Clandestine removal and undervaluation demands require independent corroborative evidence; disclosed facts cannot support extended limitation for suppression.
Clandestine manufacture, removal and undervaluation cannot be established solely from mismatches in ER-1, ER-4 and ER-6 returns, trial balance figures, or estimated input-output ratios. Cogent corroboration, such as evidence of excess raw-material procurement or consumption, electricity use, labour, transport, buyers, sale proceeds, or unaccounted transactions, is required; reconciliations and a Chartered Accountant's certificate may explain discrepancies. Auto-generated ER-4 inventory and production values do not by themselves prove actual sale value or differential consideration. Extended limitation cannot rest on suppression where the relevant returns and accounts were disclosed and the same facts were already known through earlier proceedings. Duty demands on these grounds are unsustainable.
Issues: (i) Whether duty demands for alleged clandestine manufacture and clearance and undervaluation, founded on mismatches in ER-1, ER-4, ER-6 returns and Trial Balance figures, were sustainable without corroborative evidence; (ii) Whether the extended period could be invoked for the financial year 2013-14 on the same disclosed facts that had formed the basis of earlier proceedings for financial year 2012-13.
Issue (i): Whether duty demands for alleged clandestine manufacture and clearance and undervaluation, founded on mismatches in ER-1, ER-4, ER-6 returns and Trial Balance figures, were sustainable without corroborative evidence.
Analysis: The alleged clandestine production was derived by applying input-output ratios to discrepancies in statutory returns and Trial Balance figures. Such estimation lacked a scientific basis and was not supported by evidence of excess procurement or consumption of raw materials, electricity consumption, additional labour, transport of the alleged goods, buyers, sale proceeds, or private records of cash transactions. The reconciliations and Chartered Accountant's certificate explained the discrepancies. ER-4 figures were auto-generated from inventory and production values and could not, without further evidence, establish actual sale value or undervaluation. No evidence established receipt of any alleged differential consideration from buyers.
Conclusion: The demands for clandestine manufacture and clearance and for undervaluation were unsustainable for want of cogent and corroborative evidence, in favour of the assessee.
Issue (ii): Whether the extended period could be invoked for the financial year 2013-14 on the same disclosed facts that had formed the basis of earlier proceedings for financial year 2012-13.
Analysis: The relevant ER-1, ER-4 and ER-6 returns and Trial Balance had been furnished by the assessee. Earlier proceedings concerning the same issue and the preceding financial year had already been initiated, placing the material facts within the Revenue's knowledge. The same or similar disclosed facts could not subsequently constitute suppression.
Conclusion: Invocation of the extended period was invalid because no suppression of facts was established, in favour of the assessee.
Final Conclusion: The impugned duty demands founded on alleged clandestine removal, undervaluation and extended limitation could not be sustained.
Ratio Decidendi: A charge of clandestine manufacture, removal or undervaluation cannot rest solely on return or accounting mismatches and estimated input-output ratios; it requires cogent corroborative evidence, and disclosed facts previously known to the Revenue cannot support a subsequent allegation of suppression for extended limitation.