CENTRAL EXCISE ACT, 1944

Section 11A

Recovery of duty - Clandestine removal - Duty was demanded on the basis of audit objection without causing any investigation -

Assessee was engaged in manufacture of different items of Iron and Steel and availing of CENVAT Credit in respect of inputs used in the manufacture of their final products. A Show Cause-Cum-Demand Notice was issued alleging that assessee was an ISO certified company for quality and production and they were exporting to SEZ, also exporting under letter of undertaking (LUT) and clearing for domestic consumptions. Assessee was clearing the same finished goods manufactured from the same quality of inputs to domestic market. Further, it was alleged that as assessee had maintained the EXIM norms of production ratio, no facts or submission was made by assessee as to why for domestic production, the input-output ratio was 87.72% only during 2013-14. Commissioner decided the case wherein he demanded duty under section 11A(10) along with interest and penalty. Held: It was found that no physical verification of input consumption qua finished goods manufactured thereto was carried out by the department. The duty has been demanded on the basis of audit objection without causing any investigation. The objection of audit cannot be the basis or reason to believe to further investigate the matter and cannot be the sole ground for holding clandestine manufacture and removal, in absence of any corroborative evidence. It is observed from records that neither investigation had been carried out from any buyer of finished goods nor from any transporter nor any flowback of funds was checked and neither any statement was brought on record to substantiate clandestine removal without payment of duty. Therefore, demand notice issued under section 11A could not be sustained.

REFERRED : Collector of C. Ex. v. Malleable Iron & Steel Castings Co. (P) Ltd. 1998 (100) ELT 8(SC) : 1998 TaxPub(EX) 0233 (SC), Collector of Central Excise v. H.M.M. Limited 1995 (76) ELT 497 (SC) : 1995 TaxPub(EX) 0309 (SC), M/s. Union Enterprises & Anr. v. Union of India & Others 2014 (306) ELT 216 (Cal.) : 2014 TaxPub(EX) 1163 (Cal), Commissioner of C. Ex., Meerut-I v. R.A. Castings (P) Ltd. 2011 (269) ELT 337 (All.) : 2011 TaxPub(EX) 954 (All), Jakap Metind (P) Ltd. v. Commissioner of Customs & Central Excise 2017 (356) ELT 279 (Tri-Mumbai) and M/s. Saradha Terry Products Ltd. and Shri K. Jayaraj v. CCE 2015 (327) ELT 675 (Tri-Chennai) : 2015 TaxPub(EX) 2757 (Chen).

FAVOUR : In assessee's favour.

A.Y. :

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