Clandestine removal of goods and resulting excise duty liability cannot be determined solely based on electricity consumption without other corroborative evidence, such as raw material procurement or cash flow records.

P.V. SUBBA RAO

M/s Marie Products Pvt. Ltd.¹Marie and its Director Shri Ashok Agarwal²Agarwal filed these appeals to assail the order dated 31.03.2022³impugned order passed by the Commissioner (Appeals), Jaipur in which he upheld the order dated 31.12.2020 passed by the Additional Commissioner and rejected the appeals of Marie and Shri Agarwal.

The appellant is a manufacturer of scented betelnut (supari) falling under the Central Excise Tariff Item 2106 90 30 and was registered with the Central Excise department. Based on specific intelligence that Marie was resorting to clandestine removal of goods to evade central excise duty, the officers of the Directorate General of GST Intelligence⁴DGGI, Jaipur searched the factory of Marie, the residence of its Director Shri Agarwal, Marie’s clearing forwarding agency M/s. Shubham Agency, the supplier of betelnuts to Marie M/s. Agarwal & Company, and a few other premises on 10th and 11th November 2017.

In the factory, they found excess (unaccounted) stock of raw material and finished goods valued at Rs. 68,04,678/- and seized the excess stock and issued a SCN dated 10.5.2018 in respect of the seized goods.

In the residence of Shri Agarwal, they found unaccounted perfume/compound worth Rs. 15,79,200/- which they seized and issued an SCN dated 11.5.2018.

In the business premises of the C&F Agent M/s. Shubham Agency, therefore, excess stock of sweet supari and seized it and issued SCN dated 8.5.2018.

In the premises of M/s. Agarwal and Company, the betelnut supplier, excess stock of raw betelnuts valued at Rs. 13,20,800/- was found and seized.

In the business premises of M/s. Singhal’s Flexi pack- the supplier of the packing material- excess stock of raw material, work in progress and finished goods worth Rs. 43,89,371/- was found and seized.

Certain other documents and records were also found at various places and were seized.

From the factory of Marie, 50 documents were recovered. Two sewing machines, two mixture machines (supari+Sugar), one roasted machine, one mixture machine (Supari + corn oil) and sixteen pouch packing machines were found.

After completing the investigation, the quantity of scented supari actually produced during the period October 2014 to June 2017 was estimated to be much higher than the quantity reported in the excise returns (ER-3 and ER-1) of Marie and the SCN demanded duty treating the difference as scented supari manufactured and removed clandestinely without paying central excise duty.

The SCN also proposed recovery of interest and imposition of penalties on Marie and Shri Agarwal. These proposals were confirmed in the order of the Additional Commissioner and upheld in the impugned order by the Commissioner (Appeals).

Submissions on behalf of appellant

Learned counsel for the appellant made the following submissions:

(i) The searches and investigations were conducted in November 2017 after the Goods and Services Act, 2017 came into force superseding the Central Excise Act, 1944 and evidence was collected to raise a demand for the period October 2014 to June 2017. This lacks any credibility.

(ii) The statements of Shri Sushil Shah (labourer of Marie), Shri Lalit Kumar (labour supervisor) and Shri Ashok Agarwal (Director of Marie) have no evidentiary value as they were retracted immediately.

(iii) The evidence relied upon in the SCN is sketchy and superficial and does not show any chain of events from purchase of raw material, manufacture/ production and clandestine removal.

(iv) There is no evidence of any unrecorded receipt of raw materials except 7 messages found in the mobile phone of Shri Akash Agarwal (son of Shri Ashok Agarwal).

(v) No unaccounted for money was recovered in any of the searches.

(vi) No input-output ratio was provided during the entire period of demand.

(vii) No evidence of any transportation of allegedly clandestinely removed goods is in the SCN.

(viii) There was no receipt of raw material other than what was recorded.

(ix) There is no