TaxTMI 
TaxTMI 
2016 (12) TMI 93
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....: ● This writ petitioner is manufacturing 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 who....
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.... ● It is also submitted by the counsel for the petitioners that the respondents are surprised about the loss sustained 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....
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....ndustries and for rest of the industries, no such ground is ever raised. Because of this N.K. Batra's report, several petitions have been filed and several decisions have to be given by the 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. ....
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....Association report. Dr. N.K. Batra's report was given along with the show-cause notice, whereas, rest of the two documents were not supplied to the petitioners. iii. Counsel appearing for the petitioners has relied upon several decisions, 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 answ....
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....ts by the consignees etc. These documents ought to have been collected by the respondent-department, if at all, they are interested in collection of the correct central excise duty from the noticee upon whom or upon which allegation of clandestine removal of the finished product is levelled. The electricity consumption 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,....
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....it cannot be said that the impugned orders are totally non-reasoned orders, at the same time, the main contention advanced on behalf of the petitioner has not been dealt with and no reasons have been assigned for not accepting the same. The impugned order does not show that the authority concerned has applied its mind to the contention raised by the petitioner. Therefore, 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 ....
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....tra's report has been relied upon, which has no relevance with the factory premises of the noticee. Hence, such report shall not be relied upon by the respondents, unless the aforesaid experiment is carried out at the factory premises of the noticee. This is not a first case in which such guidelines has been given. Observations made in paragraph Nos. 20.1, 20.2, 21, 22.1, 23 & 24 of 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 philo....
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....n, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. In the following case laws, it has been held that the consumption of the electricity alone is not sufficient to determine the production; (i) Pure Enterprises (P) Ltd. v. CCE, Rajkot- 1999 (111) 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 th....
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....has also been dismissed by the Hon'ble Supreme Court. Thus, the report of Dr. N.K. Batra has been several times, criticized by various adjudicating authority vis-a-vis clandestine removal and the respondent-department has also issued a circular dated 26.06.2014 and several times such notice has also been dropped while passing the Order- in- Original, as stated herein above, as pointed out by the counsel for the petitioner. Despite these facts, in violation of such directions and the circular of the department, the respondents are still issuing 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....
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....ice, which is at page no. 63 of this memo of writ petition which reveals that this petitioner has consumed electricity absolutely in consonance with the report given by Joint Plant Committee, constituted by the Ministry of Steel, Government of India and for few months it is even less than that. Thus, there are varieties of report available in the markets, one could not have been chosen by the respondents, arbitrarily, without carrying out the experiment of consumption of electricity for one ton of manufacturing at the noticee's manufacturing unit. This type of experiment is a must by the department, whenever respondents are canvassing 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 h....