2017 (3) TMI 933 - AT - Central Excise

Clandestine removal - Whether there was manufacture and removal of 3017 MT of sodium silicate during the period 2005-06, 2006-07 and 2007-08 resulting into short payment of duty? - Held that - the department was not sure about the correctness of the ratio adopted in making the demand alleging clandestine production and clearance - where the revenue is not able to establish the clandestine removal by adducing cogent and tangible evidences the argument of the appellant that he has not suppressed any production merits consideration - in catena of decisions it is held that clandestine production and demand cannot be made on the basis of theoretical calculation and presumption by the department - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Alleged suppression of production and duty payment.
2. Acceptance of liability by the respondent.
3. Input-output ratio and its relevance in determining duty payment.

Issue 1: Alleged suppression of production and duty payment
The case involved a dispute regarding the alleged suppression of production of Sodium Silicate by the respondent resulting in short payment of duty. The audit revealed a discrepancy of 3017 MT of finished goods. The appellant initially debited the duty amount but later a show cause notice was issued proposing duty appropriation, interest recovery, and penalty. The Commissioner (Appeals) set aside the order, leading to the Revenue's appeal. The Revenue contended that the respondent, by accepting the liability and paying the duty, cannot claim non-liability later. However, the respondent argued that the input-output ratio alone is insufficient to prove clandestine removal of goods without duty payment.

Issue 2: Acceptance of liability by the respondent
The Revenue argued that the respondent's acceptance of the audit objection and payment of duty precludes them from denying liability later. However, the respondent's advocate highlighted that the input-output ratio alone cannot conclusively prove duty evasion. The Commissioner (Appeals) considered the consistency of the ratio over subsequent years and the absence of differential duty demand, leading to the appeal being allowed.

Issue 3: Input-output ratio and its relevance in determining duty payment
The main issue revolved around the input-output ratio used to determine the alleged duty evasion. The audit based its findings on a job work basis ratio of 2.5 kgs of sodium silicate produced using 1 kg of soda ash. The Commissioner (Appeals) scrutinized the department's contentions and verified the consistency of the ratio over different audit periods. The Deputy Commissioner's report confirmed that no subsequent demand was raised based on the same ratio, indicating the department's acceptance of the ratio. The Tribunal held that without tangible evidence, duty demands cannot be made solely on theoretical calculations and presumptions by the department.

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing that the input-output ratio used for demanding duty lacked credibility and consistency. The decision highlighted the importance of concrete evidence in establishing duty evasion claims and upheld the Commissioner (Appeals)'s decision based on the lack of substantial proof supporting the Revenue's allegations.