TaxTMI 
TaxTMI 
2025 (7) TMI 2064
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.... during 2012-13 the appellant had consumed (88,728.980 - 75,989.474 =) 12,739.506 M.T. of Iron Ore in excess of what has been reflected in ER-6. This quantity was used to arrive at the output [ 1 : 0.47], to allege that the appellant has clandestinely manufactured 5987.368 MT of Sponge Iron, which was cleared without payment of Excise Duty of Rs.1,44,62,319. (b) Based on comparison with the ER-4 returns and Trial balance it has been alleged that the appellant had procured unaccounted excess quantity of iron ore and used the same for manufacture of unaccounted sponge iron. It is alleged that the Appellant procured unaccounted excess quantity of 154294.012 M.T. (i.e. 280784.432 M.T .- 126490.42 M.T.) of Iron Ore, which was utilized by the Appellant to clandestinely manufacture 23676.146 M.T. of Sponge Iron for clandestine manufacture of 48927.274 M.T. of Sponge Iron valued at Rs. 95,61,36,789/- involving evasion of Central Excise Duty amounting to Rs. 11,81,78,507/-. (c) On the basis of discrepancy in consumption quantity of Manganese Ore, Coke, Jhama Coal, Dolomite and Quartz reported in ER-4 (46,028.120) and ER-6 (42,817.065 M.T.) for the relevant year 2012-13, an....
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....02/- on the said alleged unreconciled amount. (iv) With this reconciliation, the excess consumption of 12,739.506 M.T. of Iron Ore stands wholly demolished and consequently the alleged yield of 5987.568 M.T. of Sponge Iron and the resultant allegation of evasion of Central Excise Duty amounting to Rs. 1,44,62,319/- are rendered wholly hypothetical, untenable and unsustainable. (v) In paragraph 1.18 of the Impugned Order the demand of Rs. 11,81,78,507/- has been computed on the basis of the cost of procurement of Iron Ore during the relevant year vis-a-vis the corresponding figure shown in Appellant's ER-4 return. On the basis that the Trial Balance figure is Rs. 145,50,24,930/- as against the corresponding figure shown in ER-4 as Rs. 65,76,10,400/-, the excess procurement cost of Iron Ore as per Trial Balance has been made attributable to clandestine production and removal thereof without payment of duty, amounting to Rs. 11,81,78,507/-. (vi) The said computation of duty is patently erroneous, evident from the following : Value in Rs. Total procurement cost of Iron Ore as shown in the Trial Balance (This includes the cost of Iron Ore Pe....
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....Report in form 3CD, the closing stock of said raw materials has been correctly reported as 13,518.75 M.T. and the same has been certified by the Tax Auditor. Copy of this said 3CD was submitted before the adjudicating authority but he did not consider the same at all, for reasons not disclosed. The appellant had also submitted to the adjudicating authority reconciliation statements. But, the same was also not considered. Therefore, demand is also, in the premises untenable and unsustainable. 7. Without prejudice, the appellant submits that the impugned demand has been confirmed on the solitary allegation of discrepancy between the figure reflected in the appellant's Trial Balance, ER-4 and ER-6 Returns. While doing so the Commissioner failed to appreciate that ER-4 is the Annual Return containing financial information statement for the preceding year filed under Rule 12(2)(a) of the Central Excise Rules, 2002 and ER-6 returns are filed under Rule 9A of the CENVAT Credit Rules, 2004 containing information regarding receipt and consumption of principal inputs. Thus, Form ER-4 is a macro return requiring an assessee to declare details of expenditure, value and quantity of input....
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....asis of an allegation, as serious as, clandestine removal. In the instant case, the Commissioner relied solely upon the mere difference between Trial Balance and ER-4/ER-6 and confirmed the demand without even referring to the Audited Balance Sheet and Schedules thereof. Accordingly, as per settled law the allegation of clandestine removal in the present case, being based comparing the incomparable and more particularly, without any corroborative evidence, is wholly unsustainable in law. 8. It is established principle of law that onus of proof of clandestine removal, contrary to the erroneous opinion of the Commissioner, is on the Department and the Department is required in law to establish clandestine manufacture and removal through positive and tangible legal evidence and the standard of proof therefor is that the same has to be proved beyond doubt and not by mere preponderance of probabilities or by way of inferences drawn based on calculations and alleged circumstantial evidence based on assumptions, presumptions and inferences. In the absence of such positive evidence, no case of clandestine removal of goods can be made out or established against an assessee. It is further....
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....ed from any of the persons or parties to whom the appellant had allegedly cleared the alleged goods without payment of duty thereon. As per the impugned order the quantity of unaccounted goods removed clandestinely was more than 57000 MT covering a period of one financial, i.e., nearly 5000 MT per month on average. To remove them from the factory hundred of vehicle or vehicle trips would be require. No details in this respect has been disclosed. No statement of any transporter or drivers has been recorded and relied upon. In fact there is not a single piece of evidence disclosed as to how and to whom and in what manner such huge quantity of the said goods were removed. There is also no evidence to show that any payment was received by the appellant from the alleged customers to whom the said alleged unaccounted goods were sold. There is also no evidence disclosed to establish, even prima facie, of payment being made by the appellant to any alleged persons/parties from whom any excess raw materials were purchased from which the said excess goods was generated. In the absence of the aforesaid, as per settled principle no case of clandestine removal can be said to have been establishe....
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....lity that demand of duty raised on the basis of input-output ratio and without having any evidence towards clandestine manufacture and removal of goods without payment of duty the demand of duty is untenable and unsustainable. In this regard reliance is placed upon inter alia the following recent decisions of this Hon'ble Tribunal in the following cases wherein reference was made and relied upon on earlier decisions of Hon'ble High Courts and this Hon'ble Tribunal :- i) Mahavir Ferro Alloys Private Ltd. Vs. Commissioner of CGST & Central Excise (225) 28 CENTAX 368 (T-CAL), ii) Pooja Sponge Private Ltd. Vs. Commr of Central Excise, Customs and Service Tax 225 (5) TMI 479 - CESTAT-KOLKATA iii) Commissioner of Central Excise and Service Tax Vs. Argasen Sponge Private Ltd. (225) 26 CENTAX 141 (T-CAL) - In this case it was held that the demand was raised against assessee on basis of estimated production of sponge iron but no tangible evidence was brought on record to show from where the assessee has procured raw materials like coal and iron ore to manufacture such a huge quantity of sponge ore, the impugned demand was not sustainable. ....
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.... product of the appellant. When such huge quantity of Iron is not accounted for, particularly when accounted for in ER 4 and Trial Balance, the appellant can not negate these factual details. He submits that ratio towards the conversion of iron ore to sponge iron is as per the industry standards. Similarly, in case of non- accounting of the raw materials, shows excess production of the Silocon Mangenese. These facts have come to light after the verification of the ER 4 with ER 6 and ER 4 with Trial Balance of the appellant. Hence, he reiterates the detailed findings of the Adjudicating authority and justifies the confirmed demands. 19. Heard both the sides and perused the Appeal papers, written submissions and the documentary evidence brought in by both the sides. 20. In respect of the demand of Rs.1,44,62,319, the appellant has explained the reason for the non-matching of the figure given in the ER 4 and the ER 6 as per the following Table : Consumption of Iron Ore as reflected in ER-4 return (Ref. Page 620. Vol. II 88728.980 Less: Iron Ore Fines received from Burdwan, found not suitable for -12703.790 production on quality ground, hence rejecte....
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.... our side in the coming paragraphs. 24. The second issue pertains to the total value of Iron Ore accounted in the Trial Balance and accounting for of the same in the ER 4. The Dept has taken the value shown in the ER 4 and compared the same with the value shown in the Trial Balance. After finding that the Trial Balance figure shows purchase of Rs.145.50 crores whereas the ER 4 shows purchase value as Rs.65.76 lacs. The differential amount is converted into iron ore quantity, further converted into finished goods quantity and duty evasion of Rs. Rs.11,81,78,507, is alleged. The Ld Senior Counsel has submitted the following Table in appellant's defence: Value in Rs. Total procurement cost of Iron Ore as shown in the Trial Balance (This includes the cost of Iron Ore Pellets procured by the Appellant during the F.Y. 2012-13 (Ref-Page 639-697 of Paper Book, Vol-II). 145,50,24,930/- Less: Procurement cost of Iron Ore Pellets (taken from data contained at said Page 639-697 read with CA Certificate at page 629 of the Paper Book, Vol-II) 81,44,34,341/- Net Procurement Cost for Iron Ore as per Trial Balance 64,05,90,589/- Total Cost of proc....
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.... an indication about their evidentiary value. 31. In this case the total quantity of alleged manufacture and removal of goods would be : 5987 MT + 2288 MT + 48927 = Total 57802 M T. Even if it assumed that each truck would carry about 20 MT, this would require movement of over 10,000 trucks, during the single financial year 2012- 13. This is considering the outward movement alone. The manufacture of this quantity of excess goods would require excess consumption of electricity. The finished goods cannot be manufactured by consuming iron ore alone. Other important raw materials would be coal and dolomites. No evidence has been brought in about excess procurement and consumption of these materials. Total Value of the clandestine clearance would be to the extent of approximately Rs.100 crores. In the entire proceedings, except for comparing the ER 4 quantities with ER 6 and ER 4 with Trial Balance, no other cogent effort has been made to fortify the allegation. From the Show Cause Notice, it is seen that not even Statement of the Director or senior officials of the company has been recorded to know the details of the alleged excess consumption. As rightly submitted by the appellant,....
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....s 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. 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 statutory backing, we do not find any merits in the OIO passed by the Adjudicating Authority. Accordingly, we set aside the impugned order on merits. Mittal Pigment Pvt. Ltd. Vs. CCE 2018 (360) ELT 157 (Tr .- Del.) 6.1 Further the department has not gone beyond the approximation of yield which they have shown as 70 to 84% in col. 3 of Annexure-A attached to the show cause notice and average yield overall had been shown as 77.60% which has been made the basis for issuance of the show cause ....
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....e 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 : (i) To find out the excess production details. (ii) To find out whether the excess raw materials have been purchased. (iii) To find out the dispatch particulars from the regular transporters. (iv) To find out the realization of sale proceeds. (v) To find out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. 13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department. 14. In the instant case, no investigation was made by the Department, even the consumption of electricity was not examined by the Department who adopted the short cut method by raising the demand and levied the penalties. ....
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.....L.T. 197." CCE, Chennai-I vs. Indian Steel & Allied Products 2016 (344) E.L.T. 292 (Tri .- Chennai) "14. In this regard, the Hon'ble High Courts and the Tribunal in various decisions consistently held that clandestine manufacture and removal of excisable goods is to be proved by tangible, direct and affirmative and incontrovertible evidences. The Hon'ble Allahabad High Court in the case of CCE v. R.A. Castings Pvt. Ltd. (supra) on the identical issue upheld the Tribunal's order and dismissed the Revenue appeal. The said High Court's decision stands affirmed by Hon'ble Supreme Court as reported in Commissioner v. R.A. Castings Pvt. Ltd. - 2011 (269) E.L.T. A108 (S.C.). The Tribunal in the recent decision in the case of Mahesh Silk Mills v. CC, Mumbai - 2014 (304) E.L.T. 703 (Tri .- Ahmd.), has relied the Tribunal's decision in the case of Nova Petrochemicals v. CCE, Ahmedabad [Final Order Nos. A/11207-11219/2013, dated 26-9-2013] [2014 (311) E.L.T. 529 (Tribunal)], wherein the Tribunal laid down the fundamental criteria to be established by revenue which is reproduced as under :- "8. Similarly, in the matter of Nova Petrochemicals ....
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....We find that the Revenue has not been able bring in even an iota of corroborative evidence, even as they are solely dependent on the alleged excess consumption, which also stands properly answered by the appellants. Therefore, we have no hesitation is applying the ratio of the discussed case and hold that the impugned order is not legally sustainable. We aside the same. 34. To summarize : (a) The appellant has been able to provide proper evidence towards the difference in the quantification shown in the ER 4 and ER 6 Returns. (b) The appellant has brought in enough evidence to explain the difference between the purchase values shown in Trial Balance and ER 4 Return. (c) The Revenue has failed to bring in any evidence to corroborate their allegation of clandestine manufacture and clearance. 35. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any, as per law. (Operative part of the order was pronounced in the open court.) ============= Document 1 DOCUMENTIT U erse CA S. K. PATODI & CO. Chartered Accountant TO WHOM IT MAY CONCERN We M/S S.K. Patodi & Co., Chartered Accountants have exa....
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.... #12006419 12:05.2012 5H 30.640 71515 1405.2012 55 35530 3SMITH 6:12000760 12:05.2017 ST â‚©#37DECE 17:05.2012 58 37a â‚©160 13.05.2012 59 3HANEM WO 13:05.201Z 60 31198 13:05.201Z 51 #170 â‚© 14.05 KEZ 52 EURO WE3725087 14.05.2017 53 357317 â‚©3 14.05.2012 64 ISMIT MEFENDI 15.05.2012 55 37576 WE 15.05.2012 00 3.EZC W153787 15.05.2012 67 5120 W377000 18.05.2012 58 EVAZE WITHSI 18.05.2012 69 335 VEJ0757 18:05.2012 70 STO NEVES754 18.05.2012 71 BEIIO 3:0766 16.05.2012 72 PAULO .. TEVE 2012 73 3.49 105.2012 74 posso 17####65X 15.05.2017 $3.000 120766-5 39.05.2017 70 020 4-0 19.05.7012 77 A MERECE 19.05.2017 75 TORINO 863717#248 12:05.2WWW 7 7.000 AZTUZ 2010-2012 DO #3310 WISH7AMISK5 20.05.2017 UI 35.000 W/5:375673 20.05 2017 UZ CICIUD WIN757M-19 40.05.2017 VI 31.730 WITHUS 71.05.2017 ET 29.710 15:79/2544 7105.2017 85 35700 VOUSHUBXIN4 203 * Document 3 CA S.....