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Issues: (i) Whether the allegation of suppression of production and clandestine removal of calcium carbide was established; (ii) whether the value of drums supplied in connection with clearance of calcium carbide was includible in the assessable value.
Issue (i): Whether the allegation of suppression of production and clandestine removal of calcium carbide was established.
Analysis: The demand was founded on electricity-consumption comparisons, an assumption that lime rather than limestone was used, and the inference that the neighbouring units operated on a batch process. The recorded raw materials, the statutory records in Form IV, the AL4 declaration, and the absence of any evidence of purchase of lime supported the assessee's version. The electricity studies, neighbouring-unit replies, TNEB material, and the department's own later Rule 173E exercise all indicated that the plant's power requirement was consistent with declared production. There was also no seizure, no transport or clearance documents for clandestine removals, and no material connecting the two agencies to any suppressed production.
Conclusion: The allegation of clandestine removal and suppressed production failed and the finding is in favour of the assessee.
Issue (ii): Whether the value of drums supplied in connection with clearance of calcium carbide was includible in the assessable value.
Analysis: The record did not establish that the agencies were dummy concerns, that DCW had not paid for the drums, or that the assessee had treated the drums as its own stock. The drums were accepted as buyer-owned packing, and the finding that clearance was not in bulk in tankers was contrary to the show cause notice itself. On those facts, the exclusion principle for buyer-supplied packing applied, and the notification relied upon by the assessee also supported non-inclusion.
Conclusion: The value of the drums was not includible in the assessable value and the finding is in favour of the assessee.
Final Conclusion: The impugned order was set aside and the matter went back only for recomputation of duty on the basis of the findings that both the clandestine-removal charge and the inclusion of drum value had failed; no penalty could survive on those heads.
Ratio Decidendi: A demand based on alleged clandestine removal must be supported by cogent corroborative evidence, and buyer-owned packing material supplied for use in packing is not includible in assessable value.
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