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TMI Blog2012 (3) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2005-2006 vis-a-vis production of their final product. The officers entertained a view that power consumption for the manufacture of per MT of ingots was ranging between 1159.72 to 2019.37 units in the year 2005-2006. 4. The bills raised by M.P. State Electricity Board were examined and compared vis-a-vis the record of production of every year. It was also found that the respondents had during the period May, 2001 to March, 2003 taken a induction furnace of M/s. Pan Steel (P) Ltd. on lease. The study of productivity of induction furnace was got conducted by the officers of IIT Kanpur in the year 2000. As per the technical opinion report of IIT, Kanpur the energy requirement of induction furnaces for manufacture of one MT of steel ingots by melting of scrap ranges between 555 to 754 KWH. The requirement in case of manufacture of ingots by melting of sponge iron ranges between 815 to 1046 KWH. Thus, the electricity consumption by the party was much higher than the normal requirement. 5. According to the expenditure of electricity alone varied from 34% to 71% of the total sale value and if the other expenditure on account of raw materials etc. are taken, the expenditure would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the maximum requirement as per the technical opinion report of IIT, Kanpur on productivity of induction furnaces, the total quantity of ingots that could be manufactured by the party during the period April, 2001 to March 2006 works out to 43286.483 MT. However, the party have shown production of only 31522.950 MT in their records. Therefore, it appeared that the party suppressed the production of 11763.533 MT of ingots and cleared the same without payment of duty amounting to Rs. 2,92,94,329/- leviable thereon. 10. On the above basis, show cause notice dated 30.5.06 was issued to the respondents proposing the confirmation of demand and imposition of penalty. 11. In their reply to the above SCN, the respondents submitted that the higher consumption of electricity cannot be indicative of clandestine removal of goods. They stated that despite losses, they were running the factor as closure would be uneconomical as the expenditure towards minimum electricity charges, salary, wages, interest on inventories, repayment of loans and interest thereon would have been much more as compared to the expenditure which is required for running the factory into loss. However, they have been able ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der as also the grounds of appeal, we find that the same reasons stand reiterated before us which were available in the show cause notice. The entire case of the Revenue is based upon the consumption of electricity and the reports of IIT Kanpur as also of the Chartered Engineer. It stands strongly contended before us that electricity is one of the major inputs and consumption figures of the same would be directly proportionate to the manufacture of the ingots. Revenue has also relied upon certain decisions of the Tribunal as also of the Hon'ble High Court to buttress their plea that where the accounts are found fabricated and untrue and where figures of raw materials utilised or the particulars of labour employed may not be available, the deemed normal production on the basis of electricity consumption cannot be faulted. They have also submitted that in the report of IIT Kanpur all the relevant factors relating to energy consumption in the induction furnaces have been taken into account and it is not merely theoretical. The demand is based on maximum consumption limit stated in the report. The Commissioner relied upon the Tribunal's decision in the case of Padmanabh Dyeing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atra's report has been blindly applied to the appellants' cases to work out the excess production. This approach is flawed and does not have sanctity. 21. The law is well settled that the electricity consumption cannot be the only factor or basis for determining the duty liability that too on imaginary basis especially when Rule 173E mandatorily 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 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, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmtex Synthetics Ltd. v. Commissioner of Central Excise, New Delhi reported in 2003 (151) E.L.T. 170 (Tri.-Del); (ii) Commr. of Central Excise, Chennai v. Dhanavilas (Madras) Snuff Co. reported in 2003 (153) E.L.T. 437 (Tri.-Chennai); (iii) Commissioner of Central Excise, Madurai v. Madras Suspensions Ltd. reported in 2003 (156) E.L.T. 807 (Tri.-Chennai); (iv) Commissioner of Central Excise, Coimbatore v. Sangamitra Cotton Mills (P) Ltd. reported in 2004 (163) E.L.T. 472 (Tri.-Chennai); (v) Commissioner of Central Excise Coimbatore v. Velavan Spinning Mills reported in 2004 (167) E.L.T. 91 (Tri.-Chennai); (vi) M. Veerabadhran & others v. Commissioner of Central Excise, Chennai-II reported in 2005 (182) E.L.T. 389 (T) - 2005 (98) ECC 790 (T). 23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the factories of the appellants for devising the consumption norms of electricity for producing on MT of steel ingots. Tribunal also observed that the electricity consumption varies from one heat to another and from one date to another and even from one heat to another within the same date. Therefore, no universal and uniformly acceptable standard of electricity consumption 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. The Tribunal has also considered the report of Dr. Batra, which has been relied upon for making the allegations that there was higher electricity consumption. It appears that Dr. Batra in his report has observed that for the production of 1 MT of steel ingots, 1046 units electricity required." 20. The Revenue further carried the matter before the Hon'ble Supreme Court and the appeal filed was rejected by the Hon'ble Supreme Court as reported in [2011 (269) ELT A 108 (SC)]. The respondents have also placed before us some other decisions on the issue, like the Tribunal's decision in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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