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TMI Blog2025 (4) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant's factory premises on 15.04.2010 and seized various records under Panchnama proceedings. 3. On completion of the investigation, a Show Cause Notice dated 23.08.2012 was issued to the appellant alleging that they had clandestinely manufactured and removed sponge iron without payment of duty. Accordingly, the notice demanded Central Excise duty amounting to Rs. 2,16,62,837/- along with interest and penalty. 4. On adjudication, the ld. adjudicating authority vide the impugned order dated 28.11.2016 confirmed the Central Excise Duty of Rs. 2,16,62,837/- demanded in the above notice under Section 11A(2) of the Central Excise Act, 1944, along with interest thereon and imposed a penalty equal to the duty demand confirmed under Section 11AC of the Central Excise Act, 1944. 5. Aggrieved by the confirmation of these demands, the appellant has filed the present appeal. 6. The break-up of the demands confirmed in the impugned order is as follows : - Sl. No. Grounds Period Qty. of Sponge Iron (in MT) Value (in Rs.) Duty Demanded (in Rs.) 1. Estimated production of Sponge Iron, applying Input/Output ratio of 1.67:1 as against 1.85:1 (Para 6.16 of OIO) 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , affirmative and corroborative material on record to evidence clandestine production or removal of the impugned goods; there is no confession of guilt either. The appellant submits that the allegation of clandestine removal is a serious charge which must be proved with cogent, tangible, affirmative and corroborative evidence based on an independent enquiry; however, in the instant case, there is not a single piece of evidence available in support of the main charge of clandestine production and removal of 13854 M.T. and 204.320 M.T. of sponge iron. 7.4. The appellant has also made the following submissions: - a. There is no evidence of actual production of 13854 MT and 204.320 MT of Sponge Iron. The demand based on "estimated production"; b. There is no evidence of removal of 13854 MT and 204.320 MT of Sponge Iron; c. There is no evidence of acceptance of buyers; d. There is no acceptance of transporters; e. There is no evidence of flow of back of funds of Rs.22.46 Cr.; f. There is no evidence of extra use of labour and payment of wages etc.; g. There is confession of guilt by the Appellant; h. Extra use of Electricity; i. Unaccounted purchase and/or consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tri. - Cal.)] (Final Order No. 77819 of 2024 dated 12.12.2024 in Excise Appeal No. 76650 of 2016 & ors. - CESTAT, Kolkata). The relevant paragraphs of the said decision are reproduced below : - "17. We find that in this case demand sought to be raised against the Respondent on the basis of estimated production as per input/output ratio of1:1.67MT and electric consumption is 162 KW for manufacture of 1 MT Sponge Iron. All these basis for confirmation of demand are on estimate basis and there is no tangible evidence has been brought by the Revenue on record from where the Respondent procure other raw materials to manufacture such a huge quantity of Sponge Iron like coal and iron ore. 18. And in the case of Arya Fibres Pvt. Ltd.(Supra) this Tribunal has laid down law for establish clandestine removal clearance in cases of allegation made of clandestine manufacture and clearance of the goods. In para 40 of the said order which are asunder : "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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chased, Input / output ratio declared by the appellant in their Annual Returns, reproduced in the previous paragraphs by way Table, the year-wise details show that the input / output ratio ranges between 1 : 1.92 in 2008-09 to 1 : 1.87 during the period April 2009 to February 2010. The contents of the Table are all declared figures and are verifiable. There is nothing to indicate that due consideration was given for these submissions by the Adjudicating authority before coming to his conclusions. His conclusions seem to be flowing directly from the input/output ratio adopted by the Dept at the time of issuing the Show Cause Notice. 18. The output is dependent on several factors other than the input / output of the main raw material, iron ore. Even within Iron ore, the Fe content would play an important role. Other than this, we have to consider the usage of the quality of coal, dolomite, the capacity of kiln etc. Thus a simple formula of input / output purely based on the iron ore usage, would not fit all the manufacturers of Spong Iron. We find that such attempts have been made by the Revenue in the past which have come up for consideration before this Bench. In the case of CCE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 58481.71 M.T., but the Sponge Iron Production recorded in the Daily Stock Account of the of the Noticee was found to be 42045.00 M.T. Therefore, it appeared that, 16436.71 M.T. of sponge iron has been manufactured surreptitiously, which has been removed clandestinely from their factory without payment of duty. 2.8. Thus, from the above, it is ascertained that ASPL has suppressed production of 16436.71 M.T. of sponge iron involving Central Excise duty of Rs. 1,83,27,914/- (including Cess) and removed the same clandestinely without payment of duty 17. We find that in this case demand sought to be raised against the Respondent on the basis of estimated production as per input/output ratio of 1:1.67MT and electric consumption is 162 KW for manufacture of 1 MT Sponge Iran. All these basis for confirmation of demand are on estimate basis and there is no tangible evidence has been brought by the Revenue on record from where the Respondent procure other raw materials to manufacture such a huge quantity of Sponge Iron like coal and iron ore." 19. Similar issue had come up before this Bench in the case of Aryan Ispat and Power Pvt. Ltd. Vs. CCE - FINAL ORDER NO. 77490-77492/2023 Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electricity for such suppressed production a prudent individual would not agree with the present conclusions of the Revenue. There is nothing on record from the Revenue side to come to a reasonable conclusion to say that there has been preponderance of probability of such suppressed production on the part of the appellant. The evidences in the form of approximation and averaging production as 77.6% and one statement of Shri Agarwal, Director of the appellant company cannot be called a prudent conclusion of the production estimate. 7. Considering above discussions and the case laws cited above, we conclude that the Revenue has failed to reasonably prove suppressed production and clandestine clearance on the part of the appellants. Consequently, the impugned order in respect of confirmation of duty for alleged suppressed production, and imposition of fine and penalty on the appellant No. 1 and imposition of personal penalty of Rs. 40 lakhs on Shri Agarwal who is appellant No. 2 are hereby set aside. The appellants will get the relief accordingly. [Emphasis supplied) 14. The above Tribunal decision was affirmed by Rajasthan High Court as reported in CCE Vs. Mittal Pigment Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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