2016 (10) TMI 867 - AT - Central Excise

Suppression of production - clandestine removal of goods - window sections, angles, flats, CTD bars, etc. - unusual deviation of electricity consumption figures for different months - Held that - the products being manufactured by the respondent are shown as window sections, angles, flats, CTD bars, etc. There is no details about the proportion of manufacture of these items or the nature of standard machinery used in the manufacture. It is also not known what will be the normal consumption per machine for a given period of time when in continuous normal operation. We have only electricity consumption for few months in 2008-2009 and certain calculation based on purported average electricity used for production of 1 M.T. of final product. We are also not very clear as to how 91 units are considered as standard for calculation as nothing is recorded regarding the nature of machinery and the consumption capacity of said machinery. We find that the calculation made is completely presumptive. There is no evidence relating to procurement of extra unaccounted raw materials/inputs, deployment of additional labour, unaccounted transportation/sale, identity of any of the buyers of such goods, etc. Even where certain verifications were made regarding trading activities, no substantial evidence could be attributed to allege that the tradings undertaken by the respondent firm are all bogus. We have already noticed in the absence of any tangible evidence, allegation of clandestine manufacture/clearance of excisable goods cannot be sustained. Even if the transactions on trading were to be found as bogus, the same by itself will not support the confirmation of duty demand as linkage to the clandestine manufacture and the income on bogus trading should be brought out by the evidence - appeal dismissed - decided against Revenue.

Summary

Issues:
- Allegations of suppression of production and clandestine clearance without payment of duty
- Unusual deviation of electricity consumption figures
- Huge amount shown in the Balance Sheet on account of trading activity without proper supporting bills
- Unexplained source of funds in the business

Analysis:
1. Allegations of Suppression of Production and Clandestine Clearance:
- The case involved allegations of suppression of production and clandestine clearance without payment of duty against the main respondent and two directors.
- The Revenue demanded a significant amount with penalties, but the Commissioner dropped all proceedings against the respondent.
- The Revenue appealed this decision, leading to the current judgment.

2. Unusual Deviation of Electricity Consumption Figures:
- The Revenue based part of its demand on the unusual deviation of electricity consumption figures for different months.
- The Tribunal found the calculation to be presumptive and lacking in clarity.
- The Original Authority emphasized the absence of standard norms and collateral evidence to support the allegations.
- Ultimately, the Tribunal held that the onus was not discharged by the Revenue, dismissing this ground of appeal.

3. Balance Sheet Trading Activity and Source of Funds:
- Another ground for the demand was the huge amount in the Balance Sheet related to trading activity without proper supporting bills.
- The Tribunal noted that the trading income should be proven to be linked to the sale of clandestinely manufactured goods, which the Revenue failed to establish.
- Lack of tangible evidence regarding unaccounted raw materials, labor, transportation, or buyers further weakened the Revenue's case.
- The Tribunal held that without substantial evidence, questioning financial transactions based on presumption was not legally sustainable.

4. Overall Decision:
- The Tribunal carefully analyzed each ground of appeal and found no persuasive evidence to interfere with the impugned order.
- Despite allegations, the lack of concrete proof regarding clandestine activities and insufficient linkage between trading income and alleged activities led to the dismissal of the Revenue's appeals.
- The judgment was pronounced on 27.09.2016, upholding the decision to drop the proceedings against the respondent.