Custom, Excise & Service Tax Tribunal
Super Doors & Plywoods Pvt Ltd vs Kolkata South on 14 November, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH: KOLKATA
REGIONAL BENCH - COURT NO. 2
Excise Appeal No. 75784 of 2018
(Arising out of Order-in-Appeal No. 104/KOL-V/2017 dated 27.11.2017 passed by the
Commissioner of C.G.S.T. and C.X. (Appeal-I), Kolkata, G.S.T. Bhawan, 8th Floor, 180,
Shantipally, Kolkata - 700 107)
M/s. Super Doors & Plywoods Private Limited : Appellant
[Presently known as 'Subgreen Wudtech Private Limited']
Falta Road, Falta, Mouja - Bayaria,
P.S.: Falta, District: 24 Parganas (South),
West Bengal - 743 513
VERSUS
Commissioner of C.G.S.T. and Central Excise : Respondent
G.S.T. Bhawan, 8th Floor, 180, Shantipally,
Kolkata - 700 107
APPEARANCE:
Shri Navin Kumar Agrawal, Chartered Accountant, for the Appellant
Ms. Suman, Authorized Representative, for the Respondent
CORAM:
HON'BLE SHRI R. MURALIDHAR, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 77713 / 2025
DATE OF HEARING: 12.11.2025
DATE OF DECISION: 14.11.2025
ORDER:[PER SHRI K. ANPAZHAKAN] M/s. Super Doors & Plywoods Private Limited (hereinafter referred to as the "appellant"), registered under Central Excise Registration No. AAMCS8253NEM001, are engaged in the manufacturing of Plywood, Sheets of Plywood and Block board of CETSH Nos. 44123190, 44083910 and 44129400 respectively.
Page 2 of 17Appeal No.: E/75784/2018-DB 1.1. A Show Cause Notice has been issued to the appellant alleging that they have manufactured and clandestinely removed 71,692.96 sqm. of Plywood and 29,32,120.17 sqm. of Veneer from the factory without payment of Central excise duty amounting to Rs.42,73,239/- (including Cesses) in contravention of the provisions of rules 4, 10(1) and 11(1) of the Central Excise Rules, 2002.
1.2. The said Notice was adjudicated and demand of Central excise duty of Rs. 42,73,239/- has been confirmed, along with interest and equal amount of duty as penalty, vide Order-in-Original No. 01/ADDL. COMMR./CE/KOL-VII/ADJN/2014-15 dated 30.05.2014.
1.3. On appeal, the Ld. commissioner (Appeals) upheld the demand of Central excise duty (including cess), along with interest and penalty, vide the impugned Order-in-Appeal No. 104/KOL-V/2017 dated 27.11.2017.
1.3. Aggrieved by the confirmation of the demand of central excise duty (including cess), along with interest and penalty thereon, the appellant has filed this appeal.
2. During the course of hearing, the appellant pointed out that they have declared the quantity of major input viz., Timber consumed and finished goods viz., Plywood, Sheets of Plywood (Veneer) and Block Board produced during the months of April, 2012 to May, 2013 in the E.R.-6 monthly returns filed by them. They have also stated that the month-wise input-output ratios derived from the above declared quantity of consumption of Timber and production of finished goods are 1:1311, 1:1015 and 1:1759 in the Page 3 of 17 Appeal No.: E/75784/2018-DB months of December, 2012, January, 2013 and February, 2013 respectively; that apart from these three months, the average input : output ratio arrived at in respect of the other months is 1:2459 and the highest is 1:2782.
2.1. It is submitted by the appellant that considering the lowest ratio which is 1:2181 in May, 2012, the Department has alleged that input output ratios in the months of December, 2012, January, 2013 and February, 2013 are disproportionate. They stated that the Revenue has also contended that the electricity consumption and resin consumption in these three months were higher than those of other months; therefore, it is alleged that the appellant has suppressed actual production for the months of December, 2012, January, 2013 and February, 2013 and has clandestinely removed the said suppressed quantities of Plywood and Sheets of Plywood (Veneer) from the factory.
2.2. The appellant refers to the following tables, on the basis of which the allegedly suppressed quantity during the three months of December, 2012, January, 2013 and February, 2013, has been worked by the Department: -
Page 4 of 17Appeal No.: E/75784/2018-DB Page 5 of 17 Appeal No.: E/75784/2018-DB 2.3. Thus, the appellant explained that on the basis of the above, the Department has demanded central excise duty of Rs. 42,73,239/-alleging that the appellant has clandestinely manufactured and cleared 71,692.96 sqm. of Plywood and 29,32,120.17 sqm. of Veneer from the factory without payment of Central excise duty.
3. The grounds urged by the appellant in the present appeal, can, inter alia, be summarized as under: -
(i) The input : output ratio will not be uniform in all months. It depends on various factors. The quality of timber is the main reason for difference in the input : output ratios. The Appellant submits that there is no Standard Input Output Norm (SION) prescribed under the Central Excise Act or Rules, nor has the appellant availed any exemption benefit on imported Timber or finished goods. Hence, applying any such ratio to arrive at the quantity of finished goods manufactured in the factory, is legally not tenable.
(ii) The SCN has failed to consider crucial production factors such as the quality of timber, work-in-process inventory, process waste and scrap, and sale of intermediate product (Veneer). The manufacturing process involves multiple stages extending over months, and the finished goods are recorded in the Daily Stock Account (DSA) only after attaining commercially saleable condition. In support of their claim, the appellant has also submitted a process flowchart of manufacture of plywood and sheets of plywood from timber (Logs), which has been Page 6 of 17 Appeal No.: E/75784/2018-DB enclosed as Annexure - A. Further, the appellant submitted different statements like month-wise timber consumption, statement of WIP after different process which are enclosed as Annexure - B.
(iii) The computation method adopted in Annexures I and II to the SCN is fundamentally flawed, as it incorrectly aggregates the quantities of Plywood, Veneer, and Block Board and assumes that one sheet of Veneer yields one sheet of Plywood, ignoring that multiple Veneer layers are required to make a single Plywood sheet. The significant generation of waste and scrap has also been ignored. Moreover, the alleged corroboration of excess production with electricity and resin consumption is baseless, as no standard consumption norm per unit of output has been shown. The Appellant submits that the alleged clandestine production and removal of finished goods is built-up not on the basis of any document of unaccounted production and removal but entirely on the basis of wrongly worked out unaccounted production, derived from faulty made-up Input-Output ratio.
Accordingly, the Appellant submits that the entire determination of excess production and resultant duty demand is arbitrary and devoid of factual and legal basis.
(iv) In support of their contention, the appellant relies on the decision in Punalur Paper Mills Ltd. v. CCE & Customs, Cochin [2009 (244) E.L.T. 204 (Tri.-Bang.)], wherein the Tribunal, following the Supreme Court's ruling Page 7 of 17 Appeal No.: E/75784/2018-DB in K.P. Varghese v. ITO [(1981) 131 ITR 597 (S.C.)], held that the onus of proving taxability lies on the Revenue and that clandestine removal must be established through tangible, positive evidence. The Tribunal also ruled that theoretical or formula-based calculations (like input-output ratios), without concrete corroboration, cannot form the basis of duty demand. Similarly, in Seal Narrow Tapes Pvt. Ltd. v. CCE [2002 (146) E.L.T. 586 (Tri.)], it was held that mere assumptions or estimates are insufficient. In the present case, the demand based solely on erroneous and arbitrary input- output ratios and without stock verification, corroborative evidence, or fault in ER-6 returns, is unsustainable in law.
(v) The appellant further submits that the Ld. Commissioner (Appeal) erred in ignoring the binding precedents of H.M.M. Ltd. [1995 (76) E.L.T. 497 (S.C.)] and Metal Forgings v. UOI [2002 (146) E.L.T. 241]. Hence, the finding that input-output ratio establishes clandestine production is grossly erroneous, arbitrary, and contrary to settled judicial principles.
(vi) Further, the appellant has relied the following case laws wherein it has been continuously held that burden to prove clandestine removal is on the Revenue and is required to be discharged by adding strong, sufficient and positive evidence:
• Shreeji Aluminum Ltd. vs. Commissioner of Central Excise, Vapi reported in 2012 (282) E.L.T. 234 (Tri- Ahmd.) • Chandon Tobacco Co. vs. Commissioner of Central Excise, Vapi reported in 2011 (270) E.L.T. B7 (Tri- Ahmd.) Page 8 of 17 Appeal No.: E/75784/2018-DB • J.A. Naidu v. State of Maharashtra reported in 1983 (13) E.L.T. 1611 (S.C.) • CCE vs Chemphar Drugs and Liniments reported in 1989 (40) E.L.T. 276 (SC) • Commissioner of Central Excise, Chennai vs R. V. Steels Pvt Ltd reported in 2009 (243) E.L.T. 316 (Chennai)
3.1. In view of the above submissions, the appellant prayed for setting aside the demands of central excise duty (including cess) confirmed against them in the impugned order, along with interest and penalty, and allowing the appeal filed by them.
4. The Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order. She submits that the output of finished goods was found to be abnormally low during the months of December, 2012, January, 2013 and February, 2013; that the electricity consumption and resin consumption in these three months were higher than those of other months. Accordingly, she justified the demand of central excise duty confirmed in the impugned order.
5. Heard both sides, perused the appeal records and the submissions made by both the sides.
6. We observe that the entire case of the Department rests solely on a theoretical and unverified input-output ratio derived from E.R.-6 returns. We find that the Department has not brought in any corroborative evidence such as physical stock verification or independent records. It is a settled principle of law that mere assumptions or presumptions cannot be a substitute for proof, beyond reasonable doubt. We find that the alleged clandestine Page 9 of 17 Appeal No.: E/75784/2018-DB production and removal of finished goods is built-up not on the basis of any document of unaccounted production and removal, but entirely on the basis of wrongly worked out unaccounted production, derived from faulty made-up input-output ratio.
6.1. In this regard, we refer to the decision in the case of Punalur Paper Mills Ltd. v. Collector of C.Ex. & Customs, Cochin [2009 (244) E.L.T. 204 (Tri.-Bang)], wherein the Tribunal, following the Supreme Court's ruling in K.P. Varghese v. ITO [(1981) 131 ITR 597 (S.C.)], held that the onus of proving taxability lies on the Revenue and that clandestine removal must be established through tangible, positive evidence. The Tribunal also ruled that theoretical or formula-based calculations (like input-output ratios), without concrete corroboration, cannot form the basis of duty demand. The relevant observation of the Tribunal in the aforesaid decision is reproduced below:
"8. We have carefully gone through the records available and the submissions. The Annexure A indicates only the abstract of calculation of alleged duty short paid. The said abstract does not contain the actual working out of the demand. It is not very clear as to what rate of duty was taken while calculating the demand. The appellants have stated that they could not have access to all the relied on documents in the Show Cause Notice. We agree with the appellants that unless the relied on documents are supplied, they would not be in a position to effectively make their submissions. Even before this Bench all the relevant documents were not available. The Hon'ble Supreme Court in the case of K.P. Varghese, cited supra, has held that "it is well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the revenue and the second condition being as much a condition of taxability as the first, the burden lies on the revenue to show that there is an understatement of the consideration and the second condition is Page 10 of 17 Appeal No.: E/75784/2018-DB fulfilled." In the Seal Narrow Tapes Pvt. Ltd. case, the Tribunal has held that the charge of clandestine removal is required to be proved by the Revenue by production of tangible and positive evidence. In the CCE Coimbatore v. Sasidhara Dyers case cited supra, it has been held that to confirm demands on clandestine removal, department should also show that the goods were produced and sold to individuals in the market by collecting evidence of purchase of inputs and sale of final goods as well as power consumption. In the ST. Texturiser v. CCE, Surat, it has been held that clandestine manufacture and removal being quasi-criminal in nature were required to be established beyond doubt by producing evidence in the shape of procurement of raw material, shortage, excess use of electricity, flow back of funds and purchase of final products by customers. In the present case, the Show Cause Notice enumerates the results of search in the premises of various purchasers of the paper from the appellant for the year 1985. The result of those search is that the said purchasers received goods - from the appellant but the gate passes (GP-1) evidencing payment of duty were not available, but those facts do not form the basis of the demand. The demand is arrived at on a theoretical basis. On the basis of different sources like weighbridge register, RT-5 etc., the raw materials supposed to have been utilized by the appellant have been arrived at. On the basis of a letter from Hindustan Paper Mills and also Shri John, Superintendent (Paper Technologist), the percentage of pulp in respect of each raw material has been considered. Thereafter the quantity of pulp has been arrived at. A formula of pulp quantity multiplied by 100:88 has been employed to arrive at the quantity of paper produced by the appellant during the relevant period. The basis for adoption of the ratio 100:88 is not at all clear either from the show cause notice or the Order-in-Original. The method adopted in the Show Cause Notice and also Order-in-Original appears to be highly arbitrary. The assumptions have no basis. They are only estimates made by the Revenue. Unless those figures arrived at by theoretical calculations are backed by concrete evidence, no demand can be made. In fact, the Central Excise Officers carried out investigations with various purchasers, however these investigations do not form the basis of demand at all. In the Page 11 of 17 Appeal No.: E/75784/2018-DB statements recorded by the Revenue it has been stated that the appellants accounted only for 1/3 of the actual production. On that basis, one cannot arrive at the actual production by multiplying the accounted production by 3. Even the Revenue has not adopted such a course. In other words, when a demand of nearly 7 crores is made, there should be clear evidences and only such evidences can form a solid basis of demand. The formulas at best can be used only for a rough estimate and not for demanding duty. The Revenue has gone by figures supplied by Hindusthan Paper Mills. In the course of personal hearing, it was vehemently argued that the appellant paper mill was very old and the machinery is not at all modern. Therefore the figures of another unit like Hindusthan Paper Mills cannot form the basis for arriving at the clandestine production and removal. In the Indian Metals & Ferro Alloys Ltd. v. CCE, cited supra it has been held that production ratios or parameters of a factory cannot be based on, or be compared to those of other factories."
[Emphasis supplied] 6.2. In the case of Seal Narrow Tapes Pvt. Ltd. v. Commissioner of C.Ex., Bolpur [2002 (146) E.L.T. 586 (Tri. - Kol.)], it has been held that mere assumptions or estimates are insufficient. In the present case, the demand based solely on erroneous and arbitrary input-output ratios and without stock verification, corroborative evidence, or fault in ER-6 returns, is unsustainable in law. The relevant part of the said decision is reproduced below:
"6. After going through the impugned orders, I agree with the submissions made by the ld. Adv. Apart from applying the input:output ratio of 1:1 to the two financial years 1994-95 and 1995-96 there is no other evidence on record to reflect upon the clandestine activities of the appellant. It is also not clear as to why only two financial years have been chosen by the Revenue for applying the said ratio and why the entire period of five years have been ignored by them. It is well settled principle of law that charge of clandestine removal is required to be Page 12 of 17 Appeal No.: E/75784/2018-DB proved by the Revenue by production of tangible and positive evidence. There being none in the present case. I find no justification for confirmation of demand against the appellant. The impugned order is accordingly set aside and appeal allowed with consequential relief to the appellants."
6.3. It is well settled that central excise duty cannot be demanded on the basis of assumptions and presumptions or preponderance of probabilities and clandestine clearance is a serious allegation, which requires cogent corroborative evidences to substantiate the allegations, which are absent in this case.
6.4. The said issue has been examined by the Hon'ble High Court of Allahabad in the case of Continental Cement Company v. Union of India [2014 (309) E.L.T. 411 (All.)], wherein it has been held as under: -
"10. We have heard the learned counsel for the parties and gone through the material available on record, from which it appears that Shri Shubhashis Dev, Government Examiner of questioned documents, Shimla gave his written opinion dated 12-6-1998, wherein he has stated that "the documents of this case have been carefully and thoroughly examined. The enclosed writings and signatures stamped and marked were all written by one and the same persons".
11. From the above, it appears that all the documents were written by one and the same persons, though the dates and the name of the parties are different. When it is so then the genuineness of the documents cannot be accepted.
12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine Page 13 of 17 Appeal No.: E/75784/2018-DB removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects :
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department.
14. In the instant case, no investigation was made by the Department, even the consumption of electricity was not examined by the Department who adopted the short cut method by raising the demand and levied the penalties. The statement of so called buyers, namely M/s. Singhal Cement Agency, M/s. Praveen Cement Agency; and M/s. Taj Traders are based on memory alone and their statements were not supported by any documentary evidence/proof. The mischievous role of Shri Anil Kumar erstwhile Director with the assistance of Accountant Sri Vasts cannot be ruled out.
15. In view of the above, we are of the opinion that when there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible. No purchase of raw material out side the books have been proved.
16. In the light of the above discussions and considering the totality of the case, we are satisfied that no case is made out for extra so called clandestine sale of the Portland Cement to the said parties. We are satisfied that the first appellate Page 14 of 17 Appeal No.: E/75784/2018-DB authority has rightly deleted the addition and cancel the penalties. Hence we hereby set aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority, along with the reasons mentioned herein.
17. In the result, all the appeals filed by the appellants are hereby allowed."
6.5. A similar issue has also been dealt with by the Tribunal at Ahmedabad in the case of Arya Fibres Ltd. v Commissioner of C.Ex., Ahmedabad-II [2014 (311) E.L.T. 529 (Tri. - Ahmd.)] wherein the Bench has categorically opined that the allegation of clandestine removal is to be corroborated by supporting evidences. The relevant observations of Tribunal in the said case are reproduced below for ease of reference: -
"40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following :
(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of :
(a) raw materials, in excess of that contained as per the statutory records;
(b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty;
(c) discovery of such finished goods outside the factory;
(d) instances of sale of such goods to identified parties;Page 15 of 17
Appeal No.: E/75784/2018-DB
(e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;
(f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;
(g) statements of buyers with some details of illicit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty;
(i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case-law on the subject in Centurian Laboratories v. CCE, Vadodara [2013 (293) E.L.T. 689]. It would appear that the decision, though rendered on 3-5-2013, was reported in the issue of the E.L.T., dated 29-7-2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased or consumed and not merely the recording of confessional statements. A co-ordinate Bench of this Page 16 of 17 Appeal No.: E/75784/2018-DB Tribunal has, in another decision, reported in the E.L.T. issue of 5-8-2013 (after hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines v. CCE [2013 (294) E.L.T. 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal."
6.6. From a perusal of the records available before us, we find that there is no corroborative evidence available on record to substantiate the allegation of manufacture and clandestine clearance of the goods in this case. We are therefore of the considered view that the demand of central Excise duty cannot be raised and confirmed on the basis of some variations in the input:output ratios in some months. Accordingly, we hold that the allegation of clandestine clearance against the appellant-company cannot be substantiated on the basis of mere assumptions and presumptions and consequently, we set aside the demand of central excise duty confirmed against the appellant in the impugned order.
Page 17 of 17Appeal No.: E/75784/2018-DB 6.7. As the demand itself cannot be sustained, the question of demanding interest or imposing penalty does not arise and hence, we set aside the same.
7. In the result, we set aside the impugned order and allow the appeal filed by the appellant, with consequential relief, if any, as per law.
(Order pronounced in the open court on 14.11.2025) Sd/-
(R. MURALIDHAR) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd