A demand for excise duty cannot be sustained solely on discrepancies between a consolidated balance sheet and unit-specific ER-1 returns if the taxpayer provides a valid reconciliation statement proving no under-reporting of assessable value.

MR. ASHOK JINDAL

By way of this appeal appellant is challenging the confirmation of demand of Central Excise duty on difference in excisable value of ER-1 return and revenue operations shown in the balance sheet of the appellant.

The facts of the case are that the appellant is engaged in manufacturing of SS pipes and tubes. A show cause notice was issued to the appellant on 27.02.2019 alleging that the appellant has evaded central excise duty of Rs. 12,76,173/- as there is a difference in assessable value shown in the ER-1 return and revenue from operation shown in the balance sheet. So, they are liable to pay duty along with interest and penalty is also imposable. The appellant contested the show cause notice but the adjudicating authority confirmed the demand opposed in the show cause notice and imposed penalty on the appellant. The appeal filed before Commissioner (Appeal) is of no avail and the same was dismissed. Aggrieved from the said order, the appellant is before me.

Learned counsel for the appellant submits that the demand is confirmed merely on the basis of difference between figures of balance sheet and ER-1 return without investigation. It is submitted that without investigation, the same is in violation of instruction of CBIC dated 20.10.2021 wherein it has been directed that field formation while analying ITR or TDS data received from the Income Tax department reconciliation statement has to be sought from the taxpayer for the differences and whether the service income earned by them for the corresponding period is applicable to any negative list service specified in section 66(e) of the Finance Act, 1994 or exempt from payment from service tax due to any reason. It was further reiterated that demand notice may not be issued indiscriminately based on differences between ITR, TDS taxable values and taxable value of service returns. He submitted that instructions given by the Revenue department are binding on the adjudicating authority. He further submitted that the demand of duty has been confirmed merely onthe basis of difference in sale reflected in balance sheet and returned filed by them in ER-1 return. Its his submission that it was well informed in the reply to the show cause notice that the appellant two units, one at Sanchor and other at Mumbai. The financial statement of both the units are prepared in consolidated manner and the figures shown in the ER=1 returns are only of the Sanchor unit whereas the figures shown in the balance sheet pertain to both Sanchor and Mumbai unit. The same cannot be compared. The impugned order is therefore, not justified in raising the demand by comparing the figures of ER-1 return and consolidated balance sheet. In view of the above he prayed tha the impugned order be set aside and the appeal be allowed.

On the other hand learned authorised representative appearing for the department submitted that the appellant has a corporate office at Mumbai and a plant at Sanchor which was registered with Central Excise Commissionerate, therefore, they are a stand alone company and no other manufacturing plant/subsidiary/joint-venture in India. With regard to instructions dated 26.10.2021, it is the submission that the show cause notice was issued based on the reconciliation data in balance sheet and ER-1 return. Therefore, it is prayed that the impugned order is upheld.

Heard the parties and considered the submissions.

I find that in this case show cause notice has been issued to the appellant on the basis of figures of sales shown in the balance sheet and ER-1 returns. The main contention of the appellant is that they are having two units, one at Mumbai and another at Sanchor and they are having registered office in Mumbai and appellant has clarified difference in figures of sales in balance sheet and ER-1 return and a reconciliation statement has also been produced which is here as under:

We submit that the allegation that we have under-reported the asse