TaxTMI 
TaxTMI 
2014 (7) TMI 654
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.... ALLOYS PVT. LTD. E/78/CEX/Commr/2009 Dated 31.08.2009 Rs.17,40,66,513/- Rs.17,40,66,513/- 4 E/1248/09-MUM GAJLAXMI STEEL PVT. LTD. E/71/CEX/Commr/2009 Dated 28.08.2009 Rs.10,27,32,129/- Rs.10,27,32,129/- 5 E/1247/09-MUM GOPALKISHAN JAJOO. E/71/CEX/Commr/2009 Dated 28.08.2009 NA Rs.2,50,00,000/- 6 E/1271/09-MUM MAHAVEER STEEL RE-ROLLING MILLS E/72/CEX/Commr/2009 Dated 28.08.2009 Rs.4,64,14,597/- Rs.4,64,14,597/- 7 E/1329/09-MUM MATSYODARI STEEL & ALLOYS PVT. LTD. E/74/CEX/Commr/2009 Dated 28.08.2009 Rs.9,22,13,861/- Rs.9,22,13,861/- 8 E/1331/09-MUM VIJAY B. MITTAL E/74/CEX/Commr/2009 Dated 28.08.2009 NA Rs.1,75,00,000/- 9 E/1332/09-MUM ADINATH CONCAST PVT. LTD. E/73/CEX/Commr/2009 Dated 28.08.2009 Rs.8,03,34,261/- Rs.8,03,34,261/- 10 E/1403/09-MUM JALNA SIDHIVINAYAK ALLOYS PVT. LTD. E/76/CEX/Commr/2009 Dated 28.08.2009 Rs.11,05,80,329/- Rs.11,05,80,329/- 11 E/1418/09-MUM NITIN R. KABRA E/78/CEX/Commr/2009 Dated 31.08.2009 NA Rs.4,35,00,000/- 12 E/1429/09-MUM META ROLLS & COMMODITIES PVT. LTD. E/79/CEX/Commr/2009 Dated 31.08.2009 Rs.13,32,19,012/- Rs.13,32,19,012/- 13 E/01/10-MUM MAULI STEEL PVT. LTD. E/81/CEX/Commr/2009 D....
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....essor of IIT, Kanpur. As per the study conducted by Dr. N.K. Batra for the manufacture of 1 MT of MS Ingots the electricity consumption should be between 555 units and 1046 unit and the Revenue is also relying upon the opinion given by All Indian Induction Furnace Association and as per the opinion 820 KW of electricity energy is required for manufacture of 1 MT of MS Ingots. Based on both the opinions, the Revenue has taken 1026 KW per MT as standard for consumption and quantum of Ingots and consequently the demand of duty in all the cases. The case of the Revenue is that if 1026 KW of electricity is used for the manufacture of 1 MT of MS Ingots then during the period in dispute all the manufacturers should have manufactured the quantities on which demands were confirmed. Show Cause Notices were issued for demanding duty on the above mentioned basis by invoking extended period of limitation and for imposition of penalties. Vide different adjudication orders the demands were confirmed with interest and penalties were imposed. 4. During the pendency of the appeals and arguments, the Revenue also filed Miscellaneous applications for producing additional evidence in respect of quantu....
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....mption. The appellant also relied upon the decision of the Tribunal in the case of Amar Ispat Ltd vs CCE reported in 2009 (235) ELT 487. 8. In the present case, there is no evidence on record in respect of unaccounted raw material for the manufacture of unaccounted ingots and in respect of clandestine clearance. No experiment was conducted in the factories regarding actual consumption of electricity. In the case of appellant M/s SRJ Petty Steel Pvt. Ltd, the experiment was conducted for two hours in the factory and the Revenue has noted in the heat conducted that the total electricity consumption is 1496 units. The experiment was conducted on 4.03.2009. This experiment shows the electricity consumption for the manufacture of one MT is also most the same as the consumption of electricity as per the appellants records. 9. Appellant also asked for copy of the report of Dr. N.K. Batra from the IIT, Kanpur and the Deputy Registrar, R & D of IIT, Kanpur vide letter dated November 01, 2007 informed that no technical opinion report of productivity of induction furnace by Dr. N.K. Batra is available on the record of IIT. Since Dr. N.K. Batra is expired therefore he was not available for c....
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....cases all of them have not maintained such record. 14. Revenue submitted that the Tribunal in the case of R.A. Castings (supra), the decision relied upon by the appellant, proceeded with the presumption that the law was well settled that electricity consumption cannot be the only factor for determining duty liability. The Hon'ble Allahabad High Court upheld the decision of the Tribunal in the case of R.A. casting (supra) on the ground that the findings of the Tribunal were based on materials on record and the findings cannot be said to be without any material and could not be held to be perverse. The Hon'ble High Court nowhere held that production of steel ingots cannot be determined on the basis of electricity consumed. 15. In respect of the experiment conducted by the excise officers in one of the manufacturing unit to determine the consumption of electricity, the contention is that observing the process of manufacture or recording of some data thereby the officers cannot be considered as an experiment. 16. The Revenue relied upon the decision of the Hon'ble Supreme Court in Triveni Rubber & Plastics reported in 1994 (73) ELT 7 (SC) whereby the Hon'ble Supreme ....
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.... supply the copy of the opinion and the IIT, Kanpur vide letter dated 1.11.2007 informed that no such opinion is available in records. During arguments, Revenue produced the data of electric consumption in respect of the units for the period after the adjudication order to show that subsequently the manufacturing units were showing less electric consumption than during the period in dispute for the manufacture of per MT MS ingots. This shows that during the period in dispute, the manufacturing units were showing higher consumption of electricity to suppress the production. If this data is taken into consideration, the case of the Revenue still remains on the basis of electric consumption only. 22. Revenue also, during arguments, produced some orders passed by the Settlement Commission whereby the matter regarding clandestine clearance was settled. We find that the Larger Bench in the case of Bosch Chassis Systems India Ltd us CCE, Delhi II reported in 2008 (232) ELT 622 (LB) held that filing an application before the Settlement Commission for waiver of interest, penalty and immunity from prosecution and suo motu payment of duty does not mean admission of allegations of fraud. Reve....
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....norm of 1046 units adopted by the Revenue as arbitrary. Why not adopt the norm of 1800 KWH/Tor 1427 KWH/T or 650 to 820 units/MT or 851 units/MT as per various reports referred to above or why not adopt some figure between 555 to 1046 units as norm as per Dr. Batra's report? 20.2 We note that no experiments have been conducted in the factories of the appellants for devising the consumption norms of electricity for producing one MT of steel ingots. It is the basic philosophy in the taxation matters that no tax can be levied on the basis of estimation. In this case, there is added problem. Estimation of production fluctuates widly depending upon the fact as to which report is adopted. Tax is on manufacture and it is to be proved beyond doubt that the goods have been actually manufactured, which are leviable to excise duty. Unfortunately, no positive evidence is coming on record to that effect. Article 265 of the Constitution of India says that no tax shall be levied or collected except by authority of law. Unless the manufacture of the steel ingots is proved to the hilt by authentic, reliable and credible evidence, duty cannot be demanded on the basis of hypot....
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.....- Mum.) (iv) Parshuram Cement Ltd. v. CCE, Lucknow- 2003 (160) E.L.T. 213 (Tri.-Del.) (v) Mukesh Dye Works v. CCE, Mumbai-VI - 2006 (196) E.L.T. 237 (Tri.-Mum.) (vi) Hans Castings Pvt. Ltd. v. CCE, Kanpur-1998 (102) E.L.T. 139 (T) (vii) M/s. Padmanabh Dyeing and Finishing Works v. CCE, Vadodara - 1997 (90) E.L.T. 343 (T) (viii) M/s. Madhu Products v. CCE, Hyderabad -1999 (111) E.L.T. 197 (T). 22. The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to: (i) Receipt of raw material inside the factory premises, and non-accountal thereof in the statutory records; (ii) Utilization of such raw material for clandestine manufacture of finished goods; (iii) Manufacture of finished goods with reference to installed capacity, consump....
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....fferent dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained. 24. In respect of unexplained income shown in the Balance-sheet the Tribunal held that onus is on the Revenue to show that the same is in respect of clandestine removal. The Revenue filed appeal before the Hon'ble Allahabad High Court and the Hon'ble Allahab....
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....ements of the share brokers etc. cannot be relied upon. The Tribunal further observed that even if, for the sake of argument, it is accepted that the income shown in the balance sheets is not the income derived form the sources declared by the appellants, there is nothing on record to link it with the so called clandestine removal of the goods. 25. Against the decision of the Hon'ble High Court, the Revenue filed SLP in the Hon'ble Supreme Court and the same was dismissed after condoning the delay reported as CCE us R.A. Castings Pvt Ltd reported in 2011 (269) ELT A 108. In the case of Amar Ispat (supra) the Tribunal also held that only electricity consumption cannot be made basis to demand. 26.Further we find that the Revenue heavily relied upon the decision of the Hon'ble Supreme Court in Triveni Rubber and Plastics vs CCE reported in 1994 (73) ELT 7 (SC) to submit that demand can be confirmed on the basis of installed capacity. 27.We find that in the case of Triveni Rubber and Plastics (supra), the Managing Partner of the factory admitted, removal of excisable goods without making any entry in the statutory records and also admitted that they were doctoring their ....
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....andestinely removed goods demand cannot be made. Therefore, the amounts which were disclosed to the Income Tax Department cannot be held to be the sale proceeds of clandestinely removed goods in absence of such evidence. 31. In the present appeals we find that evidence relied upon in the Show Cause Notices and in the adjudication orders is the same as in the case of R.A. Castings Put Ltd (supra) such as opinion of Dr. N.K. Batra and All India Induction Furnace Association. The same opinion is taken into consideration for confirming the demands. As the Tribunal in the case of R.A. Castings Put Ltd (supra) set aside the demand, based on above mentioned opinions, hence the ratio of above decision is fully applicable on the facts of the present cases. 32. In view of the discussion and in view of the decision of the Tribunal in the case of R.A. Castings Pvt Ltd (supra) the impugned orders are set aside and the appeals are allowed. (Order pronounced on ___________) Per: P K Jain: 32A. I have gone through the order recorded by Learned Hon'ble Vice President. My views on various issues involved in the present batch of appeals are at variance with the Learned Hon'ble Vice Presi....
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....and controlled by internal administrative mechanism. Under Central Excise Rules 2002, Rule 6 deals with assessment of duty, Rule 8 deals with manner of payment, Rule 9 deals with the registration, Rule 10 deals with the daily stock account, Rule 11 is relating to goods to be removed on invoice and Rule 12 is relating to filing of returns. If one goes through these rules, it would be found, in essence, a manufacturer is required to take registration only once (at the time of starting the factory). Manufacturer can produce the goods without any supervision, interference, or control of Central Excise officials. Law requires manufacturer to maintain daily stock account. Rules do not prescribe any specific format of daily stock account. The said rule reads as under: "Rule 10 Daily stock account.- (1) Every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid." Further ....
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....ral excise officers the basis of computations and that Central Excise Officer has failed to produce evidence relating to other aspects such as procurement of other raw material or clearance of finished goods or other technical reasons so that no step towards finding out the truth can be ventured. Incidentally, returns even do not envisage giving details of supplier or quantity of raw materials or other purchases or full details of finished goods or buyers. 38. In all the appeals, appellants are manufacturer of M.S. Ingots, which are produced by Induction Furnace method. Main inputs are (i) scrap/sponge iron, and (ii) electricity. M.S. Ingots in turn are used in the rolling mills mainly in the production of bars/ rods which are used in the construction of buildings/structures. Out of the to two main inputs, substantial scrap in turn is available from sources such as demolition of old buildings, iron and steel structures, old machinery etc. Such a scrap is normally called as bazaar scrap. No duty is required to be paid on such scrap and therefore credit of duty in respect of such inputs is 'nil'. 39. It is also to be noted that out of two inputs, records relating to scrap/s....
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.... 478/Final Order CEX/KNA/2007 dated 12.12.2007, the appellant accepted duty liability of Rs. 7.79 Lakhs . e) Even before Income Tax authorities, the appellant accepted their revised assessment indicating suppression production of Ingots. Commissioner of Income Tax (Appeals) confirmed net addition of income of Rs. 23.5 lakhs on account of suppressed production of ingots for assessment years 2001-02 to 06-07. M/s Kalika Steel Alloys Pvt Ltd. a) Even if only cost of electricity and raw material is added as per Balance/Sheet, it comes to 130% of sale price of ingots shown to have been manufactured, making the manufacturing commercially unviable and unsustainable in the long run. b) NIL production was shown on a number of days while electricity consumption was very high (in the same range as on other days when there was substantial production) indicating that the appellant was engaged in suppression of production. M/s Kalika Steel Alloys Pvt. Ltd. Date Electricity Consumed (in units) Production of Steel Items 01.05.05 101100 NIL 35.08.05 103500 NIL 09.01.06 48300 NIL 06.02.0....
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....ngots. (iv) From the Private Records in the form of 'Kachha Chitti' recovered during search from Shri. Girish Keshav Barwar, Supervisor of M/s KSAPL, revealed clandestine removal of 485.700 M.T. of M.S. Ingots from M/s KSAPL to M/s KRRPL vide vehicle no. MCB 8888. This fact was also confirmed in his statement dated 16.08.2006 under Section 14 of the Central Excise Act, 1944 (referred in the SCN)by Shri. Suml Prabhudas Godhwani, Accountant of M/s KSAPL. (v) Apart from confirming the above facts, Shri. Ghanshyam Chunnilal Goyal, Director of M/s Kalika Steel Alloys Pvt Ltd, mentioned that financial crisis was the reason of the clandestine removals 8$ admitted 16.200 M.T.(121 pieces) of M.S. Ingots cleared on 16.08.2006 (involving duty of Rs. 15,93,378/-)without payment of C. Ex. Duty to M/s KRRPL. Thus, in both the cases, M/s Kalika Steel Alloys Pvt Ltd had admitted under Section 14 of CEA,1944, committing purposefully grave act of clandestine removal of 535.505 M. T. of M. S. Ingots & shortages of raw materials of Sponge Iron of 116.045 M.T. s & ....
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....al 158880 c) The sanctioned auxiliary load was only 9.11% of total sanctioned load but claimed to be 20% by appellant in their section 14 statement indicating their intention not to disclose true facts to Department. d) (i) Shri. Narender Ramvilas Agarwal, Ex-Director, M/s Pawan Re-Rolling Mills PVt Ltd in his statement dated 19.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had received 40 M.T.s of M.S. Ingots from M/s Gajlaxmi Steel Pvt Ltd without any bill in cash. (ii) Shri. Dinesh Satyanarayan Bharuka, Director, M/s Rutuja Ispat Pvt Ltd in his statement dated 08.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had stated that they had received 105 M.T. of M.S. Ingots from M/s Gajlaxrni Steel Pvt Ltd without payment of C.Ex. duty. (iii) Shri. Gopikishan R. Jajoo, Director, M/s Gajlaxmi Steel Pvt Ltd in his statement dated 19.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had supplied 105 M.T. of M....
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....Nil 29.06.07 50880 Nil Total 938880 c) The sanctioned auxiliary load was only 10.95% of total sanctioned load but was claimed to be 20% by appellant in their section 14 statement indicating their intention not to disclose true facts to the Department. M/s Matsyodari Steel a) Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 134% of sale price of ingots shown to have been manufactured, making the manufacturing commercially unviable and unsustainable in the long run. b) The sanctioned auxiliary load was only 4.76% of total sanctioned load but was claimed to be 20% by appellant in their section 14 statement indicating their intention not to disclose true facts to the Department. c) (i) Shri. Vijay Brindaban Mittal, Director, M/s Shiv Shakti Steel Re-Rolling Mills Pvt Ltd in his statement dated 23.12.2006 & 23.03.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had procured 198.695 M.T.s of M.S. Ingots from M/s Matsyodari Steel & Alloys Pvt. Ltd. &....
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....(referred in the SCN) had stated that they had received 45 M.T.s of M.S. Ingots from M/s Adinath Concast Pvt. Ltd. (ii) Shri. Narender Khanyalal Pahade, Manager, M/s Adinath Steel Re-Rolling Mills in his statement dated 23.12.2006 & dated23.03.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN)stated that they had received 13.975 & 48 M.T.s of M.s. Ingots from M/s Adinath Concast Pvt. Ltd without payment of C.Ex. duty. (iii) Shri. Narender Khanyalal Pahade, Director, M/s Adinath Concast Pvt. Ltd, in his statements dated 15.01.2007, 05.02.2007 & '23.03.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had supplied 14 M.T.s of M.S. Ingots to M/s Adinath Steel Re-Rolling Mills, 45 M.T.s of M.S. Ingots to M/s Vijay Rolling Mills( Now M/s Mahalaxmi Re-Rolling Mills) & 48 M.T.s of M.S. Ingots to M/s Adinath Steel Re-Rolling Mills without payment of C.Ex. duty. Thus, M/s Adinath Concast Pvt. Ltd, had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine....
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.... Excise Act, 1944 (referred in the SCN) stated that they had cleared 265, 65 & 5.500 M.T.s of M.S. Ingots without payment of C.Ex. duty & had received the payments for the same in cash. Thus, M/s Jalana Siddhi Vinayak Alloys Pvt Ltd had admitted under Section 14 of CEA,1944, committing purposefully grave act of clandestine removal of 335.500 M.T.s of M.S. Ingots valued at Rs. 55,28,630/- involving duty of Rs. 9,02,272/-involving duty of Rs. 7,79,313/-with the sole intention of evading C. Ex. Duty involved therein. SCN No. DGCEI/ MZU/ I & i S 'C'/ 12(4)176/ 2006 dated 04.05.2007, referred at Para 11 of the SCN issued by CCE, Aurangabad. e) Clandestine clearance for above case admitted before the Department as well as Settlement Commission. In Settlement Commission Order No. 460 to 477/ Admission copy, Final Order/ CEX/ JNA/YDN/GMD/SBG/2007 and 478/Final Order CEX/KNA/2007 dated 12.12.2007, the appellant accepted duty liability of Rs. 9.02 Lakhs. M/s Meta Rolls 8b Commodities a) High electricity consumption against very low production was noticed on a number of days. b) The san....
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....esh D. Gupta, Director, M/s K. M. Re-Rolls Pvt Ltd in his statement dated 23.12.2006 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had procured 27.905 M.T.s of M.S. Ingots from M/s Mauli Steel Pvt Ltd. (ii) Shri. Mukesh, D. Gupta, Director, M/s Mauli Steel Pvt Ltd in his statement dated 12.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had supplied 28 M.T.s of M.S. Ingots to M/s K. M. Re-Rolls Pvt Ltd. Thus, M/s Mauli Steel Pvt Ltd had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 28 M.T.s of M.S. Ingots valued at Rs. 4,92,060/- involving duty of Rs. 80,305/-involving duty of Rs. 7,79,313/-with the sole intention of evading C. Ex. Duty involved therein. SCN No. DGCEI/ MZU/ I & I S 'C'/ 12(4)176/ 2006 dated 04.05.2007, referred at Para 11 of the SCN issued by CCE Aurangabad. M/s Nilesh Steel a) Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 109% of sale price of ingots shown to have been manufactu....
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.... M/s Rutuja Ispat Pvt Ltd in his statement dated 08.01.2007 & 23.03.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that they had received 120 M.T. & 35.465 M.T. of M.S. Ingots from M/s Om Sairam Steel & Alloys Pvt Ltd without payment of C. Ex. Duty. (ii) Shri. Rajendra Satyanarayan Bharuka, Director, M/s OSRSAPL in his statement dated 19.01.2007 & 27.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had supplied 50 M.T. of M.S. Ingots to M/s Pawan Re-Rolling Mills , 103 M.T. of M.S. Ingots to M/s Mahalaxmi Re-Rolling Mills, without the cover of C.Ex. Invoice & without payment of C.Ex. duty. (iii) Shri. Dinesh Satyanarayan Bharuka, Authorised Person for M/s OSRSAPL, in his statement dated 23.03.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had supplied 36 M.T. of M.S. Ingots to M/s Rutuja Ispat Pvt Ltd without payment of duty & without accounting for the same in their records. Thus, M/s Om Sairarn Steel & Alloys Pvt Ltd, had admitted under Section 14 of CEA, 1944, committing purposefully grave....
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....0 NIL 08.10.05 25120 NIL 12.10.05 30420 NIL 15.10.05 10900 NIL 16.10.05 840 NIL 30.10.05 31240 NIL 31.30.05 8860 NIL 01.11.05 2440 NIL 12.11.05 35280 NIL 19.11.05 33420 NIL 26.11.05 33120 NIL 10.12.05 30680 NIL 17.12.05 35600 NIL 07.01.06 31940 NIL 20.01.06 33100 NIL 28.01.06 32500 NIL 04.02.06 32120 NIL 11.02.06 32640 NIL 18.02.06 33680 NIL 25.02.06 34100 NIL 04.03.06 26540 NIL 09.03.06 27620 NIL 03.06.06 38240 NIL 21.06.06 11760 NIL 23.06.06 32520 NIL 24.06.06 18740 NIL 01.07.06 18740 NIL 15.07.06 22600 NIL 22.07.06 30700 NIL 26.08.06 16780 NIL 02.10.06 30660 NIL 07.10.06 38300 NIL 23.06.07 33240 NIL 19.09.07 23180 NIL 15.01.08 36860 NIL 16.01.08 17620 NIL Total 1396080 d) Clandestine removal of 504.145 MTs of ingots during Aug-Oct. 2006 admitted by appellant. e) Rs. 1,30,000/- added to income by Dy. Commissioner of Income Tax for A.Y. 2005-06 on account of suppressed production by assessee. M/s Saptashningi Alloys a) Even if only cost of electricity and raw material is added a....
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....n, out of which M/s Rishi Steel & Alloys Pvt Ltd had voluntarily deposited Rs. 2 Lakhs towards duty liability. SCN No. DGCEI/ MZU/ I & I S 'C'/ 12(4)176/ 2006 dated 04.05.2007, referred at Para 11 of the SCN issued by CCE, Aurangabad. e) Rs. 59.25 lakhs was detected as undisclosed income by Income Tax Deptt in 2004-05. M/s Regent Steel a) Even if only cost of electricity and raw material is added as per Balance Sheet, it goes upto 120% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run. Though the unit is stated have been running in losses, as per Affidavit dated 07.08.2013 filed before the Tribunal, in the year 2000 they had refurbished & upgraded old induction furnace of 3.5 M.T. to 8 M.T. capacity from the same furnace manufacturer i.e M/s Electrotherm India Ltd which is being operation in the production of ingots since 16.11.2000 onwards. b) The sanctioned auxiliary load was only 13.98% of total sanctioned load but was claimed to be 20% by appellant in their section 14 statement indicating their intention n....
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....nd that shown in returns/ self-assessment. In number of cases in connection with other investigations by the DGCEI certain documents were recovered from certain persons/appellants, appellants had admitted those liabilities and paid duty either on their own or on approaching the Settlement Commission. While demanding duty in the impugned orders, such amounts have been subtracted. Thus the duty demanded is based upon estimated production minus self-assessed duty minus duty paid as per Settlement Commission's orders (wherever applicable). 42. An interesting development took place after issuance/adjudication of above demands. Jurisdictional Central Excise Officials started general surveillance on units manufacturing M.S. Ingots, Perhaps in view of general surveillance as also the fact that self-assessment based upon electricity consumption more than 1026 units is not acceptable to department, appellants modified their self-assessment pattern. During this period (July/August 2009 to January 2010), the electricity consumption per M.T. of M.S. Ingots came down to somewhere around 1000 units/M.T. It is to be noted that there was no change in the technology or machinery manufacturing t....
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..... One of the contentions raised by the learned senior advocate for the appellants is that as per Article 265 of the Constitution of India no tax shall be levied or collected except by authority of law. Ld senior advocate has further argued that under Section 3 of the Central Excise Act, 1944 duty of excise is to be levied on goods actually produced and not based on some deemed production as per some formula. There can be no two opinions that no tax can be levied or collected without authority of law. It is not under dispute that the appellants were manufacturing MS Ingots, billets which are leviable to excise duty and therefore tax has to be levied and collected on such goods and this is as per law. The learned senior advocate has also stated that excise duty is to be levied on goods actually produced and not based on some deemed production as per some formula. We entirely agree that duty of that duty of excise is to be levied on goods actually produced. However, the question is, whether appellants have shown truthfully the entire quantity of goods produced or not. In case they have shown in their records the entire quan....
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.... under: 4. Learned Counsel for the assessee has addressed an exhaustive argument before us on the question whether a penalty imposed under Section 271(l)(a) of the Act involves the element of mens rea and in support of his submission that it does he has placed before us several cases decided by this Court and the High Courts in order to demonstrate that the proceedings by way of penalty under Section 271 (1) (a) of the Act are quasi criminal in nature and that, therefore, the element of mens rea is a mandatory requirement before a penalty can be imposed under Section 271(l)(a). We are relieved of the necessity of referring to all those decisions. Indeed, many of them were considered by the High Court and are referred to in the judgment under appeal. It is sufficient for us to refer to Section 271(l)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to. Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonme....
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....nt is correct or arrive at the correct assessment of duty. In case it is not possible to arrive at the precise duty amount, the duty will be required to be computed based upon the best judgment based upon the available details including the details submitted by the assessee in pursuance of notice. 47. In all the appeals covered by this order, the conduct of the appellants in the past have not been above board as is evident from para 40 above and there have been number of cases booked against them by different wings of Revenue including the period involved. Such conduct is evident from Show Cause Notices issued to various appellants which in turn include details of other Show Cause Notices. Those were the cases where precise details with respect to certain clearances could be recovered. In large number of cases during investigation, manufacturers have admitted about clearance of goods without payment of duty without recording in their records etc. In a number of cases, they have gone to the Settlement Commission and admitted duty liability and the matters were settled. In the present set of appeals, in addition to such specific recoveries already made, duty has been demanded based ....
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....ings. We have therefore carefully gone through the Tribunal's decision in the case of R.A. Castings. The decision in the case of R.A. Casting is based upon the following observation: 21. The law is well settled that the electricity consumption cannot be the only factor or basis for determining the duty liability that too on imaginary basis especially when Rule 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Therefore, there can be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from 'one date to another and even from one heat to another within the same dat....
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....e case of R.A. Castings Pvt Ltd, eight case laws were relied upon to come to this observation. In our view while as a general proposition, one may state that electricity consumption cannot be the only factor or basis for determining the production or duty liability. However, in our view, this aspect is required to be examined with reference to the manufacturing process, the commodity being manufactured and in value terms electricity consumed in production of one unit of product i.e. value of electricity consumed vis-a-vis value of one unit of final product. In larger number of commodities though electricity may be important input but may not be very significant in value terms. However, there are commodities/manufacturing process where electricity consumption is very significant in the basket of cost of various inputs. Any prudent businessman will in such commodities will monitor consumption pattern and take steps to minimize the consumption of electricity. We entirely agree with learned A.R. that based upon electricity consumption, quantity of production of items like caustic soda can be precisely computed. Even in case of M.S. Ingots using Induction Furnace, production can be esti....
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....premises of similar units. Thus it very clear that this Tribunal had taken a view in past that quantity of production in case of M.S. Ingots can be determined based on the factual data of electricity consumption per ton. Other case laws mentioned in the R.A. Casting covered industrial oxygen, manmade fabrics, leather goods, cement, biscuits etc. We agree that in respect of such commodities one has to first examine whether electricity is significant or main input. It is possible that electricity may not be that significant input, and therefore input-output correlation may be difficult. However, in our view the same is not true for commodities like MS ingots being manufactured through induction furnace. In fact, scrap/sponge iron and electricity are only two major inputs. All other inputs do not contribute to a significant percentage in terms of value of the inputs/final product. In our view, in a situation like this any prudent manufacturer will monitor the consumption pattern vis-a-vis per unit of final product. Variation of 100-150 units per MT will change the whole of business economics. 51. It is observed that a lot of emphasis is given by the learned senior advocate for the ap....
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....uires the Commissioner to prescribe/fix norms for electricity consumption first and notify the same to the manufacturer. We have also noted that even in the case of Hans Castings Pvt Ltd (supra) this Tribunal has taken a view to determine production based upon electricity in respect of this very commodity and that also by conducting experiment after remand order (and obviously for period subsequent to the period). We also note various cases made against the appellants and their own admissions and subsequent settlement. We also note the electricity consumption pattern July 2009-January 2010. In view of above, we are of the view, the Tribunal's decision in the case of R.A. Castings cannot be applied in the present set of appeals. 53. As far as reasons about the drastic variation and very high electricity consumption are concerned, it is observed that there is no specific explanation whatsoever from the appellants to justify the drastic variation in consumption of electricity from time to time. Further after issuance of the Show Cause Notices, and when Revenue started keeping general surveillance on the appellants units even though there was no change in the furnace or the raw ma....
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.... above facts and misleading; (ii) Revenue also submitted the factual data of electricity consumed for production of 1 MT of ingots as observed from the appellants' own records to rebut the statement that no specific per consumption is noticed in respect of electrotherm systems furnace. 55.1 The learned senior advocate though did not oppose allowing of the miscellaneous application filed by Revenue, in fact stated that this can be taken on record however, in the written submissions as also up to same extent has indicated a catena of case laws to argue that fresh evidences adduced before the CESTAT cannot be taken into account. The learned senior advocate quoted the following case laws: (i) Mohinder Singh Gill vs CEC, New Delhi - AIR 1978 SC 851; (ii) Bush India Ltd vs Union of India 1980 (6) ELT 258 (Bombay); (iii) Bata India Ltd vs CCE, Calcutta 1986 (25) ELT 559; (iv) CCE, Bangalore Vs Vaigai Thread Processor Ltd - 2004 (169) ELT 82; (v) Prakash Pipe & Industr....
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....ation collected from furnace manufacturer. It is not the case of the appellant that they have notified furnaces or inputs are different or something else has happened which would justify the lower consumption of electricity for the subsequent period. In our view, the objection is only to circumvent and justify the untruthful self-assessment done by them. 55.4 The second case law quoted by the appellants is relating to Bush India Ltd (supra). In the said case the Bush India were importing certain equipments viz Garrad Record Changer Deck and selling the same under their own brand name after putting in wooden boxes. At the time of import, Bush India was paying CV duty as complete equipment. The issue was whether such a process (putting in wooden boxes) amounts to manufacture. The Hon'ble Bombay High Court took the view that it does not amount to manufacture. The Revenue had tried to bring in an affidavit of new Assistant Collector saying that the said goods cannot be marketed to general public without being put into the said wooden boxes. It is in that context that the Hon'ble Bombay High Court has stated that raising of new ground is not admissible. It may be noted that in ....
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....nbsp; "12 Before we part we must mention that after counsel for the importers could not secure an adjournment when the matter was taken up for hearing on 23rd April, 1993, he argued the matter at length. It was only during the course of the hearing that we inquired of him if he could point out from the record whether or not the transaction had yielded any profit. When he could not give a satisfactory reply he again asked for an adjournment to produce the relevant material which we declined. The hearing concluded on the same date. Notwithstanding the same their advocate on record filed a letter dated 28th - 30th April, 1993, stating that an application was moved for rehearing because a very crucial document having direct bearing was not brought to the notice of the court. Even with these applications nos 1A 3 & 4 of 1993 the so-called crucial document was not appended. In these applications the rehearing was sought on the very same grounds on which an adjournment was sought earlier. These were followed by yet another communication which included a certificate of the Chartered Accountant to which was appended a statement of accounts showing that the importers had incurred ....
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.... Railway Admn, Gorakhpur (supra). Hon'ble Supreme Court in the said judgment observed as under: "12. Though the general rule is that ordinarily the appellate court should not travel outside the record of the lower court and additional evidence, whether oral or documentary is not admitted but Section 107 C.P.C., which carves out an exception to the general Rule, enables an appellate court to take additional evidence or to require such evidence to be taken subject to such conditions and imitations as may be prescribed. These conditions are prescribed under order 41 Rule 27 C.P.C. Nevertheless, the additional evidence can be admitted only when the circumstances as stipulated in the said Rule are found to exist. The circumstances under which additional evidence can be adduced are: (i) the court from whose decree the appeal is preferred has refused to admit evidence which ought to have been admitted, [clause (a) of sub-rule (1)], or (ii) the party seeking to produce additional evidence, established that notwithstanding the exercise of due diligence, such evidence was not withi....
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....o, it cannot strictly say that it requires additional evidence 'to enable it to pronounce judgment', it still consider that in the interest of justice something which remains obscure should be filled up so that it can pronounce its judgment in a more satisfactory manner. Thus, the question whether looking into the documents, sought to be filed as additional evidence, would be necessary to pronounce judgment in a more satisfactory manner, has to be considered by the Court at the time of hearing of the appeal on merits. 15. Insofar as the principles which govern the question of granting or disallowing amendments under order 6 Rule 17 C.P.C. (as it stood at the relevant time) are concerned, these are also well settled. Order 6 Rule 17 C.P.C. postulates amendment of pleading at any stage of the proceedings. In Pirgonda Hongonda Patil v. Kalgonda Shidgonda Patil - AIR 1957 SC 363 which still holds the field, it was held that all amendments ought to be allowed which satisfy the two conditions : (a) of not working injustice to the other side, and (b) of being necessary for the purpose of determining the real questions in controversy between the parties. Amendme....
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....emand seems to be based on certain weighment of finished goods, said to be conducted by the officers. Manufacturers have denied that any weighment was done. It is in this context that Tribunal took the view that demand cannot be raised on the basis of some formula devised from the facts pertaining to goods produced after the said period. This is clearly distinguishable from the facts of present case. Here demands though raised on the basis of Prof. Batra's report but are supported by appellants own data though for the subsequent period. 56.3 In this case of Emami Ltd (supra), the issue was whether or not goods contain Ethyl Alcohol. Test were conducted which showed absence of Ethyl Alcohol and these tests results were sought to be applied for a different period and it is in this context that the Tribunal has taken a view that test results of the samples for a different period cannot be applied. In the present case, there is no dispute about the final product or input. It is about quantity of electricity consumed in the production of one unit of finished product. In our view the said case law has no application in the present cases. 56.4 In the case of Reckit & Colman of India....
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....pon the case law in the case of Commissioner of Customs vs Indian Spinners reported in 2002 (149) ELT 557 (Tri-Mum). In the said case Tribunal dismissed appeal filed by Revenue against reduction of penalty by Collector (Appeals). A reference application was made by the Revenue against the said order. The Tribunal took a view that question of penalty has to be decided with reference to each case, each adjudication being a separate proceedings and past history is not an ingredient thereof under Section 129B of the Customs Act. The Tribunal in the said case has also held that there are other avenue open to the Customs like prosecution or preventive detention in dealing with such proceedings. We do not find any relevance of this case law in the facts and circumstances of the present cases. Here other Show Cause Notices are part and parcel of the demand notices under appeal and are being cited only to tell the conduct of appellants during the period of present demands. 58.1 The learned senior advocate also quoted followings case laws in support of his contention that filing of application before Settlement Commission is not admission of guilt: - (i) Bosch Chassis Sy....
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....ommission and settled the duty evaded. The two cases quoted by the Ld Senior Advocate do not help in the facts and circumstances of the present demands. 59.1 Ld senior advocate for the appellant has quoted the Hon'ble Supreme Court's judgment in the case of State of West Bengal and Others vs Md. Khalil and another - 2000 Indlaw SC 40 to argue that nothing can be presumed in Taxation Law unless specifically sanctioned by Statute. In the said case entry tax was being demanded on the goods found from the respondent. Respondent's claim was that he has not brought the goods from outside into Calcutta but has purchased locally. It is in those circumstances that the Hon'ble Supreme Court has made the said observation. It is for the department to first prove that the respondent has brought the goods from outside Calcutta. In the present cases, it is not in dispute that appellants are manufacturer of M.S. Ingots. They were self assessing duty/filing returns. Issue is that self assessment/returns do not reflect true position and production is suppressed. It is based upon cogent evidence. 59.2 We note that Hon'ble Supreme Court in the case of Kanungo & Co vs Collector of....
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....he proof which it was in the power of one side to prove, and in the power of the other to have contradicted". Since it is exceedingly difficult, if not absolutely impossible, for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as parts of its primary burden. Above cases though were pronounced in connection with smuggling of goods but are equally applicable for evasion of any duty as both smuggling of goods or evasion of duty have similar economic consequences. 60.1 There is no explanation to various issues raised by the Revenue. Ld Senior Advocate has quoted four cases to support that there cannot be presumption of clandestine clearance and number of judgments to support that clandestine clearances case needs to be established with cogent evidences of extra raw material procurement, sale, transport etc. These propositions are required to be examined with reference to facts and circumstances of each case. Cases where suppression in production/clandestine clearance is few percentage of total production are different from cases where certain facts indicate suppression of production to the extent....
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.... short and the department demanded duty on the finished product on the assumption that the same has been used in the manufacture of finished goods. The Tribunal hold that department cannot ask duty on finished goods but can ask respondent to reverse the Cenvat credit availed on the said material. 60.6 The learned senior advocate quoted the Hon'ble Supreme Court judgment in the case of Oudh Sugar Mills Ltd vs Union of India - 1978 (2) ELT (J-172) (SC). In the said case Oudh Sugar Mills Ltd were manufacturing roughly 12 lakhs maunds of sugar in a year. Department issued a Show Cause Notice alleging that 11606 maunds of sugar has been clandestinely cleared by the unit. The calculation was based upon report of Assistant Chemical Examiner relating to the accounts of the amount of mixed juice. The Hon'ble Supreme Court observed that the alleged quantity is less than of 1% of their annual production and the computation of sugar based upon the amount of the mixed juice. It is in these circumstances that the Hon'ble Supreme Court has taken the view that allegations based only on calculation of raw material fed into the process or on working of machinery as noted during test ins....
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....y similar type of fabrics have been manufactured. It is in these circumstances that the demand was set aside. 60.11 Similar is the position in the case of Padmanabh Dyeing & Furnishing Work vs CCE 1997 (90) ELT 343. Here also the commodity was manmade fabrics and the reasons for the earlier case are equally applicable to this case. 60.12 Another case is relating to Amar Ispat (P) Ltd vs CCE 2009 (235) ELT 487. Here the demand was made based upon the electricity consumption. It was observed that the consumption has fluctuated from month to month and therefore adoption of one particular month's electricity consumption cannot be an appropriate basis for determining production and for demanding duty. It is to be noted that in this case the energy consumption for a particular month was 700 unit per MT and Revenue wanted to use this figure to compute duty liability for all other months and as per the records of the appellant the average electricity consumed was 876 units per MT. In the present demands, department has computed the demand based upon average consumption of 1026 units which is far more higher than either 700 units or 876 units. 60.13 Another case quoted is Southern Is....
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....tion. Firstly, this letter has been obtained long after the order of the Collector. Secondly, this letter says that the meter was running in reverse direction. This theory is unacceptable in the circumstances of the case, as pointed out hereinbefore." (ii) We find that similar view as taken by this Tribunal in the following cases relating to M.S. Ingot: (a) Rattan Steel Works Vs CCE, Chennai ; (b) Nagpal Steel Ltd vs CCE - 2000 (125) ELT 1147 (Tri); (c) Hans Casting Pvt Ltd vs CCE, Kanpur - 1998 (102) ELT 139 (Tri) 62 From the foregoing evidences and analysis, we have absolutely no doubt that the appellants were not doing self-assessment truthfully and contents of monthly returns were not truthful. Undoubtedly, they were indulging suppression of production and therefore evading duty. Similarly, the daily records of production and clearance were not truthful. 63 The next issue is quantum of suppression of production and duty evaded. How much additional quantity of M.S. Ingots/goods were produced and to whom such goods are cleared a....
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....nbsp; (iii) The report "iron & steel vision" on the website (available to all) of Indian Bureau of Mines shows power consumption as 700 units/PMT. (iv) Website of Weigang Jinhuaxin Electric Furnace Manufacturers Manufacturing Co Ltd shows 500 units/PMT for 11 Ton Furnace; (vi) An article published in International Journal of Engineering & Technology indicates the electricity consumption as 700 units/PMT; (vii) An Article on website ispatguru.com indicates electricity consumption as 540-550 units/PMT; (viii) Prof. Batra's report indicates power consumption in the range of 525-1046 units/PMT depending upon efficiency and other factors. We note that average of the said range will be 785 units PMT; (ix) This Tribunal in the case of Nagpal Steel Ltd vs CCE, Chandigarh reported in 2000 (125) ELT 1147 (Tri) in a similar situation has observed as under: "13. Expert opinion was obtained by the Department from Shri P.K. Goel, Executive (Finance) of M/s. Mohta Alloys and Steel Works Limited, Ludhiana, Shri S.K. Sharma, a resident of Ludhiana....