2009 (6) TMI 858 - AT - Central Excise

Clandestine removal - Evidence - The main allegation against the appellant is that they had abnormally consumed power to the extent of more than 50.6% after the withdrawal of fixation of APC under Section 3A of the Central Excise Act. Further, after 4/2000, the increase in consumption is uniform up to 7/2001 - Held that - whole demand is theoretical - clandestine clearance cannot be sustain in the absence of corroborative evidence. It is true that electricity consumption is a very vital factory. However, the appellants had stated that the electricity consumption depends on several factors, like fluctuations, quality of raw materials consumed and also the age of the furnace etc. These things have not been contraverted adequately by the Revenue. We are not convinced that the electricity consumption would be the same in two different units. A correspondence with the KSEB reveals that there was indeed a problem of voltage fluctuations. With regard to the letters from Prince Rolling Mills Pvt. Ltd., Prince Alloys Pvt. Ltd. and P.K. Rolling Mills Pvt. Ltd., the appellants had stated that there has been reports of electricity thefts by several iron and steel company in Kerala and therefore no conclusion can be drawn from these units. The burden to prove clandestine removal is on the department. No doubt excess consumption of electricity raises a doubt or suspicion with regard to the .quantum of production by the appellant. Mere suspicion cannot lead to the demand - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Shortage/excess of stock during stock verification.
2. Reliability of statements from drivers regarding clandestine transportation.
3. Validity of evidence regarding power consumption and its impact on production.
4. Corroborative evidence for clandestine removal.
5. Theoretical basis for demand of differential duty.
6. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Shortage/Excess of Stock During Stock Verification:
The appellants argued that the issue of stock discrepancy had been previously decided in their favor by the Tribunal in Final Order No. 1608/2005 dated 5-9-2005, which set aside the demand raised by the adjudicating authority. The Tribunal agreed, noting that the shortage and excess were determined by eye estimation without actual weighment, and thus, the previous decision stands.

2. Reliability of Statements from Drivers Regarding Clandestine Transportation:
The appellants contended that the statements of two drivers, who allegedly transported ingots to other factories, were unreliable. The Commissioner's own records indicated that no entries of the said vehicle were found in the factory weighment receipt books of the alleged recipients. Additionally, proceedings against the alleged recipient companies were dropped due to lack of evidence. The Tribunal found that the statements lacked evidentiary value.

3. Validity of Evidence Regarding Power Consumption and Its Impact on Production:
The appellants challenged the reliability of statements from Shri Raju Augustine and Shri K.K. Agarwal regarding power consumption. They argued that Augustine's statement was not cross-examined and he was not employed during the disputed period. Agarwal's statement was also contested, citing reasons such as voltage fluctuations and inferior raw material quality. The Tribunal noted the discrepancies and found the explanations given by the appellants plausible, thus rejecting the Commissioner's reliance on these statements.

4. Corroborative Evidence for Clandestine Removal:
The Department failed to provide corroborative evidence for the alleged clandestine removal of goods. The Tribunal emphasized that mere excess power consumption could not substantiate clandestine removal without tangible evidence. The appellants cited several case laws supporting this stance, and the Tribunal agreed, highlighting the lack of concrete evidence such as purchase records or transportation details.

5. Theoretical Basis for Demand of Differential Duty:
The demand for differential duty was based on a theoretical calculation of electricity consumption, assuming 850 units per ton of production. The Tribunal found this approach speculative and unsupported by concrete evidence. The show cause notice's reliance on theoretical estimates was deemed insufficient for sustaining the demand.

6. Imposition of Penalties:
Given that the duty demand was not sustainable, the Tribunal concluded that penalties could not be imposed. The burden of proof for clandestine removal was on the Department, which failed to provide adequate evidence. Consequently, the Tribunal set aside the penalties.

Conclusion:
The Tribunal allowed the appeals, setting aside the demand and penalties. The decision was based on the lack of concrete evidence for clandestine removal, unreliability of statements, and speculative nature of the theoretical basis for the demand. The Tribunal emphasized that mere suspicion could not justify the demand without solid corroborative evidence. The appeals were allowed with consequential relief.

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