Statutory valuation and corroboration rules defeat undervaluation and presumed-production duty demands based only on gas consumption.

Undervaluation demand was unsustainable because the filed price lists had not been finalized by the jurisdictional authority, and assessable value had to be determined through the prescribed statutory valuation process before any demand could be raised on a different basis. A duty demand based only on presumed production from natural gas consumption was also unsustainable, as clandestine manufacture cannot be inferred from input consumption alone without independent corroboration such as raw material procurement, actual production, removal, buyers, or transport evidence. As both principal demands failed, the penalties and consequential directions also could not survive, and the impugned order was set aside.

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Issues: (i) Whether the demand raised on the ground of undervaluation was sustainable when the price lists filed by the assessee had not been finalized by the jurisdictional authority. (ii) Whether the demand of duty based on the presumed production derived from natural gas consumption was sustainable.

Issue (i): Whether the demand raised on the ground of undervaluation was sustainable when the price lists filed by the assessee had not been finalized by the jurisdictional authority.

Analysis: During the relevant period, classification lists and price lists were required to be filed before the jurisdictional Assistant Commissioner, and assessable value was to be determined through that statutory process. The price lists in question had admittedly been filed but were not finalized. In such a situation, the jurisdictional authority could not proceed on a different valuation basis or fasten a demand for undervaluation until the price lists were finalized in accordance with the prescribed procedure.

Conclusion: The undervaluation demand was not sustainable and did not survive.

Issue (ii): Whether the demand of duty based on the presumed production derived from natural gas consumption was sustainable.

Analysis: The demand was founded on an assumed consumption norm for natural gas and a corresponding inference of production. A duty demand cannot rest on a mere presumption of manufacture without supporting evidence of procurement of raw materials, actual production, removal, buyers, or transport of the alleged goods. The reasoning that consumption of gas alone could establish clandestine production was found to be untenable.

Conclusion: The duty demand based on gas consumption was not sustainable and did not survive.

Final Conclusion: As both principal demands failed, the penalties and other consequential directions also could not be sustained, and the impugned order was set aside.

Ratio Decidendi: A duty demand cannot be sustained on undervaluation unless the statutory valuation process is first finalized, and clandestine manufacture cannot be inferred merely from input consumption figures without independent corroborative evidence.

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