2014 (6) TMI 232 - AT - Central Excise

Duty demand - Clandestine removal of goods - Insufficient evidence - Held that - impugned case is made on the basis of records taken from PEL and on records known to PEL. If the case made out by revenue is taken as correct there was dilution of the concentrate supplied by PEL to produce more goods than the quantity that could have been produced from concentrate supplied by PEL to the extent ranging from 1.65% to 2.78% ignoring the year 1989-90 when it was as high as 6.2%. This position was known to PEL and they chose to do nothing about it. This appears to be an unlikely scenario considering the fact that PEL was very conscious of the quality of their product. So it would appear that PEL did not think that any dilution of their concentrate beyond prescribed limit was done by the Appellant. If that be the case, the case made by Revenue fails. The fact that the Appellant had paid his share of advertisement charges to PEL based on the sales figures in PEL s books rather than based on clearance figures in the Appellant s books is also not a sufficient evidence to prove clandestine removal because advertisement is a market development programme and the sales in the territory assigned to the Appellant in an year (even if a part of the sale was not made by him) is a factor from which Appellant stand to gain in subsequent years - So the case made out without investigating the source of the concentrate or the other inputs like pilfer proof caps to produce the quantity of final products held to be clandestinely manufactured is very weak and we are of the view that the demand confirmed cannot be sustained on the basis of evidence produced - Decided in favour of assessee.

Summary

Issues Involved:
1. Allegation of clandestine removal of goods.
2. Accuracy and reliability of sales figures reported by the Appellant.
3. Comparison with similar cases involving other parties.
4. Investigation of potential dilution of concentrate.
5. Basis for demand confirmation and sufficiency of evidence.

Detailed Analysis:

1. Allegation of Clandestine Removal of Goods:
The case involved a show cause notice (SCN) alleging clandestine removal of goods by the Appellant during the period from April 1989 to September 1993. The SCN was adjudicated in July 2009. The allegation was based on discrepancies between the sales figures reported by Parle Exports Ltd. (PEL) and the quantity for which the Appellant had paid excise duty. The sales figures from PEL were corroborated by annual sales plans signed by the Appellant and advertisement charges paid by the Appellant to PEL based on these figures.

2. Accuracy and Reliability of Sales Figures Reported by the Appellant:
The Appellant's main defense was that the sales figures included goods purchased from other bottlers, direct sales by PEL in the Appellant's territory, and inaccuracies in the figures collected over the phone. The adjudicating officer found the Appellant's arguments unconvincing, noting that the sales figures were compiled from data furnished by the Appellant and were used for advertisement contributions. The officer rejected the claim that figures were incorrectly noted over the phone, as the discrepancies were consistent and significant.

3. Comparison with Similar Cases Involving Other Parties:
The Appellant cited cases against other parties, such as Coolade Beverages (P) Ltd. and Moon Beverages Ltd., where similar allegations were dropped. The adjudicating officer distinguished these cases, noting that in those instances, there was no evidence that the sales figures were provided by the bottlers or that they were aware of the figures. In contrast, the Appellant had submitted sales reports and made advertisement contributions based on the figures, indicating their awareness and acceptance of the sales data.

4. Investigation of Potential Dilution of Concentrate:
The discrepancy in sales volume was investigated by PEL to determine if there was dilution of the concentrate supplied to the Appellant. PEL found no evidence of dilution beyond prescribed limits. The tribunal noted that PEL did not take further action despite consistent discrepancies, implying that there was no issue with the concentrate. The lack of investigation into the source of the concentrate and other inputs weakened the case against the Appellant.

5. Basis for Demand Confirmation and Sufficiency of Evidence:
The case was primarily based on sales figures from PEL's records and annual marketing programs signed by the Appellant. The tribunal found that the SCN and adjudication order did not adequately address the Appellant's claims regarding direct sales by PEL in their territory. The tribunal emphasized that without investigating the source of the concentrate or other inputs, the case for clandestine removal was weak. The payment of advertisement charges based on PEL's sales figures was not sufficient evidence to prove clandestine removal.

Conclusion:
The tribunal concluded that the demand confirmed could not be sustained based on the evidence produced. The case lacked a thorough investigation into the source of the concentrate and other inputs necessary to produce the alleged excess quantity of goods. Consequently, the tribunal allowed the appeal and set aside the adjudication order. The judgment was pronounced on 12-8-2011.