Electricity Consumption alone Cannot Establish Suppressed Manufacture: CESTAT Rejects Excise Demand on Scented Supari [Read Order]
CESTAT, rules that electricity consumption data without corroborative evidence cannot sustain allegations of suppressed production or excise duty demand.
![Electricity Consumption alone Cannot Establish Suppressed Manufacture: CESTAT Rejects Excise Demand on Scented Supari [Read Order]](https://images.taxscan.in/h-upload/2026/02/18/2126218-electricity-consumption-alone-cannot-establish-suppressed-manufacture-cestat-rejects-excise-demand-scented-supari.webp "Electricity Consumption alone Cannot Establish Suppressed Manufacture: CESTAT Rejects Excise Demand on Scented Supari [Read Order]")
The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the consumption of electricity cannot form the sole basis for making an allegation of suppressed manufacture and clandestine removal of excisable goods. The appellant Marie Products Pvt. Ltd was involved in the production of flavored supari and was filing statutory...
The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the consumption of electricity cannot form the sole basis for making an allegation of suppressed manufacture and clandestine removal of excisable goods.
The appellant Marie Products Pvt. Ltd was involved in the production of flavored supari and was filing statutory returns regularly. Based on an investigation carried out after the implementation of GST the Department held that the assessee had suppressed their production in the period from October 2014 to June 2017.
The demand was calculated by extrapolating the production figures only on the basis of electricity consumption using the highest production ratio worked out over a short period to the entire disputed period.
The demand of excise duty along with interest and penalties was upheld by the adjudicating authority on the grounds of clandestine manufacture and removal.
The assessee claimed that the consumption of electricity is an unreliable and fluctuating variable which depends on various factors such as the efficiency of the machine, product mix, labor availability down time and the use of diesel generators.
It was also submitted that the Department did not produce any corroborative evidence of excess raw material purchases, transport documents, buyers' information or unaccounted cash flow.Further,the Revenue held that the analysis of electricity consumption clearly revealed that there was a suppressed level of production.
The tribunal comprising, JUSTICE DILIP GUPTA [President] and P.V. SUBBA RAO[Technical Member]noted that clandestine manufacture and removal is a grave offense that needs robust and corroborative evidence. It was held that any inference drawn on the basis of electricity consumption alone is mere speculation and cannot form the basis of a demand. In the absence of any supporting evidence the demand was held to be unsustainable.
The Tribunal set aside the excise demand, interest, and penalties.
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