2018 (6) TMI 1597 - AT - Central Excise

Clandestine manufacture and removal - Sugar and Molasses - yield ratio for the Sugar seasons 2002 03 and 2003 04 to the cane crushed during the financial years 2002 03 and 2003 04 - HELD THAT - The reporting periods for the Sugar seasons 2002 03 and 2003 04 vis- -vis the financial years 2002 03 and 2003 04 are not straight jacket comparable as the Appellant had also produced Sugar and Molasses during the period April and May 2003 which got covered by Sugar season 2002 03 although falling within the financial year 2003 04. Therefore the financial year 2003 04 comprised of two Sugar seasons i.e. 2002 03 (covering April 2003 and May 2003) and 2003 04 (covering December 2003 to March 2004). Hence the findings of the Learned Commissioner are flawed in so far as he held that the production of Sugar/Molasses took place only during October to March which was common to both the reporting periods. The burden of establishing clandestine removal is on the revenue and in the instant case the revenue has failed to adduce any positive evidence in support of the charge as entire demand is based on a theoretical calculation and inference drawn out of an incorrect application of the yield ratio -The Fact that Sugar and Molasses are controlled products and the production/clearance is strictly regulated also cannot be lost sight of. It is unimaginable that surreptitious production and clearance of the quantity confirmed by the Order-in-Original would have gone unnoticed or not invited any proceedings from other regulated authorities. The revenue fails to discharge the burden of establishing clandestine removal - appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine production and clearance of Sugar and Molasses without payment of central excise duty.

Analysis:
1. The appellant, engaged in Sugar and Molasses manufacturing, faced a Show Cause Notice for alleged clandestine production and clearance without duty payment. The demand was based on applying yield ratios incorrectly for Sugar seasons to financial years.
2. The jurisdictional Commissioner confirmed the demand, but the appellant argued that production and clearance are regulated by Central and State Governments under specific acts and rules for Sugar, Molasses, and Sugar Cane.
3. The appellant contended that due to asymmetry between Sugar season and financial year, applying yield ratios uniformly is incorrect. Factors affecting yield include weather, cane category, and duration between purchase and crushing.
4. The burden of proving clandestine activities lies with the revenue, and the demand lacked positive evidence, being based on theoretical calculations. The appellant argued that production in April and May 2003, accounted for in the Sugar season 2002-03, affected the yield for the financial year 2003-04.
5. The appellant cited various legal precedents supporting their arguments against the demand. The revenue claimed no difference in yield ratios due to both periods comprising twelve months.
6. The Tribunal found flaws in the Commissioner's findings, noting the production in April and May 2003 affecting the financial year 2003-04. The burden of proving clandestine activities was not met by the revenue, as regulated products like Sugar and Molasses would not likely go unnoticed.
7. Consequently, the impugned Order was set aside, and the appeal by the appellant was allowed with any consequential relief.

This detailed analysis of the judgment addresses the issues involved, the arguments presented by both parties, the legal framework governing the case, and the Tribunal's reasoning leading to the final decision.