TMI Blog2023 (11) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... e iron. 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 - It is further found 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 COMMISSIONER OF C. EX., MEERUT-I VERSUS RA CASTINGS PVT. LTD. [ 2010 (9) TMI 669 - ALLAHABAD HIGH COURT] . CENVAT Credit - HELD THAT:- The items in question, viz., MS angles, bars, coils, beams, plates, channels, etc., have admittedly been used in the factory of production. It is found that part of these inputs have been used in the fabrication of EOT Crane, which is used for material handling inside the factory. It is further found 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 the furnace and thus, gets consumed in the manufacture of finished goods. Further, inputs like new plates and coils have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd, a part of which was given to the Appellant and the remaining area were given to few other small-scale units - producing HDPE drums, PP bags, laminate boards etc. There were also some godowns in the said compound. The common incoming power supply was of 33 kVA and one common meter was installed. The Department engaged one, Mr. Ravi Kumar, Engineer of the power distribution company APCPDCL, who went round the unit and reported that the Appellants were drawing 175 kVA power. Verification of the common electricity bills (received from the Supdt. Engineer, Hyderabad), revealed that Shri Shiva Spinning Mills were drawing power from APCPDCL as well as from some private parties. The details were recorded under panchnama dated 18/07/2008. 4. As per the published technical literature on use of sponge iron (input), the proportion of sponge iron in the induction furnace charge mix was determined by the balance between the cost saved because of low price of sponge iron and extra cost incurred due to higher power consumption, lower yield, etc., associated with high percentage of sponge iron in the induction furnace steelmaking. Optimum charge mix using sponge iron was that of 55% to 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat credit of ₹ 4,84,410/-. 9. It is further alleged that they have suppressed production of 200.50 MT of ingots, arrived at on the basis of estimated production, taking into account power consumption. During the period 2007-08, it appeared that Appellant have purchased 3066.965 MT of pig iron and 8145.965 MT of sponge iron of different grades. Further, they have purchased 373.544 MT of MS plates/bars/angles etc., and also cleared 5.4 MT of fabricated material and have not shown any scrap. The Cenvat credit on the same was calculated at ₹ 11,61,519/-. Further on the basis of electrical consumption, estimated production was calculated, on which basis, it was alleged that Appellant have suppressed production of 346.93 MT on which duty comes to Rs. 12,02,348/- alleged to be clandestinely removed. 10. During investigation the statement of Mr. Ram Prasad, the director, was recorded on 23/12/2008, who, inter alia, stated that they were operating only one furnace of 4 MT capacity. Initially, they had a furnace of 2 MT capacity, before the year 2004 and later on, it was increased to 4 MT capacity. That on an average, they get 5 heats per day and they are not maintaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods alleged to be removed without payment of duty during the period 2006 07 and 2007 08 along with interest. Further equal penalty was imposed of ₹ 63,16,176/- under Rule 15 of CCR and ₹ 17,62,011/- under section 11 AC of the Central Excise Act. (iii) Penalty was also imposed on Mr. Ram Prasad, Director of Appellant, Rs. 20 lakhs under Rule 26 of CER, 2002. 12. Being aggrieved, the Appellants are before this Tribunal, both the Appellant company and its Managing Director. 13. The learned counsel for Appellants, inter alia, urges that the following are the issues for determination before this Tribunal: a) Whether the learned Commissioner was correct in coming to the conclusion that the Appellants were not maintaining records relating to the purchase of inputs including the raw materials required for the manufacture of steel ingots, though they were maintaining such records, duly supported by purchase invoices. b) Whether the learned Commissioner was correct in determining the production theoretically based on the production process, as downloaded from technical books/websites on the basis of different ratios of raw materials, such as, pig iron, sponge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the demand raised and confirmed is fit to be set aside. The learned Commissioner in the impugned order have mentioned that power consumption depends upon factors like quality of raw material, that is grade of sponge iron, proportionate use of pig iron, type of scrap used, age/capacity and efficiency of the furnace, constant supply of power, breakdown/idle time, labour problems etc. However, none of these factors have been taken into consideration, while determining the estimated production during the period under dispute. Admittedly, no test production was done by Revenue in the premises of the Appellant to ascertain the approximate yield. There is no corroborative evidence on record to establish the standard power consumption for the induction furnace of the Appellant. Based on such theoretical estimation of production, the demand raised is fit to be set aside. 17. It is further pointed out that, on the date of visit of the officers to the factory on 27/3/08, no excess stock of finished goods or excess stock of raw materials was found. No stock taking was conducted on the said date. Further, the whole allegation is made on assumption and presumption, without finding any mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constantly and in the process the bars gets melted and become part of the molten steel and are thus consumed in the manufacture of finished goods. 21. Further urges that in the Impugned Order an amount of Rs.3,83,721/- has been demanded for the year 2005-06, on the ground that the Appellant had used relatively high quantity of scrap and pig iron and less quantity of sponge iron to save on power consumption. Further, it was alleged that the charge mix of sponge iron, pig iron and scrap will determine the final recovery of the ingots. Since the Appellant have not maintained any accounts of the wastage, in their records and in the ER-1 return filed, it has been concluded that the inputs have been cleared clandestinely and to cover the removal of inputs they have shown the sale of dust and therefore, Cenvat credit of Rs.3,83,721/- has been demanded on presumption. 22. Appellant further reiterates that the demand for Cenvat Credit amounting to Rs.63,16,176/- (clandestine removal of inputs Rs.33,26,464/- credit on ineligible inputs Rs.29,89,712/-) and the demand on account of clandestine removal of finished goods amounting to Rs.17,62,001/-, is not sustainable in law. 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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