Difference between the financial statement and ER-1 returns, insufficient to prove alleged clandestine removal: CESTAT [Read Order]
The CESTAT noted that the department has failed to prove the allegations of clandestine removal of goods
![Difference between the financial statement and ER-1 returns, insufficient to prove alleged clandestine removal: CESTAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/05/ER-1-returns.jpg "Difference between the financial statement and ER-1 returns, insufficient to prove alleged clandestine removal: CESTAT [Read Order]")
The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that the difference between the financial statement and ER-1 returns was insufficient to prove alleged clandestine removal. Coming to the facts of the present case, the appellant, M/s. Indore Composite Pvt. Ltd. is engaged in the manufacturing of FRP rods for optical fibre cable and was availing...
The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that the difference between the financial statement and ER-1 returns was insufficient to prove alleged clandestine removal.
Coming to the facts of the present case, the appellant, M/s. Indore Composite Pvt. Ltd. is engaged in the manufacturing of FRP rods for optical fibre cable and was availing the benefit of Cenvat Credit on inputs, input services and capital goods under Cenvat Credit Rules, 2004.
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During the scrutiny, it was found that the appellant removed miscellaneous scrap (exempted commodities) from their premises, as evidenced by their balance statement, but did not follow the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004.
The department noted that for the financial year (FY) 2016-17, there is a difference in the sale value of scrap as reported in the balance sheet and ER-1 filed by the appellant. On the difference of the amount, a central excise duty of Rs. 7.68 lakhs was payable, and a penalty was imposed under Section 11AC of the Central Excise Act, 1944, through a show cause notice (SCN), and the SCN also proposed the demand of a service tax of Rs. 82,313 not paid on clearance of exempted goods and the service tax amounting to Rs. 15,206 not paid on the difference of scrap sale.
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The assessee’s counsel relied on decisions such as Go Bindas Entertainment Pvt. Ltd. Vs. Commissioner of S.T., Noida reported as 2019 (27) GSTL 397 (Tri. All.), BG Explorationand Production India Ltd. Vs. Commissioner of Service Tax – VII reported as (2023) 12 Centax 202 (Tri.-Bom), andcontended that the demand of excise duty, which was confirmed on the basis of the difference between the balance sheet and ER-1 return, will not sustain due to a lack of evidence brought by the department.
The counsel further submitted that the demand of clandestine manufacture or clearance has been confirmed purely on assumption and presumption, and the burden is upon the Revenue to prove by way of direct, affirmative, and conclusive evidence.
The CESTAT noted that the department has failed to prove the allegations of clandestine removal of goods. The bench observed that the allegation of clandestine removal would not be sustained by just noting the difference in the balance sheet with ER-1.
Dr. Rachna Gupta (Judicial Member) ruled in favour of the assessee and set aside the impugned order.
To Read the full text of the Order CLICK HERE
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