TaxTMI 
TaxTMI 
2017 (7) TMI 1369
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....cturing M.S. Ingots since long. * Show cause notice dated 7-2-2014 was given by the Commissioner, Central Excise and Service Tax, Jamshedpur for the period running from January, 2009 to September, 2013. * Personal hearing in the case was held on 29-10-2014, 3-12-2014 and 22-12-2014. * Thereafter, the Order-in-Original was passed by the Commissioner, Central Excise and Service Tax, Jamshedpur on 27-2-2015/13-2-2015 (Annexure-3). * The petitioner had earlier filed an Appeal before the Learned CESTAT, Kolkata which was subsequently dismissed vide order dated 6-1-2016. * The petitioner further filed Tax Appeal being T.A. No. 24 of 2016 before this Hon'ble Court primarily challenging the order passed by the Learned CESTAT, Kolkata which was withdrawn. * 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 petitioner : * Counsel appearing for the petitioner 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) ....
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....re is clandestine removal of finished product, which has not been discharged, at all, by the respondents. * It is also submitted by the counsel for the petitioner 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 appearing for the petitioner has relied upon the decisions which are as under :- (a) R.A. Castings decisions reported in 2009 (237) E.L.T. 674 (Tri.), which is confirmed by the Division Bench of Allahabad High Court reported in 2010 (1) taxman.com. 342 (Allahabad) = 2012 (26) S.T.R. 262 (All.) = 2011 (269) E.L.T. 337 (All.) against which SLP preferred by the department, has also been dismissed, and (b) W.P. No. 173 of 2014 decided on 22-4-2014 by the Calcutta High Court [2014 (306) E.L.T. 216 (Cal.)]. * Counsel for the petitioner has pointed out that in several similarly situated cases, in which Dr. N.K. Batra report's report has been referred to and relied upon, for proving clandestine removal of the finished products, in the show cause, ultimately in the....
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....6-6-2014 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 7-2-2014 as well as Order-in-Original dated 27-2-2015/13-3-2015 which are at Annexure-1 and Annxure-3, respectively, may kindly be quashed and set aside. 4. Arguments canvassed by the Counsel for the respondents : * Counsel for the respondents submitted that the petitioner is having efficacious and alternative remedy against the Order-in-Original and the appeal has been preferred before the Central Excise and Service Tax Appellate Tribunal (CESTAT) under Section 35(B) of the Central Excise Act, 1944. In fact, appeal has also been preferred. * 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 other grounds like high cost of production vis-à-vis income from sale, unrealistic low amount of expenditure incurred on salary of employee....
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....ntive 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. Petitioner is in possession of an e-mail communicated by IIT as to whether such report has ever been given by IIT, Kanpur, the answer given by IIT, Kanpur in negative (Annexure-4, 4/1 to the memo of this 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 Dr. N.K. Batra for cross examination by any assessee in whole of India. Nobody knows the authenticity of Dr. N.K. Batra's report. Nob....
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.... 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's 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 26-6-2014 (Annexure-2 to the memo of this writ petition). In this case, the respondents are relying upon Dr. N.K. Batra's report. 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 petitioner was g....
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....t 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 decisions, If there is a violation of principle of natural justice, writ is always tenable at law. (vii) Thus, the department has not done any homework and the show cause notice dated 7-2-2014 (Annexure-1) has been issued. This type of short-cut should not have been followed by the department. There is no short-cut 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 petitioner. (viii) The respondents have also been given time and again the guidance by various decisions that....
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....eriment 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. v. CCE, reported in 2009 (237) E.L.T. 674 (Tri.) 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....
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....ify 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 the basis of the technical opinion report of Mr. Batra. In this connection, the following case laws are relied : (i) &....
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....eport of Dr. N.K. Batra has been several times, criticized by various adjudicating authority vis-à-vis clandestine removal and the respondent-department has also issued a Circular dated 26-6-2014 and several times such notice has also been dropped while passing the Order-in-Original, as stated hereinabove, 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 consumption of electricity, because one may be new and another may be....
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.... of the machinery utilized by the noticee. Looking to the facts of the present case, the electricity consumption pattern as has been given in Annexure-F, as stated in paragraph 5 of the show cause notice, which is at page no. 53 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-à-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 be....