TaxTMI 
TaxTMI 
2022 (9) TMI 1279
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....telligence [DGCEI] received intelligence that the assessee was suppressing the production of its finished products and subsequently clearing the same clandestinely without payment of central excise duty and started investigation. The officers searched the premises of the factory of the assessee and the residence of the Director on 18.10.2012 and seized some documents. They also took stock of the goods and found a shortage of 102.170 M.T. of Ingots. They also recorded statements of various persons during investigation. After completing the investigation, a show cause notice dated 06.11.2013 was issued by the DGCEI, demanding a duty of Rs. 7,93,16,068/- towards the central excise duty on the clandestinely removed goods along with interest and proposing imposition of penalties. This demand was on following 4 counts :- (a) Rs. 7,25,92,853/- was based on electricity consumption in the factory and reckoning the amount of electricity required for production of each ton of MS Ingots during the period April 2009 to June 2012. It was presumed that 31,128.955 M.T. of MS Ingots were clandestinely manufactured and cleared by the assessee. The demand on this count has already been dropp....
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.... evidence to establish any clandestine removal. No buyer of the cleared goods was identified and no transporter or driver was identified or questioned. To manufacture MS Ingots of the quantity indicated more raw material would have been required and no such suppliers of raw material were identified or questioned nor any shortage of raw materials found at the time of stock taking. Further, the sale of such large quantity of goods would result in large cash transactions of over Rs. 4.5 crores and no cash was seized by the Department or detected. There is not even a single case of seizure of any consignment of clandestinely procured raw material or clandestinely produced finished products. (v) None of the statements recorded during investigations are relevant as evidence in view of section 9D of Central Excise Act, which was not followed ; (vi) Since the Commissioner has already dropped the demand of Rs. 7,25,92,853/- he should have dropped this demand as well ; (vii) In his statement the Director Shri Singh had, in response to question 29, stated that that the capacity of the furnace is only 6 M.T. and a maximum of 6.5 M.T. of MS Ingots can be produced in a....
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....ts produced and the quantity of steel per heat and secondly the demand on account of the invoices. 7. He submits that as far as the quantity of steel produced based on the number of heats is concerned, the appellant has furnaces in which steel scrap is melted and thereafter it is poured into moulds which results in production of ingots. Each batch of melting is referred to as heat. The appellant has maintained a notebook which was seized during the search. The heats are numbered serially by the appellant and in this notebook the number of heats produced is mentioned datewise along with the carbon percentage and manganese percentage etc., in respect of each batch. It is not in dispute that this notebook was seized from the appellant and as can be seen from Annexure F to the appeal each page of this notebook was stamped and signed by the appellant. This notebook, however, does not mention how much quantity was manufactured in each heat. He submits that manufacture of ingots, being a batch process, the quantity manufactured during each batch depends upon the capacity of the furnace. However, there could be small variations on account of variations in the materials etc. 8. He fur....
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....rds of these three days were available. The appellant had not produced records of the previous period. Only the number of heats on each date was available in the notebook seized from the appellants. It is possible that the appellant was destroying the production reports and, therefore, production reports for the entire period were not available. Therefore, the demand of duty based on this production reports needs to be upheld. 12. As far as the demand of Rs. 6,12,193/- based on parallel set of invoices is concerned, learned Authorized Representative submits that the question is not of extra copy of the invoices being kept, but two invoices of the same number being generated by the appellant with different names and different quantities of goods and duty being paid only on one. While this practice may be going on for long, the demand has been made only in respect of 12 invoices which were actually recovered during investigation. Therefore, the demand on this count also needs to be upheld. 13. On the appellant's submission that since the demand of Rs. 7,25,92,853/- covering the period 01.04.2009 to 30.06.2012 has already been dropped by the Commissioner and hence these demands ....
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....pends on the size of the batch which, in turn, depends on the capacity of the machinery/plant. In this case, that size is the capacity of the furnace. This capacity does not vary every day, but is fixed unless the capacity is altered by adding new furnaces or replacing the existing ones. Therefore, it is reasonable to presume that the capacity of one batch will be more or less consistent with that of another. However, considering the nature of the material used, namely, scrap, the size of the batch may not be as accurate as in some other industries, such as, pharmaceutical industry. 17. According to the appellant, the capacity of each batch is only 6 M.T. or a maximum of 6.5 M.T. and ingots more than this cannot be produced per heat. It is not in dispute that the production reports for the period 14.10.2012, 16.10.2012 and 17.10.2012 maintained by the appellant are its internal records recovered during search. These are enclosed as Annexure G at pages 135 to 140 of the appeal. Unlike, the notebook which only mentioned the heat numbers and the composition of the metal, these production reports give detailed timings and when the production was switched on and switched off, the tim....
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....nd risers. The runners and risers and ingots are two distinct goods known to the industry and the weight in the production reports was only of the ingots and there is no mention of runners and risers. 19. We proceed to examine how robust and consistent is the data in the production reports. We find that in each and every batch if the total length of the ingots together and the total weight is considered, the weight of the ingots per inch of length gives to 1.96 kg., as below :- Weight of MS ingots per inch of length as per the data in the production reports of the appellant Heat No. Date No. of ingots Length (inches) weight (kg) Total length of ingots in inches Weight per ingot (kg) weight (kg) per inch length of ingot (1) (2) (3) (4) (5) (6) =(3)x(4) (7) = (5)/(3) (8) =(7)/(6) 48 14-Oct-12 71 59 8210 4189 116 1.96 49 14-Oct-12 76 59 8788 4484 116 1.96 50 14-Oct-12 81 54 8573 4374 106 1.96 51 14-Oct-12 81 54 8573 4374 106 1.96 56 16-Oct-12 78 54 8255 4212 106 1.96 57 16-Oct-12 76 57 8490 4332 ....
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....bmission of the learned Counsel that only 6 or 6.5 M.T. can be produced per heat is inconsistent with the data which is undisputed and is available on record. 22. Learned Counsel for the appellant argued that the notebook contains heatwise details only for the period July to October 2012 and the quantity produced each day has not been mentioned in the other months. We do not see any problem with this position considering that the demand has been raised only to the extent the notebook was recovered which shows the production. In fact, if there was excess production during past period also, but no records were recovered the demand for that period could not have been made and, hence, correctly has not been made. 23. Learned Counsel for the appellant further argued that no buyers of allegedly clandestinely cleared goods were identified by the Department and no cash was seized by the Department. 24. We find that the duty of central excise is leviable for the manufacture of the goods although it is payable on removal or at the end of the month. If there is no manufacture there cannot be any demand of duty. To the extent the manufacture was shown by the appellant in its excise re....
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....nd no reason for any separate test to be conducted. Demand on the basis of 12 parallel invoices. 28. The second point of dispute is the demand of Rs. 6,12,193/- based on 12 parallel sets of invoices numbered below:- Sl. No. Parallel Invoice No. Date 1. 314 21-07-2010 2. 315 21-07-2010 3. 316 21-07-2010 4. 332 26-07-2010 5. 333 26-07-2010 6. 366 04-08-2010 7. 424 18-08-2010 8. 425 18-08-2010 9. 426 18-08-2010 10. 427 18-08-2010 11. 485 30-08-2010 12. 496 02-09-2010 29. For each of these invoices there is another original invoice. These are discussed in paragraph 6.5 of the impugned order. For instance, invoice number 425 dated 18.08.2010 shows clearances of 28.750 MT of ingots through Vehicle No. CG 04K 7196 to M/s Alankar Alloys Pvt. Ltd., Raipur. Another invoice which exactly the same number was issued on 19.08.2010 indicating clearance of 5.1 MT of runners and risers to self in Vehicle No. CG04G 3191 similarly for each of the 12 invoices there is another invoice with the same number. 30. Learned Counsel for the appellant submits that they were extra cop....