TaxTMI 
TaxTMI 
2024 (12) TMI 1531
X X X X Extracts X X X X
X X X X Extracts X X X X
....at during the period from April, 2007 to January, 2010 (excluding the period form July, 2008 to October, 2008), the Noticee has recorded production of 42045.00 MT Sponge iron only against consumption of 97664.45 MT of Iron Ore. Thereby the average consumption for manufacture of 1 MT of Sponge Iron was 2.32 MT of Iron Ore. On scrutiny of iron ore purchase invoices pertaining to the impugned period, it was found that the Noticee had procured iron ore of Fe content in the range of 63% to 65%. 2.3 Further, it was found that the standard/average consumption of power per MT of production of Sponge Iron was 162.00 KWH. The Noticee has shown a substantially high rate of consumption of iron ore as well as power as compared to standard consumption pattern suggested in metallurgy Le around 1.67 M.T. of iron ore and 75-100 Kwh of power for manufacture of 1 M.T. of Sponge Iron. 2.4 The expert opinion obtained from leading technical consultants in the field of production of sponge iron supports the above view of the ratio of consumption to production is 1.67:1, they are as under: M/s Popuri Engineering & Consultancy Services, Hyderabad, who are experts in the field of designing/drawing a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... involving Central Excise duty of Rs. 1,83,27,914/- (including Cess) and removed the same clandestinely without payment of duty, thereby violating the provisions of Rule, 4, 6, 8, 10, 11, & 12 of Central Excise Rules, 2002 which is recoverable under Section 11A of the Act along with interest and applicable penal action under the rules. 2.9 According a Show Cause Notice was issued to the Noticee vide C.No.IV(6)2/CE/CPU/B-11/2010 dated 31.05.2012 for recovery of Central Excise duty amounting to Rs. 1,83,27,914/- along with imposition of penalty. interest and 3.0 ADJUDICATING AUTHORITY'S FINDINGS The adjudicating authority, after examining the facts on record and submission of the Noticee in this regard has made the following observations/findings vide instant O-1-O dated 10.06.2016. 3.1 The duty has been demanded in the SCN by alleging that there was clandestine production followed by clandestine removal of sponge iron. The department has relied upon the following aspects: a) The expert opinions- M/s Popuri Engineering & Consultancy Service, Hyderabad, who opined that 60% to 65% Fe(T) content iron ore would be required for production of sponge iron and the consumpt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ile deciding the issue in the case of M/s. Arya Fibres Pvt. Ltd; vs. CCE, Ahmedabad-II, reported in 2014 (311) ELT 529 (Tri-Ahmd)) has considered various orders of Tribunals and other appellate courts and arrived at the legal position regarding clandestine clearance and how they are to be established. Many other judicial decisions have also taken similar view. 3.4 Accordingly the adjudicating authority held that, the ratio laid down by various judgments makes it abundantly clear that department has to prove that firstly, there was clandestine manufacture and secondly, there was clandestine clearance to establish the demand of the duty for such an activity. Even one of these two are not established with certain degree of certainty, the demand on clandestine clearance will not withstand legal scrutiny. 3.5 Regarding excess consumption of power, CESTAT has dealt with the issue in its various orders wherein it was held that, electricity consumption could not be the only factor for determination of duty liability. Clandestine manufacture and removal on the basis of excess electricity consumption cannot be fastened. 3.6 Thus, the adjudicating authority found that, in the instant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e been consumed in excess without accountal during the period involved." was 84,385 M.T. in terms of which the input-output ration is derived at 1.90.1. I find that this ratio widely varies with the norms of 1.67:1 as fixed by M/s. Popuri Engineering & Consultancy Services, Hyderabad, who is a leading Technical Consultant. This is also supported by the opinion of M/s. Industrial Technical Consultant, Raipur." Accordingly the said adjudicating authority held that "I fully agree with the above reasoning adopted by the investigating officers. The department has rightly taken input output ratio 1.67:1 for calculation of production of Sponge Iron". 4.7 As regards higher consumption of electricity for corroborating suppressed production the adjudicating authority at Para 7.12 of the said order observed that: "As to how many units were consumed for production of one ton of Sponge Iron, figures have been taken from various technical reports of institutions and Industrial Technical Consultants such as, Institute of Minerals & Materials Technology, Bhubaneswar, M/s Industrial Consultants, Raipur & M/s. Popuri Engineering & Consultancy Services, Hyderabad. Such reports unequivocally ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rted in 1999(105)E.L.T.275(Ker.) wherein it has been held that, "Judicial discipline demands consistency in rendering judgments'. A judicial Officer may hold different views on various aspects. A judicial officer may err and pass contradictory orders inadvertently. But once it is brought to the knowledge of the Judicial Officer, he is duty bound to keep track of consistency. Inconsistent orders passed by a judicial Officer almost in the same fact situation, and that too on the same day, would give rise to complaint of discriminatory treatment, which will undermine the people's faith in the judicial system and the rule of law. It will cause resentment and anguish and make an imprint in the mind of the litigant that he has been discriminated. A judicial officer may err and pass illegal orders, but he shall not err in consistency. He should be consistent even in illegality." 4.11 Needless to say, it is equally expected that a quasai judicial officer should be consistent in taking stand on almost similar issue. The instant order have been passed on 10.06.2016 and in the case of M/s. Shree Mahavir Ferro Alloys Pvt. Ltd was passed on 30.12.2015 and two divergent stand have been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ucted for the impugned period and no objection was raised against the appellant on the basis of input/output ratio on excess consumption of electricity. Therefore, whole of the demand is barred by limitation as for the period 2007-08 to 2009-10 Show Cause Notice has been issued on 31st May, 2012. 9. Heard the parties. Considered the submissions. 10. We find that in this case the Show Cause Notice has been issued to the Respondent alleging clandestine removal of goods on two grounds a) Input/output ratio of raw materials on the finished goods. The case of the Revenue is that to manufacture 1 MT of Sponge Iron 1.67 MT of iron ore is required and to manufacture 1 MT of Sponge Iron 162 KW power is required. 11. The Ld. Adjudicating Authority has examined both the issues in the impugned order and drop the proceedings against the Respondent holding that the Show Cause Notice has been issued to the Respondent on the basis of estimated production of Sponge Iron, iron ore and no actual production was considered. 12. Relying on the various judicial pronouncements we further take note on the fact that a similar issue has came up before this Tribunal in the case of Aryan Ispat and Power ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....There is also no evidence towards deployment and movement of hundreds of vehicles to transport such huge quantity of coal and dolomite. Further, it is seen that no investigation has been taken up towards alleged sale of the huge quantity of Sponge Iron. No statements have recorded from any of the alleged purchasers of the finished goods. There is no allegation about recovery of any private records towards cash receipt/cash payment for the alleged clandestine transactions. In case of allegations of clandestine manufacture/sales, it is essential for the Department to bring in as much corroborative evidence as possible. In this case, it is seen that the Department has solely relied on the consumption of iron ore which is only one of the raw materials to arrive at the estimated production quantity. Even the Fe (T) content of iron ore has been taken at a consistent level of 62.7% which would not be possible when lot to lot iron ore FE (T) content is checked. The variations which are likely to occur in such lots have not been taken into consideration. 11. We find that the statement recorded by Mr. BK Chandrakar, one of the Appellants herein on 18/01/2010 was retracted by him on 24/01/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion (1) thereof would extend to adjudication proceedings as well. 7. There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 90 is required to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution. 8. As already noticed herein above, sub-section (1) of Section 90 sets out the circumstances in which a statement, made and signed before a Gazetted Central Excise Officer, shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a Gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a Gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....long with interest for the period of five years alleging suppression of clandestine removal of the final product and also imposed penalty mainly based on the production approximation and on the statement of Director of the unit, Shri Agarwal, who is one of the appellants in this case. 6.2 The department has not gone beyond the approximation and the statement of Shri Agarwal. Any prudent person would not so conclude on extra production by approximation and by a mere statement of the Director of the company. Unless there are further corroborations in the form of documentary evidences, which could be like despatch details for the production, receipt details of the said material, transactions of the sale money, transportation details of such goods, details of additional consumption of electricity for such suppressed production a prudent individual would not agree with the present conclusions of the Revenue. There is nothing on record from the Revenue side to come to a reasonable conclusion to say that there has been preponderance of probability of such suppressed production on the part of the appellant. The evidences in the form of approximation and averaging production as 77.6% and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....authority has computed the quantity and value purely on mathematical formula and worked out the total quantity of acid slurry by adopting the ratio of raw materiais LAB and sulphuric acid purely based on the alleged quantity of LAB received by the appellants from SWC and not supported with any evidence. As regards the payments made to three employees of SWC, the appellants claimed that this was paid for the expenses. Regarding payment of Rs. 11 lakhs made by Fintex Chemicals to TNPL, we find that there is no finding to link the said payments to supply of LAB to the appellants and mere statements that they are related and controlled by the appellants, is not an evidence to hold that appellants revived LAB. 16. It is pertinent to state that in order to manufacture acid slurry, use of second raw material, i.e. sulphuric acid oleum is equally important to establish illicit manufacture of finished goods of such a huge quantity, as alleged in the findings. As rightly contented by the appellants if they have to manufacture such a huge quantity of acid slurry definitely it requires huge storage capacity for LAB, finished product and spent acid, which is a by-product as the same cannot b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndestine 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 Revenues which mainly are the following: (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions, (ii) Evidence in support thereof should be of: (a) raw materials, in excess of that contained as per the statutory records, (b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from factory without payment of duty. (c) Discovery of such finished goods outside the factory (d) Instances of sales of such goods to identified parties. (e) receipt of sale proceeds, whether by cheque o by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty (g) statements of buyers with some details of licit manufacture and clearance, (h) proof of actual transportation of goods, cleared ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the basis of the higher electricity consumption. The respondents filed their reply. The Commissioner of Central Excise, Meerut-1, vide its order dated 30- 7-2007 has confirmed the demand against the respondent nos. 1 and 2 and also imposed the penalty on the respondent nos. 1 and 2 and on other respondents alleged to have been involved in the clandestine removal of the goods. 5. On consideration of the aforesaid findings, we are of the view that the findings of the Tribunal are based on the material on record and they cannot be said to be without any material and perverse. We find that the Revenue has invoked the proviso to Section 11A(1) of the Act but no case has been made out in the show cause notices or in the adjudication order that there were any mis-statement, suppression of fact or fraud on the part of the respondents. No substantial question of law arises from the order of the Tribunal. (Emphasis supplied) 17. The ratio of the cited case law are squarely applicable to the facts of the present case. In the absence of the corroborative evidence, particularly taking into account that the entire estimated production has been arrived at based on certain formula with no ....