2026-VIL-1351-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Clandestine Removal of Pig Iron, Mixed Coke and Crude Tar – DGCEI issued Show Cause Notice proposing recovery of central excise duty under Section 11A(4) of Central Excise Act with interest and penalty alleging that Appellant had clandestinely cleared goods without payment of duty – Appellant contended that shortage was only notional due to accounting methodology - Whether allegation of clandestine removal of goods by Appellant is sustainable on basis of difference between stock recorded by external agency on volumetric basis and figures reflected in statutory records without any tangible evidence – HELD – Allegation of clandestine removal is a serious charge which cannot be sustained on mere presumptions and assumptions, but requires concrete, positive and tangible evidence such as evidence of excess use of raw material, actual removal of unaccounted finished goods from factory, discovery of such goods outside factory, sale to identified parties, receipt of sale proceeds, excess electricity consumption or proof of actual transportation – In present case, no such tangible evidence has been produced by Revenue, merely difference between stock figures on volumetric basis and statutory records cannot prove clandestine removal – External agency's stock verification was conducted on volumetric basis not actual weighment, volumetric estimation is inherently approximate. Appellant's DSA was based on conversion ratios due to absence of weighment facility for pig iron production, different basis adopted for production estimation, consumption, clearance and stock taking, therefore discrepancy between stock taking figures and production figures should not immediately lead to conclusion that difference was removed clandestinely – Appellant is public sector undertaking, therefore possibility of mala fide conduct is remote – Further, statements recorded during investigation violated procedure prescribed under Section 9D(1)(b) of CEA, 1944 as the procedure requires summoning of persons who made statement, examining them as witness and opinion that admission is in interests of justice, which was not done – Extended period of limitation is not invocable as there is no evidence of positive act of suppression or fraud on part of appellant, in fact Appellant itself detected shortage and adjusted in books reflected in Balance Sheet and entire investigation emanates from such disclosure – Revenue failed to discharge burden of proving clandestine manufacture and removal by tangible evidence – Demand of central excise duty confirmed in impugned order is set aside and penalty imposed is also set aside – The appeal is allowed
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