Clandestine manufacture and extended limitation sustained where statutory records failed to disclose slag cement production.

Clandestine manufacture and removal of slag cement was upheld where the assessee failed to produce credible documentary support for its accounting explanation, and statutory records did not reflect the disputed production. The declaration filed under Rule 173B and a letter referring to use of slag were held insufficient to establish disclosure of slag cement manufacture. On that basis, the duty demand was sustained. The same non-disclosure and absence of recordal justified invocation of the extended period of limitation under the Central Excise Act, and the penalty confirmation was also sustained.

---

---

Issues: (i) whether the demand of duty on alleged clandestine manufacture and removal of slag cement was sustainable; (ii) whether the extended period of limitation could be invoked.

Issue (i): whether the demand of duty on alleged clandestine manufacture and removal of slag cement was sustainable.

Analysis: The purchase of slag was not disputed, but there was no material on record to show that the output of slag cement had been accounted for in the books of account or in the statutory records as ordinary Portland cement. The explanation regarding one-to-one correlation was rejected for want of documentary support. The declaration filed under Rule 173B of the Central Excise Rules and the letter referring to use of slag did not establish declaration of manufacture of slag cement. In the circumstances, the allegation of clandestine manufacture and removal was accepted.

Conclusion: The demand of duty on clandestine manufacture and removal of slag cement was upheld against the assessee.

Issue (ii): whether the extended period of limitation could be invoked.

Analysis: Manufacture of slag cement had not been disclosed to the Department, and the statutory records did not reflect such manufacture. On that basis, the non-disclosure was treated as sufficient to justify recourse to the extended period under the Central Excise Act.

Conclusion: The extended period of limitation was validly invoked against the assessee.

Final Conclusion: The appeal failed, and the adjudication confirming duty and penalty was sustained.

Ratio Decidendi: Where clandestine manufacture is not reflected in statutory records and the assessee offers no credible documentary support for its accounting explanation, duty demand and the extended limitation period may be upheld on the basis of the probability established from the record.

---