Back
Sets Aside 7 Crore Excise Demand For PSU
In a significant relief for (), the (CESTAT) at Kolkata has set aside a ₹7.06 crore central excise duty demand. A division bench comprising Member (Judicial) Shri Ashok Jindal and Member (Technical) Shri K. Anpazhakan ruled that the Revenue failed to substantiate allegations of of final products.
A Dispute of Theoretical Stock Discrepancy
The proceedings originated from an investigation by the (), which alleged that the appellant had clandestinely removed 20,327 metric tons of pig iron, alongside quantities of mixed coke and crude tar. This conclusion was largely based on a audit report by an external agency, , which had identified a significant variance between the company’s ‘Daily Stock Accounts’ (DSA) and the physical stock found during a volumetric verification exercise.
Divergent Views on Accounting Methodology
The Revenue argued that the shortage in stock amounted to irrefutable proof of tax evasion through unauthorized loading and clandestine clearances. In response, , a joint venture of various Central and Odisha state public sector enterprises, contended that the alleged shortages were purely notional. The company explained that its plant lacked weighment facilities for pig iron post the hot metal stage, necessitated by industrial constraints, and thus production figures were historically derived using estimated conversion ratios. Consequently, discrepancies between theoretical book stocks and actual physical stocks were an inherent feature of their operational accounting, not a sign of illicit activity.
Defining the
The Tribunal highlighted that "" is a serious charge that cannot be sustained on assumptions or audit estimation alone. Citing the established criteria from , the bench noted that the Revenue failed to produce tangible corroboration, such as evidence of excess raw material consumption, movement records, identified buyers, or financial trails reflecting illicit sales.
Crucially, the Tribunal observed that as a public sector entity, could not be labeled as having intent to evade duty. Supporting their stand with the ratio in , the bench emphasized that in large-scale steel operations, accounting for output via theoretical yields is a widely accepted practical necessity.
Key Observations
The judgment captured several pivotal observations regarding the insufficiency of the Revenue’s evidence:
-
"No tangible evidence has been brought on record by the Revenue; merely from shortages recorded by the auditors on eye estimation basis / yield basis, it has been inferred that there is of goods."
-
"Further, the appellant being a public sector undertaking, we are of the opinion that the appellant cannot be alleged to be having intentions to clear the goods clandestinely."
-
"In the absence of any statement or investigation against the appellant with corroborative evidence, the impugned order is not sustainable."
Final Verdict
Ultimately, the CESTAT concluded that the Revenue’s case relied entirely on presumptions. The tribunal held that the was inappropriately invoked, and that in the absence of clinching evidence of illicit manufacturing and removal, the demand, interest, and penalties were void. The appeal was allowed, granting the appellant full .
