2023 (8) TMI 9 - AT - Central Excise

Clandestine manufacture and removal - demand based on consumption of electricity - corroborative evidences or not - HELD THAT - While the Department is not required to precisely bring the entire details on account of these issues, they are expected to bring in at least some corroborative evidence to support the allegation that the clandestine manufacture has taken place. Mere reliance on the electricity consumption without any corroborative evidence towards excess purchase of raw materials so as to convert the raw materials into finished goods, will not help the Revenue to prove the case. After going through these factual details it emerges that the only base on which the demand has been confirmed, is on account of the electricity consumption without any corroborative evidence whatsoever in any form. In the case of M/S UNION ENTERPRISES ANOTHER VERSUS UNION OF INDIA OTHERS 2014 (5) TMI 93 - CALCUTTA HIGH COURT , the Hon ble Kolkata High Court has considered the Allahabad High Court s decision in the case of R. A. Casting on similar issue and held that mere excess consumption of electricity without any corroborative evidence relating to the purchase of the raw material, conversion of the raw material into a final products and clearance from the manufacturing unit to the respective buyers are produced does not raise presumption of evading the duty. Since the Department has relied on the Electricity consumption alone without any corroborative evidence whatsoever, the decision of the Hon ble High Courts are squarely applicable. Appeal allowed.

Summary

Issues involved: Alleged clandestine manufacture and clearance of goods based on electricity consumption.

The Appellant, a manufacturer of non-alloy Steel Ingot, was alleged to have clandestinely manufactured and cleared excisable goods, leading to a demand of Rs.5,32,700/- in excise duty. The Department based its quantification on the electricity consumption of the Appellant. The lower Authorities confirmed the demand, prompting the Appellant to appeal before the Tribunal.

The Learned Advocate for the Appellant argued that the entire demand was based solely on the electricity consumption of the induction furnace at the factory, without any corroborative evidence such as purchase of raw materials, clearance of goods, cash transactions, or private records. Citing case laws, the Advocate emphasized the need for corroborative evidence to support the allegation of clandestine manufacture. The absence of such evidence rendered the quantification based on electricity consumption erroneous and speculative.

The Learned Authorized Representative reiterated the findings of the lower authorities, leading to a hearing where both sides presented their arguments and evidence. The Tribunal observed that the Show Cause Notice was solely issued based on electricity consumption, highlighting that the Department needed corroborative evidence to prove clandestine manufacture. Mere reliance on electricity consumption without additional evidence regarding raw material purchase, production, dispatch, and sales was deemed insufficient to establish duty liability.

Referring to relevant case laws, the Tribunal emphasized that excess electricity consumption alone cannot be the basis for determining duty liability without supporting evidence of raw material purchase, production, and clearance. The Tribunal noted the consistent view that mere excess electricity consumption does not raise a presumption of duty evasion without additional corroborative evidence. Based on the lack of corroborative evidence in the present case, the Tribunal set aside the impugned order and allowed the Appeal with consequential relief, as per law.