The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside the penalty imposed under the Central Excise Act, 1944 as the difference in books of account was reconciled with corroborative evidence.
M/s. Surya Metalloy Pvt Ltd, the appellant engaged in the manufacture of MS Ingots falling under Chapter heading 72061090, appeared to have short-paid Central Excise duty of Rs.86,45,221/- during FY 2015-16, in as much as there was an apparent difference of Rs.6,91,61,767/+ in the total value of goods sold as shown in their balance sheet in comparison to the value shown in ER-1 returns.
It was noticed that the appellant had shown a value of Rs.27,24,96,537/- in the ER-1 returns, whereas, in the balance sheet, the value was shown as Rs. 34,16,58,304/-. A show cause notice was issued to the appellant, proposing therein recovery of Central Excise duty of Rs.86,45,221/- along with interest and imposition of penalty under Section 11AC of the Act.
The appellant contested the SCN by filing a reply dated 15.12.2020 explaining the apparent difference in the turnover shown in the balance sheet as well as in the ER-1 returns, as regards the goods manufactured and sold;
It was submitted that the first differential amount pertains to the excise duty, appearing in Turnover in the Financial Statements, and again reduced separately under the ‘Excise Duty column’ on which no demand of excise duty can sustain, as it is the duty charged and recovered from the customers and paid to the Government, and is not a consideration received from the customers against any sale of goods.
Further stated that the second differential amount pertains to profit on sale and purchase of commodity operations, which was inadvertently reported in the ‘Sale of products’ column in the Financial Statements, instead of disclosing separately as Turnover from commodity operations.
It was further urged that even at the audit stage, the appellant had explained the apparent difference with supporting documents and also at the pre-SCN stage. The appellant had also produced the relevant ledgers and invoices before the department. The appellant had also produced the CA certificate in support of the contentions. It was explained that the apparent difference is due to clerical error and the same is fully explained and reconciled from the books of accounts maintained in the ordinary course of business.
A single-member bench comprising Mr Anil Choudhary, Member (Judicial) observed that the Commissioner (Appeals) mechanically rejected the appeal and not found anything untrue have erred in observing that the appellant have failed to produce documentary evidence to establish that the disputed income (escaped turnover) is related to commodity trading.
Despite finding that the apparent difference is properly reconciled, still, the Commissioner (Appeals) has rejected the appeal by some irrelevant observations without there being any finding of fact against the pleadings of the appellant. While allowing the appeal, the Court set aside the impugned order.
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