TaxTMI 
TaxTMI 
2012 (9) TMI 170
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....l Alloys Pvt. Ltd., Nitin R. Kabra, Meta Rolls And Commodities Pvt. Ltd., Mauli Steel Pvt. Ltd., Omsairam Steel and Alloys Pvt. Ltd., Nilesh S.Chechani, Nilesh Steel & Alloys Pvt.Ltd., Saptshrungi Alloys Pvt. Ltd., Shivkumar N. Lohiya, Dhruvkumar S. Kadam, Rishi Steel & Alloys Pvt. Ltd., Ravi Sureshkumar Gupta, Regent Steel Pvt. Ltd., Ahmednagar Alloys Pvt. Ltd., Jailaxmi Casting & Alloys Pvt. Ltd., Navin Bagadia Versus COMMISSIONER OF C. EX., NAGPUR S/Shri P.G. Chacko, S.K. Gaule, JJ. REPRESENTED BY : S/Shri D.B. Shroff, Sr. Advocate, V. Shridharan, a/w, P.V. Sadavarte, A.K. Singh and Pramod Kumar Rai, Advocates, for the Appellant. Shri R.K. Mahajan, JCDR, for the Respondent. [Order per : P.G. Chacko, Member (J)]. - These applications filed by the appellants seek waiver of pre-deposit and stay of recovery in respect of the amounts adjudged against them. 2. The assessee-companies were engaged, during the material period, in the manufacture and sale of M.S. ingots. They used induction furnaces for melting sponge iron/M.S. scrap and manufacturing their product, for which they consumed electricity supplied by the Maharashtra State Electricity Board (MSEB).....
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....urers and the furnace suppliers was made use of. The manufacturers had apparently entered into a spate of correspondence with the suppliers of furnace on the poor performance of furnace. For instance, M/s. Orange City Alloys Pvt. Ltd., in letters written to the supplier (Megatherm Electronics Pvt. Ltd.) of furnace, complained that the energy consumption levels of the furnace were higher than what had been guaranteed. These letters indicated that, at some point of time, the energy consumption level of the furnace was not going below 850 to 860 KWH per MT as against the guaranteed level of 725 to 750 KWH per MT. The ingot manufacturer wanted the supplier to rectify the defect of the furnace. The department laid their hands on this correspondence, on the basis of which the energy consumption by the manufacturer during the relevant period was estimated and the alleged clandestine removal quantified. 3. In each of the above cases, the department issued a show-cause notice to the manufacturer concerned and one or more functionaries of the company seeking to recover duty on the ingots allegedly manufactured and cleared clandestinely by the company and also to impose penalties. The n....
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....r of Central Excise, Meerut-1 [2009 (237) E.L.T. 674 (Tri.-Del.)] wherein it was held that electricity consumption could not be the only factor for determination of duty liability especially when the Commissioner was required to prescribe norms first as per rules and that the norm of 1046 units per MT adopted by the department was arbitrary. Ld. counsel has also relied upon the stay order passed by this Bench in the case of Nasik Strips Pvt. Ltd. viz. Order No. S/162-163/10 dated 9-7-2010 [2011 (263) E.L.T. 606 (Tribunal)] in Appeal No. E/598/09 wherein waiver of pre-deposit and stay of recovery were granted by this Bench following the decision in R.A Castings Pvt. Ltd. (supra). On the other hand, ld. JCDR has relied upon the stay order in Everest Rolling Mills (P) Ltd. v. Commissioner of Central Excise, Jaipur [2009 (244) E.L.T. 91 (Tri.-Del.)] wherein it was found that it was not merely the quantum of consumption of energy that was adopted as the basis of finding of clandestine removal of goods but clandestine supply of raw materials to the ingot manufacturer was also taken into consideration. It is pointed out that the Writ Petition filed by the party against the said stay order....
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....that it was not open to the department to invoke the extended period of limitation in these cases. On the other hand, the ld. JCDR submits that the extended period of limitation is invocable in all cases of clandestine removal of excisable goods. 6. The ld. counsel for M/s. Ishu Super Steel Pvt. Ltd. and the ld. counsel for M/s. Kalika Steel Alloys Pvt. Ltd. and others have urged that the stay order passed by this Bench in the case of M/s. Nasik Strips Pvt. Ltd. be followed as a precedent. This plea has been opposed on the strength of the stay order passed by the coordinate Bench at Delhi. 7. It is the common ground taken by all the counsel that - (a) there is no evidence of unaccounted procurement of raw material; (b) no evidence of unaccounted sale of finished goods; (c) no evidence of transportation of such goods, and (d) no evidence of payment for sale of such goods. 8. The ld. counsel appearing for M/s. Shree Steel Castings (P) Ltd. has, apart from other arguments, also submitted that there can be no demand of duty on the goods in question, based on consumption of a ....
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.... unaccounted production and clearance of M.S. ingots and accordingly, demand of duty was raised on them. The production was estimated on the basis that 1046 units of electricity would be consumed in the production of 1 MT of ingots, which norm was based on a technical study report of Dr. N.K. Batra, Professor of IIT, Kanpur, who reported that an induction furnace should consume electricity in the range of 555 to 1046 units for the manufacture of 1 MT of M.S. ingots. The department gathered data regarding the electricity consumption by the assessee for the period of dispute and worked out the production of ingots on that basis. There was no other basis for alleging clandestine removal of ingots or estimating the production. This position is clear from the following observation contained in the Tribunal's order in R.A. Castings' case :- "It may be emphasized that the instant case has been booked only on the basis of theoretical conclusions drawn on the basis of the 'technical opinion report' of Shri N.K. Batra. Professor of I.I.T., Kanpur and no evidence relating to clandestine manufacture and removal of goods is on record." The Tribunal accordingly set aside the demands of duty an....
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.... the assessee were overruled and, in the absence of valid or convincing explanation for the excess consumption of power, the demand worked out on the basis of consumption of electricity in clandestine manufacture of finished goods was sustained. We find that both Triveni Rubber and Plastics (supra) and Rattan Steel Works (supra) go to support the Revenue's case in the present batch of appeals. 13. The JCDR has also heavily relied on the Tribunal's stay order in M/s. Bhagwati Ispat Pvt. Ltd.'s case and the Supreme Court's order in the connected Civil Appeal. M/s. Bhagwati Ispat Pvt. Ltd. were also engaged in the manufacture of M.S. ingots from sponge iron and M.S. scrap by making use of an induction furnace. Their records indicated that they had themselves furnished electricity consumption figures to the department for getting their duty liability fixed on the basis of actual production in terms of sub-section (4) of Sec. 3A of the Central Excise Act and, accordingly the Commissioner fixed the duty liability for the year 1997-98. The average consumption of electricity per MT was 861 units during the period Sept. 1997 to March, 1998 while during the year 1997-98 it was 941 unit....
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....e to make pre-deposit though to the reduced extent of 20%. Again, the Apex Court's order in M/s. Bhagwati Ispat case lends great support to the Revenue in the present batch of appeals. We may also point out that Bhagwati Ispat case was not brought to our notice when the stay order was passed on 9-7-2010 in the case of Nashik Strips Ltd. (supra). 14. The ld. JCDR has also cited stay order dated 22-3-2010 passed by this bench in the case of Trimurty Ispat Ltd. (Appeal Nos. E/794 & 795/09) wherein we had directed them to pre-deposit an amount of Rs. One crore (approx: 25%) towards demand of duty of Rs. 3.9 crores. He has also pointed out that, in an appeal filed against the above order, the party offered to deposit Rs. 50 lakhs, which was accepted by the Bombay High Court in order dated 6-7-2010. This case of Trimurty Ispat Ltd. [2010 (258) E.L.T. 17 (Bom.)], wherein the demand of duty had been worked out on the basis of the consumption of electricity, was also not brought to our notice when we passed the stay order in Nashik Strips case. 15. Though stay order [2009 (244) E.L.T. 91 (Tri.-Del.)] which directed M/s. Everest Rolling Mills (P) Ltd. to pre-deposit one-third of ....
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....ate to manufacture and removal of the goods. In the case in hand, the appellants have totally failed to discharge his onus. In such circumstances, the question of further evidence in the form of buyer's records or transporters examination or electricity records or record pertaining to excessive raw material need not be referred to." 16. We may also quote from Bhagwati Ispat (supra) : "In the instant case the number of units of electric power consumed as shown in the electricity bills have been taken for arriving at the production. The number of total units consumed as shown in the bills is the actual quantity of electricity consumed by the assessee. As regards the assessee's argument that the department has not given any evidence about the purchase of raw material, utilization of vehicles for transport, payment for labour, etc. and as to how, when and where the alleged quantity was made, cleared and transported and to whom the goods were supplied, it is obvious that when any person indulges in clandestine manufacture and removal of goods, he will not keep any records of that. The same has been done by the assessee in this case also but the purchase of electricity being from ....
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....n M.S. ingots as per IS standards. When the required amount of Si-Mn was less than 1 kg. per ton of M.S. ingots, the melter's statement was not reliable. Counsel also pointed out that the above evidence of the melter was not accepted by the Commissioner (Appeals) for the period, January to August 2008 vide Order-in-Appeal No. 164/2010 dated 1-6-2010. The reason for not relying on the evidence was that the melter had also stated a different range of Si-Mn consumption (10-12 kgs per MT of ingots) for the period from March 2008. Before us, the department has not shown that the operation of Order-in-Appeal No. 164/2010 dropping demand of duty on the party was stayed by this Tribunal or any competent court. On the other hand, the appellant's counsel has cited a decision of this Tribunal (vide Mohan Steels) which supports their case. In the cited case, it was found that the assumption that 9 kgs of ferro alloys were required for the production of 1 ton of ingots was at variance with technical literature and hence could not be any basis for charge of clandestine manufacture and clearance of the product [vide 2004 (177) E.L.T. 668 (Tri.-Del.)]. The counsel has also usefully cited decisions....
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....tings as a precedent, the final order in R.A. Castings case wherein no corroborative evidence was found by the Bench. 20. Ld. JCDR, at the time of hearing, filed appealwise summary of facts of the case and findings of the adjudicating authority. Copies were also served on the counsel for the appellants. The crucial evidentiary findings noted by the JCDR are tabulated below appealwise :- Appeal No. Appellant Period Electricity Consumption Specific findings E/402/09 Shridhar Castings 2/03-11/07 2003-04-1370.13 2004-05-1388.01 2005-06-1285.38 2006-07-1283.48 2007-08-1072.50 (a) 'NIL' production shown on a number of days while electricity consumption was very high. (b) Profit shown in Balance Sheet without showing expense towards electricity bill payments. (c) Non-accountal of receipts of ferro alloys. E/762/09 Ishu Super Steel 4/04-11/07 2005-06-1185.63 2006-07-1285.98 2007-08-1272.14 (a) 'Nil' production shown in RG 1 on some days while G-7 Form showed substantial consumption of energy. (b) Cost of production per MT for the period 2004-05 to 2007-08 was more than the transaction value shown in ER-1 return. (c) Balance Sheet....
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....elling price of ingots. (c) The sanctioned auxiliary load was only 9.11% of the total sanctioned load, but claimed to be 20% by the appellant in statement. (d) Income of Rs. 2.50 lakhs added by Income Tax Dept. against excess burning loss shown by the assessee, and this assessment was not challenged. (e) same as (e) above. E/1271/09 Mahaveer Steel 4/03-3/08 2003-04-1305 2004-05-1363 2005-06-1473 2006-07-1247 2007-08-1306 (a) same as (a) above. (b) Cost of electricity & raw material shown to be 90.13%-130.31% of selling price of ingots. (c) Sanctioned auxiliary load was only 10.95% of the total sanctioned load but claimed to be 20% by the appellant in their statement. E/1319/09 SRJ Preety 4/03-12/07 2003-04-1856 2004-05-2118 2005-06-1956 2006-07-1454 2007-08-1578 (a) Cost of electricity and raw material shown to be 125% of selling price of ingots. (b) Sanctioned auxiliary load was only 7.8% of the total sanctioned load but claimed to be 25% by appellant in statement. (c) Commissioner of Income Tax (Appeals) confirmed net addition of income of Rs. 23.5 lakhs on account of suppressed production of ingots for assessment y....
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....4 2007-08-1686 (a) Cost of electricity & raw material shown to be 107% of selling price of ingots. (b) Auxiliary load required to be sanctioned by MSEB was only 8.83% of total load, but claimed to be 30% by appellant in statement. (c) Same as (c) above. (d) "Credit balance written off" in Balance Sheet, Rs. 7.97 lakhs in 2004-05 and 35.73 lakhs in 05-06, but no documentary evidence produced. E/02/01 Om Sairam Steel 11/03-3/08 2003-04 - 1738 2004-05-1878 2005-06-2054 2006-07-1428 2007-08-1211 (a) Cost of electricity & raw material shown to be 98% - 132% of selling price of ingots. (b) Sanctioned auxiliary load was only 7% of total sanctioned load but claimed to be 25% -30% by appellant in statement. (c) same as (c) above. (d) "Credit balance written off", Rs. 71.04 lakhs & Rs. 25.32 lakhs, in Balance Sheets, but these amounts were paid in cash to creditors who confirmed the fact; Financial account fabricated to mislead the deptt. (e) Burning loss reduced by Income Tax assessing authority by 1% and 0.5%, which was accepted by assessee; the resultant additional i....
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....ing price of ingots. (b) Sanctioned auxiliary load was only 10.68% of total sanctioned load but claimed to be 20% by appellant in statement, (c) Appellant paid Rs. 5.5 lakhs as duty in a case of clandestine removal of ingots involving duty of Rs. 17 lakhs, booked by DGCEI. (a) cost of electricity & raw material shown to be 91.96% -118.34% of selling price of ingots. (b) Sanctioned auxiliary load was only 10.68% of total sanctioned load but claimed to be 20% by appellant in statement, (c) Appellant paid Rs. 5.5 lakhs as duty in a case of clandestine removal of ingots involving duty of Rs. 17 lakhs, booked by DGCEI Though, in respect of Kalika Steel Alloys (P) Ltd. and others manufacturing steel ingots within the jurisdiction of C.C.E, Aurangabad, the ld. JCDR submitted statements of data showing that their electricity consumption has come down after surveillance by the department started, we have not considered this new evidence against them. But we have certainly noted the points highlighted by ld. JCDR from the findings recorded by the Commissioners in all the cases discussed in this para. These points are -- (a) As the appellants denied having....