TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 1331
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....ellant"), is a private limited company incorporated under the Companies Act, 1956 having its principal place of business registered at Bela Industrial Estate, Bela Chapra Industrial Complex, Muzaffarpur - 842 005. The appellant is engaged in the business of manufacturing of medicament falling under Chapter 30 of the Central Excise Tariff Act, 1985 having Central Excise Registration No. AACCM6171DXM001 for such manufacture and sale of medicaments. 2.1. A Thematic Audit was conducted by CERA, on the books of accounts of the appellant covering the period 2011-12 to 2013-14, on the theme of Central Excise Exemption availed by SSI units. During the course of audit, officers of CERA received 24 sample invoices from the appellant. On analysis of the said 24 invoices, it was observed by CERA that the appellant had not cleared the goods as per the provisions laid down in Section 4A of the Central Excise Act, 1944. It was alleged that the appellant was taking into account much lesser value for the purpose of levy and payment of central excise duty than the declared MRP of the medicines less prescribed abatement of 35% of MRP value, resulting in undervaluation of goods and probable short p....
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....was much higher than the unit sale price during the period from January, 2014 to March 2014, resulting into probable escapement of Central Excise duty, the appellant's contention is that it is a wrong assertion arrived at by the Department since the fact of price fluctuation is a normal commercial reality and not an evidence of duty escapement; it is explained that prices of goods fluctuate by reason of ordinary market forces such as demand and supply dynamics, competition, input costs, capacity utilization, seasonality, contract term variations and commercial strategy. Thus, the appellant submitted that mere inter-period variation in average selling prices, even if substantial, is neither unnatural nor inherently indicative of evasion of duty liability. 3.2. It is the submission of the Ld. Counsel for the appellant that Section 4 of the Central Excise Act, 1944 sets out the statutory basis for valuation of excisable goods where duty is charged with reference to value; that as per Section 4, the assessable value of goods sold in the course of wholesale trade shall be the transaction value i.e., the price actually paid or payable for the goods sold, subject to conditions prescrib....
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....ence the appellant cannot be prejudiced with such a charge even when the Department has failed to provide any documentary and strong evidence in that regard. 3.4. The appellant also raised the ground that it is a settled principle that the allegation of clandestine removal is a serious one and the same has to be brought on record by the Department, which has not at all been done in the present case; in support of this view, the appellant relies on the decision of the Hon'ble Delhi High Court in the case of Commissioner of Central Excise v. Kuber Tobacco Products Pvt. Ltd. [(2024) 18 Centax 417 (Del.)] dated 11.03.2024. 3.5. Reliance is also placed by the appellant upon the judgment of the Hon'ble Delhi High Court in the case of Commissioner of Central Excise v. Shakti Zarda Factory (I) Ltd. [2015 (321) E.L.T. 438 (Del.)],wherein it was held that "the initial burden was on the Department to prove the allegations of the clandestine receipt of raw material or manufacture and removal of the final products". 3.6. Furthermore, the appellant has also cited the decision of the CESTAT, Kolkata in the case of Raj Kumar Gupta (Alias) v. Commissioner of CGST & Central Excise, Patna-I,....
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....pted the average sale price to determine the differential duty payable by the appellant. Accordingly, the Ld. Authorized Representative of the Revenue supported the demands confirmed in the impugned order. 5. Heard both sides and perused the appeal records. 6. We find that the demand in the present case has been raised and confirmed on the basis of an Audit conducted by CERA, on the books of accounts of the appellant covering the period from 2011-12 to 2013-14. During the course of Audit, officers of CERA received 24 sample invoices from the appellant. On analysis of the said 24 invoices, it was gathered by CERA that the appellant has not cleared the goods as per the provisions laid down in Section 4A of the Central Excise Act, 1944. It was alleged that the appellant was taking into account a much lesser value for the purpose of levy and payment of central excise duty than the MRP declared in the said invoices. On the basis of these observations, the Department has arrived at the average sale price of unit product manufactured by the appellant during the period from April 2013 to December,2013. It was found that the average sale price, arrived at by the Department, was much h....
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....s agreements, invoices, flow back of money and contemporaneous evidence relevant to each removal. 6.2. In the present case, it is observed from the records that the allegation of undervaluation and the demand of central excise duty has been arrived at by the Department only on the basis of the 24 sample invoices submitted by the appellant to CERA. The Department has not brought in any other evidence to prove its contention of undervaluation. 6.3. We find that the Department has alleged dual pricing by the appellant. In this regard, however, we observe that the Department has not brought in any evidence to substantiate the allegation that the appellant has actually cleared the goods under two sets of invoices. In fact, we find that the Department has conducted verification of the invoices by the field officers. The verification report received has been recorded by the ld. adjudicating authority in the impugned order, which is reproduced below for ready reference: "7. Since address of the manufacturer company was mentioned to be located at Indore and Works as B.I.E. 842 005, a reference through letter dated 07.04.2015 was made to the Asstt Commissioner, C. Ex. & S. Tax....
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.... there has been no undervaluation of goods as alleged by the Department and hence the appellant cannot be prejudiced with such a charge, especially when the Department has failed to provide any documentary evidence in support of the allegation of clandestine removal. 6.5. The allegation of the Department is that the average sale price of product manufactured by the appellant during the period from April, 2013 to December, 2013 was much higher than the unit sale price during the period from January, 2014 to March 2014, resulting into probable escapement of Central Excise duty. In this regard, we take note of the fact that the Ld. adjudicating authority has not taken into account the bulk sales of Paracetamol Tab (500 mg) carrying price of Rs. 0.17 per tablet to the Government of Uttar Pradesh, for which the MRP price was not applicable. The appellant has submitted the evidence of invoices issued for clearances of goods in bulk to the Government of Uttar Pradesh without MRP. For ready reference, a sample invoice issued by them for clearances of goods in bulk to the Government of Uttar Pradesh is reproduced below: 6.6. On perusal of the invoices submitted, we find that the appel....
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....h as L.R.s. statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; e. Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal. 6.9. In the instant case, we observe that no such evidence to the above effect have been brought on record. Since none of the ingredients required for alleging clandestine manufacture and clearance are satisfied in this case, we find that such an allegation against the appellants cannot be sustained, merely on the basis of assumptions and presumptions. 6.10. We observe that a similar issue has been dealt with by the Tribunal at Ahmedabad in the case of Arya Fibres Ltd. v Commissioner of C.Ex., Ahmedabad-II [2014 (311) E.L.T. 529] wherein it has been held that the allegation of clandestine removal is to be corroborated by supporting evidences. The relevant observations of Tribunal in the said order are reproduced below for ease of reference: - "40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the s....
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....gued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased or consumed and not merely the recording of confessional statements. A co-ordinate Bench of this Tribunal has, in another decision, reported in the E.L.T. issue of 5-8-2013 (after hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines v. CCE [2013 (294) E.L.T. 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of ....
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....d out whether the excess raw materials have been purchased. (iii) To find out the dispatch particulars from the regular transporters. (iv) To find out the realization of sale proceeds. (v) To find out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. 13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department. 14. In the instant case, no investigation was made by the Department, even the consumption of electricity was not examined by the Department who adopted the short cut method by raising the demand and levied the penalties. The statement of so called buyers, namely M/s. Singhal Cement Agency, M/s. Praveen Cement Agency; and M/s. Taj Traders are based on memory alone and their statements were not supported by any documentary evidence/proof. The mischievous role of Shri Anil Kumar erstwhile Director with the assistance of Accountant Sri Vasts cannot be ruled out. 15. In view of the above, we are of the opinion that when there is no extra consumption o....
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....nks between the document recovered during the search and activities being carried on in the factory of production; etc." 7. Therefore, by applying the ratio laid down in the above decisions and in the absence of any corroborative evidence available on record to substantiate the allegation of clandestine clearances in the impugned order, we hold that the demand confirmed in the impugned order is not sustainable. Accordingly, we set aside the same. As the demand of central excise duty is not sustained, the question of demanding interest or imposing penalty does not arise and hence we set aside the same. 8. In the result, we set aside the impugned order qua confirming the demand of central excise duty, along with interest and penalties thereon, and allow the appeal filed by the appellant with consequential relief, if any, as per law. (Order pronounced in the open court on 24.02.2026) ============= Document 1 TAX INVOICE ORNATE LABS PVT. LTD. Industrial Estate Bela, Muzaffarpur-842005 TIN-VAT:10311595089 M/S ORNATE LABS (PVT) LTD 5.KAISERBAGH, J.C. BOSE ROAD LUCKNOW VAT-CST: 10311595186 DL: 1418/1419 INV.NO. DATE : : 70 21/12/2012 ORDER NO. : N....