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The Commissioner of Central Excise, Kolkata-III issued show- cause notice stating that the assessee is liable to pay additional excise duty on account of clandestine removal of the products manufactured by them. The assessee's explanation was that the consumption of product LAB and Spent Sulphuric Acid during the material period and the ratio of LAB to LABSA and ratio of Spent Sulphuric Acid was almost the same in respect of the manufacturing activity done by the assessee for themselves and the activity done for conversion job. It was stated that the ratio of Spent Sulphuric Acid to Sulphuric Acid for the assessee's manufacture was 1:0.82 and for that conversion job it was 1:0.81 and there is hardly any difference. The Commissioner while adjudicating the show-cause notice opined that the difference in the input output ratio between that which was adopted for the assessee's own manufacture and that for the conversion job was different and there is no reason as to why such a different ratio should be adopted and therefore came to the conclusion that there was suppression, consequently clandestine removal.

The assessee has filed appeal before the Tribunal challenging the said order and explained that their manufacturing activities as to how they were engaged in manufacture for themselves as well as they have been carrying on conversion job for another third party. After nothing the facts the Tribunal held that LABSA and Spent Sulphuric Acid are of the same quality and the processing tank is also common in the factory as it is not possible to manufacture goods separately. Further, the Tribunal analysed the total consumption of LAB and Sulphuric Acid during the material period and took note of the ratio adopted and on facts held that there is hardly any difference between the ratio adopted for their own manufacture and conversion job. Further, the Tribunal noted that the department has not made any allegation that assessee procured excess quantity of LAB to manufacture excess quantity of Acid Slurry or LABSA 90%, nor the department has produced any evidence or referred to any material to show how excess amounts of LAB has been brought into the factory and how the same were removed after being manufactured into LABSA. Thus, the Tribunal concluded that without any evidence on record the allegation of clandestine removal cannot be made.