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2025 (3) TMI 776 - AT - Central ExciseClandestine removal - discrepancy between ER-1 and ER-4 Returns - typographical error in ER 4 - extended period of limitation - HELD THAT - Admittedly the entire proceedings have been initiated on account of audit taken up in May 2015. The audit team has issued Spot Memo on 09/5/2015 raising the issue that ER-4 Returns are showing higher quantity of sales as against the quantity shown in the ER-1 Returns. Audit has pointed out that the difference between these figures is to tune of 945.900 MT. The appellant submitted their explanation on 19/06/2015 stating that while filing the ER-4 for the month of January 2014 instead of typing 10 MT they have typed the same as 100 MT because of which the excess quantity of 90 MT has been shown in the ER-4 Returns. In respect of 755.900 MT they have explained that the scrap generated in the course of manufacture has been shown in the ER-4 under the sales column but has been consumed by them captively for re-cycling the same. Since the ER 4 Return does not have any specific column to show such captively consumed figures they have shown the same in the Sales column. The entire demand has been confirmed based solely on the basis of audit objection without giving due consideration to the documentary evidence placed by the appellant. Therefore on this count itself the confirmed demand is not sustainable. Time limitation - HELD THAT - It is found that by way of Spot Memo dated 09/5/2015 the issue about the differential 946 MT was raised by the audit team for which the appellant has filed their reply on 19/6/2015. Therefore the Department has come to know about the issue on 19/06/2015 itself. However they have waited for next nearly two years to issue the Show Cause Notice by invoking the extended period without showing as to what kind of investigation was taken up during the intervening period. Moreover it is found that the difference in quantification of demand has been gathered from ER-1 ER-4 and ER-6 Returns which have been filed by the appellant. All these facts go on to show that the Department has not made out any case of suppression on part of the appellant - the demand set aside even on account of limitation. Conclusion - i) The demand based on an alleged discrepancy between ER-1 and ER-4 Returns is not sustainable due to a lack of corroborative evidence of clandestine clearance. ii) The demand is time-barred as the Department failed to issue the Show Cause Notice within the appropriate timeframe without justification. The appeal is allowed both on account of merits as well as on account of time bar.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Clandestine Clearance Allegation - Relevant Legal Framework and Precedents: The allegation of clandestine removal requires the Revenue to provide substantial evidence of unaccounted production and clearance without payment of duty. Precedents such as the case of Satyam Iron and Steel Company emphasize the necessity of cogent evidence to support such allegations. - Court's Interpretation and Reasoning: The Tribunal found that the Revenue failed to provide corroborative evidence of clandestine clearance. The lack of evidence regarding buyers, transportation, or cash transactions was highlighted as a critical shortcoming. - Key Evidence and Findings: The appellant's explanation of the discrepancy as a typographical error and captive consumption was supported by a Chartered Accountant's Certificate. The Tribunal noted that if clandestine removal had occurred, the ER-1 and ER-4 Returns would have been manipulated to match. - Application of Law to Facts: The Tribunal applied the legal requirement for substantial evidence in clandestine removal cases and found the Revenue's case lacking. - Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the Chartered Accountant's Certificate was merely a reconciliation statement but found the appellant's explanation more credible. - Conclusions: The Tribunal concluded that the demand based on alleged clandestine clearance was not sustainable due to the lack of evidence. Limitation and Timeliness of the Show Cause Notice - Relevant Legal Framework and Precedents: The extended period for issuing a Show Cause Notice requires evidence of suppression or willful misstatement by the assessee. The case of Satyam Iron and Steel Company was referenced to highlight the requirement for timely action by the Revenue. - Court's Interpretation and Reasoning: The Tribunal found that the Department was aware of the issue by June 2015 but delayed issuing the Show Cause Notice until June 2017 without justification. - Key Evidence and Findings: The Spot Memo and the appellant's timely response indicated that the Department had sufficient knowledge of the issue well before the notice was issued. - Application of Law to Facts: The Tribunal applied the legal standards for invoking the extended period and found the Revenue's actions unjustified. - Treatment of Competing Arguments: The Tribunal dismissed the Revenue's attempt to justify the delay, noting the lack of further investigation during the intervening period. - Conclusions: The Tribunal held that the demand was time-barred, as the conditions for invoking the extended period were not met. Consideration of Chartered Accountant's Certificate - Relevant Legal Framework and Precedents: The credibility of documentary evidence, such as a Chartered Accountant's Certificate, is crucial in disputes involving accounting discrepancies. - Court's Interpretation and Reasoning: The Tribunal gave significant weight to the Chartered Accountant's Certificate, which reconciled the ER-1 and ER-6 figures and confirmed the use of scrap for captive consumption. - Key Evidence and Findings: The Certificate supported the appellant's explanation of the discrepancy and was not adequately considered by the lower authorities. - Application of Law to Facts: The Tribunal found that the Certificate provided a credible explanation for the discrepancy, undermining the Revenue's allegations. - Treatment of Competing Arguments: The Tribunal rejected the Revenue's dismissal of the Certificate as merely a reconciliation statement. - Conclusions: The Tribunal concluded that the Certificate was a critical piece of evidence that supported the appellant's case. SIGNIFICANT HOLDINGS - The Tribunal held that the demand based on an alleged discrepancy between ER-1 and ER-4 Returns was not sustainable due to a lack of corroborative evidence of clandestine clearance. - It was determined that the demand was time-barred, as the Department failed to issue the Show Cause Notice within the appropriate timeframe without justification. - The Tribunal emphasized the importance of substantial evidence in proving clandestine removal and the necessity of considering all documentary evidence presented by the assessee. - The Tribunal set aside the impugned order and allowed the appeal, granting the appellant relief on both merits and limitation grounds.
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