TMI Blog2017 (7) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account 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 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. 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. 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. The document has been referred in the show cause notice dated 7-2-2014 (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. The matter is remanded for adjudication of the show cause notice dated 7-2-2014 and the matter will be decided afresh - Petition allowed by way of remand. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notice is issued upon presumptions and surmises about unaccounted manufacturing of M.S. Ingots and clandestine removal of the final product and nothing has been proved by the 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-F, as referred in para 5 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 2009 (237) E.L.T. 674 (Tri.) in the case of R.A. Casting (Private) Ltd. v. 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof has been given to the Counsel for the respondents. (b) M/s. Madhura Ingots Steel Co. Pvt. Ltd. Order-in-Original : 07/ Central Excise/commr/2015, dated 19-5-2015. (c) M/s. Jagannath Cement Works Pvt. Ltd. being Order-in-Original : 31/De novo/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 petitioner 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 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 v. 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 Orders-in-Original are passed as stated hereinabove, droppin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve also been dealt with in detail, in the Order-in-Original. Very meager amount of salary has been paid by this petitioner to his employees, there is a loss caused to the petitioner since long, still they are continuing in the manufacturing activities and the petitioner is showing profit in their profit and loss account by showing the profit from the non-core activities and no satisfactory explanation has been given by the petitioner. These aspects of the matter have been mentioned in detail in the Order-in-Original and hence, this Court may not entertain this writ petition. 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 27-2-2015/13-3-2015 (Annexure-3 to the memo of this writ petition) mainly for the following facts and reasons : (i) Show cause notice was given by the respondents on 7-2-2014 for the period running from January, 2009 to September, 2013 mainly on the ground that there is unrealistic electricity consumption, high cost of production vis- -vis income from sale, unrealistically low amount of expenditure towards salary of employees a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption 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. (c) Quantity of the manufacturing with reference to the capacity of production by the noticee unit. (d) Quantity of the packing material used. (e) The total number of the employees employed and the payment made to them. In this case, statements of the labourers ought to have been reduced in writing, by the department which ought to refer that over and above of the salary paid by the noticee, some other type of remunerations, in cash or kind have been paid by the noticee, such statements are must. (f) Ostensible discrepancy in the stock of raw materials and the finished product. (g) Clandestine removal of goods with reference to entry/exit of vehicles like trucks etc. in the factory premises. (h) If there is any proof abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind. Violation of either of them could in the given facts and circumstances of the case, vitiate the order itself. Further, the High Court of Gujarat, in the case of Vadilal Gases Ltd. v. Union of India, reported in (2015) 64 Taxmann.com 56 (Gujarat) = 2016 (332) E.L.T. 625 (Guj.), in paras 10 and 11, has held as under :- 10. At this juncture, reference may be made to the decision of the Supreme Court in the case of Asstt. Commissioner of Commercial Tax v. Shukla and Brothers (2010) 4 SCC 785 on which reliance has been placed by the Learned Counsel for the petitioner wherein the Court has held that the principles of natural justice has twin ingredients; firstly the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing; and secondly, the orders so passed by the authorities should give reasons for arrivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 also depends 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 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel 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 applied to the appellants 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 consumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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, which can be followed thereafter and the Revenue in the present case 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 alleged 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) (ix) The aforesaid decision has been uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 laying down the norms for the consumption of electricity for the manufacture of one MT 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars 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. If the employees are stating that they are getting more remuneration than what is shown in the books of account 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 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 doc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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