TMI Blog2016 (1) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... and assumptions. Even in interpreting the data in the pen drive and taking some support from the select statements of persons, we find that the data applicable to a particular period was extrapolated for the whole period of demand by presuming a standard projection. This apparently is not legally sustainable. When the allegation of unaccounted clearances and substitutions of inputs of huge quantities were made, the minimum requirement is to have independent support of such allegation by way of evidence of transport, cash transaction, third party documents or affirmations etc. Here in this case, corroborations are lacking. We are aware that in the case of clandestine removal it is not required for the Revenue to prove precise and comprehensive details of each such clearances with 100 per cent accuracy. However, this does not mean that even in the total absence of corroborative evidence without at least establishing a preponderance of probability the case for confirmation of demands can be made. Large number of statements were recorded and also relied upon; but these statements were not put to test by way of cross-examination and analysis or supported by documentary evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods. It was discovered that credit was taken by appellants on two invoices dated 24.6.2008 issued by GMI for amount of ₹ 6,58,815/- without actually receiving the goods/raw material by appellants. Upon such intelligence, a search was conducted in the factory premises of the appellant on 24.6.2008. The Central Excise Officers found one pen drive attached to the computer in the cabin of Shri Tulsi Ram Yadav, who was the Assistant Manager, Production Planning and Central (PPC). They resumed this pen drive and other documents under panchnama. Subsequently a search was conducted on the next day (25.06.2008) for the purpose of stock verification of raw material lying in the factory premises. Stock verification was done on daily basis and concluded on 4.7.2008. 3. After stock taking, it was found that a total stock of Aluminum scrap/ingot of 1082895 kgs. was lying in the factory premises of appellant. As per RG23A Pt. I (Daily Raw Material Register) the total stock of Aluminum scrap and CG ingots as on 25.6.2008 was 898091 kgs. Thus a stock of 184804 kgs of Aluminum scrap/ingots was found in excess. In addition other materials like Assorted Zinc scrap, SS Scrap, Non metall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inadmissible as these were diverted by the appellant without issue of sale invoice or any accounting thereof. (iv) CENVAT Credit of ₹ 7,40,68,846/- on the balance quantity i.e., 4427307 kgs of Aluminum scrap availed and utilized is inadmissible as these were sold unaccounted during the period April, 2006 to April, 2008. (v) Appellants are liable to pay Central Excise Duty of ₹ 4,17,58,397/- on account of duty short paid on clearance of aluminum dross in the guise of ash and residue. 5. Before we proceed any further, it has to be stated that very little assistance was received from either side as neither the appellants nor Revenue was able to throw light on the entire documents and facts as presented by the case. Neither side made any comprehensive factual presentation, nor could answer satisfactorily when pointed questions were asked on reconciliation of data. This is very important as the impugned order is more than 400 pages long without sequential coherence and having over lapping findings with not so clear analysis of facts. 6. It would be worthwhile to give a brief over view of the fact and evidence placed before us. In this case all the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The process of manufacture started with the sorting and segregation of scrap to remove impurities. The segregated items were made into different batches after ascertaining the chemical composition of the scrap. In order to ensure that batches are not mixed up they were reclassified on the basis of chemical composition for being used. Copper, Zinc, Magnesium etc which were segregated from the scrap were used for making master alloys or used directly. 8. The appellants manufactured different types of Aluminum Alloy such as ADC12, HS1, AC4B, LM6, LM24, etc. Besides aluminum scrap, the appellant used CG aluminum ingots which were procured from Hindalco, Balco etc. The iron content in the CG ingots varied from 0.2% to 0.5%. CG ingots of high iron content of 0.4% to 0.5% was categorized as Dil. ingot and were used for diluting the alloys where higher iron content was permitted. CG ingots of high purity of 99.5% to 99.7% were categorized as EC/Fridge ingots and used for manufacture of alloy which required higher purity and low iron content. 9. They also manufactured Zinc alloys viz, Zamk 3 and Zamak 5 which contained 3 to 5% aluminum and rest zinc. Due to the considerable differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey were clearing aluminum dross in the guise of ash and residue without paying duty. As the entire case of Revenue is based on the data received from pen drive for better appreciation of the discussion, the various excel files found in the data of pen drive and referred in the impugned order is noticed as under: (a) Excel file -Loss Monthwise-1 which contained five sheets namely Sheet-1, TOTAL, FURWISE, DIFF-7, and DIFF-8 (b) File -RECON MONTHLY DROSS.xis which contained 14 sheets namely, April, May, June, July, August, September, October, November, December, January 2008, February 2008, March 2008, April 2008 and May 2008 (c) File name WITHOUT PROCESS DROSS RATE-XIS (d) Files DAILY STOCK (April, 2008)-decrypted and Daily Stock (May 2008) decrypted which contained three sheets namely Received , issue and actua (e) File name -Raw material classification VKS Sheet-1 which contained one sheet. (f) File name HGS For June, 2008, MARKETING QUATATION FILE-decrypted.XIS (Sheet)ADC-12-A (g) File -Recon-PP (Physical adj 2005-06) Stock Reconcil April to December Stock Reconcil April to March, 2008 and 2009. 12. Besides the above, loose docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2007 to 31.5.2008 the appellant had dispatched CG/EC ingots other than the quantity they had issued for the purpose of manufacture of final products. When the above quantity of dispatch of CG/EC ingots were to be matched with sale invoices issued by appellant it was found that appellant has not issued any sale invoices for sale of CG/EC ingots on these dates. For eg., as per excel file DAILY STOCK (April, 2008) Sheet Issue for the month of January, 2008 shows dispatch as follows: 13.01.2008 30 MT 14.01.2008 20 MT 15.01.2008 20 MT 16.01.2008 30 MT 28.01.2008 30 MT 30.01.2008 22 MT 14.3 But it was found that appellant has not issued any sale invoice for the sale of CG/EC ingots on the above dates. On scrutiny of the consumption data in the excel file LOSS MONTHWISE-1 it was found that the same were not used for manufacture of final product. 14.4 On the scrutiny of RECON MONTHLY DROSS (Sheet APRIL) it was found that appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. It is further admitted by department that the quantity of finished goods manufactured during the above period is found to tally with the quantity of finished goods entered in RG-1 register maintained for production and removal of finished goods. That the case of department is fully based on speculations, surmises and erroneous inferences drawn from the documents seized. 14.6 The appellant manufactures aluminum alloy ingots for which the inputs used are, viz Aluminum scrap, Aluminum CG/EC ingots, Silicon metal, Copper, other alloying elements like, Manganese etc. Aluminum scrap is mainly imported, and covered under ISRI Code namely Tense, Taint, Tabor, Twitch. The scrap will contain impurities and several alloying elements like silicon, copper, Magnesium, Manganese etc. The finished product comprises of aluminum alloys viz, ADC-12, AC4B, HS1, LM6 etc which have definite composition. The appellant has to ensure that the raw materials charged in the furnace has the correct composition which will result in the manufacture of the aluminum alloy ingot of desired specification. In case of any variation in composition of the finished product, the whole material charged which may v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urns. The net balance of 7730.937 MT was fully consumed in manufacture. The details of consumption and Reconciliation statement in reply to show cause notice is furnished by appellants as follows: Quantity of CG ingots purchased 7851.640 MT Less closing stocking as on 31/5/2008 90.970 MT Less Trading sale 29.739 MT Balance quantity of CG ingots consumed 7730.931 MT 14.9 Out of 7851.640MT of CG/EC ingots consumed 643.012MT was reclassified according t o their iron content as D.ing (Dilution ingots) because the same was containing high iron. These could be used only for correction/dilution. The segregation of 643.012 MT of D.ing is supported by data of pen drive. Again as per data 4961.310 MT of dross was generated. Out of this 1853.243MT dross was processed by pulverizing to generate 1260.25 MT of dross which was directly used in manufacture of Aluminum ingots. It generated 593.08 MT of Ash and Residue. Out of the balance of 3108.067 MT of dross the appellant produced dross ingots both in house and by job work. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On perusal of records it was found that appellant was selling elements like copper, Manganese, Zinc etc which were sorted from the aluminum scrap procured for manufacture of final products, without reversing the credit. The excel file RECON MONTHLY DROSS (Sheet April, 1) showed that several elements like Brass, Lead, Stainless Steel, Magnesium, etc obtained from sorting of the scrap was sold by appellants during April, 2007 which were shown as outgoing material in the sheet. The sale did not reflect in ER-1 returns of April, 2007. The appellants sold these without issuing any sale invoices. In the sheet EFF-STD-New, it was found stated the usable and saleable material after sorting out. The saleable impurities like the metals mentioned above come to 30.60% of the total quantity. The value of these saleable impurities was half the value of the container and therefore was profitable for appellants to sell these elements after sorting of the imported scrap. Further, the LOSS MONTHWISE-1 (Sheet TOTAL) did not show consumption of these sorted material which would establish that these were not used in manufacture of final product. As the sorted material was not found used in manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omprising of zinc copper, manganese, titanium etc is incomprehensible to any reasonable person. It cannot be imagined that any person would clandestinely remove and sell sorted material like zinc, copper, manganese etc and again procure similar material from the local market without bills. The impugned order has been passed is absurd and without taking into consideration the reply of the appellants and is not sustainable. 16. Issue No. 3 The appellant availed and utilized cenvat credit of ₹ 1,03,10,874/- on Aluminum Scrap of 6,98,393 kgs and the same was diverted without issue of sale invoice and without accounting. Therefore, the credit is not admissible. 16.1 Case put forward by Revenue:- On scrutiny of the excel file DAILY STOCK (APRIL 2008)-decrypted and DAILY STOCK (May 08)-decrypted (Sheet-RECEIVED) along with their DAILY MATERIAL RECEIPT ADVICE sheets resumed it was found that appellants had not actually received CG ingots and aluminum scrap and this issue confines to aluminum scrap. It was found that appellants availed and utilized inadmissible cenvat credit without actual receipt of Aluminum scrap on the quantity of 698393 kgs. The data in the said she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of this noting PPC enters in the stock account since they are now segregated and available for production. As regards hand written inscriptions on left side bottom of DMR, these are items which have been issued to production from under process stock. In case any material out of such has been sold, then proper sale invoices has been issued. For eg. on 5.4.2008, a quantity of 4860 kgs burnt has been hand written on left bottom side. This quantity has been sold to M/s. Mohbeen Ahmed by proper bill. That this would prove that if any item is sold proper invoice is issued, if any item is issued to production from under process stock, then the total stock is just reduced by that figure. The quantities entered in excel sheet on received were the quantities of scrap which were issued from RG23A Part 1 for production or transferred from cold refining department to production department. These quantities are included in the under process (u) column in the excel sheet. The quantity entered in RG23A Part-I register but not shown as received in excel sheet is because those quantities are not cleared by Quality Control Department. Therefore, the inference drawn by the Department that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inadmissible. 17.2 Submissions by Appellant The allegation leveled against the appellant on this issue is that appellants removed 4427 MT of raw material clandestinely on which credit was availed. The department for its convenience has arrived at the conclusion that 9015480 kgs of raw material was received unaccounted. After deducting 45,88,173 kgs of which duty has been already demanded on the first two issues, the balance quantity of 4427MT is taken for raising this demand. On the very face of it, this allegation is absolute absurd since according to the department itself, there is no evidence for removal of 4427 MT or any part thereof. The department has mainly relied on the quantities shown in column u in the pen drive and the use of the words, purchase and sale in these excel sheets. It is submitted that the quantity of around 9000 MT mentioned under Column u in the pen drive is under process material like dross and rejections which was reused for production of finished goods. The appellant has reproduced the relevant entries in the appeal memo which is as under:- Column u April 2006 to March, 2007` 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that appellant diverted 4427 MT of sorted aluminum scrap and sold them without bills is an allegation without any sense. 18. Issue No. 5 The appellants cleared aluminum dross in the guise of ash and residue and thus short paid duty of ₹ 4,17,58,397/-. 18.1 Case put forward by Revenue In the process of manufacture, aluminum dross is generated and these are categorized into three by the appellant according to their aluminum content. Chamak category has high percentage of aluminum, while Mota has 70% and Barik 45% of aluminum. Some of the dross, i.e., Chamak, Mota and Barik are sent by appellants to outside job workers who leach out the aluminum content to manufacture aluminum ingots or dross ingots. On investigation, it was found that the recovery of Aluminum from Aluminum dross by job workers was very high ranging from 46% to 76%. As per the statements it was found that the appellants not only used these aluminum/dross ingots in the batch to manufacture Aluminum alloy ingots, but also that they used the same in their correction process. 18.2 On scrutiny of data contained in pen drive it was found that appellants sold Aluminum dross without being shown in ER-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard both sides elaborately and perused appeal records. 20. We find that the department proceeded against the appellant to deny CENVAT Credit on various items and also to demand duty on the goods cleared by them. As mentioned by us earlier in this order that the analysis of facts and evidences both in the show cause notice and the impugned order is not sequential, comprehensive and clear. Even during the arguments, explanations sought for on specific issues were not forthcoming with any clarity. We find that the data retrieved from the pen drive was the main source of various allegations and later confirmation against the appellant. Large number of statements have been recorded which were selectively quoted to support the conclusions drawn by interpreting the data in the pen drive. 21. In this case, we find both the parties, namely, the Revenue as well as the appellant agree that data in the pen drive is the main source of the case and the appellant has not been disputing the correctness of the data in the said pen drive which is their private record maintained for planning and managing the various materials and the production inside the unit. 22. The main crux o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,713 MTs. have been fully consumed in the manufacture of aluminum alloy ingots. The reconciliation statement provided by the appellant from the data contained in the pen drive is as follows: Quantity of CG ingots purchased 7851.640 MT Less closing stocking as on 31/5/2008 90.970 MT Less Trading sale 29.739 MT Balance quantity of CG ingots consumed 7730.931 MT Details of consumption (i) Consumption under the head CG ing. according to deptt 6145.748MT (ii) Quantity of CG/EC ingots included in D.ing in pen drive 643.012MT (iii) Consumption of CG/EC ingots shown as EC(W)/Fridge 400.025MT (iv) CG/EC ingot used in the production of CU-Master Shown in pen drive 123.544MT (v) CG/EC ingot used in production of manganese Master alloy shown in pen drive 35.338MT (vi)CG/EC ingots shown as N.Ing in pen drive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sustained. 28. Next issue is on CENVAT Credit of ₹ 1,03,10,874/- which was denied on the ground of diversion of 698 MTs of aluminum scrap. This was based on certain loose sheets and some tick marks found in the private records. Here, again there is absolutely no corroboration of such diversion of cenvat availed scrap. No transport evidence, buyer s details, money transportation etc. The private records are explained by the appellant. The tick marks and W marks are made by quality control department. Regarding hand written remark also, we find appellants explanation convincing and satisfactory. They have explained with illustration about sale of certain items and under process stock as entered in the statutory RG23A Part-I. The difference between private excel sheet and this statutory record has been explained by clearance or hold or certain sale, duly accounted for in the final statutory account. We find, either non-receipt or clandestine removal after receipt of any cenvatable raw material, has to be established by consistent corroborative evidence. We find no such evidence for this and the denial of credit is largely based on presumption and inference from private re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luminum dross not being an excisable goods as per decisions of Hon ble Supreme Court in the case of Indian Aluminum Company Limited reported in 1995 (77) ELT 268 SC and 2006 (203) ELT 3 SC. In a recent decision, the Hon ble High Court of Bombay in the case of Hindalco Industries Limited - 2015 (315) ELT 10 (Bombay) examined the issue of duty liability of aluminum dross and after relying on the various decisions including the above mentioned decisions of the Hon ble Supreme Court held the product as not liable to excise duty. 31. Considering the above legal position, we find even if it is considered that the appellant have cleared aluminum dross, the duty liability on the same cannot be sustained. 32. Having examined each one of the points involving demand of duty or denial of credit as above we also arrive at certain general conclusions relevant to the case: (a) As already stated, the whole case is built up on data contained in the pen drive and certain statements of persons. Admittedly, the data contained in pen drive is not disputed by the appellant. The whole dispute evolve on the interpretation of the data contained therein. In such a situation, it is necessary for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LT 487 (Tri-Ahmd.), the Tribunal observed that if the case of clandestine removal is to be sustained based on private records then the same is required to be supported by corroborative evidence with regard to purchase of raw material, manufacture of final goods, flow-back of money or identification of the buyers and their statement etc. In Arya Fibers Pvt. Ltd. 2014 (311) ELT 0529 (Tri-Ahmd.) the Tribunal laid down certain principles, after detailed analysis of large number of case laws, to establish the case for clandestine manufacture/clearance. The Tribunal observed that there should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions. Similar ratio was followed in large number decisions by the High Courts and Tribunal - Siddh Industries-2013 (293) ELT 0556 (Tri-Ahmd.); Bansal Wires Pvt. Ltd.-2010 (26) ELT 1166 (Tri-Del); Arsh Casting Pvt. Ltd. - 2010 (252) ELT 191 (HP), Pan Parag India Ltd. - 2013 (291) ELT 0081 (Tri-Del), Jasmine Paints - 2013 (287) ELT 239 (Tri-Del); Castrol India Ltd - 2012 (283) ELT 399 (Tri-Chennai), Jaidev Alloys Pvt. Ltd.- 2012 (279) ELT 283 (Tri-Ahmd.) 35. Having considered the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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