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TaxTMI 
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2008 (6) TMI 197
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....Ltd. (appellants in appeal E/3097/07). He also imposed personal penalty of Rs. 5 lakhs each on the Directors of the Company. He further imposed personal penalty of Rs. 1 lakh each on Shri Kamlesh Gupta, proprietor of M/s. Gupta & Associates and Shri Ashok Gupta, Director of M/s. RJD Stock Brokers Pvt. Ltd., amongst others. The Commissioner, vide Order-in-Original No. 32/Commr/Mrt I/2007 dated 30-7-2007, while granting certain relief, has confirmed the Central Excise duty amounting to Rs. 98,66,104/- under Section 11A(2) of Central Excise Act, 1944 together with interest and imposed equivalent amount of penalty under Section 11AC ibid on M/s. Kamakhya Steels Pvt. Ltd. (appellants in appeal E/3057/07). He also imposed personal penalty of Rs. 5 lakhs each on the Directors of the Company. He further imposed personal penalty of Rs. One lakh each on S/Shri Vikas Kumar, Vinay Kumar, Smt. Raj Kumari Jain, Shri Kamlesh Gupta and M/s. Liftmak Udyog (P) Ltd. amongst others. 2. Heard both sides and perused the records. 3. The appellant-companies are engaged in the manufacture of 'M.S. Ingots' falling under Chapter Heading 7206.90 of Central Excise Tariff Act, 1985. They have in their factory....
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....sary adjudication proceedings, the Commissioner passed the impugned orders as referred to above. In the said orders, he observed as under: "While arriving at the conclusion of electricity consumption required to manufacture 1 ton of M.S. Ingots, Dr. Batra has considered a number of factors like basic principle and design of induction furnace, stirring effect in induction furnace, use of capacitors, melting practice, furnace capacity, heat balance, electricity load, slag rate, thermal efficiency, electrical efficiency etc. I find that the report is exhaustive and all the factors affecting the production of M.S. Ingots by induction furnace have been discussed in detail. After a detailed study, the report has arrived at a finding that demand of specific energy for production of 1 MT of MS ingots should be in the range of 555 to 1046 units (KWH/Ton). The consumption of electricity by the party in the manufacture of 1 MT of M.S. Ingots is between 1287 to 1367 units in the case of M/s. Kamakhya Steels (P) Ltd. and 2072 to 2443 units in the case of M/s. R.A. Castings (P) Ltd., which are higher than the norms specified in the IIT technical opinion report. I find that the production has be....
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....udice to the above, the data sought to be relied upon in the report of late Shri Batra appears to be from some technical literature of 1977 of Moscow and 1985 of USA and there is nothing relevant out of the same to the period, product, technology and furnace of the appellant. The alleged report is unsigned and has no factual basis or experiment conducted by its author in any furnace. A purely academic/theoretical write up cannot be the basis for the central excise authorities to raise demand and imagine the same as applicable universally and binding on every one. The factors taken in Mr. Batra's report are per se exclusively connected with the manufacturing activity only and no weightage or consideration has been given to the auxiliary loads. The report deals with the productivity of the furnace only and not the factory as a whole. (iv) No one from the appellants side had been ever asked to go through and give any statement on the factual, technical, commercial and legal aspects of the alleged report being adopted to raise demands by invoking extended period of limitation. Nor any enquiry or investigation was done, to ascertain the alleged additional raw materials having been rece....
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....ts from share trading transactions and to assume the same to be sale proceeds of ingots clandestinely manufactured and cleared is totally without jurisdiction. (vii) They had earlier an old and outdated furnace of 2.5 MT capacity which was dismantled because of total uneconomic and non-usable position and the new furnace of 4 MT was installed on 21-8-2004 in which commercial production started on 5-10-2004 and thereafter the production improved because of the furnace being new with higher capacity. In the whole show cause notice, the Revenue has proceeded on the assumption that 1046 units would be required for producing 1 (one) tonne of ingots. The Revenue has altogether ignored the statutory records and documents and all the assessments as well as audits carried out for the entire period. The Revenue has assumed that the higher electricity consumption is the only manufacturing cost or input and all other items of inputs and their costs are irrelevant. This is legally impermissible. The electricity is only one of the items of costs in producing ingots and not the only item. If there are multiple inputs and costs, the revenue cannot take only one of the items of input or cost there....
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....e denied the opportunity to cross-examine them in spite of repeated requests made for the purpose. 9. The ld. Advocate, Shri L.P. Asthana, representing appellant-company M/s. Kamakhya Steels (Pvt.) Ltd. and their Directors advanced arguments more or less on the same lines as advanced by the ld. Advocate Shri R. Santhanam. He stated that the report given by Shri Batra in his individual capacity cannot be given the status and the credibility, which a report of the IIT will enjoy as the report of IIT will have inputs of different experts and collective analysis by the Institute, entailing responsibility and reputation of the Institute. His other contentions were as under: (i) The finding of the ld. Commissioner regarding electricity consumption is erroneous because he has relied upon an unsigned report of a professor, who is no longer available for cross-examination; who has not visited the factory of the appellants; not conducted experiment in the factory; the report is of the year 2000 and no definite conclusion can be drawn on such a report for subsequent several years. (ii) The consumption of electricity depends upon several factors-kind and quality of input (whether it is spon....
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....ot allow cross-examination of the persons whose statements were recorded under duress and coercion. Thus on the basis of such statements, the facts as stated in the balance sheet cannot be rejected. It is a settled principle of law that if there is a conflict between the documentary and oral evidence, preference should be given to the documentary evidence. In this connection, provisions of Section 92 to 96 of the Evidence Act are also relevant. Moreover, these incomes were disclosed to the income-tax authorities, who alone were competent to decide upon the true nature of the profits, whether they were from trading of shares, commissions etc., or otherwise. Their income-tax returns have already been assessed by the income-tax authorities. The Central Excise authorities have no jurisdiction to deal with such matters. (viii) Lastly, the demands are time-barred as the show cause notice has been issued in December, 2006 demanding duty for the period from December, 2001 to March, 2005. He pointed out that the extended period of five years cannot be invoked as Mr. Batra's report is of December, 2000 and it was available with the Department. In spite of that, no action was taken for six y....
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....Electric Steel Making Technology in 21st Century published by R.P. Varsney, Executive Director, All India Induction Furnace Association, New Delhi, the power consumption for manufacture of 1 MT tones of ingots for Induction Furnace, has been shown to range from 650 units to 820 units, depending upon the percentage mix of sponge iron and scrap. These figures are within the range given in Dr. Batra's report; (v) In the case of Nagpal Steels Ltd. v. CCE, Chandigarh reported in 2000 (125) E.L.T. 1147 also norm of 851 units for manufacture of 1 MT tones ingots has been accepted by the Tribunal. Therefore, the adoption of norm of 1046 unit based on Dr. Batra's report for manufacture of 1 MT tones of ingots is reasonable. 13. The ld. S.D.R. submitted that M/s. R.A. Castings have put forth an explanation that the income from share broking transactions has been accepted by the Commissioner (Appeals) as "other business income" and, therefore, has to be considered legitimate. On perusal of this Order of Commissioner (Appeals) of Income-tax dated 12-9-2007 submitted by M/s. R.A. Castings in the course of the hearing, it has to be appreciated that income from share transactions has been acce....
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....47 (T). 18. We have carefully considered the rival submissions and perused the records. Since all the appeals arise of the Orders-in-Original both dated 30-7-2007 and the issue involved in both the orders is common, all appeals are being taken up for disposal by the common order. 19. The main question to be decided in the instant appeals here is whether the appellants during the period December 2001 to March, 2005 have actually manufactured M.S. Ingots in excess of what has been recorded in their statutory records and removed the said quantity clandestinely from their factory without payment of duty. The excess production has been worked out on the basis of electricity consumption for which the standard norms are imported from the report of late Mr. N.K. Batra, Professor of Material and Metallurgical Engineers, IIT Kanpur. 20. We find that the following reports have been referred to either by the appellants or the Revenue laying down the norms for the consumption of electricity for the manufacture of one MT of steel ingots: (i) 555 to 1046 (KWH/T) as per Dr. Batra's report; (ii) 1800 KWH/T as per the report by Joint Plant Committee constituted by the Ministry of Steel, Governm....
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....y factor or basis for determining the duty liability that too on imaginary basis especially when Rule 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Therefore, there can be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. In the following case law....
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....ii) Commissioner of Central Excise, Madurai v. Madras Suspensions Ltd. reported in 2003 (156) E.L.T. 807 (Tri.-Chennai); (iv) Commissioner of Central Excise, Coimbatore v. Sangamitra Cotton Mills (P) Ltd. reported in 2004 (163) E.L.T. 472 (Tri.-Chennai); (v) Commissioner of Central Excise Coimbatore v. Velavan Spinning Mills reported in 2004 (167) E.L.T. 91 (Tri.-Chennai); (vi) M. Veerabadhran & others v. Commissioner of Central Excise, Chennai-II reported in 2005 (182) E.L.T. 389 (T) = 2005 (98) ECC 790 (T). 23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on diff....
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....lly carried out and reflected in the books of accounts and records duly assessed, audited and accepted by other revenue authorities. 27. Since the incriminating statements of the share brokers etc. have been relied upon in the proceedings, it was incumbent upon the Revenue to produce them as well as the investigating officer for cross-examination by the appellants, as was repeatedly requested by them. In the absence of the same, the statements of the share brokers etc. cannot be relied upon. Even if, for the sake of argument, it is accepted that the income shown in the balance sheets is not the income derived from the sources declared by the appellants, there is nothing on record to link it with the so called clandestine removal of the goods and that cannot be made the basis to establish a case of clandestine removal. In any case, the Commissioner has not determined the duty liability on the basis of the profit shown in the balance 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....