Seeking withdrawal of the present appeals on the ground that the amount involved in each of the appeals is less than the monetary limit as per the instructions issued by the CBIC under F. No. 390/Misc/116/2017-JC dated 22.08.2019 - HELD THAT:- Both the appeals are dismissed under Litigation Policy without going into the merits of the case.
Seeking withdrawal of appeal - case has been settled under Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 - SVLDR-4 certificates submitted - HELD THAT:- Considering the case has been settled under SVLDRS, 2019, the appeal is dismissed as deemed withdrawn.
Rectification of error apparent on record in order-in-appeal passed by Commissioner of Central Excise (Appeals) - application has limited itself to the non-applicability of the decision of the Larger Bench in re Gauri Plasticulture P Ltd [2019 (6) TMI 820 - BOMBAY HIGH COURT]which, at all events, was referred to in the order of the Tribunal to dispose off submission that decision of Slovak India Trading Co Ltd [2006 (7) TMI 9 - KARNATAKA HIGH COURT] applied to appellants.
HELD THAT:- It would appear that the applicant has not taken note of the further elaboration, and independent finding in the said order, besides decision of the Tribunal in Voltas Ltd v. Commissioner of Central Excise, Pune-IV [2018 (4) TMI 352 - CESTAT MUMBAI] that such monetization would be tantamount to refund of duty collected in accordance with law which was not a ground of challenge in the appeal.
As the final order of the Tribunal, which is sought to be portrayed having arrived at incorrect conclusion from an unappealable decision, has determined ineligibility separately, we find no merit in this application which is rejected.
Valuation - non-inclusion of freight charges collected from their buyers in the assessable value - HELD THAT:- The issue is squarely covered by the judgment of Hon’ble Supreme Court in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [2015 (10) TMI 613 - SUPREME COURT] wherein it has been held It is clear, therefore, that on and after 14-5-2003, the position as it obtained from 28-9-1996 to 1-7-2000 has now been reinstated. Rule 5 as substituted in 2003 also confirms the position that the cost of transportation from the place of removal to the place of delivery is to be excluded, save and except in a case where the factory is not the place of removal.
The Supreme Court dismissed Civil Appeals due to low tax effect based on the latest Ministry of Finance instruction dated 02.11.2023. The delay was condoned, and pending applications were disposed of.
Restoration of appeal which was dismissed earlier as withdrawn - appeals involving tax incidence of more than Rs.5 crore - Condonation application - Classification of goods - blanks for components out of CR/HR sheets/coils of iron and steel - HELD THAT:- An application for recall of the order has been moved with the delay of 326 days and it is contended that the tax incidence is actually more than Rs. 5 crores and, therefore, the appeal was got dismissed as withdrawn under some misconception.
In view of the facts and circumstances and the averments made in the delay condonation application as well as the restoration application, it is satisfying that the delay is sufficiently explained and the order dated 02.08.2019 deserves to be recalled.
Valuation of goods - CNG - Administered Price Mechanism - calculation of transaction value falling under the provisions of Sec 4(1)(a) of Central Excise Act - HELD THAT:- The Court below has erred in drawing adverse inferences as the word ‘commission’ has been used instead of the word ‘profit-margin’. Further, no adverse inferences can be drawn as the RSP is fixed by the Appellant, which is a PSU and CNG being a sensitive product touching the life of common man, in various aspects.
CENVAT Credit - input services - construction of setting up of plant - period involved in the present case was from 2006 to 2010 - HELD THAT:- This issue is no more res-integra and various benches of the Tribunal has considered this issue and has consistently held that during the relevant period, the construction activity was very much covered under the definition of ‘Input Service’ as provided under Rule 2(l) of CCR, 2004.
The Hon’ble Punjab and Haryana High Court in the case of COMMISSIONER CENTRAL EXCISE COMMISSIONERATE, DELHI-III VERSUS M/S BELLSONICA AUTO COMPONENTS INDIA P. LTD. [2015 (7) TMI 930 - PUNJAB & HARYANA HIGH COURT] have upheld the eligibility of the construction service for setting up the factory.
This issue of eligibility of cenvat credit of construction service during the relevant period was held in favour of the assessee and by following the said decisions, the impugned order is not sustainable in law, and therefore, the same is set-aside by allowing the appeal of the appellant with consequential relief, if any, as per law.
Area Based Exemption - N/N. 50/2003-CE dated 10.6.2003 - denial of CENVAT Credit - denatured alcohol and CO2 manufactured by the distillery - sugar factory and the distillery unit - single or separate unit - alleged short reversal of CENVAT Credit under Rule 6(3A) for December 2014 - Time Limitation.
Whether the sugar factory and the distillery unit were two units or one unit? - HELD THAT:- Various facilities of the company are treated as separate units under some laws and as one by some other laws and the concerned agencies deal with them accordingly. Merely because a separate licence was issued by the State Excise, Pollution Control, etc. for the distillery does not make it a different unit under the Central Excise. In this case, the appellant had obtained a single Central Excise Registration for the sugar factory and set up the distillery plant within its premises. Further, it also filed single returns with the excise department covering both the sugar plant and the distillery - it is thus found that the sugar factory and the distillery are one unit as far as the Central Excise is concerned. Central Excise Act, Rules and notifications should be applied accordingly.
It has already been held by this Tribunal while remanding the matter that it is not tenable to hold that some products can avail area-based exemption and others need not avail area-based exemption. Once the appellant had opted for the area-based exemption notification, it is not open for it to say that it will not avail the benefit for some goods manufactured and will avail the benefit for other goods - As the exemption notification is not confined to only such products as were mentioned in the declaration but was available to all the goods manufactured in the unit including the new products manufactured after the declaration and those manufactured using newer plants and machinery installed in the unit, the exemption was available to the denatured alcohol and CO2.
All assessees are required to self-assess and pay duty. If duty is paid in excess of what is due or paid when it is not due, the assessee can claim refund. There is no mechanism to refund suo moto the duty paid under the Central Excise law. There is also a mechanism of issuing a Show Cause Notice under section 11A to recover duty not levied, not paid, short levied, short paid or erroneously refunded. There is no provision to issue a notice under section 11A for any other purpose. For instance, if duty is paid where one is not to be paid, there is no provision to issue a show cause notice calling upon the assessee as to why the excess duty paid should not be refunded. If duty is short paid, a show cause notice can be issued by the officers and if it is paid in excess, the assessee has to file a refund claim.
The denatured alcohol and CO2 manufactured by the distillery were fully exempted from duty and therefore, no CENVAT credit of capital goods used in setting up the plant could be availed by the appellant.
CENVAT Credit - input services - denial as per notification no. 21/2014-CE (NT) which restricted availment of CENVAT credit to six months from the date of invoice - HELD THAT:- This notification came into force only from September, 01 2014. According to the appellant the invoices were issued prior to this date but it availed the CENVAT credit thereafter. If it be so, as per the settled legal position the appellant is entitled to CENVAT credit on all such of these invoices which were issued prior to September, 01 2014.
Alleged short reversal of CENVAT Credit under Rule 6(3A) for December 2014 - HELD THAT:- It is held that the appellant is entitled to the benefit of CENVAT credit of Rs. 32, 82,816/- on all such invoices which were issued prior to 1 September, 2014 and according to the appellant all the invoices were issued prior to this date, there cannot be any duplication. The demand of Rs. 4,57,436/- needs to be upheld.
Time Limitation - HELD THAT:- The show cause notice was issued on 4.01.2016 during which period the normal period of limitation was one year from the relevant date, i.e., the date on which the return is filed and if no return is filed, the last date on which the return has to be filed. Extended period of limitation was not invoked in the show cause notice or in the impugned order. Even the penalty under section 11AC was imposed as applicable to cases other than fraud, collusion, wilful misstatement or suppression of facts. The appellant received capital goods between 26.03.2013 and 2.11.2014 but availed CENVAT credit in December, 2014. The return for December, 2014 would have been filed in January, 2015 and the show cause notice was issued on January 04, 2016 within one year - there are no force in the submission of the learned counsel that the show cause notice was time barred.
The impugned order needs to be modified to the extent of setting aside the denial of CENVAT credit on input services to the extent of Rs. 32,82,816/- for taking credit after six months from the invoice as there is no violation of notification no. 21/2004-CE (NT) consequent interest and reducing penalty under section 11AC to this extent - rest of the demand upheld - appeal allowed in part.
Availment of irregular credit - Clandestine Removal - failure to maintain proper records of receipt, issue and consumption of raw materials/inputs required for manufacture of the finished goods, being MS ingots and MS fabrication - HELD THAT:- From analysis of data in the balance sheet for the period 2004–05 to 2007-08, it appeared that there is great variation in production parameters including the power consumption per unit of production of ingots. The basic raw materials required for manufacture of MS ingots are sponge iron, pig iron and/or scrap. Sponge iron was also used in plants using coal-based technology and gas-based technology. The percentage of usage of charge mix was maximum 30% in the case of gas based sponge iron, and it may be as high as 80% in case of coal-based sponge iron. The yeild was also higher by 2% in case of gas-based sponge iron.
Admittedly, Appellants have maintained sufficient records of their transactions, production, etc. They have furnished regular returns and other prescribed forms which have not been found to be untrue or wrong - It is further found that the demand raised for alleged clandestine production and clearance of finished goods and raw materials is vague and not based on any proper prescribed norms. Further such demand is hit by the ruling of Hon’ble Supreme Court in the case of COMMISSIONER OF C. EX., MEERUT-I VERSUS RA CASTINGS PVT. LTD. [2010 (9) TMI 669 - ALLAHABAD HIGH COURT].
CENVAT Credit - HELD THAT:- The items in question, viz., MS angles, bars, coils, beams, plates, channels, etc., have admittedly been used in the factory of production. It is found that part of these inputs have been used in the fabrication of EOT Crane, which is used for material handling inside the factory. It is further found that some of the items like MS bars, which are required to stir the molten steel during production, get melted and become part of the molten steel in the furnace and thus, gets consumed in the manufacture of finished goods. Further, inputs like new plates and coils have been used in repair of the furnace lining, which has to be done periodically. Thus, the Appellants have rightly taken Cenvat credit and the disallowance of credit is bad during the period under dispute.
Interpretation of the word ‘exemption’ - applicability of Notification No. 23/2003-CE was amended by Notification No. 22/2006-CE - exemption from SAD on the goods cleared from the factory in the shape of sample quoting not for sale in DTA - HELD THAT:- Admittedly in the present case there is no ambiguity in the notification and the issue needs to be considered by interpreting the notification strictly not by referring to the context etc as stated by the impugned order. Undisputedly the goods in dispute were not taxable because only that turnover was subject to tax which was a commercial transaction and the clearance of the samples was excluded from the taxable turnover as per Section 7 of the U P Vat Act, 2008.
In the present case the goods in dispute are not specified in schedule I or Schedule IV of the U P VAT Act hence are not exempt from payment of VAT, but the clearance of samples from EOU are not part of the taxable turnover as per the provisions of this Section 7. The transactions in respect of sample do not fall under the category of exempt goods as defined by the U P Vat Act, 2008. These clearances were not subjected to the VAT in view of the provisions contained in Section 7.
The wordings of proviso of the notification No No 23/2003-CE dated 31.03.2003 as amended by Notification No 22/2006-CE dated 01.03.2006 are unambiguous and they refer to exempt goods under VAT Act. In the present case the goods are not specified as exempt goods as defined under the VAT Act, but are not the part of taxable turnover.
The impugned order is without any merits - appeal allowed.
Validity of SCN - Recovery of Refund claim - Issuance of impugned notices for return of the Cess, since earlier it had been refunded on the basis of then valid law, as laid down by the Supreme Court.
HELD THAT:- When the matters were taken up for final consideration, it was reported to this Court that, the same issue was pending before the Supreme Court, and as such, all these matters were adjourned on many dates, to await the outcome thereof.
The matters before the Supreme Court were then disposed of vide order dated 04.07.2022, whereby the subsequent decision of the Supreme Court overruling M/S. SRD NUTRIENTS PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE GUWAHATI [2017 (11) TMI 655 - SUPREME COURT] in the case of M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA & OTHERS [2019 (12) TMI 286 - SUPREME COURT] was held, to not have any bearing on past decisions, which attained finality.
These writ petitions are disposed of, and accordingly the show-cause/demand/recovery notices appearing in all these connected writ petitions stand quashed and set aside.
Recovery of CENVAT Credit wrongly availed - disputed quantity of inputs of 9.857 MTs waste and scrap purchased by the Respondent, Arsh Alloys from various ship breaking units during the period from April 2007 to August 2010 - It is the case of department that Respondent has received only invoices from ship breaking units without actual receipt of inputs.
HELD THAT:- It can be seen that case of the department is not solely based on statements of various third parties but also other material viz. bazaar scrap, note book showing details of transactions with the ship breakers found at the premises of Respondent and discrepancies noticed in transport documents viz. quantity transported beyond permissible limit and absence of chantiwala (scrap sorter) engaged by the Respondent.
As regards, bazaar scrap found during search at the premises of Respondent, learned Commissioner has observed that it is not possible to identify the nature of scrap from the photographs and that Panchnama does not disclose educational qualification and work experience of witnesess and hence they could not have been considered as experts for forming opinion on the nature of scrap - Mere fact that Respondent has also been buying bazaar scrap on which no duty is paid itself is not enough to hold that all 1366 consignments of duty paid inputs were not received by the Respondent during the period April 2007 to August 2010 and that the final products cleared during this period on which duties were admittedly paid were entirely manufactured out of bazaar scrap.
As regards Respondent having not engaged any chantiwala (scrap sorter) the show cause notice in para 6.3.21 relies upon the statement of brokers which are found to be not reliable by the commissioner in absence of any corroborative evidence and further, some have been retracted/sought to be corrected by brokers by way of filing affidavits. Be that as it may, no question was put forth to the partner of Arsh Alloys in the statements dated 18.11.2010 and 13.03.2012 that in absence of Chantiwala having been engaged how they were able to purchase the scrap - no inference can be drawn on that basis to hold that inputs in question were not received by the Respondent.
The next contention of the department is that evidence of cash flow back viz. note book has not been considered by the Learned Commissioner. Reliance has been placed by the department on the statements dated 7-9-2011, 16- 3-2012 and 16-4-2012 of broker namely Kalpesh Prabhudas Mehta who appears to have confirmed that the said entries in the note book pertain to cash amount paid back to the ship breakers against cheques issued by Respondent - There is no investigation undertaken or evidence gathered at the premises of re-rolling mills to whom goods were allegedly diverted. Similarly, reliance has been placed on the statement dated 16-3-2012 of broker named Priyesh Bharatbhai Parekh is also misplaced which in first place does not refer to the Respondent but Ahmed steel. It appears, the brokers have opined based on the statement of vehicle owners and entries of the note book and not based on perusal of the records of transaction maintained by them. There are otherwise no records of brokers investigated. Since, the statements are not supported with records maintained by the brokers with regard to the transactions in question; not even one entry in the note book stands corroborated with the records of the brokers, such statements of brokers were rightly discarded by the Learned Commissioner.
Learned Commissioner has also discarded the statements of owner of vehicles and statements of authorized persons of rerolling mills being inadmissible evidence on account of absence of any investigation or records of such third parties brought in support of their statements - it is a settled law that where there are tangible documentary evidence in favour of the assesse and even there are overall statements of third party contradicting the documentary evidence, such tangible documentary evidence must be given primacy over the overall statements.
Thus, there is no infirmity in the Order of Learned Commissioner and the same has to be upheld. In the result, impugned order is upheld and appeals of the appellant/revenue are dismissed.
CENVAT Credit - sulphuric acid (by- product) - common input used for manufacture of taxable as well as exempt goods - non-maintenance of separate records - reliance placed upon Explanation (1) introduced w.e.f. 01.03.2015 and Board circular dtd. 25.04.2016 to demand the amount in terms of Rule 6(3) of Cenvat Credit Rules, 2004.
HELD THAT:- A perusal of Rule 6(1) clearly shows that the manufacturer has to manufacture dutiable goods as well as exempted goods. It has to be seen that though the said explanation puts forward a deeming provision that non-excisable goods cleared on payment of consideration are also to be considered as exempted goods, there is no corresponding amendment made in sub-rule (1) of Rule 6 so that the goods that emerged out of process of manufacture falling in clause (1) are also to be considered as exempted goods.
As per the settled decisions, the disputed goods which are not consciously manufactured by the appellant and which emerged unavoidably in the process of manufacture of other goods cannot be considered as goods manufactured by the appellant. Since disputed goods is not manufactured goods but the by-product which emerges/comes into existence in the process of manufacture of copper products, and therefore the production of Sulphuric Acid cannot be held to be manufacture of exempted goods.
From para 3.7 of Chapter 5 of Circular dtd. 25.04.2016, it is clear that any input/input services contained in any by-product/waste/refuse, Cenvat Credit cannot be varied or denied. With this statutory clarification demand under Rule 6 in respect of by-product is not applicable - Once it is established that the product in question is by-product then it is settled that in respect of by-product demand under Rule 6 will not sustain. Accordingly, in the present case also, Sulphuric Acid being a by-product, no demand under Rule 6 shall sustain.
Invocation of Extended period of Limitation - Recovery of central excise duty on coal extracted and cleared by Jindal Steel & Power Ltd. - suppression of material facts from the department - additional value of coal was not included by the appellant in the invoices for payment of excise duty and this fact was not disclosed in the statutory ER-1 returns - revenue neutrality - HELD THAT:- In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [1995 (3) TMI 100 - SUPREME COURT], the Supreme Court examined whether the department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Central Excise Act. The proviso to section 11A of the Central Excise Act which was considered by the Supreme Court carved out an exception to the provisions that permitted the department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts.
It would transpire from the aforesaid decision that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked.
In the present case, the show cause notice merely alleges that because the appellant did not pay central excise duty on additional levy at the rate of Rs. 295 /- per MT, the appellant suppressed material facts. There is no allegation in the show cause notice that such suppression was with an intent to evade payment of central excise duty. This was an important aspect, which was required to be not only alleged in the show cause notice, but also to be proved by the department before the extended period of limitation of five years could have been invoked. However, it has neither been alleged nor proved - In such circumstances, it is not possible to hold, even if there was suppression of facts, that the appellant had any intent to evade payment of central excise duty.
Revenue Neutrality - HELD THAT:- Even if there was any additional duty payable by the appellant, the same would be admissible as CENVAT credit to its own Raigarh unit. Such CENVAT credit would have been utilized by the Raigarh unit for payment of central excise duty at its end. Therefore, the entire exercise of demanding any further excise duty would be revenue neutral.
It, therefore, follows that the extended period of limitation could not have been invoked in the facts and circumstances of the case. As the entire demand of central excise duty has been confirmed after invoking the extended period of limitation, the confirmation of the demand would have to be set aside - In this view of the matter, it would not be necessary to examine whether the additional levy of Rs. 295/- per MT was actually required to be added to the cost of production.
Disallowance of CENVAT Credit - inputs and capital goods - process of making electronic capacitor grade metalized dielectric plastic film (MPP film), falling under Chapter 3920 2090 of the CETA, 1985, amounts to manufacture or not - HELD THAT:- The issue whether the process of making MPP film amounts to manufacture or not is no longer res integra - under similar facts and circumstances, the Coordinate Bench of this Tribunal at Mumbai in the case of Paper Products Ltd., vs CCE, Mumbai [2014 (3) TMI 521 - CESTAT MUMBAI] have distinguished the ruling of Hon’ble Supreme Court in the case of Metalex India Pvt Ltd., vs CCE [2004 (2) TMI 387 - SUPREME COURT] and have held that under similar facts and circumstances, the process amounts to manufacture.
It is further found that Coordinate Bench in Chandigarh in the case of Dhruv Industries Ltd., vs CCE, Delhi-III [2018 (4) TMI 1492 - CESTAT CHANDIGARH] have also, under similar facts and circumstances, distinguished the ruling of Metalex and held that a new product comes into existence by use of the various raw materials viz., Poly Propylene, Polyester Films of Aluminium & Zinc, which is coated and further the process required use of capital goods/ machinery involving substantial cost and such process of manufacture takes about 36 hours. It was held that a new product comes into existence.
Thus, the process of making MPP Films, capacitor grade from plain plastic film would amount to manufacturing process during the relevant period and the MPP, classifiable under CETH 3920 2090 would still be a manufactured good under Section 2(f), irrespective of absence of any chapter note specifically declaring the said activity as a manufacturing activity. Once the process is considered as manufacturing process, the credit becomes admissible.
The Appellant is entitled to Cenvat credit - appeal allowed.
Classification of goods - Chick drinker and Auto feeder manufactured by the appellant - classifiable under CETH 84361000 of Central Excise Tariff Act, 1985 as claimed by the appellant or whether to be classified under CETH 39269099 as held by the department? - it was held by Tribunal that the impugned goods merit classification under CETH 84361000, as adopted by the appellant.
HELD THAT:- There are no merit in the appeal - appeal dismissed.
Recovery of credit of tax paid on input services - manufacturer of ball bearings - common use in undertaking of manufacturing activity as well as rendering of exempted service - Non-reversal in the manner prescribed in rule 6 of CENVAT Credit Rules, 2004 - mechanism to be adopted for neutralization owing to operation of rule 6(2) of CENVAT Credit Rules, 2004 - HELD THAT:- The issue lies in the narrow compass of applicability of rule 6(3) of CENVAT Credit Rules, 2004 insofar as the period prior to specific exclusion of ‘trading activity’ is concerned.
From the very beginning, eligibility for availment of CENVAT credit of tax paid on ‘input service’ was set out to exclude such as used for undertaking ‘exempt service’ – which incorporates both ‘taxable service’ subject to exemption and services on which no tax is leviable thereon. Though, ‘trading’ came to be acknowledged within the framework of CENVAT Credit Rules, 2004 specifically with effect from April 2011, the Explanation incorporating such specifies had to be clarificatory in consequence; such services as are beyond the purview of Finance Act, 1994 such as has been held by the Tribunal, in M/S. ORION APPLIANCES LTD. VERSUS CST AHMEDABAD [2010 (5) TMI 85 - CESTAT, AHMEDABAD], lies within exclusive powers of the State Government and is in conformity by the second limb of the definition. Accordingly, trading activity was always to be treated as having been exempt service within the meaning of rule 2(e) CENVAT Credit Rules, 2004.
Consequently, credit availed thereof is to be disallowed to such extent insofar as ‘input services’ were deployed in common on the activity of manufacturing of, as well as ‘trading’ in, ball bearings.
Mechanism to be adopted for neutralization owing to operation of rule 6(2) of CENVAT Credit Rules, 2004 - HELD THAT:- Rule 6(3) of CENVAT Credit Rules, 2004 affords neutralization authorized by law as is evident from the commencement with non obstante qualification. Even within the scheme of such reversal, alternatives are provided with the option of discharging payment through CENVAT credit account by such percentage of value of exempted service as is prescribed or by proportionate reversal. The appellant herein had undertaken proportionate reversal which is not in question and the only issue in contention is the correctness of proportion. While the impugned order has taken the value of manufacturing and value of trading as the factors for such delineation, it is the claim of the appellant that adoption of value of traded goods would distort the principle underlying CENVAT credit scheme.
As the appellant had reversed the credit, and rule 14 of CENVAT Credit Rules, 2004 would come into play only when the reversal prescribed in rule 6(3) of CENVAT Credit Rules, 2004 had not been complied with by assessee, we see no reason for further proceedings except insofar as notice under rule 14 of CENVAT Credit Rules, 2004 and penalty under rule 15 CENVAT Credit Rules, 2004 is to be confined to non-adherence to the terms as set out.
Principles of natural justice - order passed without participation of noticee - manufacturing of goods taking place or not - plant and machinery belonging to appellant or not - premises for carrying out impugned manufacturing activity are or were in his possession or not - relevancy on statements placed - corroborative evidences or not - HELD THAT:- The impugned order was passed without the participation of the noticee except to the limited extent of filing reply to the show cause notice. Undoubtedly, the appellant had been placed on notice of the dates of hearing despite which there is demonstrated non-participation by the appellant.
The seizure had not been effected by the central excise officers. We also take note that, other than the statements of the appellant herein and few others, no effort had been made by the central excise authorities to link procurement of raw materials and channelizing of the finished product with the appellant herein. In the absence of such corroborative evidence, statements which may have, otherwise, supported circumstantial evidence are of no relevance. Furthermore, the statements themselves had not been subject to the test of section 9D of Central Excise Act, 1944 for deployment towards the findings in the proceedings.
The evidence on which the duty liability, and penalties, have been fastened on the appellant herein, has not been established even by preponderance of probability owing to non-establishment of relevancy of statements, as set out in section 19 of Central Excise Act, 1944, the matter requires fresh appreciation - Appeal allowed by way of remand.
Clandestine removal without entering in the production records - mild steel (MS) ingots - Penalties under rule 26 of Central Excise Rules, 2000 and section 11AC of Central Excise Act, 1944 - recovery of differential duty under section 11A of Central Excise Act, 1944 along with interest thereon under section 11AB of Central Excise Act, 1944 - between September 2003 and July 2009.
The case of the central excise authorities, in a nutshell, is that raw materials procured from the open market was utilized to enable unreported production which is evidenced by inflated consumption of electricity during the reported heat cycles preferring to take cover under inefficient performance per cycle.
HELD THAT:- From an analysis of the facts, it would appear that correlation of certain factors concerned with production do not suffice for establishing the extent of evasion, if any; at best, these aspects may corroborate the allegation of clandestine removal of evasion of duties of central excise.
Doubtlessly, evidencing of clandestine removal must rest upon preponderance of probability as direct evidence is rarely possible, but interferences must indicate both probability and preponderance. Normally, it should happen that goods that have reached the market are traced to the assessee through a backward trail or raw materials that originated from a source be traced through forward trail to assessee. Ideally, both should converge but, for the purpose of ordering clandestine removal, one or the other would suffice; that is the true spirit of preponderance of probability - In the present instance, there are no whiff of the former whereas of the latter, there is ‘free floating’ evidence of procurement of ‘sponge iron’ and ‘BP sets’ by the assessee; nonetheless, the trail of investigation for linking delivery of alleged procurement of these raw materials and consumables at the premises of the assessee rests solely upon certain statements. Unless those statements are tested for acceptability, connecting of dots will hardly reveal the hidden picture.
The witnesses relied upon by the central excise authorities are not acceptable evidence in the absence of cross-examination that was denied. The impugned order fails on that ground but, as the request for cross-examination had been rejected deliberately, availability or amenability to production for cross-examination is not in question.
The impugned order set aside - matter remanded back to the original authority for fresh determination on the facts and evidences limiting reliance to such statements that have crossed the hurdle of ‘relevancy’ prescribed in section 9D of Central Excise Act, 1944 - appeal allowed by way of remand.
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