2015 (9) TMI 926 - AT - Central Excise

Duty evasion - Clandestine removal of goods - estimation of turnover - comparison of power consumption - third party evidence - Held that - On the basis of records recovered from a third party, the allegation of duty evasion cannot be made against an assessee unless cross examination of the persons from whom possession the records had been recovered, has been allowed, which has not been done in this case. Moreover, just because, M/s.NIPL had filed application before the settlement commission and had admitted certain quantum of duty evasion, it cannot be treated as an admission of receipt of unaccounted MS ingots by the respondent, and in this regard, we are supported by the decision of the larger bench of the Tribunal in the case of Bosch Chassis Systems India Ltd. Vs. CCE, Delhi-III- 2008 (9) TMI 106 - CESTAT NEW DELHI . There is absolutely no justification for adopting power consumption norm of M/s.SSSRM to the unit of the respondent as while the rolling mills of M/s.SSSRM is automatic rolling mills, the respondent s rolling mill is manual. Moreover, no experiment has been conducted by the department to ascertain as to whether the roiling mills of the respondent is comparable with the rolling mills of M/s.SSSRM in terms of technology and production. Besides this, we also find that that National Institute of Secondary Steel Technology, established by the Ministry of Steel, Govt. of India conducted a study and submitted a technical report on performance, and energy consumption of re-rolling mills, where electricity consumption was arrived at 215 units per MT and Government of Rajasthan in the notification issued under compounded levy scheme for charging sales tax from rolling mills has mentioned power consumption of the medium size rolling mill as 225 units per MT. In view of this, there is absolutely no justification for adopting power consumption norm of 102.09 units per MT of M/s.SSSRM in respect of the respondent. Rule 173E provided for determination of normal production by a manufacturing unit and that could be adopted as basis for allegation of duty evasion, in case his actual production drastically varied from the normal production. But in this case, no experiment has been conducted by the department, in respect of the respondent s unit to determine their actual power consumption, Before adopting power consumption ratio of M/s.SSSRM and applying it to the respondent s unit absolutely no study has been conducted to establish as to whether the rolling mill of the respondent is comparable with the rolling mill of M/s.SSSRM. - Decided against Revenue.

Summary

Issues:
1. Allegation of duty evasion based on unaccounted receipt of raw materials.
2. Allegation of under-reporting production based on power consumption ratio.

Analysis:
1. The case involved rerolling mills manufacturing MS rolled products chargeable to duty under chapter 72 of Central Excise Tariff. The issue arose when discrepancies were found in the receipt of MS ingots from a supplier, leading to allegations of duty evasion. The department claimed that the respondent received unaccounted MS ingots, which were used in manufacturing rolled products cleared without duty payment. The duty demand was not solely based on accounted ingots but also on electricity consumption. The Commissioner dropped proceedings, but a review order by the Committee of Chief Commissioners directed an appeal to the Tribunal for clarification.

2. The appellant argued that the respondent received unaccounted ingots and under-reported production based on power consumption. They relied on a Supreme Court judgment stating a preponderance of probability suffices for allegations. The respondent countered, stating the evidence was insufficient and power consumption ratios were not comparable due to different rolling mill efficiencies. They referenced technical reports and government notifications to support their argument. The Tribunal analyzed the evidence, highlighting the lack of direct proof and inadequate justification for applying another mill's power consumption ratio. They emphasized the importance of conducting experiments to determine actual power consumption before making allegations. Ultimately, the Tribunal dismissed the revenue's appeal, finding no fault in the impugned order.