2015 (6) TMI 373 - AT - Central Excise

Duty demand - Clandestine removal of goods - Held that - Entries regarding despatches of Saria II in the daily receipt and despatches sheets recovered from the factory premises have to be treated as clearances of TMT bars only as the price of Saria I and Saria II is same, while TMT Bar is much costlier that the CTD bar and, therefore, the appellants claim that Saria II despatches are the sales of CTD bar by M/s Meenakshi Steel made from the appellants factory is difficult to accept. Moreover both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma in their statements given over a period of one year and which have not been retracted, have stated that the documents recovered from the factory pertain to the finished goods cleared from the factory. If this is so, their claim that despatches of Saria II from the factory are the sales of CTD bars made from the factory which has been purchased from the outside is difficult to accept, more so, as no intimation had been given by the appellant company to the Jurisdictional Central Excise Authorities regarding receipt of duty paid CTD bars from outside and their sale from the factory. Appellants plea made long after the issue of show cause notice and even the after conclusion of the personal hearing that the despatches of Saria II, as reflected in the daily receipt and despatch sheets recovered from the factory, are the sales of CTD bars made by a group trading concern M/s Meenakshi Steel cannot be accepted. In view of this, we hold that the duty demand of ₹ 7,22,15,192/- based on the Chart A, B, C and D, which, in turn, have been prepared on the basis of daily receipt and despatch sheets and delivery orders recovered from the factory premises has to be upheld. During the period from 10/09/05 to 01/10/05 the appellant company received certain quantity of MS Ingots from Nirmal Inductomelts Pvt. Ltd. without any accountal which has obviously been used for manufacture of TMT bars and after taking into account 8% burning loss, the bars estimated to have been manufactured are 202.888 MT on which the duty liability is ₹ 6,77,061/-. In view of this, we hold that duty demand of ₹ 6,77,061/- has also to be upheld. Merely on the basis of power consumption norm which has not been determined by actual experiment, duty demand against an assessee cannot be confirmed when there is no corroboration experiment regarding receipt of unaccounted experiment and despatch of finished product. In view of this, we hold that the duty demand of ₹ 16,38,63,265/- is not sustainable and has to be set aside. - Penalty imposed on assessee company is reduced - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Alleged unaccounted manufacture and clandestine removal of Saria (TMT Bars).
2. Alleged unaccounted receipt of MS Ingots.
3. Determination of duty demand based on power consumption ratio.

Detailed Analysis:

1. Alleged Unaccounted Manufacture and Clandestine Removal of Saria (TMT Bars):
The primary issue revolves around the alleged clandestine removal of Saria (TMT Bars) by the appellant company, based on documents recovered during a search conducted on 10/09/05. These documents included delivery orders, daily receipt and despatch sheets, Nakal Bahi, Roz Namcha, and private ledger books. The Department prepared Charts A, B, C, and D from these documents, indicating despatches of Saria II and scrap/rejects without corresponding invoices, suggesting clandestine removal.

The appellant argued that the despatches of Saria II were sales of CTD bars by M/s Meenakshi Steels, a trading concern owned by Shri Ghasi Lal Sharma, and not manufactured by the appellant. However, both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma, in their statements, admitted that the documents pertained to the goods manufactured and cleared from the factory. The Tribunal found the appellant's claim unconvincing, noting that the price of Saria I and Saria II was the same, while TMT bars were more expensive than CTD bars. Consequently, the duty demand of Rs. 7,22,15,192/- based on Charts A, B, C, and D was upheld.

2. Alleged Unaccounted Receipt of MS Ingots:
The Department also alleged that the appellant received 5050 MT of unaccounted MS Ingots from various suppliers during the period from 1st April 2005 to 08/09/2005, which were used for unaccounted production of Saria. This was corroborated by statements from three suppliers, although the cross-examination of these suppliers was not allowed. Additionally, it was found that the appellant continued to receive unaccounted ingots from M/s Nirmal Inductomelts Pvt. Ltd. till 01/10/05, resulting in an estimated clandestine manufacture of 202.88 MT of TMT bars. The duty demand of Rs. 6,77,061/- based on this unaccounted receipt was upheld.

3. Determination of Duty Demand Based on Power Consumption Ratio:
The duty demand of Rs. 16,38,63,265/- for the period from April 2002 to March 2005 was based on an assumed power consumption ratio of 102.09 units per MT of rolled products. This ratio was determined by dividing the total power consumption during July 2005 and August 2005 by the alleged actual production during these months, which included both recorded production and alleged clandestine clearances. The Tribunal found this method flawed, as it assumed that the goods sold during these months were produced during the same period without corroborative evidence. There was no technical literature or actual experiment to support the claimed power consumption norm. Consequently, the duty demand of Rs. 16,38,63,265/- was set aside.

Conclusion:
The Tribunal upheld the duty demand of Rs. 7,28,92,253/- along with interest and reduced the penalty on the appellant company to Rs. 7,28,92,253/-. The penalties on Shri Ghasi Lal Sharma and Shri Murari Lal Sharma were reduced to Rs. 10,00,000/- and Rs. 50,000/- respectively. The duty demand of Rs. 16,38,63,265/- based on the power consumption ratio was set aside.