TMI Blog2004 (7) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... r the period from December, 1989 to January, 1993; that the Commissioner, under Order-in-Original dated 23-9-1996 confirmed demand of Rs. 59.44 lakhs and dropped the remaining demand, on the basis that 11kgs. of ferro alloys would be required to manufacture one M.T. of the final product; that the Commissioner also assumed that there could be consumption of power by theft which was not alleged in the show cause notice; that on appeal filed by them as well as Revenue, the Tribunal vide Final Order No. A 899-901/2000-NB, dated 9-10-2000 set aside the Order and remanded the matter to the Commissioner with the direction that the Commissioner would furnish a copy of the report of the Indian Institute of Technology to both the sides and give the Appellants an opportunity of producing documents in their defence; that the Commissioner in the impugned Order, has confirmed the entire demand in the show cause notice based on the assumption that there could be manipulation of power consumption; he had assumed that the consumption of ferro alloys would be only 9 kgs. per M.T. of the final product and he ignored the report of experts on the ground that the same may not be relevant. 2.2 The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meter reading and there was no excess consumption of power is evident from the following :- (i) The U.P. State Electricity Board Divisional Engineer, Distribution Division, Unnao has given a certificate dated 26-11-1996 that the metering arrangements were always found in order and there were no possibilities of electricity theft or pilferage of power. (ii) The Power is supplied to their Sub-station from Sonic Sub-station on direct feeder. The Power supply from Sonic Sub-station is metered at the said Sub-station. Therefore, the question of Appellant s Sub-station receiving any power over and above the power supply from Sonic Sub-station cannot at all arise. 3.2 He contended that the Appellants thus cannot obtain any quantity of power more than that supplied by the Sonic Sub-station; that the total quantity of extra power required for the production alleged to have been suppressed is around 1.3 crore units; that hence, the assumption by the Commissioner that they could have successfully managed the manipulation of meter reading is totally baseless. He mentioned that in order to justify the impugned demand of duty, the Commissioner has discredited the Divisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Consultant mentioned that even the assumptions made by the Commissioner with reference to two instances are incorrect and contrary to the factual position; that in respect of the dates 2-5-1992 and 3-5-1992, the Commissioner has assumed that 4 heats were taken on 2-5-1992 and 3 heats were taken on 3-5-1992 which is incorrect; that the relied upon documents show only two heats on 2-5-1992 and two heats on 3-5-1992, that is only four heats as against seven heats assumed by the Adjudicating Authority; that in any case, since the heats taken on 2-5-1992 and 3-5-1992 were off grade and it did not come out in production which can be converted into castings, the meter reading seems to have been taken as the opening reading itself; that this is evident from the fact that on 4-5-1992, the quantity produced was shown as 64.79 MTs and as per the closing meter reading on 4-5-1992, the quantity produced was shown as 64.79 MTs and as per the closing meter reading on 4-5-1992, the total units consumed was 51900 units; thus for the quantity of 64.79 MTs, the consumption per unit was only 675 units per MT; that since the 4 off grade heats taken on 2-5-1992 and 3-5-1992 approximating 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nganese 13.34 kg/ton of steel billet Ferro silicon 3.20 kg/ton of steel billet Ferro manganese 11.22 kg/ton of steel billet 5.2 He mentioned that the report dated 13-9-96 of the Assistant Commissioner, Central Excise Jamshedpur regarding M/s. TISCO Ltd. mentions that in the manufacture of one M.T. of billets about 14.3 kg. of silicon manganese is used; that inspite of these norms of ferro alloys consumption, the Commissioner has proceeded to confirm the demand holding that 9 kgs. of ferro alloys is sufficient for one M.T. of final product; that further the issue of ferro alloys as per the statutory records, RG23A, Part-I, is equal to the stores ledger issue/consumption; that after the personal hearing, a team of officers was deputed to their factory which conducted a study of the manufacturing process, including the quantities of ferro alloys added at every stage of manufacture; that obviously, the result of the said study had not thrown any result adverse to the submissions made by them since the report had not been made available to them and also during the de novo proceedings. He contended that the onus is on the revenue to prove charge of manufacture and clandestine r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arc furnace of 15 tonne capacity; that at the time of visit the officers noticed three induction furnaces were in production; that they were maintaining daily production reports and heatwise furnace log sheets; that for preparing these records, the melters had been preparing and submitting kutcha log sheets/pads showing, inter alia, the quantity of ferro alloys used; that the Officers resumed some Kutcha log sheets/Pads relating to the period 13-1-1993 to 18-1-1993 from 2 melters namely Rakesh Singh and Devi Dayal Singh; that these Melters in their statements dated 18-1-1993 confirmed preparation of the said Kutcha records on regular basis and confirmed correctness of the details recorded therein; that later on Mayank Pandey and Rajesh Kumar Rai, both Melters, in their statements dated 3-2-1993 and Melter Sampat Lal Verma in his statement 16-219-93 endorsed the view in respect of preparation of Kutcha records and correctness of the details recorded therein; that the Appellants were showing less production in their RG1 Register than what was mentioned in Kutcha records; that a quantity of 311.280 MT had been removed as indicated in Kachha log sheets resumed from the melters; that sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Engineer cannot be interpreted to mean that there could be no possibility of irregular use or manipulation. 7. The learned SDR mentioned that as the genuineness of katcha log sheets has not been challenged by the melters or the Appellants, duty is payable by them on 311.280 M.T. suppressed during 13-1-93 to 18-1-93; that as the shortage of 6943 kgs. of ferro manganese has not been explained satisfactorily the duty has to be paid on the quantity of billets manufactured out of the same; that 51850 kgs. of ferro manganese had been used to manufacture billets clandestinely as no consumption of ferro silicon had been shown by them in any log sheet during the said period. Finally he mentioned that kutcha slips for 5 days reveal the consumption ratio of silicon manganese to be 8.5 kgs. approximately per M.T. which has been confirmed by the melters and others; that the TISCO report is not applicable as the quantum of various inputs used in the integrated steel plants cannot be compared with those in mini steel plants; that as per the production log sheets, only silico manganese has been shown to be consumed and the average consumption ratio is around 9 kgs. per M.T.; that thus the produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered by them. 9.1 We have considered the submissions of both the sides. The impugned Order has been passed by the Commissioner on remand by the Appellate Tribunal vide Final Order No. A/899-901/2000, dated 9-10-2000. The Tribunal had remanded the matter as the evidence produced by the Appellants from independent manufacturers and others was not examined properly and when the assessee had stated that power consumption may be taken as a factor for determining the quantum of final product the Commissioner had observed use of electricity which was not recorded in the bills without making such an allegation in the show cause notice. The defence of the Appellants before us is that the power used by them is only sufficient to manufacture the quantity of ingots/billets recorded by them in their records and the Commissioner has come to the conclusion that the Appellants had managed the manipulations of meter reading. The Commissioner has confirmed the demand on the basis that 9 kgs of ferro alloy is sufficient to manufacture one M.T. of ingots/billets. The Appellants have contended that the entire case of the Department is only on the basis of assumptions and presumptions whereas th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king by the visiting officers, that the Appellants had indulged in a systematic manipulation of records of power consumption. This finding is without any material brought on record. On the other hand the Appellants have brought on record a certificate dated 26-12-96 issued by the Divisional Engineer. Electricity Distribution Division, Unnao which mentions as under :- On the basis of the reports/raids conducted from 1988 till date of metering arrangement checks on USEB 33/11KV Sub-station at Mohan Steels Ltd., Unnao; manned by the employees of the Board for 24 hours, it is very clear and apparent that the metering arrangements were always found in order and there were no possibilities of electricity theft or pilferage of power. 9.2 The Divisional Engineer of Electricity Board, thus, rules out any manipulation of electric meter as the metering arrangements were always found in order . The Commissioner has disregarded this certificate by merely observing that the certificate had been issued on the request of the Appellants only; it also gives an indication that no irregularity was noticed during the time of raids; this certificate cannot be interpreted to mean that there could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 kg/t of ferro-silicon . The Report also fixes the same quantum of consumption of ferro-manganese and ferro-silicon as norms while dealing with "Norms for Important Parameters . The learned Consultant has also brought on record the Input-Output ratio fixed by the Ministry of Commerce for Import-Export purposes. As per these norms also Silico Manganese required is 15 kgs. and Ferro Manganese 10 kgs. In view of this the Revenue cannot proceed on the assumption that only 9 kgs. of ferro alloys is required for manufacture of one ton of billet merely on the statement of melters. The Revenue has not verified the contention of the Appellants that ferro-alloy is also added at the stage of ladle and concast. As observed earlier, the Revenue has also not made any investigation in respect of another most vital raw material that is M.S. Scrap/Sponge iron. It has been held by the Tribunal in the case of Amba Cement Chemicals, supra, when the Revenue alleged the clandestine manufacture of cement on the basis of formula for use of lime stone per ton of cement; that No investigation is conducted in respect of other raw-materials such as coal, gypsum and clay which are also required for manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry evidence, we hold that clandestine removal of goods is not proved, and therefore, the demand of duty on this issue is not maintainable in law. In addition there is no corroborated evidence to show the use of other raw materials etc. to sustain the demand of duty. 11. Regarding shortage of ferro manganese noticed by the Central Excise Officers when they visited the factory premises on 18-1-93, we are of the view that the submissions made by the Appellants regarding issue on 16-1-93 has not been properly considered by the Adjudicating Authority. Shri S.K. Shukla, Stores Clerk of the Appellants, in his statement dated 18-1-93 had deposed that entries in respect of materials after 11-1-93 had not been made in the records and the entries regarding material issued after 14-1-93 were also not made even though the materials were issued for consumption on verbal request. This aspect requires to be examined by the Adjudicating Authority. We, therefore, remand this aspect for re-consideration of the jurisdictional Adjudicating Authority. Thus the demand of duty as confirmed against the Appellants and penalty imposed on them are set aside. The issue regarding shortage of 6943 kg. of fe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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