TaxTMI 
TaxTMI 
2023 (11) TMI 1029
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....erential duty under section 11A of Central Excise Act, 1944 along with interest thereon under section 11AB of Central Excise Act, 1944 due on 'mild steel (MS) ingots' allegedly manufactured by them between September 2003 and July 2009 and removed clandestinely without entering in the production records. 2. The ingots were manufactured from 'sponge iron' and 'steel scrap' that, combined with certain 'ferro alloys' etc, is the 'charge' for the 'heat cycles' of the 'crucible' from which the molten mass is transported through channels within the solidifying chamber containing 'ingot - shaped' moulds. Owing to the design, the quantity of 'runners and risers' - which are the horizontal and vertical overflows that remain outside the moulding compartments when the molten metal is poured from above - are unvarying across 'heat cycles' for which the principal input is electrical energy. 3. Shortage of finished products and inputs on which CENVAT credit had been availed were noticed during visit of officers of central excise on 17th November 2005 which was regularized promptly by discharge of differential duty and reversal of credit. That was also the starting point of investigations that c....
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....d from the open market was utilized to enable unreported production which is evidenced by inflated consumption of electricity during the reported heat cycles preferring to take cover under inefficient performance per cycle. With the allegation revolving around unaccounted sourcing of raw material, the charge of concealment of 'heat cycles' was sought to be buttressed by the discrepancy of 686 nos. of 'BP set' between records of the assessee and of one of the vendors for the period from 10th July 2006 to September 2007 which was translated as deployed for as many 'heat cycles' yielding 4705.96 MT, at the rate of 6.8 MT of ingots per cycle, with duty liability of Rs. 1,49,40,275. The reported consumption of 572400 units on eight days between 10th Match 2004 and 28th July 2004, when no production reportedly occurred, was alleged, on the basis of normative data, to have been utilized for manufacture of 678.470 MT of the finished product involving duty liability of Rs.14,74,357 from 797.64 MT of raw material. Taking note of three movements of 122.255 MT, attributed to the assessee in accounts maintained by one of their transporters but not accounted for in production records, it was con....
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....risers' was also alleged to have been devised to facilitate undeclared production. Taking into account the discrepancy in procurement of 'BP set' from one of the vendors, indicating non-accountal of 686 between 10th July 2006 and September 2007 translating into as many 'heat cycles' yielding 6.80 MT of ingots per cycle and, thus, as indicative of number of heats actually operated with 6.80 MT of ingots per heat, it was concluded that 4706 MT of 'ingots' involving duty liability of Rs. 1,49,40, 275 had been manufactured and clandestinely cleared. The consumption of 'ferro alloys' that, beyond a threshold would not add to the economic value of the finished goods was factored in to conclude that 22945.73 tons had been produced in excess of the declared quantity of 59,777 MT and from the enhanced usage of 10 kg of 'ferro alloys' indicating actual production by 4346.150 MT with duty liability of Rs. 6,43,30,468.86 thus evaded. 8. The 'charge mix' was examined and the role of 'scrap', as source of 'pig iron', was factored in to conclude that, against 5038.67 MT of 'scrap' declared to have been received in 2003-04, 8784.058 MT of 'scrap' had arrived at the factory without being accounted....
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....sed penalty of Rs. 54,00,000 under rule 26 of Central Excise Rules, 2002 on the individual-appellant before us. 12. The order [ order-in-appeal no. SR/164/NGP/2010 dated 1st June 2010 ] of Commissioner of Central Excise & Customs (Appeals), Nagpur dropped the proceedings for recovery of Rs. 98,83,000 for the period from January 2008 to August 2008 by placing reliance on the decision of the Tribunal in Mohan Steels Ltd v. Commissioner of Central Excise, Kanpur [2004 (177) ELT 668 (Tri-Del)] and appeal, seeking reinstating of recovery of duty, along with interest thereon, and penalties as had been determined by the original authority, came to filed by Revenue consequent to which demand for recovery of Rs. 1,32,00,000 for the period from September 2008 to July 2009 was confirmed in order [ order-in-original no. 36/2009/C dated 29th December 2009 ] of Commissioner of Central Excise & Customs, Nagpur by adopting the computation in the first of the adjudications leading to appeal by assessee and Shri Manoj Maheshwari. 13. Learned Counsel for M/s Shree Steel Casting (P) Ltd and Shri Maheshwari contented that the determination of evasion was not based on law for having relied upon a pres....
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....ts' in production. It was also pointed out that consumption of 'silica manganese' - an essential and relatively expensive ingredient -, as attested by the smelter and the individual appellant in their respective statements during the investigation, was pointer to the differential production established to be 5834.54 tons. He distinguished the decision in re Mohan Steels Ltd as the present investigation had gone beyond statements to establish consumption patterns of essential materials and consumables. 15. This is not a case of clandestine removal as there is no evidence on record of any recovery of finished goods having been made or even of attributable sale proceeds; such clearance is merely implied and the evidence presented by central excise authorities is claimed to established suppression of production inferring from the use of significant inputs and consumables as well as alleged procurement of consumables and sponge iron that were kept out of the records at the factory. The consumption of energy, the production capacity of installed equipment, the procurement of 'sponge iron' and the purchase of 'BP sets', though not deployed for determining the extent of suppressed product....
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....landestine removal beyond reasonable doubt as there is no evidence of actual excess production, removal of such excess production, transport of such excess production, confirmation from buyers and receipt of unaccounted cash towards sale of such unaccounted clearances. We find that the department has not done so. Few more cases in this regard are as under :- xxxxxx The legal position as brought out in the cases mentioned above leaves no doubt that the demand cannot be sustained on the ground of presumption.' and in re Mohan Steels Ltd, it was held that '9.1 We have considered the submissions of both the sides. The impugned Order has been passed by the Commissioner on remand by the Appellate Tribunal vide Final Order No. A/899-901/2000, dated 9-10-2000. The Tribunal had remanded the matter as the evidence produced by the Appellants from independent manufacturers and others "was not examined properly" and when the assessee had stated that power consumption may be taken as a factor for determining the quantum of final product the Commissioner had observed use of electricity which was not recorded in the bills without making such an allegation in the show cause notice. The defen....
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....ing, oxy-fuel burner, scrap pre-heating, water cooled roof and panels for wall lining, etc. The Report envisaged two model plants and the norms for the important parameters were worked out in order to establish the benefits of the phase of modernization. The norms for power was 670 kwh/per ton of billet for 10/12 t furnace and 630 kwh for 25/30t furnace. These norms regarding consumption of power have not been disputed by the Revenue. The Adjudicating Authority has come to the conclusion, merely on the basis of three furnaces found to be working by the visiting officers, that the Appellants had indulged in a systematic manipulation of records of "power consumption. This finding is without any material brought on record. On the other hand the Appellants have brought on record a certificate dated 26-12-96 issued by the Divisional Engineer. Electricity Distribution Division, Unnao which mentions as under :- "On the basis of the reports/raids conducted from 1988 till date of metering arrangement checks on USEB 33/11KV Sub-station at Mohan Steels Ltd., Unnao; manned by the employees of the Board for 24 hours, it is very clear and apparent that the metering arrangements were always fou....
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....t 9 kgs. ferro alloys is required for manufacturing 1 kg. of ingot/billet. This is not supported by any technical data/literature on the subject. On the other hand, the Report on "Technology Evolution in Mini Steel Industry" clearly mentions that "Analysis of the ferro-alloy consumption in mini steel plants reveal that consumption of ferro-manganese varies from about 5 to 12 kg/t and that of ferro silicon from about 3 to 7 kg/t of billets. In general, it can be assumed that mini steel plants would consume about 10 kg/t of ferro manganese and 5 kg/t of ferro-silicon". The Report also fixes the same quantum of consumption of ferro-manganese and ferro-silicon as norms while dealing with "Norms for Important Parameters". The learned Consultant has also brought on record the Input-Output ratio fixed by the Ministry of Commerce for Import-Export purposes. As per these norms also Silico Manganese required is 15 kgs. and Ferro Manganese 10 kgs. In view of this the Revenue cannot proceed on the assumption that only 9 kgs. of ferro alloys is required for manufacture of one ton of billet merely on the statement of melters. The Revenue has not verified the contention of the Appellants that fer....
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.... & others [ order dated 7th March 2018 in central excise appeal no. 58 - 66 / 2015 and 45 / 2016 ] , held that '7. Taking into consideration the fact that the finding with regard to electricity consumption is contrary to decision of Supreme Court in R.A. Castings (supra), the said issue is required to be answered in favour of the assessee and against the department. xxxxxx 11. In the light of above, following directions are issued in all these appeals : - i. The Original Authority will give documents to the parties, if it is not already supplied and not available with the parties. ii. If any statement is to be relied upon and parties are desirous, they will be allowed to cross examine the same. The principles of natural justice will be strictly followed and thereafter, the authority will pass a reasoned order and if any cross examination is not allowed, the authority will pass a reasoned order for not granting cross examination. iii. The parties will appear before the original authority/ Commissioner on 16.4.2018. The Authority will try to complete proceedings within four months. iv. If any amount which has been paid by the assessee, the same will be kept in Suspense A....
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....iate the notion of lack of bias in such denial that, especially in the light of section 9D of Central Excise Act, 1944, should not have occurred save with detailed justification. A statement that serves to connect the dots, as facts may be called, for the purpose of determining inculpatory responsibility and willful acts of omission and commission. A case made out on statements and peripheral records must find corroboration in each other; the validity of statements lies in sustaining through cross-examination and, hence, the significance of section 9D of Central Excise Act, 1944. xxxxx 10. The bare essentials for establishing occurrence of clandestine removal has been elaborated thus '40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; ....
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....ccounted raw material purchased or consumed and not merely the recording of confessional statements. A co-ordinate Bench of this Tribunal has, in another decision, reported in the E.L.T. issue of 5-8-2013 (after hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines v. CCE [2013 (294) E.L.T. 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences headi....