Tribunal upholds duty demand of Rs. 7.28 cr against company for clandestine removal, penalty reduced

The Tribunal upheld a duty demand of Rs. 7,28,92,253/- against the appellant company for alleged clandestine removal of Saria (TMT Bars) and unaccounted receipt of MS Ingots. The penalty on the company was also reduced. However, the duty demand of Rs. 16,38,63,265/- based on a power consumption ratio was set aside due to lack of corroborative evidence.

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Issues Involved:
1. Alleged unaccounted manufacture and clandestine removal of Saria (TMT Bars).
2. Alleged unaccounted receipt of MS Ingots.
3. Determination of duty demand based on power consumption ratio.

Detailed Analysis:

1. Alleged Unaccounted Manufacture and Clandestine Removal of Saria (TMT Bars):
The primary issue revolves around the alleged clandestine removal of Saria (TMT Bars) by the appellant company, based on documents recovered during a search conducted on 10/09/05. These documents included delivery orders, daily receipt and despatch sheets, Nakal Bahi, Roz Namcha, and private ledger books. The Department prepared Charts A, B, C, and D from these documents, indicating despatches of Saria II and scrap/rejects without corresponding invoices, suggesting clandestine removal.

The appellant argued that the despatches of Saria II were sales of CTD bars by M/s Meenakshi Steels, a trading concern owned by Shri Ghasi Lal Sharma, and not manufactured by the appellant. However, both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma, in their statements, admitted that the documents pertained to the goods manufactured and cleared from the factory. The Tribunal found the appellant's claim unconvincing, noting that the price of Saria I and Saria II was the same, while TMT bars were more expensive than CTD bars. Consequently, the duty demand of Rs. 7,22,15,192/- based on Charts A, B, C, and D was upheld.

2. Alleged Unaccounted Receipt of MS Ingots:
The Department also alleged that the appellant received 5050 MT of unaccounted MS Ingots from various suppliers during the period from 1st April 2005 to 08/09/2005, which were used for unaccounted production of Saria. This was corroborated by statements from three suppliers, although the cross-examination of these suppliers was not allowed. Additionally, it was found that the appellant continued to receive unaccounted ingots from M/s Nirmal Inductomelts Pvt. Ltd. till 01/10/05, resulting in an estimated clandestine manufacture of 202.88 MT of TMT bars. The duty demand of Rs. 6,77,061/- based on this unaccounted receipt was upheld.

3. Determination of Duty Demand Based on Power Consumption Ratio:
The duty demand of Rs. 16,38,63,265/- for the period from April 2002 to March 2005 was based on an assumed power consumption ratio of 102.09 units per MT of rolled products. This ratio was determined by dividing the total power consumption during July 2005 and August 2005 by the alleged actual production during these months, which included both recorded production and alleged clandestine clearances. The Tribunal found this method flawed, as it assumed that the goods sold during these months were produced during the same period without corroborative evidence. There was no technical literature or actual experiment to support the claimed power consumption norm. Consequently, the duty demand of Rs. 16,38,63,265/- was set aside.

Conclusion:
The Tribunal upheld the duty demand of Rs. 7,28,92,253/- along with interest and reduced the penalty on the appellant company to Rs. 7,28,92,253/-. The penalties on Shri Ghasi Lal Sharma and Shri Murari Lal Sharma were reduced to Rs. 10,00,000/- and Rs. 50,000/- respectively. The duty demand of Rs. 16,38,63,265/- based on the power consumption ratio was set aside.

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