The clandestine removal of goods cannot be established solely based on electricity consumption ratios; such a demand is unsustainable without corroborative evidence of inputs, labour, and actual production records, as electricity consumption is not a universal or uniform standard for calculating excise duty liability.

Date of Hearing/ Decision: 24.03.2026

ASHOK JINDAL:

1. The appellant is in appeal against the impugned order wherein demand of duty has been confirmed against the main appellant along with interest and penalty on both the appellants have been imposed.

2. The facts of the case are that the appellant is engaged in manufacture of scented betel nuts, which is known as meethi supari, and is registered with the Central Excise Department. In the process of manufacture of scented betel nuts, raw material betel nuts is procured and then it is cut into small size by cutting machine. Thereafter, the cut betel nuts are processed in sieving machine, then it is soaked in water overnight in terrace. The soaked betel nuts is dried and mixed with liquid sugar and kept on terrace for 2 days. The prepared finished product is packed in pouches and sold in the market in bulk packages.

3. On 22 and 23.12.2017, the factory and residential premises of Shri Jugal Kishore Agarwal were searched by officials of DGCI and it was found that raw material and finished goods of Rs. 57,16,55 were in excess as well as certain raw materials have been found short as compared to stock register. Some loose sheets have also been found during the course of search. The statement of Shri Jugal Kishore Agarwal, Director, was recorded on 23.12.2017 wherein he admitted the alleged removal of finished goods and discrepancy in stocks. The statement of Shri Pramod Bora, site supervisor, was also recorded on 22.12.2017. Subsequently, both Shri Jugal Kishore Agarwal and Pramod Bora retracted their statements vide letters dated 23.12.2017. Again, their statements were recorded on 08.01.2018, which were again retracted. The statement of one Shri Suryawan Singh, labour, was also recorded on 22.12.2017 wherein he explained the manufacturing process.

4. In the show cause notice dated 25.06.2019, excise duty was demanded for the period from 14.06.2017 by invoking extended period of limitation on the basis of electricity consumption by applying peak ratio of production per unit of electricity as noticed during December 2017. It was also alleged in the show cause notice that during physical verification of stock at the time of search, stock of certain raw materials and finished goods were found in excess, whereas stock of some other raw materials was found short. Loose purchase records were also found showing clandestine removal of manufactured goods from the factory premises and the Director of the appellant admitted alleged removal of goods.

5. The matter was contested by the appellant but the Adjudicating Authority confirmed the demand proposed in the show cause notice. The said order was challenged before the learned Commissioner (Appeals). The matter was remanded again to the Adjudicating Authority vide order dated 16.04.2021, wherein the learned Commissioner (Appeals) directed the Adjudicating Authority to conduct necessary enquiry regarding the correctness of allegations made by the appellant and thereafter pass a speaking order. Again, in the remand proceedings, the Adjudicating Authority confirmed the demand holding that the appellant has not produced proper stock records and the allegation of excess and shortage of stock is not acceptable. The demand of Central Excise duty, ascertained on the basis of electricity consumption, appears to be close to the amount admitted by the appellant’s Director. The said order was again challenged before the learned Commissioner (Appeals), who dismissed the appeal filed by the appellant and upheld the demand, holding that the demand is based on electricity consumption and admission by the Director. Against the said order, the appellant is before me.

6.