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TMI Blog2019 (12) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, Shri Pankaj Agarwal under Rule 26 of the Central Excise Rules, 2002. 2. In brief, the appellant is the manufacturer of M.S Ingot and TMT Bars falling under Chapter 72 of the First Schedule of the Central Excise Tariff Act, 1985. The officers of DGCEI, Regional Unit, Raipur visited the factory premises of the appellant on 31.01.2014 and found that there is no stock of raw material (Sponge Iron, Pig Iron, Ferro Silicon, Silico-Manganese, Scrap MS Ingots, MS billets) and finished products (MS Ingots, TMT Bars, Runners & Raisers, End Cuttings). During the search of the factory premises, the records of production and clearances of the excisable goods like the Daily Stock Account, the raw material Account Register, the Sale invoice Book etc. were not found. No incriminating documents were found by the officers during the search of the Factory, City office and the business premises at Kabir Nagar, Raipur. Shri Pankaj Agarwal, Director of the company informed the officers that the power connection of the factory was terminated by the Chhattisgarh State Power Distribution Company (CSPDCL) since the month of July 2013 on account of their failure to clear the electricity charge dues. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance of such quantity fake invoices were shown. 5. Similarly, demand of duty against 620.660 MT of Slag was demanded. The show cause notice dated 04.05.2016 was issued for demand of duty amounting to Rs. 3,34,93,077 in respect of clearance of 8085.320MT of TMT Bars cleared without payment of duty by the appellant prior to July 2013. Similarly demand of duty on 620.660MT of quantity of slag amounting to Rs. 3, 83,568 has been demanded on the same ground. Accordingly, Show Cause Notice dated 04.03.2016 issued to the appellant for demand of the Central Excise Duty which is totally based on two products namely; TMT Bars and Slag. The said demand was adjudicated by the Ld. Commissioner and the Ld. Commissioner has confirmed demand of Duty, penalty and interest as stated above. 6. Heard Learned Counsel, Anurag Mishra and Aditi Seetha on behalf of the appellant. They have submitted that the entire demand is based on the closing balances shown in the ER-1 and ER-6 return. The entire show cause notice is based on inconsistency and the department is taking two stands while calculating the duty on the said finished goods. The department is demanding duty on TMT Bars and Slag only wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (of 91.07%) or conversion of M.S Ingot to TMT bar has been derived from Form IV Register for the month of June 2013. Therefore by applying the yield percentage, the said demand has been raised against the appellant. This entire demand is based on one raw material i.e., Sponge Iron. It is presumed by the officers that this Sponge Iron is being used for the manufacturing of M.S Ingots and subsequently these M.S Ingots were used for manufacturing of TMT bars. As a matter of fact, M.S ingots cannot be alone manufactured from Sponge Iron only. For manufacturing of M.S Ingot, other raw materials such as Pig iron, Cast Iron Scrap, Mild Steel Scrap, Ferro Alloys etc. are also essentially needed. The conclusion of the department that 5396.980MT of M.S Ingots were manufactured out of 6371.130MT of Sponge Iron is not sustainable and not practically possible. Once the manufacturing of M.S Ingot has not taken place, question of manufacturing of 4915.030MT of TMT bar is not maintainable in the eyes of law. Therefore demand of duty of Rs, 2, 86, 17,242 which is based on average yield production for the month of June 2013 is not maintainable at all. 6.3 They further submitted as a matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removal cannot be held sustainable as far as the demand of Rs. 2,86,17,242/- is concerned. The only basis that has been relied upon in the show cause notice to prove the charges of alleged clearance is the statement of Shri Pankaj Agrawal. It is well settled principle of law that serious allegation of clandestine removal has to be adduced by illicit purchase of raw materials, use of the said raw materials for manufacturing of goods, transportation of such raw materials and sale of such illicit goods and receipt of payment of such clearances in cash. The Ld. Advocate has submitted that the only evidence which has been relied upon by the Department is the statement of Shri Pankaj Agarwal who has simply provided the yield of production of a particular month which cannot be uniformly applied for the entire period of demand. Such a statement has to be corroborated by purchase of raw material, consumption of electricity, sale of goods, transportation of such goods and receipt of payment in cash from such buyers. These clinching evidences are completely missing as far as this demand is concerned. The Hon'ble Allahabad High Court in case of Commissioner of CUS., C.E, S &T, Ghaziabad versus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elves with the state transport department, but it does not mean that they are inoperative. Therefore only on the basis of transport inquiry, it cannot be concluded that the said transport vehicles are non-existent. 6.5 The Ld. Advocate further submitted that even otherwise out of 27 transporters, the department has obtained statements only from 7 transporters who have stated that they have never transported the alleged goods. The department should have made inquiries from all the transporters or should have made efforts to take the statement of all the transporters, which has not been done in the present case. The appellant asked for the cross-examination of the said transporter(s) out of which only 2 appeared for cross-examination. Therefore on the basis of deposition of said transporter(s) it cannot be concluded that the vehicle used in transportation are not capable of transporting the said goods or the said vehicles are non-existent. The department has also failed to make any inquires from the buyers to whom goods have been sold during the period of 08.01.2014 to 10.01.2014. No efforts were made by the department to ascertain whether they have received the goods from the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the yield of production was in respect of only a particular month which was uniformly applied for entire demand of Central Excise Duty. At no point or stage, Department has able to prove that the appellant during the relevant period was having electricity connection to manufacture M.S Ingots and TMT Bars. It is an admitted fact that for the period the demand has been raised, the appellant did not have any power connection. Department has also failed to produce that there is any other alternate source of power to manufacture those goods. In such a situation, it is very clear that the entire demand is based on mere average yield of production and no concrete evidence to manufacture the alleged goods has been brought on the record by the department. The statement which has been relied upon by the department is only in respect of month of June 2013 which is uniformly applied for calculating the demand. It is a settled law that the charges of clandestine removal cannot be based on some formula as already held by the Hon'ble Rajasthan High Court in C.C.E Udaipur vs. Mittal Pigments Pvt. Ltd. reported at 2018(16)G.S.T.L 41. It is a well settled principle of law that charges of clandestine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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