2016 (10) TMI 763 - AT - Central Excise

Evasion of excise duty - clandestine removal of goods - alloys and non-alloy steel ingots - demand of duty with imposition of penalties - norms as per Rule 173E - serious inconsistencies in the entries as well as the purported meter reading for electricity. The meter reading as on 27.04.1999 was shown higher than the meter reading later given by the electricity department in their monthly bill as on 30.04.2016 - Held that - production based on estimation basis without any corroboration cannot be the basis for duty demand. In the present case, the purported production as per the private records for the period of 27 days in April 1999 was projected for demand period of 4 years in respect of two respondents and for about two years in respect of the third respondent. Such extrapolation of small base data (even if such data is considered authentic) is not legally sustainable. When the case of manufacturer suppliers of ingots itself has not been supported with adequate evidence further demand based on such purported excess production of raw material cannot stand. Further, we also note that average consumption of electricity was worked out in respect of M/s Magnum Steels Limited based on the consumption of particular period. The respondents contended that if average has to be worked out of the consumption the data should be taken for the entire year. In that case the average consumption will get altered and the calculation of alleged excess production will not be sustainable. The demand of duty of such substantial nature cannot be sustained on piecemeal evidence which are uncorroborated. The case of the Revenue has serious infirmities both in law and in fact. Even considering the general principle that in the case of clandestine removal cannot be established by precise and mathematical corroborative evidence, the minimum legal requirement is a preponderance of probability atleast to sustain the allegation. On careful analysis, we find that the case of Revenue against the assessee is full of presumptions and projection with unexplained gaps in analysis of facts which are too many too gloss over. We find that to arrive at a contrary conclusion other than the one arrived by original authority we are not presented with sufficient supportive evidence in the appeals by the Revenue - appeals dismissed.

Summary

Issues:
Appeals against order by Commissioner of Central Excise regarding duty evasion through clandestine removal of excise goods.

Analysis:
1. The Revenue appealed against the Commissioner's order dropping proceedings against the manufacturing assessees due to lack of evidence of excess raw material, clandestine production, or financial transactions. The Revenue argued based on documents recovered from the units indicating excess production, electricity theft cases, and duty calculations based on private records.

2. The main contention was regarding the calculation of duty demand based on a handwritten chart recovered from a person present in the factory premises, projecting clandestine manufacture and clearance of steel ingots against the manufacturing units. The respondents contested the grounds of appeal, highlighting inconsistencies in entries and meter readings, as well as lack of evidence regarding the employment status of the person who prepared the chart.

3. The Revenue argued that the duty demand was not based on Rule 173E but on collected evidence, while the respondents emphasized that the consumption of electricity alone was insufficient to ascertain normal production. The original authority noted serious inconsistencies in the entries and lack of corroboration for the duty demand based on the extrapolation of small data.

4. The case against the manufacturing units and Magnum Steels Limited was based on allegations of unaccounted production and clearances, supported by diary entries and statements from buyers and transporters. However, the original authority found discrepancies in the projected production capacity, reliance on selective data, and lack of evidence on various aspects relevant to production.

5. The Tribunal dismissed the appeals, citing serious infirmities in the Revenue's case both legally and factually. The lack of sufficient supportive evidence, reliance on presumptions, and unexplained gaps led to the conclusion that the duty demand could not be sustained based on piecemeal and uncorroborated evidence. The judgment emphasized the need for a preponderance of probability to sustain allegations of clandestine removal, which was lacking in the Revenue's case.