2008 (6) TMI 188 - AT - Central Excise

Clandestine removal of goods - shortages of finished goods MS Ingots and excess stock of MS scrap demand raised mere on basis of electricity consumption held that since fuel consumption has been fluctuating from month to month adoption of one particular month s consumption can not be made appropriate basis for determining production for number of years demand is set aside

Summary

Issues Involved: Clandestine removal of goods, demand of duty based on electricity consumption, confiscation of excess stock, imposition of penalties.

Detailed Analysis:

1. Clandestine Removal of Goods:
The case involved M/s. AIPL, where officers of Central Excise conducted a search and found discrepancies in stock and private records indicating clandestine removal of goods. The company was accused of receiving scrap in excess and manufacturing and clearing ingots without accounting for them and without paying duty. Statements from various stakeholders corroborated these findings. The department issued a show cause notice proposing recovery of duty and penalties.

2. Demand of Duty Based on Electricity Consumption:
For the period from August 2004 to 3rd September 2004, the demand of Rs. 20,36,114/- was upheld based on private records and statements. However, for the period prior to August 2004, the demand was based on an analysis of electricity consumption, adopting a mean average of 700 KWH per MT. This method was contested, and the tribunal found it inappropriate to apply retrospectively. The tribunal referenced the case of M/s. Arti Leathers (P) Ltd. v. CCE, where a similar approach was set aside. The tribunal highlighted that electricity consumption depends on various factors, such as type/quality of scrap, breakdowns, and power cuts, making it an unreliable sole basis for determining production.

3. Confiscation of Excess Stock:
The Commissioner confiscated the excess stock of MS scrap found during the search, with an option for redemption on payment of a fine. This part of the order was not specifically contested in the judgment summary provided.

4. Imposition of Penalties:
Penalties were imposed on M/s. AIPL, its Director, and other involved parties. The tribunal reduced the penalty on M/s. AIPL to Rs. 5 lakhs and on its Director to Rs. 2.50 lakhs, considering the pre-deposit made and in light of previous tribunal orders. The penalty on M/s. Multi Steel Stores was upheld as their involvement in purchasing clandestinely cleared goods was established.

Conclusion:
The tribunal upheld the duty demand of Rs. 20,36,114/- for the period from August 2004 to 3rd September 2004 and set aside the demand for the period prior to August 2004 based on electricity consumption. The penalties were reduced for M/s. AIPL and its Director, while the penalty on M/s. Multi Steel Stores was upheld. The appeals were partly allowed for M/s. AIPL and its Director, and dismissed for M/s. Multi Steel Stores.