2014 (3) TMI 123 - AT - Central Excise

Waiver of pre-deposit - Clandestine removal of goods - computation of excess production on the basis of average consumption of electricity - demand of duty and levy of penalty - Held that - more or less, similar evidence/circumstances, as referred to in Shridhar Casting s case(2012 (9) TMI 170 - CESTAT, MUMBAI) have been brought out on record by the Revenue against the Applicants in the present set of Appeals. The ld. Consultant for the Applicants vehemently argued that besides consumption of electricity, other material evidences, like transporter s documents, raw materials purchased, etc. are necessary as held in Orange Alloys case (2012 (11) TMI 374 - BOMBAY HIGH COURT) by the Hon ble High Court, while directing pre-deposit. The said argument of the Applicants though may sound plausible, but on a cumulative reading of the above observations along with the facts and circumstances narrated in Sridhar Casting s case(2012 (9) TMI 170 - CESTAT, MUMBAI), we do not find force in the said argument for the simple reason that Their Lordships, while directing pre-deposit followed the judgment of Hon ble Supreme Court in Bhagwati Ispat Pvt. Ltd. s case(2006 (11) TMI 222 - SUPREME COURT OF INDIA). Even though the Applicants have all along been disputing the basis of consumption of electricity for confirmation of the demand, but could not bring out any materials on record, justifying the high consumption of electricity, which varied significantly. Appellant directed to make pre-deposit of 25% of duty confirmed - stay granted partly.

Issues Involved:
1. Waiver of pre-deposit of duty and penalty.
2. Methodology for assessing clandestine removal of goods based on electricity consumption.
3. Validity and reliance on Dr. N.K. Batra's report.
4. Corroborative evidence requirement for confirming duty demands.
5. Financial hardship and undue hardship arguments for waiver.

Detailed Analysis:

1. Waiver of Pre-Deposit of Duty and Penalty:
The appellants sought waiver of pre-deposit of duty and penalty confirmed against them. The Tribunal considered the financial hardships expressed by the appellants and the interest of revenue. It directed a pre-deposit of 25% of the duty confirmed against each appellant within eight weeks. Failure to deposit would result in dismissal of the appeals without further notice.

2. Methodology for Assessing Clandestine Removal of Goods Based on Electricity Consumption:
The duty demands were confirmed on the ground that the appellants had manufactured and removed excisable goods clandestinely without payment of duty. This was based on the average consumption of electricity necessary for producing 1 MT of MS Ingots, as opined by Dr. N.K. Batra. The total quantity of production was calculated from the total consumption of electricity, and the difference between this and the quantity recorded in the statutory Daily Stock Account (DSA) was alleged to be cleared without payment of duty.

3. Validity and Reliance on Dr. N.K. Batra's Report:
The appellants argued that the methodology adopted, based solely on Dr. N.K. Batra's report, was fallacious and contrary to the principle of law laid down by the Tribunal and upheld by the Supreme Court in R.A. Castings Pvt. Ltd. The Tribunal had held that in the absence of corroborative tangible evidence, solely relying on electricity consumption for duty demand was unsustainable. The Revenue, however, argued that the consumption of electricity was a reliable piece of evidence, being recorded by the respective Electricity Boards, and hence could be adopted as the basis for demand.

4. Corroborative Evidence Requirement for Confirming Duty Demands:
The appellants contended that there was no other evidence to substantiate the clandestine manufacture and clearance of goods except for the hypothetical calculation based on electricity consumption. They cited the R.A. Castings case, which established that mere consumption of electricity could not be the basis for confirming duty demands. The Revenue countered that in clandestine removal cases, other data could be manipulated, but electricity consumption data was reliable. They also cited cases like Bhagwati Ispat Pvt. Ltd. and Nagpal Steel Ltd., where similar methodologies were upheld.

5. Financial Hardship and Undue Hardship Arguments for Waiver:
The appellants argued that the steel industry was in a bad shape, and they were facing severe financial crises, as recorded in their balance sheets. Therefore, pre-depositing any amount would cause undue hardship. The Tribunal considered these arguments but noted that the appellants had not provided sufficient evidence to justify the high consumption of electricity. Consequently, the Tribunal directed a pre-deposit of 25% of the duty confirmed, considering the financial hardships and the interest of revenue.

Conclusion:
The Tribunal directed the appellants to pre-deposit 25% of the duty confirmed within eight weeks, considering the financial hardships and the interest of revenue. The Tribunal found that the appellants could not make a prima facie case for total waiver of pre-deposit and that the methodology based on electricity consumption, supported by Dr. N.K. Batra's report, was not entirely baseless. The Tribunal's decision was influenced by the principles laid down in previous judgments, including those by the Supreme Court and various High Courts.

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