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Issues: (i) Whether the demand of duty on alleged clandestine manufacture and removal of aerated water, based on requisition slips and surrounding evidence, was sustainable. (ii) Whether the assessee was entitled to allowance of process loss and rejection of the plea for cum-duty valuation.
Issue (i): Whether the demand of duty on alleged clandestine manufacture and removal of aerated water, based on requisition slips and surrounding evidence, was sustainable.
Analysis: The demand was not founded on requisition slips alone. The record included shortages of raw materials and finished goods, non-accountal in statutory records, and a statement/letter from the assessee's president ing receipt of sale proceeds from clearances reflected in the requisition books. The assessee also failed to show that the raw materials issued to production were returned to stores. In these circumstances, the evidence was held sufficient to establish clandestine manufacture and removal, and the precedents cited by the assessee were found inapplicable on the facts.
Conclusion: The duty demand on clandestine removal was upheld.
Issue (ii): Whether the assessee was entitled to allowance of process loss and rejection of the plea for cum-duty valuation.
Analysis: The Tribunal accepted the claim of 15% process loss and reduced the demand accordingly. The plea that the demand had been computed on cum-duty price was rejected because there were no invoices for clandestine clearances and no material to show that the duty had been worked out on a cum-duty basis. The assessable value alone formed the basis for computation.
Conclusion: The assessee succeeded only to the extent of 15% process loss, and the cum-duty valuation plea was rejected.
Final Conclusion: The demand was sustained in principle, but the quantum was reduced after allowing process loss, resulting in only partial relief to the assessee.
Ratio Decidendi: Clandestine manufacture and removal can be established by a chain of corroborative circumstances and admissions, and not merely by a single document, while process loss may be allowed if accepted on the facts; a cum-duty plea fails where clandestine clearances were not covered by invoices and no supporting basis is shown.
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