2018 (7) TMI 1524 - AT - Central Excise

Tribunal overturns Revenue's claims of clandestine activities, upholds SSPL's production records and capacity.

The Tribunal found that the Revenue failed to prove allegations of clandestine manufacture and clearance by SSPL. It was determined that SSPL accurately ... Clandestine Manufacture and Removal - MS ingots - it was alleged that the heat register, private heat register and ingots movement register indicate that there was excess production which was suppressed from the statutory records - whether appellant SSPL has recorded the correct production of MS ingots or otherwise? Held that:- This is the third round of litigation before the Tribunal on the very same issue. In the first round of litigation, the Adjudicating Authority confirmed the same demands raised against SSPL and imposed penalties, also on KSPL - The entire findings of the Adjudicating Authority are only on the records of both private and official showing the production of MS ingots per heat in the range of 3.5 to 3.8 MTs. The findings recorded by the Division Bench in COMMISSIONER OF CENTRAL EXCISE, HYDERABAD – III VERSUS M/S SINGARENI STEELS PVT. LTD. [2010 (9) TMI 1240 - CESTAT BANGALORE] as to the production capacity of appellant SSPL of the furnace installed, has reached finality. Since these findings have attained finality, the Adjudicating Authority could not have without filing an appeal and adducing contrary evidence gone beyond the findings recorded by the Tribunal. In the absence of so, in the adjudication order, the Lower Authority should have followed the order of the Tribunal and considered the production capacity of the appellant SSPL as indicated in the Final Order recorded by Division Bench. The allegation of the Revenue that appellant SSPL had clandestinely manufactured excess production and removed the same without payment of duty falls flat - In view of the findings of the Division Bench order, it is found that lower authorities have erred in coming to a conclusion there was excess production and clearances clandestinely from SSPL. The entire demand needs to be set aside. Demand of Interest and penalty - Held that:- Since the entire demand of SSPL stands set aside, the question of interest and penalty on SSPL does not arise, as also the question of imposing penalty of KSPL also does not arise. Appeal allowed - decided in favor of appellant. Issues Involved:1. Allegation of clandestine manufacture and clearance by SSPL.2. Validity of extended period for issuing the show cause notice.3. Determination of production capacity of SSPL’s furnace.4. Imposition of penalty on SSPL and KSPL under Central Excise Rules.Issue-wise Detailed Analysis:1. Allegation of Clandestine Manufacture and Clearance by SSPL:The Revenue alleged that SSPL clandestinely manufactured and cleared MS Ingots without recording them in statutory records, based on private records, electricity consumption, and statements from SSPL’s officials. It was found that SSPL had not recorded the production of 4096.544 MTS of MS ingots during specific periods. Additionally, 4250.243 MTS of ingots were allegedly removed without duty payment. The Tribunal noted that the entire case hinged on whether SSPL accurately recorded its production. The Tribunal found that the Adjudicating Authority’s reliance on private and official records showing higher production was not substantiated by contrary evidence.2. Validity of Extended Period for Issuing the Show Cause Notice:The show cause notice was issued by invoking the extended period, which the appellant contested as incorrect due to the delay in issuing the notice after obtaining documentary evidence. The Tribunal did not explicitly address this issue in detail, focusing instead on the core issue of production capacity and clandestine manufacture.3. Determination of Production Capacity of SSPL’s Furnace:The Tribunal emphasized the importance of determining the production capacity of SSPL’s furnace. It was noted that the furnace’s capacity was certified as 2.1 MTs per heat by the manufacturer and the Commissioner of Central Excise, Hyderabad-III. The Tribunal found no evidence of alterations to enhance the furnace’s capacity. The Adjudicating Authority’s findings based on private records indicating higher production were not supported by any contrary evidence. The Tribunal held that the production capacity of 2.1 MTs per heat should be considered final, as there was no appeal against this finding.4. Imposition of Penalty on SSPL and KSPL under Central Excise Rules:The Tribunal set aside the penalties imposed on SSPL under Rule 173Q and on KSPL under Rule 209A of the Central Excise Rules, 1944. The Tribunal found no evidence of KSPL’s involvement in clandestine activities or receiving goods without duty payment. Since the demand against SSPL was set aside, the question of penalties on both SSPL and KSPL did not arise.Conclusion:The Tribunal concluded that the Revenue failed to prove that SSPL had clandestinely manufactured and cleared excess production of MS ingots. The Adjudicating Authority’s reliance on private records and electricity consumption was not substantiated by any contrary evidence. The Tribunal held that the production capacity of SSPL’s furnace should be considered as 2.1 MTs per heat, as certified by the manufacturer and the Commissioner of Central Excise. Consequently, the entire demand and penalties were set aside, and the appeals were allowed.