2004 (4) TMI 526 - AT - Central Excise

Summary

Issues:
1. Duty demand based on power consumption per m.t. of M.S. Ingots.
2. Allegations of clandestine clearance without concrete evidence.
3. Application of experimental power consumption ratio to determine duty demand.
4. Comparison with previous judgments and legal precedents.
5. Consideration of factors affecting power consumption in induction furnace units.

Analysis:
1. The primary issue in this case revolves around the duty demand imposed on the Appellant based on the power consumption per metric ton of M.S. Ingots. The Department alleged that the Appellant's actual production exceeded the declared amount, leading to a demand for allegedly short-paid duty. However, the Appellant contested this claim, arguing that the power consumption ratio of 1100 units per m.t. was arbitrary and not reflective of actual production variations in an induction furnace unit.

2. Despite the allegations of clandestine clearance, the tribunal noted a lack of concrete evidence supporting such claims. There was no proof of unaccounted production, removal of finished goods, or discrepancies in raw material procurement or sales records. The absence of substantial evidence weakened the basis for the duty demand solely reliant on power consumption ratios.

3. The tribunal scrutinized the application of the experimental power consumption ratio to determine the duty demand. It highlighted that no specific experiments were conducted in the Appellant's unit to ascertain the actual power consumption for producing one metric ton of M.S. Ingots. Instead, the ratio from a different entity, Hans Castings Pvt. Ltd., was used without considering the unique operational factors affecting power consumption in the Appellant's unit.

4. The comparison with previous judgments, including the case of Inder Steel Pvt. Ltd. and legal precedents like the Triveni Rubbers & Plastics case, played a crucial role in the analysis. While the Department defended the duty demand based on estimated production from power consumption, the tribunal emphasized that such estimations must align with concrete evidence of unaccounted production or removals to be deemed valid.

5. Lastly, the tribunal considered various factors affecting power consumption in induction furnace units, such as machinery age, operational frequency, and power breakdowns. It emphasized the importance of assessing these factors to accurately determine power consumption ratios for production estimations. The tribunal concluded that without substantial evidence of unaccounted activities, relying solely on power consumption ratios for duty demands was unjustified, leading to the decision to set aside the impugned order and allow the appeals filed by the Appellant.