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Satguru Cement Pvt. Ltd., Mr. Jagdish Agarwal And Others Versus CCE, Indore And Others

2015 (7) TMI 460 - CESTAT NEW DELHI

Demand of duty on estimated production based on power consumption - period of 01.04.2001 to 31.03.2004 - During this period the factory of the appellant company was not paying any duty and was not registered with the Central Excise Department, as it was availing full duty exemption. - Penalty u/s 11AC - Held that:- When the Department itself had appointed the Centre of Energy Studies and Research for carrying out a survey of the appellant s cement plant and determining their power consumption ra .....

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Commissioners findings regarding generation of electricity from D.G. sets.

Merely on the basis of power consumption norm and that too when there are serious doubts about its correctness, duty demand cannot be confirmed against an assessee, when there is no other corroborative evidence of unaccounted purchase of raw-material and clearance of unaccounted production. In view of this, we hold that the duty demand for the period from 01.04.2001 to 31.03.2004 based on the power consumption .....

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e Petitioner : Shri. K. K. Anand, Advocate, Ms. Surabhi Sinha, Advocate For the Respondent : Shri. M. S. Negi, DR ORDER Per: S. K. Mohanty 1. The facts giving rise to these three appeals are, in brief, as under:- 1.1 M/s. Satguru Cement P. Ltd., Zeerabad, Distt. Dhar (hereinafter referred to as the appellant company ) are a Private Limited Company engaged in the manufacture of ordinary portland cement chargeable to central excise duty under the heading 2502.29 of the Tariff. Shri Jagdish Agarwal .....

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r reporting its production of cement, searched the factory premises of the appellant company at Zeerabad, Dist. Dhar, Office premises of the appellant company at 11, 3rd Floor, Daba Bazar, Indore, residential premises of Shri.Jagdish Agarwal, Director of the appellant company in Indore and also the premises of certain traders M/s. Burhani Traders, Khandwa, M/s. Amolak Enterprises, Khandwa, M/s. Mahaveer Transport, Rajgarh (Dhar) and M/s.Arora Road Lines, Rajgarh (Dhar). In the course of search o .....

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ice at Dava Bazar Indore, and that the documents at Sl. No.7, 13 and 14 of the Annexure to the Panchnama of the search of the office on 27.10.2004 are notebook, ledger and cashbook respectively of the appellant company, which was being maintained by him and contained party-wise details of the dispatch, sale and payment particulars of cement. Statement of Shri Charanjeet Singh Arora, Proprietor of M/s. Arora Road Lines, who were found to be providing transport to the appellant company during the .....

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pertained to the various transactions during the period from 01.04.2004 to 27.10.2004. 1.3. The statement of Shri Jagdish Agarwal, Director of the appellant company was recorded wherein he stated that the installed capacity of the cement plant was 200 M.T. per day and that the payments against sale of cements had been received by cheque as well as cash the details of which were entered in the ledger in the cash book seized from their office. As per the entries in the ledger for the period from .....

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and accordingly the clearance after 14.06.2004 were liable for duty. The duty on the clearances in excess of the exemption limit was worked out as ₹ 16,81,711/- which appeared to have evaded by the appellant. 1.4. During the period from April 2004 to September 2004 the total power consumption in the cement plant of the appellant company was 7,48,710. According to the Department, the production during the period from 01.04.2004 to 29.09.2004 was 10346.5 M.Ts. after excluding the opening bal .....

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id any duty claming that value of their clearances were within the exemption limit of ₹ 1.00 Crore, while the value of the production during each of these three years, as estimated by the Officers was much more than the exemption limit of ₹ 1.00 Crore, it appeared that during each financial year from 2001-02 to 2003-04, the appellant company had evading the duty, the details of which are given in annexure 29 to the show cause notice. The duty demand of ₹ 1,44,53, 850/- is on th .....

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,648/- and dropped the balance amount of duty demand. An amount of ₹ 5,00,000/- already paid by the appellant company during investigation was appropriated. Beside this, the Commissioner also demanded interest under section 11 AB on the above mentioned duty demand. While he imposed penalty of ₹ 15,64,359/- on the appellant company under section 11AC, another penalty of ₹ 1,00,000/- was imposed on Shri Jagdish Agarwal, Director of the appellant company under Rule 26 of the Centr .....

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ting reasonable opportunity of personal hearing. 1.7. In denovo adjudication proceedings, the matter was decided by the Commissioner vide order in original No.15/COMMR/CEX/IND-2010 dated 5/5/2010. By this order with regard to the duty demand of ₹ 16,57,293/- based on the entries in the note-book and ledger book seized from the Office for the period from 01.04.2004 to 27.10.2004, the Commissioner confirmed the same under proviso to section 11A (1) of the Central Excise Act, 1944. However, w .....

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f ₹ 42,94,662/- alongwith interest on it under section 11AB. He also imposed penalty of equal amount on the appellant company under section 11AC and penalty of ₹ 1,00,000/- on Shri Jagdish Agarwal, Director under rule 26 of the Central Excise Rules, 2002. Against this order of the Commissioner both the appellant company and its Director Shri Jagdish Agarwal as well as the Revenue are in appeal. 2. Heard both the sides. 3. Shri K.K. Anand, Advocate, the ld. Counsel for the appellant p .....

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m the electricity board, the appellant had also used electricity generated by their DG set, that the Commissioner has wrongly arrived at the power consumption norm of 155 units per M.T., that prior to denovo adjudication proceedings the department after remand of the matter by the Tribunal, had appointed the Centre of Energy Studies & Research, Distt. Dhar, Madhya Pradesh for conducting a study regarding power consumption in respect of the cement plant of the appellant company; that the Offi .....

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nd according to his study, the power consumption was 228 Units per M.T. and subsequently, on 07.03.2006 another Chartered Engineer Shri. K.M.Thompre had visited the appellant s unit and according to his study the power consumption was 231.39 Units per M.T., that the power consumption norm of 212 units per M.T. determined by the Centre of Energy Studies & Research is in accordance with the power consumption norm in respect of the appellant cement plant determined earlier by two other Chartere .....

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as on 01.04.2004 the opening balance of cement as recorded in the appellant company s production records was 372 M.Ts. and production of cement during the period from 01.04.2004 to September, 2004 was much less M.Ts., that the Department has wrongly taken the sale figures of 10,718 M.T. during the period from 01.04.2004 to 30.09.2004 as the production figure, which is totally wrong, as the cement sold during this period was also that cement which has been produced during the period prior to 01. .....

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ELT 337 (All.) and the judgment of Allahabad High Court has further been affirmed by the Apex Court reported in 2011 (269) ELT A108 (SC) and that same view has been taken by the Tribunal in its order dated 20th March, 2012 in the case of CCE, Indore vs. Venus Alloys Pvt. Ltd. It was, therefore, pleaded by Shri Anand that duty demand of ₹ 26,12,951/- for the period from 01.04.2001 to 30th March, 2004 is not sustainable at all. He, however, did not seriously contest the duty demand of ͅ .....

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demand cannot be confirmed against an assessee. 4. Shri M.S. Negi, the ld. Departmental Representative, while defending the Commissioner s order confirming the duty demand of ₹ 16,53,293 for the period from 01.04.2004 to 26.10.2004, and also defending the Commissioner s order with regard to confirmation of duty demand of ₹ 26,12,951/- for the period from April, 2001 to March, 2004 based on the power consumption assailed the part of the order dropping the duty demand of ₹ 1,18, .....

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ger (Production) of the appellant company who had accepted the power consumption of 72 Units per M.T. Shri Negi, therefore, pleaded that in respect of the period from 1st April 2001 to 31.03.2004, the entire duty demand as made in the show cause notice should have been confirmed as for this period the power consumption norm of 72.36 units per M.T. has been correctly determined by the Investigating Officers. 5. We have considered the submissions from both the sides and perused the records. The du .....

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book seized from the same office of the appellant company during the period from 19.10.2004 to 26.10.2004, another 276 M.Ts. of cement had been cleared. Thus, during the period from 01.04.2010 to 26.10.2004 total cement cleared was 12071.5 M.Ts. However, during the financial year 2004-05 when they were availing of SSI exemption under Notification No.6/2003-CE dated 01.03.2003, only the clearances upto repees one crore in a financial year were fully exempt from duty and they were required to pay .....

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ed by Shri Dharmender Goyal in his statement dated 27.10.2004 and 20.01.2005. Accordingly, we hold that duty has been correctly demanded on the value of clearances during 2004-05 which are beyond rupees one crore and, accordingly, the duty demand of ₹ 16,57,293/- which is on the value of cement cleared beyond rupees one crore has to be upheld. In fact, this duty demand has not even been seriously contested by the appellant. 6. The other duty demand raised in the show cause notice is ₹ .....

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his period and the under reported production has been cleared clandestinely without payment of duty. For this purpose Investigating officers estimated the actual production for the period from 01.04.2001 to 31.03.2004 by dividing the power consumption during this period by 72.36 as, according, to investigating officers in the appellants cement plant 72.36 units of electricity is required for production of 1 M.T. of cement. 6.2. The basis for the power consumption norm of 72.36 Units per M.T. is .....

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the investigating officers have taken the quantity of clearance of cement during this period as the quantity of production of this period. which is not correct, as the quantity of clearances including the unaccounted clearances could be of the period prior to 01.04.2004. It is also the plea of the appellants that after remand of this matter by the Tribunal to the Commissioner for denovo adjudication, the Department had got a study of their cement plant conducted by the Centre of Energy studies .....

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ra Jain and Shri K.M. Tompre had visited the appellants units and while Shri Prakash Chandra Jain had given opinion that power consumption norm in their unit is 228 Unit per M.T. Shri K.M.Tompre has given report that the power consumption norm in their cement plant is 231 units per M.T. Thus, it has been pleaded that the power consumption norm determined by the Centre of Energy Studies and Research 212 M.T is comparable with the power consumption norm determined by the other two Chartered Engine .....

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res of power consumption from April 2004 to September 2004 and mentions total power consumption as 7,48,710. Para 9 (ii) mentions that on going through the clearance of cement shown on page 1 to 9 of the Ledger, Shri Surve has stated that during period 01.04.2004 to 29.09.2004, the production of cement was 10718.5 M.Ts. and after deducting the opening balance of 372 M.T. as on 01.04. 2004 the actual production during 01.04.2004 to 29.09.2004 would be 10346.5 (10718.5 - 372). The figure of 72.36 .....

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anufactured during the period prior to 01.04.2004 also. 6.4. The question then arise is as to what is the correct power consumption ratio. We find that in this regard the department itself had got a study conducted through the Centre of Energy Studies & Research in March, 2010 and an Officer of this Institute after visiting the Unit alongwith the Jurisdictional Range Superintendent and Range Inspector had given a report dated 16.03.2010 that their power consumption is around 212 Unit per M.T .....

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missioner to discard this opinion of an expert and arrive at his own power consumption norm of 155 units by assuming that during the period from 01.04.2001 to 31.03.2004 the appellant had also used electricity generated by the DG sets for which we do not find any evidence. In fact, the Department itself in its appeal against Commissioners order disputes the Commissioners findings regarding generation of electricity from D.G. sets. 6.5. The revenue in its appeal mainly questions the Commissioner .....

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neers, Shri Prakash Chandra Jain and Shri K.M. Tampre. The Revenue s appeal also mentions that the Commissioner has failed to appreciate the fact that the assessees premises were searched once again by the DGCI on 30th March, 2007 and during the course of investigation at that time also, on comparison of power consumption and the actual production during January 2007 to March, 2007, the power consumption ratio was found to be 74 unit per M.T. which is close to the figure arrived at 72.36 Unit pe .....

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