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2018 (12) TMI 778 - AT - Central ExciseClandestine removal - Khaini - Revenue alleged that the assessee did not fully account the goods manufactured in the factory in the statutory records and cleared the unaccounted portion clandestinely without payment of duty - Held that - The assessee has admitted that they have continued to follow the same process of manufacture; and the percentage of ingredients during the current period of dispute, as in the earlier period which was already investigated and settled. The proprietor in his statement dt. 20/05/2006 has also admitted to the fact of non accountal of the additional quantity of khaini as result of addition of water. Time Limitation - Held that - The Hon ble Supreme Court has held in the case of Nizam Sugar Factory 2006 (4) TMI 127 - SUPREME COURT OF INDIA , that the extended period of limitation under Section 11A will not be available to Revenue to raise demand a second time on the same set of allegations. Consequently, it is concluded that the demand duty is to be restricted to the normal time limit. Appeal allowed in part.
Issues Involved:
1. Allegation of clandestine manufacture and clearance of Khaini without payment of duty. 2. Validity of the formula used for determining unaccounted production. 3. Adequacy of evidence supporting clandestine clearance. 4. Applicability of the extended period of limitation for raising the demand. Detailed Analysis: 1. Allegation of Clandestine Manufacture and Clearance: The assessee, a manufacturer of Khaini, was accused of not fully accounting for the goods manufactured at their Kolkata unit and clearing the unaccounted portion without paying the required Central Excise Duty. The dispute covered the period from April 2006 to July 2007, with a Show Cause Notice (SCN) issued on 21/02/2008 proposing a demand of ?9,07,16,213/- along with interest and penalties. The SCN alleged that only 50% of the actual production was recorded, based on previous investigations and statements from the assessee’s personnel. 2. Validity of the Formula Used for Determining Unaccounted Production: The SCN adopted a formula from earlier proceedings, which estimated that 62 kg of tobacco was required to produce 100 kg of Khaini. This formula was initially used in a prior case settled by the Settlement Commission. The Adjudicating Authority, however, used the same formula to restrict the demand to ?2,84,26,761/- along with an equal amount of penalty. The assessee contested the use of this formula, arguing that no new investigation or verification of ingredients was conducted for the current period. 3. Adequacy of Evidence Supporting Clandestine Clearance: The assessee argued that the demand was based solely on earlier investigations without any new evidence for the disputed period. They highlighted the absence of evidence regarding extra raw material procurement or unaccounted production and clearance of Khaini. The assessee cited several case laws emphasizing that clandestine clearances must be supported by tangible evidence. The Revenue, on the other hand, argued that the manufacturing process remained unchanged and that the increase in Khaini’s weight due to water addition was not accounted for, as confirmed by the statements of the assessee’s personnel. 4. Applicability of the Extended Period of Limitation: The assessee contended that part of the demand was time-barred since the Department had already investigated similar allegations for an earlier period, invoking the extended period under Section 11A. They referenced the Supreme Court’s decision in Nizam Sugar Factory, which held that the extended period of limitation could not be invoked a second time on the same set of allegations. The Tribunal agreed, concluding that the demand should be restricted to the normal period of limitation. Judgment: - The appeal filed by the Revenue was rejected. - The appeal filed by the assessee was partly allowed. - The demand and consequent penalty were to be restricted to the normal time limit, and the Adjudicating Authority was directed to re-quantify the demand and penalty accordingly. Conclusion: The Tribunal upheld the use of the Settlement Commission’s formula for determining unaccounted production but limited the demand to the normal period of limitation, rejecting the Revenue’s appeal for a higher demand and partly allowing the assessee’s appeal.
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