Objection of Audit can’t be the basis for determining Duty liability, in absence of any evidence to justify the Clandestine Manufacture/Clearances: CESTAT [Read Order]

The Customs, Excise, Service Taxes Appellate Tribunal (CESTAT) held that objection of audit cannot be the basis for determining duty liability, in absence of any evidence to justify the clandestine manufacture or clearances.

The appeal is filed by M/s. BST Infratech Limited and M/s. Manbhum Ispat Private Limited wherein the issue raised is that whether the Standard Input Output Norms (SION) of DGFT Policy is applicable on the appellants and whether they had followed the SION norms as per proviso to condition 3(d) of Notification No. 52/2003-CUS as amended during the period 2012-13 to 2016-17.

The second issue is whether in the circumstances and the facts on record, an extended period of limitation can be invoked.

In both the appeals, the duty has been demanded on the basis of an audit objection on difference in production arrived by taking input-output ratio at the rate of 95% based on SION and that shown in their Form 3CD, ER-5 /ER-4 returns.

The Notification No. 52/2003-CUS has been issued in terms of section 25(1) of the Customs Act, 1962 and is an exemption notification. It does not prescribe any method/ procedure to determine the quantum of production under the Central Excise Act for demand of duty. Section 3 of the Central Excise Act is the charging section, stipulates that duty is to be charged on the goods produced or manufactured.

The coram consisting of P.K.Choudhary and P. Anjani Kumar 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.

“It is our considered view that 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 has been carried out from any buyer of finished goods nor from any transporter nor any flow back of funds was checked and neither any statement brought on record to substantiate clandestine removal without payment of duty,” the CESTAT said.

The Tribunal has held that no SION number was given in the show cause notice while the Adjudicating Authority has relied upon SION number C-460 & C-514. Thus, he has traveled beyond the Show Cause Notice.

“The allegation of suppressing the facts from the department does not hold good in the event of periodic audit of both the appellant assessees. There is no other evidence in the impugned order to show that the appellants have willfully suppressed the facts from the department in order to evade payment of duty,” the CESTAT said.