TMI Blog2023 (11) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... e per cycle. HELD THAT:- From an analysis of the facts, it would appear that correlation of certain factors concerned with production do not suffice for establishing the extent of evasion, if any; at best, these aspects may corroborate the allegation of clandestine removal of evasion of duties of central excise. Doubtlessly, evidencing of clandestine removal must rest upon preponderance of probability as direct evidence is rarely possible, but interferences must indicate both probability and preponderance. Normally, it should happen that goods that have reached the market are traced to the assessee through a backward trail or raw materials that originated from a source be traced through forward trail to assessee. Ideally, both should converge but, for the purpose of ordering clandestine removal, one or the other would suffice; that is the true spirit of preponderance of probability - In the present instance, there are no whiff of the former whereas of the latter, there is free floating evidence of procurement of sponge iron and BP sets by the assessee; nonetheless, the trail of investigation for linking delivery of alleged procurement of these raw materials and consumab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l input is electrical energy. 3. Shortage of finished products and inputs on which CENVAT credit had been availed were noticed during visit of officers of central excise on 17th November 2005 which was regularized promptly by discharge of differential duty and reversal of credit. That was also the starting point of investigations that culminated in issue of show cause notice dated 7th October 2008 for recovery of duties not paid on clearances effected between March 2003 and December 2007 which appeared to have been prompted by two factors: the replacement of electrotherm furnace with 5 MT capacity that was in place since February 1998 with a inductotherm furnace of 7 MT capacity in May 2005 that necessitated additional sanction of load from the Maharashtra State Electricity Board (MSEB) mandating record of daily consumption of electricity which was obtained on 19th June 2008 and, in accordance with statutory procedure then in vogue, the monthly production return filed with the Joint Plant Committee (JPC) which, for June 2006, reported capacity of 22000 MT. According to the impugned order pertaining to the first notice, the disproportionately high consumption of electricity c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of normative data, to have been utilized for manufacture of 678.470 MT of the finished product involving duty liability of ₹14,74,357 from 797.64 MT of raw material. Taking note of three movements of 122.255 MT, attributed to the assessee in accounts maintained by one of their transporters but not accounted for in production records, it was concluded that duty of ₹ 3,94,344 had been evaded. 6. These six appeals, arising from the same charge of clandestine removal of mild steel (MS) ingots in September 2003 - December 2007, January 2008 - August 2008 and September 2008 July 2009, have been at the instance of M/s Shree Steel Castings (P) Ltd and Shri Manoj Maheshwari insofar as the first and last are concerned and of Revenue for the second in which the order of Commissioner of Central Excise Customs (Appeals), by placing reliance on the decision of the Tribunal in Mohan Steel v. Commissioner of Central Excise (Appeals), Nagpur [2004 (177) ELT 668 (Tri-Del)], set aside the recovery of ₹ 98,83,000 along with attendant penalties even as the order of Commissioner of Central Excise Customs, Nagpur challenge the culmination of proceedings that, though commenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loys indicating actual production by 4346.150 MT with duty liability of ₹ 6,43,30,468.86 thus evaded. 8. The charge mix was examined and the role of scrap , as source of pig iron , was factored in to conclude that, against 5038.67 MT of scrap declared to have been received in 2003-04, 8784.058 MT of scrap had arrived at the factory without being accounted for with ingot yield of 7466.40 MT. Taking the charge mix proportion for 2004-05 and 2005-06, it was concluded that, against declared receipt of 3789.24 MT and 5475.805 MT in 2004-05 and 2005-06, 111052.66 MT and 10426.195 MT of scrap had not been accounted for and, thus, concealed production of 9394.77 MT and 8862.27 MT of steel ingots during the said period. It was alleged that the records mandated by trade notice no. 771/4/2006/Tech dated 23rd February 2006 had not been maintained to facilitate unaccounted receipts and removals which also prevented proper stock verification, that the selling price of ingots was less than the cost of production and the loss offset by other income which could be attributable to revenue from illicit transactions; it was recorded in the notice that none of the persons con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed in order [ order-in-original no. 36/2009/C dated 29th December 2009 ] of Commissioner of Central Excise Customs, Nagpur by adopting the computation in the first of the adjudications leading to appeal by assessee and Shri Manoj Maheshwari. 13. Learned Counsel for M/s Shree Steel Casting (P) Ltd and Shri Maheshwari contented that the determination of evasion was not based on law for having relied upon a presumptive scale of production based on a minor input, viz., ferro alloy without any rational justification and by erroneous interpretation of a statement of their melter, one Muniraj Singh Sengor. It was further contended that, in the impugned statement of the melter, the assertion of deployment of 10-12 kg for each ton of ingot was ignored by the central excise authorities. Relying upon the standard input output norms (SION) the only authoritative determination in exercise of statutory empowerment vested in the Central Government in the Foreign Trade Policy (FTP), it was submitted by Learned Counsel that the input of 15 kg of ferro alloy , i.e. silica manganese, finds support in the technical opinion of Visveswariya National Institute of Technology, Nagpur th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed to established suppression of production inferring from the use of significant inputs and consumables as well as alleged procurement of consumables and sponge iron that were kept out of the records at the factory. The consumption of energy, the production capacity of installed equipment, the procurement of sponge iron and the purchase of BP sets , though not deployed for determining the extent of suppressed production, have been exhibited to corroborate under-recording of production. The actual requirement of ferro alloys was ascertained in statements recorded during the investigation and this was applied for computation of actual production. Hence, leaving aside, for the moment, the circumstantial proof of having indulged in such conspiracy, the appropriateness of the computed duty liability must needs be evaluated. 16. In re Ghodavat Pan Masala Products Ltd, it was held by the Tribunal that 14. After hearing rival submission, perusal of the records and the case laws relied on by both the sides, we find that the demand of the department is based only on theoretical calculation of PLR which is not the main input of the appellants. The main product of appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-10-2000. The Tribunal had remanded the matter as the evidence produced by the Appellants from independent manufacturers and others was not examined properly and when the assessee had stated that power consumption may be taken as a factor for determining the quantum of final product the Commissioner had observed use of electricity which was not recorded in the bills without making such an allegation in the show cause notice. The defence of the Appellants before us is that the power used by them is only sufficient to manufacture the quantity of ingots/billets recorded by them in their records and the Commissioner has come to the conclusion that the Appellants had managed the manipulations of meter reading. The Commissioner has confirmed the demand on the basis that 9 kgs of ferro alloy is sufficient to manufacture one M.T. of ingots/billets. The Appellants have contended that the entire case of the Department is only on the basis of assumptions and presumptions whereas the contention of the Revenue is that the duty has been confirmed on the basis of statements of melters and other officials of the Appellants company and records. After considering the various submissions made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants have brought on record a certificate dated 26-12-96 issued by the Divisional Engineer. Electricity Distribution Division, Unnao which mentions as under :- On the basis of the reports/raids conducted from 1988 till date of metering arrangement checks on USEB 33/11KV Sub-station at Mohan Steels Ltd., Unnao; manned by the employees of the Board for 24 hours, it is very clear and apparent that the metering arrangements were always found in order and there were no possibilities of electricity theft or pilferage of power. 9.2 The Divisional Engineer of Electricity Board, thus, rules out any manipulation of electric meter as the metering arrangements were always found in order . The Commissioner has disregarded this certificate by merely observing that the certificate had been issued on the request of the Appellants only; it also gives an indication that no irregularity was noticed during the time of raids; this certificate cannot be interpreted to mean that there could be no possibility of irregular use or manipulation. On the basis of such findings it cannot be claimed by the Revenue that the Appellants have indulged in a systematic manipulations of record of power con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also brought on record the Input-Output ratio fixed by the Ministry of Commerce for Import-Export purposes. As per these norms also Silico Manganese required is 15 kgs. and Ferro Manganese 10 kgs. In view of this the Revenue cannot proceed on the assumption that only 9 kgs. of ferro alloys is required for manufacture of one ton of billet merely on the statement of melters. The Revenue has not verified the contention of the Appellants that ferro-alloy is also added at the stage of ladle and concast. As observed earlier, the Revenue has also not made any investigation in respect of another most vital raw material that is M.S. Scrap/Sponge iron. It has been held by the Tribunal in the case of Amba Cement Chemicals, supra, when the Revenue alleged the clandestine manufacture of cement on the basis of formula for use of lime stone per ton of cement; that No investigation is conducted in respect of other raw-materials such as coal, gypsum and clay which are also required for manufacture of cement... As no investigation is conducted in respect of other raw materials which are essential for the production of cement, therefore, the demand on the basis of that appellants suppressed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natural justice will be strictly followed and thereafter, the authority will pass a reasoned order and if any cross examination is not allowed, the authority will pass a reasoned order for not granting cross examination. iii. The parties will appear before the original authority/ Commissioner on 16.4.2018. The Authority will try to complete proceedings within four months. iv. If any amount which has been paid by the assessee, the same will be kept in Suspense Account. In case the appeal is not heard within four months from 2.4.2018, the amount will be refunded on 1.9.2018. However, it is made clear that if any adjournment is taken by the assessee, that period will not be counted in the period of four months. v. If the authority is not in a position to complete the proceedings within 120 days then he will be required to refund the amount deposited. xxxxx 13. The order of the tribunal and order in original are quashed and set aside. Dismissal of appeal filed by department will not affect the passing of adjudication order on merits. After original order is passed, it will be open for the department to pass appropriate order with respect to penalty in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal. in re Arya Fibres Pvt Ltd which does not appear to have been adhered to in the impugned order. 19. From an analysis of the facts and judicial pronouncement supra, it would appear that correlation of certain factors concerned with production do not suffice for esta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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