AI Drafter 
TaxTMI 
TaxTMI 
2020 (2) TMI 603
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....al Excise Act, 1944. The same my be appropriated from Rs. 2,83,698/- already deposited by the notice. iii. I also impose a penalty of Rs. 1,18,050/- upon M/s Aarti Steels Ltd, Focal Point, Ludhiana under Rule 25 of the Central Excise Rules." 1.2 Respondents have filed cross objections in the matter. 2.1 Respondent's- • Manufacture of various iron and steel products like Ingots, Continuous Cast Billets, Rounds, Bars, Flats, wire rod, various type of wire like Black Wire, Galvanized Wire, Cycle Spoke Wire, Tyre Beed Wire, Rope Wire, Spring Steel Wire, Cable Armouring Wire etc., of Alloy Steel as well as Non Alloy Steel; • They have galvanization facility too; • They manufacture goods on their own behalf and also undertake job-work for others. They also get their goods manufactured on job work from others; • The goods manufactured at every stage of manufacture are identifiable with separate name, form and tariff heading. 2.2 During course of visit undertaken by the Officers of DGCEI to the premises of respondent and on scrutiny of records resumed from their premises relating to production and clearance including pri....
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.... only) should not be demanded and recovered from them in terms of proviso to Section 11A(1) of Act on account of 1343.090 MT of Wire Rods detailed under paragraph 6.7 & 10.1.1 and computed at Annexure C1(iii) to this notice; d. Rs. 34,18,857/- (Rupees Thirty Four Lakh eighteen thousand eight hundred and fifty seven only) should not be demanded and recovered from them in terms of proviso to Section 11A(1) of Act on account of 1018.08 MT of steel rounds and rods detailed under paragraph 6.7 & 10.1.1 and computed at Annexure C1(iv) to this notice; e. Rs. 37,79,322/- (Rupees Thirty seven Lakh seventy nine thousand three hundred and twenty two only) should not be demanded and recovered from them in terms of proviso to Section 11A(1) of Act on account of 1186.980 MT of steel Patra i.e. Flats detailed under paragraph 6.7 & 10.1.1 and computed at Annexure C1(v) to this notice; f. Rs. 44,22,347/- (Rupees Forty Four Lakh twenty two thousand three hundred and forty seven only) should not be demanded and recovered from them in terms of proviso to Section 11A(1) of Act on account of 976.227 MT of steel wires detailed under paragraph 6.7 & 10.1.1 and computed at Annexu....
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....ons of the rules as pointed out at para 11(c) supra. 2.4 The show cause notice was adjudicated by the Commissioner as per impugned order referred in para 1, supra. 2.5 Aggrieved by the order of the Commissioner, revenue has preferred this appeal. 3.1 We have heard Shri Rajeev Gupta, Commissioner and Shri Vijay Gupta, Assistant Commissioner, Authorized Representatives for the Revenue and Shri R Santhanam for the respondents. 3.2 arguing for the revenue learned Authorized Representative submitted that- • Adjudicating authority has erroneously partly dropped the demand made in the respect of the shortages determined during the course of physical stock verification. The stock verification was done in the presence of the respondent representatives and with their assistance. Respondents had admitted the shortages and have paid the amount of duty due on the shortages so determined; • In respect of the demand made on the steel ingots on the basis of the electricity consumption, the order of adjudicating authority is erroneous as the power/ electricity consumption of 775 KWH/ PMT of Steel Ingots was not made on the basis of any tests conducted by the re....
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....be reversed recovered; • Respondents have admitted in the reply to show cause notice that the private records belonged to them and were maintained by them for purpose of internal accounting. Thus these records contained the actual production. • The impugned order of adjudicating authority needs to be set aside on the above accounts;. 3.3 Arguing for the respondents learned advocate, submitted that Commissioner has in the impugned order considered the issues raised in the show cause notice in right perspective and have recorded his findings accordingly. It is settled law that- • Demand of duty cannot be made on the basis of assumptions and presumptions but has to be made on the basis concrete evidence of production and clearance of goods; • Tribunal has in series of decisions has held that demand made on the basis of consumption of electricity per unit of goods produced cannot be sustained. Thus the demand made on the basis of electricity consumption taken at 775 unit per metric ton cannot be sustained as has been held by the Commissioner in the impugned order; • They had properly accounted for the production of exc....
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....lectricity consumption; iii. Nil production on certain days when there was electricity consumption recorded; iv. Difference found in production recorded in RG-1 register and the private records; v. Irregular credit on zinc ingots; 4.3.1 The issue at "i." above, has been discussed and considered by the Commissioner in his order as follows: "3.47 Then there is another issue i.e. on 4.2.2004, during stock taking in the factory premises of the Noticee by the DGCEI officers, shortage of 84.434 MT of wire was detected. All other raw materials, work in progress and finished goods were found tallied with the recorded balances. On that particular date, the Noticee has contended that they had a recorded stocks of raw materials, work in progress and finished goods totalling upto 12818.041 MT. I have gone through the stock taking report prepared on spot. As per stock verification report the goods were not physically weighed but were worked out on the basis of average weight of lots/ bundles/ pieces etc. Stock taking on average basis cannot be substitute of actual weighment. The notice has pointed out that a stock of rusted wire rods weighing 49.2 MT in 25....
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....uantity of old rusted wire (said to be scrap) has to be counted as stock, even if it is a scrap. There may be valuation issue on this, but its existence in the assessee's premises cannot be ignored and has to be added to the total stock. DGCEI has in fact, erred in not taking cognizance of this and alleging shortage without accounting for this stock, especially when it has been duly reflected in the panchnama. I have also noticed that the notice had earlier deposited an amount of Rs. 2,83,698/- which is equivalent to duty leviable on 84.434 MTs of wire rods. However, since there is an error apparent on record, hence, noticee's act of deposit of the said amount does not vitiate their rights and they are entitled to claim relief on this count. The said amount remains as deposit with the Government, till the amount is appropriated after determination of duty liability. Thus I find that actual shortage in stocks of wire rods was 35.134 MT only. Admitting the stock taking report to be correct, the demand for central excise duty on shortage of only 35.134 MT of wire rods amounting to Rs. 1,18,050/- is sustainable." 4.3.2 We are in total agreement with the reasoning adopted by the Comm....
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....tober 2003 888 units 9 Jan 2004 903 units I observe, for instance, if during the months of August 2001, some demand of ingot section is worked out, the production figures have been worked out by dividing the total power consumption by 980 units. For October 2001, the production figures have been worked out by dividing the total power consumption by 947 units. For Jan 2002, the production figures have been worked out by dividing the total power consumption by 1028 units and so on. I find that hen a bench mark of 775 units has been adopted in the show cause notice then production figures should have been worked out accordingly. I find that the power consumption in the range of 903-1028 is acceptablehere to DGCEI. In the same show cause notice I observe that the duty has been demanded where the power consumption is more than 775 unit/ PMT. No justification for adopting such bench marks has been given in the notice. 3.44 In the show cause notice, the variation/ fluctuation of pwer consumption per MT of Ingot produced was noticed at 1017 units, 972 units & 983 units on 17.1.2004, 19.1.2004 and 22.1.2004 respectively. The noticee has pointed out that the dem....
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....on the same day, when they are produced. Quality inspection, in fact, is an integral part of production process, and it is an accepted procedure in Central Excise Rules, and there are umpteen number of products wherein the manufacture is considered complete only after quality control certifies it to be of desired quality or specifications, and hence to be entered in RG-1 records. On the basis of facts brought before me I conclude that recording of production by the noticee, after quality control clearance, is in order and does not violate any provision of Central Excise rules. The explanation of the noticee that there was production on the national holidays, but in absence of quality control staff, no production was entered in RG-1 records on the said days, but entered in their statutory records only on subsequent days after quality control check found it in order and hence acceptable. Hence demand of duty based on account of this allegation is not sustainable." 4.5.2 Commissioner is correct in his conclusion that the goods were entered in the production records maintained by the respondents only after quality inspection and clearance. During the period of demand it was for the ....
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....51.9 84 2551.0 67 257.92 9 2808.9 96 - 57.012 May 2507.2 47 2382.1 65 123.25 6 2505.4 21 1.826 Jun 2642.0 10 2548.4 28 156.93 4 2705.3 62 - 63.352 July 2690.0 67 2675.7 60 1.035 2676.7 95 13.272 Aug 2769.9 56 2693.8 08 73.210 2767.0 18 2.938 Sept 2780.0 73 2697.3 65 81.619 2778.9 84 1.089 Oct 2844.1 02 2772.9 14 74.934 2847.8 48 -3.746 Nov 2780.7 92 2850.1 10 3.248 2853.3 58 - 72.566 Dec 02 3091.4 81 3032.4 93 2.900 3035.3 93 56.088 Jan- 03 2769.7 76 2783.3 64 5.848 2789.2 12 - 19.436 Feb 2603.7 04 2463.5 81 0.000 2463.5 81 140.12 3 Mar 2725.3 73 2463.4 63 5.490 2468.9 53 256.42 Pr 2518.2 37 2406.4 63 0.000 2406.4 63 111.77 4 May 2918.5 27 2796.5 95 0.000 2796.5 95 121.93 2 Jun 2770.6 14 2576.6 59 0.000 2576.6 59 193.95 5 July 2896.4 36 2719.0 21 0.000 2719.0 21 177.41 5 Aug 2977.5 36 2708.3 12 5.030 2713.3 42 264.19 4 Sept 2921.5 76 2689.0 45 0.000 2689.0 45 232.53 1 ....
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....N - RUD-25) Total production as per the Non Conformity Reports = 55802.801 MT Total production as per as per private records =55082.243 MT Rejection from it. = 385.431 MT Net Production in pvt record (55082.243-385.431) = 54696.812 MT Total production as per ER-1 returns and job work records = 54971.536 MT These figures have been checked/ compared and found to be correct. This clearly exceeds by 274.724 MT as compared to private records. I find that the private records and the official records do not tally month wise. This noticee has explained that this is due to overlapping of production figures at the month end. Some time the production of a particular item is there in private records but same is entered in Official records after quality control clearance. But over a period of time, both the figures get reconciled. 3.29 .... 3.30 After going through the show cause notice and the reply of the noticee, I find that the other reason for difference in private records and statutory records figures is the occurrence of non conformities/ rejections within the factory premises. Since the noticee has an integrated unit, the rejectio....
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....ER- return is the statutory return prescribed under Central Excise Law. If the total production declared in ER-1 return is higher than that computed production on the basis of private records we do not find any merits in submission made by the revenue, that production in RG-1 register do not tally with private records. Hence the issue on this account is answered in favour of the respondents. 4.7.1 In respect of issue at "v" Commissioner has in impugned order has observed as follows: "3.46 I find it surprising that the DGCEI has not taken into consideration the zinc received from job workers. I observe that there is complete reconciliation between the inventory, receipt & consumption figures of duty paid zinc and the demand on account of excess availment of CENVAT credit is not sustainable. The Noticee has logically explained that the reason for difference between the statutory records and the private records is that the total quantity of zinc shown in Form IV Register represents the duty paid zinc and job worked recovered zinc. But in private records, it shows standard consumption versus Zinc drawn from from stores, which is their internal exercise. I am of the opinion ....