stand accepted by the Income Tax authorities were not genuine transactions. Virtually no evidence is produced by the Revenue as regards the clandestine manufacture and clearances of appellant s final product. It is well settled law that the allegations of clandestine manufacture and removal are required to be proved by production of sufficient evidence in the shape of production of raw material, the actual manufacture of the goods, transportation of the same or in the shape of identification of the buyers. There is no statement of any persons indicating or admitting that income as reflected by the appellants in balance sheet stands derived from clandestine activities of manufacturer and clearance of their final products. Appeal dismissed - decided against Revenue.

Summary

Issues involved:
Challenging demand of Central Excise Duty, imposition of penalties, inclusion of November 2001 in the demand.

Analysis:
1. Challenging demand of Central Excise Duty and Penalties:
The case involved appeals against the Order-in-Original dated 31.07.2007, where the appellant, engaged in manufacturing M.S. Ingots, was accused of suppressing production based on electricity consumption discrepancies. The Revenue alleged excess electricity consumption and fictitious income, demanding duty of ?2.96 crores with penalties. The appellant argued that transactions were duly recorded, no evidence of clandestine activities existed, and electricity consumption alone couldn't prove wrongdoing. Reference was made to past judgments supporting lack of evidence for clandestine removal. The Tribunal emphasized that Central Excise authorities lacked jurisdiction to challenge transactions accepted by Income Tax authorities. The Tribunal cited precedents where Revenue's actions were deemed without jurisdiction due to lack of evidence and disregard for audited financial records.

2. Inclusion of November 2001 in the demand:
The Revenue sought to include clearances from November 2001 in the demand, alleging fictitious transactions to mask receipts from clandestine activities. However, the Tribunal noted the Revenue's case relied heavily on balance-sheet entries, which were duly accounted for and accepted by Income Tax authorities. Lack of evidence for clandestine manufacture and clearances, such as raw material production, transportation, or buyer identification, weakened the Revenue's position. The Tribunal emphasized the need for sufficient evidence to prove clandestine activities. Citing past judgments, including the one in R.A. Casting Pvt Ltd case, the Tribunal dismissed the Revenue's appeal, set aside the impugned order, and allowed the appeals by the assessee and connected persons.

In conclusion, the Tribunal ruled in favor of the appellants, highlighting the importance of evidence and jurisdictional boundaries in challenging excise duty demands and penalties. The judgment underscored the need for concrete proof of clandestine activities and upheld the sanctity of audited financial records accepted by competent authorities. The decision provided a comprehensive analysis of the issues raised, citing relevant legal precedents to support the dismissal of the Revenue's appeal and the allowance of appeals by the appellants and related parties.