Clandestine manufacture not proved where no concrete nexus linked respondents to footwear production or removal

Central excise duty and penalty could not be fastened on the respondents because the Revenue failed to prove that they manufactured the footwear or got it manufactured on their behalf. The record showed manufacture by individual cobblers or other independent entities, with societies acting as billing and payment channels, but no evidence of raw material procurement, machinery, manufacturing premises, power use, supervisory control, or any other concrete nexus with the respondents. As the actual manufacturer was not identified with certainty and the statements relied on did not establish clandestine manufacture or removal, the respondents could not be treated as manufacturers for excise purposes.

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Issues: Whether the Revenue had established that the respondents were the manufacturers of the footwear or had got the goods manufactured on their behalf so as to fasten central excise duty and penalty.

Analysis: The demand was founded on the allegation that the cooperative societies were merely paper entities and that the footwear was actually manufactured by or for the respondents. The evidence, however, showed that the footwear was made by individual cobblers or other independent entities and routed through societies that issued bills and received cheque payments. The record did not contain any material showing procurement of raw materials, use of machinery, manufacturing premises, power consumption, supervisory control, or any other concrete link connecting the respondents with the manufacturing activity. The Revenue also failed to identify the actual manufacturer with certainty. The statements relied upon, read as a whole, did not establish that the respondents themselves manufactured the goods or got them manufactured on their behalf.

Conclusion: The allegation of clandestine manufacture and removal was not proved and the respondents could not be treated as manufacturers for excise purposes.

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