2017 (9) TMI 333 - AT - Central Excise

Tribunal overturns duty demand and penalties on manufacturer due to lack of evidence

M/s. Barijoriwala Rolling Mills Pvt. Ltd., Shri Lakhan Goyal, Director Versus CCE, Jaipur-I

The Tribunal set aside the Commissioner of Central Excise's order imposing duty demand and penalties on a manufacturer of M.S. rolled products due to ... Clandestine manufacture and removal - MS Ingots - demand on the ground that on the basis of a small quantity of 36.49 MTs of M.S. ingots shown to have been cleared by M/s. Nirmal Inductomelt Pvt. Ltd. to the main appellant and not shown in the accounts of the main appellant and also on the ground that estimated production by the main appellant based on average power consumption, as arrived at in another unit manufacturing M.S. items. Held that: - the discrepancy in the receipt of raw materials and M.S. ingots was alleged on the basis of purported records maintained by M/s. Nirmal Inductomelt Pvt. Ltd. There is no other corroborative evidence for unaccounted receipt of such materials and use of material in further manufacture by the main appellant - There are many other substantial distinction between the main appellant and SSSRM. Even otherwise, we note that no examination or technical test has been conducted in the main appellant’s unit, to arrive at the correctness of power consumption and also to get additional corroborative evidence with reference to possible unaccounted manufacture and clearance of dutiable items. Merely on the basis of power consumption of the appellant unit, allegation of unaccounted production of M.S. ingots and its clandestine removal could not be sustainable. Appeal allowed - decided in favor of appellant. Issues:- Allegation of unaccounted receipt and usage of M.S. ingots- Allegation of unaccounted production of M.S. items based on power consumptionAnalysis:1. The case involved two appeals against an order by the Commissioner of Central Excise, Jaipur-I, regarding duty demand and penalties imposed on the main appellant, a manufacturer of M.S. rolled products. The appeals were related to unaccounted receipt and usage of M.S. ingots and alleged unaccounted production of M.S. items based on power consumption.2. The Original Authority confirmed duty demand and penalties, alleging that the main appellant suppressed production and engaged in clandestine removal without duty payment. The duty demand was based on discrepancies in M.S. ingots receipt and estimated production using power consumption data. Penalties were imposed on the main appellant and its Director.3. The appellants argued that the case lacked verification or evidence supporting the allegations. They contended that the demand was based on presumption and estimation without factual or legal backing. They highlighted inconsistencies in electricity consumption calculations and lack of technical verification specific to the main appellant's operations.4. The Tribunal noted that the case heavily relied on estimated production using power consumption data from another unit, which was not comparable to the main appellant's operations. The Tribunal emphasized the importance of technical tests to validate power consumption claims and criticized the lack of such tests in the main appellant's unit.5. Referring to similar cases, the Tribunal highlighted the need for actual experiments to determine power consumption accurately. It cited instances where demands based solely on power consumption were deemed unsustainable without proper technical assessments. The Tribunal emphasized the necessity of reliable methods, such as conducting experiments in the concerned unit, to support duty demands.6. Based on the analysis and precedents, the Tribunal found no merit in the impugned order and set it aside, allowing the appeals. The decision was influenced by the lack of technical verification, inconsistencies in power consumption comparisons, and the necessity for reliable evidence to support duty demands.This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision based on legal principles and precedents.