TMI Blog2016 (11) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any of the committee's report for electricity consumption pattern always leads to arbitrariness on the part of the respondent-department - Petition is allowed by way of remand. - W. P. (T) No. 939 of 2016 - - - Dated:- 31-8-2016 - D. N. Patel And Ratnaker Bhengra, JJ. For the Petitioners : Mr. Sumeet Gododia, Advocate For the Respondents : Mr. Deepak Roshan, Advocate ORDER Per D. N. Patel, J. 1. This writ petition has been preferred challenging the show-cause notice dated 01.08.2014 (Annexure-1), issued by the Commissioner, Central Excise and Service Tax, Ranchi as well as the Order-in-Original passed by the Commissioner, Central Excise and Service Tax, Ranchi dated 22.03.2016 ( Annexure-14), mainly on the ground that the show cause notice has been issued on presumption and surmises. The highest case of the department is that there is some possibilities of clandestine removal of the M.S. Ingot, which is a final product of this petitioner. 2. Factual matrix: ● This writ petitioner is manufacturing M.S. Ingot from sponge iron and they are manufacturing M.S. Ingot since long. ● Show cause notice dated 01.08.2014 was given by the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents. Only on the basis of presumptions, the show cause notice has been decided. The consumption of electricity pattern which is referred in the show cause notice as well as in the Order-in- Original, is absolutely baseless. It is submitted by the counsel for the petitioner that looking to Annexure -RUD-7 as referred in para 4 of the show cause notice, reveals the electricity consumption per M.T. , which is absolutely in consonance with the report given by the Joint Plant Commissioner constituted by the Ministry of Steel, Government of India and as per this report, the consumption can be 1800 KWH/T ( as referred in paragraph no 20 of a decision reported in 237 ELT 674 in the case of R.A. Casting (Private) Ltd. Vs. CCE, case. Thus, there is no scientific survey carried out by the respondents which can lead to conclusive evidence of unaccounted manufacturing of M.S. Ingots and clandestine removal thereof. ● It further submitted by the counsel for the petitioner that Dr. N.K. Batra's report has been referred every now and then, since 2003 onwards, by the respondents and there are no less than one dozen judgments in which it has been observed right from the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Batra report has been referred and relied upon, for proving clandestine removal of the finished products, in the show cause, ultimately in the Orders-in-Original, the show cause notices have been dropped by the adjudicating authority itself. The similarly situated cases are as under:- a. Globe Steel Alloys Pvt. Ltd, the Order-in- Original :02/Central Excise/commr /2015 dated 31.03.2015, copy whereof has been given by the counsel to the counsel for the respondents. b. M/s. Madhura Ingots Steel Co. Pvt. Ltd. Order-in-Original:07/ Central Excise/commr/2015 dated 19.05.2015. c. M/s. Jagannath Cement Works Pvt. Ltd being Order-in-Original:31/Denovo/Commr/2015 dated 15.12.2015. d. M/s. Kamsa Steel Pvt. Ltd. being Order-in- Original:33/ commr/2015 dated 21.12.2015, and several other orders, copies of which have been given to this Court and given to the respondents. ● On the basis of aforesaid decisions, it is submitted by the counsel for the petitioners that electricity consumption pattern, is useless argument, on behalf of the respondents. Every now and then, such argument has been canvassed, in the Order-in-Original and the first adjudicating authority has dro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on salary of employees and manufacturing activity incurs losses and still petitioner no.1 continues, whereas in the profit loss account from the non-core activities, profit has been shown by manipulating books of account. In detail, consumption of electricity pattern has been mentioned in Annexure- RUD-7, which is referred in paragraph-4 of the show- cause notice. Similarly, other grounds have also been dealt with in detail, in the Order-in-Original. Very meager amount of salary has been paid by these petitioners to their employees, there is a loss caused to the petitioner No.1 since long, still they are continuing in the manufacturing activities and the petitioners are showing profit in their profit loss account by showing the profit from the non-core activities and no satisfactory explanation has been given by these petitioners. This aspect of the matter has been mentioned in detail in the Order-in-Original and hence, this Court may not entertain this writ petition. ● It is further submitted by counsel for the respondents that time and again opportunity of being heard was given to the petitioners, approximately for more than half dozen times, but, the petitioners ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Service Tax, Ranchi that the noticee has not given any reply, thus, it appears that no adequate opportunity of being heard has been given to these petitioners. iv. Counsel appearing for the petitioners has relied upon several decisions, as stated herein above. It ought to be kept in mind by the respondents that the electricity consumption pattern can be a corroborative ground and not a substantive ground at all. Thousands of possibilities cannot be equated with one truth. The grounds, which are referred in the Order-in-Original, are in fact leading the respondents towards the highest probabilities and nothing beyond that to suspect that there is clandestine removal of the finished product by the noticee. Nonetheless, for exact proof of unaccounted manufacturing of finished products and for clandestine removal thereof, more labour was required to be done by the respondents. It has become fashion with the respondents-department to rely upon a document, since 2003 onwards, which is known as report given by Dr. N.K. Batra, so-called Professor of IIT, Kanpur. When IIT, Kanpur is inquired by these petitioners whether such report has ever been given by IIT, Kanpur, the answer given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the respondent-department, if at all, they are interested in collection of the correct central excise duty from the noticee upon whom or upon which allegation of clandestine removal of the finished product is levelled. The electricity consumption report like Dr. N.K. Batra report can hardly be treated as a substantive evidence. Time and again, the decisions have been given by the tribunals but the respondents- departments are turning deaf-ear to. In this case, they are also turning deaf-ear to their own circular dated 26.06.2014 (Annexure-3 to the memo of this writ). In this case, the respondents are relying upon Dr. N.K. Batra's report, also upon the allegation that much less salary has been paid to the employee and the unit is running in losses. All these are nothing but the possibilities, for clandestine removal, but, for proving the clandestine removal, the substantive piece of evidence is must. Few such evidences have been referred by this Court. The list of these evidences is not exhaustive:- (i) The department should have collected the proof of amount received from the consignees, statement of consignees, receipts of sale proceeds by the consignor and its disposal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoval of finished product viz M.S. Ingots by the petitioners. ix. The respondents have also been given time and again the guidance by various decisions that whenever they are relying upon the electricity consumption pattern, experiment in the very same unit ought to have been carried out for manufacturing of 1 MT of the finished product or for at least 1000 such unit, if any other product is involved, so that average consumption of electricity can be accurately measured by the respondent-department. Electricity consumption, which is based upon Dr. N.K. Batra's report is absolutely useless, with reference to the units for which allegation is levelled for clandestine removal without carrying out any experiment of consumption of electricity in the very same unit. Hence, we, hereby direct the respondents, henceforth not to use Dr. N.K. Batra report against any noticee especially when the department is levelling allegations of clandestine removal of finished products, unless, the experiment of consumption of electricity is carried out at the factory premises of the very same assessee/noticee. The consumption of the electricity depends upon the efficiency of the machines also. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no tax can be levied on the basis of estimation. In this case, there is added problem. Estimation of production fluctuates widly depending upon the fact as to which report is adopted. Tax is on manufacture and it is to be proved beyond doubt that the goods have been actually manufactured, which are leviable to excise duty. Unfortunately, no positive evidence is coming on record to that effect. Article 265 of the Constitution of India says that no tax shall be levied or collected except by authority of law. Unless the manufacture of the steel ingots is proved to the hilt by authentic, reliable and credible evidence, duty cannot be demanded on the basis of hypothesis and theoretical calculations, without taking into consideration the ground realities of the functioning of the factories. High consumption of electricity by itself cannot be the ground to infer that the factories were engaged in suppression of production of steel ingots. The reasons for high consumption of electricity in the case of the appellants' factories have not at all been studied and analysed by the Revenue independently. Instead, the norm of 1046 units fixed as per Dr. Batra's report has been blindly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing case laws are relied: (i) Emmtex Synthetics Ltd. v. Commissioner of Central Excise, New Delhi reported in 2003 (151) E.L.T. 170 (Tri.- Del.); (ii) Commr. of Central Excise, Chennai v. Dhanavilas (Madras) Snuff Co. reported in 2003 (153) E..T. 437 (Tri.-Chennai); (iii) Commissioner of Central Excise, Madurai v. Madras Suspensions Ltd. reported in 2003 (156) E.L.T. 807 (Tri.- Chennai); (iv) Commissioner of Central Excise, Coimbatore v. Sangamitra Cotton Mills (P) Ltd. reported in 2004 (163) E.L.T. 472 (Tri- Chennai); (v) Commissioner of Central Excise Coimbatore v. Velavan Spinning Mills reported in 2004 (167) E.L.T. 91 (Tri.- Chennai); (vi) M. Veerabadhran and others v. Commissioner of Central Excise, Chennai-II reported in 2005 (182) E.L.T. 389(T)= 2005 (98) ECC 790 (T). 23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also available in this country, which are as under:- (a) Dr. N.K. Batra's report (b) Report by Joint Plant Committee constituted by the ministry of steel, Government of India. (c) Report of NISST, Mandi Gobindgarh given in June-July, 2006. (d) Report of Executive Director, All India Induction Furnace Association, New Delhi, and all these reports say different electricity consumption, per ton. These facts have been referred in paragraph nos. 19 20 of the decision reported in 237 ELT 674 and the same reads as under :- 19. The main question to be decided in the instant appeals here is whether the appellants during the period December 2001 to March, 2005 have actually manufactured M.S. Ingots in excess of what has been recorded in their statutory records and removed the said quantity clandestinely from their factory without payment of duty. The excess production has been worked out on the basis of electricity consumption for which the standard norms are imported from report of late Mr. N.K. Batra, Professor of Material and Metallurgical Engineers, IIT Kanpur. 20. We find that the following reports have been referred to either by the appellants or the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legation levelled in show cause notice and ultimately after adjudication, the show cause notice has been dropped. Thus, without experiment is being carried out at the premises of the noticees, use of any of the committee's report for electricity consumption pattern always leads to arbitrariness on the part of the respondent-department. Whenever arbitrariness is present, equality is absent. Equalities and arbitrariness are strong enemies of each other. When equality is present, arbitrariness is absent. 6. Hence, this Court is remanding the matter to the Commissioner, Central Excise Service Tax, Ranchi. This Court is not much going into detail of further arbitrariness in the Order-in-Original about the lower remuneration to the employees of the petitioner no. 1 as well as the manufacturing unit is running in loss and the profit is made from non-core activities etc. There appears to be very high sounding reasons, but, if they are viewed with zoom lens camera, it appears that nothing is proved by the respondents. Low remuneration is a relative word and therefore, statement of the employees of the noticee, ought to have been reduced to writing by the respondents- department. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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