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2015 (11) TMI 1472 - CESTAT NEW DELHI

2015 (11) TMI 1472 - CESTAT NEW DELHI - TMI - Duty demand - Estimation of production of production of goods used as Captive consumption - Non accounting of goods - assumptions and presumptions - Invocation of extended period of limitation - Held that:- Duty demand is based on that - (a) chromium content of SS billets/flats manufactured during the period of dispute, (b) chromium content of Ferro chrome used for manufacture of stainless steel billets, and (c) recovery percentage chromium content f .....

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hence, the duty demand would be sustainable confined only to normal limitation period.

Prima facie 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 .....

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ome 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/03939/10 in Appeal No.E/04036/2010-EX & E/Stay/03944/10 in Appeal No.E/04046/2010-EX - STAY ORDER NO.51336-51338/2015 - Dated:- 12-3-2015 - Mr.Rakesh Kumar, Member (Technical) And Mr.S.K.Mohanty, Mem .....

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in this case is from 1.4.97 to 30.11.2012. The main raw material of the appellant for manufacture of SS flats/billets is steel scrap. Other raw material used by the appellant are ferro chrome, ferro manganese and ferro silicon. In the course of enquiry by the jurisdictional central excise officers heat wise records for certain days, maintained by the production department were examined in the course of which it was found that average chromium content of SS flats/billets manufactured by the appe .....

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%,60.66%, 60.68%, 60.06%, 61.26% and 60.18% respectively. On the basis of this, the officers determined chromium used for manufacture of stainless steel during different periods. It was assumed by the officers while using chromium in form of ferro chrome 8.67% of the chromium content is lost and in the other words out of total chromium content of ferro chrome, only 91.33% would would have gone into stainless steel manufactured by the appellant. Assuming on the basis of the quantity of ferro chro .....

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e 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 .....

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sed under section 11AC. Confiscation of plant, and machinery of the appellant company was also ordered under Rule 173Q (2) (b) of Central Excise Rules with option to be redeemed on payment of redemption fine of Rs.one crore. Penalty of Rs.one crore was imposed on Shri Arun Rathi, Director of the appellant company and a penalty of ₹ 25 lakh was imposed on Shri Vinod Sharma, Authorized Signatory of the appellant company under rule 26 of the Central Excise Rules, 2002. In the course of adjudi .....

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d by the Commissioner on the ground that in this regard, the appellant have not submitted any record in the form of show cause notice. 1.3 Against this order of the Commissioner these appeals have been filed alongwith stay applications. 2. Heard both sides in respect of the stay applications. 3. Shri Prabhat Kumar, Advocate, the learned Counsel for the appellant, pleaded that out of total demand of ₹ 26,25,16,682/-, the duty demand of ₹ 11,15,22,355/- for the period 1.4.97 to 30.1.99 .....

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1,15,22,355/- is excluded, the rest of the duty demand which would remain is ₹ 15,69,94,327/- for the period Feb.1999 to 30.1.2001, that the entire demand is based on a series of assumptions which are that (a) average contents of chromium in Ferro chrome used 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 .....

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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, no chemical test was done to ascerta .....

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inless steels without any evidence whatever of unaccounted production of principal raw material steel scrap/ sponge iron or other or evidence of clandestine removal of SS billets/flats, the same is not sustainable, that apex court in the case of Oudh Sugar Mills Ltd. vs .Union of India-1978 (2) ELT J-172 (SC) has held that allegation of under reporting of production of sugar and its clandestine removal on the basis of average recovery percentage from sugar cane is not sustainable without tangibl .....

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company and also the requirement of pre-deposit of penalty by the other appellants may be waived for hearing of their appeals and its recovery may be stayed till the disposal of the appeal. 3.1 Shri Prabhat Kumar further submitted that the factory is closed since 2008 and the appellant company is facing acute financial hardship and for this reason also there is a case for waiver of the requirement of pre-deposit 4. Shri M.S.Negi, the learned DR opposed the stay applications by reiterating the f .....

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00, 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 .....

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of SS billets. He pointed out that the fact that as per production records of 24.11.2000, Ferro Manganese consumption per MT of SS billet was 156.662 kgs, while the appellant company has shown consumption of Ferro Manganese are 237 kgs per MT during 1997-98, 230 kgs per MT during 1998-99, 229 kg per MT during 1999-2000, 222 kgs per MT during 2000-01, 229 kgs per MT during 2001-02 respectively which also clearly indicated that the appellant company under reporting production of SS billets. The st .....

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sued to the local customers. 4.2 Shri Negi also pointed out that in para 4.8 and 4.9 of the show cause notice, according to which consignments of SS flats were removed during night by some transporters without payment of duty and for which higher rate of transportation charge of ₹ 1475/- per truck instead of ₹ 800/- per MT was paid. He has accordingly pleaded that the duty demand has been correctly calculated on the basis of chromium content of SS billets/flats, chromium content of f .....

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also supports the department case of under reporting production and clandestine clearance of unaccounted production by the appellant company. He stated that their records/statements indicated the duty evasion of ₹ 37,34,861/- on clandestine removal of 131 MT of SS billets. 4.3. With regard to financial hardship, Shri Negi submitted that the issue was also considered by the Tribunal in the stay order No.60217/2013 dt.20.12.13 and in this regard, the Tribunal relying on the apex court judgem .....

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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 t .....

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, 60.06, 61.26%, and there is process wastage of 8.67%, that these assumptions are arbitrary and not based on any concrete evidence and hence, on the basis of these assumptions, the duty demand cannot be confirmed. Shri Prabhat Kumar further pleaded that the present show cause notice for demand of duty of ₹ 26,25,16,682/- for the period1.4.97 to 30.11.2001 has been issued on 1.5.2005 by invoking the proviso to section 11A(1), and this show cause notice is based on the presumptions as menti .....

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licable and hence, duty demand made by the show cause notice dated 1.5.2002 is time barred. 5.1. With regard to the plea of ld.DR that certain records recovered from the appellant company and the statements of certain persons, Shri Ganesh Sharma, Shri Vinod Sharma, Authorised Signatory and Shayam Dutt Lohani, clerk of the godown indicated clandestine removal of 131 MT SS billets involving duty of ₹ 39,34,861/-, Shri Prabhat Kumar pleaded that this allegation is based on internal private re .....

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. vs. CCE, Ahmedabad-II-2014 312) ELT 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 basi .....

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als. 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 and thus, the duty demand has been raised by invoking the extended period of in terms of proviso to section 11A(1). There are two preliminary objections of the ld.Counsel of the appellant. First objection is that earlier, the department vide show cause notice dated 21.3.2000 .....

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2,355/- as the same has been alleged earlier in another case. However, in this regard, they have neither submitted any record in the form of SCN. As such, I am unable to find facts about the same and am unable to consider their request on this issue. The appellant s contention is that they have enclosed a copy of the show cause notice dated 21.3.2000 in the course of enquiry and the same had also been submitted in reply to the show cause notice. We are of the view that the Commissioners finding .....

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sis of the same set of facts and same allegation, the department has earlier issued show cause notice dated 21.3.2000 for demand of duty for the period December, 1995 to January, 1999. and in this regard, reliance is p laced on the apex court judgement in the case of Nizam Sugar Factory vs. CCE, AP-2006 (197) ELT 465 (SC). We find that in the present case, duty demand is based on that - (a) chromium content of SS billets/flats manufactured during the period of dispute, (b) chromium content of Fe .....

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pplicable 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 60.6 .....

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ent of SS billets/flats is 13.1% has estimated the production of SS billets/flats during 1997 to 30.11.01 period and this estimated production has been compared with the production for this period recorded by the appellant in the RG-1 register and duty has been confirmed on unaccounted production estimated in this manner. Further, it is seen that earlier show cause notice dated 21.03.2000 also demands the duty from the assessee for December, 1995 to January, 1999 on the same basis. But in this s .....

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oduction 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-1978 (2) ELT J-172 (SC) 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 .....

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