2004 (7) TMI 530 - AT - Central Excise

Demand - Clandestine removal - Assumption of clandestine removal based on power consumption - production based on ferro alloys consumption - shortage of ferro manganese - HELD THAT - The norms for power was 670 kwh/per ton of billet for 10/12 t furnace and 630 kwh for 25/30t furnace. These norms regarding consumption of power have not been disputed by the Revenue. The Adjudicating Authority has come to the conclusion merely on the basis of three furnaces found to be working by the visiting officers that the Appellants had indulged in a systematic manipulation of records of power consumption. This finding is without any material brought on record. It has also been contended by the Appellants that the supply of electricity to their Sub-station is made from 132/33 KVA Sonic Sub-station on direct feeder. There is nothing on record to show that the power required by the Appellants to manufacture the quantity of ingots and billets alleged to have been manufactured by them had been supplied by Sonik Sub-station to the Sub-station at the Appellants end. Thus the Revenue has not succeeded in proving its allegation that the Appellants have manipulated their records of power consumption. Quantity of ferro alloys required to manufacture 1 ton of ingot/billet - 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 1999 (9) TMI 314 - CEGAT NEW DELHI 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 the receipt of one raw material is not sustainable. Shortage of ferro manganese noticed by the Central Excise Officers when they visited the factory premises on 18-1-93 we are of the view that the submissions made by the Appellants regarding issue on 16-1-93 has not been properly considered by the Adjudicating Authority. Shri S.K. Shukla Stores Clerk of the Appellants in his statement dated 18-1-93 had deposed that entries in respect of materials after 11-1-93 had not been made in the records and the entries regarding material issued after 14-1-93 were also not made even though the materials were issued for consumption on verbal request. This aspect requires to be examined by the Adjudicating Authority. We therefore remand this aspect for re-consideration of the jurisdictional Adjudicating Authority. Thus the demand of duty as confirmed against the Appellants and penalty imposed on them are set aside. The issue regarding shortage of 6943 kg. of ferro manganese is remanded to the jurisdictional Adjudicating Authority for being adjudicated afresh in accordance with law.

Summary

Issues Involved:
1. Alleged Suppression of Production and Clandestine Removal of Goods.
2. Assumption of Manipulation of Power Consumption.
3. Consumption of Ferro Alloys.
4. Shortage of Ferro Manganese.

Summary:

1. Alleged Suppression of Production and Clandestine Removal of Goods:
M/s. Mohan Steels Ltd. appealed against the Order-in-Original confirming the demand of Central Excise duty and penalty for allegedly manufacturing and clearing excisable goods clandestinely without payment of duty. The proceedings were initiated by a show cause notice dated 28-12-1994 for the period from December 1989 to January 1993. The Commissioner had previously confirmed a partial demand based on the assumption of raw material consumption and potential power theft. The Tribunal remanded the matter for reconsideration with directions to furnish a report from the Indian Institute of Technology and allow the appellants to produce documents in their defense. The Commissioner, in the impugned order, confirmed the entire demand based on assumptions about power consumption and ignored expert reports.

2. Assumption of Manipulation of Power Consumption:
The learned Consultant argued that their power consumption was as per requirement and there was no allegation of excess power use in the show cause notice. The U.P. State Electricity Board certified that the metering arrangements were always in order, ruling out electricity theft or pilferage. The Commissioner's assumption of meter manipulation was deemed incorrect and unsupported by evidence. The Tribunal observed that the charge of clandestine removal must be based on conclusive and tangible evidence, not mere assumptions.

3. Consumption of Ferro Alloys:
The learned Consultant contended that the Commissioner's assumption of 9 kgs. of ferro alloys per M.T. of final product was incorrect. The report from the Indian Institute of Technology and other technical literature indicated higher consumption norms. The Tribunal noted that the Commissioner's findings were not supported by technical data and that the revenue had not investigated the appellants' claims regarding the stages of ferro alloy addition. The Tribunal emphasized that the charge of clandestine removal requires evidence of procurement of raw materials, labor, electricity consumption, and transportation of goods, which was lacking in this case.

4. Shortage of Ferro Manganese:
The learned Consultant explained that the issue of ferro manganese on 17-1-1993 and 18-1-1993 was not considered, and the Commissioner ignored this explanation. The Tribunal noted that the evidence regarding the removal of final products was not brought on record and that the demand of duty cannot be based on assumptions and presumptions. The Tribunal remanded the issue of the shortage of 6943 kgs. of ferro manganese to the jurisdictional Adjudicating Authority for re-consideration.

Conclusion:
The Tribunal set aside the demand of duty and penalty against the appellants, emphasizing that assumptions and suspicions cannot replace legal proof. The issue regarding the shortage of ferro manganese was remanded for fresh adjudication.