Whether the demand of Central Excise duty can be confirm only on the basis of income tax demand without any corroborative evidence?

PJ/CASE LAW/2016-17/3085

Case:- SUPREME CYLINDERS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I

Citation:- 2016 (332) E.L.T. 373 (Tri. - Del.)

Brief Facts:- The office of the Accountant General during the course of audit of the books of accounts in the appellant’s factory premises, detected that there was an income tax demand of Rs. 57,00,000/- which the appellant deposited without contesting the assessment order. On the basis of the payments made to the Income Tax Department, the Central Excise Department initiated proceedings against the appellant on the alleged ground that the LPG Cylinder worth Rs. 57,00,000/- have been removed clandestinely from the factory. The proceedings initiated in this regard culminated in the adjudication order in confirming the duty demand and also imposition of penalty. In appeal, the Commissioner (Appeals) has upheld the adjudication order. Hence this present appeal before this Tribunal.

Appellant’s Contention:- The appellant submits that the LPG cylinders manufactured by the appellant are supplied to the Public Sector oil companies, namely, India Oil Corporations, Bharat Petroleum Corporation and Hindustan Petroleum Corporation. The goods are supplied on the basis of tender call notice. The said goods are subject to physical control under the stringent guidelines prescribed by the (BIS) Bureau of Indian Standards. The appellant further submits that the cylinders manufactured by the appellant are required to undergo the BIS specification norms and unless the quality control as per the said norms are achieved, the cylinders will not be in the marketable condition. The appellant further submits that the they have maintained adequate records to demonstrate that the goods manufactured by the us have been removed on payment of Central Excise duty. It is his submission that since no verification has been done at the factory and also no investigation has been taken place at the buyer’s end, the allegation of clandestine clearance of goods levelled against the appellant cannot sustain. To support his said views, the appellant relies on the decision of this Tribunal in the case of CCE v. Saini Industries Ltd. reported in 2014 (304)E.L.T.282 (Tri.-Del.) and CCE Ludhiana v. Zoloto Industries reported in 2013 (294)E.L.T.455 (Tri.-Del.).

Respondent’s Contention:-The respondent reiterates the findings recorded in the impugned order and further submits that the appellant had no other activities excepting manufacture of LPG cylinders. According to ld. DR, since there was an income tax demand pertaining to manufacture and sale of cylinders and the undisclosed income was promptly paid by the appellant without contesting the liability, it can be safely concluded that the goods have been clandestinely removed from the factory without payment of Central Excise duty.

Reasoning of judgment:- The Tribunal Heard both the sides and perused the records. The tribunal finds from the available records that the Central Excise duty demand has been confirmed by the authorities below solely based on the demand confirmed by the Income Tax department. The allegation of clandestine removal of goods has been levelled on the ground that the income tax dues have been promptly paid by the appellant without contesting the liability. The Tribunal also finds that in arriving at such conclusion, the Department has not carried out any independence enquiry to ascertain as to whether the goods were removed clandestinely without payment of Central Excise duty. Documents/records maintained by the appellant regarding manufacture and clearance of goods have also not been verified. Further, there is no evidence regarding receipt of excess raw material/input goods required for manufacture of the alleged clandestine removal of goods. The Tribunal further finds that no investigation has been taken place at the buyer’s end, to verify the particulars regarding receipt of unaccounted for goods, who are the reputed public sector oil companies. Since LPG cylinders are not general merchandise, capable of bought and sold in the common market place and is controlled under the stringent norms prescribed by BIS, The Tribunal considered opinion that the allegation of clandestine removal without proper verification of books cannot be a defensible ground for confirmation of duty demand and for imposition of penalty. The Tribunal also finds that this Tribunal in the case of Zoloto Industries (Supra) has held that in absence of admission of clandestine manufacture and removal by the assessee, the allegation of clandestine removal cannot sustain and the duty demand cannot be confirmed. Further, this Tribunal in the case of Saini Industries (supra) has held that stock verification by the Income tax Department cannot be accepted on its face value in view of doubts raised by the assessee and in the absence of corroborative evidence regarding clandestine activity, no duty of excise can be confirmed. In view of above, The Tribunal of the considered opinion that clandestine removal of cylinder cannot be upheld in this case and as such, the impugned order is set aside and the appeal is allowed in favour of the appellant.

Decision:- Appeal Allowed in favour of appellant.

Comments:- The Crux of this case is that the Revenue confirmed the demand against the assessee without any corroborative evidence regarding clandestine removal. The department also not verifies the same at the buyer’s end. The Tribunal finds that in the absence of the evidence no demand of duty can be confirmed and Tribunal set aside the order and allowed the appeal of assessee.

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PJ/CASE LAW/2016-17/3085

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