2016 (9) TMI 1016 - AT - Central Excise

Suppressed production of clandestine clearances of goods without payment of duty - approximation production considering average yield of the product viz. zinc oxide out of the raw material issued - department has not gone beyond the approximation of yield shown as 70 to 84% - average yield overall had been shown as 77.60%. - Demand alongwith interest and imposition of penalty. Held that - there is nothing on record from the Revenue side to come to a reasonable conclusion to say that there has been preponderance of probability of such suppressed production on the part of the appellant. The evidences in the form of approximation and averaging production as 77.6% and one statement of Shri Agarwal, Director of the appellant company cannot be called a prudent conclusion of the production estimate. Therefore, we are of the considered view that the department has not discharged its burden of conclusively proving the case of suppressed production and clandestine clearance by the appellants. In this regard we seek support from Hon ble Allahabad High Court s decision in the case of Continental Cement Company Vs. Union of India 2014 (9) TMI 243 - ALLAHABAD HIGH COURT and Supreme Court s decision in the case of Oudh Sugar Mills Ltd. Vs. Union of India 1962 (3) TMI 75 - SUPREME COURT OF INDIA and CESTAT s in the case of Punalur Paper Mills Ltd. Vs. CCE 2008 (8) TMI 471 - CESTAT, BANGALORE . In view of the above, the impugned order in respect of confirmation of duty for alleged suppressed production, and imposition of fine and penalty on the appellant No. 1 and imposition of personal penalty of ₹ 40 lakhs on Shri Agarwal who is appellant No. 2 are hereby set aside. Demand - inputs short found - duty deposited by the assessee-appellant and was appropriated to the Government account by the impugned order - Held that - there has not been any submissions by the appellants. Therefore, this part of the order confirming the said duty does not warrant any intervention from this Tribunal. It is hereby sustained. - Appeals disposed of

Summary

Issues:
- Allegation of suppressed production and clandestine clearance of goods without payment of duty
- Confirmation of central excise duty and penalty imposition

Analysis:
1. Allegation of Suppressed Production and Clandestine Clearance:
- The case involved M/s Mittal Pigment Pvt. Ltd. and its Director appealing against a demand of &8377; 2,30,39,602/- along with interest and penalty imposed by the Commissioner of Central Excise, Jaipur-I for alleged suppressed production of Zinc Oxide.
- The Revenue alleged that the appellants suppressed goods resulting in a duty demand of &8377; 2,30,39,602/-, supported by the average yield of the product being 77.60% and a show cause notice issued by the Commissioner.
- The appellants argued that the Department's method of fixing input-output norms was flawed, as no standard norms existed for Zinc Oxide production due to varying impurities in raw materials. They also contended that evidence of clandestine removal was lacking.
- The Tribunal noted that the Revenue's case relied heavily on approximations and the statement of the Director, lacking concrete evidence such as dispatch particulars, sale proceeds realization, and increased power consumption.
- Citing legal precedents, the Tribunal held that the Revenue failed to conclusively prove suppressed production and clandestine clearance, setting aside the duty confirmation and penalties imposed.

2. Confirmation of Central Excise Duty and Penalty Imposition:
- The impugned order confirmed central excise duty of &8377; 1,31,898/- on short found inputs, which the appellants had deposited and was appropriated to the government account. The appellants did not contest this part of the order.
- The Tribunal sustained the confirmation of this duty, as there were no submissions challenging it.
- Consequently, the Tribunal set aside the duty confirmation and penalties related to the alleged suppressed production and clandestine clearance, providing relief to the appellants.

This detailed analysis of the judgment highlights the key issues of suppressed production, duty confirmation, and penalty imposition, along with the arguments presented by both sides and the Tribunal's decision based on legal principles and precedents.