Order Date: 31 August 2022

Facts-

• The Appellant, Shree Hari Sponge Private Limited is engaged in the manufacture of sponge iron falling under Central Excise Tariff 7203 on which applicable central excise duty is being paid.
• An enquiry was initiated at the factory premises wherein the records maintained by the appellant were scrutinized. It was found that the consumption of iron ore and electricity use for manufacture of final product i.e., sponge iron were comparatively high as against the one disclosed by the appellant in their monthly central excise returns.
• Relying on some reports obtained by the Central Excise Department, an average input output ratio was formulated and compared with the actual production of the appellant. The difference in the quantity of final product i.e., sponge iron was assumed to be unaccounted for which Show Cause Notice was issued to propose central excise duty demand.
• The Appellant contended that the reports relied by the Central Excise Department could not be made basis to allege clandestine manufacture and removal of excisable goods in the absence of any corroborative evidence. 
• Being aggrieved the appellant filed this appeal.

Issue-

• Whether the demand of duty along with penalty is sustainable?

Order-

• The Tribunal observed that the entire basis of the instant demand is the reports of external agencies. No efforts have at all been made to find out whether at all there was any unaccounted production and clearance of goods. The Tribunal in the case of R.A. Castings (P) Ltd. has dealt with an identical issue wherein it has been held that duty demand cannot be raised on the presumption of higher production for reasons of high electricity and raw material consumption. It has also been held that tax is on the manufacture and clearance, and it is to be proved beyond doubt that goods have actually been manufactured.
• In the present case there is no evidence, much less any corroborative evidence, to show that there is production and clearance of the quantity of final products which have been arrived at in the notice by comparing the external reports and the quantity of production disclosed by the Appellant in their excise returns.
• Moreover, no proceedings have been initiated pursuant to such seizure of consignment except the statement of the employees of the appellant company wherein it was deposed that the company is not maintaining any process log book nor do they have any lab test report or drop test report. No statements of the driver of the vehicle or the owner of said consignments are in record nor there is any clue whether any proceedings have been taken subsequent to the alleged seizure.
• It is a settled legal position that the charge of clandestine clearance of goods is a serious charge and cannot be made on presumptions and assumptions and the onus lies on the Revenue to prove it with some evidence which has not been done in the present case. 
• Hence the impugned Order cannot be legally sustained and hence, the entire demand is set aside and the appeal is allowed with consequential relief.