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TMI ID= 222135
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2013 (4) TMI 331 - CESTAT AHMEDABAD

Cadila Healthcare Ltd. Versus CCE Ahmedabad

The issue involved in this case is regarding the discharge of differential duty which has been worked out by the lower authority based upon the difference between the theoretical yield and the actual yield as recorded by the appellant of a bulk drug intermediate. - Held that – It shows that the findings arrived at by the adjudicating authority are on the basis of assumptions and presumptions and in the absence of any independent evidence, cannot be upheld. Decision of the Tribunal in the case of Swati Polyester [2005 (8) ELT 216 (Tri. Mumbai)] would also be applicable in this case as the confirmation of the differential duty is based upon the assumption made. I find that the impugned order is unsustainable and is liable to be set aside. The impugned order is set aside and the appeal is allowed.

No.- Appeal No.E/1317/11

Dated.- January 31, 2013

Citations:

  1. Commissioner Versus Swati Polyster - 2007 (1) TMI 565 - GUJARAT HIGH COURT

  2. PCL OIL & SOLVENTS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, VAPI - 2009 (2) TMI 645 - CESTAT, AHMEDABAD

  3. SUZLON FIBRES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, SURAT - 2008 (8) TMI 609 - CESTAT, AHMEDABAD

  4. NAV KARNATAKA STEELS PVT. LTD. Versus COMMISSIONER OF C. EX., BELGAUM - 2007 (11) TMI 231 - CESTAT, BANGALORE

  5. HINDUSTAN COCA COLA BEVERAGES PVT. LTD. Versus COMMR. OF C. EX., THANE-I - 2006 (7) TMI 450 - CESTAT, MUMBAI

  6. SWATI POLYSTER Versus COMMISSIONER OF CENTRAL EXCISE, SURAT-I - 2005 (8) TMI 216 - CESTAT, MUMBAI

  7. GHODAVAT PAN MASALA PRODUCTS LTD. Versus COMMISSIONER OF C. EX., PUNE - 2003 (12) TMI 212 - CESTAT, MUMBAI

  8. PARLE BEVERAGES LTD. Versus COMMISSIONER OF C. EX., MUMBAI-I - 1998 (7) TMI 393 - CEGAT, MUMBAI

Hon'ble Mr. M.V. Ravindran, Member (Judicial)

For the Appellant: Shri J.C. Patel, Adv

For the Respondent: Shri M. Kutty, A.R.       

Per : Mr. M.V. Ravindran;

This appeal is directed against the order in appeal No.244/2011(Ahd-II)CE/PKJ/Commr(A)/Ahd, dt.10.08.11.

2. During the course of verification of Central Excise records viz. job challans, job work register, Daily stock account etc. by the Central Excise audit, it was found that the appellant got manufactured their product namely RNA TARTARATE on job work basis and exported it to M/s. IMI TAMI INSTITUTE AND DEVELOPMENT LTD., ISRAEL, under BOND. The quantity of the intermediate goods received from the job-worker was 73.2 Kgs. The said intermediate goods received from the job-worker were further subjected to process called Salt Breaking Process, Sieving, Filtration, Distillation, Testing. The goods were finally packed and labeled before its clearance from their factory premises. After carrying out such above mentioned process, the appellant had shown the output of 25.3 Kgs. finished goods. This reveals that there is loss of 47.9 Kgs. of the finished goods. It was alleged that this variation between the quantity receipt from job worker and the quantity of final product manufactured was because of clandestine removal of the differential quantity of finished goods. On being pointed out the variation, the appellant replied that the said variation has been occurred on account of process loss. The Audit Officers were not satisfied with the reply of the appellant as the variation is significant and not accounted for. It was further alleged that the appellant did not have the facility to manufacture the impugned product, and therefore the loss appeared to be on account of its removal from the factory of the appellant, without proper documentation and without payment of duty. The Central Excise duty amounting to Rs.4,89,631/- on the said differential quantity of 47.9 Kgs. Was worked out.

3. Show cause notice was issued demanding the differential duty from the appellant along with interest and proposal was made for imposition of penalty under Rule 25 of Central Excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944. The said show cause notice was adjudicated by the adjudicating authority and wherein the demand was confirmed along with interest and also equivalent amount of penalty was also imposed. The assessee took up the matter before the first appellate authority who vide his order dated 25.08.09 dismissed the appeal and upheld the order in original. The appellant herein challenged the order in appeal before the Tribunal and CESTAT vide final order No.A/516/WZB/AHD/2010 dated 21.05.10 remanded the matter back to the original adjudicating authority for denovo proceedings. The adjudicating authority in denovo proceedings after following the due process of law confirmed the demands raised in the show cause notice along with interest and also imposed equivalent amount of penalty. On an appeal against such an order, the first appellate authority has reduced the demand of duty to Rs.1,60,605/- along with interest and also upheld the equivalent amount of penalty under Rule 25 of the Central Excise Rules, 2002.

4. Ld. counsel would draw my attention to the order of the first appellate authority and order of the Tribunal while remanding the matter back. It is his submission that the chartered engineers whose services were requisitioned by the appellant for certifying the yield of the final products had indicated in the certificate they would be able to get a theoretical yield of 37.73 Kgs. while the appellant had actually got 27.3 Kgs. It is his submission that the chartered engineers in their certificate had specifically mentioned that the actual yield of 27.3 kgs of the product is quite justifiable. It is his submission that the demand of the duty on the differential 10.43 kgs is based on assumptions and presumptions and there is no evidence as such of removal of such goods from the factory premises of the appellant either clandestinely. He would rely upon the decision of this Tribunal in the case of Swati Polyester 2005 (192) ELT 985 (Tri. Mumbai) and submit that this was taken by the Revenue to Honble High Court of Gujarat and Honble High Court has dismissed the appeal which is reported at 2008 (221) ELT A 25 (Guj.). He would also rely upon the judgment of the Tribunal in the case of PCL Oil & Solvents Ltd. 2009 (246) ELT 528 (Tri. Ahmd.) for the proposition that charges of clandestine activities cannot be upheld on the basis of input output ratio and assumptions and presumptions.

5. Ld. D.R. would reiterate the findings of the lower authorities.

6. I have considered the submissions made by both sides and perused the records.

7. The issue involved in this case is regarding the discharge of differential duty of Rs.1,06,651/- which has been worked out by the lower authority based upon the difference between the theoretical yield and the actual yield as recorded by the appellant of a bulk drug intermediate. I find that the chartered engineers certificate which was produced before the Tribunal in the first round of litigation reads very clearly that the manufacture of 25.3 kgs from an input of 73.2 kgs is quite justifiable as per the technical details shown in the attached sheet. In my view, the impugned order upholding that the appellant is liable to pay duty on the balance amount of 10.43 kgs seems to be totally misplaced in as much as there is nothing on record which indicates that there was a manufacturing of the excess quantity and clearance of the same from the factory premises of the appellant.

8. I find that the judgment of the Tribunal in the case of PCL Oil & Solvents Ltd. is directly applicable in this case and I reproduce the ratio:

11. In the case of M/s. Suzlon Fibres Ltd. [2008 (230) E.L.T. 166 (Tri. Ahmd], it was observed that the case of clandestine removal cannot be made on the basis of input-output ratio and is required to be corroborated by an independent evidence. Thus by relying upon the precedent decision of the Tribunal in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. [2006 (205) E.L.T. 700 (Tri)], the demand was set aside. Similarly in the case of M/s. Ghodavat Pan Masala Products Ltd. [2004 (175) E.L.T. 182 (Tri.-Mum.)], it was observed that theoretical calculations based on minor inputs without tangible, strict, positive, direct and corroborative evidence to show that goods produced in excess removed or transported, the allegations of clandestine removal cannot be upheld. To the same effect is the Tribunals decision in the case of M/s. Parle Beverages Ltd. [1999 (114) E.L.T. 872 (Tri.)], it was observed that there is no contractual obligation on the part of the assessee to strictly adhere to the formula. The object of the formula is to ensure consistency of the product in different batches and in each bottle of the same batch. It is therefore, more of a working guide than an inflexible requirement in terms of quantity of end-product and it is not permissible to demand duty only on the basis of consumption of a single raw material. In the case of M/s. Nav Karnataka Steels Pvt. Ltd. v. CCE, Bangalore [2008 (225) E.L.T. 454 (Tri. Bang.)], it was observed that theoretical formulas based upon the consumption of the raw material cannot be made the basis for arriving at the correct production.

The ratio of all the above decisions is to the effect that the charges of clandestine activities cannot be upheld on the basis of theoretical input-output norms. The same are required to be corroborative by production of independent evidences. Examining the case file from the above angle, we find that apart from the input-output ratio, which has been made the basis, there is no other evidences on record to show that the appellant either did not receive the raw materials, on which they have taken the credit or after receiving the same and availing the credit, the same stand removed by them in the open market. The statements given by the Director, Production In-charge and Lab. Assistant refer to the normal consumption of raw materials for production of one batch of their final product. There is no admission in the said statements to the effect that the raw materials were not actually received by them and they were showing excess consumption of the raw materials to accommodate such non-receipted raw materials. There is also no admission in the said statements to the effect that raw materials stand diverted in the open market. Even the experiments conducted by the Department in the presence of the officers showed variance quantity of used raw materials than the input-output norms. All these factors lead to show that the findings arrived at by the adjudicating authority are on the basis of assumptions and presumptions and in the absence of any independent evidence, cannot be upheld.

9. I also find that the decision of the Tribunal in the case of Swati Polyester would also be applicable in this case as the confirmation of the differential duty is based upon the assumption made on the

10. In view of the foregoing, I find that the impugned order is unsustainable and is liable to be set aside. The impugned order is set aside and the appeal is allowed.    

(Dictated and pronounced in the Court)                         

 

                                                           

 

 
 
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