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2025 (11) TMI 1542
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....gaged in the manufacture of Pig Iron, Pig Iron Chips, Pig Iron Skull, MS Scrap, Granulated Slag and Sinter at its factory located at Bamunara Industrial Area, P.O. Gopalpur, Durgapur, District - Burdwan, West Bengal and registered with the Central Excise authorities under Registration No. AABCN8514GXM001. 2.1. During the period 2012-13, the appellant installed a sinter plant for manufacture of sinter inter alia using iron ore fines. The sinter produced from the said sinter plant was in turn used in manufacture of pig iron. Since, both the iron ore and iron ore fines are classifiable under same Chapter Heading 2601, the purchase and/or consumption of iron ore and iron ore fines was clubbed together in ER-4 Returns, Tax Audit Report and VAT Audit Report filed by the appellant. 2.2. During scrutiny of records of the appellant in 2014, the Revenue observed that as per the ER-4 returns filed by the appellant, a total of 1,75,218 M.T. of iron ore was consumed by the appellant for producing 76,550.42MT of pig iron, which is reflected in the ER-1 returns filed by them. However, the input output ratio as declared by the appellant in ER-5 return was 1.9. Solely relying upon the input-o....
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....ubmission that it is a settled legal principle that a demand alleging clandestine removal cannot be sustained solely on the basis of input-output ratios, in the absence of any corroborative or direct evidence. Reliance in this regard is placed on the following judgements: i. Commissioner of C.Ex., Kolkata-III vs. Sai Sulphonate Pvt. Ltd. [2022 (380) ELT 441 (Cal. HC)] ii. Pooja Sponge Pvt Ltd. vs. Commr. of CX, Customs & Service Tax, Bhubaneshwar [2025 (5) TMI 479 - CESTAT KOLKATA] iii. M/s. Viraj Steel and Energy Ltd. vs. Commissioner of CX, Cus. & ST, Rourkela [2025 (4) TMI 954 - CESTAT KOLKATA] iv. Ambey Laboratories vs. Commr. of C.Ex., Delhi [2017 (6) GSTL 175 (Tri. - Del.)] 3.3. It is his further submission that though it may not be necessary for the Department to prove clandestine activity with mathematical precision or establish every link in the chain, it is nevertheless incumbent upon the Department to discharge the burden of proof by establishing the charge on the touchstone of preponderance of probability; in the present case, the Department has failed to discharge even this minimum evidentiary threshold. It has also been submitted....
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....o appreciate that, during the relevant period, the appellant had set up a sinter plant for manufacture of sinter using iron ore fines, which materially altered the consumption pattern of iron ore; consequently, the ratio of FY 2011-12 could not have been straightjacketed and applied to FY 2012-13 without accounting for the changed manufacturing process. 4.1. Further, the appellant also argues that the computation of demand by the Ld. adjudicating authority suffers from grave factual and computational infirmities in as much as the production of pig iron skull and sinter has not been taken into account while calculating the quantity of goods production. The appellant submits that apart from 76550.42 MT of pig iron, the appellant also produced 3075.30 MT of pig iron skull and 56223.37 MT of sinter as evident from Para 5.6 of the impugned Order; while taking the figure of consumption of iron ore from ER4 return, the ld. adjudicating authority has conveniently ignored the corresponding figure of production of finished goods declared therein, i.e., 79626 MT which includes both 76550.42 MT of pig iron and 3075.30 MT of pig iron skull. In this regard, they also submit that despite accep....
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....us Commissioner of Central Excise, Kolkata[2025 (3) TMI 430 - CESTAT KOLKATA]. The appellant specifically submits that the demand is hit by limitation in so far as the Notice in the instant case was issued on 09.05.2017 while the spot audit memo was issued on 13.03.2014; that it is a settled position in law that extended period of limitation cannot be invoked when the entire demand is based on the audit observations. The appellant states that they should not be prejudiced for the latches and lapses on part of the Department. Since, in the instant case the Notice has been served after more than three years from the date of audit, it is their contention that the entire proceedings are barred by limitation. Our reference in this regard is invited to following judicial pronouncements: i. M/s. Ripley & Co. Limited Versus Commissioner of Central Excise and Service Tax, Kolkata [2025 (8) TMI 572 - CESTAT KOLKATA] ii. M/s Eveready Industries India Limited Versus Commissioner of Central Excise, Kolkata [2025 (3) TMI 496 - CESTAT KOLKATA] 6. In view of the aforementioned submissions, the Ld. Counsel for the appellant prayed for setting aside the impugned order and allowi....
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....upheld merely on the basis of inference of input-output ratio. The relevant part of the said decision is reproduced below: "5. The assessee has filed appeal before the Tribunal challenging the said order and explained that their manufacturing activities as to how they were engaged in manufacture for themselves as well as they have been carrying on conversion job for another third party. After noting the facts the Tribunal held that LABSA and Spent Sulphuric Acid are of the same quality and the processing tank is also common in the factory as it is not possible to manufacture goods separately. Further, the Tribunal analysed the total consumption of LAB and Sulphuric Acid during the material period and took note of the ratio adopted and on facts held that there is hardly any difference between the ratio adopted for their own manufacture and conversion job. Further, the Tribunal noted that the department has not made any allegation that assessee procured excess quantity of LAB to manufacture excess quantity of Acid Slurry or LABSA 90%, nor the department has produced any evidence or referred to any material to show how excess amounts of LAB has been brought into the factory a....
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.... On going through the relevant portion of the Show Cause Notice and the Order In Original [ Para 7.9 and 7.9 ], we find that the Revenue has considered the input / output ratio of 1 : 1.67 as sacrosanct based on the expert opinion of Institute of Mineral Technology, Govt of India and another opinion of Popuri Engineering & Consultancy Services, Hyderabad. There is nothing to indicate that the Revenue has made independent study of the working of the appellant's plant to take some sample outputs to study the pattern of input / output ratio. As per the data of Purchase of Iron Ore Fe Content, Grade-wise Coal purchased, Input / output ratio declared by the appellant in their Annual Returns, reproduced in the previous paragraphs by way Table, the year-wise details show that the input / output ratio ranges between 1 : 1.92 in 2008-09 to 1 : 1.87 during the period April 2009 to February 2010. The contents of the Table are all declared figures and are verifiable. There is nothing to indicate that due consideration was given for these submissions by the Adjudicating authority before coming to his conclusions. His conclusions seem to be flowing directly from the input/output ratio adopted by....
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....Iron. ii) M/s Industrial Technical Consultant, Raipur, who are experts in the field of designing/drawing and providing sponge iron technology have opined that the consumption to production ratio is 1.67:1 and the average power consumption is in the range of 90 KWH for production of 1 M.T. of sponge Iron. 2.5. During the period April, 2007 to January, 2010 (excluding the month form July, 2008 to October, 2008), the Noticee has recorded average consumption of 2.32 M.T. of Iron Ore for manufacture of 1 M.T. of Sponge Iron. Taking in account of the input-output ratio of 1.67:1 as per expert opinion, the estimated production of sponge iron comes to 58481.71 M.T., but the Sponge Iron Production recorded in the Daily Stock Account of the of the Noticee was found to be 42045.00 M.T. Therefore, it appeared that, 16436.71 M.T. of sponge iron has been manufactured surreptitiously, which has been removed clandestinely from their factory without payment of duty. 2.8. Thus, from the above, it is ascertained that ASPL has suppressed production of 16436.71 M.T. of sponge iron involving Central Excise duty of Rs. 1,83,27,914/- (including Cess) and removed the same clandestinely wi....
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....f 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 one statement of Shri Agarwal, Director of the appellant company cannot be called a pr....
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....nce in cases of allegation made of clandestine manufacture and clearance of the goods. In para 40 of the said order which are as under: "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: (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 the factory without payment of duty. (c) discovery of such finished goods outside the factory, (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque orby cash, of such goods by the manufacturers or persons authorized by h....
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....rtered Accountant certifying that the consumption of 1,75,218 MT of iron ore declared in ER-4 return includes consumption of 73271.19 MT of iron ore fines. Since, all the inputs did not comprise standard iron ore, we are of the opinion that the input output ratio of the Financial Year 2011-12 cannot be directly applied to compute the production of finished goods for the relevant period. 10.1. Thus, we hold that the entire computation forming the basis of the impugned demand is factually erroneous, legally untenable, and mechanically arrived at without proper application of mind. Accordingly, we hold that the demand of central excise duty confirmed in the impugned order is not sustainable and hence the same is liable to be set aside. 11. We observe that the impugned order has alleged clandestine manufacture and removal of excisable goods, which needs to be substantiated through tangible, direct, affirmative and incontrovertible evidences relating to: a. Receipt of raw material inside the factory premises, and non-accountal thereof in the statutory records; b. Utilization of such raw material for clandestine manufacture of finished goods; c. Manufactu....
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....t manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case-law on the subject in Centurian Laboratories v. CCE, Vadodara [2013 (293) E.L.T. 689]. It would appear that the decision, though rendered on 3-5-2013, was reported in the issue ....
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....rial available on record, from which it appears that Shri Shubhashis Dev, Government Examiner of questioned documents, Shimla gave his written opinion dated 12-6-1998, wherein he has stated that "the documents of this case have been carefully and thoroughly examined. The enclosed writings and signatures stamped and marked were all written by one and the same persons". 11. From the above, it appears that all the documents were written by one and the same persons, though the dates and the name of the parties are different. When it is so then the genuineness of the documents cannot be accepted. 12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects : (....