2023 (3) TMI 433 - AT - Central Excise

Clandestine removal - Corroborative evidences - 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 - HELD 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.

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.

In absolutely identical facts of the present case in the case of CCE., RAIPUR VERSUS M/S. SAINI INDUSTRIES LTD. [2014 (7) TMI 617 - CESTAT NEW DELHI] this Tribunal has held that even though stock verification received from Income Tax Department but nothing on record that 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 confirmed.

The Tribunal has taken a consistence view that merely on the basis of income tax investigation the case of clandestine removal under the Central Excise Act cannot be confirmed without bringing independent tangible evidence on record - the department could not establish the case of clandestine removal. Hence, the impugned order is not sustainable and the same is set aside.

Appeal allowed.