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2014 (8) TMI 660 - AT - Central ExciseClandestine manufacture and removal of Ingots without payment of duty - Allegation on the basis of electricity consumption - Revenue contends that manufacturing units are showing more electricity consumption for production per MT of MS ingots - Reliability on the case of R.A. Castings Put Ltd vs CCB reported in 2008 (6) TMI 197 - CESTAT NEW DELHI - Difference of opinion - Matter referred to larger bench - Majority order - Held that - it is evident that the demand alleging clandestine removal and suppression has been made mainly on the basis of the report of Dr. Batra, in preference to other available reports produced by the appellants which show higher consumption of electricity. Even the actual consumption found by the department on physical verification in the unit of the appellant was more than the highest reported by Dr. Batra. The raw material consumed as per findings of Commissioner comprised about 90% of Sponge Iron, which could have increased the power consumption as per available reports. Admittedly, the power consumption could have carried for various reasons which were placed before the Commissioner, and it was also contended that there was no evidence adduced for alleged clandestine removal. The various circumstances narrated in the impugned order however created doubt in the mind of the Commissioner. No incriminating statement recorded in the instant case has been brought to my notice by the department. In the matter of SRJ Peety, on being asked to clarify on higher consumption of electricity than in Dr. Batra s report, in his statement dated 03.05.2008, Shri. S.S. Peety gave many reasons such as unscheduled shut downs in supply of electricity and furnace, unskilled labour, furnace efficiency, model of furnace, units required in burning loss of inputs, power voltage fluctuation, inferior quality of scrap, tripping of electricity supply, power transmission losses, decrease in efficiency of plant and machinery and consumption of roughly 20% power in Auxiliary Load. He has not accepted the allegation of clandestine removal in his statement. Commissioner is not relying on the same and the findings of the Commissioner, as recorded earlier, have not been challenged by the Revenue. All these other allegations were also levelled in R.A. Casting (supra). It was further observed in R.A. Casting (supra) that it would be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. None of the so called other evidences referred in the impugned Orders prove clandestine clearance. The primary evidence of department is admittedly excess electricity consumption based on benchmark adopted allegedly from report of Dr. Batra, which was already held to be arbitrary by Hon ble Tribunal in RA Casting (supra). Thus, in my opinion the primary evidence relied in the impugned Order is itself inadmissible, and no other evidence in the instant case proves clandestine production and clearance to sustain the demand. It is contended by Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. There can be no dispute on the fact that in adjudication proceedings, the charge of clandestine removal is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumption and assumptions. Regarding the claim of the Revenue that subsequent to passing of impugned Orders the power consumption for manufacturing one MT of Ingots has reduced in factories of all the appellants, I am of the view that it cannot be a basis to sustain the findings in the impugned Orders by assuming that there could not be any reason for lower consumption of electricity during the subsequent period. I also agree with the finding of the Hon ble Vice President that in any event, this additional material is also only of power consumption. Further, in Sarvana Alloys Steels Pvt. Ltd. 2011 (2) TMI 1211 - CESTAT, BANGALORE similar order based on power consumption was held unsustainable and the appeal was allowed after considering inter alia the judgments in D. Bhoormull (1974 (4) TMI 33 - SUPREME COURT OF INDIA), Gulabchand Silk Mills (2005 (3) TMI 192 - CESTAT, BANGALORE), as also Hans Casting (1998 (3) TMI 298 - CEGAT, NEW DELHI). In A.K. Alloys, 2011 (10) TMI 427 - CESTAT, NEW DELHI the Tribunal followed the decision of R.A. Casting (supra) and allowed the appeal, as the demand was based mainly on the evidence of power consumption without any evidence of clandestine removal - judgment in R.A. Casting (supra) would be squarely applicable in the facts of the instant case in all the appeals - Decided in favour of assessee.
Issues Involved:
1. Determination of excise duty based on deemed production derived from electricity consumption. 2. Validity of the report by Dr. Batra as a basis for calculating deemed production. 3. Requirement of corroborative evidence for clandestine removal of goods. 4. Applicability of previous judgments and legislative provisions in the context of the current case. Detailed Analysis: 1. Determination of excise duty based on deemed production derived from electricity consumption: The primary issue was whether the excise duty could be levied based on deemed production calculated from electricity consumption. The Hon'ble Vice President held that the demand could not be confirmed solely on the basis of deemed production derived from electricity consumption, as suggested in Dr. Batra's report. The Vice President emphasized the absence of cogent material evidencing receipt of unaccounted raw material, unaccounted production, clandestine clearance, unaccounted receipts, and payments. Conversely, the Hon'ble Member (T) upheld the impugned orders, relying on deemed production calculated as per Dr. Batra's report and additional data of electricity consumption during a subsequent period. 2. Validity of the report by Dr. Batra as a basis for calculating deemed production: The Vice President placed heavy reliance on the Tribunal's detailed judgment in R.A. Casting Pvt Ltd vs CCE, where the demand based on electricity consumption was set aside. It was noted that Dr. Batra's report suggested a range of 555 to 1046 units for producing 1 MT of MS Ingots, but the actual consumption in the appellants' factories was higher. The Vice President found that the demand could not be sustained on assumptions and presumptions without corroborative evidence. The Hon'ble Member (T), however, upheld the demand based on Dr. Batra's report, citing discrepancies and additional evidence submitted during the appeals. 3. Requirement of corroborative evidence for clandestine removal of goods: The Vice President stressed that the Revenue failed to produce evidence of purchase of additional raw material, sale of clandestinely removed goods, mode of payment, flow back of funds, and transportation records for movement of raw material and finished products. The Vice President held that the demand could not be sustained without such corroborative evidence. The Hon'ble Member (T) relied on additional evidence of electricity consumption data during a subsequent period and discrepancies in the appellants' records to uphold the demand. 4. Applicability of previous judgments and legislative provisions in the context of the current case: The Vice President distinguished the current case from previous judgments relied upon by the Hon'ble Member (T), such as Triveni Rubber & Plastics, Nagpal Steels Ltd, and Hans Casting Pvt Ltd, on the basis of factual differences. The Vice President noted that the judgment in R.A. Casting (supra) was delivered after considering these judgments and was more applicable to the facts of the current case. The Vice President also highlighted the absence of a legislative provision similar to Rule 173E of the Central Excise Rules, 1944, which allowed for the estimation of production based on electricity consumption. Conclusion: The majority view, concurring with the Vice President, concluded that the impugned orders could not be sustained based on deemed production derived from electricity consumption without corroborative evidence. The appeals were allowed, and the impugned orders were set aside. The judgment emphasized the necessity of positive and concrete evidence to prove clandestine removal and rejected the reliance on assumptions and presumptions based on electricity consumption alone.
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