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2016 (5) TMI 84 - ALLAHABAD HIGH COURT

2016 (5) TMI 84 - ALLAHABAD HIGH COURT - 2016 (334) E.L.T. 595 (All.) - Clandestine removal - excess quantity of molasses - demand of duty is based on an assumption that declaration of excess quantity of molasses by the appellant is indicative that the appellant must have purchased and crushed the additional quantity of sugar cane and that corresponding quantity of sugar was manufactured and cleared clandestinely. - Held that:- mere fact that the volume of molasses has increased after the closur .....

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ion in this regard has been made by the Department. It is a known fact that if there was excess production in which case there would be excess consumption of electricity, which fact was not examined by the Department. Consequently, on the basis of presumption, a serious charge of clandestine manufacture and removal of sugar has been imposed, which is wholly erroneous. - The charge of clandestine removal of sugar is required to be discharged by the Department by production of sufficient and t .....

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ground of clandestine removal cannot be recovered on the basis of presumptions and assumptions. Clinching evidence is required with regard to purchase of raw materials, use of extra electricity, sale of final products and realisation of sale proceeds before imposing any demand. As in the absence of any such evidence demand cannot be imposed. Therefore, the payment of duty, interest and penalty consequently cannot be sustained and are set aside. - Once a finding has been given by the Tribunal .....

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T OF INDIA] and Commissioner of Customs, Mumbai vs. M.M.K.Jewellers [2008 (3) TMI 5 - SUPREME COURT]. - Decided in favour of appellant - Central Excise Appeal No. 316 of 2010 - Dated:- 23-2-2016 - Hon'ble Tarun Agarwala And Hon'ble Vinod Kumar Misra, JJ. ORDER ( Per: Tarun Agarwala,J. ) 1. The appellant is a Company incorporated under the Indian Companies Act and is engaged in the manufacture of sugar. During the course of manufacture of sugar, molasses emerges as a by-product. This mola .....

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hysical stock of molasses is ascertained and the same is intimated to the State Excise Department as well as to the Central Excise Department. 2. Molasses is a highly sensitive and volatile goods. The volume of molasses, which are stored in steel tanks and pucca pits, expands with the rise of temperature and there is a heavy risk of auto combustion. Consequently, the physical stock of molasses is affected due to a number of factors, namely, dip reading method which is not an accurate method and .....

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ceed beyond alarming limits, the steel tanks are frequently sprayed with water in order to avoid auto combustion and also to control the temperature. Not only the above, since sugar is present in the molasses due to decomposition foaming is generated in the molasses and consequently, water is sprayed on the outer surface of the steel tanks. The water so sprayed on the tanks often finds it way into the tanks through the gaps in joints and open spaces at the top. This ultimately results in the inc .....

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se Department. 4. The Central Excise Department directed the appellant by letter dated 8.6.2006 to clarify the circumstances which caused an increase in the stock of the molasses. The query of the Department was duly replied, in spite of which, a show cause notice dated 26.6.2007 was issued alleging that the increase in the volume of molasses after closure of the factory indicated clandestine manufacture of sugar which was cleared without payment of duty and consequently, directed the appellant .....

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07 holding that the extended period of limitation under Section 11-A of the Central Excise Act could not be invoked and, consequently, also set aside the imposition of penalty under Rule 25 of the Central Excise Rules, 2002 (hereinafter referred to as the Rules). The Appellate Tribunal, however, directed the appellant to pay the duty which fell within the period of limitation along with interest and further imposed penalty for this period under Section 11-AC of the Central Excise Act. 6. The app .....

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the extent that Tribunal has directed for payment of duty along with interest is legally justified in as much as the same has been passed on the basis of assumptions, conjectures and surmises & ignoring evidence on record ? 7. We have heard Sri Nishant Mishra, the learned counsel for the appellant and Sri Siddharth Shukla, the learned counsel for the Department. 8. We find that demand of duty is based on an assumption that declaration of excess quantity of molasses by the appellant is indic .....

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allotted by the Cane Commissioner. The sugar factory is under an obligation to purchase cane only from the cane centers and from nowhere else. The cane, which is purchased from the cane growers, is received in the factory premises which is weighed on computerized weigh bridge under the supervision of a representative of the Cane Society. The purchase and issue of sugar cane are accounted and documents are prepared on a daily basis. The sugar, which is manufactured is weighed and kept in gunny b .....

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orded in the appropriate registers. 10. The fact that temperature in the molasses tanks rises and foam is generated due to combustion of the chemicals present in the molasses is well known. It is also a known fact that if the temperatures are not controlled, it may result in auto combustion and, therefore, it is necessary to keep the temperatures at a lower level for which purpose water is sprinkled on the tanks in order to reduce the internal temperature. The sprinkling of the water at times se .....

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pinion that there should also be clinching evidence in the nature of purchase of raw material, i.e., sugarcane, use of electricity, removal of the final product, i.e., sugar and its sale. Such evidence is missing. No investigation in this regard has been made by the Department. It is a known fact that if there was excess production in which case there would be excess consumption of electricity, which fact was not examined by the Department. Consequently, on the basis of presumption, a serious ch .....

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that no case is made out for clandestine manufacture of sugar and its removal. 14. In Continental Cement Company vs. Union of India, 2014 (309)E.L.T. 411 (All.), a Division Bench of this Court held that the demand of duty on the ground of clandestine removal cannot be recovered on the basis of presumptions and assumptions. The Court held that clinching evidence is required with regard to purchase of raw materials, use of extra electricity, sale of final products and realisation of sale proceeds .....

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