2010 (9) TMI 669 - HC - Central Excise

Demand - Clandestine removal - excess production of MS ingots - No experiment have been conducted in the factories of the appellants for devising the consumption norms of electricity for producing on MT of steel ingots - Tribunal also observed that the electricity consumption varies from one heat to another and from one date to another and even from one heat to another within the same date - Therefore, no universal and uniformly acceptable standard of electricity consumption can be adopted for determining the excise duty liability that too on the basis of imaginary production - 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 - The income shown in the balance sheets is not the income derived form the sources declared by the appellants, there is nothing on record to link it with the so called clandestine removal of the goods - find that the Revenue has invoked the proviso to Section 11A(1) of the Act but no case has been made out in the show cause notices or in the adjudication order that there were any mis-statement, suppression of fact or fraud on the part of the respondents - Decided in favour of assessee.

Summary

Issues:
Appeal against Tribunal's order quashing adjudicating authority's decision on central excise duty demand and penalty imposition based on excess production estimation through higher electricity consumption. Allegations of clandestine removal of goods and income from share trading.

Analysis:
The case involved appeals under Section 35-G of the Central Excise Act, 1944 against the Tribunal's decision that favored the respondents and nullified the adjudicating authority's order. The respondents, engaged in manufacturing MS ingots, faced show cause notices for central excise duty demand confirmation and penalty imposition for the period from 2001-02 to 2004-05. The notices were based on excess production estimation linked to higher electricity consumption. The Commissioner confirmed the demand and imposed penalties on the respondents and others allegedly involved in clandestine goods removal.

Challenging the orders, the respondents appealed to the Tribunal, which emphasized that electricity consumption alone cannot determine duty liability, especially when norms for consumption were not prescribed as required by Rule 173E. The Tribunal noted the lack of experiments to establish electricity consumption norms for steel ingots production and the variability in consumption. It also scrutinized a report by Dr. Batra, indicating the electricity units required for ingots production.

Regarding allegations of fictitious firms and share trading income, the Tribunal found reliance on incriminating statements without producing witnesses for cross-examination unjustifiable. Even if income sources differed from declarations, no evidence linked it to alleged clandestine goods removal. The Tribunal concluded that the Revenue failed to prove misstatement, suppression of facts, or fraud by the respondents, rendering the invocation of Section 11A(1) proviso baseless.

The High Court upheld the Tribunal's findings, deeming them well-founded on the available evidence. It highlighted the absence of proof of misrepresentation or fraud by the respondents, negating the need for invoking the Section 11A(1) proviso. Consequently, the appeals were dismissed, affirming the Tribunal's decision and rejecting the Revenue's claims of legal issues warranting further consideration.