2011 (2) TMI 839 - AT - Central Excise

Demand and Penalty - Clandestine removal of M.S. Ingots - Department contended that the appellant average power consumption per M.T. should be 1100 units and it is on this basis the production of M.S. Ingots in the case of both the appellants has been estimated and after comparing the same with the production recorded in their RG-1 register, the allegation of under reporting of production and clandestine clearance of unreported production, without payment of duty has been made. No experiment for determining the average power consumption for production of one M.T. of M.S. Ingots has been conducted and the figure of 1100 per M.T. has been adopted from some experiment conducted in the unit of M/s Hans Casting - As the power consumption of one induction furnace unit cannot be compared with the power consumption of other unit without ascertaining the type of furnace, the technology used, the age of the machinery, power supply pattern and, the type of scrap used and for this, the only reliable method is to conduct actual experiment in the unit and ascertain the average power consumption per M.T. which has not been done in these cases - Held that adopting of power consumption norm of another unit is arbitrary and the confirmation of duty demand on this basis would not be sustainable - Decided in favour of assessee.

Summary

Issues:
Allegations of suppression of production and clandestine removal of M.S. Ingots without duty payment based on power consumption discrepancies.

Analysis:
The case involved allegations against the appellants for underreporting production and clearances of M.S. Ingots, leading to duty demands and penalties. The Department claimed that excessive power consumption indicated clandestine clearances. The Adjudicating Authorities confirmed duty demands based on average power consumption figures of 1100 units per M.T., derived from an experiment at M/s Hans Casting. The Commissioner (Appeals) upheld these orders, prompting the present appeals.

The appellant's counsel argued that the power consumption norm was arbitrary, as no experiments were conducted at the appellants' factories to determine actual power consumption. They highlighted a precedent where the Tribunal set aside duty demands based solely on electricity consumption. The Department, however, defended the orders, citing high power consumption as evidence of underreported production. The appellant's counsel further pointed out discrepancies in power consumption calculations and additional manufacturing activities beyond M.S. Ingots production.

Upon review, the Tribunal found the Department's reliance on another unit's power consumption norm arbitrary. It emphasized the need for individualized experiments to ascertain accurate power consumption per M.T. The Tribunal referenced a similar case where the duty demand was dismissed by higher courts, supporting its decision to set aside the impugned orders. Consequently, the appeals were allowed, and the orders were deemed unsustainable.

In conclusion, the Tribunal emphasized the importance of conducting specific experiments to determine power consumption accurately. It rejected the Department's reliance on generalized norms and cited a previous case where duty demands were dismissed on similar grounds, upholding the principle of individualized assessments for duty determinations.