Audit-based duty demand for alleged excess scrap fails without proof of raw material differences or clandestine removal

A duty demand based solely on an audit objection alleging excess scrap and processing loss in job-work manufacture cannot be sustained without independent investigation into the raw materials, supply sources, and manufacturing process. Mere comparison of wastage percentages between self-manufactured and job-work goods is insufficient where no evidence supports clandestine removal or rebuts the assessee's explanation that different materials generated higher loss. The demand here rested on presumption rather than proof, and was set aside in favour of the assessee.

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Issues: Whether the duty demand based on audit objection, alleging excess scrap and processing loss in job-work manufacture, could be sustained in the absence of investigation into the nature of raw materials and the manufacturing process.

Analysis: The demand was founded only on the audit objection and comparison of wastage percentages between self-manufactured goods and job-work goods. No independent investigation was conducted into the nature of the materials used, the different sources of supply, or the basis for the alleged excess loss. In the absence of evidence to support clandestine removal or to rebut the assessee's explanation that the job-work materials were different and generated more wastage, the demand rested on presumption alone.

Conclusion: The demand was unsustainable and was set aside in favour of the assessee.

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