Clandestine removal demand fails where furnace oil consumption alone cannot prove extra production and removal beyond recorded quantities.

Clandestine removal of additional CTD bars could not be sustained on the basis of furnace oil consumption alone where the basic raw material figures matched the records and the assessee gave a plausible, evidence-backed explanation for higher fuel use due to furnace damage, heat loss and repairs. Rule 173E allows estimation of normal production by reference to relevant factors, but the Revenue still had to prove the larger alleged removal under the addendum notice. The record showed no admission by the assessee of removals beyond the quantity already covered by the first notice, and the Tribunal's factual appreciation was a possible view, not perverse. The Bombay HC upheld setting aside the additional duty and penalty.

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Issues: Whether the demand raised in the addendum and corrigendum notice for alleged clandestine clearance of additional quantities of CTD bars was sustainable on the basis of furnace oil consumption and whether the Tribunal erred in setting aside that demand.

Analysis: Rule 173E of the Central Excise Rules permits estimation of normal production by having regard to relevant factors such as installed capacity, raw material utilisation, labour and power consumed. The Revenue relied mainly on furnace oil consumption to estimate production, but the basic raw material figures were available and tallied with the records. The assessee had furnished a plausible explanation for the higher furnace oil consumption, supported by evidence of severe furnace damage, heat loss, repairs and accounting entries. The burden remained on the Revenue to prove the larger alleged clandestine removal under the addendum notice, and the record did not show any admission by the assessee of removal beyond the quantity already covered by the first notice. The Tribunal's appreciation of facts and distinction of the cited precedent was a possible view and was not shown to be perverse.

Conclusion: The demand for the additional alleged clandestine removal was not proved, and the Tribunal was correct in setting aside that part of the duty and penalty.

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