Per K.C. Mamgain :

This is an appeal filed by M/s. Annapurna Industries Ltd., against Order-in-Appeal No. 58/99 (H-II) CE dtd. 31.08.99 passed by the Commissioner of Central Excise (Appeals), Hyderabad.

2. On the basis of an intelligence that the appellants are clandestinely manufacturing and removing aerated waters without payment of duty, the Central Excise Officers visited their factory premises on 23rd May 1994. On a scrutiny of RG-1 and Form IV register with physical stock, they found that 199 crates of Bisleri Soda and 453 crates of Thumsup were short and 14 units of essence of Limca and Thumsup in excess. They also found 30,900 Nos. of crown corks and 446.25 Kgs of Citric Acid short, than the recorded balance in the statutory records. Shri Pradeep Kesarikar was the only responsible officer available in the factory who informed the officers that there was no production on 21.5.94 and 22.5.94 on account of holidays. The excess quantity of goods alongwith incriminating records was seized. On examination of the seized records, the officers found that there were store requisition application/slips showing issue of different raw materials including essence, the main input for manufacture of aerated water. This covered the period of issue from 1.4.94 to 16.4.94,30.4.94 to 13.5.94 and 14.5.94 to 23.5.94. On comparison of the account of the issue of the raw materials vide requisition slips with that of the statutory records, it was found that these were not accounted for. Based on the various statements and investigations conducted, show cause notice was issued to the appellant which was adjudicated by the Additional Commissioner who demanded duty of Rs. 13,434.80 on 199 crates of Bisleri Soda and 453 crates of Thumsup found short. He also confiscated 5 units of Limca and 9 units of Thumsup essence. He also demanded duty of Rs. 10,15,622.40 under Rule 9 (2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise and Salt Act, 1944. He also imposed a penalty of Rs. 2 lakhs on the appellants. The appeal filed by the appellants was rejected by the Commissioner (Appeals) under the impugned order.

3. Shri C. Sarabeswara Rao, Consultant appeared for the appellants and Shri Kumar Santosh, Ld. SDR appeared for the Revenue.

4. Shri C. Sarabeswara Rao, the Ld. Counsel for the appellants pleaded that he is not contesting other things but only contesting demand of Rs. 10,15,622.40 confirmed by the lower authorities. He stated that this demand is based on the basis of 139 requisition slips. Out of these 139 slips 'quantity issued' has filed been filled in 15 slips only and the entries in the form IV/RG-I Registers were made in respect of these slips. All the quantities of raw materials intended for, were not utilized in full in the production of finished goods, as such usage of raw material and production of finished goods, depends on market requirements. The requisition slips do not by themselves constitute direct evidence on which the charge of production and clandestine removal can be sustained. Production of finished goods as per the standard formula particularly in the absence of any cogent, reliable, and conclusive evidence in respect of the so-called excess production and clearance of the goods so produced cannot be assumed. Duty of Rs. 10,15,623 was paid by the appellants, even before filing the appeal before the Commissioner (Appeals). The entire case of the Department is based on the alleged use of the single raw material namely essences. There is no cogent, convincing or tangible evidence of clandestine production and removals of such goods from the appellant's factory. The demand based on theoretical production on the basis of assumed usage of essence as per the requisition slips is therefore totally unsustainable and may be set aside with consequential relief as per the ratio of the following decisions:-

"1. 1997 (22) RLT 128 (CEGAT)=1997 (94) ELT 519 (Tribunal) M/s. L.M.L. Ltd. Vs. CCE, Kanpur

2. 2000 (37