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2015 (9) TMI 926 - CESTAT NEW DELHI

2015 (9) TMI 926 - CESTAT NEW DELHI - 2015 (329) E.L.T. 250 (Tri. - Del.) - Duty evasion - Clandestine removal of goods - estimation of turnover - comparison of power consumption - third party evidence - Held that:- On the basis of records recovered from a third party, the allegation of duty evasion cannot be made against an assessee unless cross examination of the persons from whom possession the records had been recovered, has been allowed, which has not been done in this case. Moreover, just .....

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.SSSRM to the unit of the respondent as while the rolling mills of M/s.SSSRM is automatic rolling mills, the respondent's rolling mill is manual. Moreover, no experiment has been conducted by the department to ascertain as to whether the roiling mills of the respondent is comparable with the rolling mills of M/s.SSSRM in terms of technology and production. Besides this, we also find that that National Institute of Secondary Steel Technology, established by the Ministry of Steel, Govt. of India c .....

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/s.SSSRM in respect of the respondent.

Rule 173E provided for determination of normal production by a manufacturing unit and that could be adopted as basis for allegation of duty evasion, in case his actual production drastically varied from the normal production. But in this case, no experiment has been conducted by the department, in respect of the respondent's unit to determine their actual power consumption, Before adopting power consumption ratio of M/s.SSSRM and applying it to t .....

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ief, as under. 1.1 The respondent are rerolling mills engaged in the manufacture of MS rolled products i.e. bars, angles and flats chargeable to Chargeable to duty under chapter 72 of Central Excise Tariff. For manufacture of MS rolled products, raw material is MS ingots which they purchased from the various ingots manufacturers. One of the raw material suppliers is M/s.Nirmal lnductomelt Pvt.Ltd. (hereinafter referred to as NIPL). The premises of NIPL were searched by the Central Excise officer .....

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their books of accounts, while the NIPL could not produce any central excise invoice in respect of balance quantity of 60.46 MT supplied to the respondent. M/s.NIPL filed application before settlement commission accepting certain duty evasion for settlement of their matter. 1.2 The department was of the view that the entries in the books of accounts of M/s. NIPL showing unaccounted sale of MS ingots without issue of invoices show that the respondent received unaccounted MS ingots which were used .....

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of rolled products as 102.09 units per MT. Adopting this ratio to the respondent unit, the investigating officers estimated their production of rolled product during the period December, 03 to September, 06 by dividing total power consumption by 102,09, On this basis, their production was estimated as 22089.51 MT whereas the assessee had recorded only 9737.57 MT of the finished goods in their production accounts during the same period. On the basis of estimated production determined in this mann .....

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determination of certain point arising out of this impugned order as mentioned in the review order. This order had been passed by the Committee of Chief commissioners under section 35E(1). In pursuance of this review order passed by the Committee of Chief Commissioners, the Commissioner has filed this appeal before the Tribunal. 2. Heard both sides. 3. Shri R.K.Grover, ld.DR. assailed the impugned order of the Commissioner by reiterating the grounds of appeal in the revenue's appeal and emp .....

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n correctly determined by applying the ratio of power consumption determined in the case of M/s. SSSRM as 102.09 units per MT. He relied on the judgement of the apex court in the case of CC, Madras vs. D.Bhoormull-1983 (13) ELT 1546 (SC) wherein the apex court has held that the department is not required to establish allegation against the assessee with mathematical precision and only preponderance of probability is required to be established. He also emphasised that power consumption in the cas .....

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unaccounted raw materials together with confessional statements of the supplier unit -NIPL. He, therefore, pleaded that the impugned order is not correct. 4. Shri Bipin Garg, the learned Counsel for the respondent, pleaded that the allegation of receiving 60.46 MT of unaccounted MS ingots during the period from August, 05 to October, 05 is based only on the entries of ledger book account of NIPL, that these documents recovered from a third party cannot be used against the respondent without per .....

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utomatic roiling mills while the respondent's rolling mill is manual, there is big difference in the efficiency of two rolling mills; that as discussed by the Commissioner in para 54 of his order, National Institute of Secondary Steel Technology, established by the Ministry of Steel, Govt. of India conducted a study and submitted a technical report on performance and energy consumption of re-rolling mills, where electricity consumption was arrived at 215 units per MT, while average consumpti .....

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if the production is estimated on the basis of power consumption of 225 units per MT as mentioned in the Rajasthan Government's notification, there would be no unaccounted production, that allegation of unaccounted production merely on the basis of power consumption norm of another rolling mill, is not sustainable, that in this regard, that he relies upon the judgement of Hon'ble Allahabad High Court in the case of CCE, Meerut-I vs. R.A.Castings Pvt.Ltd. reported in 2011 (269) ELT 337 ( .....

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ch had entries regarding supply of MS ingots to a number of re-rolling mills including the respondent unit and as per these entries, during the period from 02.08.2005 to 1.10.2005, the respondent had received 60.46 MT of MS Ingots from m/s.NIPL without any accountal. On this basis, the department has alleged that the respondent unit were indulging in duty evasion by receiving unaccounted MS Ingots and using the same in the unaccounted manufacture of rolled products. (2) Power consumption ratio o .....

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other than the entries in the private ledger book of M/s.NIPL and the statement of the concerned person of NIPL, there is no evidence in support of the department's allegation that during the above mentioned period, the respondent received 60.46 MT of MS Ingots from NIPL without any invoices. It is well settled law that on the basis of records recovered from a third party, the allegation of duty evasion cannot be made against an assessee unless cross examination of the persons from whom poss .....

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(Tri.-LB). Therefore, merely on the basis of entries in the ledger book recovered from M/s.NIPL which indicated the supply of certain quantity of MS Ingots to the respondent during August,05 to October, 05, it cannot be concluded that the respondent were indulging in duty evasion by under reporting the production of rolled products. Moreover, on the basis of entries in the private ledger book of M/s.NIPL at the most duty could be demanded only on rolled product manufactured out of 60.46 MT of MS .....

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t conducting any experiment. There is absolutely no justification for adopting power consumption norm of M/s.SSSRM to the unit of the respondent as while the rolling mills of M/s.SSSRM is automatic rolling mills, the respondent's rolling mill is manual. Moreover, no experiment has been conducted by the department to ascertain as to whether the roiling mills of the respondent is comparable with the rolling mills of M/s.SSSRM in terms of technology and production. Besides this, we also find th .....

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