TMI Blog2015 (11) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... ie view is that the duty demand is based on estimated production of SS billets/flats which has been determined on the basis of a series of assumptions. There does not appear to be any cogent basis for these assumptions. The apex court in the case of Oudh Sugar Mills Ltd. vs .Union of India- [1962 (3) TMI 75 - SUPREME COURT OF INDIA] has held that allegation of under reporting of production of clandestine removal of sugar on the basis of average percentage sugar recovery from sugar cane is not sustainable without tangible evidence of clandestine removal. In our view, the ratio of this judgement is squarely applicable to the facts of the present case. In this regard, we also find that no chemical test has been conducted to ascertain chromium content of SS billets or chromium content of Ferro chrome. There is also no basis for taking the recovery percentage of chromium from ferro chrome as 91.33% while in the earlier show cause notice dt.21/3/2000 recovery percentage of chromium from ferro chrome had been taken as 75%. Prima facie, the duty demand based on such arbitrary assumptions would not be sustainable. - Stay granted. - E/Stay/03938/10 in Appeal No.E/04035/2010-EX, E/Stay/03939 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have gone into manufacture of stainless steel and taking the chromium content of SS billets/flats as 13.1% the officers estimated the production of SS billets/flats. It is the production estimated in this manner which has been compared with the production recorded in the various central excise record and on this basis, the officers were of the view that during the period 1.4.97 to 30.11.2001, the appellant company have not accounted for 69,986.013 MT SS billets/flats on which the duty was chargeable is ₹ 26,25,16,682/-. It is on this basis, that show cause notice dated 1.5.2002 was issued to the appellant company by invoking extended period of limitation under proviso to section 11A (1) for recovery of above mentioned duty from the appellant company alongwith interest on it under section 11AB and also for imposition of penalty of equivalent amount under section 11AC. The SCN also sought to impose penalty under Rule 26 on Shri Arun Rathi, director of the appellant company and Shri Vinod Sharma, Authorized Signatory of the appellant company. 1.2 The above SCN was adjudicated by the Commissioner, vide Order-in-Original dated 28.9.10 by which above mentioned duty demand was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed is from 61.26% to 60.06%, (b) out of this chromium content of Ferro chrome 91.33% only goes into the manufacture of stainless steel and (c) SS billets/flats contain 13.1% of the chromium, that these assumption are wrong, and chromium content of Ferro chrome can widely vary from 50% to 64% and the recovery percentage of chromium from ferro chrome also varies widely and the chromium content of stain steel can also vary from 9% to 14%, that in the previous show cause notice dt.21.3.2000 issued on the same ground, while chromium content of ferro chrome has been taken as 58.02%, recovery percentage has been taken as 75% and chromium content of SS billets has been taken as 13.85%, that in the present SCN, the chromium content has been assumed on the basis of only one day s record of production department to be 61.26% to 60.06% and similarly, recovery percentage has been arbitrarily arrived taken as 91.33%, that in the present show cause notice, the chromium content has been taken 13.1% while in the earlier show cause notice the same had been taken 13.85%, that no chemical test had been done for different periods for determining the chromium content of SS billets/flats, that similarly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, that the recovery percentage of chromium from Ferro chrome has been taken from the appellant companys own heat wise record for on 24.11.2000, that terms of these records, the chromium content of Ferro chrome is 61.56% and further process loss is 8.67% of chromium content, that the production record showed that chromium content of SS billets/flats is 13.10% , that since the chromium content in Ferro chrome and recovery percentage of chromium from ferro chrome is based on heat wise records for 24/11/2000 and certain other days, there was no requirement of tests for determining chromium content of ferro chrome of SS billets, that the appellant had practice of destroying records of production which also indicates that they were under reporting production. 4.1 He also pleaded that as per heat wise production records of 24.11.2000, the electricity consumption per MT was 422.24 units, while the appellant have shown the electricity consumption as 673 units per MT, for 2000-01, 770 units per MT, for 1999-2000, 849 units per MT, for 1998-99, 750 units per MT for 1997-98, which also showed that they were under reporting production of SS billets. He pointed out that the fact that as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard, the Tribunal relying on the apex court judgement in the case of Indu Nissan Oxo Chemicals reported in 2008 (221) ELT 7 (SC) has held that even when the company has been declared as sick unit under Sick Industrial Companies (Special Provisions) Act, 1985, this would not exempt the assessee from the provisions of section 35F. 4.4 He accordingly submitted that this is not the case for total waiver from the requirement of pre-deposit. 5. Shri Prabhat Kumar, learned Counsel for the appellants, in rejoinder pleaded that the Commissioner s order has confirmed duty demand from the appellant company only on the basis of assumptions, that chromium content of SS billets is 13.1%, percentage of chromium in Ferro Chrome is 60.68%, 60.06 and 61.26% and there is process wastage of chromium of 8.67%, that the Commissioner while confirming the demand of duty against the appellant has not considered and has not gone into evidence discussed in the para 4.3, 4.4 and 4.5 of the impugned order for working out the demand, that constitutional bench of the apex court in the case of Oudh Sugar Mills vs, Union of India (supra) has held that allegation of duty evasion based on calculations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LT 225 (Tri.-Ahmd.) and Arya Fibres Pvt.Ld.-2014 (311) ELT 529 (Tri.). 5.2. Shri Prabhat Kumar further pleaded that main raw material of the appellant is steel scrap, Ferro Manganese, ferro silicon, etc. and in the course of search of the factory and stock taking in respect of these raw materials, absolutely no irregularity has been found and no documents have been recovered showing any unaccounted purchase of these raw material and therefore merely on the basis of chromium content of SS billets/flats and Ferro Chrome and percentage of process of loss, duty demand cannot be confirmed. With regard to the plea of the ld.DR, regarding electricity consumption per MT, he stated that in view of the apex court s judgement in the case of R.A.Casting pvt.Ltd.-2011 (269) ELT A108 held that merely on the basis of higher electricity consumption, unaccounted production cannot be presumed unless there is evidence on record showing unaccounted purchase of raw materials. 6. We have considered the submissions from both sides and perused the records. 7. In this case, duty demand of ₹ 26,25,16,682/- has been made for the period 1.4.97 to 30.11.2001 by show cause notice dated 1.5.2002 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is seen that show cause notice dated 21.3.2000 demanding duty for the period 1.4.97 to December, 1999 had also been issued on the same basis, though chromium content of SS billets and percentage recovery of chromium from ferro chrome were different. In view of this, we hold that Prima facie the judgement of apex court in the case of Nizam Sugar Factory (supra) would be applicable to the facts of the present case and therefore, the extended period would not be applicable and hence, the duty demand would be sustainable confined only to normal limitation period. 9. It is seen that in the present case, the duty demand has been quantified on the basis of assumptions that - (a) chromium content of SS billets/flats manufactured by the appellant during the period of dispute 13.1%, (b) chromium content of Ferro chrome used for manufacture of stainless steel is from 60.66% to 61.26% and (c) recovery percentage chromium from Ferro chrome is 91.33%. These figures have been taken from the production record of only one day. The department on the basis of average chromium content of Ferro chrome being 60.06 to 61.26% and assumption of process loss of chromium being 8.67% i.e. recovery of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain internal documents and statements of certain persons. The appellant had sought cross examination of these persons Shri Ganesh Sharma, Shri Vinod Sharma, Authorised Signatory and Shayam Dutt Lohani, clerk of the godown but cross examination has not been allowed. In these circumstances, we are of the view that merely on the basis of such evidence the allegation of duty evasion of ₹ 37,34,861/- on the alleged clandestine removal of 131 MT SS billets would not be sustainable. Moreover, in the impugned order, the duty has not been demanded on the basis of the documents and statements discussed in para 4.3 to 4.5 of the impugned order. The duty has been demanded on the basis of chromium content of SS billets/flats manufactured by the appellant during the period of dispute being 13.1%, the chromium content of Ferro chrome being 60.68%, 60.06 and 61.26% and the recovery percentage of chromium from ferro chrome being 91.33%. 11. We are therefore prima facie of the view that the appellant have made out a case in their favour from waiving the requirement of pre-deposit of duty, interest and penalty and stay of recovery for hearing of their appeals. Therefore, we waive the requi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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