TaxTMI 
TaxTMI 
2016 (12) TMI 93
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring M.S. Ingot from sponge iron and they are manufacturing M.S. Ingot since long. ● Show cause notice dated 04.09.2014 was given by the Commissioner, Central Excise and Service Tax, Ranchi for the period running from August,2009 to March,2014. ● Personal hearing in the case was held on 22.12.2015. The noticees have filed written submissions which was taken on record. ● Thereafter, the Order-in-Original was passed by the Commissioner, Central Excise and Service Tax, Ranchi on 19.01.2016( Annexure-6). ● Being aggrieved and dissatisfied by the show cause notice as well as by the Order-in-Original, the present writ petition has been preferred. 3. Arguments canvassed by the counsel for the petitioners: ● Counsel appearing for the petitioners submitted that there is gross violation of principle of natural justice. The documents which are referred to and relied upon, in the show cause notice like: a. Nucleus Group report; b. The All India Induction Furnace Association report, though were demanded, but, never supplied. ● The whole show cause notice is issued upon presumptions and surmises about unaccounted manufacturing of M.S. Ingots a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stained by the petitioner. Merely because there is a loss to this petitioner that does not mean that there is a clandestine removal. ● Counsel for the petitioners has further submitted that the respondents have also shown their surprise about the wages paid by this petitioner to its 40 employees. The respondents have never recorded the statement of any of the employee and the respondents have presumed that higher wages must have been paid by the petitioner in absence of any statement of any of the employee. Thus, on the basis of this presumption that the petitioner must be paying higher wages to its employees and therefore, there is clandestine removal. This is also a baseless conclusion arrived at, in the Order-in-Original. ● Counsel appearing for the petitioners has relied upon the decisions which are as under:- a. R.A. Castings decisions reported in 237 ELT 674, which is confirmed by the Division Bench of Allahabad High Court reported in 2010(1) taxman.com. 342 (Allahabad), against which SLP preferred by the department, has also been dismissed, and b. W.P. No. 173 of 2014 decided on 22.04.2014 by the Calcutta High Court. ● Counsel for the petitioners ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Courts. ● Counsel for the petitioners has submitted that even a circular has been issued, which is at Annexure-2 dated 26.06.2014 that whenever any decision has been finally accepted by the respondents-department, the same has to be followed in other cases. This circular has also not been followed in this case. In fact, the respondents could not prove the clandestine removal of the finished products viz. M.S. Ingots and hence show-cause notice dated 04.09.2014 as well as Order- in-Original dated 19.01.2016 which are at Annexure-1 and Annexure-6, respectively, may kindly be quashed and set aside. 4. Arguments canvassed by the counsel for the respondents: ● Counsel for the respondents submitted that these petitioners are having efficacious and alternative remedy against the Order-in-Original and the appeal could have been preferred before the Central Excise and Service Tax Appellant Tribunal (CESTAT) under Section 35(B) of the Central Excise Act, 1944. ● Counsel appearing for the respondents submitted that Dr. N.K. Batra's report is not an only ground as mentioned in the show-cause notice, there are several grounds, like high cost of production vis-a-vis ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecisions, as stated herein above. It ought to be kept in mind by the respondents that the electricity consumption pattern can be a corroborative ground and not a substantive ground at all. Thousands of possibilities cannot be equated with one truth. The grounds, which are referred in the Order-in-Original, are in fact leading the respondents towards the highest probabilities and nothing beyond that to suspect that there is clandestine removal of the finished product by the noticee. Nonetheless, for exact proof of unaccounted manufacturing of finished products and for clandestine removal thereof, more labour was required to be done by the respondents. It has become fashion with the respondents-department to rely upon a document, since 2003 onwards, which is known as report given by Dr. N.K. Batra, so-called Professor of IIT, Kanpur. When IIT, Kanpur is inquired by these petitioners whether such report has ever been given by IIT, Kanpur, the answer given by IIT, Kanpur in negative (Annexure-7 to the memo of the petition). iv. Right from 2003 onwards, in not a single matter decided by the Commissioner or by the Tribunal or by any adjudicating authority, the department has produced D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion report like Dr. N.K. Batra report can hardly be treated as a substantive evidence. Time and again, the decisions have been given by the tribunals but the respondents- departments are turning deaf-ear to. In this case, they are also turning deaf-ear to their own circular dated 26.06.2014 (Annexure-2 to the memo of this writ). In this case, the respondents are relying upon Dr. N.K. Batra's report, also upon the allegation that much less salary has been paid to the employee and the unit is running in losses. All these are nothing but the possibilities, for clandestine removal, but, for proving the clandestine removal, the substantive piece of evidence is must. Few such evidences have been referred by this Court. The list of these evidences is not exhaustive:- (i) The department should have collected the proof of amount received from the consignees, statement of consignees, receipts of sale proceeds by the consignor and its disposal. vi In the instant case, though the petitioners were granted an opportunity of being heard, but while passing the Order-in-Original, the adjudicating authority has not dealt with the main contention advanced on behalf of the petitioner and no re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore, as held by the Supreme Court in the above decision, the principles of natural justice would stand violated in the light of the fact that the concerned authority has not applied its mind to the principal contention raised by the petitioner, inasmuch as, it has not given any reason in respect thereof." In view of the aforesaid decision, If there is a violation of principle of natural justice, writ is always tenable at law. vii. Thus, the department has not done any home work and the show cause notice dated 04.09.2014 ( Annexure-1) has been issued. This type of short cut should not have been followed by the department. There is no shortcut for success. The aforesaid documents and evidences could have been collected very easily by the department, if at all, department is of the opinion that there is a clandestine removal of finished product viz M.S. Ingots by the petitioners. viii. The respondents have also been given time and again the guidance by various decisions that whenever they are relying upon the electricity consumption pattern, experiment in the very same unit ought to have been carried out for manufacturing of 1 MT of the finished product or for at least 1000 su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the decisions rendered by the Tribunal in the case of R.A. Castings Pvt. Ltd. Vs. CCE, reported in 237 ELT 674 read as under:- "20.1 From the perusal of these reports, we find that wide variations in the consumption of electricity have been reported for the manufacture of one MT of steel ingots. This renders the norm of 1046 units adopted by the Revenue as arbitrary. Why not adopt the norm of 1800 KWH/T or 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 comi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11) E.L.T. 407 (Tri.) (ii) Kapadia Dyeing Bleaching and Finishing Works v. CCE, Surat- 2000 (124) E.L.T. 821 (Tri.) (iii) A. Arti Leathers (P) Ltd. v. CCE and C, Ahmedabad- 2001 (136) E.L.T. 1255 (Tri.- 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). 22.1 For want of evidence relating to the above points, clandestine removal cannot be sustained merely on the basis of the technical opinion report of Mr. Batra. In this connection, the following case laws are relied: (i) Emmtex Synthetics Ltd. v. Commissioner of Central Excise, New Delhi reported in 2003 (151) E.L.T. 170 (Tri.- Del.); (ii) Commr. of Central Excise, Chennai v. Dhanavilas (Madras) Snuff Co. reported in 2003 (153) E..T. 437 (Tri.-Chennai); (iii) Commissioner of Central Excise, Madurai v. Madras Suspensions Ltd. reported in 2003 (156) E.L.T. 807 (Tri.- Chennai);....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing show cause notices, levelling allegations of clandestine removal of the finished product, based upon the electricity consumption pattern shown by Dr. N.K. Batra. We, therefore, direct the respondents not to mention Dr. N.K. Batra's report in their show cause notice unless an experiment is carried out by the respondent department in the factory premises of the noticee for production of 1 MT or for production of more than sufficiently large quantity like 1000 units etc. in any other cases, because electricity consumption depends upon the nature of machinery. Even two refrigerators of same kind and type and capacity may not have the same consumption of electricity, because one may be new and another may be old. x. Likewise such type of other reports are also available in this country, which are as under:- (a) Dr. N.K. Batra's report (b) Report by Joint Plant Committee constituted by the ministry of steel, Government of India. (c) Report of NISST, Mandi Gobindgarh given in June-July, 2006. (d) Report of Executive Director, All India Induction Furnace Association, New Delhi, and all these reports say different electricity consumption, per ton. These facts have been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the ground of electricity consumption pattern vis-a-vis clandestine removal of finished products. Otherwise, without such experiment, if any one of the aforesaid report relied upon, then it is arbitrariness on the part of the respondents and whenever there is any arbitrariness, there is always violation of Article 14 of the Constitution of India because for few of the noticees such type of reports are not relied upon whereas for rest of the assessee, as per the choice of the respondents, such type of reports will be relied upon and in fact, this has happened in this case. Several Orders- in-Original have been pointed out during the course of arguments by the counsel for the petitioners wherein electricity consumption pattern allegation levelled in show cause notice and ultimately after adjudication, the show cause notice has been dropped. Thus, without experiment is being carried out at the premises of the noticees, use of any of the committee's report for electricity consumption pattern always leads to arbitrariness on the part of the respondent-department. Whenever arbitrariness is present, equality is absent. Equalities and arbitrariness are strong enemies of each other.....