TaxTMI 
TaxTMI 
2017 (9) TMI 333
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....ne of the suppliers of ingots to the main appellant. The record recovered from M/s. Nirmal showed that 54.56 MT of MS Ingots were sold to main appellant, during the period 2.8.2005 to 3.10.2005. The record maintained by the main appellant had shown receipt of only 18.07 M.T. during the said period. The remaining 36.49 MT of MS ingots was unaccounted. The Revenue conducted further follow up investigations and thereafter, proceedings were initiated against the appellants. 2. On adjudication of case, the Original Authority held that the main appellant suppressed production of dutiable items and indulged in clandestine removal without payment of duty. He confirmed central excise duty demand of Rs. 2,79,34,347 and imposed equal amount of penalty in terms of Section 11 AC of the Central Excise Act, 1944. He further imposed a penalty of Rs. 20 lakhs on Shri Lakhan Goel, Director of the main appellant, under Rule 26 of Central Excise Rules, 2002. 3. Ld. Counsel for the appellants submitted that the whole case against the appellant was on the basis of two points- (a) There is unaccounted receipt and usage of 36.49 MTs of M.S. ingots from M/s. Nirmal Inductomelt; and (b) By consi....
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.... clearance. The Revenue preferred an appeal against this order. The Tribunal vide Final Order No.51555 of 2015 dated 10.04.2015 dismissed the appeal by Revenue. The ld. Counsel also referred to the Final Order No.50905-50910 of 2015 dated 19.03.2015 dealing with similar set of facts and demands based on common investigations. 5. Ld.AR reiterated the findings of the Original Authority. He submitted that there is a wide variation in the power consumption during the impugned period, which was not explained satisfactorily, by the appellant. Power is one of the main resource in the manufacturing activity of M.S. Items and is a good indicator of quantum of production. He supported the findings of the Original Authority. 6. We have heard both the sides and perused the appeal records. 7. In the present case, duty demand is confirmed on two main basis. The first one is on the basis of a small quantity of 36.49 MTs of M.S. ingots shown to have been cleared by M/s. Nirmal Inductomelt Pvt. Ltd. to the main appellant and not shown in the accounts of the main appellant. The second reason, which is the main basis of confirmation of demands is estimated production by the main appellant ba....
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....e respondent received 60.46 MT of MS Ingots from NIPL without any invoices. It is well settled law that on the basis of records recovered from a third party, the allegation of duty evasion cannot be made against an assessee unless cross examination of the persons from whom possession the records had been recovered, has been allowed, which has not been done in this case. Moreover, just because, M/s. NIPL had filed application before the settlement commission and had admitted certain quantum of duty evasion, it cannot be treated as an admission of receipt of unaccounted MS ingots by the respondent, and in this regard, we are supported by the decision of the larger bench of the Tribunal in the case of Bosch Chassis Systems India Ltd. Vs. CCE, Delhi-III-2008 (232) ELT 622 (Tri.-LB). Therefore, merely on the basis of entries in the ledger book recovered from M/s. NIPL which indicated the supply of certain quantity of MS Ingots to the respondent during August,05 to October, 05, it cannot be concluded that the respondent were indulging in duty evasion by under reporting the production of rolled products. Moreover, on the basis of entries in the private ledger book of M/s. NIPL at the most....
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....cturing unit and that could be adopted as basis for allegation of duty evasion, in case his actual production drastically varied from the normal production. But in this case, no experiment has been conducted by the department, in respect of the respondents unit to determine their actual power consumption. Before adopting power consumption ratio of M/s. SSSRM and applying it to the respondent's unit absolutely no study has been conducted to establish as to whether the rolling mill of the respondent is comparable with the rolling mill of M/s.SSSRM." 9. We also note that in another bunch of appeals arising out of common investigation, the Tribunal vide final order dated 19.03.2015 in the case of M/s. R.M. Brother Pvt. Ltd. and others held that merely on the basis of power consumption of the appellant unit, allegation of unaccounted production of M.S. ingots and its clandestine removal could not be sustainable. The Tribunal held that power consumption for production of 1 M.T. of M.S. ingots would depend upon various factors like age of the machinery, technology used, type of furnace, power supply pattern, type of raw materials used etc. It was held that the only reliable method woul....
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....y government of India is available, I do not find any basis to reject the same and to give more credence to data arrived at in case of a third party and that too based on short period of two months, without conducting any actual experiment/verification to sustain allegation of clandestine removal of goods. In this connection the Hon'ble Supreme Court in the case of Reliance Cellulose Products Ltd. Vs CCE Hyderabad -reported at 1997(93)ELT 246 ( 5.C)-has held that test report of Chemical Examiner and Chief Chemist of the Government, unless demonstrated to be erroneous, cannot be lightly brushed aside on the basis of opinion of some private persons. 55. Further from the documents submitted by one of the noticee in similar matter, I observe that throughout the country the electric consumption per MT of rolled products in rolling mills are different and assessment was not done on the basis of electric consumption. Some places it was reported to as high as 700 units PMT and no SCN was issued to such units. Further, Commercial Taxation Department of Rajasthan under an optional compounded levy scheme....
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....ducts Angels etc, when there was allegation of some unaccounted for raw material for a particular period. It is the basic philosophy in the taxation matters that no tax can be levied on the basis of estimation. Estimation of production fluctuates widely 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 which are leviable to excise duty have been actually manufactured. Unfortunately, no positive. evidence has been placed on record in the impugned show cause notice to that effect. Though its common knowledge that steel rolling mills do evade duty of excise yet high consumption of electricity by itself cannot be the ground to infer that they were engaged in suppression of production of MS rolled products. The reasons for high consumption of electricity in the case of their factory have not at all been studied and analyzed by the Revenue independently. Instead , the norm of 102.09 units for MS rolled products fixed as per private records of other units as per impugned Show Cause Notice has been blindly applied to the noticee's case ....
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....t too on the basis of imaginary production assumed, with no other supporting record, evidence or document to justify the allegations. The Hon'ble CESTAT in the case of RA.Castings Ltd Vs CCE Merrut reported at 2009(237) ELT 674(Tri. Del) has Document 3 7 Excise Appeals Nos.672 and 673/2010-EX(DB) comprehensively dealt with the issue of central excise duty demand on the basis of electric consumption on the report of a professor of IIT, Kanpur in respect of induction furnace and held that demand based on theoretical calculations is not sustainable. It was also held that high consumption of electricity by itself not a ground to infer suppression of production and electricity consumption cannot be the only factor for determination of liability. It was further held that clandestine removal not sustainable merely based on technical opinion. The said judgment was upheld by Hon'ble high Court of Allahabad and department's SLP against High Court order was dismissed by Hon'ble Supreme court in its order dated 31.1.2011. Relevant Para of the said judgment are reproduced below: 20.1 From the perusal of these reports, we find that wide variat....