AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 997
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.... with the Central Excise authorities under Registration No. AABCN8514GXM001. 3. During the course of scrutiny of records of the appellant in 2014, the Department compared the sales value declared in VAT returns for the financial year 2012-13 with the value of clearances reported in ER-1 returns and assumed the differential value to be the value of goods clandestinely removed without payment of excise duty. The observations of the Department were communicated to the appellant vide spot audit memo dated 13.03.2014, to which the appellant furnished its reply on 02.04.2014. 3.1. The Department carried out similar comparisons for the Financial Years 2013-14, 2014-15 and 201516 as well. 4. Subsequently, a Show Cause Notice dated 09.05.2017 was served upon the appellant by invoking the extended period of limitation, demanding excise duty to the tune of Rs. 16,54,91,669/-, along with interest and equivalent penalty, on the allegation of clandestine production and clearance. The appellant filed their reply to the above Notice vide letter dated 10.01.2018 reconciling the said differences along with a Chartered Accountant's certificate and other documentary evidences in support of th....
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....leged buyers or transporters. The entire case rests merely on presumptions and assumptions, drawn solely from the comparison of the figures reported in VAT returns vis-à-vis the excise returns in ER-1 form. The Ld. adjudicating authority has failed to take note of the fact that the difference between the value of clearances as per ER-1 returns and sales value as per VAT returns is on account of the sale of non-excisable goods (traded goods and inter alia including sale of inputs as such on which proportionate CENVAT credit had been reversed by the appellant. The Ld. adjudicating authority has failed to appreciate that ER-1 returns capture details only in respect of excisable goods, and hence the value of sale of non-excisable goods would not reflect in the said returns. It is a settled legal principle that a demand alleging clandestine removal cannot be sustained solely on the basis of comparison of statutory returns, in the absence of any corroborative or direct evidence. Reliance in this regard is placed on the following judgements: a. M/s. Standard Pharmaceuticals Ltd. Versus Commissioner of Central Excise, Kolkata [2025 (3) TMI 430 - CESTAT KOLKATA] b. ....
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.... (i) It is submitted that the differences in the value of clearances reflected in the ER-1 returns vis-à-vis the turnover reported in the VAT returns arise on account of (i) trading sale of goods, (ii) removal of inputs as such, namely coke and limestone (iii) sale of fixed assets, (iv) sale of non-excisable goods, and (v) certain clerical errors in filing the ER-1 returns wherein the value of clearances was inadvertently not reflected. (ii) The said differences and their reasons were duly reconciled and explained by the appellant before the Ld. adjudicating authority. The appellant had also furnished a certificate issued by an independent Chartered Accountant in support of its contention. However, the ld. adjudicating authority has disregarded the said Chartered Accountant's certificate on a superfluous ground that it was not supported by documents. In this regard, it is submitted that all the supporting documents including, sale invoices, tax audit report, financial statements and excise returns were duly furnished before the ld. adjudicating authority. In spite thereof, in due haste to confirm the demand, the Ld. A....
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....ste product generated in Appellant's manufacturing operations was sold without excise duty. Party wise statement of sale of same and sample copies of invoices is from Pg. 11 to 11B/C. 2. Rs. 21,68,26,641/- for the FY 2013-14 i. Rs.20,89,90,150/- is towards sale of Hosiery Yarn as reported in P&L A/c of FY 2013-14 ii. Rs.78,36,491/- is towards the value of Coke removed as such on which proportionate CENVAT Credit has been reversed as can be evidenced from ER- 1 return i. Even after accepting that the Appellant is engaged in trading of hosiery yarn, the Ld. AA has rejected the value of its sale for alleged lack of documentary evidence. ii. Removal of cake has also been disregarded for lack of evidence. Findings of Ld. AA is grossly incorrect and inconsistent as all the documents along with CA certificate were furnished. 3. Rs. 4,35,57,989/- for the FY 2014-15 i. Rs.3,05,82,933/- is towards the value of coke and Rs. 69,82,399/- is towards the value of limestone removed as such on which proportionate CENVAT Credit has been reversed as can be evidenced from ER-1 return. ii.Rs.48,14,000/- is value of exports of Pig Iron made in July 2014, which were inadv....
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....parate proceedings emanating from the very same Spot Audit Memo, wherein the Notice was also issued on 09.05.2017, this Tribunal has already held that the entire proceedings were hit by limitation. In view thereof, the present proceedings, which emanate from the same Spot Audit Memo and involve a Notice issued on the same date, is liable to be set aside as being barred by limitation. (iii) It is a settled position in law that extended period of limitation cannot be invoked when the entire demand is based on the audit observations. The appellant shall not be prejudiced for the latches and lapses on part of the Department. Since, in the instant case the Notice has been served after more than three years from the date of audit, the proceedings are barred by limitation. Reference in this regard is invited to following judicial pronouncements: a. M/s. Ripley & Co. Limited Versus Commissioner of Central Excise and Service Tax, Kolkata [2025 (8) TMI 572 - CESTAT KOLKATA] b. M/s. Eveready Industries India Limited Versus Commissioner of Central Excise, Kolkata [2025 (3) TMI 496 - CESTAT KOLKATA] (iv) Accordingly, the impugned order deserves to be set asid....
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....al has observed as under: - "7. We note that the Chartered Accountant has issued the Certificate on 11.02.2015 clearly showing the way the Invoices which were taken for issue of demand in the Show Cause Notice. The date of this CA's Certificate clarifies that this was obtained before the Personal Hearing and before the impugned Order was passed. We also note that the Adjudicating authority has recorded at page 15 of the OIO that the CA's Certificate has been filed. But, instead of going through the details given therein, he has simply ignored the same and has not given any finding whatsoever as to why or how the certificate does not carry the defence of the appellant. It has been held in catena of decisions that once the CA's Certificate is produced before the Adjudicating / Appellate authority, he is required to consider the same and if he is not in agreement with the same, he should rebut with proper reason. 8. In the case of Gillette India Ltd. Vs Commissioner of Central Excise (CESTAT Chandigarh) vide Final der No.60581/2023 dated 2.11.2023, the Chandigarh Tribunal has held as under. "20. In addition to the appellant's claim that their....
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....y to the customers as "the Appellants have produced all the balance sheets... Wherein the disputed amount has been shown as claim receivable," and "all the figures had been duly certified by the Chartered Accountant." Following the said decision, we hold that the Appellants are entitled to get the amount of refund sanctioned to them by the Adjudicating Authority." 9.2. Therefore, we find that the Certificate issued by the Chartered Accountant produced by the appellant is sufficient to hold that the difference between the figures in the VAT Return and ER-1 Return is only because of the trading activity undertaken by the appellant. 10. Further, without adducing any concrete evidence, the ld. adjudicating authority has alleged clandestine removal of goods on the part of the appellant. 10.1. The said allegation, on the basis of the difference between the VAT Returns and ER-1 Returns, is not sustainable, as held by this Tribunal in the case of M/s. Standard Pharmaceuticals Ltd. Versus Commissioner of Central Excise, Kolkata [2025 (3) TMI 430 - CESTAT KOLKATA] wherein this Tribunal has observed as under: - "6. We find that in this case it has been alleged against the ap....
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.... 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 same in contrast to the Tribunal's decision in the case of Vigirom Chem Pvt.Ltd. referred (supra). As such, I set aside the impugned order and allow the appeal with consequential relief to the appellant." 9. Further in the case of Continental Cement Company v. Union of India (2014 (309) ELT 411 (All)]. the Hon'ble Allahabad High Court held that to allege clandestine removal of the goods, the following requirements are to be considered. "12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be conf....
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....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 of difference in the figures of audit report and ER-1 return without establishing the parameters of clandestine manufacture and removal of goods, the charge of clandestine removal is not sustainable. Therefore, on merits also, we hold that in the absence of any statement or investigation against the appellant with corroborative evidence, the impugned order is not sustainable. Accordingly, the same is set aside. In the result the appeal is allowed with consequential relief, if any." 10.2. Further, in the case of M/s. Carbon Resources Private Limited Versus Commissioner of CGST & Excise, Patna II [2021....
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....prepared by the Chartered Accountant was not ignored on irrelevant or arbitrary grounds." We find that the above judgment was also confirmed by the Hon'ble Apex Court reported in Commissioner v. Universal Polythelene Industries - 2016 (342) E.L.T. A226 (S.C.). 9. In the instant case also, we are of the view that the Appellant has been able to produce the relevant reconciliations to explain the differences in clearance figures as per ER 1 and as per form 3CD which was on account of inclusion of 7031.42 MT twice by considering the conversion from CPC ROK to CPC Screen and CPC fines in captive consumption details and yield of finished products both in the annexure to the Tax Audit report. 10. The above submission is explained with the help of the figures provided in the table herein-above: The total amount of Raw Petroleum Coke consumed during the period in dispute is 18128.60 MT [Column C, Row-Consumption). Hence, on applying the input: output ratio of 1.3:1, the total quantity of Calcined Petroleum Coke that can be manufactured by the Appellant amounts to (18128.60/1.3) MT which equals to 13945 MT (approx.). In "Column G, Row Production of the....
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....his Tribunal has observed as under : "11. Coming to the issue of time bar, the Show Cause Notice has been issued within one year from the date of Audit getting the reply from the appellant. But it is noted that the appellants are registered manufacturer. As such they have been filing their Monthly Returns showing the value adopted by them. Even under the self assessment regime, scrutiny of the ER-1 Returns are still to be taken up by the Range officials. There is nothing to indicate that the self-assessed ER1 were taken up for scrutiny and any query was raised towards the assessable value adopted by the appellant for their clearances. Therefore, we set aside the confirmed demand for the extended period." 7. In view of the above discussions, we are not going into the merits of the case. We are of the view that the demand is barred by limitation, accordingly, the same is set aside. Consequently, no penalties are imposed on the appellants." 12.1. In view of the above observation, we also hold that the extended period of limitation is not invocable in the facts and circumstances of the present case. Therefore, the Issue (c) under paragraph 8 of this Order stands an....