The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench held that reports form external agencies cannot be sole basis to allege clandestine manufacture and removal of excisable goods.
The assessee, M/s. 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 assessee viz daily stock account, raw materials register, and central excise returns 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 Central Excise Department from M/s. Popuri Engineering & Consultancy Services, Hyderabad and M/s. Industrial Technical Consultant, Raipur, 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 for the period 2008-09 and 2009-10.
The Bench consisting of P K Choudhary, Judicial Member and Raju, Technical Member observed that “We find 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.In the present case we do not find any 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.”
Kartik Kurmy, Advocate for the Appellant and J. Chattopadhyay, Authorized Representative for the Revenue appeared respectively.
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