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2019 (2) TMI 1864 - AT - Central ExciseClandestine Removal - MS Ingots - by-product runner and risers - allegation that some of these Runner Risers were removed on payment of duty and the balance was captively consumed in the manufacture of final products i.e. M.S. Ingots - determination of input-output ratio - Corroborative evidences or not - extended period of limitation - HELD THAT - Save and except the theoretical calculation and /or based on some production ratio stated by the assessee in their ER-5 Return, Revenue has worked out the standard production, which should have been achieved and has accordingly worked out the short production as clandestine production and its removal without payment of duty. This Tribunal has time and again held that such standard has been laid down only to provide a starting point of investigation and no liability can be fastened on the assessee in absence of corroborative evidence of clandestine manufacture and removal - Admittedly, in the facts and circumstances of the present case, there is not a single instance of either clandestine manufacture and/or removal found by the Revenue. Appeal dismissed - decided against Revenue.
Issues:
- Appeal against dropping of show cause notice - Short accountal of production of M.S. Ingots - Consumption of M.S. Scrap - Appeal remanded by Tribunal - Consumption of Runners & Risers - Input-output ratio calculation - Appeal by Revenue Analysis: 1. Appeal against dropping of show cause notice: The case involved an appeal by the Revenue against the dropping of a show cause notice dated 30.04.2015. The assessee was engaged in the manufacture of M.S. Ingots and M.S. Scrap. The show cause notice alleged short accountal of production of M.S. Ingots and non-payment of duty amounting to &8377; 1,07,66,054/-, including cess, during the period 2010-2011 to 2014-2015. The order-in-original dated 3.06.2016 confirmed the proposed demand with interest and penalty. 2. Short accountal of production of M.S. Ingots: The Central Excise Audit revealed discrepancies in the production of M.S. Ingots as declared by the respondent. It was noted that the respondent had consumed more M.S. Scrap than the quantity of M.S. Ingots produced, indicating a short accountal of production. The show cause notice alleged that the respondent cleared the short-produced M.S. Ingots without payment of duty, contravening the provisions of the Central Excise Act and Rules. 3. Consumption of M.S. Scrap: The Tribunal observed that the appellant had declared an input-output ratio in their ER-5 Return. The appellant claimed that 1.1 kg of M.S. Scrap was used to manufacture 1 kg of M.S. Ingots. However, discrepancies arose when the actual production figures were compared to the declared input-output ratio, leading to the initiation of the show cause notice. 4. Appeal remanded by Tribunal: The Tribunal, in Appeal No.E/52525/2016, remanded the matter to the Original Authority for further consideration. It was noted that by-products like 'runner and risers' were produced during the manufacturing process of M.S. Ingots. The Tribunal directed the Original Authority to consider the final output of M.S. Ingots along with the consumed 'runner and risers' to determine the input-output ratio accurately. 5. Consumption of Runners & Risers: The issue of consumed 'runner and risers' as intermediate products was crucial in determining the input-output ratio. The appellant contended that the consumed quantity of 'runner and risers' should be added to the account of M.S. Scrap to maintain the input-output ratio as per their declarations. 6. Input-output ratio calculation: The Tribunal directed a reevaluation of the input-output ratio considering the production of M.S. Ingots and the consumption of 'runner and risers.' The records were audited, and it was found that the input-output ratio declared by the appellant matched the actual production figures when considering the consumed 'runner and risers' as part of the final output. 7. Appeal by Revenue: The Revenue challenged the dropping of the demand by the Commissioner, arguing that 'runner and risers' should not be considered as final products and included in the quantity of M.S. Ingots for calculating the input-output ratio. The Revenue contended that the records should have been examined to ascertain if the recycled 'runner and risers' were added to the quantity of scrap for calculating the input-output ratio. 8. Final Decision: The Tribunal dismissed the Revenue's appeal, emphasizing the lack of evidence supporting the allegations of clandestine production or removal. It was noted that the Revenue's calculations were based on theoretical ratios declared by the assessee without concrete proof of suppression. The Tribunal upheld the dropping of the demand, stating that liability cannot be imposed solely on theoretical calculations without corroborative evidence of clandestine activities.
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