2010 (3) TMI 982 - AT - Central Excise

Issues Involved:
1. Validity of the show cause notices based on electricity consumption norms.
2. Justification for the adoption of average electricity consumption as the basis for duty demand.
3. Adequacy of evidence for allegations of unaccounted production and clandestine removal.

Issue-wise Detailed Analysis:

1. Validity of the show cause notices based on electricity consumption norms:

The appellants, manufacturers of M.S. Ingots, were issued four show cause notices demanding differential duty based on the electricity consumption norm of 1000 units per M.T. set by the Collector, Kanpur, in a case involving another company. The original authority confirmed the duty demands based on this norm, but the Commissioner (Appeals) remanded the case for fresh consideration. During de novo proceedings, the norm was revised to 1067 units per M.T. based on tests conducted at a third unit, Hans Casting Pvt. Ltd. The original authority partially confirmed the demands but reduced the duty amounts. The appellants argued that no specific investigation or tests were conducted at their unit, and the reliance on another unit's consumption norms was unjustified.

2. Justification for the adoption of average electricity consumption as the basis for duty demand:

The appellants contended that the electricity consumption varied widely in the tests conducted at Hans Casting Pvt. Ltd., ranging from 857 to 1239 units per M.T. They argued that the adoption of 1067 units as the average consumption was questionable due to the inherent variability in electricity consumption caused by factors such as machine operation, power failures, and raw material quality. The appellants emphasized that comparing their unit's consumption with another unit's varying pattern was not justified. They also highlighted the lack of other corroborative evidence, such as procurement records, manpower deployment, or private records indicating excess production or clandestine removal.

3. Adequacy of evidence for allegations of unaccounted production and clandestine removal:

The appellants argued that the findings of excess production and clandestine removal were based purely on assumptions and lacked corroborative evidence. They cited a Tribunal decision in a similar case where power consumption for production was adopted as 1100 units per M.T., and no inference of excess production was drawn based solely on electricity consumption without supporting evidence. The respondent supported the order of the Commissioner (Appeals), arguing that the average consumption per M.T. was a valid factor for determining production and relied on Supreme Court and Tribunal decisions to support this view.

Judgment:

The Tribunal noted that the show cause notices were based on serious charges of unaccounted production and clandestine removal, relying solely on another unit's order without any specific investigation or tests at the appellant's premises. The Tribunal highlighted the lack of corroborative evidence, such as variations in other inputs or records of unaccounted manufacture, and emphasized that serious allegations could not be substantiated based on assumptions and suspicions alone. The Tribunal found the investigation to be half-hearted and the show cause notices lacking substantial evidence.

The Tribunal also pointed out that the reliance on the Supreme Court decision in the case of Triveni Rubber and Plastics was misplaced, as it related to a different context under Rule 173E of the Central Excise Rules. The Tribunal concluded that no demand could be confirmed merely based on average electricity consumption in another unit without corroborative evidence of suppression of production or clandestine removal.

Conclusion:

The Tribunal set aside the orders of the lower authorities for lack of evidence and allowed the appeals with consequential relief as per law. The judgment emphasized the necessity of concrete evidence to support allegations of unaccounted production and clandestine removal, rather than relying solely on electricity consumption norms from another unit.

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