TaxTMI 
TaxTMI 
2022 (4) TMI 476
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.... paid on inputs in terms of Cenvat Credit Rules, 2004 as amended. They had purchased Induction furnace of 8 MT capacity from M/s. Megatherm Electronic, Pvt. Ltd., Kolkata (for short, referred to as "M/s Megatherm") in the year 2001, which is in use by them since then. They use electricity supplied by Maharashtra State Electricity Board. The raw materials are charged in the crucible of induction furnace to convert the same into molten mass, which is poured in the moulds to obtain ingots/runners/risers and the said process is termed as one heat. 1.2 Up to the period 30.06.2005, the above factory was owned by M/s. Saggu Castings Pvt. Ltd.(for short, referred to as the "appellant No.2"), which was subsequently taken over by the appellant No.1. Shri Malkiatsingh Jagatsingh Saggu (for short, referred to as the "appellant No.3") was the former Director of M/s. Saggu Castings Pvt. Ltd. Shri Bharatbhai B. Doshi (for short, referred to as the "appellant No. 4") is the Director of the appellant No.1 company and also the partner in other manufacturing and trading companies. 1.3 In this case, the Department had gathered information that the appellant No.1 was evading the payment o....
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....rded from the transporters, who were engaged for transporting the goods belonging to the appellant No.1. 1.4. Upon detailed investigation into the matter, the department had concluded that the appellant No.1 had suppressed the production of ingots and removed the same without payment of Central Excise duty. Accordingly, show cause proceedings were initiated by the department against all the appellants, proposing confirmation of the Central Excise duty demand along with interest and for imposition of penalties. The matter arising out of the show cause notices, were adjudicated vide orders dated 01.06.2009 and 10.06,2010 by the learned Commissioner of Central Excise, Nagpur (for short, referred to as the "impugned orders"), wherein the proposals made against the appellants were confirmed in the following manner: Appeal No. E/986/09 E/1787/10 E/985/09 E/1786/10 E/948/09 Party Name Orange City Alloys Pvt. Ltd. Orange City Alloys Pvt. Ltd. Mr. Bharat B. Doshi, Director Mr. Bharat B. Doshi, Director Malkiatsingh Jagatsingh Saggu SCN Date 9.1.2009 7.1.2010 9.1.2009 7.1.2010 7.1.2009 Period 16.12.2003 to 24.11.2008 25.11.2008 to 31.7.2009 16.12.2003 to 2....
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.... was required to be updated and corrected. On the contrary, the learned Advocate has referred to the report prepared by M/s. National Institute of Secondary Steel Technology for the period June-July 2006 wherein, it has been stated that electricity consumption per MT of steel ingot would ideally be ranging between 1427 KWH of power to produce 1 MT of Pencil Ingots. 2.3. With regard to the allegation that the appellants had procured bogus purchase invoices and cleared excisable ingots in the garb of traded goods, Learned Advocate submitted that trading income relates to supply of angles, flats, channels, etc. He further submitted that receipt of the traded goods has actually been acknowledged by the buyer, for which the appellants had received the sale proceeds. Further, Learned Advocate submitted that the findings regarding excess burning loss in the impugned order are without any legal basis inasmuch as 10% burning loss is permissible as per the guidelines issued by the Ministry of Steel. Learned Advocate has also refuted the other charges levelled against the appellants in the SCNs as well as the impugned order. 2.4 Shri Malkiatsingh is the appellant No.3 in this bu....
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....uty computation aspect have been appropriately dealt with in the impugned orders passed by the Learned adjudicating authority and the same had been done on admitted electricity consumption of 925 Units per MT prior to 20.10.2005 and 860 Units per MT thereafter. The Learned AR has relied upon the following judgments to strengthen the stand of Revenue that there is no infirmity in the impugned order passed by the original authority: (i) Triveni Rubber & Plastics v/s Collector of CEx., Cochin-1994(72)ELT 897(Tribunal) (ii) Triveni Rubber & Plastics v/s Collector of CEx. Cochin-1994(73)ELT 7(SC) (iii) Rattan Steel Works v/s CCE, Chennai-2009(236) ELT 152 (Tri-Chennai) (iv) Nagpal Steels Ltd. v/s Collector, of CEx, Chandigarh-2000(125)ELT 1147(Tribunal) (v) R.P. Nagpal v/s CCE, Chandigarh- 2002(147)ELT 243 (P&H) (vi) Melton India v/s Commissioner Trade Tax, UP- 2007-TIOL-14-SC-CT (vii) Super Tyres Pvt. Ltd. vs CCE, Panchkula- 2009(244)ELT 363 (Tri-Del.) (viii) Gulabchand Silk Mills Pvt. Ltd. v/s CCE, Hyderabad-11-2005(184)ELT 263 (TriBang.) (ix) Bajrang Petro Chemicals Pvt. Ltd. v/s CCE, Kanpur- 2015(317....
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....e expert in the field. Further, it is also evident from the records that above power consumption as reported by the department is matching with the figures reflected by the appellants in their records, meant for scrutiny by the statutory authorities. The law is well settled that consumption of electricity per heat depends upon several factors such as nature and character of scrap, efficiency of the labour, upkeep of furnace, the desired characteristics of the final material, power fluctuation, etc. Therefore, no uniform criteria could be applied to determine the quantity of final product produced on the basis of electricity consumption. 7.2 Further, it is also noticed that the power consumption in the appellant's factory ranges between 1314 Units to 1662 Units is a gross figure which is inclusive of the power consumed by the auxiliary equipment; whereas, power consumption of 925 Units or 860 Units considered for calculation of production was confined only to the power consumed in the furnace. Furthermore, out of the total consumption of electricity, 20% of consumption is meant for ancillary and allied activities relating thereto and on deducting such percentage used for othe....
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....try could be about 1427 KWH of power to produce 1 MT of pencil ingots; however higher consumption of electricity is not ruled out by individual units. The report also says that on account of wide variations, no bench marking of electricity consumption can be done as such. Further, it is also noticed that the Joint Plant Committee constituted by Govt. of India have furnished a report in 2004 titled "Survey of Electric Furnace Industries in India", clarifying that the power consumption required to produce 1 MT of ingots from scrap is 1800 units/ MT and the same can go beyond 2000 units/ MT. 7.5 The above evidences prove that there is wide variation in the consumption of electricity for the manufacture of one MT of steel ingots. There is no prescribed fixed ratio between the power consumption and the production of ingots. Therefore, the adoption of consumption norm of electricity by the department at the range of 925 Units/ 860 Units for calculating the so-called unaccounted production, in our considered view is not tenable. 8. Apart from relying upon the above primary evidences, the department had also relied upon the following corroborative evidences to allege that the appel....
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.... suppressed ingots by the appellants. For the said purpose, the adjudicating authority has relied upon the statement of the transporters to hold that the appellants had procured bogus purchase invoices and cleared excisable ingots in the garb of traded goods. In this context, the appellants have contended that the trading income relates to supply of angles, flats, channels, etc. and such trading activities were undertaken at the appellant's Bhilai Unit and not from the appellants' factory. On examination of case records, we also find that the transporters in their statements also stated that they had not transported MS angles, channels, flats etc., from the appellants Bhilai Unit to their buyers. Further, it is not the case of Revenue that the sale proceeds of the traded goods were not received by the appellants from their buyers. Therefore, we are of the view that there is no basis to allege that the amount generated in the above manner had any nexus with the sale of ingots by the appellants. We also find that the appellants had sought cross examination of the transporters to test the veracity of the statements, but such opportunity was denied. Thus, there is gross violation of th....
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....fits from trading transactions and to assume the same to be sale proceeds of ingots clandestinely manufactured and cleared by the appellants, is completely without any basis or jurisdiction. It is a settled principle of law that the burden of proof in the case of clandestine removal is on the Department and it cannot be discharged on the basis of suspicions and surmises. 8.3 The burning loss in this case was less than 10%, except for the year 2005-06, when the same was 11.1% and marginally in the higher side. It is a standard practice in the trade of manufacture of iron and steel that 10% burning loss is usually permissible, owing to the reason of various factors. Considering such practicality, the guidelines issued by the Ministry of Steel has also acknowledged such fact. Therefore, the issue of burning loss cannot be the standalone basis to allege suppression of production. 8.4. Further, the department has concluded that the income shown under the heading 'other income' is not genuine and the same represents the income derived from clandestine clearance of ingots. Under the Income Tax law, it is not necessary that only the income from the assets owned by the company....
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.... of the present appellants relating to raw materials, finished goods, production, clearances, opening and closing stock, work in progress etc. Therefore, the charges levelled against the appellants that the finished goods were clandestinely manufactured and removed by the appellants are without any basis and the impugned orders passed in confirming the adjudged demands are liable to be set aside. 9.1 The issue identical to the present case arose in the case of R.A. Castings Pvt. Ltd. Vs. CCE - 2009 (237) ELT 674 (Tri.), wherein the allegation of clandestine removal of ingots was charged on the basis that (i) the assessee was showing less production in comparison to electricity consumption norms prescribed by IIT report of Dr.Batra; & (ii) the assessee had shown huge profit through 'share trading' & 'sales commission' and that the same represent income earned from clandestine clearance of ingots. In this case, the Tribunal rejected the contention of Revenue by holding that allegation of suppression of production and clearance relying on technical opinion and reports on electricity consumption are arbitrary and thus, demand based on theoretical calculations is not sustainable;....
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.... sheets. He has used this only as corroboration and not the primary basis for determining the quantum of production of steel ingots. Once the main evidence itself is found to be unreliable, such figures of profits etc. in the balance sheets cannot form a basis for rejecting the quantum of production appearing in the records of the appellants. 9.2 The aforesaid decision of the Tribunal in the case of R.A. Casting Pvt. Ltd. is affirmed by the Hon'ble High Court reported at CCE Vs. R.A. Castings Pvt. Ltd. - 2011 (269) ELT 337 (All.) and further maintained by the Hon'ble Supreme Court reported at 2011 (269) ELT A108 (SC). 9.3 Further, in the case of SRJ Peety Steel Pvt. Ltd. Vs. CCE - 2015 (327) ELT 737 (Tri.), the issue pertained to clandestine manufacture and clearance of ingots without payment of excise duty by the assessee. The entire case was based mainly on the allegation that the assessee was showing more electricity consumption for production per MT of MS ingots as compare to the electricity consumption mentioned in the study conducted by Dr. N.K. Batra, Professor of IIT, Kanpur. In this case, there was difference of opinion between the Members in the Bench. On re....
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....d to prove its case to its mathematical precision, by relying on judgment of the Hon'ble Supreme Court in the case of D. Bhoormull - 1983 (13) E.L.T. 1546 (S.C.) relied upon by the Commissioner as well as the Hon'ble Member (Technical). It is seen that even this judgment was considered in R.A. Castings (supra)..... 91. There can be no dispute on the fact that in adjudication proceedings, the charge of clandestine removal is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions. Regarding the claim of the Revenue that subsequent to passing of impugned orders the power consumption for manufacturing one MT of Ingots has reduced in factories of all the appellants, I am of the view that it cannot be a basis to sustain the findings in the impugned orders by assuming that there could not be any reason for lower consumption of electricity during the subsequent period. I also agree with the finding of the Hon'ble Vice-President that in any event, this additional material is also only of power consumption." 9.4 Similarly, in the case of J.J. Re-Rollers (supra), Revenue had alleged suppre....
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.... brought out by the Revenue in the proceedings against the respondent. Further, we note that all the incomes have been taken out of recorded balance sheet and the attempt by the Revenue to interfere the linkage between the clandestine clearance of the excisable goods to that income has not been materially supported by any evidence. We also note that the main respondent had actually suffered losses of more than Rs. 1 crore/each during the year 2004-05 and 2005-06 as per the books of accounts. We are in agreement with the Original Authority and hold that in the absence of any tangible evidence, the financial transaction as per the Balance Sheet and other financial dealings cannot be questioned without any substantial evidence to make a demand of Central Excise duty based on the inference and presumption. The same is not legally sustainable. Even for argument, it is accepted that the some of their trading activities are bogus, it is necessary to show that in such transaction, the real product involved is clandestinely manufactured excisable goods. 7. In the present case, we note that there is no evidence relating to procurement of extra unaccounted raw materials/inputs, deploy....