2018 (1) TMI 1582 - AT - Central Excise

Tribunal rejects revenue's appeal for lack of evidence linking undervaluation to income

The Appellate Tribunal CESTAT ALLAHABAD rejected the revenue's appeal due to the lack of evidence establishing a clear nexus between the alleged ... Valuation - undervaluation - Revenue entertained a view that the assessable value of appellant’s goods was on the lower side whereas the goods was being sold at higher price and the differential amount was being reflected in the balance sheet as income arising out of Share Trading - HELD THAT:- The revenue in the present appeal has not produced any evidence on record to show that such extra income shown by the respondent in their balance sheet was on account of any under valuation activities of their final products. In the absence of any evidence on record, the revenue’s allegation cannot be upheld. No infirmity is found in the impugned order of Commissioner (Appeals) - appeal dismissed - decided against Revenue. Issues: Alleged undervaluation of goods leading to income from share trading, confirmation of demand, imposition of penalties, nexus between income from share trading and value of cleared products.Alleged Undervaluation of Goods Leading to Income from Share Trading:The case involved a dispute where the revenue alleged that the assessable value of the appellant's goods was lower than the actual selling price, leading to income being reflected in the balance sheet as arising from share trading. The original authority confirmed a demand of approximately Rs. 22 lakhs against the respondent based on this allegation. However, the Commissioner (Appeals) noted that the revenue failed to establish a clear nexus between the income from share trading and the value of products cleared by the assessee. Citing precedents, the Commissioner observed that the department's claim of fictitious income/profit due to share trading profits lacked evidence. Relying on the Tribunal's decision in a similar case, the Commissioner set aside the original order due to lack of evidence supporting the revenue's allegation.Confirmation of Demand and Imposition of Penalties:The proceedings initiated by the revenue against the respondent resulted in the confirmation of a demand of around Rs. 22 lakhs along with the imposition of penalties on the respondent and other noticees. However, the Commissioner (Appeals) found that the revenue's case lacked substantial evidence linking the alleged undervaluation of goods to the income from share trading. The Commissioner highlighted that the balance sheet of the company showed profits from share trading and received as commission, which the revenue deemed as fictitious. By relying on a Tribunal decision, the Commissioner concluded that the revenue's claims were unsubstantiated, leading to the setting aside of the original order.Nexus Between Income from Share Trading and Value of Cleared Products:The crux of the issue revolved around establishing a connection between the income generated from share trading and the valuation of the products cleared by the respondent. The Tribunal noted that the revenue failed to provide any concrete evidence demonstrating that the additional income reflected in the balance sheet was a result of undervaluation activities related to the final products. In the absence of compelling evidence supporting the revenue's allegations, the Tribunal upheld the decision of the Commissioner (Appeals) and rejected the revenue's appeal. The Tribunal emphasized the necessity of substantiated claims and evidence to support allegations of undervaluation or fictitious income.In conclusion, the judgment by the Appellate Tribunal CESTAT ALLAHABAD highlighted the importance of establishing a clear nexus between alleged undervaluation of goods and income from share trading. The decision underscored the significance of presenting substantial evidence to support claims of undervaluation and fictitious income, ultimately leading to the rejection of the revenue's appeal due to the lack of evidence linking the income from share trading to the valuation of cleared products.