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TMI Blog2024 (10) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... orded in the final products register and duty was paid. The remaining quantity was not found in the factory. The shortage is also not of small quantity in the case of OUDH SUGAR MILLS LTD. VERSUS UNION OF INDIA [ 1962 (3) TMI 75 - SUPREME COURT] but in this case, of the 933 MT only 70 MT was found in stock. There are no hesitation in upholding the decision of the impugned order that the appellant had removed the goods found short clandestinely and is liable to pay excise duty under section 11A invoking extended period of limitation along with interest and penalty under section 11AC. Penalty on Shri Tekriwal - HELD THAT:- Rule 26 shows that the pre-requisite for imposing penalty under Rule 26 is confiscation of the goods and the person being concerned in any manner with such goods. In this case, the Commissioner dropped the proposal to confiscate the goods. Therefore, Rule 26 cannot apply. Appeal disposed off. - MR. DILIP GUPTA, PRESIDENT AND MR. P. V. SUBBA RAO, MEMBER (TECHNICAL) Shri Bipin Garg and Ms. J. Kainaat, Advocates for the Appellant Shri Unmesh Kumar, authorised representative for the Respondent ORDER M/s. Hi Tech Abrasives Ltd. [Assessee] and Shri Pankaj Tekriwal [Tek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the following submissions. a. Generation of dust in the process of the manufacture of their final products is inevitable. b. When the Panchnama was drawn, Shri Pramod Kumar, authorised signatory of the appellant and Shri Manoj Kumar Jain, Production Manager, explained that during the manufacture, there was a manufacturing loss of 7%, dust loss of about 5 % (which is recoverable) and blow holes loss of about 1% and skull formation loss of about 1%. He further explained that since 2007-08, the appellants stopped accounting of the dust loss; before this, they had sold the dust for about Rs. 1,000/- per metric ton. c. Since 2008, the appellant used the dust to fill pits and dumped it on the roadside, etc. d. The demand was confirmed based on assumptions and presumptions without any evidence. e. In Continental Cement Company vs UOI [ 2014(309) ELT 411 (All)], the Allahabad High Court held to substantiate allegations of clandestine removal, clinching evidence was required and it cannot be merely based on assumptions. Revenue must prove this charge through sufficient evidence. f. The entire demand is made on theoretical calculations. g. The alleged shortage can be explained by the loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elegant but simple accounting system, the appellant had maintained record of the WIP. The raw materials consumed minus the loss is added to the opening stock of the WIP and the finished goods manufactured during the month are subtracted out of the WIP to arrive at the closing balance of the WIP. In other words, the entire loss which occurs during the process of manufacture was already subtracted and the quantity of final product which would emerge after deduction was recorded in the WIP register. For example, in the above table, although the raw material issued for production during August 2011 was 736.450 MT, manufacturing losses of 105.450 MT were deducted and only 664.420 MT was recorded as the final product in the WIP register. 15. The finished goods manufactured could be out of the raw materials consumed during that month or those which were are already part of the work-in-progress at the beginning of the month. If the quantity of finished goods manufactured during the month is more than the raw materials consumed (minus losses) during the month, it results in a decrease of the WIP at the end of the month and vice versa. The losses in the production are accounted for by subtra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage of 15.11%) while entering the figures in the WIP register. Therefore, the shortage cannot be explained by claiming it was dust loss. Secondly, if such a large amount of dust was generated and which was of some value, no businessman or factory will not account for it or not sell it. Thirdly, it is unthinkable that 880 MT of the dust could be dumped on public roads without anyone noticing it. The first fact that the loss detected was after accounting for all losses including dust losses itself should remove any doubt about the shortage. 21. The next question is what would have happened to the WIP found short. Once raw material is issued for production, they can only move forward towards finished products and they cannot go back and become raw material. The irresistible conclusion is that the final products were removed after manufacture. No duty has been paid on those goods and they have not been accounted for in the Register for Final Products. 22. Learned counsel vehemently argued that duty cannot be demanded based on theoretical calculations and he relied on several judicial decisions in support. We have considered these decisions and they were on different set of facts. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed products which it recorded and cleared as per its finished product register. 26. The genuineness of these records is not disputed by either side. These were not recovered from any third party sources but these were the appellant s own records maintained in its own factory and produced by the appellant during investigation by the officers of DGCEI. The discrepancy that was found was in the WIP register. The appellant does not dispute that the WIP register maintained by it is genuine and that it reflects the quantity of the raw material issued for production. The losses that would occur in the manufacture of the final products have already been accounted for in the WIP register as discussed above. Thus, the 933 MT of WIP reflected in the WIP register has to be the stock lying manufactured or which is in the process of completing the manufacture and it is expressed in terms of the quantity of the final products after deducting all the production losses. Against this quantity, only 70 MT was found. 27. The question which arises is as to what had happened to the rest. The assertion of the appellant is that it was lost as dust and that dust could be sold at a low price of about Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brett felicitously puts it- all exactness is a fake . El Dorado of absolute Proof being unattainable, the law, accepts for it, probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof often it is nothing more than a prudent man s estimate as to the probabilities of the case. 31. The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered to use the words of Lord Mansfield in Blatch v. Archar (1774) 1 Cowp. 63 at p. 65 According to the Proof which it was in the power of one side to prove and in the power of the other to have contradicted . Since it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as part of its primary burden . 32. Smuggling is clandestine conveyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landestine removal. There is no dispute about the authenticity of the records and who had maintained them. The only dispute is regarding how the shortage of WIP is interpreted. The appellant s explanation is that it is due to dust of about 5% generated during the manufactured which it claims to have not accounted for and dumped on the roads because its sale value is low but this loss has already been taken into account in the WIP register and the shortage is after accounting for these losses. Since the raw material were already put through the process of manufacture the logical conclusion would be that the final goods were manufactured but lesser quantity was recorded in the final products register and duty was paid. The remaining quantity was not found in the factory. The shortage is also not of small quantity in the case of Oudh Sugar Mills but in this case, of the 933 MT only 70 MT was found in stock. 31. In the facts of this case, we have no hesitation in upholding the decision of the impugned order that the appellant had removed the goods found short clandestinely and is liable to pay excise duty under section 11A invoking extended period of limitation along with interest and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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