Proportionate duty liability upheld where mixed-source consumption could not be separately identified and records were inconclusive.

Where consumption of ingots from captive manufacture and market purchases could not be separately established, duty liability may be determined on a proportionate basis as the most reasonable method. The available records did not permit exact segregation of inputs used in the rolling division, so the lower appellate authority's pro rata approach was accepted. The objection that the demand could not stand because the show cause notice did not specifically mention market purchases was rejected, as the assessee's own letter had proposed working out consumption proportionately. The reduced demand based on proportionate consumption was sustained and the cross-objection failed.

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Issues: Whether the duty demand could be worked out on a proportionate basis where the quantity of ingots consumed from own manufacture and market purchases could not be separately ascertained, and whether the benefit of the exemption notification could be denied for want of separate records.

Analysis: The available records did not enable either side to determine with certainty how much ingots consumed in the rolling division came from the furnace division and how much was purchased from the market. In such circumstances, the proportionate consumption method adopted by the lower appellate authority was treated as the most appropriate basis for determining the duty liability. The contention that no demand could be raised merely because the show cause notice did not mention market purchases was also not accepted, since the assessee's own letter had suggested working out consumption on a pro rata basis.

Conclusion: The proportionate basis for consumption was upheld and the Revenue's challenge to the reduced demand failed. The respondents' cross-objection was also rejected.

Final Conclusion: The order determining duty liability on a proportionate consumption basis was sustained, with no interference in the appellate order.

Ratio Decidendi: Where actual consumption of inputs from mixed sources cannot be separately established by either party, duty liability may be determined on a proportionate basis as the most appropriate and reasonable method.

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