TMI Blog2018 (5) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the appellant - further, it is an admitted fact that the appellants have disclosed higher percentage of production and less percentage of scrap plus burning loss, during the periods under consideration and accordingly, adverse inference drawn by revenue on assumption and presumption is not tenable. Thus, duty- of ₹ 1,54,58,307/- is set aside. Demand of ₹ 25,52,260/- relating to disallowance of captive consumption of inputs/ semi finished goods - Held that: - the same is also based on the presumptions, that these were actually converted into forgings, but were used for repair of plant and machinery and manufacture of tools, dies & fixtures, etc. - there is no proper basis for such presumption and the denial of benefit of exemption under Notification No.67/95-CE, is only on the basis of suspicion - demand of duty of ₹ 25,52 260/- is not tenable and the same is set aside. Demand with respect to alleged shortage in the stock of raw materials, scrap and finished goods on the date of inspection - Held that: - there is no calculation sheet and/or weighment slips available on record. From perusal of panchnama, it is the evident that the physical verification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on job work basis, Though the appellant have the facility for cutting and manufacturing of rough forgings, machined forgings and flanges, but due to insufficient capacity, raw material is also sent to various job workers for carrying out different processes like cutting of rough material, manufacture of rough forgings and rough machining. All goods are sent to job workers under cover of job work challan. Different job workers carry out different processes. On 12 th May, 2006 there was a search or inspection in the manufacturing premises of the appellant, the residential premises of izs director, (Shri B. K. Agarwal), the premises of Eve raw material suppliers and the job workers of the appellants. In the course of physical verification in the factory of the appellant, the officers allegedly noticed some shortages in the stock of raw material, scrap and finished goods, involving Central Excise duty of ₹ 12,20,388+cess. The director of the appellant Shri Brijesh Kumar allegedly admitted the shortage and deposited the sum of ₹ 8 lakhs vide TR-6 challan dated 29.05.2006 and ₹ 4,20,388/- vide another TR-6 challan dated 05.07, 2006 and ₹ 24,408/vide another TR-6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents from the Excise Department in respect of such dispatches. Therefore, he had mentioned the said remarks himself against the respective entries. Further, register at Sl.No.64 (Private record) resumed from the factory premises, bearing the heading 'Forging R.G.P. and contains entries for the period from 17.11.2005 to 23.01.2006. The said register was compared with the job work register and the registers at Sl. No.55. The dispatch particulars in the job work register were found tallying with the particulars in the said two registers. Some discrepancies in the dates of receipt of material were noticed in a few stray cases and in some cases, the weight of the goods received back was apparently different. On the basis of these few stray cases of discrepancies between the job worker register, registers at no.55 and 64, it appeared to revenue, as alleged in the SCN, that since the three registers do not tally as far as receipt of goods, after job work, this alone appears to indicate that there could be situations where the goods were issued/ sent for job work but not received back and that the goods shown as received in job work register, but not reflected as received in register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were cleared clandestinely, without payment of duty. Accordingly, it was alleged, that 487.882MT of raw materials issued (allegedly in excess) for job work were not received back, nor accounted for and 1173, 107 MT of rough forgings were also not accounted form The duty for the year 2004-05 to 2006-07 had been calculated and demanded ₹ 1,54,58,307/- plus cess. It also appeared that for the years 2004-05 to 2006-07, the RG-4, form-IV and daily stock account of the appellant indicated that certain quantity of raw materials and rough forgings were shown issued under the heading 'others'. In his statement dated 19.03.2008, Shri Pathak stated that during the period 2004-05 and 2005-06, a quantity of 104.385 MT and 185.140 MT respectively of raw material was used for captive consumption. It was converted into forgings weighing 93.955MT and 166.620MT and were billed for repair of plant and machinery and for manufacture of tools, dies and fixtures. The said goods have been cleared or used captively under exemption Notification No.67/95-CE. In respect of the said goods, it was alleged that there was no evidence of manufacture of tools, dies fixtures etc., as claimed out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corpn, Ltd. reported at 2004 (165) ELT 257 (SC) and also in the case of M/S Tega India Ltd. Vs Commissioner reported at 2004 (164) ELT 390 (SC), Further, he stated that the impugned order has been passed without hearing the appellant. The learned counsel for the appellant was prevented by sufficient cause, to appear before the learned Commissioner. Further, he submitted that rejection of request for adjournment on a bona-fide ground is bad and hit by the ruling of Hon'ble Supreme Court in the case of M/S Salem Advocates Bar Association Vs Union of India reported at V (2005) STL 653. Further, the impugned order is bad for denying the opportunity to cross-examine the panch witnesses, transporters and Shri Nitin Agarwal, Director of M/S Shyam Forgings. It has been repeatedly held by Hon'ble Supreme Court that revenue must examine its witnesses and offer them for cross-examination. It is further contended that the stock verification was done by way of eye estimation only which is evident on the face of record, as there is no record of weighment in the form of weighment slips or a worksheet, etc, It is further stated that cross-examination of Shri Nitin Agarwal, Director of M/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand has been calculated erroneously, as the generation of scrap at the cutting stage (first step in the process of manufacture) has not been taken into account and only the burning loss has been considered, Further, the demand is raised on the presumption that the appellant must have cleared forgings in the garb of scrap without there being any evidence in support of this contention, Further, there is no investigation with regard to the alleged purchasers of the goods clandestinely cleared, the manufacture of excess quantity of forgings, the receipt of consideration for such forgings, and so on. The duty confirmed, being on the basis of bald allegations, in absence of any corroborative evidence, is not sustainable. Further, he placed reliance on the ruling of this Tribunal in the case of M/S Pepsico India Holding Limited Vs CCE 2000 (117) ELT 659 (Tribunal) which was confirmed by the Hon ble Bombay High Court reported at 2008 (232) ELT A 197 Although the input output norms were fixed, however, in all cases duty have been paid by the appellant on the actual production, whether the same was more or less than the prescribed norms. Further he states that the demand of duty based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, in the case of the appellant, as is evident from the records, that the disputed inputs were received by them, entered in the records, issued to production and the finished goods manufactured were duly reflected in the RG-I register and cleared upon payment of duty. Learned Counsel further states that the show cause notice is also bad for invocation of the extended period of limitation, the same being presumptive, based on input output norms. The appellants have been filing regular ER-I returns and have been maintaining the prescribed statutory records. The production of finished goods and generation of scrap was duly reflected in the records of the appellant and the percentage of scrap generated could have been easily verified by the Department. Accordingly, the learned counsel for appellants prays for setting aside the impugned order and allowing the appeals with consequential relief to the appellants. 7. The learned A. R. for revenue has relied upon the impugned order. 8. Having considered the rival contentions, we find that amount of ₹ 1,54,58 307/- has been confirmed towards Excise duty for the period from 2004-05 to 2006-07 on the presumption that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of scrap and burning loss was also verified by Assistant Commissioner in the year 2002 for the purpose of fixing the input/output norms for production of goods for export. The Assistant Commissioner has found that the finished product/ flanges were 46.98% and scrap was 45.70% while burning loss was about 7.32% . Further, we find that it is admitted fact that the appellants have disclosed higher percentage of production and less percentage of scrap plus burning loss, during the periods under consideration and accordingly, adverse inference drawn by revenue on assumption and presumption is not tenable. Thus. duty- of ₹ 1,54,58,307/- is set aside. We find that similar view was taken by Hon'ble Supreme Court in the case of M/S Tega India Ltd. (supra) wherein production had been assumed on iron and steel items, based on standard consumption of electricity. Further, assumptions and presumptions, however strong cannot take place of evidence. 8.1 So far the demand of ₹ 25,52,260/- is concerned relating to disallowance of captive consumption of inputs/ semi finished goods, the same is also based on the presumptions, that these were actually converted into forgings, but we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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