2008 (5) TMI 526 - AT - Central Excise

Tribunal Overturns Penalties for Lack of Evidence in Central Excise Case

The Tribunal set aside the confirmation of demand and imposition of penalties by the Commissioner of Central Excise under section 11AC of the Central ... Demand - Clandestine removal - Evidence Issues involved:The issues involved in the judgment are the confirmation of demand and imposition of penalties by the Commissioner of Central Excise u/s 11AC of the Central Excise Act, 1944.Confirmation of Demand:The appellant, engaged in manufacturing stainless steel and alloy steel ingots, filed appeals against the adjudication order confirming a demand of Rs. 82,67,765. The Revenue alleged that income shown under 'other receipts' in the balance sheet for 2001-2002 and 2002-2003 was attributable to the sale of SS ingots and alloy steel ingots cleared without duty payment. The appellant contended they were also engaged in trading activities, supported by registration certificates, and produced evidence of various income sources like commission, slag sales, Dharam Kanta income, and freight income. The Revenue rejected this evidence as manipulated, but the appellant provided documents showing compliance with Service Tax and Sales Tax authorities. The Tribunal found the demand unsustainable as there was no evidence linking the 'other receipts' income to duty-free cleared goods.Imposition of Penalties:The Revenue argued that the appellant's ledger accounts and certain cash sales entries lacked verification and customer details for weighment payments were undisclosed, indicating 'other receipts' were from duty-free cleared goods. However, the Tribunal noted the appellant's registration for trading activities, production of invoices and bills for traded goods, and compliance with Service Tax payments. Despite the lack of verification from customers, employees, or evidence of unaccounted raw materials, the Tribunal found the demand based on 'other receipts' income unsustainable and set it aside, allowing the appeals.This judgment highlights the importance of providing verifiable evidence to support income sources and the necessity of establishing a clear link between income shown in financial statements and the activities subject to duty payments.