2025-VIL-75-CESTAT-DEL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Clandestine removal, Extended period of limitation, Difference in financial statements and returns - Appellant cleared miscellaneous scrap (exempted goods) but did not follow the provisions of Rule 6(3) of Cenvat Credit Rules, 2004. Additionally, there was a difference in the sale value of scrap as reported in the balance sheet/trial balance and the ER-1 returns filed by the appellant, resulting in a differential duty demand - Whether the difference between the financial statements and the ER-1 returns is sufficient proof of alleged clandestine removal of goods – HELD - The entire case of the Revenue is based on the audit objection and the comparison of entries in the statutory records vis-à-vis the balance sheet. However, there is no positive evidence produced by the Department to establish the allegations of clandestine removal - the income shown in the balance sheets, unless linked to other clinching evidence, cannot be proof of clandestine removal of goods - The Department failed to prove the allegations of clandestine removal, and the difference in the balance sheet compared to the ER-1 return was a presumptory basis for raising such an allegation – the impugned order is set aside and the appeal is allowed Issue 2: Whether the appellant is liable to pay duty on the differential amount based on the difference in the financial statements and the ER-1 returns – HELD - Service tax can be levied only when there is a clear identification of the service provider, service recipient, and the consideration paid for the same. In the absence of any such evidence it is not open for the Department to raise demands based on other statutory returns like the Income Tax Returns or balance sheets without proving that the service has been rendered by the assessee and the consideration thereof has been received. The Chartered Accountant's certificate provided by the appellant, proving the reconciliation of the financial statements and the returns, was not considered by the Department - the Chartered Accountant's certificate is a valid piece of evidence and the difference between the financial statements and the returns cannot be the sole basis for the demand.
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