Estimated manufacture cannot support excise demand without statutory authority and proof of clandestine removal.

Excise duty could not be demanded on an estimated quantity of manufacture derived from later-period ER-5 return data because no provision under the Central Excise Act, 1944 or the rules authorised such estimation. The demand also failed for want of prescribed norms and supporting examination of variations in inputs, labour, materials, power supply and plant conditions, leaving the assessment presumptive. In the absence of a legally sustainable basis and proof of clandestine removal, the impugned demand and penalty were set aside by CESTAT.

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Issues: Whether excise duty could be demanded on an estimated quantity of manufacture on the basis of ER-5 return data for a later period, in the absence of any enabling provision or prescribed norms, and without establishing clandestine removal.

Analysis: The estimated production for an earlier period was worked out from input-output data furnished in ER-5 returns for a subsequent year. The record did not show any provision under the Central Excise Act, 1944 or the rules made thereunder authorising such estimation for duty demand. The demand was also not supported by the mandatory exercise of fixing norms and examining variations in inputs, labour, material, power supply and plant conditions. In the absence of such foundation, the demand remained presumptive and the principle requiring proof of clandestine removal was not satisfied.

Conclusion: The demand was unsustainable and the appeals were allowed.

Final Conclusion: The impugned demand and penalty were set aside because excise duty cannot be fastened on a mere estimate of production without legal authority and evidentiary support.

Ratio Decidendi: Excise duty cannot be demanded on estimated manufacture unless the statute or rules authorise such estimation and the Revenue establishes a legally sustainable basis, including proof of clandestine removal where required.

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