TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 1032
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....Excise officers on 10/9/05. In course of search of the factory premises, certain loose papers sheets containing despatches of bars/rods and receipt of MS Ingots were recovered alongwith various other records in the factory offices, which were taken into custody. Certain records were recovered in a bag from a room in the factory premises and since these records appeared to be the records of sale of bars and purchase of ingots in form of private ledger books pertaining to period from April 2005 to September 2005, the same were also taken into custody. On study of the private ledger book for the period from April 2005 to September 2005, it appeared that during July and August 2005, 461.31 MT of MS Ingots had been received by SSSRM from the appellant unit in respect of which the appellant unit had not issued any invoices. Beside this, it was also found that during the same period SSSRM had received 29 consignments of Ingots from the appellant unit, the total weight which was 511.26 MT and though the appellant had issued invoices in respect of the same, the details regarding quantity were not matching as the total quantity as per the invoices issued by the appellant was 545.143 MT. The ....
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....at no records of the power failure, and stoppage of production due to power failure was being maintained and during 2005-2006 the company failed to recover the material cost and power cost. According to the Department, however, the power consumed of the appellant should be 689 units per MT of MS Ingots. It is on the basis of this norm that the Investigating Officers estimated the actual production of the appellant company during the period from April 2002 to September 2006 as 64511.25 MT against which the appellant company had shown the production of only 37478.94 MT and accordingly it has been alleged that during the period from April 2002 to September 2006, the appellant has under reported the production of 27032.313 MT of MS Ingots which has been cleared without payment of duty. The duty involved on this estimated unreported production is Rs. 5,37,28,971/- . 1.6 It is on the basis of the above investigation that a show cause notice dated 27/4/04 was issued to the appellant company for demand of duty of Rs. 5,37,28,971/- from them in respect of alleged clandestine removal of MS Ingots during the period from April 2002 to September 2006 alongwith interest thereon under Section 11....
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....ts to 1100 units per MT, that the power consumption norm of 689 units per MT is totally arbitrary, without any basis and without conducting any actual experiment or study in this regard in the appellant's unit, that in the appellant unit upto August 2004, there was only one furnace of 3 MT capacity and in September 2004 the same was replaced by the furnace of 6 MT capacity, that, therefore, while from September 2004 to September 2006 the installed capacity of production can be taken as 12600 MT per annum as shown in the cost audit report, during period from April 2002 to August 2004 the capacity would be only 6300 MT per year, that on this basis, the maximum production during April 2002 to August 2004 could be only 15750 MT @ 6300 MT per year and the maximum production during September 2004 to September 2006 @ 12,600 MT per annum would be only 26200 MT and thus the maximum production possible during the period from April 2002 to September 2006 on the basis of the installed capacity of the unit would be 40,950 MT against which the production recorded in the Central Excise records is 37478.94 MT, that the Departments allegation during this period that the appellant must have produce....
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....ainable, that the ratio of the Apex courts judgment is squarely applicable to the facts of this case, more so, when no test/inspection/study of the appellants unit has not been conducted to determine its average power consumption per MT of MS Ingots produced and an arbitrary power consumption norm of 689 units per MT had been adopted and that in view of the above, the impugned order confirming duty demand of Rs. 5,37,28,971/- against the appellant company alongwith interest and imposing penalty of equal amount on the appellant company under Section 11AC and penalty of Rs. 25,00,000/- on its Director Shri Harish Aggarwal under Rule 26 of the Central Excise Rules is not sustainable. 4. Shri Pramod Kumar, the learned Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that the appellant during the period of dispute were selling the goods at very nominal profit or at price much below the cost of production, that no businessman would continue to conduct his business when he is incurring huge losses, that from the entries in the private ledger book of SSSRM it is clear that the appellant during the period from April 2005 to August 2005 had ....
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....005-2006 was only 76.14% and 72.81% and that they have not kept record of the power consumption on different stages and also no record of the stoppage of production due to power break down etc. has been kept. The special audit report also mentions that during 2004-2005 and 2005-2006 the appellant unit had received commission income of Rs. 1,16,25,916/- and that while during 2003-2004, they have sold their goods on a very meagre profit margin of Rs. 15 per MT, during 2004-2005 they have sold their goods at a huge loss of Rs. 1278 per MT and that no manufacturer would sale his goods at such a huge loss and still continue in his business. 6.1 The contention of the appellant on the other hand is that merely on the basis of certain entries in the private ledger book of M/s SSSRM, no allegation of duty evasion by clandestine removal can be made against the appellant, when the persons of SSSRM who were maintaining the ledger book were not examined and merely on the basis of third party records, the allegation of duty evasion cannot be made against an assessee, when there is no other independent evidence. It is also pleaded by the appellant that their power consumption varies mostly betwe....
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....t is cost audit report according to which during 2003-2004 the appellant had sold their product Rs. 15 per MT and during 2004-2005 sold their product used huge loss of Rs. 1278 per MT and that during 2004-2005 and 2005-2006 they have shown commission income of Rs. 1,16,25,916/- from various parties in respect of certain commission agent service being provided by them which is not their line of business. In our view merely because during 2003-2004 the appellant sold their finished goods on a small profit margin of Rs. 15 per MT and during 2005-2006 the appellant sold their products at the loss of 1278 per MT, no adverse conclusion can be drawn and merely on profit and loss data it cannot be concluded that the appellant were indulging in duty evasion by clandestine removal during this period. Though the Department alleges that during 2004-2005 and 2005-2006 the appellant had received the commission income of Rs. 1,16,25,916/- from commission agent certificate from parties which is an unrelated activity and thereby implying that the appellant were under reporting their production and showing their income from manufacturing activity as the income from commission agent service, no adver....
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....h was dismissed by Hon'ble Punjab & Haryana High Court vide judgment reported in 2012 (275) E.L.T. A57 (P&H), and also the cases of Trikoot Iron and Steel Casting Ltd. vs. CCE, Meerut reported in 2015 (315) E.L.T. 65 (Tri. - Del.) and Pragati Steels Pvt. Ltd. vs. CCE, Kanpur reported in 2012 (286) E.L.T. 253 (Tri. - Del.). Recently the Tribunal in the case of SRJ Peety Steels Pvt. Ltd. and others vs. CCE, Aurangabad reported in 2014 - TIOL - 1530 - CESTAT - MUM has also taken the same view holding that the power consumption norm of another unit cannot be applied in respect of an induction furnace unit and on this basis the allegation of clandestine manufacture and clearance cannot be made. Apex court in the case of Oudh Sugar Mills Ltd. vs. Union of India reported in 1978 (2) E.L.T. (J 172) (S.C.) has also held that allegation of clandestine production and removal based only on calculation of raw material fed into the process or on working of the machinery as noticed during test inspection would not be sustainable unless there is tangible evidence on record in support of clandestine production and removal. In the present case other than the assumption that the power consumption nor....