2014 (5) TMI 981 - AT - Central Excise

Duty demand - Clandestine removal of goods - Held that - Demand stand confirmed on the allegations and findings of clandestine manufacture and removal of Sugar, which solely are based upon the excess production of molasses. Such excess production is only to the tune of 0.64% and apart from the above there is virtually no evidence of clandestine manufacture and removal of excess Sugar. The excess molasses quantity is depending upon number of factors including the whether condition, the quality of the sugarcane and storing capacity etc. In the absence of any evidence that the appellants have actually manufactured excess sugar and has cleared the same without payment of duty, the confirmation of duty on the basis of excess molasses by itself cannot be upheld. Accordingly, I set aside the impugned order - Decided in favour of assessee.

Summary

Issues:
1. Concealment of excess molasses and sugar production.
2. Burden of proof on Department regarding clandestine manufacture and removal of sugar.
3. Excess molasses generation and its relation to sugar production.
4. Confirmation of duty based on excess molasses production.

Analysis:

1. The appellants, engaged in sugar and molasses manufacture, admitted excess molasses stock in tanks during a measurement by State Excise Officers for Sugar Season 2008-09. They intended to clear the excess stock on payment of Central Excise duty. However, discrepancies were found in their records, indicating excess production of molasses and sugar not accounted for to evade duty. The Assistant Commissioner confirmed the demand and penalty, considering the unchallenged excess molasses quantity and the assumption of clandestine sugar production and removal based on the excess molasses. The appellants disputed the concealment claim, citing the nature of molasses, milling performance, and recovery factors affecting sugar production.

2. The Commissioner (Appeals) upheld the demand, shifting the burden on the appellants to prove the excess molasses generation was not due to sugar overproduction. As the appellants failed to provide a satisfactory explanation, the confirmation of duty based on excess molasses production was deemed valid. The burden of proof lay on the Department to establish clandestine sugar manufacture and removal, which was supported by the excess molasses storage admitted by the appellants.

3. The confirmation of duty solely on excess molasses production, amounting to 0.64% of the total, lacked substantial evidence of clandestine sugar production and removal. Factors like weather conditions, sugarcane quality, and storage capacity influenced molasses generation. Without concrete proof of excess sugar manufacture and clearance without duty payment, the duty confirmation based on excess molasses alone was deemed insufficient. The absence of evidence linking the excess molasses to clandestine sugar production led to the appeal's acceptance and relief granted to the appellant.

In conclusion, the judgment highlighted the importance of substantiated evidence in establishing clandestine activities in manufacturing sectors, emphasizing the need for clear documentation and proof to support duty demands based on excess production quantities.