Issues: Whether filling gas into smaller cylinders supplied by customers amounted to manufacture or deemed manufacture under the relevant chapter note, so as to attract duty and penalty.

Analysis: The activity was found to be contingent on customer-driven preference and not a continuous or autonomous repacking activity of the assessee. The containers were supplied by customers and bore no marking of the assessee. The Tribunal held that the cited precedents did not match the facts of the present dispute. It further held that the refilling of gas into customer-provided containers was comparable to a post-production mode of removal and did not constitute the kind of independent treatment contemplated by the deeming provision.

Conclusion: The activity did not amount to manufacture or deemed manufacture, and the demand as well as the penalty were held unsustainable.

Final Conclusion: The duty demand and penalty confirmed by the lower authorities were set aside, and the appeal was allowed.

Ratio Decidendi: A customer-directed filling of gas into customer-owned containers, undertaken after production and not as an autonomous repacking activity of the assessee, does not by itself constitute manufacture or deemed manufacture under the tariff note.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether CENVAT credit on civil construction services received and invoiced prior to 01.04.2011 was admissible under Rule 2(l) of the CENVAT Credit Rules, 2004, and whether its denial was sustainable.

(ii) Whether CENVAT credit was admissible on maintenance of grid / 33KV transmission line outside the plant on the ground of nexus with manufacture.

(iii) Whether CENVAT credit was admissible on maintenance of railway track used for inbound raw materials and outbound finished goods movement, treated as part of plant/material handling system.

(iv) Whether CENVAT credit was admissible on township maintenance, travel agency service, and interior decoration service as "input services" used in relation to manufacturing activity.

(v) Whether CENVAT credit on outdoor catering services received prior to 01.04.2011 was admissible, and whether its denial was sustainable.

(vi) Whether the extended period of limitation could be invoked and whether penalty was imposable where the credit availment was disclosed in periodic returns and audit information was furnished.

2. ISSUE-WISE DETAILED ANALYSIS

A. Civil construction services received prior to 01.04.2011

Legal framework: The Tribunal examined eligibility under the definition of "input service" in Rule 2(l) of the CCR, 2004, in the context of the amendment effective from 01.04.2011 and the departmental clarification referred to by the Tribunal.

Interpretation and reasoning: The Tribunal found as a fact that the construction services in question were received prior to 31.03.2011 and that all related invoices were issued prior to 31.03.2011. It accepted that exclusion of such services from the definition was operative only from 01.04.2011, and relied on the Board circular referred to in the order as clarifying that credit is available if provision of service had been completed before 01.04.2011.

Conclusion: Denial of credit for civil construction services for the period prior to 01.04.2011 was held not legally sustainable, and the disallowance was set aside.

B. Maintenance of grid / transmission line outside the plant

Interpretation and reasoning: The Tribunal concluded that maintenance of the 33KV transmission line ensured continuous electricity supply for refining operations, that continuous power supply was essential for running the plant, and therefore the service had a direct nexus with manufacturing activity, even though located outside the plant.

Conclusion: CENVAT credit on service tax paid for maintenance of the grid outside the plant was held admissible, and the disallowance was set aside.

C. Maintenance of railway track used for movement of inputs and finished goods

Interpretation and reasoning: The Tribunal found that the railway track was used for transportation of inputs/raw materials to the factory and outward transportation of finished goods. It also noted that the assessee had declared it as part of plant and machinery and treated the railway track, relying on the principle applied in the decision referred to in the order, as capital goods in the nature of a material handling system. On that basis, the Tribunal treated maintenance services of such track as eligible for credit.

Conclusion: Credit on service tax paid towards maintenance of the railway track was held admissible, and the disallowance was set aside.

D. Township maintenance, travel agency service, and interior decoration service

Interpretation and reasoning: The Tribunal recorded a factual finding that these services were used in relation to the manufacturing activities and accepted that they qualified as eligible "input services" within Rule 2(l) of the CCR, 2004, on the facts of the case.

Conclusion: The disallowance of credit on township maintenance, travel agency, and interior decoration services was set aside and credit was held admissible.

E. Outdoor catering services received prior to 01.04.2011

Legal framework: The Tribunal addressed eligibility under Rule 2(l) of the CCR, 2004 in light of the amendment effective from 01.04.2011 and the departmental clarification referred to in the order.

Interpretation and reasoning: The Tribunal found that the outdoor catering services were received prior to 31.03.2011. It relied on the Board circular referred to in the judgment as clarifying credit availability if the service provision was completed before 01.04.2011, and applied that position to the facts found.

Conclusion: Denial of credit on outdoor catering services for the period prior to 01.04.2011 was held not legally sustainable, and the disallowance was set aside.

F. Extended limitation and penalty

Interpretation and reasoning: The Tribunal found that the assessee had disclosed availment of CENVAT credit in periodic returns and also furnished service-category-wise information during audit. On these facts, it held there was no suppression of information. Consequently, invocation of the extended period to disallow credit was rejected. For the same reasons, penalty was held not imposable; additionally, since credit was allowed on merits, the Tribunal found no justification for penalty.

Conclusion: The extended period was held not invocable, and the penalty imposed was set aside.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether penalties imposed on co-noticees under Rule 26 of the Central Excise Rules, 2002 can be sustained when the demand of duty and penalties against the main noticee, arising from the same show cause notice and Order-in-Original, have already been set aside by the Tribunal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of penalties on co-noticees after setting aside duty demand and penalties against main noticee

Legal framework (as discussed)

2.1 The penalties in question were imposed on co-noticees under Rule 26 of the Central Excise Rules, 2002 read with Section 174 of the Central Goods and Services Tax Act, 2017, pursuant to a common show cause notice and common Order-in-Original by which duty demand and penalties had been confirmed against the main noticee.

Interpretation and reasoning

2.2 The Tribunal notes that by the same Order-in-Original, central excise duty demand and associated penalties had been confirmed against the main noticee and another individual, and that those appeals had already been decided by the Tribunal vide a prior Final Order.

2.3 In the earlier Final Order, the Tribunal held that the Revenue had failed to establish on facts the manufacture of "Ready Mix Concrete (RMC)" by the main noticee, noting in particular: absence of inspection at the site; the assessee's registration under service tax and payment of service tax on job charges; the nature of invoices issued separately for material supply and job work; and the conclusion that what was produced and supplied was "concrete mix" which is not dutiable. It also held that, in view of the assessee's disclosures and service tax registration, the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944 was not invocable.

2.4 On that basis, in the earlier Final Order the Tribunal set aside the entire duty demand and penalties against the main noticee and the other individual noticee.

2.5 Referring to this earlier adjudication, the Tribunal holds that once the foundational demand of duty and penalties against the main noticee arising from the same facts and show cause notice has been set aside, there remains no basis to sustain derivative or consequential penalties upon co-noticees.

2.6 The Tribunal applies the settled principle that where the demand of duty is set aside, penalties on co-noticees, which are premised upon that very demand and alleged contravention, cannot be sustained.

Conclusions

2.7 As the Order-in-Original confirming duty and penalties on the main noticee has been set aside by the Tribunal in the connected appeals, the penalties imposed on the present appellants as co-noticees under Rule 26 of the Central Excise Rules, 2002 cannot be upheld.

2.8 The impugned order is held to be unsustainable insofar as it relates to the present appellants, and the appeals are allowed, setting aside the penalties imposed on them.

Issues: (i) Whether cenvat credit is admissible on capital goods and plant and machinery assembled at site which are alleged to be embedded to earth and thereby immovable; (ii) Whether cenvat credit is admissible on input services used for setting up the plant after omission of the words "setting up" w.e.f. 01.04.2011.

Issue (i): Whether cenvat credit is admissible on capital goods/plant and machinery assembled at site alleged to be immovable.

Analysis: The definition of capital goods in Rule 2(a) of the Cenvat Credit Rules, 2004 contemplates goods "used in the factory of the manufacturer of the final products." Tests for determining movability versus immovability were applied: nature of annexation, object of annexation, intention of the parties, functionality, permanency and marketability. Reliance was placed on the principles summarised in the cited apex authority that mere attachment to earth does not automatically render goods immovable where attachment is not intended to be permanent and the goods can be dismantled or marketed.

Conclusion: Cenvat credit on capital goods/plant and machinery assembled at site is admissible; denial of credit on the ground that such goods are embedded to earth and immovable is set aside. This conclusion is in favour of the assessee.

Issue (ii): Whether cenvat credit on input services used for setting up the plant is admissible despite omission of the words "setting up" w.e.f. 01.04.2011.

Analysis: Prior tribunal decisions dealing with eligibility of input service credits post-amendment were followed. The authorities distinguishing the cited precedents were considered and the tribunal applied its line of consistent decisions extending credit for relevant input services where those services materially relate to establishment and functioning of the manufacturing unit.

Conclusion: Cenvat credit on input services used for setting up/establishment-related activities is admissible; the demand based on denial of such input service credits is set aside. This conclusion is in favour of the assessee.

Final Conclusion: The impugned order is set aside and the appeal is allowed, resulting in cancellation of the demands relating to denial of cenvat credit on capital goods and input services.

Ratio Decidendi: Where goods attached to earth can be dismantled, relocated or sold and the attachment is not intended to be permanent, such goods are movable for the purposes of capital goods and eligible for cenvat credit; similarly, input services which materially relate to establishment and functioning of the manufacturing unit remain eligible for credit notwithstanding the omission of the phrase "setting up" w.e.f. 01.04.2011.

Issues: Whether Jute Cess was payable after conversion of cess-paid jute fabric into jute bags.

Analysis: The exemption notifications governing articles of jute manufacture exempted specified goods consumed within the factory for manufacture of final jute products, and the Tribunal had already decided the same question in earlier proceedings. That view had also been affirmed by the Calcutta High Court. Following that binding line of authority, the Tribunal held that conversion of cess-paid jute fabric into jute bags did not attract Jute Cess again.

Conclusion: The appellant was not liable to pay Jute Cess on conversion of cess-paid jute fabric into jute bags.

Ratio Decidendi: Where cess has already been paid on jute fabric and the same material is merely converted into jute bags, the subsequent conversion does not create a fresh liability to Jute Cess.

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether exemption under Notification No. 12/2012-C.E. for Traction Motors was available when such Traction Motors were cleared "as such" from the factory to various zones of the Indian Railways, on the plea that such clearances amounted to "captive consumption" within the same organisational unit.

(ii) Whether the demand could be sustained by invoking the extended period of limitation when the alleged non-payment was detected from information disclosed in ER-1 and ER-6 returns, and whether penalty under Section 11AC was imposable in the absence of suppression with intent to evade.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Eligibility to exemption for Traction Motors cleared outside the factory

Legal framework (as discussed): The Court considered Notification No. 12/2012-C.E. and applied its condition that the exemption is available only when the parts (Traction Motors) are used within the factory of production (or within any other factory of the same manufacturer) in the manufacture of specified final goods.

Interpretation and reasoning: The Court treated it as an admitted fact that the Traction Motors were removed outside the factory. It rejected the argument that various zones of the Indian Railways should be deemed to be factories of the manufacturer merely because the manufacturer is a part of the Indian Railways. The Court also noted the absence of evidence showing how the goods were used after clearance from the factory of production. It further held that the cited authorities relied upon by the appellant were not relevant to the facts (being from different tax contexts), and applied the Tribunal's earlier view in the appellant's own case as squarely covering the merits.

Conclusion: The Court conclusively held that the conditions of Notification No. 12/2012-C.E. were not fulfilled for Traction Motors cleared outside the factory, and therefore the exemption was not available; duty was payable on such clearances.

Issue (ii): Extended limitation, interest, and penalty

Legal framework (as discussed): The Court examined invocation of the extended period on the allegation of suppression, and the consequential penalty under Section 11AC, in the context of the record showing the demand was derived from ER-1 and ER-6 returns.

Interpretation and reasoning: The Court found no suppression of information because the dispute emerged from scrutiny of the appellant's own statutory returns, and therefore extended limitation was not sustainable. Following the same approach as taken in the earlier order referred to by the Court, it maintained liability within the normal period. Since suppression with intent to evade was not established, it held that penalty under Section 11AC could not be imposed.

Conclusion: The Court set aside the demand to the extent it relied on the extended period, upheld duty with interest only for the normal period, and set aside the penalty. The matter was remanded solely for quantification of the duty demand confined to the normal period.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether service tax paid on lease premium for land taken for setting up a cement packing plant qualifies as "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 post 01.04.2011.

1.2 Whether input services used prior to commencement of commercial production (including services relating to taking land on lease, procurement of machinery and setting up of plant) are eligible for CENVAT credit.

1.3 Whether CENVAT credit distributed by an Input Service Distributor (ISD) to the manufacturing unit can be denied and recovered at the recipient unit, and whether the marketing-related services in question qualify as input services.

1.4 Whether event management services used for business meetings and promotional events qualify as input services after the 2011 amendment to Rule 2(l) of the CENVAT Credit Rules, 2004.

1.5 Whether repainting work services fall within the exclusion relating to construction/works contract under Rule 2(l) of the CENVAT Credit Rules, 2004.

1.6 Whether invocation of the extended period of limitation and imposition of penalty were justified in the facts of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility of CENVAT credit on lease premium for land used for setting up cement packing plant

Legal framework (as discussed)

2.1 The Tribunal examined Rule 2(l) of the CENVAT Credit Rules, 2004, particularly the scope of the "means" part ("in or in relation to manufacture... whether directly or indirectly") and the effect of the 01.04.2011 amendment which deleted "setting up" from the inclusive part but did not alter the main/"means" clause.

2.2 The Tribunal relied upon its earlier decision in M/s Shell India Pvt. Ltd., as affirmed by the High Court and with SLP dismissed by the Supreme Court, wherein it was held that deletion of "setting up" from the inclusive part does not exclude services used for setting up from the main part of the definition if they are used in or in relation to manufacture/output service and are not specifically excluded.

Interpretation and reasoning

2.3 The Tribunal held that services used for obtaining land on lease for setting up a factory are directly in relation to manufacture because, without such land, no factory can be set up and no manufacture can take place.

2.4 It reiterated that, post-2011, services that are used directly or indirectly "in or in relation to manufacture" continue to be covered by the main part of Rule 2(l), unless specifically excluded, and that the removal of "setting up" from the inclusive part does not affect this position.

2.5 Following Shell India and other Tribunal precedents (including Kellogs India, Pepsico India Holdings, and Sri Chamundeshwari Sugars) on similar facts, the Tribunal found that lease premium for land taken for setting up the factory is an eligible input service.

Conclusions

2.6 The Tribunal concluded that lease premium for land used for setting up the cement packing plant qualifies as "input service" under Rule 2(l) and that CENVAT credit on the corresponding service tax is admissible. The demand on this ground is unsustainable.

Issue 2: Eligibility of CENVAT credit on services used prior to commencement of commercial production (Rs. 36,97,114)

Legal framework (as discussed)

2.7 The Tribunal considered Rule 2(l) of the CENVAT Credit Rules, 2004 and the judicial view that services having nexus with future manufacturing activity qualify as input services even if used prior to commencement of commercial production.

Interpretation and reasoning

2.8 The services in question related to: (i) taking land on lease, (ii) procurement of machinery, and (iii) setting up of plant, all prior to commencement of manufacture.

2.9 The Tribunal accepted that, without these very services, the appellant could not undertake the manufacturing process and that they therefore have a direct nexus with the manufacturing activity.

2.10 It followed the reasoning in cited precedents (including decisions such as Tata Motors Ltd. and Shree Cement Ltd.) that there is no bar on availing CENVAT credit on input services received prior to commencement of commercial production, so long as there is a clear nexus with the intended manufacture.

Conclusions

2.11 The Tribunal held that the services received prior to commencement of production, being indispensable and directly related to the forthcoming manufacturing operations, qualify as input services. The disallowance of CENVAT credit of Rs. 36,97,114/- on this ground is not sustainable.

Issue 3: CENVAT credit distributed by ISD and its denial/recovery at recipient unit (Rs. 1,21,727)

Legal framework (as discussed)

2.12 The Tribunal considered the scheme of CENVAT credit for Input Service Distributor under Rule 7 of the CENVAT Credit Rules, 2004 and the principle that a recipient unit merely utilizes credit distributed by ISD, whereas the availment and incidence of tax are at the ISD level.

2.13 The Tribunal relied on the decision in M/s Metro Shoes Pvt. Ltd., which held that the assessee-recipient is not required, under the framework of Rules, to verify the eligibility or source of credit distributed by the ISD and that any dispute on admissibility must be addressed at the ISD level.

Interpretation and reasoning

2.14 The services in question were marketing-related services availed by regional marketing offices (Hyderabad, Bangalore, Chennai) for marketing of final products, on which service tax was paid and credit taken by the ISD at Bangalore, which then distributed the credit to the appellant.

2.15 The Tribunal found that: (i) the ISD had undisputedly borne the incidence of tax; (ii) the services were used for marketing of the final product, which is an activity in relation to manufacture; and (iii) under the CENVAT scheme, wrongful availment, if any, must be examined at the ISD level, not at the recipient unit which merely utilizes distributed credit.

Conclusions

2.16 The Tribunal held that CENVAT credit of Rs. 1,21,727/- distributed by the ISD could not be denied or recovered from the recipient unit and that the marketing services qualify as input services. The demand on this count is unsustainable.

Issue 4: Eligibility of CENVAT credit on event management / business meeting services (Rs. 90,716)

Legal framework (as discussed)

2.17 The Tribunal again applied Rule 2(l) of the CENVAT Credit Rules, 2004 post-2011 and examined whether event management services used for business meetings and promotional events are "in relation to" manufacture or provision of output activity.

2.18 The Tribunal relied on decisions such as Arris Group India Pvt. Ltd. and Honda Motorcycle and Scooter India Pvt. Ltd., which recognized event management services used for client/employee events and inaugural/promotional functions as eligible input services where they are linked to business, advertisement or promotion.

Interpretation and reasoning

2.19 The disputed amount of Rs. 90,716/- related to service tax paid on event management services provided by M/s Bigtree Advertising and Media Communications Pvt. Ltd. for business meetings held at the appellant's plant and for events aimed at marketing and promoting the appellant's cement products.

2.20 The Tribunal found these services to be inextricably linked and having direct nexus with the manufacturing and sale/marketing of the appellant's products, thus falling within the ambit of input service.

Conclusions

2.21 The Tribunal held that event management and business meeting services used for marketing, promotion and business discussions constitute input services and that CENVAT credit of Rs. 90,716/- is admissible. The denial of credit on the ground of "function/entertainment charges" is unsustainable.

Issue 5: CENVAT credit on repainting work vis-à-vis works contract/construction exclusion (Rs. 1,34,123)

Legal framework (as discussed)

2.22 The Tribunal considered the exclusion in Rule 2(l) of the CENVAT Credit Rules, 2004 for services in the nature of works contract or construction of building or civil structure, or construction of structure for support of capital goods.

Interpretation and reasoning

2.23 The services under dispute were repainting work services. The Department treated them as works contract/construction services falling within the exclusion.

2.24 The Tribunal held that the exclusion under Rule 2(l) is confined to specific types of works contract or construction activities, namely construction of building or civil structure and construction of support structures for capital goods.

2.25 The Tribunal found that the repainting work in question was a works service contract but did not amount to construction of a new building or civil structure, nor construction of support structures for capital goods, and hence does not fall within the excluded category.

Conclusions

2.26 The Tribunal concluded that repainting services are not covered by the works contract/construction exclusion and therefore qualify as input services. Disallowance of CENVAT credit of Rs. 1,34,123/- on this basis is untenable.

Issue 6: Validity of invoking extended period of limitation and imposition of penalty

Legal framework (as discussed)

2.27 The Tribunal considered the conditions for invoking the extended period under Section 11A of the Central Excise Act, 1944 read with Rule 14 of the CENVAT Credit Rules, 2004, namely the presence of suppression of facts, willful misstatement or intent to evade duty.

Interpretation and reasoning

2.28 It was noted that a departmental audit had been conducted at the corporate office for an earlier period (July 2012 to September 2014), resulting in an Order-in-Original dated 31.03.2016 with penalty, but no objection was then raised on the type of ineligible CENVAT credits now alleged.

2.29 The Tribunal observed that the current allegations are based entirely on documents maintained by the appellant and that the department was already in a position to examine these issues during the earlier audit.

2.30 In these circumstances, the Tribunal held that there was no basis to allege suppression or mala fide intent, and hence no justification for invoking the extended period of limitation.

Conclusions

2.31 The Tribunal held that invocation of the extended period of limitation and consequent penalties are unsustainable. The entire demand raised by invoking the extended period, along with penalties, is liable to be set aside.

Overall disposition

2.32 On cumulatively accepting the appellant's entitlement to CENVAT credit on all disputed heads and holding that extended limitation and penalties were wrongly invoked, the Tribunal set aside the impugned order in toto and allowed the appeal with consequential relief in accordance with law.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether CENVAT credit could be availed on imported melting scrap on the basis of endorsed Bills of Entry and subsequent dealer invoices, when there was no physical movement of goods and the scrap was not an input for the manufacturer at the relevant time.

1.2 Whether the endorsement of Bills of Entry and reliance on dealer registrations and records were sufficient to validate the documents for CENVAT credit under Rule 9 of the CENVAT Credit Rules, 2004.

1.3 Whether the precedent permitting transfer of credit on the basis of endorsed Bills of Entry (Union of India v. Marmagoa Steel Ltd.) was applicable to the facts of the present case.

1.4 Whether the conduct of the appellants amounted to misuse of the CENVAT scheme, justifying invocation of the extended period and imposition of penalties under Rule 15(2) and Rule 15A of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Availment of CENVAT credit on imported melting scrap on the basis of endorsed Bills of Entry and dealer invoices; validity of documents under Rule 9 CCR, 2004

Legal framework (as discussed)

2.1 The Tribunal examined Rule 9 of the CENVAT Credit Rules, 2004 regarding authorized duty-paying documents and the manner in which manufacturers and registered dealers may avail and pass on credit. It was noted that a manufacturer may take credit on inputs received under a Bill of Entry, and on invoices issued by an importer/first stage dealer/second stage dealer, provided such dealers maintain proper records indicating that the inputs are from duty-paid stock of the producer/importer.

2.2 It was emphasized that Rule 9 does not prescribe an endorsed Bill of Entry as a permissible document for a registered dealer to receive inputs or to pass on CENVAT credit, and that physical receipt of goods is a precondition for availing credit.

Interpretation and reasoning

2.3 The Tribunal noted that the imported melting scrap was received and remained at the premises of the manufacturer throughout, and that the purported transfers between the two registered dealers and back to the manufacturer were only on paper, without any physical movement of goods or actual purchase/sale.

2.4 It was found that the imported scrap was melting scrap, which is a raw material for ingots/billets, whereas the manufacturer was admittedly engaged in manufacture of TMT bars, whose immediate inputs were ingots and billets. The manufacturer did not have an induction furnace in 2006 and therefore could not use melting scrap as input at the relevant time. On this basis, the Tribunal held that the scrap was not an "input" for the manufacturer when imported.

2.5 The Tribunal agreed with the original adjudicating authority that CENVAT credit cannot be transferred to a dealer on the basis of an endorsed Bill of Entry issued to a manufacturer where the goods are not the manufacturer's inputs, and that Rule 9 does not authorize endorsement as a valid mode for a registered dealer to receive or pass on credit.

2.6 It was further recorded that the first stage dealer had not "purchased" the imported scrap under cover of an invoice from the manufacturer/importer, nor had the dealers physically received the goods. The alleged receipts and issues by the dealers were only paper transactions, known to all three units, which shared common personnel and management, as evidenced by the statements of the authorized signatories who signed undated endorsements on the Bills of Entry.

2.7 The Tribunal stressed that mere existence of endorsed documents and internal records, without corroborated physical movement or possession of the goods, is insufficient to satisfy the basic conditions for availing CENVAT credit. The absence of any sale or purchase, and the creation of a paper trail solely to enable credit at a later date, were highlighted.

Conclusions

2.8 The Tribunal held that the imported melting scrap was not an eligible input for the manufacturer at the relevant time and that the use of endorsed Bills of Entry and dealer invoices, without physical receipt or proper procurement of goods, violated Rule 9 and Rule 4 of the CENVAT Credit Rules, 2004. Accordingly, the manufacturer was not entitled to CENVAT credit, and the demand for recovery of wrongly availed credit under Rule 14 read with Section 11A(1) was upheld.

Issue 3: Applicability of the decision in Union of India v. Marmagoa Steel Ltd. on endorsed Bills of Entry

Legal framework (as discussed)

2.9 The Tribunal referred to the decision of the Supreme Court in Union of India v. Marmagoa Steel Ltd., wherein it was held that CENVAT credit is admissible on imported consignments when the Bill of Entry is directly transferred by the importer to another unit of the assessee, without the goods being received by the importer's own manufacturing unit, provided duty has been paid and transfer of goods under the endorsed Bill of Entry is established.

Interpretation and reasoning

2.10 The Tribunal distinguished that precedent on facts. It observed that in Marmagoa Steel, transfer under endorsed Bills of Entry was accompanied by proof of receipt of goods by the recipient unit, and the duty payment and transfer were not in dispute.

2.11 In the present matter, the Tribunal found that the dealers (Appellants 2 and 3) had not procured the goods from the manufacturer/importer or from any other dealer under valid invoices, and there was no acceptable or corroborative evidence of actual receipt or procurement of the goods by them. It also noted that the importer-manufacturer itself could not have taken credit earlier because the imported scrap was not its input at the relevant time.

Conclusions

2.12 The Tribunal held that the ratio of Marmagoa Steel was not applicable in the absence of proof of physical movement/receipt of goods and in view of the ineligibility of the scrap as input at the relevant time. The reliance on that decision by the appellants was rejected.

Issue 4: Misuse of CENVAT scheme, invocation of extended period, and imposition of penalties under Rule 15(2), Rule 15A CCR and Rule 25 CER

Legal framework (as discussed)

2.13 The Tribunal considered Rule 14 and Rule 15(2) of the CENVAT Credit Rules, 2004 read with the proviso to Section 11A(1) and Section 11AC of the Central Excise Act, 1944, as well as penalties on registered dealers under Rule 15A of the CENVAT Credit Rules, 2004 and Rule 25 of the Central Excise Rules, 2002. It was noted that Rule 15A came into force with effect from 01.03.2008 and that its provisions, along with Rule 11 and Rule 25 of the Central Excise Rules, 2002, apply to registered dealers.

Interpretation and reasoning

2.14 The Tribunal endorsed the original authority's findings that the sequence of transfers-from importer-manufacturer to its dealer registration, then to the related dealer, and back to the manufacturing unit-was devised with a mala fide intention to misuse the CENVAT scheme. The aim was to convert otherwise ineligible credit on scrap (not an input in 2006) into apparently eligible input credit when the induction furnace was installed in 2008.

2.15 The Tribunal relied on the statements of common employees/authorized signatories who operated across all three units, signed undated endorsements, and were fully aware that the transactions were only on paper and that no physical movement or legal purchase/sale occurred. This common knowledge and coordinated conduct were treated as evidence of deliberate contravention.

2.16 Regarding the dealers, the Tribunal noted that the first dealer had not purchased the imported scrap under proper invoices and had passed on credit despite knowing the invalid nature of the transactions; similarly, the second dealer issued CENVATable invoices without ever receiving the goods, solely to enable the manufacturer to take credit. These acts post-01.03.2008 were held to fall squarely within Rule 15A and also to attract Rule 25 of the Central Excise Rules, 2002, as applied to registered dealers.

Conclusions

2.17 The Tribunal concluded that the appellants had intentionally contravened the CENVAT Credit Rules, 2004 and Central Excise Rules, 2002, by creating paper transactions and passing on credit without physical movement or valid procurement of goods. The extended period for recovery was implicitly justified on the basis of mala fides and suppression inherent in the scheme.

2.18 The denial and recovery of CENVAT credit, along with penalties on the manufacturer under Rule 15(2) read with Section 11AC, and on the dealers under Rule 15A of the CENVAT Credit Rules, 2004 and Rule 25 of the Central Excise Rules, 2002, were upheld. The appeals were dismissed in toto and the impugned appellate orders sustained.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether, in the case of inter-unit transfers valued under Rule 8 of the Central Excise Valuation Rules, 2000 on the basis of CAS-4 costing, the duty short paid in some months and excess paid in other months of the same financial year can be adjusted on a net basis, so that only the differential duty for the year is payable, notwithstanding that the clearances were not under provisional assessment.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Adjustment of excess and short payment of duty under CAS-4 based valuation for inter-unit transfers

Legal framework (as discussed by the Tribunal)

(a) Rule 8 of the Central Excise Valuation Rules, 2000, requiring valuation on cost of production plus 10% where goods are captively consumed or transferred to a sister unit and there is no sale.

(b) CAS-4 (Cost Accounting Standard-4) methodology and ICAI/ICWAI guidelines on periodicity and annual cost determination, including the 2012 revised guidelines advising annual certification based on finalized books and payment of differential duty if actual costs differ from provisional costs.

(c) Sections 11A and 11B of the Central Excise Act, 1944, as examined in the context of whether refund provisions or unjust enrichment principles apply when computing final liability on an annual CAS-4 basis.

Interpretation and reasoning

(a) The Tribunal noted that the clearances were to a sister unit for captive consumption with no independent sale, and valuation was done under Rule 8 on the basis of CAS-4, initially using previous year's audited cost data, followed by reconciliation when current year figures became available.

(b) Relying extensively on the judgment of the High Court of Madhya Pradesh in the matter concerning Godrej Consumer Products, and the Tribunal's decisions in Essar Steel India Ltd. and Jindal Steel & Power Ltd., the Tribunal accepted that when CAS-4 based valuation is finalised on an annual basis, the "overall duty liability/short payment" must be computed after considering all duty already paid on such goods during that financial year.

(c) The Tribunal endorsed the reasoning that where annual CAS-4 costing is applied, it is legally untenable for the department to:

   (i) Use full-year data to derive a uniform CAS-4 cost/assessable value, but

   (ii) Confine the demand only to months where the earlier adopted value was below such cost, while ignoring months where duty was paid on a higher value than the CAS-4 figure.

(d) The Tribunal emphasized that, even in the absence of formal provisional assessment, once the valuation is based on annual CAS-4, the computation of demand must follow the same basis; hence, excess duty paid in some months and short duty in others must be netted out, and only the differential, if any, can be demanded.

(e) It was specifically held, in line with Essar Steel India Ltd., that Section 11B and the doctrine of unjust enrichment have "no application" in such a situation, because the adjustment of excess and short payment is part of the final determination of liability on an annualized CAS-4 basis, not a claim for refund of duty.

(f) The Tribunal further relied on Suzlon Energy Ltd., Devi Thread Processors Pvt. Ltd. and Bajaj Tempo Ltd. to hold that in inter-unit transfers without sale, and where credit is availed by the recipient unit, adjustment of excess duty with short-paid duty is permissible and insistence on separate payment and refund would be a meaningless and unnecessary exercise.

(g) The Tribunal distinguished the decisions cited by the Revenue-Mahindra & Mahindra Ltd., Krishna Electric Industries Ltd. and Sterlite Industries Ltd.-on the ground that:

   (i) In Mahindra & Mahindra, short payment arose due to a wrong CAS-4 certificate detected by Revenue on audit and related to different factual circumstances.

   (ii) In Krishna Electric Industries, the dispute concerned depot sales and Rule 7 valuation, with price variations over periods, not inter-unit transfers under Rule 8.

   (iii) In Sterlite Industries, the issue was non-inclusion of certain cost elements in CAS-4, unlike the present case where the method and correctness of annual CAS-4 costing were not in dispute.

(h) Referring to ICWAI 2012 revised guidelines, the Tribunal agreed that where provisional costing is used during the year and annual CAS-4 is computed on finalized accounts, differential duty is to be worked out for the year and paid on a net basis, which supports the practice followed by the appellant.

Conclusions

(a) For inter-unit transfers valued under Rule 8 on CAS-4 basis, when the final assessable value is determined on annual CAS-4 costing, the department must compute the liability for the entire financial year by adjusting excess duty paid in certain months against short duty in others; only the net differential duty, if any, is recoverable.

(b) Automatic disallowance of such adjustment, and insistence that the assessee should pay gross short duty for some months and separately claim refund for excess paid in others, is contrary to the correct application of Rule 8, CAS-4 norms, and the binding judicial precedents relied upon.

(c) The denial of adjustment by the lower authorities was held to be legally unsustainable; accordingly, the impugned order was set aside and the appeal allowed, with the effect that only the already self-calculated net differential duty (if any) remains payable for the relevant financial year.

Issues: Whether the goods manufactured by the assessee were classifiable as Brass Billets or Brass Ingots, and whether the assessee was entitled to small scale exemption under Notification No. 8/2003-CE dated 01.03.2003.

Analysis: The demand rested substantially on a partner's earlier statement and an expert opinion obtained in 2001, while the disputed period was April 2005 to June 2005. The Original Authority had accepted the assessee's stand that the products were Brass Billets with weight below 5 kgs and therefore eligible for exemption. The appellate authority reversed that finding without a sufficient basis. On identical facts in a similar matter, the Tribunal had rejected reliance on the same type of expert opinion because it was incomplete and the characteristics of the goods had not been properly examined. The earlier order in the assessee's own case for a different period had also proceeded on the same lines.

Conclusion: The goods were held to be Brass Billets, not Brass Ingots, and the assessee was held entitled to the small scale exemption. The impugned order was unsustainable and the appeal succeeded.

Ratio Decidendi: Where classification is disputed, an incomplete or stale expert opinion unsupported by proper examination of the goods cannot displace factual findings that the product answers the exempted description.

Issues: (i) Whether the impugned order rightly confirmed recovery of CENVAT credit and penalties from the zonal offices and the seventeen manufacturing units in respect of goods transport agency services and related distributed input credit; and (ii) whether the matter requires fresh adjudication in light of gaps in findings regarding taking/utilisation of credit, duplication of demand and suppression of facts.

Analysis: Rule 7 of CENVAT Credit Rules, 2004 governs distribution by an input service distributor and does not itself confer on zonal offices the status of taking or utilising credit; Rule 14 limits recovery to cases where credit has been taken and/or utilised. The amendment to the definition of input service in rule 2(l) and issues concerning "place of removal" under section 4(3)(c) of the Central Excise Act, 1944 are relevant to eligibility of credit for outward transportation. The record shows that the impugned order did not address whether the zonal offices or the seventeen units actually took or utilised the disputed credit, whether there was duplication in computation of demand, or whether the factories had knowledge of the source of assigned credit; these lacunae impede a conclusive adjudication on recovery and intent to evade duty.

Conclusion: The impugned order is set aside and the matter is remanded for fresh decision on any recovery to be made from the seventeen factories after considering whether credit was in fact taken or utilised, addressing alleged duplication of demand and examining any suppression of facts; appeal allowed by way of remand (in favour of the assessee).

Issues: (i) Whether the order of Commissioner of Central Excise confirming recovery and imposing penalty should be set aside as an impermissible overlapping and redundant proceeding; (ii) Whether the impugned order of the first appellate authority rejecting refund claims under Rule 5 of the CENVAT Credit Rules, 2004 should be set aside and the refund applications restored to the original authority for fresh consideration in accordance with law and procedure.

Issue (i): Whether the order of Commissioner of Central Excise confirming recovery and imposing penalty should be set aside as an impermissible overlapping and redundant proceeding.

Analysis: The order under challenge mirrored findings of the first appellate authority and did not contain original findings. The penalty imposed under Rule 15 was without authority insofar as it attended to recovery under Rule 14. The existence of two separately enforceable recoveries arising from identical circumstances created risk of duplicative enforcement and undermined hierarchical appellate comity. Applying the principle that a subordinate adjudication should not re-duplicate an appellate determination where there is no independent application of mind, the impugned Commissioner order was examined for prejudice to the revenue and for presence of reasoned adjudication.

Conclusion: In favour of the Assessee. The order of the Commissioner of Central Excise confirming recovery and imposing penalty is set aside.

Issue (ii): Whether the impugned order of the first appellate authority rejecting refund claims under Rule 5 of the CENVAT Credit Rules, 2004 should be set aside and the refund applications restored to the original authority for fresh consideration in accordance with law and procedure.

Analysis: The earlier Tribunal remand restored claims to the original authority for fresh adjudication under Rule 5. The first appellate order rejecting the refund failed to record reasons and did not provide the appellant with a proper opportunity to meet essential factual grounds—specifically, evidence as to non-utilisability of accumulated credit and the basis for rejection. The procedural requirements for issuance of a show cause or reasoned rejection under Rule 5 and the related notification were not satisfied. Consequently, the appellate order did not conform to the remand direction and required setting aside to enable a fresh, reasoned decision by the original authority.

Conclusion: In favour of the Assessee. The impugned first appellate order is set aside and the refund applications are restored to the original authority for fresh processing in accordance with law and procedure.

Final Conclusion: The redundant and non-reasoned adjudication by the Commissioner of Central Excise is extinguished and the appellate order rejecting the refund is set aside to permit fresh, procedurally compliant determination by the original authority; this disposition preserves appellate hierarchy and ensures the claims are re-adjudicated on recorded reasons and with opportunity to the assessee to meet factual deficits.

Ratio Decidendi: Where an appellate determination or remand requires fresh adjudication under the prescribed rule, subordinate or subsequent adjudication that merely duplicates appellate findings without independent, reasoned application of mind and that creates duplicative enforceable recoveries must be set aside; refunds under Rule 5 require reasoned communication of grounds and opportunity to the claimant before rejection.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether Central Excise duty could be demanded from one registered manufacturer for alleged manufacture and clandestine clearance of goods from the registered premises of another independent manufacturer, on the basis of seized documents and statements, in particular whether "Kalimati" and the other manufacturer's unit were the same concern.

(2) Whether computer printouts taken from a seized pen drive, not satisfying the requirements of Section 36B of the Central Excise Act, 1944, could be treated as admissible and reliable evidence for confirming demands of duty based on alleged clandestine clearances.

(3) Whether allegations of clandestine manufacture and removal could be sustained solely on preponderance of probability, circumstantial evidence and uncorroborated third-party statements, without independent corroboration and without allowing cross-examination of the persons whose statements are relied upon.

(4) Whether penalties could be imposed on the principal assessee, the other independent manufacturer, and its authorised representative under the Central Excise Act and Rule 26 of the Central Excise Rules, 2002, when the duty demand on alleged clandestine manufacture at that unit is unsustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Demand of Central Excise duty from one assessee on alleged manufacture at another independent unit; identity of "Kalimati" and the other unit

Legal framework (as discussed)

The Court noted that Central Excise duty is demandable from the "manufacturer" under Section 11A of the Central Excise Act, 1944, and that where several entities are separately registered as manufacturers, the burden to shift manufacturing liability from the registered premises of one assessee to another requires strong, cogent and corroborated evidence. The Court also noticed that the law on clandestine removal demands strict proof, with reference to factors such as excess production, procurement of raw materials, electricity consumption, transport and buyer evidence, as culled out from cited decisions (including Continental Cement Company and Nova Petrochemicals).

Interpretation and reasoning

(a) The Court recorded that the entire demand of Rs. 16,31,40,921/- was raised solely on the footing that the respondent-assessee (CHPL) was the real manufacturer of goods allegedly produced and cleared clandestinely not only from its own premises but also from the factories of KYS and another registered unit, RI.

(b) It was undisputed that CHPL, KYS and RI were independently registered with the Central Excise Department, had separate factories at different locations, separate VAT, Service Tax, PAN and other statutory registrations, and cleared goods under their own Central Excise invoices and returns.

(c) The Court held that, in this factual matrix, "irrefutable evidence" is required to treat CHPL as the manufacturer of goods physically produced in the independent factories of KYS and RI. Mere financial assistance or payments made by the director of CHPL to KYS or RI, without a rent agreement or any formal arrangement evidencing transfer of manufacturing operations, could not by itself convert CHPL into the manufacturer of those units' goods.

(d) As regards the alleged manufacture and clearance at the premises of RI:

* The Revenue's case rested mainly on interpreting the name "Kalimati/Kalimati Steel/KL" appearing in seized documents and pen-drive printouts as referring to RI, and thus imputing manufacture at RI to CHPL.

* The Adjudicating Authority had found, and the Court agreed, that there was no independent corroborative evidence to show that "Kalimati Steel" and RI were the same entity. The seized documents and printouts repeatedly used the term "Kalimati/Kalimati Steel/KL" and nowhere mentioned RI or "Ratangarva Industries".

* The authorised representative of RI, in his Section 14 statement and in defence reply, categorically denied that "Kalimati Steel" was his concern, denied any business relation between RI and CHPL/KSPL or their directors, and denied that RI's plant and machinery had been given on rent to CHPL. He maintained that RI was a separate proprietorship unit independently manufacturing goods.

* The Court noted that no document recovered during search linked RI's factory, production or clearances to the "Kalimati" entries or to CHPL's alleged clandestine removals; inward-outward reports and other seized documents referred only to "Kalimati/KL" and not to RI.

* Statements of Sunil Kumar Bajpai (Director of CHPL) and Bimlesh Kumar Ojha (employee of KSPL) asserting that RI and Kalimati were the same were treated as third-party statements lacking corroboration. These were contradicted by the direct statement of RI's authorised representative. On this basis, the Court held that such third-party assertions, without corroborative documentary or transactional evidence, could not be the sole foundation to equate RI with "Kalimati".

(e) The Court endorsed the Adjudicating Authority's detailed findings that:

* No daily inward-outward report or seized document contained any remark linking the entries to RI;

* The seized pen drive and printouts did not indicate that the dispatch/sale details were related to RI;

* Reliance solely on the third-party statements of CHPL's Director and a former employee of KSPL, in the face of categorical denial by RI's authorised representative and lack of documentary linkage, was impermissible.

Conclusions

(i) The Revenue failed to establish that "Kalimati/Kalimati Steel/KL" and RI were one and the same concern, or that CHPL was the manufacturer of goods allegedly produced and cleared from RI's factory.

(ii) In the absence of cogent, corroborated evidence that the goods attributed to "Kalimati" were in fact manufactured at RI by or on behalf of CHPL, Central Excise duty could not be demanded from CHPL in respect of the alleged clearances from RI.

(iii) The dropping of the demand of Rs. 2,49,70,691/- raised on CHPL for alleged goods manufactured at RI was upheld as legally correct and free from infirmity.

Issue (2): Admissibility and evidentiary value of computer printouts from a seized pen drive under Section 36B of the Central Excise Act

Legal framework (as discussed)

The Court examined Section 36B of the Central Excise Act, 1944, governing admissibility of computer printouts and electronic records as evidence, particularly the mandatory conditions under sub-section (2) for treating such printouts as evidence of the contents of the original electronic records.

Interpretation and reasoning

(a) The primary basis of the alleged clandestine production and clearance was a pen drive seized from CHPL's office. Data from the pen drive was connected to a computer and printouts taken in the presence of staff and officers.

(b) The Court noted that for such printouts to be admissible and reliable, the mandatory requirements of Section 36B(2) must be strictly complied with. It was on record that these requirements were not fulfilled in the present case.

(c) As the statutory preconditions were not met, the Court held that the computer printouts taken from the pen drive could not be treated as admissible evidence. Consequently, they could not be relied upon to sustain the allegations of clandestine manufacture and removal.

Conclusions

(i) Non-compliance with the mandatory requirements of Section 36B(2) rendered the computer printouts from the seized pen drive inadmissible as evidence.

(ii) The duty demand could not be sustained on the basis of such inadmissible electronic documents, and the Adjudicating Authority's refusal to rely on them was affirmed.

Issue (3): Proof of clandestine manufacture and removal; use of circumstantial evidence, third-party statements, and denial of cross-examination

Legal framework (as discussed)

The Court applied the established legal principles on proof of clandestine manufacture and clearance, as summarized in the cited judgments of Continental Cement Company (High Court) and Nova Petrochemicals (Tribunal). These authorities emphasize that clandestine removal is a serious charge and cannot be sustained on assumptions or probabilities alone; the Revenue must furnish clinching, corroborative evidence on several counts (including excess production, raw material purchases, electricity consumption, transportation, buyer statements, sale proceeds, and linkage of documents to actual manufacturing activity).

Interpretation and reasoning

(a) The Revenue's appeals asserted that the Adjudicating Authority should have proceeded on "preponderance of probability" and circumstantial evidence, relying heavily on statements of CHPL's Director, staff and certain other persons to connect CHPL with alleged manufacture at RI.

(b) The Court found that, apart from uncorroborated statements and entries in inadmissible pen-drive printouts, there was no evidence of:

* Excess procurement of raw materials;

* Excess electricity consumption;

* Transporters' records showing clandestine movements;

* Identified buyers' confirmations with supporting documents;

* Recovery of unaccounted cash or other financial trail evidencing clandestine sales;

* Discovery of unaccounted finished goods or any independent contemporaneous records linking CHPL's alleged clandestine clearances to RI's factory.

(c) The Court observed that the case rested mainly on third-party statements (such as of CHPL's Director and staff, and certain weighbridge personnel) which were not supported by independent documentary evidence and were contradicted by the direct statement of RI's authorised representative.

(d) The respondent-assessee had specifically requested cross-examination of the persons whose statements were relied upon. The Adjudicating Authority did not allow this request. The Court held that, in such circumstances, these statements could not be treated as admissible and reliable evidence against the assessee. Once these statements were excluded, the record lacked material to substantiate the allegations of CHPL's involvement in manufacture and clearance at RI.

(e) Relying on the legal standards laid down in Continental Cement and Nova Petrochemicals, the Court reiterated that clandestine removal cannot be established merely on inferences, assumptions or probabilities, and that the Revenue must bring on record concrete and corroborated evidence, which was absent in the present case.

Conclusions

(i) The Revenue's case, being founded essentially on inadmissible computer printouts and uncorroborated third-party statements-without cross-examination and without independent corroborative evidence-did not meet the legal standard required to prove clandestine manufacture and removal.

(ii) Demands of Central Excise duty cannot be upheld purely on "preponderance of probability" or circumstantial suspicion in the absence of tangible and corroborative evidence on production, raw materials, electricity, transportation, buyers and financial flow-back.

(iii) On this evidentiary deficiency, the allegation that CHPL had manufactured and clandestinely cleared goods from RI's factory failed and the dropped demand was correctly set aside.

Issue (4): Imposition of penalties on the principal assessee, the other unit, and its authorised representative

Legal framework (as discussed)

The Court considered the provisions relating to penalty under the Central Excise Act and under Rule 26 of the Central Excise Rules, 2002 (for persons who deal with excisable goods liable to confiscation), and proceeded on the principle that where the underlying duty demand itself is unsustainable, penal consequences cannot survive.

Interpretation and reasoning

(a) The Adjudicating Authority had dropped the demand of Rs. 2,49,70,691/- on CHPL relating to alleged goods manufactured at RI and, consequentially, refrained from imposing any penalty on CHPL in respect of that part of the case, and also from imposing any penalty on RI or its authorised representative, Shri Sudhir Kumar Singh.

(b) The Revenue appealed contending that CHPL and Shri Sudhir Kumar Singh were liable to penalty, particularly under Rule 26 of the Central Excise Rules, 2002, based on alleged involvement in clandestine clearances.

(c) The Court, having held that:

* The duty demand on CHPL in respect of alleged manufacture at RI was not sustainable;

* The allegation that RI and "Kalimati" were the same concern remained unsubstantiated; and

* There was no admissible and corroborated evidence of clandestine manufacture or clearance from RI by or on behalf of CHPL;

concluded that there was no factual or legal foundation for imposition of any penalty on CHPL, RI or its authorised representative for the dropped portion of the demand.

Conclusions

(i) With the failure of the Revenue to establish clandestine manufacture and clearance from RI by CHPL, the demand of duty of Rs. 2,49,70,691/- was unsustainable; accordingly, no penalty could be imposed on CHPL in respect of that allegation.

(ii) There being no established involvement of RI in any proved clandestine activity with CHPL, no penalty was imposable on RI.

(iii) For the same reason, no penalty under Rule 26 of the Central Excise Rules, 2002, could be imposed on Shri Sudhir Kumar Singh, authorised representative of RI; the non-imposition of penalty on him was upheld.

(iv) The Adjudicating Authority's decision not to impose penalties on CHPL, RI and Shri Sudhir Kumar Singh in relation to the dropped demand was affirmed, and the Revenue's appeals seeking such penalties were rejected.

1. ISSUES PRESENTED AND CONSIDERED

(1) Whether recovery of duty under Section 11D of the Central Excise Act, 1944 was permissible when duty collected from the buyer had already been deposited with the Government.

(2) Whether allegations of clandestine manufacture and clearance of 2490.880 MT of finished goods, based primarily on investigation at the buyer's end and a third-party statement, were legally sustainable.

(3) Whether the statement of the buyer's director, recorded during investigation, could be relied upon without compliance with Section 9D of the Central Excise Act, 1944.

(4) Whether penalties on the appellant-company and on its director under Section 11AC of the Act read with Rule 26 of the Central Excise Rules, 2002 were sustainable in absence of a sustainable duty demand and corroborative evidence of involvement.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Recovery under Section 11D when duty already deposited

Legal framework (as discussed) - Section 11D enables recovery where an assessee collects any amount as duty of excise from buyers but does not deposit the same with the Central Government. Interest under Section 11DD was also invoked in the impugned order.

Interpretation and reasoning - The Tribunal recorded that there was no dispute that: (a) the appellant issued central excise invoices to the buyer for 2490.880 MT of M.S. Rounds and M.S. Flats; (b) the appellant collected duty from the buyer; and (c) the entire duty so collected was deposited in the Government account. The transactions were on an ex-factory basis and payments were received through account payee cheques. The Tribunal held that Section 11D applies only where amounts collected "as duty" from customers are retained by the assessee and not paid to the Government. Since, in the present case, duty had already been correctly paid into the Government account, there was no statutory basis to invoke Section 11D or to again demand the same amount under that provision. Consequently, appropriation of the already paid duty against the Section 11D demand was also held to be unwarranted.

Conclusions - (a) Section 11D was inapplicable as there was no retention of duty collected from the buyer; (b) the demand of Rs. 71,14,525/- under Section 11D and interest under Section 11DD were set aside; (c) appropriation of duty already paid against the Section 11D demand was held unsustainable and set aside; (d) the duty earlier paid in the normal course on the clearances, being correctly discharged, was not interfered with.

Issue (2): Alleged clandestine manufacture and clearance of finished goods

Legal framework (as discussed) - Duty on clandestine removals was demanded under Section 11A(4) with interest under Section 11AA and penalty under Section 11AC. The Tribunal applied settled principles that clandestine clearance is a serious charge requiring cogent, corroborative evidence, and that duty cannot be demanded on assumptions, presumptions, or mere preponderance of probabilities.

Interpretation and reasoning -

(a) The entire case of the Department against the appellant was based on an earlier investigation against the buyer, wherein it was alleged that the buyer availed irregular CENVAT credit on invoices without receipt of goods. The Tribunal noted that separate show cause proceedings against the buyer had culminated in disallowance of such CENVAT credit by an order-in-original, independent of the present proceedings.

(b) The Department's allegation in the present case was that the appellant issued invoices to the buyer without actually supplying the goods and instead clandestinely diverted 2490.880 MT of finished goods to other customers without payment of duty. The Tribunal examined the appellant's evidence and statements: (i) the appellant's authorised representative stated that the goods were sold on an ex-factory basis; (ii) transportation was arranged by the buyer; (iii) duty was paid on the clearances; and (iv) payments were received through account payee cheques. The Tribunal accepted that, on an ex-factory sale, responsibility for transportation and any discrepancy regarding vehicle numbers or infrastructure at the buyer's end cannot be fastened on the seller.

(c) The Tribunal observed that no independent evidence was produced by the Department to support the allegation that the appellant clandestinely manufactured and cleared the same quantity to unnamed other customers. There was no corroborative material such as evidence of excess raw material purchases, excess production, extra electricity consumption, transport documents indicating unaccounted removals, identification of actual clandestine buyers, realization of sale proceeds of alleged unaccounted clearances, or discovery of unaccounted finished goods outside the factory. Reference was made to judicial precedents which require tangible corroborative evidence in matters of clandestine removals and reject demands based merely on private records or uncorroborated statements.

(d) The Tribunal emphasized that charges of clandestine removal cannot be sustained solely on presumptions or on inferences drawn from the buyer's conduct or infrastructure, particularly when there is no evidence that the appellant diverted goods to other parties or received any unaccounted consideration.

Conclusions - (a) The allegation that the appellant clandestinely manufactured and cleared 2490.880 MT of finished goods to third parties was held unsubstantiated and unsupported by corroborative evidence; (b) the demand of Rs. 71,14,525/- under Section 11A(4) on account of alleged clandestine manufacture and clearance, along with consequential interest, was set aside.

Issue (3): Admissibility and evidentiary value of third-party statement under Section 9D

Legal framework (as discussed) - Section 9D of the Central Excise Act governs the relevancy and admissibility of statements made before gazetted Central Excise officers. It prescribes conditions under which such statements may be treated as relevant and the mandatory procedure for their use as evidence, including examination of the maker as a witness and opportunity for cross-examination, unless circumstances under Section 9D(1)(a) exist.

Interpretation and reasoning -

(a) The adjudicating authority had primarily relied upon the statement of the buyer's director, who had allegedly admitted that the buyer's transactions were only on paper and that invoices were received without corresponding physical receipt of goods. The Tribunal found that this statement, though recorded during investigation, had not been dealt with in accordance with Section 9D-there was no examination of the maker before the adjudicating authority, no recorded satisfaction for admitting the statement in evidence, and no opportunity for cross-examination.

(b) By referring to binding judicial precedents interpreting Section 9D, the Tribunal held that: (i) statements recorded during investigation cannot be treated as relevant evidence to prove the truth of their contents in adjudication proceedings unless Section 9D(1) is complied with; (ii) in absence of compliance, such statements lose their evidentiary value; and (iii) if the procedure under Section 9D is not followed, reliance on such statements amounts to reliance on irrelevant material, which vitiates the finding.

(c) The Tribunal applied these principles to the present case and held that the buyer's director's statement, being untested and admitted without compliance with Section 9D, had no evidentiary value and could not be used to sustain the demand or to prove that no goods were actually supplied by the appellant.

Conclusions - (a) The statement of the buyer's director, recorded during investigation, was held inadmissible and devoid of evidentiary value for want of compliance with Section 9D; (b) such untested statement could not be relied upon to support the allegations of non-supply of goods or clandestine diversion by the appellant.

Issue (4): Sustainability of penalties on the company and its director

Legal framework (as discussed) - Penalty equal to duty was imposed on the company under Section 11AC for alleged suppression and clandestine clearances. A separate penalty was imposed on the director under Rule 26(1) read with Rule 26(2)(ii) of the Central Excise Rules, 2002 for alleged involvement in the offence.

Interpretation and reasoning -

(a) The Tribunal held that once the substantive duty demands, both under Section 11D and under Section 11A(4) for clandestine clearances, were found unsustainable on merits, no question of penalty or interest could survive. With the main charge itself failing, penal provisions could not be independently invoked.

(b) As regards the director, the Tribunal found that the Department had not brought on record any corroborative evidence to establish his personal knowledge, participation, or conscious involvement in any act of issuing bogus invoices or diverting goods to undisclosed customers. In absence of specific evidence, mere designation as director could not justify penalty under Rule 26.

Conclusions - (a) Penalty on the company under Section 11AC, being consequential to an unsustainable demand, was set aside; (b) penalty on the director under Rule 26(1) read with Rule 26(2)(ii) was also set aside due to absence of corroborative evidence of his involvement; (c) with both demands having been quashed on merits, corresponding liabilities for interest and penalties did not survive.

1. ISSUES PRESENTED AND CONSIDERED

1.1. Whether failure to supply seized and relied-upon documents before passing the adjudication order, and deciding the matter ex parte, violated principles of natural justice and rendered the order unsustainable.

1.2. Whether central excise duty demand for alleged clandestine manufacture and clearance could be sustained when based solely on private "rough estimate" note books without corroborative evidence, and the consequent effect on eligibility to SSI exemption under Notification No. 8/2003-CE.

1.3. Whether duty demand and confiscation in respect of finished goods found in stock at the time of search were sustainable when the total value of clearances including such goods remained within the SSI exemption limit.

1.4. Whether imposition of interest and penalty on the manufacturer under Sections 11AB, 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 could survive when the substantive duty demands were set aside.

1.5. Whether penalties imposed on the Director and Supervisor under Rule 26 of the Central Excise Rules, 2002 were sustainable in the absence of evidence establishing their involvement in any offence.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Non-supply of relied-upon documents and violation of natural justice

Legal framework (as discussed):

2.1. The Tribunal considered the general principles of natural justice, particularly the requirement of furnishing relied-upon material to an affected party and affording adequate opportunity to rebut allegations and adduce evidence.

Interpretation and reasoning:

2.2. The appellants repeatedly requested, by multiple letters, supply of all seized and relied-upon documents referred to in the show cause notice.

2.3. From the record, the Tribunal found no evidence that such documents were ever supplied before the adjudicating authority proceeded to decide the matter ex parte.

2.4. The Tribunal held that, without access to the relied-upon documents, the appellants were effectively denied an opportunity to make "effective submissions" and to defend against the allegations, amounting to a breach of natural justice.

2.5. Relying on the principle that orders passed in violation of natural justice are void and not curable, the Tribunal held that an ex parte order passed without supplying the relied-upon documents is not sustainable in law.

Conclusions:

2.6. The impugned order, having been passed ex parte without supplying relied-upon documents, was held to be vitiated for violation of principles of natural justice. The Tribunal, however, proceeded to examine and decide the matter on merits as well.

Issue 2 - Sustainability of demand for clandestine clearances and effect on SSI exemption

Legal framework (as discussed):

2.7. The demand was raised under Section 11A of the Central Excise Act, 1944, on the ground that by suppressing production/clearances the assessee allegedly crossed the exemption threshold under Notification No. 8/2003-CE (SSI exemption).

2.8. The Tribunal discussed the settled legal position that clandestine clearance is a serious allegation requiring cogent, corroborative evidence and that duty cannot be demanded on mere assumptions, presumptions or preponderance of probabilities.

Interpretation and reasoning:

2.9. The department computed total clearances for the relevant financial year by adding: (a) recorded clearances of about Rs. 1,18,14,462/-, and (b) an additional value of Rs. 85,95,500/- derived solely from eight "Books containing Rough Estimates" seized from the premises.

2.10. The Tribunal noted that there was no investigation to establish that the quantities and values reflected in these rough estimate books corresponded to actual manufacture and clearance of excisable goods.

2.11. No verification was done at the alleged buyers'/receivers' end; no statements or confirmations from such buyers were produced.

2.12. No transporters were identified; no evidence of transportation of alleged unaccounted goods was brought on record.

2.13. There was no evidence of purchase of excess raw material, no proof of excess consumption of electricity, and no evidence of receipt of sale proceeds (cash or otherwise) relating to alleged clandestine removals.

2.14. The adjudicating authority had treated the private rough estimate books as if they were records of actual clearances without any corroborative material, contrary to the settled requirement that private/internal documents cannot, by themselves, form the sole basis of a clandestine removal demand.

2.15. Based on judicial precedents cited and extracted, the Tribunal reiterated that, in cases of alleged clandestine manufacture and removal, the Revenue must adduce tangible evidence such as excess raw material, proof of actual removal, statements of buyers, transport details, flow-back of funds, or other concrete corroboration. Such evidence was found to be wholly absent.

Conclusions:

2.16. The inclusion of Rs. 85,95,500/- based solely on rough estimate books to compute the total value of clearances was held to be legally unsustainable.

2.17. Consequently, the total clearance value of Rs. 2,04,09,926/- adopted by the department was held to be unsupported by evidence.

2.18. On exclusion of this unsupported component, the actual value of clearances remained Rs. 1,18,14,462/-, which is within the SSI exemption limit under Notification No. 8/2003-CE for the relevant year.

2.19. The demand of central excise duty of Rs. 16,65,594/- (with cess) relatable to alleged clandestine clearances, along with interest, was held unsustainable and was set aside.

Issue 3 - Duty demand and confiscation of goods found in stock at the time of search

Legal framework (as discussed):

2.20. Demand on the seized finished goods was confirmed under Section 11A, and confiscation ordered under Rule 25 of the Central Excise Rules, 2002, with an option of redemption fine.

2.21. The Tribunal examined this in the context of the SSI exemption limit under Notification No. 8/2003-CE.

Interpretation and reasoning:

2.22. Central excise duty of Rs. 2,56,000/- and education cess of Rs. 5,120/- had been demanded on the goods lying in stock in the factory on the date of search.

2.23. The Tribunal observed that, after excluding the unsupported alleged clandestine clearances, the total value of clearances for the financial year, even when the value of the seized in-stock goods is included, remained within the SSI exemption threshold.

2.24. Since the assessee's aggregate clearances (including the seized stock) did not exceed the SSI limit, no duty was payable on such goods under the relevant exemption Notification.

2.25. Once no duty liability on such stock existed by reason of SSI exemption, the basis for treating the finished goods as liable to confiscation under Rule 25 also failed.

Conclusions:

2.26. The duty demand of Rs. 2,56,000/- and cess of Rs. 5,120/- on the goods found in stock at the time of search was held unsustainable and set aside.

2.27. The order of confiscation of the finished goods and the associated redemption fine were held to be unjustified and were set aside.

Issue 4 - Interest and penalty on the manufacturer

Legal framework (as discussed):

2.28. Interest had been ordered under Section 11AB, and penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002, premised entirely on the confirmed duty demands.

Interpretation and reasoning:

2.29. The Tribunal found that all substantive duty demands (on alleged clandestine clearances and on stock in factory) were unsustainable and were being set aside.

2.30. In the absence of any surviving demand of duty, there remained no foundation in law for levy of interest or imposition of penalty upon the manufacturer under Section 11AC/Rule 25.

Conclusions:

2.31. With the duty demands set aside, the consequential interest liability and penalty imposed on the manufacturer were held to be unsustainable and were accordingly set aside.

Issue 5 - Penalties on Director and Supervisor under Rule 26

Legal framework (as discussed):

2.32. Penalties had been imposed on the Director and the Supervisor under Rule 26 of the Central Excise Rules, 2002, which requires evidence of their knowing involvement in dealing with excisable goods in a manner rendering them liable to confiscation.

Interpretation and reasoning:

2.33. The Tribunal examined the record and found no evidence establishing that the Director or Supervisor had knowingly participated in or facilitated any clandestine manufacture, clearance, or other contravention.

2.34. With the primary finding that clandestine removal and duty evasion were not established against the manufacturer, the prerequisite factual foundation for invoking Rule 26 against individuals was absent.

2.35. The Tribunal held that the necessary ingredients for imposition of penalty under Rule 26 had not been proved in the instant case.

Conclusions:

2.36. The penalties imposed on the Director and Supervisor under Rule 26 were held to be unsustainable and were set aside.

2.37. As a result, the entire impugned order was set aside and all appeals were allowed with consequential relief as per law.

Issues: (i) Whether statements recorded during investigation and computer printouts from a pen drive could be relied upon without compliance with the mandatory procedural requirements governing admissibility of statements and electronic records; (ii) Whether the allegation of clandestine removal was proved on the basis of the materials on record in the absence of corroborative evidence.

Issue (i): Whether statements recorded during investigation and computer printouts from a pen drive could be relied upon without compliance with the mandatory procedural requirements governing admissibility of statements and electronic records.

Analysis: The evidentiary value of statements recorded during investigation depends on compliance with the statutory procedure for admitting such statements in adjudication. In the same manner, computer printouts and other electronic material can be acted upon only when the requirements for proving electronic records are satisfied. Where the department relies on such material without following the prescribed procedure, the material cannot be treated as substantive evidence.

Conclusion: The statements and electronic printouts were not admissible as reliable evidence against the assessee.

Issue (ii): Whether the allegation of clandestine removal was proved on the basis of the materials on record in the absence of corroborative evidence.

Analysis: A charge of clandestine removal must be established by tangible and corroborative evidence. Private papers, wage sheets, or estimated production figures, without supporting proof of excess raw material purchase, electricity consumption, transport movement, buyers, cash flow, or other connecting evidence, are insufficient. In the absence of such corroboration, the demand and penalties cannot be sustained.

Conclusion: The allegation of clandestine removal was not proved and the demand and penalties could not survive.

Final Conclusion: The impugned demand, interest, and penalties were set aside, and the appeals succeeded with consequential relief.

Ratio Decidendi: A demand for clandestine removal cannot rest on untested statements or electronic material unless the statutory rules of admissibility are complied with, and it must be supported by independent corroborative evidence establishing the removal.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the processes applied to grey cotton fabrics at two separate units - bleaching and mercerizing at one unit, and squeezing and stentering at another - collectively constitute "manufacture" with the aid of power, thereby disentitling the processed fabrics from exemption under Entry 106 of Notification No. 5/98-CE.

1.2 Whether, for determining "manufacture" and eligibility to exemption, the processes undertaken at the two distinct partnership units could be clubbed as one continuous and integrated manufacturing process, notwithstanding their separate legal identities and the dropping of demand against one of them.

1.3 Whether the CESTAT was justified in isolating the activities of each unit, treating them as independent and non-clubbable, and thereby extending the benefit of the exemption notification to the unit from which the final goods were cleared.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Manufacture with aid of power and applicability of Entry 106 of Notification No. 5/98-CE

Legal framework

2.1 The Court referred to Section 2(f) of the Central Excise Act, 1944 (pre-2017 amendment), defining "manufacture" to include any process: (i) incidental or ancillary to completion of a manufactured product; (ii) specified in the Tariff as amounting to manufacture; and (iii) in relation to certain goods, involving packing, repacking, labelling or other treatment to render goods marketable.

2.2 Entry 106 of Notification No. 5/98-CE was reproduced, granting exemption to "cotton fabrics processed without the aid of power or steam," with an Explanation deeming colour fixation by passing steam over fabrics to be without the aid of steam.

2.3 The Court relied on prior decisions interpreting "manufacture" and "process" in exemption notifications: (i) Standard Fireworks Industries, holding exemption inapplicable where any process in relation to manufacture is carried on with aid of power, even if outside the factory; and (ii) Collector of Central Excise v. Rajasthan State Chemical Works, explaining that manufacture involves a series of processes, each step integrally connected with the final product, and that any essential or subordinate activity in relation to manufacture is also a "process."

Interpretation and reasoning

2.4 Applying the above principles, the Court reiterated that manufacture is the cumulative effect of various integrally connected processes to which raw material is subjected, and each essential step in that chain is a "process in relation to the manufacture."

2.5 Factually, the show cause notice and the Order-in-Original recorded that:

(a) Unit No. 1 received grey fabrics and carried out bleaching and mercerizing;

(b) the bleached/mercerized fabrics in wet condition were moved to Unit No. 2 for squeezing and stentering, the latter being carried out with the aid of power; and

(c) the dry fabrics were then returned to Unit No. 1 for bailing/folding and packing, after which they were cleared as cotton fabrics.

2.6 The Court considered all these activities-bleaching, mercerizing, squeezing, stentering, and bailing/packing-as forming one continuous chain of processes in the conversion of grey fabrics into finished cotton fabrics. Each operation was integrally connected; without any one of them, the manufacture or processing of the final product would be impossible or commercially inexpedient.

2.7 In particular, stentering with the aid of power at Unit No. 2 was found to be an integral part of that chain of manufacture. Following the ratio of Standard Fireworks and Rajasthan State Chemical Works, the use of power at any essential stage in relation to manufacture rendered the overall manufacture as being "with the aid of power" for the purpose of applying the exemption notification.

2.8 The Court held that the CESTAT erred in concluding that the processed fabrics at Unit No. 1 were manufactures "without the aid of power" merely because, viewed in isolation, certain processes at Unit No. 1 might not have used power. The correct enquiry was whether, in relation to the manufacture of the final cotton fabrics, any process in the chain used power.

Conclusions

2.9 The conversion of grey fabrics into cotton fabrics involved an integrated series of processes, including stentering with the aid of power at Unit No. 2. Consequently, the manufacture of cotton fabrics was with the aid of power.

2.10 Since a process in relation to the manufacture of the final goods was admittedly carried out with the aid of power, the goods did not satisfy the condition "processed without the aid of power or steam" in Entry 106 of Notification No. 5/98-CE.

2.11 Unit No. 1 was, therefore, not entitled to the benefit of exemption under the said Entry.

Issue 2: Clubbing of processes across two separate units for determining manufacture and exemption

Interpretation and reasoning

2.12 The CESTAT, in allowing the appeals, had laid emphasis on:

(a) separate partnership concerns for each unit;

(b) absence of common partners;

(c) different machinery in each unit; and

(d) separate job work bills and payments,

and on that basis refused to club the activities of both units for determining excisability and eligibility to exemption.

2.13 The Court held that this approach misdirected itself by focusing on the distinct legal identities of the units instead of the nature of the processes and their role in the chain of manufacture. The critical test was whether the processes undertaken at both units formed part of a continuous and integrated chain culminating in the final product, not whether the entities were separately constituted.

2.14 On the facts found in the Order-in-Original, the two units operated in a common premises, and the grey fabrics moved physically from one unit to the other and back, undergoing sequential processes (bleaching/mercerizing ? squeezing/stentering ? bailing/packing) before clearance as cotton fabrics. This sequence was a single continuous manufacturing activity in relation to the same goods.

2.15 The Court therefore treated the processes at both units as one composite manufacturing process for the purposes of Section 2(f) and the exemption notification. The exclusivity or independence of the partnership concerns, and distinct billing patterns, were held immaterial to this characterization of the manufacturing chain.

Conclusions

2.16 For determining whether the goods were "processed without the aid of power," the processes at both units had to be clubbed and considered as one continuous and integrated manufacturing process.

2.17 The CESTAT's refusal to club these activities, on the ground of distinct legal identities and separate job work arrangements, was legally erroneous.

Issue 3: Effect of dropping demand against one unit and correctness of CESTAT's interference with the Order-in-Original

Interpretation and reasoning

2.18 The CESTAT held that, since the demand was not confirmed against Unit No. 2, the use of power at Unit No. 2 during stentering could not affect the eligibility of Unit No. 1 to the exemption; it thus treated the power-based process at Unit No. 2 as irrelevant for Unit No. 1's liability.

2.19 The Court rejected this reasoning, stating that the non-confirmation of demand against Unit No. 2 did not alter the character of the overall manufacturing process. For the purposes of Section 2(f) and the exemption notification, the focus had to be on the entirety of the processes that the goods actually underwent before clearance, irrespective of on whom the demand was ultimately fastened.

2.20 Once it was established that the fabrics cleared from Unit No. 1 had undergone stentering with the aid of power at Unit No. 2 as part of the same manufacturing chain, the fact that demand was dropped against Unit No. 2 could not be invoked to treat the goods as "processed without the aid of power."

2.21 The Court found that the Commissioner's Order-in-Original had correctly appreciated the evidence and applied the law on integrated processes and use of power, and that the CESTAT had interfered by artificially bifurcating a continuous manufacturing process and misapplying the settled legal principles.

Conclusions

2.22 The non-confirmation or dropping of demand against Unit No. 2 was irrelevant to the characterization of the overall process as manufacture with aid of power and to the liability of Unit No. 1.

2.23 The CESTAT erred in setting aside the Order-in-Original by treating the processes of each unit as independent and ignoring the integrated nature of manufacture; its view was contrary to settled legal principles on "process" and "manufacture."

2.24 The Order-in-Original, fastening duty and penalty liability on Unit No. 1 on the basis that the cotton fabrics were manufactured with the aid of power and hence not exempt, was correctly restored by the Court.

Issues: Whether the petitioner's declaration under the SVLDRS fell under the litigation category or the arrears category, and whether the impugned SVLDRS-3 correctly quantified the tax dues after accounting for the pre-deposit already made.

Analysis: The demand arising from the show cause notice had not attained finality by 30 June 2019 because the Tribunal had remanded the matter for re-quantification and had kept quantification of duty and penalty open. A case where duty has not been finally quantified and remains pending after remand falls within Section 124(1)(a) of the Finance Act, 2019, not Section 124(1)(c). The record also showed that the petitioner's pre-deposit of Rs. 10 lakhs had been adjusted in the committee's earlier computation, and there was no material to disbelieve that payment. The impugned computation under the arrears category therefore overlooked the correct statutory footing and the adjustment already made.

Conclusion: The petitioner's case was held to be covered by the litigation category, and the impugned SVLDRS-3 quantification under the arrears category was not sustainable.

Final Conclusion: The declaration had to be processed on the basis of litigation-category relief with proper adjustment of the pre-deposit, and the committee was directed to determine the correct amount accordingly.

Ratio Decidendi: Where a duty demand has been remanded for re-quantification and has not attained finality as on the relevant cutoff date, it is a litigation-category matter under the SVLDRS scheme, and any admitted pre-deposit must be deducted while computing the amount payable.

Outcome: All three petitions filed by the Union and the connected petition filed by Pearl Global Ltd. were dismissed.

Issues: Whether the finding of clandestine removal of 68.996 MT of single ply yarn and the consequent demand and penalty could be interfered with in reference jurisdiction.

Analysis: The stock discrepancy was examined by the adjudicating authority, the appellate authority, and the Tribunal on the basis of the RG-1 register, invoices, and the manufacturing process. The authorities concurrently held that the shortage existed at the stage of single ply yarn and was not attributable to wastage arising from conversion into double ply yarn. The Court held that the question whether there was shortage on the date of search was a pure question of fact, and that it could not reappreciate evidence already considered by the fact-finding authorities. In the absence of any perversity, lack of evidence, or legal infirmity, the concurrent factual findings were not open to interference.

Conclusion: The finding of clandestine removal was upheld and the demand and penalty were sustained.

Final Conclusion: No referable question of law arose from the Tribunal's order, and the reference petition failed.

Ratio Decidendi: Concurrent findings of fact based on appreciation of evidence, including stock records and physical verification, are not interfered with in reference jurisdiction unless they are perverse, unsupported by evidence, or otherwise legally infirm.