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2019 (4) TMI 1408 - AT - Central ExciseClandestine removal - Methanol - Formaldehyde - it was alleged that the assessee has failed to account the entire quantity of final product manufactured - HELD THAT - The allegation of clandestine clearance has to be supported by tangible evidence of clearance of the alleged additional quantity. Such allegation cannot be made simply on the basis of arithmetical projection based on a mathematical formula. This view finds support in the case of RA CASTINGS PVT. LTD. VERSUS COMMISSIONER OF C. EX., MEERUT-I 2008 (6) TMI 197 - CESTAT NEW DELHI - The total quantum of steel ingots manufactured by the assessee was projected on the basis of a Technical Report of study carried out by a Prefessor of IIT, Kanpur, but the CESTAT while examining the appeal against such demand, observed that the allegation of clandestine clearance cannot be sustained only on the basis of such Technical Report. The demand for duty as well as proposal for recovery of cenvat credit cannot be sustained and the impugned orders upholding such view are set aside - appeal allowed - decided in favor of appellant.
Issues:
- Allegation of suppression of production by the assessee - Challenge to the orders of Departmental Authorities and Commissioner (Appeals) - Dispute regarding the quantity of Methanol manufactured and accounted - Reversal of cenvat credits for excess inputs used - Justification of demand of duty by Revenue Analysis: 1. Allegation of Suppression of Production: The case involved a Public Sector Undertaking manufacturing petroleum products facing allegations of suppression of production due to discrepancies in the quantity of Methanol manufactured and accounted for. The Departmental Officers alleged that the assessee failed to account for the entire quantity of final product manufactured, leading to a show-cause notice for duty evasion. 2. Challenge to Orders: The orders of the Departmental Authorities demanding duty were challenged by the assessee, while the orders of the Commissioner (Appeals) dropping the demands were challenged by the Revenue. The appeals were consolidated for a common decision due to the common issue at hand. 3. Dispute over Quantity of Methanol: The dispute revolved around the quantity of Methanol manufactured and accounted for by the assessee. The Revenue based its allegations on the input/output norms declared by the assessee, claiming that the entire quantity of Methanol manufactured was not accounted for, leading to duty evasion accusations. 4. Reversal of Cenvat Credits: The Revenue proposed the reversal of cenvat credits for the excess inputs used by the assessee beyond the theoretically calculated quantity required for the manufacture of the accounted Methanol quantity. This proposal was part of the duty demand raised against the assessee. 5. Justification of Duty Demand: The Revenue justified the demand of duty by emphasizing that the norms adopted by the assessee themselves indicated discrepancies in accounting for the quantity of Methanol manufactured. The Revenue argued that the demand was based on accepted norms and should be upheld. 6. Decision and Analysis by Tribunal: After hearing both sides and reviewing the appeal records, the Tribunal observed that the input/output ratio norms provided by the Revenue were not conclusive evidence of duty evasion. The Tribunal highlighted that the norms could only cover the use of Natural Gas as feed stock and not account for other legitimate uses within the factory, leading to variations in gas consumption. 7. Legal Precedents and Conclusion: The Tribunal referred to legal precedents and emphasized that allegations of clandestine clearance must be supported by tangible evidence. Citing a specific case, the Tribunal noted that duty demands cannot be sustained solely based on theoretical calculations without concrete proof of clandestine activities. Consequently, the Tribunal set aside the duty demand and the proposal for cenvat credit recovery, allowing the appeals filed by the assessee and rejecting the appeal filed by the Revenue.
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