2025-VIL-1725-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Section 36B of Central Excise Act, 1944 – Manufacture of excisable goods – Allegation of clandestine clearance – Demand of differential duty – Appellant is engaged in manufacture and clearance of excisable goods, namely, polybags – After investigation, department issued show cause to Appellant by proposing demand of duty on account of alleged clandestine clearances and denial of SSI Exemption – Adjudicating authority confirmed demands as proposed in show cause notice – Whether department has established allegation of clandestine removal of excisable goods against Appellant with sufficient evidence – HELD – Allegation of clandestine clearances is primarily based on a pen drive recovered from residential premises of a partner of Appellant. Data contained in said pen drive was retrieved by Indian Automation and Technologies Private Limited, which is not a notified agency as Examiner of Electronic Evidence under Section 45A of Evidence Act. Pendrive has not met the mandatory protocols set out under Section 36B of the Act including requirement of a certificate under Section 36B(4) of the Act. Pen drive has not been considered as a valid evidence and hence, any demand based on such evidence cannot be sustained – On issue of consumption of electricity, Adjudicating authority has not considered any of submissions made by Appellant with respect to various factors and reasons attributable to difference in power consumption including difference in usage of virgin materials vis-a-vis reprocessed materials. It is natural that making polybags from reprocessed materials results in more electricity consumption. Any demand of differential duty, merely based on power consumption, cannot stand scrutiny of law. Revenue has not discharged their onus to establish any excess production by Appellant nor clandestine removal thereof. Demand of differential duty, on account of clandestine clearances, as confirmed in impugned order is set aside – Appeals allowed - Clubbing of value of clearances – Denial of exemption – Whether denial of SSI Exemption on account of clubbing of value of clearances of Appellant and other units is legally tenable or not – HELD – Appellant have placed on record that all disputed units had source of capital investments either by way of their savings or through loans from banking channels, which remains undisputed as evidenced by their financial records. Appellants have successfully demonstrated the independent existence and also independent machinery and infrastructure to manufacture the goods. Sharing of few common resources would not be a ground to club value of clearances between units. Department has not alleged any beneficial interest at hands of disputed units to constitute a mutuality. Denial of SSI Exemption and consequential demand of duty by clubbing value of clearances of Appellant and other units shall fail the scrutiny of law because of their independent existence. Order under challenge is set aside.
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