Duty demand upheld based on inferred clandestine Portland cement production from quarrying and clinker shortage

HC upheld the duty demand for clandestine manufacture and removal of Portland cement, finding the authorities' inference-based on large limestone quarrying and a clinker shortage-justified to estimate unaccounted production and resulting duty escapement. The court rejected the appellant's contention that only positive proof of manufacture would validate the demand. As the lower authority had already waived the penalty, HC found no illegality or reason to interfere with the order sustaining the duty assessment.

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Issues:
Challenge to excise duty demand based on shortage of clinkers and alleged clandestine removal of cement without duty payment.

Analysis:
The appellant, a cement factory, challenged an excise duty demand of Rs. 23,04,994 based on a shortage of clinkers. The appellant, a Small Scale Industry unit, availed exemption benefits under Notification No. 175 of 1986 for concessional excise duty rates. An inspection revealed discrepancies in clinker stock, leading to a show cause notice proposing duty demand, penalty, and interest. The Order-in-Original demanded Rs. 23,04,994 as duty and an equal penalty. The appellant appealed, and the first respondent partially allowed it, reducing the duty to Rs. 13,04,994. The appellant contested the order, arguing against the justification for duty imposition.

The main issue focused on the abnormal shortage of clinkers leading to excess cement production allegedly clandestinely removed without duty payment. The appellant contended that the shortage did not prove clandestine removal without concrete evidence. The respondent argued that discrepancies in clinker, coke breeze, and limestone quantities supported the claim of clandestine cement removal. The original authority noted officers present during inspection and the appellant's delayed objection to stock discrepancies.

The Court upheld the respondent's decision, emphasizing the lack of satisfactory explanations from the appellant regarding the significant clinker shortage. Discrepancies in raw material quantities, including limestone and coke breeze, indicated irregular stock maintenance and potential clandestine activities. The Court found the authorities' conclusion on clandestine cement production and duty evasion justified based on the evidence presented. The deletion of the penalty by the first respondent was considered a lenient gesture. Consequently, the Court dismissed the appeal, finding no grounds for interference with the respondent's order.

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