The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) sets aside Rs. 53.38 Lakh duty demand in the case of clandestine removal of Fatty Acid as Refined Palm Oil (RPO) due to lack of evidence.
Budge Budge Refineries Ltd, appellant-assessee, manufactured RPO from Crude Palm Oil, which was further processed into Interesterified Vegetable Fat (IVF). Fatty Acid was generated as a by-product. It also manufactured Plastic Jars and Tin Containers for packing RPO and IVF and was involved in trading RPO, with most traded goods not entering the factory. The final products were exempt under Notification No. 4/2005. The appellant-assessee had central excise registration, paid applicable duties, and filed monthly ER-1 returns.
A show cause notice dated May 6, 2011, demanded duty on various grounds, and the adjudicating authority issued the impugned order the same day.
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The notice alleged the clandestine removal of 1157.346 MT of Fatty Acid as RPO between November 29, 2007, and December 3, 2008, based on Free Fatty Acids(FFA) levels in the Lab Register. The FFA content was recorded as 4.8% to 5.6%, but only 2% to 4% of Fatty Acid was shown as recovered. A duty demand of Rs. 53,38,184/- was raised and confirmed in the impugned order. The assessee contested the demand in the appeal.
Read More: CESTAT Dismisses Clandestine Removal Charge due to Lack of Supporting Evidence
The two member bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) found that the demand of Rs. 53,38,184/- for the alleged clandestine removal of Fatty Acid as RPO was based on assumptions, not solid evidence. The department relied on lab records showing a Free Fatty Acid (FFA) content of 4.8% to 5.6%, while only 2% to 4% was shown as recovered. However, the statement from N.K. Giri, GM (Technical), explained that the FFA percentage could vary due to several factors, which the department had ignored.
The tribunal noted that the department’s conclusion about Fatty Acid removal was based on comparing different registers, but there was no real proof, like statements from buyers or receipts, to support the claim. The documents mentioned in the order did not show any clear evidence of the goods being removed without paying duty.
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Since the allegation of clandestine clearance was serious, the bench stated that actual proof, not just assumptions, was required. As there was no such proof, it ruled that the demand of Rs. 53,38,184/- was not justified.
In short, the demand was set aside, and the appeal filed by the assessee was disposed of.
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