TMI Blog2014 (8) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... n could have carried for various reasons which were placed before the Commissioner, and it was also contended that there was no evidence adduced for alleged clandestine removal. The various circumstances narrated in the impugned order however created doubt in the mind of the Commissioner. No incriminating statement recorded in the instant case has been brought to my notice by the department. In the matter of SRJ Peety, on being asked to clarify on higher consumption of electricity than in Dr. Batra's report, in his statement dated 03.05.2008, Shri. S.S. Peety gave many reasons such as unscheduled shut downs in supply of electricity and furnace, unskilled labour, furnace efficiency, model of furnace, units required in burning loss of inputs, power voltage fluctuation, inferior quality of scrap, tripping of electricity supply, power transmission losses, decrease in efficiency of plant and machinery and consumption of roughly 20% power in Auxiliary Load. He has not accepted the allegation of clandestine removal in his statement. Commissioner is not relying on the same and the findings of the Commissioner, as recorded earlier, have not been challenged by the Revenue. All these o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ESTAT, NEW DELHI] the Tribunal followed the decision of R.A. Casting (supra) and allowed the appeal, as the demand was based mainly on the evidence of power consumption without any evidence of clandestine removal - judgment in R.A. Casting (supra) would be squarely applicable in the facts of the instant case in all the appeals - Decided in favour of assessee. - E/1332, 1332, 1319, 1248/09, 30/10, 125/09, 56/10, 01/10, 84/10, 1417/09, 41/10, 1403/09 & 1329/09 , E/1319/09, E/1225/09, E/1417/09, E/1248/09, E/1247/09, E/1271/09, E/1329/09, E/1331/09, E/1332/09, E/1403/09, E/1418/09, E/1429/09, E/01/10, E/30/10 - - - Dated:- 30-7-2014 - PER : M V Ravindran All these Difference of Opinion are placed before me as per the direction of Hon'ble President to resolve the following differences: (a) Whether in view of the discussion in para 1 to 31 and in view of the decision of the Tribunal in the case of R.A. Castings Pvt Ltd (supra) the impugned orders are to be set aside and the appeal allowed; OR (b) Whether in view of the discussion in para 32A-68 above and in view of the Hon'ble Supreme Court's judgment in the case of Triveni Rubber and Plastics (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence demand cannot be made only on the basis of electricity consumption. This detailed judgment in R.A. Casting's case was upheld by Hon'ble Allahabad High Court, and thereafter even SLP of Revenue there against was dismissed. Hon'ble Vice President had applied the said precedent in R.A. Casting (supra) since, even in the appeals in question, there is no evidence on record in respect of unaccounted raw material for the manufacture of unaccounted ingots and clandestine clearance, either no experiment was conducted in the factories regarding actual consumption of electricity, or if the experiment was conducted in the factory, the electricity consumption was found to be higher than that opined by Dr. Batra and was as per the appellants' records at that time. 4. On the other hand, Hon'ble Member (T) upheld the impugned Orders and dismissed the appeals by upholding demand based on deemed production arrived as per formula based on report of Dr. Batra by relying on curtained discrepancies on which as per the Hon'ble Member (T) satisfactory explanations were not forthcoming and mainly on the basis of evidence placed on record by the Revenue vide Misc. Applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s sad demise, he was not available for cross examination to test the basis of the report on the basis of which the demands are confirmed. It was contention of the appellants that to prove clandestine removal the Revenue has to produce evidence of purchase of additional raw material, sale of clandestinely removed goods, mode of payment, flow back of the fund, transport report for movement of raw material and finished products etc. In the present case, there, is neither no such evidence is produced by the Revenue, nor any documents recovered from the manufacturer's place in this regard indicate illicit removals. For manufacture of ingots no doubt the electricity is also a major input, but the other raw materials such sponge iron/scrap is also required. There is not even an iota of evidence on record in respect of receipt of any unaccounted raw material or clearance of ingots without payment of duty. It was also shown during the hearing that the alleged dates when no production was recorded in factories of some appellants despite there being electricity consumption, were in fact Holidays and on those days only maintenance or trials were conducted leading to power consumption but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) were also pointed out on behalf of the appellants inasmuch as it was shown that in the case of SRJ Peety Steels Pvt Ltd, which was taken up as the lead matter for arguments- (i) As against alleged figures of 79.76% to 104.58% recorded in para 5 of SCN (at Page 100) the Revenue erred in alleging that only cost of electricity and raw material when added as per Balance Sheet was 125% of sale price of ingots, (ii) As against roughly 20% recorded in para 8 of SCN, erroneously it was projected that the appellant had claimed in his statement 25% auxiliary load, (iii) SCN and Addendum relied only on statements dated 03.05.2008 and 25.3.2009 of Shri S.S. Peety, and none of the statements of year 2006 or 2007, referred by Revenue for opposing the appeal, were even relied in the instant SCN and Addendum thereto. Evidence in the cases already settled, on which the Commissioner himself had not placed any reliance, were being erroneously relied by the Revenue, that too when even cross objection were not filed by the Department. (iv) Revenue's claims regarding Income Tax proceedings were also misplaced and misconceived. In fact, in Income Tax proceedings it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Commissioner in the impugned Orders as they did not support the charge of clandestine production and clearance. Even after having Report of Dr. Batrar as well as instructions issued by DG(Audit), the department could not collect evidence of clandestine manufacture or clearance, and the charge of clandestine manufacture and clandestine clearance, can be sustained only if series of assumptions are made, which is not permissible as per the Constitution Bench Judgment in Oudh Sugar Mills Ltd vs Union of India, 1978 (2) ELT J172 (SC). The appellants have also shown that in their replies filed before the Adjudicating Authority they had inter alia relied upon the following material (i) Letters dated 18.3.2008 and 25.4.2008 of R.P. Varshney [All India Induction Furnaces Association] informing that his Article prepared in 1989-90 was for Concast Steel making and not for Induction Furnace, and that power consumption can be 1000 unit to 1800 units per MT, (ii) Letter dated 5.4.2008 of Electrotherm agreeing with the views of Induction Furnace Association, (iii) Letter dated 9.8.2008 of Electrotherm to one Trimurti Ispat suggesting reasons which lead to high power cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commission and those disputes were settled before issuance of the show cause notices in the instant case. Some of the manufacturers had in past demand of Income Tax for undisclosed income. In some units on certain days there was power consumption but no corresponding product at all. These circumstances according to Revenue show that the conduct of the appellants in the past have not been above board and these manufacturers were indulging in suppression of the production of excisable goods to evade payment of duty. Judgments in Melton India vs Commissioner Trade Tax, UP, Rajmoti Industries vs Jt. Commissioner of Income Tax, and an order dated 28.9.2010 in Venkata Raimana Stone Crushers Co vs State of A.P. of Sales Tax Appellate Tribunal were cited by the Revenue pertaining to other statutes (other than Central Excise Act) where demand was made on the basis of electricity consumption. It was submitted that progressively higher level of trust was bestowed on the manufacturers who themselves assesses their duty liability and file periodical returns. Therefore, if the manufacturers are unable to provide any specific reasons/explanations to any abnormalities pointed out to them, it sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some of the findings of the Commissioner in the impugned Order merit reproduction:- 12(4) The department, for calculating the quantity of suppressed production, has considered the upper limit of the consumption range of Dr. Batra's Report i.e. 1026 units and in cases where the consumption is more than 1026 units per metric tonne, allegation of suppression and clandestine removal has been made.... 12(5) The Assessee have countered the department's allegation by relying on the reports of the National of Secondary Steel Technology (NISST) June-July 2006 and the Joint Plant Committee constituted by the Ministry of Steel, in 2004. According to these reports, the average consumption of electricity PMT of ingots is 1427 (NISST), and as per the JPC Report 1800 uits are required to produce 1 tonne of ingots form scrap. The energy consumption is more if sponge iron is used as input ............ I find that while adopting the NISST report inits defence the assessee has not furnished any data on, or evidence of, the variable factors which have contributed to higher electrical consumption in production in his factory. He has not furnished any evidence to support his con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubt in the mind of the Commissioner. It was however categorically recorded in para 19 by the Commissioner that no reliance was placed on evidence relied upon in proceedings which were settled by accepting the argument that each case has to be treated as a separate case based on its own merits and dealt with accordingly. 19. There are other instances of central excise violations detected by other agencies where the assessee was found to be involved. In one instance the assessee had approached the Settlement Commission, admitted the evasion offence of an idedntical nature and had obtained immunity from criminal proceedings. The Assessee has however argued that each case has to be treated as a separate case based on its own merits and dealt with accordingly. The argument of the assessee is accepted. No reliance has been placed on evidence relied upon in central excise proceedings. The findings in this case are based only on material and evidences that have been brought on record in the instant case. I am therefore of the opinion that reliance now placed by the Revenue on the evidence in earlier cases which were already settled, is totally misplaced, when these findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e itself records in para 7A that- 7A During the statement of Shri Surendra S. Peety, Director of the Company recorded under Section 14 of the Central Excise Act, 1944 before the Superintendent (Prev.) on 3.5.2008 he stated that they have not maintained the G-7 forms daily as it is not a mandatory requirement by MSEDCL..........The G-7 forms were not maintained by the assessee on daily basis. Only one entry in each month was made in the G-7 Forms. Therefore, non-submission of G-7 forms on daily basis by the appellants do not advance the case of Revenue, and the findings of the Commissioner in this regard and erroneous. In any event, G-7 forms are also only to record power consumption in the relevant time, which is available in the electricity bills of relevant time, which are not in dispute. 12. It is also seen that letter dated 28.2.2006 of DG (Audit) is amongst relied upon documents wherein by relying on said report of Dr. Batra, Commissioners were instructed to investigate unaccounted production if any after collecting corroborative evidence on the following points:- i) Transportation of raw material and finished goods. ii) Documents/records relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Rules, 1944 would still apply, despite there being no similar provision in the present Central Excise Rules, it cannot be ignored that these Rules empowered the Commissioner to fix normal production having regard to various factors including installed capacity of the factory, raw material utilization, labour employed, power consumed and such other relevant factors as he may deem appropriate. If this Rule would be applicable, the Commissioner could have fixed normal production as per data from the manufacturer's own factory, which shall form the norm, so as to assess shortfall in production compared to such norm in absence of satisfactory explanation for shortfall in production. In the instant case, based on installed capacity, raw material utilization and power consumption in the premises of the appellants no norm was specified by the Commissioner, rather the demand was based on external report of Dr. Batra. No such legislative sanction now exists for M.S. Ingots and Billets, unlike some products like Pan Masala, manufacture of which attracts section 3A and specific notification to that effect has been issued and thus deemed production can form the basis of demand. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as clear evidence of clandestine clearance as discussed in para 14-17 of the order. Out of 417 weighments, 111 wieghments were not reflected in books of accounts. Consignment of Ingots were being transported second time on earlier used gate pass. The driver admitted that he had already transported one consignment of ingots on the same gate pass and that the ingots loaded in the truck were being transported on the very same gate pass. There were other statements confirming clandestine clearance. There was an internal production / monthly report for the period covered under SCN. The General manager (Technical) of the Appellant Company, in his statement stated that during his service with the Appellants, he was asked to prepare this type of report on production/monthly report for submission to the Managing Director. In R.A. Castings case, this judgment in Nagpal's case was considered and was distinguished in view of the above facts. Such evidences are not forthcoming in present appeals. 17. In Hans Castings Private Limited (supra) appeal was actually allowed by way of remand on the ground that sufficient evidence was not available to prove that power consumption per tonne was b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o another case is not at all decisive.'' Applying the said ratio, I find that the judgments relied by the Revenue do not help them in sustaining the impugned Orders in the peculiar facts. 20. It is also seen that the Hon'ble Vice President correctly opined that the judgment in R.A. Casting (supra) is squarely applicable in the facts of the instant appeals. In R.A. Casting the electricity consumption was 2072 to 2443 units per MT, which is higher than the average electricity consumption in the instant appeals. 20.1 The Commissioner in the orders impugned in the instant appeals was having the following reports and clarifications for his consideration- (i) '555 to 1046 units PMT as per Dr. Batra's report; (ii) 1800 units PMT as per the report by joint Plant Committee constituted by the Ministry of Steel, Government of India; (iii) 1427 units per MT as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv) 650 to 820 units /MT as per Article of the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v) 1000 to 1800 units per Ton or even higher, as per Letters dated 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g huge amounts of cash with the stock brokers and receiving cheques of profits against the cash so deposited, (iv) Claim of High Auxiliary load of about 35%. However, the Tribunal in categorical terms held that no demand can be upheld based on electricity consumption as such because the clandestine manufacture and removal of excisable goods is to be proved by tangible, direct affirmative and incontrovertible evidences relating to- (i) Receipt of raw material inside the factory premises, and non-accountal thereof in the statutory records; (ii) Utilization of such raw material for clandestine manufacture of finished goods; (iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products; (iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters' documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained. 20.8 In the present appeals, none of the so called other evidences referred in the impugned Orders prove clandestine clearance. The primary evidence of department is admittedly excess electricity consumption based on benchmark adopted allegedly from report of Dr. Batra, which was already held to be arbitrary by Hon'ble Tribunal in RA Casting (supra). Thus, in my opinion the primary evidence relied in the impugned Order is itself inadmissible, and no other evidence in the instant case proves clandestine production and clearance to sustain the demand. It is contended by Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), however I neither could find any material in support of this argument, nor any such fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales Tax Tribunal (Visakhapatnam Bench) in the case of Venkata Raimana Stone Crushers Company vs. State of Andhra Pradesh. In the case of Melton India (supra), for the norm of power consumption, actual electricity consumption of the assessment year 2000-01 was taken as norm' and the same was applied in subsequent assessment years 2001-02 and 2002-03. This was followed by the Sales Tax Tribunal in the order cited by Revenue. In the case of Rajmoti Industries, facts of the case are that for the assessment year 2005-06, the Assessing Officer rejected the books of accounts of the assessee and made various additions, not only for the reason of unexplained wide fluctuations in the productivity as compared to that in A.Y. 2004-05, but also because the assessee therein had not recorded the work-in-progress in the books of accounts. I am therefore of the opinion that these cases, apart from being under Statutes other than Central Excise Act, do not in any manner help in sustaining the findings recorded in the impugned order. In none of these cases any theoretical report was relied for arriving at deemed production. 24. Further, in Sarvana Alloys Steels Pvt. Ltd. 2011 (274) ELT 248 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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