TaxTMI 
TaxTMI 
2026 (8) TMI 994
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....ttended the Personal Hearing granted by the Adjudicating authorities. They countered each and every allegation contained in the SCN by showing the details as per their records. However, after due process, the Adjudicating authority confirmed the demand along with interest and penalty. Hence, the appellant is before the Tribunal. 2. The Ld. Chartered Accountant, appearing on behalf of the appellant, makes the following submissions: 2.1. It is explained that the aggregated demand of duty amounting to Rs.4,89,96,699/- (BED + Education Cess + S&HE Cess) pertaining to the period 2014-15 encompasses 7 (seven) allegations, out of which 3 (three) relate to alleged clandestine production and removal of finished goods and four (four) relate to alleged undervaluation, as below: Sl. No. Type of allegation Amount of duty in demand (Rs.) Reference to S.C.N. Sub-group : Ferro Silico Manganese 1. Clandestine production and clearance of Ferro Silico Manganese 15,28,070.00 Para 4, 16 & 17 2. Undervaluation of Ferro Silico Manganese 1,98,21,361.00 Para 7 & 21 Sub-group : Pellet 3. Clandes....
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....which records only receipts into the factory), there is, in fact, no excess consumption of the said raw materials in E.R.-4; on the contrary, a marginal excess of about 0.99 M.T. appears in E.R.-6, attributable to weighing-scale tolerance and dust content. This reconciliation was placed before the Commissioner but has not been dealt with in the impugned Order. (iv) With this reconciliation, the alleged excess consumption of 712.320 M.T. of raw materials stands wholly demolished, and consequently the alleged yield of 227.730 M.T. of Ferro Silico Manganese and the resultant allegation of evasion of Central Excise duty amounting to Rs. 15,28,070/- are rendered wholly hypothetical, untenable and unsustainable. (v) It is further submitted that no Standard Input Output Norm (SION) is prescribed for Ferro Silico Manganese under the Central Excise Act, 1944 or the Rules made thereunder, and the input : output ratio of 1 : 0.32 adopted in the SCN is an arbitrarily derived figure, incapable of yielding a precise and legally sustainable estimate of actual production, let alone establishing clandestine removal. (B) Alleged clandestine removal of 2,014.740 M.T. Iron O....
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....t, and is wholly insignificant. (iv) It is further submitted that the quantity of Iron Ore Fines shown as consumed is identical in both the E.R.-4 and E.R.-6 returns for the said period; the alleged discrepancy exists only at the purchase/receipt stage, for the reason explained above. If the purchase or receipt figures are sought to be relied upon for one purpose, the correlated consumption figures recorded in the very same set of returns cannot be selectively disregarded for another - which is precisely what has been done in the Show Cause Notice. (v) With the above reconciliation, the alleged excess purchase of Iron Ore Fines stands demolished, and consequently the alleged unaccounted production of 2,014.740 M.T. of Iron Ore Pellet and the resultant allegation of evasion of duty amounting to Rs. 19,71,217/- are rendered wholly hypothetical, untenable and unsustainable. The finding of the Commissioner that acceptance of the Stock-in-Transit explanation would have a bearing on the following year's figures is misconceived, since the said quantity, upon actual receipt in the subsequent period, would necessarily stand duly reflected and accounted for in the retur....
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....n value. This is independently borne out by the fact that, as per the very same E.R.-4 return, the per-M.T. values shown for opening stock, production and closing stock of each of the four products are markedly different from, and in some instances (e.g., the opening stock value of Sponge Iron shown as Rs. 70,032.02 per M.T.) plainly absurd in comparison to, the actual transaction values reflected in the appellant's tax invoices raised on unrelated buyers during the very same period. (iii) Further, in respect of Ferro Silico Manganese, Iron Ore Pellet and Sponge Iron, the sale quantity shown in E.R.-4 includes the quantity cleared for captive consumption (and, in the case of Sponge Iron and Pellet, is also net of sales returns), whereas the value of captive consumption is not separately reflected in the E.R.-1 returns at all. The E.R.-4 sale value can therefore be meaningfully compared with the E.R.-1 clearance value only after like-for-like adjustment for captive consumption and sales returns - an exercise which the Show Cause Notice has not undertaken, and which was placed before the Commissioner by way of a detailed Statement of Reconciliation that has not been cons....
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....ion of the Commissioner, is on the Department and the Department is required in law to establish clandestine manufacture and removal through positive and tangible legal evidence and the standard of proof therefor is that the same has to be proved beyond doubt and not by mere preponderance of probabilities or by way of inferences drawn based on calculations and alleged circumstantial evidence based on assumptions, presumptions and inferences. In the absence of such positive evidence, no case of clandestine removal of goods can be made out or established against an assessee. It is further settled law that in the absence of any positive evidence the benefit of doubt has to be in favour of the assessee. Applying the said settled principles of law there can be no manner of doubt or dispute whatsoever, on the basis of the facts and materials on record, that the said requirements of law to establish that there has been any clandestine removal of the said goods by the appellant in the instant case has not been and cannot be said to have been satisfied. Contrary finding of the Commissioner in the impugned order is based on assumptions, presumption and/or conclusions which are patently incor....
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....o evidence to show that any payment was received by the appellant from the alleged customers to whom the said alleged unaccounted goods were sold. There is also no evidence disclosed to establish, even prima facie, of payment being made by the appellant to any alleged persons/parties from whom any excess raw materials were purchased from which the said excess goods was generated. In the absence of the aforesaid, as per settled principle no case of clandestine removal can be said to have been established against the appellant. In this respect reliance is placed on the decision of this Hon'ble Tribunal in the case of Arya Fibers Ltd. Vs. CCE (supra) where the entire law on clandestine removal has been discussed and the legal position has been succinctly summarised in para 40 of the order. The requirements serialised therein, which are nothing but putting together of the settled principles, has not been and cannot be said to have been satisfied in the instant case. (iii) The absurdity and patent untenability of the impugned order is also evident from the fact that the production quantity as per SCN and the impugned order surpasses the installed capacity of production of Spong....
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....aining clandestine manufacture and removal of goods as abovestated are satisfied. In this regard reliance is placed upon the following decisions :- • Standard Pharmaceuticals Ltd. Vs. Commissioner of Central Excise 2025 (3) TMI 430 - CESTAT KOLKATA • Micky Metals Limited Vs. Commissioner of Central Excise 223 (7) TMI 357 - CESTAT KOLKATA (vii) In this regard reliance is also placed upon the decision of this Hon'ble Bench of the Tribunal in Jai Salasar Balaji Industries Private Ltd. Vs. Commissioner of Central Excise and Service Tax 2025 (3) TMI 776 - CESTAT KOLKATA. (viii) In the case of Super Smelters Ltd. Vs. Commissioner of Customs, Central Excise and Service Tax 2020 (371) ELT 751 (T-KOL) this Hon'ble Tribunal held that in the absence of corroborative evidence demand based on average weight method basis was unsustainable. This Hon'ble Tribunal was pleased to hold the charges of clandestine removal of goods cannot be upheld merely on assumptions and presumptions but has to be provide with proved evidences such as purchase of excess raw materials, consumption of excess electricity, employment of extra labour, seizure of cash, transporta....
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....tion and clearance of Billet 82,200 Total demand on account of alleged clandestine removal: 35,81,487 Sl. No. Type of allegation Amount of duty in demand (Rs.) 1 Undervaluation of Ferro Silico Manganese 1,98,21,361 2 Undervaluation of Pellet 76,59,986 3 Undervaluation of Billet 1,71,87,939 4 Undervaluation of Sponge Iron 7,45,926 Total demand on account of alleged undervaluation: 4,54,15,212 6. In case of the demand for clandestine clearance, the quantification of removed finished goods has been worked out based on the mis-match between ER 4, ER 6, ER1 and Trial Balance figures. Based on the ratio of raw materials : output, the quantification has been worked out. This is a flawed method to arrive at the production figures. The manufacture requires different raw materials and consumables in different proportions. Even such quantification of the demand is not corroborated with any other evidence towards excess consumption of electricity, labour deployment, purchase of other consumables on cash basis, sale of finished goods on cash basis, to and fro movement of hundreds of trucks, any statemen....
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.... : output of raw materials, pertaining to the Financial Year 2012-13 came up before this Bench. The Bench has set aside the demand of Rs.12.50 crores. The present SCN pertains to the periodical notice pertaining to FY 2014-15. We find that the issue is identical, the way of investigation and verification by the Revenue is similar and in both the cases, no corroborative evidence has been brought in by them, whereas the Appellant has brought in the documentary evidence from their side. Therefore, we have no hesitation to follow the ratio laid down by this Bench in the case of Shyam Sel & Power Ltd v. Commissioner of C.Ex., Bolpur, in Appeal No. E/76637/2016 under Final Order No.76985/2025 dated 18th July 2025 [CESTAT, Kolkata]. Accordingly, the demand of Rs. 35,81,487/- stands set aside on merits. 6.4. Further, on an identical issue in respect of the same appellant for the Financial Year 2013-14, this Bench vide Order in the case of Shyam Sel & Power Ltd v. Commissioner of C.G.S.T. & C.Ex., Bolpur, in Appeal No. E/76351/2018 under Final Order No. 75966/2026 dated 21st July 2025 [CESTAT, Kolkata] has set aside the impugned demand of Rs.18,17,92,020/- and allowed the appeal filed by....
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.....-4, which has arisen from the undervaluation of Billets In E.R.-4 return, the value of finished goods sold is auto-generated figure by adding opening inventory value with production value and by subtracting closing inventory value. The auto-generated sale value figure in E.R.-4 does in no way represent real sale value Undervaluation of Sponge Iron 7,45,926 The comparison between the amount of sale of Sponge Iron shown in E.R.-4 and the amount declared in E.R.-1, indicates an excess amount of Rs. 60.35 lakh in E.R.-4, which has arisen from the undervaluation of Ferro Alloys In E.R.-4 return, the value of finished goods sold is auto-generated figure by adding opening inventory value with production value and by subtracting closing inventory value. The auto-generated sale value figure in E.R.-4 does in no way represent real sale value TOTAL 4,54,15,212 7.3. Therefore, we hold that no case of under-valuation has been made out by the Revenue with proper, cogent and corroborative evidence. Hence, we set aside the demand of Rs. 4,54,15,212/- on merits. 8. We find that in both the above set of demands, the corrob....
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....ST, Bhubaneswar-II [FINAL ORDER NO.77490-77492/2023 Dated 17/11/2023] "10. From the Show Cause Notice and the OIO passed, it gets clarified that the demand has been made towards excess production of 11089.730 MT of Sponge Iron during the period July 2006 to November 2009 solely based on the formula adopted by the Department to arrive at the estimated production of iron ore to this extent. While the purchase quantity of iron ore has been taken into account and the electricity consumption has been considered, as pointed out by the Appellant, the manufacture of sponge iron also requires two other important raw materials/consumable viz., Coal & dolomite. In the entire investigation, the Department has not brought out any evidence towards excess procurement of coal and dolomites. Since the coal is bought from the coal mine, proper records were kept both by the vendor as well as by the receiver. Such huge quantity of coal could not have been bought by way of cash. There is also no evidence towards deployment and movement of hundreds of vehicles to transport such huge quantity of coal and dolomite. Further, it is seen that no investigation has been taken up towards alleged sale o....
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....y evidences, which could be like despatch details for the production, receipt details of the said material, transactions of the sale money, transportation details of such goods, details of additional consumption of electricity for such suppressed production a prudent individual would not agree with the present conclusions of the Revenue. There is nothing on record from the Revenue side to come to a reasonable conclusion to say that there has been preponderance of probability of such suppressed production on the part of the appellant. The evidences in the form of approximation and averaging production as 77.6% and one statement of Shri Agarwal, Director of the appellant company cannot be called a prudent conclusion of the production estimate. 7. Considering above discussions and the case laws cited above, we conclude that the Revenue has failed to reasonably prove suppressed production and clandestine clearance on the part of the appellants. Consequently, the impugned order in respect of confirmation of duty for alleged suppressed production, and imposition of fine and penalty on the appellant No. 1 and imposition of personal penalty of Rs. 40 lakhs on Shri Agarwal who is a....