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TMI Blog2025 (3) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... return without establishing the parameters of clandestine manufacture and removal of goods, the charge of clandestine removal is not sustainable.' It is found that in this case the show cause notice has been issued on 29.04.2015 for the period 2010-11 and 2011-12 on the basis of difference between Form 3CD and ER-1 Returns. As all these documents were in public domain during the impugned period, therefore, as the documents are available with the department and if there any allegations required to be made that to be made during the normal period of limitation, which the Revenue has failed to do so. Extended period of limitation - HELD THAT:- The demand pertaining to extended period of limitation is not sustainable and whole of the demand is beyond the normal period of limitation. Conclusion - Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. The charge set aside concluding that the demand for excise duty, interest, and penalties was unsustainable due to lack of evidence, violation of natural justice, and inapplicability of the extended limitation period. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere no un-accounted clearances after adjusting for the Bengal Excise clearances but at best some conversion errors (from secondary unit to primary unit) which was getting re-checked by the statutory auditors, the proceedings were initiated against the Appellant including its Director and the ex-employee as a Co-Noticee vide Show Cause Notice dated 29 April 2015 alleging clandestine manufacture and clearance of the liquid medicaments based on the quantitative clearance reflected in the Audit report in Form 3CD vis-à-vis ER-1 Returns for the relevant period. It may be noted that SCN did not allege any difference in the aggregate clearance value for medicines (including liquid medicine) reflected in ER-1 Returns vis-à-vis Form 3CD as there was none. Further, no independent enquiry or reconciliation was conducted by the revenue and neither is there any 3rd party evidence what-so-ever much less any incriminating evidence in framing the serious charge of clandestine manufacture and clearance. 2.4 The Appellant furnished a detailed reply duly supported by Certificates from its statutory Auditors, M/s L.B.Jha & Co (who had also carried out the tax audit) reconciling the clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of the documents on record. To support this, he relied on Shyam Textiles Ltd. Vs. CCE" 2015 (322) ELT 547. B. The reconciliation furnished by the statutory Auditors of the Appellant reconciling the clearances (both in quantity and value) could not have been conveniently brushed aside citing superfluous reasons as the Learned Adjudicating Authority could have sought additional details and/or explanation before adjudicating the matter. Moreso, when there was no difference what-so-ever in the sales/clearance values as per the financial statements vis-à-vis 3CD and ER-1 and the entire demand is based on assumptions and presumptions B.1 The Appellant would like to submit that the Learned Adjudicating Authority has discarded/ignored the Certificate of the statutory Auditors, which was furnished by the Appellant duly reconciling the clearance of liquid medicine reflected in different units of measurement in the Form 3CD vis-à-vis the ER-1. However, the Learned Adjudicating Authority based on a discrepancy in the Certificate of the statutory Auditors as regards production quantity reflected in the top sheet/summery vis-à-vis the product wise details app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliable without citing any cogent reasons for the same. C. Allegations of Clandestine Removal of Goods cannot be alleged by the Learned Adjudicating Authorities simply on the basis of comparing two statutory returns and without providing any corroborative evidence to establish or substantiate the allegation. The Ld. Authorities have thus not discharged the initial burden of proof placed upon them by law. C.1 The Ld. Adjudicating Authorities have based their entire case of clandestine removal of goods on the discrepancy in quantities observed between the two statutory statements, Form 3CD and ER-1. The charge of clandestine removal of goods without payment or short payment of excise duty is a very serious allegation. Such a charge cannot be made merely on the basis of difference in the figures found in the two statutory reports submitted by the Appellant without substantial corroborative evidence. Such difference cannot be the only ground for confirming the central excise duty on the differential quantity. To support this, he relied on M/s Pratap Polysacks Ltd. v Commissioner of Central Excise, Haldia" [2023 (8) TMI 346 - CESTAT KOLKATA]. C.2 It is a settled principle of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation. No statement of has been recorded. In that circumstances the charge of clandestine removal of goods not sustainable." C.4 The Appellant thus submits that the Ld. Authorities have not been able to put forward any evidence other than the mismatch of the two statutory records to being forward a case of clandestine removal of liquid medicament against the Appellant. The Ld. Authorities have thus not been able to discharge the initial burden of proof to establish clandestine removal of liquid medicaments by the Appellant as they have simply compared the ER-1 and Form 3CD, the two statutory return and have concluded their case. D. Ambiguity cited by the Learned Adjudicating Authority in the bifurcation of the product between the State Excise and Central Excise does not exist in law and stems from a clear non-application of mind. D.1 The Ld. Adjudicating Authority have alleged that the Appellant attempted to manipulate the clearance figures of certain medicine by disputing the basis of classification of certain products such as Livergen Liquid and Livergen Syrup under State Excise Law. The Appellant submits that some of the medicines/goods manufactured by it contains alcoh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when asked for it. E.2 The Department cannot invoke the extended period of limitation, nor impose the resulting penalty, as the case against the Appellant is based solely on the discrepancy of figures in the two statutory returns, which are public documents. This discrepancy was identified during the audit of the Appellant's books of accounts conducted by the Revenue Department. Furthermore, the Learned Adjudicating Authorities have failed to record any third-party statements to support their allegations of clandestine removal of liquid medicament. Since there was no suppression of facts by the appellant in the first place, no extended period of limitation can be invoked by the Ld. Adjudicating Authority. E.3 Reference is drawn to the case of "Micky Metals Limited" (supra ) where the Tribunal was of the view that in cases where the demand of clandestine removal of goods has been alleged by the revenue only on the basis of difference in the figures of Form 3CD and ER 1, which were available with the revenue in time, the department cannot invoke extended period of limitation. To the same effect is the decision of this Tribunal in the case of "Shri Mahavir Ferro Alloys Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the lower authorities are solely based upon the Sales Tax Returns' figures. The Tribunal's decision in the case of Vigirom Chem Pvt.Ltd. referred (supra) laying down that the clandestine allegation cannot be made exclusively on the basis of record of sale of goods in the Sales Tax Returns. Otherwise also, I find 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. The Revenue's reliance on the Tribunal's decision in the case of Victor Component Systems Pvt.Ltd. referred (supra) is not appropriate inasmuch as it is seen that in that case, the Revenue relied upon the entries made in private records seized and recovered from the appellant's premises and the matter was remanded for re-quantification, by taking into account the sales figures as reflected in the Sales Tax Returns. This was so done at the request of the appellant. I find no justification to follow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder No. 26467/2013, dated 8-7-2013 [2016 (46) S.T.R. 233 (Tri. -Bang.)] observed that prima facie there was no suppression of facts or mis-declaration on the part of the appellants. We also find that in view of the above, timely scrutiny of Returns by the Department would have shown that there is huge accumulated credit; Department was free to further investigate the matter and issue timely SCN. In view of the same, we find that the appellants have a strong case on limitation too and the SCN is barred by limitation. In the result, we are of the considered opinion that the impugned order does not survive on merits as well as limitation." 11. As revenue has raised the demand only on the basis of difference in the figures of audit report and ER-1 return which were available with them in time, in that circumstances as held by this Tribunal in the case Tally Solutions Pvt.Ltd. (supra) the extended period of limitation is not invocable as show cause notice for the period 2006-07 has been issued on 01.03.2011 by invoking extended period of limitation. 12. We further find that time and again it is held by the judicial pronouncements as discussed hereinabove that merely on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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