TMI Blog2008 (5) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... documents were recovered. Statements of officials of ACCIPL, transporters and others were recorded. Investigations carried out revealed that ACCIPL were removing goods on duplicate copy of invoice showing excise duty payable under the monthly payment system in terms of Rule 8 of the Central Excise Rules, 2002, which goods after delivery at octroi naka were brought back to the factory for reuse for clearance under the same invoices. The invoices were subsequently destroyed once the goods reached the octroi naka and on the following date, another set of invoices bearing the same numbers on the destroyed invoices were prepared. All the materials were sold to their customers through Shri Sanjay Mittal, their broker and Commission Agent. The goods were transported from ACCIPL on behalf of Shri Alpesh N. Gosalia, Director of M/s. ANSL. In order to show lower consumption of raw materials, ingots were purchased from the open market in cash without accountal in the records of ACCIPL who was also not maintaining separate accounts for actual consumption of raw materials and actual production. During the year 2002-03, ACCIPL was found to have removed 14894.430 MTs. of finished products, withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndestine removal involving duty of Rs. 12,40,730/- existed and the assessee accepted this demand and did not contest the same and the Tribunal confirmed this demand. The total demand raised was Rs. 4,57,49,000/- (including the above figure of Rs. 12,40,730/-) based on Furnace Oil consumption. The Commissioner adopted the SION norm at the rate of 58 litres of Furnace Oil per MT of finished product was adopted for demanding duty, which demand was set aside by the Tribunal. The relevant portion of the Tribunal s order is reproduced below :- 15. On a very careful consideration of the entire issue, we find that the major demand is based on the consumption of furnace oil. Even though the show cause notice proceeds on the basis of 40 litres per MT, the Commissioner, has given that up in the impugned order and proceeds to determine the consumption at 58 litres per MT. This approach is not satisfactory. The revenue is not in a position to establish the receipt of principal raw material by appellant to establish clandestine production and removal. The incriminating documents recovered can be taken as evidence only for the removals represented by them and there cannot be an extrapolation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is not applicable in the present case, for the reason that it was rendered in the context of Rule 173E of the Central Excise Rules which contemplated an entirely different scheme of assessment. As per the Rule, when there was a short fall in reported production from the norms fixed, the assessee would be required to explain and duty liability would arise if short fall was not satisfactorily explained. In the present case, Rule 173E was not in force during the relevant period. Hence, the question of applying the scheme of assessment under that Rule does not arise. Moreover, Rule 173E contemplates a prior ascertainment of normal production. In the case of Triveni Rubber, the Commissioner had ascertained the electricity consumption for a period of 8 months wherein the operation admittedly was normal and the consumption was thereafter applied for the period in dispute in that case, as per the mandate of Rule 173E. In the present case, however, no such ascertainment has been made. 5. The Triveni Rubber case decision has been distinguished by the Tribunal in cases where demands were confirmed on hypothetical standard. In the case of Devi Rubber Industries v. CCE [2001 (135) E.L.T. 79 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpreted". This observation does not support the view that production can be determined on the basis of one raw material alone, as has been done in this case. The Court in coming to its conclusion took note of the fact that the accounts were found fabricated and untrue. There is no such allegation here. . 14. The essence of Rule 173E is that the norm of production to be complied must be on the fixed at a time the production was considered normal having regard to the various factors mentioned there. It may be possible that not all the factors can be taken into account. There is in the present case however, no attempt to consider any of the factors other than raw material before arriving at the norm. It cannot therefore be held that the formula by itself, without consideration of any of the other factors would not amount to determination of a norm under Rule 173E. It has, therefore, to be held that there is insufficient basis for the demands of duty. In view of this we do not propose to answer the question as to whether the demands were barred by limitation. The demand for duty and penalty is set aside. Even in the Triveni Rubber case, nowhere the Apex Court has h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir had been carried out. The department had sufficient opportunity to rebut the evidence produced by ACCIPL such as bills for materials for repair and certificate from Chartered Engineer, but has failed to do so. The Commissioner has also stated that considering the higher cost of fuel incurred in running the damaged furnace, ACCIPL could have got it repaired at a cost of Rs. 10 to 12 lakhs. However, the question before the Commissioner was not whether the repair could have been carried out at lesser cost but whether the condition of furnace resulted in increased fuel consumption or not. Higher fuel consumption due to above factors has not been disputed by the adjudicating authority and in these circumstances, the adjudicating authority could not have proceeded on the basis that 50 Ltrs of fuel oil consumed would result in production of 1 MT of finished products. 8. Even assuming that furnace oil consumption of 50 Ltrs is considered to be normal level of consumption, there is no material on record to establish that the factory of ACCIPL was working under normal circumstances. The assessee had led in detailed, corroborative evidence to substantiate its claim that furnace was dama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003-04 CTD bars 22,573 9,979 7,745 5,926 8,667 Melting scrap 374 164 122 93 136 Mill scale 479 192 87 59 45 TOTAL 23,426 10,335 7,954 6,078 8,849 Furnace oil consumed in litres 10,45,000 3,90,000 2,74,000 10,48,000 3,94,800 Litres per MT of CTD 46.29 39.08 35.38 176.86 45.55 For the duration of the compounded levy scheme i.e. up to the year 2000, ACCIPL operated on triple shifts and hence production was higher. Subsequently the factory operated on single shift. The assessee claimed depreciation for plant and machinery under the Companies Act, 1956 for triple shift for the years 1998-1999 and 1999-2000. Thicker gauge of bars involving lesser value addition was produced during these years. After the expiry of compounded levy scheme, the production was 9979 MT and 7745 MT for the years 2000-01 and 2001-2002 respectively. The production was lower due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IPL, since the admitted duty liability of Rs. 11 06,430/- has been discharged prior to the passing of the impugned order of the Commissioner, the maximum penalty that could be imposed in accordance with the provisions of Sec. 11AC is 25% of the duty amount. We, therefore, reduce the penalty on ACCIPL to Rs. 3 lakhs (Rupees Three lakhs only) following the ratio of Nav Karnataka Steels Pvt. Ltd. decision supra. Penalties imposed under the provisions of Rule 26 of the Central Excise Rules, 2002 on Directors and employees of ACCIPL and on M/s. ANSL and its Director and Shri Sanjay Mittal are set aside in the absence of finding that any goods are liable to confiscation or actual confiscation, in the light of Tribunal s order in Castrol India Ltd. v. CCE, Vapi [2008 (222) E.L.T. 408] 12. In the result, we uphold the duty demand of Rs. 11,06,430/- set aside the balance demand, reduce the penalty imposed on ACCIPL to Rs. 3 lakhs and set aside the penalties on the other appellants. Appeal No. E/1110/06 is therefore partly allowed while Appeal Nos. E/1111 to 1116/06 and E/1155, 1236, 1237 and 1257/06 are allowed in toto. (Pronounced in the court on 9-5-2008) - - TaxTMI - TMITax - Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
