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TMI Blog2016 (11) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... 679; Show cause notice dated 01.08.2014 was given by the Commissioner, Central Excise and Service Tax, Ranchi for the period running from June,2009 to March-2014. ● First date of hearing was on 25.03.2015 i.e. after approximately 7 months and 25 days. Petitioner could not remain present because of illness of mother of petitioner no. 2, who is a Director of Petitioner no. 1. ● On 22.09.2015, petitioner could not appear before respondent no. 2 since the letter dated 16.09.2015 was received by the petitioner on 22.09.2015 at 2.30 p. m. ● On 21.12.2015, the hearing was fixed. This petitioner appeared and filed a letter requesting that documents upon which the reliance is placed in the show cause notice may be supplied to the petitioner. Few of the documents though are relied upon by the respondents in the show cause notice like Nucleus Group report and All India Induction Furnace Association report which were referred in the show cause notice and though they were demanded by this petitioner, the same were not supplied. ● On 13.01.2016, petitioner again requested to supply the documents referred and relied upon in the show cause notice, but, they were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch it has been observed right from the learned Tribunal to the Hon'ble Supreme Court of India that electricity consumption per se cannot be relied upon by the respondents for proving clandestine removal of final product, because there is no set pattern for consumption of electricity. There are several reports given by more reliable institutions and persons than Dr. N.K. Batra, which have been referred in the aforesaid decisions of R.A. Castings. Cross examination of Dr. N.K. Batra is also not made available, despite the request was made. The respondents ought to have carried out experiment of consumption pattern of electricity at the factory premises of the noticee, which has been referred to paragraph no. 22 of the decisions of R.A. Castings Private Ltd, which has not been gone into by the respondents. The whole show cause notice is based upon presumptions and surmises. The burden of proof lies upon the respondents that there is clandestine removal of finished product, which has not been discharged, at all, by the respondents. ● It is also submitted by the counsel for the petitioners that the respondents are surprised about the loss sustained by the petitioner. Merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst adjudicating authority has dropped the baseless notice and whenever the first authority has confirmed such ground, the tribunals have passed the Orders and quashed such ground, like in the case of R.A. Castings Pvt. Ltd Vs. CCE, which is approved by the Allahabad High Court and SLP has been dismissed by the Hon'ble Supreme Court. It is further submitted that whenever Order-in-Original are passed as stated herein above, dropping the show cause notice, the same are placed before the committee, consisting of two chief commissioners and they are taking decisions, whether to prefer any further appeal or not and all aforesaid cases where the show cause notice has been dropped and the ground of the electricity consumption pattern has also not been approved, in the Order-in-Original, no appeal has been preferred by the department. Thus, it has become fashion with the respondent that arbitrarily in few cases, ground of Dr. N.K. Batra will be raised for few industries and for rest of the industries, no such ground is ever raised. Because of this N.K. Batra's report, several petitions have been filed and several decisions have to be given by the Courts. ● Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imes, but, the petitioners had not filed any reply. Counsel for the respondents submitted that Annexure-16, which is a preliminary defence, was never given during the course of hearing before the Commissioner, Central Excise and Service Tax, Ranchi, but, it was given in the common centre of the Central Excise and Service Tax Office of the Commissioner. Whenever any matter is being conducted by the adjudicating authority, the reply should have been tendered before the adjudicating authority and hence, it has been observed in paragraph no. 20 of the Order- in-Original that noticee has not given any reply. Hence this Court may not interfere with the orders passed by the Commissioner, Central Excise and Service Tax dated 22.03.2016. REASONS 5. Having heard counsels for both the sides and looking to the facts and circumstances of the case, we, hereby, quash and set aside the Order-in-Original dated 22.03.2016 (Annexure-14 to the memo of this writ petition) mainly for the following facts and reasons: i. Show-cause notice was given by the respondents on 01.08.2014 for the period running from June, 2009 to March, 2014 mainly on the ground that there is unrealistic electricity consumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur, the answer given by IIT, Kanpur in negative (Annexure-5 to the memo of the petition). v. Right from 2003 onwards, in not a single matter decided by the Commissioner or by the Tribunal or by any adjudicating authority, the department has produced Dr. N.K. Batra for cross examination by any assessee in whole of India. Nobody knows the authenticity of Dr. N.K. Batra's report. Nobody is error proof authority much less Dr. N.K. Batra. Hence, his cross examination is must. His report is not a conclusive piece of evidence as per Indian Evidence Act, 1972. vi. Several decisions have been given by the Tribunals which have been confirmed by the High Courts that electricity consumption alone if adopted as a basis of the demand, the same is not tenable.The respondents can take the electricity consumption pattern as a corroborative piece of evidence, but, in absence of substantive proofs like- (a) Details about the purchase of the raw material within the manufacturing units and no entries are made in the books of account or in the statutory records. (b) Manufacturing of finished product with the help of the aforesaid raw material, which is not mentioned in the statutory records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posal. vii As no adequate opportunity of being heard has been given to the petitioner, there is violation of principles of natural justice, hence, this writ petition is entertained at this stage. It has been held by Hon'ble Supreme Court in the case of 'Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai & Ors', reported in (1998) 8 SCC 1, in paragraph no. 14 and 15, which reads as under:- "14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for "any other purpose". 15. Under Article 226 of the Constitution , the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not norm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds upon the fact whether the noticee is utilizing obsolete machinery or modern machinery. Dr. N.K. Batra might have carried out experiment in a factory where there may be efficient machinery, whereas machines used by the noticee may not have the same efficiency. Therefore, cross examination of Dr. N.K. Batra is must. Department can use the report of Dr. N.K. Batra's as the guidelines and nothing beyond that. Department has to bring its own experts at the factory premises of the noticee. Department must carry out an experiment of the consumption of the electricity at the manufacturing place of the noticee either for 1 MT or for 1000 unit etc. so that, the electricity consumption pattern can be measured for the very same machinery and thereafter it can be compared with the quantity of the finished products mentioned, in the books of accounts, with the electricity bills of the noticee. This exercise is must before issuing the show cause notice by the respondent-department ,whenever the department is levelling allegation of clandestine removal on the basis of electricity consumption pattern. Instead of doing this exercise, straight way, Dr. N.K. Batra's report has been relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants' cases to work out the excess production. This approach is flawed and does not have sanctity. 21. The law is well settled that the electricity consumption cannot be the only factor or basis for determining the duty liability that too on imaginary basis especially when Rule 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Therefore, there can be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what is alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained." (emphasis supplied) x. The aforesaid decision has been upheld by the Division Bench of Allahabad High Court in a decision reported in 2010(1) taxman.com 342(Allahabad) and SLP preferred against the said decision has also been dismissed by the Hon'ble Supreme Court. Thus, the report of Dr. N.K. Batra has been several times, criticized by various adjudicating authority vis-a-vis clandestine removal and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T of steel ingots: (i) 555 to 1046 (KWH/T) as per Dr. Batra's report; (ii) 1800 KWH/T as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India; (iii) 1427 KWH/T as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv) 650 units to 820 units/MT as per the Executive Director, All India Induction Furnace Association, New Delhi; (v) 851 units/MT in the case of Nagpal Steel v. CCE, Chandigarh reported in 2000 (125) E.L.T. 1147". (emphasis supplied) In view of the aforesaid electricity consumption report, per tonnage, it appears that the variation is from 555 units to 1800 kWH/Per Ton. This is mainly because of the nature of the machinery utilized by the noticee. Looking to the facts of the present case, the electricity consumption pattern as has been given in Annexure- RUD-7, as stated in paragraph 4 of the show cause notice, which is at page no. 63 of this memo of writ petition which reveals that this petitioner has consumed electricity absolutely in consonance with the report given by Joint Plant Committee, constituted by the Ministry of Steel, Government of India and for few months it is even less than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by the noticee, then these statements ought to have been reduced in writing and they must be referred in the show cause notice. Copies of the gist of the statements should be given to the noticee and those employees must be kept ready for cross examination. This type of procedure ought to have been followed by the respondents- department. Instead of doing this exercise, allegation has been levelled that there is low remuneration paid by the noticee, is not sufficient at all. 7. The Order-in-Original is based upon mere presumptions and possibilities, and, nothing has been proved at all by the respondents, especially unaccounted manufacturing of M.S. Ingots and the clandestine removal thereof. 8. The documents which are referred to in the show cause notice and relied upon, should have been supplied to the petitioners. These documents are:- Nucleus Group report and All India Induction Furnace Association Report. These documents have been referred in the show cause notice dated 01.08.2014 ( Annexure-1). Imaginary is the basis of the show cause notice and without proof, the Order- in-Original has been passed in the same breath. 9. We, therefore, quash and set aside the Order-in- O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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