TMI Blog2014 (7) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... EW DELHI), the impugned orders are to be upheld and all the appeals dismissed. - Appeal Nos.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, E/29/10, E/2/10, E/120/10, E/41/10, E/42/10, E/43/10, E/140/10, E/56/10, E/84/10, E/1270 - - - Dated:- 31-1-2014 - S S Kang and P K Jain, JJ. For the Appellant : Mr A Hidayatullah, Sr. Counsel For the Respondent : Mr Shobha Ram, Commissioner, (AR) JUDGEMENT Per: S S Kang: 1. Common issues are involved. Therefore appeals are being taken up for disposal. 2. Following appellants filed appeals against the confirmation of demands and imposition of penalties: Sl. No. APPEAL NO. PARTY OIO NO./DATE Confirmed Duty Demand (In Rs.) Penalty Imposed (In Rs.) 1 E/1319/09-MUM SRJ PEETY STEEL PVT. LTD. E/75/CEX/Commr/2009 Dated 28.08.2009 Rs.33,15,01,382/- Rs.33,15,01,382/- 2 E/1225/09- MUM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 009 Rs.9,80,33,970/- Rs.9,80,33,970/- 14 E/30/10-MUM NILESH STEEL ALLOYS PVT. LTD. E/80/CEX/Commr/2009 Dated 31.08.2009 Rs.13,12,28,035/- Rs.13,12,28,035/- 15 E/29/10-MUM NILESH S. CHECHANI E/80/CEX/Commr/2009 Dated 31.08.2009 NA Rs.3,28,00,000/- 16 E/02/10-MUM OM SAIRAM STEEL ALLOYS PVT. LTD. E/82/CEX/Commr/2009 Dated 31.08.2009 Rs.12,55,17,735/- Rs.12,55,17,735/- 17 E/120/10-MUM AHMEDNAGAR ALLOYS PVT. LTD. E/84/CEX/Commr/2009 Dated 11.09.2009 Rs.71,76,760/- Rs.71,76,760/- 18 E/41/10-MUM SAPTSHRUNGI ALLOYS PVT. LTD. E/83/CEX/Commr/2009 Dated 31.08.2009 Rs.5,19,41,800/- Rs.5,19,41,800/- 19 E/42/10-MUM SHIVKUMAR N. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Dr. N.K. Batra, Professor of IIT, Kanpur. As per the study conducted by Dr. N.K. Batra for the manufacture of 1 MT of MS Ingots the electricity consumption should be between 555 units and 1046 unit and the Revenue is also relying upon the opinion given by All Indian Induction Furnace Association and as per the opinion 820 KW of electricity energy is required for manufacture of 1 MT of MS Ingots. Based on both the opinions, the Revenue has taken 1026 KW per MT as standard for consumption and quantum of Ingots and consequently the demand of duty in all the cases. The case of the Revenue is that if 1026 KW of electricity is used for the manufacture of 1 MT of MS Ingots then during the period in dispute all the manufacturers should have manufactured the quantities on which demands were confirmed. Show Cause Notices were issued for demanding duty on the above mentioned basis by invoking extended period of limitation and for imposition of penalties. Vide different adjudication orders the demands were confirmed with interest and penalties were imposed. 4. During the pendency of the appeals and arguments, the Revenue also filed Miscellaneous applications for producing additional ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of electricity consumption. The appellant also relied upon the decision of the Tribunal in the case of Amar Ispat Ltd vs CCE reported in 2009 (235) ELT 487. 8. In the present case, there is no evidence on record in respect of unaccounted raw material for the manufacture of unaccounted ingots and in respect of clandestine clearance. No experiment was conducted in the factories regarding actual consumption of electricity. In the case of appellant M/s SRJ Petty Steel Pvt. Ltd, the experiment was conducted for two hours in the factory and the Revenue has noted in the heat conducted that the total electricity consumption is 1496 units. The experiment was conducted on 4.03.2009. This experiment shows the electricity consumption for the manufacture of one MT is also most the same as the consumption of electricity as per the appellants records. 9. Appellant also asked for copy of the report of Dr. N.K. Batra from the IIT, Kanpur and the Deputy Registrar, R D of IIT, Kanpur vide letter dated November 01, 2007 informed that no technical opinion report of productivity of induction furnace by Dr. N.K. Batra is available on the record of IIT. Since Dr. N.K. Batra is expired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such records in G7 Forms and in the present cases all of them have not maintained such record. 14. Revenue submitted that the Tribunal in the case of R.A. Castings (supra), the decision relied upon by the appellant, proceeded with the presumption that the law was well settled that electricity consumption cannot be the only factor for determining duty liability. The Hon'ble Allahabad High Court upheld the decision of the Tribunal in the case of R.A. casting (supra) on the ground that the findings of the Tribunal were based on materials on record and the findings cannot be said to be without any material and could not be held to be perverse. The Hon'ble High Court nowhere held that production of steel ingots cannot be determined on the basis of electricity consumed. 15. In respect of the experiment conducted by the excise officers in one of the manufacturing unit to determine the consumption of electricity, the contention is that observing the process of manufacture or recording of some data thereby the officers cannot be considered as an experiment. 16. The Revenue relied upon the decision of the Hon'ble Supreme Court in Triveni Rubber Plastics reported in 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no more. The appellants made a request to IIT, Kanpur to supply the copy of the opinion and the IIT, Kanpur vide letter dated 1.11.2007 informed that no such opinion is available in records. During arguments, Revenue produced the data of electric consumption in respect of the units for the period after the adjudication order to show that subsequently the manufacturing units were showing less electric consumption than during the period in dispute for the manufacture of per MT MS ingots. This shows that during the period in dispute, the manufacturing units were showing higher consumption of electricity to suppress the production. If this data is taken into consideration, the case of the Revenue still remains on the basis of electric consumption only. 22. Revenue also, during arguments, produced some orders passed by the Settlement Commission whereby the matter regarding clandestine clearance was settled. We find that the Larger Bench in the case of Bosch Chassis Systems India Ltd us CCE, Delhi II reported in 2008 (232) ELT 622 (LB) held that filing an application before the Settlement Commission for waiver of interest, penalty and immunity from prosecution and suo motu paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts/MT as per various reports referred to above or why not adopt some figure between 555 to 1046 units as norm as per Dr. Batra's report? 20.2 We note that no experiments have been conducted in the factories of the appellants for devising the consumption norms of electricity for producing one MT of steel ingots. It is the basic philosophy in the taxation matters that no tax can be levied on the basis of estimation. In this case, there is added problem. Estimation of production fluctuates widly depending upon the fact as to which report is adopted. Tax is on manufacture and it is to be proved beyond doubt that the goods have been actually manufactured, which are leviable to excise duty. Unfortunately, no positive evidence is coming on record to that effect. Article 265 of the Constitution of India says that no tax shall be levied or collected except by authority of law. Unless the manufacture of the steel ingots is proved to the hilt by authentic, reliable and credible evidence, duty cannot be demanded on the basis of hypothesis and theoretical calculations, without taking into consideration the ground realities of the functioning of the factories. High consumption of elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anpur-1998 (102) E.L.T. 139 (T) (vii) M/s. Padmanabh Dyeing and Finishing Works v. CCE, Vadodara - 1997 (90) E.L.T. 343 (T) (viii) M/s. Madhu Products v. CCE, Hyderabad -1999 (111) E.L.T. 197 (T). 22. 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 Commercial Tax Department and the receipt by the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained. 24. In respect of unexplained income shown in the Balance-sheet the Tribunal held that onus is on the Revenue to show that the same is in respect of clandestine removal. The Revenue filed appeal before the Hon'ble Allahabad High Court and the Hon'ble Allahabad High Court dismissed the appeal as reported in CCB us R.A. Castings Put Ltd reported in 2011 (269) ELT 337 (All HC). The Hon'ble High Court held as under: 3. Being aggrieved by the impugned orders, the respondents filed appeals before the Customs, Excise Service Tax Appellate Tribunal, New Delhi. The Tribunal observed that it is settled principle of law that the electricity consumption cannot be the only factor or basis for determining the duty liability, that too on imaginary basis, especially when Rules 173E mandatory requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any taking also into account the consumption of various inputs, requirements of labo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994 (73) ELT 7 (SC) to submit that demand can be confirmed on the basis of installed capacity. 27.We find that in the case of Triveni Rubber and Plastics (supra), the Managing Partner of the factory admitted, removal of excisable goods without making any entry in the statutory records and also admitted that they were doctoring their accounts so as to show that actual production was below the exemption limit. In these circumstances the Hon'ble Supreme Court upheld the demand on installed capacity of the unit. The Revenue also relied upon the decision of the Tribunal in the case of Rattan Steel Works vs CCE to submit that demand can be made on the basis of power consumption. We have gone through the decision. We find that there was an evidence by way of statements of traders who had arranged sale of clandestinely removed goods to the dealers in Kerala. On the basis of statements made by the brokers and bills the Revenue quantified the demand. In view of this evidence the demand was confirmed. In the present case we find there is no such evidence regarding clandestine clearance of goods. Therefore, the ratio of the above decisions are not applicable to the facts of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Castings Pvt Ltd (supra) the impugned orders are set aside and the appeals are allowed. (Order pronounced on ___________) Per: P K Jain: 32A. I have gone through the order recorded by Learned Hon'ble Vice President. My views on various issues involved in the present batch of appeals are at variance with the Learned Hon'ble Vice President and therefore a separate order is being recorded. 33. Brief facts, as also the arguments of both sides, have been recorded in brief by the Learned Hon'ble Vice President. However, there are certain additional facts/arguments both on the side of appellants as also Revenue which would be discussed while examining the respective issues. 34. Central Excise Act was enacted in 1944 and Central Excise Rules were also framed in the same year and these Rules were in use till 2001. From time to time many amendments have been carried out in both the Act and the Rules, Initially the Rules prescribed for controlling the entire process of production and clearance of goods, right from raw materials to finished product. Assessment of duty was to be completed by the Central Excise Officer before the goods were cleared/removed from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid. Further Rule 11 prescribes that the goods are required to be removed on an invoice. Rule 6 which is relating to assessment of duty reads as under: Rule 6 Assessment of duty. The assessee shall himself assess the duty payable on any excisable goods: Provided that in case of cigarettes, the Superintendent or Inspector of Central Excise shall assess the duty payable before removal by the assessee It can be seen from the above rule, the assessee is required to himself assess the duty payable and there is no role of Central Excise officials in the assessment of duty. Rule 12 prescribes filing of return. The returns are required to be filed on monthly or quarterly basis in the format prescribed. 36. It will, thus, be seen from the scheme of administration, once in life time registration is required to be taken by a manufacturer, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rces such as demolition of old buildings, iron and steel structures, old machinery etc. Such a scrap is normally called as bazaar scrap. No duty is required to be paid on such scrap and therefore credit of duty in respect of such inputs is 'nil'. 39. It is also to be noted that out of two inputs, records relating to scrap/sponge iron as also final product viz M.S. Ingots are within the control of manufacturer. Electricity is the only main input, whose records are not controlled by manufacturers and are also available from Electricity Boards or Electric Supply Companies which are generally Government owned/controlled. 40. Here, it will be necessary to look at the basis on which Revenue is claiming that self-assessment made by the appellants are not proper and related records and returns filed do not represent the TRUTH and appellants have suppressed the production and clearance of goods. M/s SRJ Peety a) Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 125% of sale price of ingots shown to have been manufactured, making the production commercially unviable and unsustainable in the long run. b) The sanctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s engaged in suppression of production. M/s Kalika Steel Alloys Pvt. Ltd. Date Electricity Consumed (in units) Production of Steel Items 01.05.05 101100 NIL 35.08.05 103500 NIL 09.01.06 48300 NIL 06.02.06 49500 NIL 28.08.06 115950 NIL 04.09.06 33675 NIL 11.09.06 42900 NIL 18.09.06 52200 NIL 25.09,06 44400 NIL 02.10.06 44625 NIL 08.01.07 41100 NIL 26.01.07 129300 NIL 01.05.07 90450 NIL 13.08.07 115950 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch from Shri. Girish Keshav Barwar, Supervisor of M/s KSAPL, revealed clandestine removal of 485.700 M.T. of M.S. Ingots from M/s KSAPL to M/s KRRPL vide vehicle no. MCB 8888. This fact was also confirmed in his statement dated 16.08.2006 under Section 14 of the Central Excise Act, 1944 (referred in the SCN)by Shri. Suml Prabhudas Godhwani, Accountant of M/s KSAPL. (v) Apart from confirming the above facts, Shri. Ghanshyam Chunnilal Goyal, Director of M/s Kalika Steel Alloys Pvt Ltd, mentioned that financial crisis was the reason of the clandestine removals 8$ admitted 16.200 M.T.(121 pieces) of M.S. Ingots cleared on 16.08.2006 (involving duty of ₹ 15,93,378/-)without payment of C. Ex. Duty to M/s KRRPL. Thus, in both the cases, M/s Kalika Steel Alloys Pvt Ltd had admitted under Section 14 of CEA,1944, committing purposefully grave act of clandestine removal of 535.505 M. T. of M. S. Ingots shortages of raw materials of Sponge Iron of 116.045 M.T. s the value of the impugned goods was Rs, 1,23,80,794/- involving duty of Rs'. 20,20,546/- and involving duty of ₹ 7,79,313/-with the sole intention of evading C, Ex. Duty involved therein. M/s K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but claimed to be 20% by appellant in their section 14 statement indicating their intention not to disclose true facts to Department. d) (i) Shri. Narender Ramvilas Agarwal, Ex-Director, M/s Pawan Re-Rolling Mills PVt Ltd in his statement dated 19.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had received 40 M.T.s of M.S. Ingots from M/s Gajlaxmi Steel Pvt Ltd without any bill in cash. (ii) Shri. Dinesh Satyanarayan Bharuka, Director, M/s Rutuja Ispat Pvt Ltd in his statement dated 08.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had stated that they had received 105 M.T. of M.S. Ingots from M/s Gajlaxrni Steel Pvt Ltd without payment of C.Ex. duty. (iii) Shri. Gopikishan R. Jajoo, Director, M/s Gajlaxmi Steel Pvt Ltd in his statement dated 19.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had supplied 105 M.T. of M.S. Ingots to M/s Rutuja Ispat Pvt Ltd 40 M.T. of M.S. Ingots to M/s Pawan Re-Rolling Mills PVt Ltd without payment of C.Ex. duty. Thus, M/s Gajlaxmi Steel Pvt Ltd had admitted under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil 08.10.04 31168 Nil 01.11.04 50144 Nil 12.11.04 832 Nil 31.12.04 22752 Nil 07.01.05 22944 Nil 26.01.05 30112 Nil 04.02.05 45216 Nil 29.07.05 23520 Nil 11.11.05 28224 Nil 18.11.05 23008 Nil 15.03.06 992 Nil 20.10.06 46240 Nil 21.10.06 7872 Nil 26.01.07 10272 Nil 04.03.07 44416 Nil 11.05.07 1664 Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 12.12.2007, the appellant accepted duty liability of ₹ 5.56 Lakhs. M/s Adinath Concast a) Even if only cost of electricity and raw material is added as per B/S, it comes to 113% of sale price of ingots shown to have been manufactured, malting the manufacturing commercially unviable and unsustainable in the long run. Though the unit is stated to be running in losses, as per Affidavit dated 06.08.2013 filed before the Tribunal, a 12 M .T. capacity melting furnace purchased from M/s Electrotherm India Ltd which is in operation of manufacturing of ingots from 2.08.2005 onwards. b) The sanctioned auxiliary load was only 8% of total sanctioned load but was claimed to be 25%-30% by appellant in their section 14 statement indicating their intention not to disclose true facts to the Department.. c) (i) Shri. Narender Ramvilas Agarwal, In-Charge, M/s Mahalaxmi Re-Rolling Mills Shri. Vijay Laxmi Narayan Agarwal, Propritor, M/s Vijay Rolling Mills( Now M/s Mahalaxmi Re-Rolling Mills) in their statement dated 19.01.2007 25.01.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had stated that they had received 45 M.T.s of M.S. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f days while electricity consumption was very high as is clear from the Table below: Date Electricity Consumed in units) Production of Steel Items 04.10.03 66015 Nil 06.10.03 61335 Nil 13.10.03 73305 Nil TotaL 200655 d) (i) Shri. Sunil R. Agarwal, Partner, M/s Roopam Steel Re-Rolling Mills Pvt Ltd in his statement dated 23.12.2006, 16.01.2007 23.03.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that they had procured 263.995, 63.590 5.110 M.T.s of M.S. Ingots from M/s Jalana Siddhi Vinayak Alloys Pvt Ltd without payment of C.Ex. duty. (ii) S/ Shri. Dinesh O. Agarwal, Umesti O. Agarwal, Directors , M/s Jalana Siddhi Vinayak Alloys Pvt Ltd Shri. Sunil R. Agarwal, Authorised Person, M/s Jalana Siddhi Vinayak Alloys Pvt Ltd in their statements dated 11.01.2007, 24.01.2007 23.01.2007 under Section 14 of the Central Excise Act, 1944 (referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the SCN issued by CCE, Aurangabad. (d) Clandestine clearance in above case was admitted before the Department as well as Settlement Commission. In Settlement Commission Order No. 460 to 477/ Admission copy, Final Order/ CEX/ JNA/YDN/GMD/SBG/2007 and 478/Final Order CEX/KNA/2007 dated 12.12.2007, the appellant accepted duty liability of ₹ 6.62 Lakhs. M/s Mauli Steel a) Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 107 % of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run. b) The sanctioned auxiliary load was only 8.83% of total sanctioned load but claimed to be 30% by appellant in their section 14 statement indicating their intention not to disclose true facts to the Department. c) Credit balance written off in Balance Sheet, ₹ 7.97 lakhs in 2004-05 and 35.73 lakhs in 05-06 but no documentary evidence produced. d) (i) Shri. Mukesh D. Gupta, Director, M/s K. M. Re-Rolls Pvt Ltd in his statement dated 23.12.2006 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case admitted before before the Department as well as Settlement Commission. Settlement Commission Order No. 460 to 477/ Admission copy, Final Order CEX/JNA/YDN/GMD/SBG/ 2007 and 478/Final Order CEX/KNA/2007 dated 12.12.2007, the appellant accepted duty liability of ₹ 21.99 Lakhs. M/s Om Sairam Steel a) Even if only cost of electricity and raw material is added as per Balance Sheet, then it comes to 132% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run. b) The sanctioned auxiliary load was only 7% of total sanctioned load but claimed to be 25% - 30% by appellant in their section 14 statement indicating their intention not to disclose true facts to the Department.. c) (i) Shri. Dinesh Satyanarayan Bharuka, Director, M/s Rutuja Ispat Pvt Ltd in his statement dated 08.01.2007 23.03.2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that they had received 120 M.T. 35.465 M.T. of M.S. Ingots from M/s Om Sairam Steel Alloys Pvt Ltd without payment of C. Ex. Duty. (ii) Shri. Rajendra Satyanarayan Bharuka, Director, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The sanctioned auxiliary load was only 15.35% of total sanctioned load but claimed to be 36% by appellant in their section 14 statement indicating their intention not to disclose true facts to the Department. c) NIL production shown on a number of days despite considerably high electricity consumption. Appellant: M/s Ahmednagar Alloy Pvt. Ltd. Date Electricity Consumed (in units) Production of Steel Items 09.07.05 27440 NIL 23.07.05 28420 NIL 30.07.05 39440 NIL 06.08.05 39460 NIL 13.08.05 35280 NIL 15.08.05 30500 NIL 20.08.05 34800 NIL 27.08.05 21860 NIL 29.08.05 36560 NIL 03.09.05 35140 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.10.06 30660 NIL 07.10.06 38300 NIL 23.06.07 33240 NIL 19.09.07 23180 NIL 15.01.08 36860 NIL 16.01.08 17620 NIL Total 1396080 d) Clandestine removal of 504.145 MTs of ingots during Aug-Oct. 2006 admitted by appellant. e) ₹ 1,30,000/- added to income by Dy. Commissioner of Income Tax for A.Y. 2005-06 on account of suppressed production by assessee. M/s Saptashningi Alloys a) Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 101% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run. b) The sanctioned auxiliary load was only 6.25% of total sanctioned load but claimed to be 20% by appellant in their section 14 statement indicating their intention no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s added as per Balance Sheet, it goes upto 120% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run. Though the unit is stated have been running in losses, as per Affidavit dated 07.08.2013 filed before the Tribunal, in the year 2000 they had refurbished upgraded old induction furnace of 3.5 M.T. to 8 M.T. capacity from the same furnace manufacturer i.e M/s Electrotherm India Ltd which is being operation in the production of ingots since 16.11.2000 onwards. b) The sanctioned auxiliary load was only 13.98% of total sanctioned load but was claimed to be 20% by appellant in their section 14 statement indicating their intention not to disclose true facts to the Department. M/s Jailaxmi Castings a) Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 118% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run. b) The sanctioned auxiliary load was only 10.68% of total sanctioned load but claimed to be 20% by appellant in their section 14 statement indicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s orders (wherever applicable). 42. An interesting development took place after issuance/adjudication of above demands. Jurisdictional Central Excise Officials started general surveillance on units manufacturing M.S. Ingots, Perhaps in view of general surveillance as also the fact that self-assessment based upon electricity consumption more than 1026 units is not acceptable to department, appellants modified their self-assessment pattern. During this period (July/August 2009 to January 2010), the electricity consumption per M.T. of M.S. Ingots came down to somewhere around 1000 units/M.T. It is to be noted that there was no change in the technology or machinery manufacturing the M.S. Ingots during this period/period covered by demand notices. There is no change in the composition of inputs. Table below shows the electricity consumption of various appellants. Sl Name of the units Consumption during 08-09 During August 2009 During September 2009 During October 2009 During November 2009 During December 2009 During Janu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1265 1023 1019 1016 1019 1001 1018 12 M/s Om Sai Ram Steel Alloys Pvt. Ltd. Jalna 1266 1017 1022 1026 1266 1026 1025 13 M/s Saptashringi Alloys Pvt. Ltd. Jalna 1367 1091 1025 1026 1029 1017 1022 14 M/s Rishi Steel Alloys Pvt. Ltd. Jalna 1739 1038 1028 1030 1470 1118 1025 15 M/s Regent Steel Pvt. Ltd. Jalna 1100 1033 1025 1026 1025 1025 1025 43. Both sides were heard extensively on number of days. Learned senior advocate for the appellants have not disputed any of the details mentioned earlier. Thus the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch cases it is not necessary that all the documents or complete details are recovered. Moreover, there can be situations where though prima facie it is established that manufacturer has suppressed the correct quantum of production. However, from the records maintained by the manufacturer (which are not truthful), it is not possible to know precisely the quantity of the suppressed production of goods and thereafter cleared without payment of duty or recording the details in record. In such a situation what is required to be done. Whether in the absence of precise details, untrue and incorrect self assessment/returns to be accepted and no duty can be demanded; or based upon the available details Central Excise official resorts to best judgment-assessment. Undoubtedly before resorting to the best judgment-assessment, Central Excise officer will be required to furnish details to the manufacturer and the manufacturer would have an opportunity to rebut the method of computation or explain the factors/information. 45. It is, by now, an established law that taxation is a civil obligation. In the present cases, the manufacturers are required to fulfil this civil obligation truthfully. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scourage the repetition of the offence. In the case of a proceeding under Section 271(l)(a), however, it seems that the intention of the legislature is to emphasize the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(l)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum Volume 85, page 580, Paragraph 1023: A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. 46. In our view, as mentioned earlier, since normally the assessment is to be made by the manufacturer hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 174453 (58.65%) 122946 (41.34%) 2 M/s Kalika Steel Alloys Pvt. Ltd. 153680.544 102083.623 (66.42%) 51596.921 (33.57%) 3 M/s Bhagyalaxmi Steel Alloy Pvt Ltd 142137 82973 (58.38%) 59265 (41.72%) 4 M/s Gajlaxmi Steel Pvt Ltd 101026.491 64390.918 (63.74%) 36635.576 (36.26%) 5 M/s Mahavir Steel Re-rolling Mills Pvt. Ltd. 73365.763 56257.675 (76.68%) 37108.088 (23.31%) 6 M/s Matsyodari Steel Alloys Pvt. Ltd. 99756.672 63937.345 (62.08%) 37819.327 (37.91%) 7 M/s Adinath Concast Pvt Ltd 62080.64 36249.49 (58.39%) 25831.16 (41.61%) 8 M/s Jaina Sidhivinayak Alloys Pvt. Ltd 116517.404 76949.345 (66.04%) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Therefore, there can be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from 'one date to another and even from one heat to another within the same date, There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. In the following case laws, it has been held that the consumption of the electricity alone is not sufficient to determine the production: (i) Pure Enterprises (P) Ltd. v. CCE, Rajkot - 1999 (111) E.L.T. 407 (Tri.) (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be very significant in value terms. However, there are commodities/manufacturing process where electricity consumption is very significant in the basket of cost of various inputs. Any prudent businessman will in such commodities will monitor consumption pattern and take steps to minimize the consumption of electricity. We entirely agree with learned A.R. that based upon electricity consumption, quantity of production of items like caustic soda can be precisely computed. Even in case of M.S. Ingots using Induction Furnace, production can be estimated within few per cent accuracy. In the present set of cases, production is estimated after erring in favour of appellant only. 50. The learned A.R. has correctly pointed out that out of eight case laws (mentioned in para 47 above) relied upon in the case of R.A. Castings Pvt Ltd, only the case law relating to Hans Casting Pvt Ltd was relating to production of M.S. Ingots. It is also noted that the Tribunal in the case of Hans Castings Pvt Ltd, Kanpur vs CCE - 1998 (102) ELT 139 (TJ) has observed as under: 8. Heard the submissions of both sides. We note that the basic issue in all the three appeals is the same as to whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng manufactured through induction furnace. In fact, scrap/sponge iron and electricity are only two major inputs. All other inputs do not contribute to a significant percentage in terms of value of the inputs/final product. In our view, in a situation like this any prudent manufacturer will monitor the consumption pattern vis-a-vis per unit of final product. Variation of 100-150 units per MT will change the whole of business economics. 51. It is observed that a lot of emphasis is given by the learned senior advocate for the appellants that the decision of the Tribunal in R.A. Casting was further upheld by the Hon'ble Allahabad High Court and thereafter by the Hon'ble Supreme Court. The Hon'ble Allahabad High Court in the said case as reported in 2011 (269) ELT 337 (All), has observed as under: 5. On consideration of the aforesaid findings, we are of the view that the findings of the Tribunal are based on the material on record and they cannot be said to be without any material and perverse. We find that the Revenue has invoked the proviso to Section 11A(1) of the Act but no case has been made out in the show cause notices or, in the adjudication order that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings cannot be applied in the present set of appeals. 53. As far as reasons about the drastic variation and very high electricity consumption are concerned, it is observed that there is no specific explanation whatsoever from the appellants to justify the drastic variation in consumption of electricity from time to time. Further after issuance of the Show Cause Notices, and when Revenue started keeping general surveillance on the appellants units even though there was no change in the furnace or the raw material composition, the consumption of electricity drastically came down and became close to what is proposed in the Show Cause Notice. Here again, there is no explanation from appellants whatsoever why and how the electricity consumption came down especially when electricity is so critical in the manufacture of ingots and slight variation of which will change the entire economy relating to production and marketing of the said goods. 54. During the initial arguments, the learned senior advocate for the appellants was asked by this Bench 'that since electricity is a very important and is one of the two main inputs viz scrap/sponge iron and electricity is critical componen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws: (i) Mohinder Singh Gill vs CEC, New Delhi - AIR 1978 SC 851; (ii) Bush India Ltd vs Union of India 1980 (6) ELT 258 (Bombay); (iii) Bata India Ltd vs CCE, Calcutta 1986 (25) ELT 559; (iv) CCE, Bangalore Vs Vaigai Thread Processor Ltd - 2004 (169) ELT 82; (v) Prakash Pipe Industry Ltd Vs CC 1993 (68) ELT 779; (vi) United Machinery Works Pvt Ltd vs CCE, Coimbatore - 1995 (79) ELT 477; (vii) Jain Exports Pvt Ltd vs Union of India - 1993 (66) ELT 537 (SC) 55.2 We note that rule 27 of CESTAT (Procedure) Rules, 1982 provides for admission of additional evidence. There can be no doubt that the said power has to be exercised sparingly by judiciary. The power has to be used for bringing out TRUTH so that Justice triumphs. In the present case, the so-called additional evidence is nothing but Appellants' own data relating to power consumption of the subsequent period, when Revenue started keeping general surveillance. Moreover, data is not for one or two days but for about six months. In fact, in our view, this data is a far better substitute for what was earlier envisaged under Rule 173E of Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of new Assistant Collector saying that the said goods cannot be marketed to general public without being put into the said wooden boxes. It is in that context that the Hon'ble Bombay High Court has stated that raising of new ground is not admissible. It may be noted that in the present case Revenue is only citing appellants' own data. There is no challenge to the said data by the appellants. There is no challenge about any modification of furnace or any other reason so as to justify drastically lower consumption of electricity in the subsequent period. In view of this, we find that the facts of present batch of cases are different and the said case law is not applicable. 55.5 In the case of Bata India Ltd, Calcutta (Supra) the issue was relating to valuation of shoes. Appellants' claim was that Bata Brand shoes were sold through their own outlets alone. At the Tribunal stage, Revenue wanted to produce an evidence that Bata brand shoes are also sold in the wholesale lot to independent buyers. Evidence was for a different period. In those circumstances that Tribunal had taken a view that evidence is not contemporaneous in nature and therefore, is not admissible. 55 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which an adjournment was sought earlier. These were followed by yet another communication which included a certificate of the Chartered Accountant to which was appended a statement of accounts showing that the importers had incurred a substantial loss in the sale of high sea basis. We are indeed surprised at the attitude of the learned advocates representing the importers. It betrays a misconception that any document can be produced at any time and stage of the proceedings and the court can be accepted to resemble to give a fresh hearing or a second innings to fill the gaps left by the importers because of their default merrily because they had the means to afford it. We cannot countenance such a demand and must deprecate it strongly. We do so and reject both the applications. To allow them would encourage multiplicity of hearings and create a wrong precedent. 55.10 Facts and circumstances of all the above cases are totally different than the facts and circumstances of the present case. In the present case, the so-called additional evidence are nothing but the electricity consumption details of the appellants themselves. These are after booking and adjudication of the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence, established that notwithstanding the exercise of due diligence, such evidence was not within the knowledge or could not, after the exercise of due diligence, be produced by him at the time when the decree appealed against was passed, [clause (aa), inserted by Act 104 of 1976], or (iii) the appellate court requires any document to be produced or any witness to be examined to enable it to pronounce Judgment, or for any other substantial cause, [clause (b) of sub-rule (1)]. 13. It is plain that under clause (b) of sub-rule (1) of Rule 27 order 41 C.P.C., with which we are concerned in the instant case, evidence may be admitted by an appellate authority if it 'requires' to enable it to pronounce judgment 'or for any other substantial cause'. The scope of the Rule in particular of clause (b) was examined way back in 1931 by the Privy Council in Parsotim Thakur v. Lal Mohar Thakur - AIR 1931 PC 143. While observing that the provisions of Section 107 as elucidated by order 41 Rule 27 are clearly not intended to allow litigant, who has been unsuccessful in the lower court, to patch up the weak parts of his case and fill up omissions in the court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be refused only where the other party cannot be placed in the same position as if the pleading had been originally correct, but the amendment would cause him an injury which could not be compensated in costs. (Also see Gajanan Jaikishan Joshi v. Prabhakar Mohanlal Kalwar - (1990) 1 SCC 166.) 16. These are the broad principles to be kept in view while dealing with applications under order 41 Rule 27 and order 6 Rule 17 C.P.C. 56. The learned senior advocate for the appellants quoted the following case laws to argue that evidence of period other than period of dispute are irrelevant: (i) CCE, Coimbatore vs Cambodia Mills Ltd - 2001 (128) ELT 373 (Mad), (ii) M. Veervardan vs CCE, Chennai 2 - 2005 (182) ELT 389, (iii) Emami Ltd vs CCE, Kolkata - 1 2002 (148) ELT 1238 (iv) Reckit Colman of India Ltd vs CCE - 1996 (88) ELT 641 (SC) 56.1 We have gone through the said judgments. In the case of Cambodia Mills Ltd, appellant was manufacturing yarn of different counts and duty varied with count and goods manufactured on a particular date was found to be of different count and department wanted to use the test results of the goods produced for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal on the ground that the plea was never canvassed by Revenue. The Hon'ble Supreme Court observed as under: 3. It will be remembered that the case of the Revenue, which the appellant had been required to meet at every stage from the show cause notice onwards, was that the said product was a preparation based on starch. having come to the conclusion that the said product was not a preparation based on starch, the Tribunal should have allowed the appeal. It was beyond the competence of the Tribunal to make out in favour of the Revenue a case which the Revenue had never canvassed and which the appellants had never been required to meet. It is upon this ground alone that the appeal must succeed. 56.5 Thus in our view, none of the four case laws quoted by the Ld Senior Advocate help in the facts and circumstances of the case. Here, all that is being said is that demand raised by Revenue is supported by appellants own conduct/data for the period subsequent to that of present proceedings. By not permitting such data, we will only be obstructing the TRUTH to come out, Such a proposition has to be rejected. 57.1 In Show Cause Notices issued to present appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II - 2011 (274) ELT 561 58.2 In the first case, the Larger Bench of this Tribunal, observed as under: 13. In the above view of the matter, Issue Nos. 2 and 3 are answered in the negative, that is, in favour of the assessee and against the Revenue, and it is held that the mere filing of application before Settlement Commissions under Section 32E of the Act for waiver of interest, penalty and immunity from prosecution and suo motu payment of duty as per se construed as admission of the allegations in the show cause notice as regards the fraud, collusion etc. Inference in this regard may be drawn from the contents of the applications, that is, pleadings of the applicant and finding of the settlement Commission, if any. Issue No. 1 pertains to the merits of the case and parties generally agreed that the same may be decided by the Division Bench at the stage of final disposal of the appeal. 58.3 The facts in second case were that the appellant had taken Cenvat credit on the strength of supplementary invoice issued by Chennai Petroleum Corporation Ltd (CPCL). Against CPCL department had issued Show Cause Notice for demanding additional duty on the goods alleging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the version of the appellant and then states that the appellant had not been able to meet the inferences arising therefrom. In our opinion, the High Court was right in holding that the burden of proof had shifted on to the appellant after the Customs authorities had informed appellant of the results of the enquiries and investigations. 59.3 We also note that Hon'ble Supreme Court in the case of Collector of Customs vs D. Bhoormull - reported in 1983 (13) ELT 1546 (SC) has laid down principles relating to burden of proof, as under: It cannot be disputed that in, proceeding for imposing penalties, under Clause (8) of S.167 to which s. 178-A does not apply, the, burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope And the nature of the onus, cast by it, we must pay due regard to other kindred principles, no less fundamental, of universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Senior Advocate. 60.2 First case quoted is relating to CCE, Chandigarh vs Nachiketa Paper Ltd - 2008 (225) ELT 194 (P H). In the said case, officials visited the unit and certain shortage of raw materials and finished goods were found. Respondent paid duty relating to the said goods. The issue before the Hon'ble High Court was relating to the imposition of penalty on the respondent. In this context the Tribunal had taken a view that there is no evidence relating to fraud, collusion or wilful misstatement or suppression of facts for imposing penalty under Section 11AC, which was upheld by the Hon'ble High Court. 60.3 Second case quoted in CCE ST, Daman vs Nissan Themoware Pvt Ltd - 2011 (266) ELT 45 (Guj) . In this case departmental official visited the respondent's unit. On stock taking they found shortage of one raw material and all other raw materials were found to tally. Department took the view that the said raw material has been used in the manufacture of the final goods and accordingly duty was demanded on the final product which was paid by the respondent. Department issued Show Cause Notice for duty as also penalty. The Tribunal taking into fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to conviction and the said case law has no application for determining the duty liability which is the civil obligation. The standard of evidences in the two proceedings are entirely different. 60.8 Another case quoted is relating to K. Rajagopal vs CCE - 2002 (142) ELT 128. In the said case, certain private note books were recovered during the search from the premises of the appellant. At the time of raid and the seizure of the note book, the accountant was very much present. On the basis of the said note book the department came to the conclusion that certain raw materials have been purchased and in turn are used in the manufacture of goods (fire works) and duty was demanded. The Tribunal took the view that raw materials were such which are covered under Explosives Act and can be supplied only by a person having license under the Explosives Act. Moreover the said raw materials are required to be purchased only through Governmental sources. No investigation was done by the department to know the source of such raw materials and therefore demand of duty on fire works presumed to be manufactured from such material was set aside. 60.9 Another case quoted in Ghodavat Pan M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation and other problems being faced by them. 60.14 In none of above mentioned cases, facts and circumstances are comparable to the facts and circumstances in the present cases. We have to therefore examine the impugned orders with reference to details of present case alone. (i) On the contrary, we find that Hon'ble Supreme Court in the case of Triveni Rubber and Plastics vs Commissioner of Central Excise, Cochin reported 1994 (73) ELT 7 (SC) has held that demand arrived at by the assessing normal production on the basis of electricity consumed cannot be faulted. In facts and circumstances of the present cases, we find that this decision is squarely applicable to the present cases. Hon'ble Supreme Court observed: 4. It is argued by Mr. Anam that the only basis of the estimate of the production is the consumption of the electricity during the said period. What happened in this case is this : The Collector took the period from October 1979 to May 1980 as the base period. He ascertained the quantity of tread-rubber produced and the quantity of electricity energy consumed. Adopting the ratio between the consumption of electricity and the quantum of tread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturer's dated 22.6.2006, indicates the energy consumption as follows: (a) with 100% clear scrap -600-625 kwh/ton; (b) with 60% sponge iron 600-695 kwh/ton. Appellant's have contended that M/s Electrotherm have gone back on their letter. We are of the view that this is only to save their buyers of furnace from the present cases. We also note that during the course of hearing, Revenue obtained a general leaflet of the same manufacturer. This leaflet indicates power consumption with difference frequency and voltages as under: KW Frequency (Cycles) Input KVA Melt Rate Steel @1650 C Iron @ 1480 C 450 1 kHz 535 875 970 600 1 kHz 700 1165 1280 750 0.5kHz 880 1440 1580 1000 0.5kHz 1175 1915 2110 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri S.K. Sharma, a resident of Ludhiana and an Engineer, Shri R.N. Mishra, Production Manager of M/s. Raj Sandeep, Ludhiana and Shri S.C. Ojha, Works Manager of M/s. Prontos Limited, on consumption of electricity per M.T. of Steel Ingots and it was noticed that the consumption of electricity ranged between 750 KWH to 800 KWH (Units). Enquiries caused with M/s. Hindustan Brown Boveri Limited, the supplier of Furnaces to the Appellants, indicated that power consumption to super heat and melt down in respect of Arc furnace and induction furnace was 485 KWH and 540 KWH respectively. Since electricity was one of the main raw materials, for manufacture of steel ingots, 851 KWH (Units) of electricity per MT of Steel Ingots was taken as the norm for ascertaining the production of ingots. On comparison of the production figure of steel ingots recorded in the two heat registers maintained by melters with the production recorded in the Central Excise records, it was found that during the period January, 1990 to 10-10-1990, the appellants had suppressed production of 4062.797 MT of Steel ingots. These registers were, however, subsequently found missing from the records. (x) In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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