2017 (8) TMI 689 - AT - Central Excise

Clandestine manufacture - molasses more than recorded balances - it was presumed that unaccounted and proportionate sugar was manufactured and cleared without payment of duty - validity of SCN - Held that - there are many contradictory statements made in the SCN - The SCN has failed to substantiate the procurement of raw material for presumed quantity of sugar having manufactured which was not accounted for nor the Investigating Officers took stock of the balance quantity of sugar available in the factory nor they verified the production record in respect of sugar - the SCN is presumptive - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Central Excise duty demand based on presumed quantity of sugar.
2. Contradictory statements in the show cause notice.
3. Lack of evidence regarding procurement of raw material and production record verification.

Analysis:

Issue 1: The appeal was filed against an Order-in-Appeal regarding the demand of Central Excise duty amounting to ?31,40,137 based on the presumed quantity of sugar manufactured by the appellant. The show cause notice contended that the appellants had declared molasses more than recorded balances, leading to the presumption of manufacturing proportionate sugar without payment of duty. The Original Authority confirmed the demand, and the ld. Commissioner (Appeals) upheld the decision. However, the Tribunal found the show cause notice to be presumptive and unsustainable in law due to lack of evidence regarding the procurement of raw material and production record verification. Consequently, the impugned Order-in-Appeal was set aside, and the appeal was allowed.

Issue 2: The learned counsel for the appellant highlighted the contradictory statements in the show cause notice dated 24-1-2008. It was pointed out that the notice admitted erroneous declarations regarding molasses, leading to the presumption of unaccounted sugar production. The officers had not checked the stock balance or verified production records to ascertain the quantity of raw materials procured for the alleged clandestine manufacturing and clearance of goods. This inconsistency in the notice was a crucial aspect considered by the Tribunal in determining the validity of the demand for Central Excise duty.

Issue 3: The Tribunal noted the failure of the investigating officers to substantiate the procurement of raw material for the presumed quantity of sugar manufactured by the appellant. The lack of verification of stock balances and production records raised doubts about the accuracy of the allegations made in the show cause notice. As a result, the Tribunal concluded that the notice was presumptive and unsustainable in law, leading to the decision to set aside the impugned Order-in-Appeal and allow the appeal. The judgment emphasized the importance of proper evidence and verification in such cases to establish liability for Central Excise duty.