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2015 (8) TMI 57 - CESTAT NEW DELHI

2015 (8) TMI 57 - CESTAT NEW DELHI - TMI - Clandestine manufacture and removal of goods - Non accounting of goods - whether on the basis of the evidence, the Commissioner's orders confirming the duty demands against the appellants and imposing penalty on them can be upheld - Held that:- Investigation in respect of the appellant unit started when the unit of NIPL was visited by the Central Excise officers on 03/10/05 and their sales of MS Ingots to various rolling mills were ascertained on the ba .....

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records in respect of which the invoices had been issued. It is on this basis it is alleged that during the period from 02/8/05 to 01/10/05 M/s Everest, M/s MPK and M/s Khetan have received 143.32 MT, 40.21 MT and 39.93 MT of unaccounted MS Ingots from NIPL. However, the duty demand against M/s Everest, M/s MPK and M/s Khetan is not on this basis

Thus the evidence in support of Department's allegation of duty evasion against the appellants is - (a) entries in the private ledger book o .....

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e their average power consumption for production of one MT of rolled products. - Commissioner in the order in the case of M/s Everest has accepted that the rolling mills of SSSRM is automatic rolling mill, but he has still applied the power consumption norm of SSSRM to the appellant unit, on the ground that the products being manufactured by SSSRM are CTD bars which consume more power while the products being produced by the appellant consume lower power. In our view this assumption is an arbitr .....

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stimated and duty demand cannot be affirmed against him on this basis. - impugned orders are not sustainable. The same are set aside. - Decided in favour of assessee. - Excise Appeal Nos. 1359-1362 of 09 and 1905-1906 of 2010, E/Misc/52366-52369/2014 - Final Order Nos. 51404-51409/2015 - Dated:- 23-4-2015 - Rakesh Kumar, Member (T) And S. K. Mohanty, Member (J),JJ. For the Appellant : Shri Bipin Garg, Adv. For the Respondent : Shri Pramod Kumar, AR (Jt CDR) ORDER Per Rakesh Kumar:- The facts lea .....

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to as M/s MPK) and Shri Rajendra Kumar Khetan is the Director of M/s Khetan Alloys Pvt, Ltd. (hereinafter referred to as M/s Khetan). The period of dispute in the case of M/s Everest is from May 2003 to September 2003, the period of dispute in the case of MPK is from April 2003 to September 2006 and in the case of M/s Khetan, the period of dispute is from May 2004 to September 2006. 1.2 The raw material for the appellant unit is MS Ingots. The factory premises of M/s Nirmal Inductoment Pvt. Ltd. .....

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05 it appeared that M/s MPK had received 80.38 MT of MS Ingots from NIPL but M/s MPK in their records had showed only 40.17 M.T. of Ingots and hence the receipt of 40.21 M.T. of MS Ingots by MPK appeared to be unaccounted. In the case of M/s Khetan, it was found that as per the records of NIPL, M/s Khetan during the period from 02/8/05 to 01/10/05 had received 79.95 M.T. of MS Ingots from NIPL but as per the records of M/s Khetan, they had received only 40.03 M.T. and thus it appeared that they .....

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use in the manufacture of rolled products and such unaccounted manufacture of rolled products was being cleared clandestinely without payment of duty. Though the inquiry was made with the Directors of the appellant company, they denied the receipt of any unaccounted goods from NIPL. However, the officers inquired into the electricity consumption of the appellant units. In this regard, the officers studied the electricity consumtion of another rolling mill M/s Shree Sharma Steel Rolling Mills, Ja .....

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s per M.T. On this basis in the case of M/s Everest their production of roiled product during the period from May 2003 to September 2006 was determined as 15677.27 M.T. as against their recorded production of 6838.44 M.T. during this period and accordingly it was alleged that they have cleared 8838.82 M.T. of rolled products involving duty of ₹ 2,88,00,377/- clandestinely without payment of duty. In the case of M/s MPK products, their production during the period from April 2003 to Septemb .....

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,041 MT and thus it appeared that they have cleared 8570.32 MT of rolled products involving duty of ₹ 2,89,14,441/- clandestinely without payment of duty. 1.5 It is basis of the above investigation that three show cause notices issued to the appellants for demand of the Central Excise duty mentioned above from them alongwith interest thereon under Section 11AB and also for imposition of penalty on them under Section 11AC and the Central Excise Act 1944 and for imposition of penalty on thei .....

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ction 11AB of Central Excise Act, 1944 and beside this, while penalty of equal amount was imposed on each appellant company under Section 11AC ibid, penalty under Rule 26 of the Central Excise Rules, 2002 of ₹ 25,00,000/-, ₹ 10,00,000/- and ₹ 20,00,000/- was imposed on Shri Suresh Kumar Aggarwal, Director M/s Everest, Shri Suresh Kumar Sharma, Director M/s MPK and Shri Rajendra Kumar Khetan, Director of M/s Khetan respectively. 1.6 Against the above order of the Commissioner, t .....

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without any accountal and without invoices, this allegation is based only the ledger book entries of NIPL, that other than the entries in the ledger book of NIPL, there is no other independent evidence of unaccounted receipt of MS Ingots by the appellant from NIPL, that it is well settled law that the duty demand against the assessee cannot be confirmed merely on the basis of third party records and in this regard he relies upon the judgments of the Tribunal in the cases of CCE, Indore vs. Rajr .....

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nd its use in the manufacture of unaccounted rolled products and its clearances without payment of duty is without any basis, that in any case, the Department has not demanded duty from the appellants companies on this basis, that the Department has adopted the yard stick of power consumption of SSSRM - 102.09 units per MT of the rolled products in respect of the rolling mills of the appellants and on this basis has estimated their production, that the power consumption in the case of the appell .....

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so notification dated 22/8/05 issued by the Government of Rajasthan under the composition scheme for manufacturers of rolled products of mild steel, that this notification has been issued by the Government of Rajasthan for the purpose of charging sales tax and in this notification the average power consumption of the medium size rolling mills manufacturing rolled products from Ingots has been taken as 225 units per MT, that in view of this, adopting the yard stick of 102.09 units per MT of SSSRM .....

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power consumption also depends upon the thickness of the rolled products being manufactured and the lesser is the thickness of the rolled products, the more would be the consumption, that in view of this, without going into the specifications of the rolled products being manufactured by the appellants and the type of their machinery it is totally arbitrary to adopt the power consumption normal of SSSRM to the appellant units, that the proceedings had been initiated on the same basis against two .....

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ing November 2004 the average power consumption was 1354.44 Units per MT and the reason for the same was that the production during November 2004 was only 3.617 MT, that there is absolutely no justification for adopting the power consumption norm of 102.09 units per MT of SSSRM which is an automatic rolling mill to the rolling mills of the appellant companies which are manual, as while the daily production of SSSRM of 220 MT to 250 MT, in the case of the appellant unit, the daily production is 1 .....

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, more so, when no study or experiment has been conducted in the case of the appellant units to determine their actual power consumption, that in this regard he relies upon the judgment of the Tribunals in the case of R.A. Castings Pvt. Ltd. vs. CCE, Meerut - I reported in 2009 (237) E.L.T. 674 (Tri. - Del.), that Department's appeal against this judgment was rejected by Hon'ble Allahabad High Court vide judgment reported in 2011 (269) E.L.T. 337 (All.) and the SLP filed against the judg .....

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Tribunal in the cases of Trikoot Iron and Steel Casting Ltd. vs. CCE, Meerut reported in 2015 (315) E.L.T. 65 (Tri. -Del.) and in the case of Pragati Steels Pvt. Ltd. vs. CCE, Kanpur reported in 2012 (286) E.L.T. 253 (Tri. - Del.), that recently the Tribunal in the case of SRJ Peety Steels Pvt. Ltd. and others vs. CCE, Aurangabad reported in 2014 -TIOL - 1530- CESTAT- MUM has held merely on the basis of arbitrarily adopted power consumption norm, as duty demand cannot be confirmed against the s .....

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been conducted to ascertain the power consumption norm and power consumption norms of another rolling mills - SSSRM has been arbitrarily adopted to the rolling mills of the appellant companies and that in view of above, the impugned orders are not sustainable. 4. Shri Pramod Kumar, the learned Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that each of the appellant units during period from 02/8/05 to 01/10/05 had received unaccounted MS Ingots f .....

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varied from 289 units per MT in July 2005 to 150 units per MT in June, 2003, and that the power consumption norm of SSSRM is correct, as even though the SSSRM is an automatic rolling mils, the product being manufactured by that unit are TMT bars which consume more power and, therefore, on an average the power consumption norm of the appellant unit would be comparable with the power consumption norm of SSSRM. Shri Pramod Kumar also pleaded that when as per the records of NIPL they had supplied ce .....

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nufacture of rolled products, which were being cleared clandestinely without payment of duty and when there is clear evidence on record to prove that the appellant were indulging in duty evasion, their production has been estimated on the basis of their power consumption. He, therefore, pleaded that there is no infirmity in the impugned orders. 5. We have considered the submissions from both the sides and perused the records. 6. The appellant are manufacturers of rolled products, the raw materia .....

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aying duty on much lesser quantity. Since the appellant unit - M/s Everest, M/s MPK and M/s Khetan were among the customers of NIPL, the quantity of MS Ingots supplied by NIPL to these units during period from 02/8/05 to 01/10/05 as per the entries of NIPL ledger book was compared with the supplies as per NIPL records in respect of which the invoices had been issued. It is on this basis it is alleged that during the period from 02/8/05 to 01/10/05 M/s Everest, M/s MPK and M/s Khetan have receive .....

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the appellant units during the period of dispute on the basis of their power consumption by applying the norm of 102.09 units per MT in respect of SSSRM. It is on this basis that the duty demands of ₹ 2,88,00,377/-, ₹ 1,60,85,657/- and ₹ 2,89,14,441/- have been confirmed against M/s Everest, M/s MPK and M/s Khetan respectively alongwith interest and imposition of equal amount of penalty on them under Section 11AC and beside this, imposition of penalty under Rule 26 of the Centr .....

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from 225 units per MT to 275 units per MT. 7.1 Though the Department also refers to the statements of the Directors of the appellant unit but on going through the same, it is seen that there is nothing inculpatery in their statement admitting the receipt of unaccounted raw material and its use in unaccounted production of rolled products and its clearance. 7.2 The point of dispute is as to whether on the basis of the above evidence, the Commissioner's orders confirming the above-mentioned d .....

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n allowed. In this case, no such cross examination of the concerned persons of NIPL who had made entries in the ledger books had been allowed. Therefore, the entries in the ledger book of NIPL by themselves cannot be treated as an evidence of the appellants having received certain quantity of unaccounted MS Ingots and having used that quantity in unaccounted production of rolled products and their clandestine clearance. In this regard we are also supported by the Tribunal's judgments in the .....

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ction of rolled products of the appellant units can be estimated on the basis of their power consumption and whether on this basis the duty on the alleged unaccounted production can be demanded. There is no dispute that no experiments or studies have been conducted by the Department in respect of the rolling mills of the appellant companies to determine their average power consumption for production of one MT of rolled products. The appellant's contention is that while the rolling mill of SS .....

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c rolling mill, but he has still applied the power consumption norm of SSSRM to the appellant unit, on the ground that the products being manufactured by SSSRM are CTD bars which consume more power while the products being produced by the appellant consume lower power. In our view this assumption is an arbitrary assumption without any basis and without conducting any study or experiment in this regard. On the other hand, the rolling mill each of the three appellants was studied by NISST, an Inst .....

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norm of ingots based immediate scale rolling mills without any repeaters is mentioned as 225 units per MT. The lower power consumption norm of 180 units per MT is in respect of Ingots based large scale/semi automatic manufacturing units. There is no dispute that the rolling mills of the appellants are not even semi-automatic but are manual and, therefore, in terms of this, notification of the Government of Rajasthan their power consumption norm would be 225 units per MT. In view of this, we hol .....

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