TaxTMI 
TaxTMI 
2014 (8) TMI 660
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....sting Pvt Ltd (supra), the impugned orders are to be upheld and all the appeals dismissed. The said Difference of Opinion was argued on 11th, 12th and 13th June, 2014. The appellant-assessees were represented by ld. Counsels Shri Prakash Shah, Dr. G.K. Sarkar, Shri Pramod Kumar, whereas Shri K.M. Mondal, Special Counsel appeared on behalf of the Revenue. The Miscellaneous applications listed are disposed of as not pressed by both sides. 2. The amounts confirmed in the Orders impugned in these appeals are recorded in Para 2 of the Order by the Vice President. Brief common facts are recorded by Hon'ble Vice President in his order. The Revenue's contentions in each of the case in these appeals are recorded in para 40 to 42 of the separate Order passed by the Hon'ble Member (T). 3. The Hon'ble Vice President held that in the fact situation of the instant case, the demand cannot be confirmed solely on the basis of deemed production arrived at on the basis of electricity consumption as suggested in report of Dr. Batra, and allowed the appeals for lack of any cogent material evidencing receipt of unaccounted raw material, unaccounted production, clandestine clearance, ....
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....ucing 1 MT of MS Ingots in a subsequent period mainly after adjudication of the case. Hon'ble Member (T) mainly placed reliance on the following four judgments- i) Triveni Rubber & Plastics - 1994 (73) ELT 7 (SC) ii) Ratan Steel Vs CCE, Chennai 2009 (236) ELT 152 (T- Chennai) iii) Nagpal Steels Ltd vs CCE, Chandigarh, 2000 (125) ELT 1147 (T- Del.) iv) Hans Casting Pvt Ltd vs CCE, Kanpur, 1998 (102) ELT 139 (T- Del.) 5. For sake of brevity the arguments and contentions of both sides as recorded in the separate orders passed by the Ho'ble Members are not reproduced. On the difference of opinion, both sides have argued on the same lines and the contentions advanced by them have already been recorded by the Hon'ble Members. The main contention of the appellants is that as per the provision of Section 3 of the Central Excise Act, 1944, the duty of excise is to be levied on the goods actually produced and not based on some deemed production based on any formula taken from any Report. The only exception of this scheme of charging duty on the basis of actual production is compounded levy scheme und....
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....ined on the basis of evidence of power consumption collected after the passing of adjudication order for a subsequent period by relying upon the decision of the Hon'ble Supreme Court in the case of Mohinder Singh Gill vs CCE, New Delhi, AIR 1978 SC 851 & Jain Exports Pvt Ltd vs Union of India, 1993 (66) ELT 537. The Revenue cannot go beyond the scope of the Show Cause Notice. It was submitted that evidence of period other than period of dispute are irrelevant. Moreover, the Hon'ble Vice President has opined that even if this subsequent data is taken into consideration, the case of the Revenue still remains on the basis of electric consumption only. So far as the earlier cases settled by the Settlement Commission are concerned, it was submitted that those proceedings cannot be reopened as per the statutory scheme under section 32M of the Central Excise Act, and in any event it was shown from the impugned Orders that adjudicating authority had recorded specific finding that the same cannot be relied for adjudicating the present cases. Department has not preferred any appeal, nor they filed any cross-objections against this finding of the Commissioner. It was also submitted th....
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....mption cannot be basis to allege clandestine removal. Some other judgments of this Hon'ble Tribunal: Sarvana Alloys Steel Pvt Ltd, 2011 (274) ELT 248 (Tri-Bang.) and Southern Ispat Ltd, 2009 (248) ELT 270 (T-Bang.), wherein the demand based on power consumption were set aside, were also cited. It was emphasized that there cannot be presumption of clandestine clearance and that clandestine clearances case needs to be established with cogent evidences. Report of Dr. Batra was at the instance of Central Excise Department and was thus available with the Department since year 2000. Even the letter dated 28.2.2006 of DG (Audit) is amongst relied upon documents wherein by relying on said report of Dr. Batra, Commissioners were instructed to investigate unaccounted production if any after collecting corroborative evidence on the following points - "(i) Procurement of additional raw material for manufacture of unrecorded production. (ii) Transportation of raw material and finished goods (iii) Documents/records relating to unrecorded production (iv) Assessable value how and why the steel ingots are sold at t....
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.... of Electrotherm to one Trimurti Ispat suggesting reasons which lead to high power consumption, (iv) Letter issued by IIT, Kanpur, to show that report of Dr. Batra was not issued by IIT, Kanpur, (v) Report issued by National Institute of Secondary Steel Technology (NISST), Mandi Gobindgarh suggesting power consumption upto 1427 units per MT. (vi) Report of Joint Plant Committee constituted by Govt. Of India in 2004 titled "Survey of Electric Furnace Industries in India" suggesting power consumption of 1800 units PMT. It was further emphasized on behalf of the appellants that the facts of the present cases were more akin to those in R.A. Casting (supra), as compared to the facts of the above referred four cases heavily relied by the Hon'ble Member (T). Moreover, the judgment in R.A. Casting (supra) was delivered after considering the judgments in Triveni Rubber & Plastics (supra), Nagpal Steels Ltd (supra) and Hans Casting Pvt Ltd (supra). In the common written submissions filed by the appellants. 6. On the other hand the Revenue submitted that there cannot be general presumption that the production of a commodity can....
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....the manufacturers are unable to provide any specific reasons/explanations to any abnormalities pointed out to them, it shall be open for a Central Excise Officer to ascertain based upon available information and best judgment the deemed production and the minimum evaded Central Excise duty. During the period (July/August 2009 to January 2010), the electricity consumption per M.T. of M.S. Ingots for these manufacturers was about 1000 units/M.T. without any evidence of any change in the composition of inputs, facilities or furnaces. Reliance was placed on order 41 Rule 27 of Civil Procedure Code and it was submitted that in light of judgment of Hon'ble Apex Court in North Eastern Railway Admn, Gorakhpur, 2012 (28) STR (SC) these additional evidences can be relied for sustaining the adjudication order, although the same were not considered in adjudication. It was submitted that by applying the test of probability the impugned orders can be thus confirmed, and in the facts of the instant cases decision in R.A. Casting (supra) may not be applied. Reliance was also placed on Collector of Customs vs. D. Bhoormull, 1983 (13) ELT 1546 (SC) to emphasize that in adjudication proceedings e....
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....ctors which have contributed to higher electrical consumption in production in his factory. He has not furnished any evidence to support his contention that the induction furnace in his factory requires higher electrical power than the 1026 units indicated by Dr. Batra's report. The argument of the assessee is not convincing and appears to be merely a theoretical assertion unsubstantiated by any evidence. I am therefore unable to accept the Assessee's defence on this point." "13(3) It has been contended by the assessee that the department ahs done specific verification of electricity consumption in their plant and the consumption was found to be 1496 units. I find that such as test was conducted only once and not over a period of time to accept this as a norm..... ..." "13(4) It has also been contended by the assessee that there are several factors due to which consumption of electricity varies and they have indicated the names of such variables...." "14(3) (1) The instances quoted above create a doubt in the mind of any reasonable person as to the veracity and truthfulness of the assessee's claims when any suc....
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.... brought on record in the instant case." I am therefore of the opinion that reliance now placed by the Revenue on the evidence in earlier cases which were already settled, is totally misplaced, when these findings of Commissioner are not even challenged by Revenue. Both sides have categorically submitted that the impugned Orders in all appeals are similar and that demand has been confirmed mainly on account of excess consumption of electricity by applying Dr. Batra's report as a yardstick. 9. No incriminating statement recorded in the instant case has been brought to my notice by the department. In the matter of SRJ Peety, on being asked to clarify on higher consumption of electricity than in Dr. Batra's report, in his statement dated 03.05.2008, Shri. S.S. Peety gave many reasons such as unscheduled shut downs in supply of electricity and furnace, unskilled labour, furnace efficiency, model of furnace, units required in burning loss of inputs, power voltage fluctuation, inferior quality of scrap, tripping of electricity supply, power transmission losses, decrease in efficiency of plant and machinery and consumption of roughly 20% power in Auxiliary Load. He has not accep....
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....instructed to investigate unaccounted production if any after collecting corroborative evidence on the following points:- i) Transportation of raw material and finished goods. ii) Documents/records relating to unrecorded production. iii) Assessable value how and why the steel ingots are sold at the value barely able to cover the electricity charge iv) Assessable value how and why the steel ingots are sold at the value barely able to cover the electricity charge. v) Pattern of sale of finished goods - whether any cash sales, sales through dealer, to related person and receipt of any additional consideration or flow back, presence of unexplained other income or miscellaneous income or availment of unsecured loans by the party may also be investigated for their genuineness. vi) Any other evidence related to clandestine manufacture and clearance of steel ingots." It cannot be ignored that despite these clear instructions, the Revenue in the subject Show cause notice issued on 9.5.2008 and even in addendum thereto on 2.4.2009, could not lead any evidence of the natur....
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....was based on external report of Dr. Batra. No such legislative sanction now exists for M.S. Ingots and Billets, unlike some products like Pan Masala, manufacture of which attracts section 3A and specific notification to that effect has been issued and thus deemed production can form the basis of demand. 14. In Triveni Rubber (supra) there existed a legislative sanction in the form of Rule 173E to estimate production based on electricity consumption, based on internal benchmarking, which was applied for a prospective period, unlike the instant case, evidently, in that matter there was admission of clandestine clearance and doctoring of accounts. From Para 4 of the said judgment it is seen that the Collector took the period from October 1979 to May 1980 as the base period, and based on actual production in that period, calculated deemed production for a prospective period, thus by adopting an internal norm, and did not apply any external report. This case was considered by Tribunal in para 28 of RA Casting (supra) and has been distinguished on facts. It was observed that in the case of Triveni Rubber (supra) , the issue before the Hon'ble Supreme Court as discussed in para 2 of ....
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....was distinguished in view of the above facts. Such evidences are not forthcoming in present appeals. 17. In Hans Castings Private Limited (supra) appeal was actually allowed by way of remand on the ground that sufficient evidence was not available to prove that power consumption per tonne was based either on evidence on records seized from the appellants, or on any experiment conducted in the premises of the assessee. On the other hand, in the instant appeals, there is no evidence of clandestine clearance, and so far as power consumption is concerned, in fact experiment was carried out by the department in the factories of the appellants but in the experiment power consumption was found much higher than that suggested in Dr. Batra's report. 18. In Rattan Steel Works (supra), unlike the instant appeals, there were incriminating Statements recorded from scrap dealers, brokers in iron & steel trade products, bill traders, transporters, people maintaining weight bridges and dealers in MS rounds suggesting large scale evasion of Central Excise duty by Rattan Steels. Further, Duty was quantified on the basis of the depositions of brokers and bill traders and not on the basis of ele....
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....; (iii) 1427 units per MT as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv) 650 to 820 units /MT as per Article of the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v) 1000 to 1800 units per Ton or even higher, as per Letters dated 18.3.2008 and 25.4.2008 of same Mr. R.P. Varshney [All India Induction Furnaces Association] informing that his Article prepared in 1989-90 was for Concast Steel making [thus not for Induction Furnace], (vi) 620 to 690 units/MT as per Letter dated 22.6.2008 from Electrotherm (vii) Letter dated 9.8.2008 of Electrotherm to a client suggesting reasons which lead to high power consumption, and another Letter dated 5.4.2008 of Electrotherm agreeing with the views of Induction Furnace Association and informing that it is very difficult to define any range of power consumption. 20.2 As against this, in para 20 of the Order, the Tribunal in R.A. Casting (supra) considered different electricity consumption figures for production of 1 MT of MS Ingots, reported in following different reports- &nbs....
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....ii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products; (iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters' documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v) Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal. 20.5 However, since no such evidence were brought on record, the Appeal of R.A. Casting was allowed for want of evidence relating to the above points, with further finding that the Revenue, not having conducted any experiment whatsoever, cannot be permitted to justify the demands raised. Similar is the fact situation in the instant appeals. 20.5 The evidence as per Revenue in the instant appeals are- a) High electrici....
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....of department is admittedly excess electricity consumption based on benchmark adopted allegedly from report of Dr. Batra, which was already held to be arbitrary by Hon'ble Tribunal in RA Casting (supra). Thus, in my opinion the primary evidence relied in the impugned Order is itself inadmissible, and no other evidence in the instant case proves clandestine production and clearance to sustain the demand. It is contended by Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. The Revenue sought to rely on an order passed by Tribunal in Gulabchand Silk Mills Pvt. Ltd., V/s. CCE, Hyderabad - II 2005 (184) ELT 263, however the same was also considered in R.A. Casting (Supra). It has been contention of the department that the Department is not required to prove its case to its mathematical precision, by relying on judgment of the Hon'ble Supreme Court in the case of D. Bhoormull - 1983 (13) ELT 1546 (SC), relied upon by the Commissioner as well as the Hon'ble Member (Tech....