AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 76
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....3.2013. M/s Prakash Industries Limited is engaged in the manufacture of sponge iron, M.S. Ingots, billets and bloom falling under Chapter 72 of the Central Excise Tariff. They have two units - One situated in District Champa, Janjgir (Chhattisgarh) (PIL-I) and the second unit situated at Raipur (PIL-II). M/s Vivek Steels, Raipur are unregistered trading firm who have issued challans/ bills in respect of bloom, billets/ ingots manufactured by PIL to various parties of Nagpur. Acting upon the information that PIL was engaged in large scale evasion of duty by suppression of production of final products, the Central Excise Officers undertook search operation at the factory premises. PIL-I was searched on 31.01.2005, which continued upto 02.02.2005. During the course of search numerous incriminating documents indicating suppression of production were recovered. A part of the recovery was effect from the fourth floor of the Bin Building of Sponge Iron Division concealed in a plywood box covered with a polythene sheet hidden under a heap of Stone Chips camouflaging as waste, which were unearthed and seized. During the course of physical verification of the stock of raw materials and finis....
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....nalty and interest. (iii) Penalties stands imposed against various persons. Aggrieved by the impugned order, appeals have been filed by all connected parties against duty demand as well as the penalties imposed. Revenue have also challenged the order on the ground that the adjudicating authority has erroneously scaled down the demand to about Rs. 16 crore against PIL-I. Hence, all the appeals are disposed of through this common order. 6. In respect of PIL-I, the issue before Authority below was whether there was clandestine manufacture and removal of sponge iron for captive consumption in the manufacture of Bloom billets and ingots ultimately removed clandestinely evading excise duty of Rs. 16,92,11,104/- (inclusive of education cess of Rs. 26,16,085/-). The second issue was whether the quantity of bloom, billets and ingots not found during physical verification amounts to clandestinely removed with evading excise duty of Rs. 96,48,603/- (inclusive of education case of Rs. 1,89,188/-). 7. Appellant was operating two kilns of 500 Tons capacity per day carrying out directly reduced iron (DRI) process for manufacture of sponge iron. Using the sponge iron so manufactured, b....
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.... the kilns were available on the back side of the actual production report which remained absent in the fabricated reports proving that production figures were fabricated to suppress the same in Excise records. (d) Daily operation report of the direct reduced iron process plant recovered from the SID when compared with the records maintained in Excise division for the period 01.04.2002 to 30.01.2005, resulted in difference of 2,69,603 MT of sponge iron arose suppressed production of such quantity not found in the Excise records. (e) The kiln operating days and kiln shut down days figures appearing in daily operation report of directly reduced iron plant recovered from SID when compared with daily operation kept at the Excise Division, difference of 453 days was noticed. In other words, in the Excise records 453 days of excess shut down was falsely recorded although there was no such shut down. (f) Shut down/start up information relating to the kilns was to be reported to the jurisdictional Superintendent of Central Excise Department on the same day. But while questioning Shri S.N. Jha, DGM (Excise) who was signatory to such report it came to light of investigation that the....
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....generated report dated 02.12.2004 showed production summary of November, 2004. Similarly another computer sheet dated 01.01.2005 showed production summary of December, 2004. Figure in these documents differed with the figures reported in the statutory records for the relevant periods making clear that statutory record were not recording actual production. (m) The computer generated performance report dated 03.01.2005 containing production of sponge iron, iron ore consumption, dispatch of sponge iron for captive consumption etc., for the months of October, 2004 to December, 2004 exhibited the figures of direct reduced iron plant daily operation recovered from SID. But such figures varied with the RG-1 figures exhibiting suppression of production. (n) The kiln shut down files recovered during the search contained tentative plans of shut down, technical analysis of the cleaning of accretion inside the kilns and other documents like bills raised by the contractor for such cleaning which confirmed the shut down status as shown in the daily operation report maintained in direct reduced iron plant. But the shut down status appearing in the Excise records varied proving suppression o....
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....oose papers recovered from the weighbridge site of the appellant (manufacturer). Truck operation report, inter officer memo, vehicle movement register, driver bio-data log book recovered from the Transport Section of the factory as well as minutes of daily coordination meeting of the Commercial Department of the Noticee recovered from the Executive Director‟s Chamber demonstrated clandestine removal of above goods. Similarly incriminating documents recovered during the follow up search conducted in the premises of M/s Vivek Steels, Ramsagar Para, Raipur, also showed clandestine removal of blooms, billets and ingots manufactured out of the suppressed quantity of sponge iron manufactured. Admission of Shri Vivek Jajodia, Proprietor of the said firm also proved disposal of clandestinely removed goods of above description. 13. Facts and figures gathered from Municipal Corporation, Nagpur, builty book register/cash memos recovered from the transporters namely-M/s Jay Amba goods carrier, M/s Shri Gurunanak Roadways and from M/s Lift & Shift, Raipur and parallel invoices recovered from M/s Sun Vijay Rolling & Engineering Ltd Nagpur and M/s Sun Vijay Steel Pvt Ltd, Nagpur during f....
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....sion noticed during those periods and assessable value for the respective period were worked out basing on ER-1 returns: Period Suppression of captive consumption of sponge Iron(MT) Suppression of production of blooms, billets and ingots worked out @ 88.04% conversion rate (MT) Rate PMT on average Assessable value as per ER-1 Total Assessable Value(Rs) Rate of duty Basic Excise duty(Rs) Education Cess (Rs) 1.7.03 to 27.7.03 16983.000 14951.833 11443/- 171093825/- 16% 27375012/- 1.5.04 21.5.04 6179.230 5440.194 19337/- 105197031/- 8% 8415762/- Aug.04 9849.510 8671.508 18900/- 163891501/- 12% 19666980/- 393340/- Sep.04 10248.300 9022.603 18456/- 166521161/- 12% 19982539/- 399651/- Oct.04 8365.830 7365.276 18260/- 134489940/- 12% 16138793/- 322776/- Nov.04 19303.600 16994.889 17917/- 304497426/- 12% 36539691/- 730794/- Dec.04 18905.590 16664.481 17063/- 284004778/- 12% 34080574/- 681611/- 1.1.05 to 30.1.05 2307.000 2031.082 18035/- 36630563/- 12% 4395668/- 87....
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.... an estimation of production of sponge iron and blooms, billets and ingots and made allegation of clandestine removal thereof. Electricity is not only generated in the captive power plant but also wind power was generated by the appellant and used for its various purpose including use in infrastructure. 22. Accounting to appellant, finding irregularities in the original adjudication order of the same appellant, Tribunal had remanded the matter in the decision reported in 2010 (262) ELT 562 (Tri.). There was neither any unaccounted receipt of the iron ore nor there was any unaccounted manufacture of sponge iron. Similarly, no unaccounted manufacture of blooms, billets and ingots were made. When the iron ore was sold at the Railway sliding and that remained unquestioned, there was no scope for Revenue to make allegation that unaccounted iron ore were used for manufacture of sponge iron. 23. Appellant further submitted that there was no investigation made to find that there was no sales of iron ore made at the railway sliding. Ld. Authority below acted suspiciously recording erroneous facts in para 41 of the re-adjudication order. There was no suppression of any kind established....
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....e unaccounted goods which was demonstrated by various evidences recovered during investigation. 29. None of the evidence gathered by investigation at the time of investigation were rebutted by appellant. The report recovered from the kiln, sponge iron division and from various sources were not controverted. There were lower quantity of output recorded in Excise record compared to the actual input and electricity consumed. Cogent and credible evidence gathered by investigation proved questionable modus operandi of the appellant. There were shortage of stock found proving clandestine removal. Appellant operated with oblique motive to cause prejudice to Revenue. There was also premeditated design made by appellant to cause evasion systematically and scientifically. 30. With the above background, we have heard various ld. Counsels for the appellant/ assessee and Revenue was represented by Sh. R. K. Mishra, ld. AR. 31. The main points argued by ld. Counsel is summarised below: (i) He submitted that the entire iron ore which is the main raw material is received by the factory through the Railway siding at Bardwar, Orissa; thereafter it goes to the appellant factory through tr....
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....ue during investigation was that the appellant-assessee was issuing invoices in such a way that the original and duplicate copies showed the clearance of finished product such as bloom and billets but the triplicate copy showed the same goods fraudulently as „slag‟. Such modus operandi came to light only from the incriminating documents seized during the investigation. Further, he argued that: (i) From the elaborate investigations conducted, it stands established that the appellant was not accounting the entire production in their excise division. Three different versions of daily production reports were recovered - showing different figures. The recovered documents proved that the manufacture of sponge iron was not fully accounted and the same stand admitted in the statements recorded from various employees such as Sh. M. S. Vas, Manager, Sh. T. P. Mukhopadhyay, Sr. Manager (Q&A), Sh. S. N. Jha and others. (ii) The incriminating documents were, in fact, found during the search in a concealed box which was hidden under other debris, This proves their malafide intention to evade payment of Excise duty. (iii) It was also submitted that the claim of sale of iron o....
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....account average consumption of electricity required for unit of the finished product. It has been submitted before us that it will not be fair to take such a view, since the electricity generated and accounted in the annual report includes also that generated by wind farm in Tamil Nadu. Further, it is submitted that the captive power plant not only caters to the direct reduction sponge iron plant but other parts of the appellant‟s factory. But we find that these arguments were considered carefully by the adjudicating authority in the present round of litigation resulting in the impugned order. The demand confirmed in the present proceedings is not entirely on the basis of theoretical calculation of the estimation of finished products. 35. The investigation undertaken by Revenue has conclusively established that the production has not been fully accounted in the statutory record maintained in the Excise Division. The total quantum of production of sponge iron has been determined by the adjudicating authority on the basis of various records recovered during investigation and confirmed and admitted by the appellant‟s employees. These include- (i) daily operation repo....