TMI Blog2015 (11) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... not supported by any other independent evidence on record. Therefore, we hold that merely on the basis of the entries in the private ledger book of SSSRM, the allegation of duty evasion against the appellant company cannot be sustained. Merely because during 2003-2004 the appellant sold their finished goods on a small profit margin of ₹ 15 per MT and during 2005-2006 the appellant sold their products at the loss of 1278 per MT, no adverse conclusion can be drawn and merely on profit and loss data it cannot be concluded that the appellant were indulging in duty evasion by clandestine removal during this period. Though the Department alleges that during 2004-2005 and 2005-2006 the appellant had received the commission income of ₹ 1,16,25,916/- from commission agent certificate from parties which is an unrelated activity and thereby implying that the appellant were under reporting their production and showing their income from manufacturing activity as the income from commission agent service, no adverse conclusion can be drawn from this, as the appellant s claim that they had paid service tax on the commission income and also the income tax had been deducted at the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory premises and since these records appeared to be the records of sale of bars and purchase of ingots in form of private ledger books pertaining to period from April 2005 to September 2005, the same were also taken into custody. On study of the private ledger book for the period from April 2005 to September 2005, it appeared that during July and August 2005, 461.31 MT of MS Ingots had been received by SSSRM from the appellant unit in respect of which the appellant unit had not issued any invoices. Beside this, it was also found that during the same period SSSRM had received 29 consignments of Ingots from the appellant unit, the total weight which was 511.26 MT and though the appellant had issued invoices in respect of the same, the details regarding quantity were not matching as the total quantity as per the invoices issued by the appellant was 545.143 MT. The Department, therefore, was of the view that during July and August 2005, the appellant have received 927.57 MT of MS Ingots (461.31 MT + 511.26 MT) which had been clandestinely cleared by the appellant without payment of duty and on which the duty involved was ₹ 25,39,575/-. Beside this, from the entries in the privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er MT of MS Ingots. It is on the basis of this norm that the Investigating Officers estimated the actual production of the appellant company during the period from April 2002 to September 2006 as 64511.25 MT against which the appellant company had shown the production of only 37478.94 MT and accordingly it has been alleged that during the period from April 2002 to September 2006, the appellant has under reported the production of 27032.313 MT of MS Ingots which has been cleared without payment of duty. The duty involved on this estimated unreported production is ₹ 5,37,28,971/- . 1.6 It is on the basis of the above investigation that a show cause notice dated 27/4/04 was issued to the appellant company for demand of duty of ₹ 5,37,28,971/- from them in respect of alleged clandestine removal of MS Ingots during the period from April 2002 to September 2006 alongwith interest thereon under Section 11AB and also for imposition of penalty on the appellant company under Section 11AC and imposition of penalty under Rule 26 of the Central Excise Rules on Shri Harish Aggarwal, Director of the appellant company. 1.7 The above show cause notice was adjudicated by the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as only one furnace of 3 MT capacity and in September 2004 the same was replaced by the furnace of 6 MT capacity, that, therefore, while from September 2004 to September 2006 the installed capacity of production can be taken as 12600 MT per annum as shown in the cost audit report, during period from April 2002 to August 2004 the capacity would be only 6300 MT per year, that on this basis, the maximum production during April 2002 to August 2004 could be only 15750 MT @ 6300 MT per year and the maximum production during September 2004 to September 2006 @ 12,600 MT per annum would be only 26200 MT and thus the maximum production possible during the period from April 2002 to September 2006 on the basis of the installed capacity of the unit would be 40,950 MT against which the production recorded in the Central Excise records is 37478.94 MT, that the Departments allegation during this period that the appellant must have produced 64511 MT of MS Ingots is, therefore, without any basis, that this allegation is absolutely wrong when the Department does not dispute that during period upto August 2004 there was only one furnace of 3 MT capacity in the appellants unit and only in September 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption norm of 689 units per MT had been adopted and that in view of the above, the impugned order confirming duty demand of ₹ 5,37,28,971/- against the appellant company alongwith interest and imposing penalty of equal amount on the appellant company under Section 11AC and penalty of ₹ 25,00,000/- on its Director Shri Harish Aggarwal under Rule 26 of the Central Excise Rules is not sustainable. 4. Shri Pramod Kumar, the learned Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that the appellant during the period of dispute were selling the goods at very nominal profit or at price much below the cost of production, that no businessman would continue to conduct his business when he is incurring huge losses, that from the entries in the private ledger book of SSSRM it is clear that the appellant during the period from April 2005 to August 2005 had supplied huge quantity of MS Ingots without issue of invoice and without payment of duty to SSSRM and this is a clear evidence of duty evasion by the appellant company. He, therefore, pleaded that there is no infirmity in the impugned order. 5. We have considered the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-2005 and 2005-2006 the appellant unit had received commission income of ₹ 1,16,25,916/- and that while during 2003-2004, they have sold their goods on a very meagre profit margin of ₹ 15 per MT, during 2004-2005 they have sold their goods at a huge loss of ₹ 1278 per MT and that no manufacturer would sale his goods at such a huge loss and still continue in his business. 6.1 The contention of the appellant on the other hand is that merely on the basis of certain entries in the private ledger book of M/s SSSRM, no allegation of duty evasion by clandestine removal can be made against the appellant, when the persons of SSSRM who were maintaining the ledger book were not examined and merely on the basis of third party records, the allegation of duty evasion cannot be made against an assessee, when there is no other independent evidence. It is also pleaded by the appellant that their power consumption varies mostly between 1,000 to 1,100 units per MT and during 2005-2006 it varied 1,100 to 1,486 units per MT and that the norm of 689 units per MT is absolutely without any basis. It has also been pleaded by the appellant that the capacity of production of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have shown commission income of ₹ 1,16,25,916/- from various parties in respect of certain commission agent service being provided by them which is not their line of business. In our view merely because during 2003-2004 the appellant sold their finished goods on a small profit margin of ₹ 15 per MT and during 2005-2006 the appellant sold their products at the loss of 1278 per MT, no adverse conclusion can be drawn and merely on profit and loss data it cannot be concluded that the appellant were indulging in duty evasion by clandestine removal during this period. Though the Department alleges that during 2004-2005 and 2005-2006 the appellant had received the commission income of ₹ 1,16,25,916/- from commission agent certificate from parties which is an unrelated activity and thereby implying that the appellant were under reporting their production and showing their income from manufacturing activity as the income from commission agent service, no adverse conclusion can be drawn from this, as the appellants claim that they had paid service tax on the commission income and also the income tax had been deducted at the source on the payments being received is not disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Pragati Steels Pvt. Ltd. vs. CCE, Kanpur reported in 2012 (286) E.L.T. 253 (Tri. - Del.). 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 also taken the same view holding that the power consumption norm of another unit cannot be applied in respect of an induction furnace unit and on this basis the allegation of clandestine manufacture and clearance cannot be made. Apex court in the case of Oudh Sugar Mills Ltd. vs. Union of India reported in 1978 (2) E.L.T. (J 172) (S.C.) has also held that allegation of clandestine production and removal based only on calculation of raw material fed into the process or on working of the machinery as noticed during test inspection would not be sustainable unless there is tangible evidence on record in support of clandestine production and removal. In the present case other than the assumption that the power consumption norm of the unit should be 689 units per MT, there is no evidence of unaccounted purchase of raw material or other clear evidence of clandestine removal of finished goods. 7.3 Moreover, when the Department does not dispute that ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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