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TMI Blog2023 (11) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... ds on daily basis and further assessed/paid the duty on the excisable goods selectively, removed by them with intent to evade payment of duty. It further appeared that during the period 2004 - 05 till 2007 - 08, the Appellant have availed Cenvat credit fraudulently. Further appeared that during the period 2006 - 07 and 2007 to 08, Appellant have suppressed production and have clandestinely removed MS ingots involving duty of Rs. 5,59,663/- and Rs. 12,02,348/- respectively. It further appeared that Mr. Ram Prasad, Director of the company, who looked after the production, purchase, sales and related financial matters, is liable to penal action. It is also alleged that during the time of visit to the factory by the officers, records relating to receipt, consumption and stock of inputs and finished goods were not made available. Revenue had resumed the records available in the factory during search under panchnama. 3. In response to summons, Appellant had produced records like balance sheets, electricity bills for the period 2006 - 07 and 2007 - 08 and ledgers maintained in 'modi script'. They had stated that they were not maintaining form-4 register. The Appellant unit is located in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of capital goods and not used in the manufacture of dutiable ingots. 7. During the period 2005 - 06, Appellant have utilized raw material weighing 9677.268 MT of sponge iron of different grades, 3870.098 MT of pig iron, 460.94 MT of PCM jam, 33 MT of scrap, 196.775 MT of ingots and 5.77 MT of MS rods, total weight being 14243.851 MT. With the closing balance of 537 MT, production during the year was 8248.94 MT of ingots plus dust sale was shown at 4563.21 MT. On this basis, it was alleged that Appellant have shown bogus sale of dust to cover the clandestine removal of inputs. Further, Appellant have availed Cenvat credit of Rs. 33,26,464/-, in violation of Rule 2(k) read with Rule 9(5) of CCR 2004. Further, Appellant have also availed Cenvat credit of Rs. 3,83,721/- on MS rods and MS ingots, which are not the inputs for manufacture of MS ingots. 8. It further appeared that during the year 2006-07, Appellant have purchased 1726.90 MT of pig iron and PCM jam/scrap, 3856 MT of sponge iron of grade A & B and sponge iron fines, iron lumps. Further, Appellant purchased 143.64 MT of MS Angles/ channels/ coils/ sheets/plates etc., which appeared to be not their inputs and hence, they ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts using coal-based technology and gas-based technology. The percentage of usage of charge mix was maximum 30% in the case of gas based sponge iron, and it may be as high as 80% in case of coal-based sponge iron. The yeild was also higher by 2% in case of gas-based sponge iron. It further appeared that the yield from use of sponge iron would be around 67%. It further appeared that, in the facts of the present case, there was a mix of different grades of sponge iron of B & C and iron ore fines. It appeared difficult to rely on the industry standard. Therefore, to arrive at the approximate yield from a mix of such diverse grades of sponge iron and/or charge mix with pig iron/scrap, the revenue considered the power consumption as parameter. Pro rata yield from low-grade sponge iron was derived to arrive at the expected yield of power consumption based on charge mix. The SCN was adjudicated on contest by the learned Commissioner who was pleased to confirm the demand as follows: (i) Demand for irregular Cenvat credit Rs. 63,16,176/- including cess taken and utilized during the period 2004-05 to 2007-08. (ii) Demand of Rs. 17,62,011/- or (Rs.5,59,663/- + Rs.12,02,348/-) payable on fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of statutory records by the manufacturers with effect from 01/07/2000. The following records have been done away with viz., RG-1, EP-4, RG-23A part 1 and 2. In spite of all this, the Appellant have maintained proper records. Therefore the said allegation is bad and not sustainable. 15. So far as the engagement of Mr. Ravi Kumar, an employee of the power disruption company - APCPDCL, to ascertain power consumption of different units located within the same premises of Shri Shiva Spinning Mills, and on the basis of such report submitted, as well as on an analysis of manufacturing process of MS ingots with respect to quality/grade of the materials used, the production of ingots by the Appellant have been estimated by the revenue after taking into account the industry standards. Such exercise has been held to be bad in law by the Hon'ble High Courts and confirmed by the Apex Court in the case of RA Castings [2011 (269) ELT A108 (SC)], [2009 (237) ELT 674 (Tri- Delhi)]. 16. Further urges, without serving a copy of such report (by Mr. Ravi Kumar) to the Appellant, reliance on such report obtained behind the back of the Appellant is bad in law. On this score alone, the demand raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of capital goods. It is also alleged that such items are not suitable for use in the manufacture of finished goods - MS Ingots. 20. Learned Counsel urges that these goods were not used as raw material in the manufacture of ingots, but were used in the manufacture of capital goods/accessories which are further used in the factory of production. For example, angles, beams and channels were used in the fabrication of EOT Crane, which is used for material handling including for movement of MS ingots from the moulds to the storage yard. Similarly, plates and coils were used as inputs in the maintenance of the induction furnace installed within the factory. These plates and coils are cut to size and used as parts of the furnace by welding the same to the furnace, which gets damaged/ eroded due to constant use. If such periodical repair and maintenance is not done, then there will be risk of the furnace leaking/ breaking at the point where it is damaged. It is necessary to periodically (almost every month) change the surface of the furnace by welding new plates and coils to the furnace lining. Similarly, MS bars are required to stir the molten steel constantly and in the process t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y procured scrap was found available but no records were maintained for purchase of such scrap. 25. Having considered the rival contentions, we find that admittedly, Appellants have maintained sufficient records of their transactions, production, etc. They have furnished regular returns and other prescribed forms which have not been found to be untrue or wrong. We further find that the demand raised for alleged clandestine production and clearance of finished goods and raw materials is vague and not based on any proper prescribed norms. Further such demand is hit by the ruling of Hon'ble Supreme Court in the case of RA Castings Pvt Ltd (supra). 26. So far the disallowance of Cenvat credit totalling Rs.61,90,180/- is concerned, we find that the items in question, viz., MS angles, bars, coils, beams, plates, channels, etc., have admittedly been used in the factory of production. We also find that part of these inputs have been used in the fabrication of EOT Crane, which is used for material handling inside the factory. We further find that some of the items like MS bars, which are required to stir the molten steel during production, get melted and become part of the molten steel in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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