2014 (7) TMI 569 - AT - Central Excise

Duty demand - Demand based on usage of electricity - Revenue contends that there was excess consumption of electricity, thus leading to a charge on the part of the Revenue that appellant have manufactured excess quantum of their final product than what they have reflected in their statutory records - Held that - The appellants are not disputing the demands confirmed on the basis of entries made in the daily production records as also in the ledgers of the traders and also on the basis of raw materials supplied by the inputs supplier - apart from the electricity consumption, which according to the Revenue is much on the higher side when compared to the electricity consumed during the period 1.1.99 to 16.2.99, there is virtually no evidence against the appellant reflecting upon the excess production and clearance. We note that the clandestine removal is a serious charge against the assessee and inasmuch as the burden for the same is upon the Revenue, the same is required to be discharged by production of tangible and positive evidence. Merely because during the period in question the appellant was indulging in clandestine activities, would not ipso facto lead to establish that they have been indulging in such activities even during the past period. To manufacture such a quantum of their final product, they need raw material and the actual production of the same and then the clandestine clearance to their buyers. The Revenue has neither established that as to who supplied the raw material to the appellant during the said longer period of two years. There is also no statement of any person actually doing the manufacturing activity so as to reveal that excess manufacture was done by them during the period. Further no buyer of the assessee stand identified by the Revenue. We also note that the statement of Shri Ravi Gupta only clarifies the position for the period from 1.1.99 to 16.2.99 and does not relate to clandestine activities for the past period. In the nutshell it can be said that there is virtually no evidence on record, except the electricity consumed, to establish the clandestine activity of the appellant. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Confirmation of demand of duty against M/s. R K Polytubes, imposition of penalty, confirmation of interest, imposition of penalty on M/s. Fairdeal Agencies, clandestine production, excess consumption of electricity, evidence required for establishing clandestine activity, challenge to confirmation of demand based on electricity consumption.

The judgment pertains to the confirmation of demand of duty against M/s. R K Polytubes and the imposition of penalties based on discrepancies found during a visit by Central Excise officers to their factory. The officers discovered shortages and excesses in raw materials and final products, leading to the initiation of proceedings. The demand was confirmed by the Commissioner, including penalties, based on various factors such as discrepancies in private production registers, stock ledger books of trading firms, and raw materials supplied. The key issue in dispute was the confirmation of demand based on excess consumption of electricity, which the appellant contested as being presumptive and not conclusive evidence. The appellant argued that electricity consumption alone cannot establish clandestine activity, citing legal precedents. The Revenue, however, argued that the appellant had admitted to clandestine production during a specific period, supporting the demand based on electricity consumption.

The Tribunal analyzed the evidence presented by both sides and highlighted that while the electricity consumption was high compared to a specific period, there was insufficient evidence to conclusively prove excess production and clearance by the appellant. The burden of proving clandestine activity rested with the Revenue, requiring tangible and positive evidence. The Tribunal emphasized that mere involvement in clandestine activities during a specific period did not automatically imply the same for previous periods. The lack of evidence regarding raw material suppliers, manufacturing activities, and buyers further weakened the Revenue's case. Relying on a previous decision regarding electricity consumption as the sole basis for confirming demands, the Tribunal held that without corroborative evidence, such as in this case, electricity consumption alone cannot establish clandestine manufacturing and clearance of goods. Therefore, the confirmation of demand based on electricity consumption was not upheld.

As the appellant had accepted demands on certain grounds, the Tribunal remanded the matter to the original adjudicating authority for quantifying the duty liability and penal liability based on the findings. Additionally, the Tribunal left the decision on penal liability for M/s. Fairdeal Agencies to the Commissioner, allowing the appellants to contest the imposition based on facts, evidence, and legal issues. The appeals were disposed of accordingly, with the matter being remanded for further proceedings.