2012 (3) TMI 408 - AT - Customs

Clandestine removal - Electricity consumption - The requirement in case of manufacture of ingots by melting of sponge iron ranges between 815 to 1046 KWH. But for the assessee, power consumption for the manufacture of per MT of ingots was ranging between 1159.72 to 2019.37 units in the year 2005-2006 - Revenue was of the view that respondents had not accounted for the entire production that could be manufactured from the electricity consumed by them and cleared the same clandestinely without payment of duty - Held that - the issue is squarely covered by the Tribunal s decision in the case of R.A. Castings Pvt. Ltd. 2010 (9) TMI 669 - ALLAHABAD HIGH COURT which stand confirmed by the Hon ble High Court of Allahabad as also by the Hon ble Supreme Court - it was held in the case that It is settled principle of law that the electricity consumption can not be the only factor or basis for determining the duty liability, that too on imaginary basis, especially when Rules 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Appeal rejected - demand set aside - decided against Revenue.

Issues Involved:
1. Allegation of clandestine removal of goods based on electricity consumption.
2. Validity of evidence and methodology used by Revenue to establish clandestine removal.
3. Reliance on IIT Kanpur's report and other technical opinions.
4. Legal precedents and standards for proving clandestine removal.

Detailed Analysis:

1. Allegation of Clandestine Removal Based on Electricity Consumption:
The core issue revolves around the Revenue's allegation that the respondents clandestinely removed goods without paying duty, inferred from the electricity consumption data. The Revenue argued that the electricity consumption for manufacturing MS ingots was significantly higher than the norm, suggesting unaccounted production and removal of goods.

2. Validity of Evidence and Methodology Used by Revenue:
The Revenue based its case on the electricity consumption data and technical reports, particularly from IIT Kanpur, which suggested that the energy requirement per MT of steel ingots was lower than what was recorded by the respondents. The Commissioner, however, found that the charge of clandestine removal based solely on electricity consumption without corroborative evidence was unsustainable. The Commissioner emphasized the lack of direct evidence such as records of raw material receipts, labor employment, transport documents, and actual removal of goods.

3. Reliance on IIT Kanpur's Report and Other Technical Opinions:
The Revenue heavily relied on the IIT Kanpur report, which provided norms for electricity consumption in the production of steel ingots. However, the respondents countered this by providing certificates from a Chartered Engineer and Chartered Accountant, explaining the higher electricity consumption due to auxiliary loads and other factors. The Commissioner noted that the IIT Kanpur report only addressed the productivity of the furnace and not the entire factory operations, thus dismissing it as insufficient to prove clandestine removal.

4. Legal Precedents and Standards for Proving Clandestine Removal:
The judgment referenced several legal precedents, including the Tribunal's decision in R.A. Castings P. Ltd. vs. CCE Meerut, which held that high electricity consumption alone cannot be the basis for concluding clandestine removal. The Tribunal reiterated that tax cannot be levied based on estimations and theoretical calculations without concrete evidence of actual manufacture and removal of goods. The judgment emphasized the necessity of tangible, direct, and affirmative evidence to substantiate allegations of clandestine removal, such as records of raw material receipts, labor employment, and transport documents.

Conclusion:
The Tribunal upheld the Commissioner's decision to vacate the show cause notice, concluding that the Revenue's case based solely on electricity consumption and the IIT Kanpur report was insufficient to prove clandestine removal. The Tribunal stressed the importance of concrete evidence and dismissed the appeal, aligning with established legal principles that mere high electricity consumption does not substantiate allegations of unaccounted production and removal of goods. The judgment reinforced the requirement for comprehensive and corroborative evidence to support claims of clandestine removal in excise duty matters.

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