Associated Power Structure Pvt Ltd VERSUS  C.C.E. & S.T.-Vadodara-ii 

Excise Appeal No. 605 of 2012-DB

(Arising out of OIO-1/VDR-II/OA/APS/ADJ/COMMR/12-13 Dated- 19/04/2012 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II)

Associated Power Structure Pvt Ltd

VERSUS 

C.C.E. & S.T.-Vadodara-ii 

WITH

Excise Appeal No. 726 of 2012

(Arising out of OIO-1/VDR-II/OA/APS/ADJ/COMMR/12-13 Dated- 19/04/2012 passed by Commissioner of Central Excise, CUSTOMS (Adjudication)-VADODARA-II)

Ajay M Patel

VERSUS 

C.C.E. & S.T.-Vadodara-ii

APPEARANCE:

Shri Saurabh Dixit, Advocate for the Appellant

Shri. G. Kirupanandan, Superintendent (AR) for the Respondent

 

CORAM: HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON’BLE MR. RAJU, MEMBER (TECHNICAL)

 

Final Order No. A/ 10408-10409 /2023

 

 

 

 

 RAMESH NAIR

DATE OF HEARING:09.01.2023 DATE OF DECISION:06.03.2023

 

 

The brief facts of the case are that the appellant is engaged in the manufacture of excisable goods such as steel, Structural material falling under chapter heading 73 of Central Excise Tariff Act, 1984. Certain search was conducted by the income tax department in the premises of the appellant wherein the appellant accepted certain variation in raw material scrap and stock value that while the appellant was in the process of

 

finalizing their accounts. Certain working paper was noted by the IT department which include two Trial balances both up to 04.03.2008 having different working values for, inter alia, raw material as well as scrap. That since two separate values were recorded in such Trial balances for stock of scrap and raw material that the IT authorities made the appellant to pay income tax on the difference between the two values. The appellant had admittedly recorded the stock of Raw material as well as scrap in their records. The case of the Department is that the stock of raw material and scrap which was earlier not recorded and the same was recorded on the investigation of the Income Tax Department, the said goods may have been used to produce finished goods which may have been cleared clandestinely. Accordingly, the demand of excise duty on the finished goods alleged to have been manufactured out of the stock recorded as per Income Tax Investigation was demanded.

2. Shri Saurabh Dixit, Learned Counsel appearing on behalf of the appellant submits that this is not a case of shortage of goods but as per the Income Tax Investigation certain stock of raw material and scrap was not accounted for. On the basis of Income Tax search the certain stock was accounted for in the excise records. Once the same was accounted for obviously the same has been cleared on the payment of duty, accordingly, there cannot be demanded on such stock. He further submits that the department has presumed on the basis of Income Tax Investigation that the goods have been manufactured and cleared clandestinely whereas no independent evidence was brought on record. He submits that the workingof demand is on the hypothetical and presumptive basis. Regarding raw material being used to produce finished goods and scrap being found as per private records. Therefore, on this basis the demand cannot be sustained. He further submits that it may be appreciated that considering the volume of the material dealt with by the appellant till date of IT search the 945 tons of the raw material stock and 310 tons of Scrap is hardly 0.6 % ( for raw material) and 0.21% (of scrap) respectively of the total material received by them which difference is too negligible as compared to the volume of the work undertaken in the fact. In support of his submission he placed reliance on the following judgments:

 

 

• RAVIFOODS LTD -2011 (266) E.L.T. 399 (Tri. – Bang)
• ZOLOTOINDUSTRIES- 2013 (294) L.T. 455 (Tri. – Del)
• SAINIINDUSTRIES LTD-2014 (304) L.T. 282 (Tri. – Del.)

 

• CHETAKMARMO  LTD. -2015 (325) E.L.T. 150 (Tri. – Del.)
• SUPREMECYLINDERS -2016 (332) E.L.T. 373 (Tri. – Del.)
• ARISUDANAINDUSTRIES  -2016 (339) E.L.T. 258 (Tri. Chan.)
• IOC V/s. CCE- 2003(158) ELT 49(Tri-Kolkata)
• IPCLV/s. CCE, Vadodara 2005(181) ELT 99 (Tri-Mumbai)
• KwalityTube Industries 2008(232) ELT 813(Tri-Ahmd)
• CCEV/s. Kwality Tube Industries-2009(240) ELT 20(Guj)
• GoodKare Medico  Ltd.-2019 (366) E.L.T. 133 (Tri. – All)
• MahavirMetal Industries -2014 (313) L.T. 581 (Tri. – Ahmd)

 

 

 

3. Shri G. Kirupanandan, learned Superintendent (AR) appearing on behalfthe Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both the sides andperused the  We find that the demand was raised in the present case on the basis of IT search according to which the appellant had allegedly on account for some quantity of raw material and scrap which was duly accounted for in the excise records of the appellant. Once the unaccounted stock of raw material and scrap was accounted for obviously the same would be cleared on payment of duty. In this fact the department’s case is of no basis that goods might have been cleared clandestinely. Moreover except relying on the IT Search the revenue has not independently investigated the case, no evidence of clandestine manufacture and removal and transportation of the goods was investigated or brought on record. Therefore, merely, on this IT Search demand cannot be confirmed. When the appellant have recorded the raw material and scrap as per the IT investigation, it means certain stock was lying unaccounted which stood accounted for by making proper entries in the records. In such case, there cannot be any case of clandestine removal. The department has demanded duty assuming that goods have been cleared clandestinely is without any basis. Even, the accounting made by the appellant on the instance of IT Search does not show that the goods have been cleared clandestinely. The difference which was pointed out by the income tax department is very negligible i.e. raw material 0.6 % and scrap of 0.21% against the total raw material and scrap dealt by the appellant. For this reason also it cannot be assumed that the goods have been cleared clandestinely. As regard the reliance placed on the IT search, it is settled law that on the basis of Income Tax  demand  of  Central  Excise  Duty  cannot  be  confirmed  without

 

independent investigation and bringing tangible evidence on records. This view, is supported by the following judgments:-

• In case of RAVI FOODS PVT.LTD (Supra) the Tribunal has taken a view that any details submitted by the assessee of input output ratio electricity consumption and other materials could be rejected on the ground that there was admission before the income tax authority. In the said decision the Tribunal has taken a view that despite the admission before the income tax authority when no evidence found of clandestine manufacture confirmationof demand in such case is beyond scope of show cause notice alleging suppression of turnover.
• In the case of ZOLOTO INDUSTRIES (Supra) the Tribunal held that the surrender of income to the Income Tax Department having no evidence to show that income was surrenderedon account of clandestine manufacture and removal when no admission of clandestine manufacture and removal by the assessee’s authorise representative, no reason to hold that surrendered income was on account of clandestine manufacturing activity.
• In absolutely identical facts of the present case in the case of SAINI INDUSTRIES LTD (Supra) this Tribunal has held that even though stock verification received from Income Tax Department but nothing on recordthat assessee had actually manufactured and removed the goods clandestinely . The stock verification done of Income Tax Authorities cannot be accepted on its face value in view of doubts raised by assessee and in the absence of corroborative evidence, hence, no duty of excise can be
• Inthe case of CHETAK MARMO PVT. (Supra) this tribunal held that it is a well settled law that clandestine removal ought to be established by production positive evidence in absence of any other evidence on record, some discloser and surrender of income before Income Tax Authorities especially when assessee pleading also undertaking other activities of generation of income not to be held to the sufficient evidence to uphold finding of clandestine activities in absence of procurement of raw material, the actual manufacture of goods and non identity of transporter and customer etc.
• In the case of SUPREME CYLINDERS LTD (Supra) the assessee haspaid the income tax demand without contesting. The revenue has alleged clandestine removal of finished goods on the ground that there was no other source of  It was held by the Tribunal that department having not

 

conducted independent verification of documents/ records maintained by assessee for manufacture and clearance of goods, receipt of access raw material for manufacture of alleged clandestinely removed goods, unaccounted goods received by the buyers which are reputed public sector undertakings and also goods in question being not general merchandise item sold under stringent norms prescribed by the allegation of clandestine removal in absence of corroborative evidence is not sustainable.

• As per the above judgments and other judgments relied upon by the appellant, the Tribunal has taken a consistence view that merely on thebasis of income tax investigation the case of clandestine removal under the Central Excise Act cannot be confirmed without bringing independent tangible evidence on record.

5. Therefore, as per the discussion and finding given hereinabove, we are of the considered view that the department could not establish the case of clandestine removal. Hence, the impugned order is not sustainable and the same is set aside.Appeals are allowed with consequential relief.

 

 

 

(Pronounced in the open court on 06.03.2023)

 

 

 

 

(RAMESH NAIR) MEMBER (JUDICIAL)

 

 

 

 

 

 

 

 

 

 

PRACHI

(RAJU) MEMBER (TECHNICAL)