2016 (12) TMI 1212 - AT - Central Excise

Clandestine removal - process loss - appellant is the manufacturer of M. S. Bars by hot rolling of M. S. Ingots. That hot rolling leads to generation of mill scale waste which is normally 1 to 3% of the weight of the finished product. That appellant has claimed such a loss due to mill scale generation as 10%. It is the case of the Learned AR That generation of 10% mill scale, against a normal generation of 1-3% of mill scale, is not justified at all and the material to the extent of 8% excess claim has been used for manufacture of M.S. Bars which have been clearly / removed clandestinely - whether mill scale generation of 10% claimed by the appellant is justified? Held that - It is observed from the case records that no scientific literature / data has been relied upon by the Revenue as to what should be a normal range for generation of mill scale in a hot rolling process. No experiment has been done by the Revenue in support of their case that mill scale generation should be in the range of 1 to 3% only. There is no variation in the raw material stock and also no seizure of clandestinely removed finished goods. On the contrary Respondent has intimated to the Project Management Cell UNDP/GEP Project (Steel), GOI, Ministry of Steel that they are incurring 10% loss. In the absence of any evidence to the contrary it cannot be said that mill scale generation will always be 1 to 3% in the hot rolling processes. It has thus been rightly observed by the first appellate authority in Para 6 of the OIA dt 10/6/13 that onus to prove clandestine manufacture & clearances of finished goods lies with the department. Clandestine removal cannot be upheld on the basis of presumptions, assumptions & surmises - appeal rejected - decided against Revenue.

Summary

Issues: Justification of 10% mill scale generation claimed by the appellant

In this case, the main issue before the Appellate Tribunal was whether the 10% mill scale generation claimed by the appellant, who is a manufacturer of M.S. Bars, was justified. The Revenue argued that such a high percentage of mill scale generation was not acceptable, alleging that the excess material had been used for manufacturing M.S. Bars that were removed clandestinely. On the other hand, the Respondent contended that there was no evidence to refute the 10% claim, and the Ministry of Steel had not objected to it. The Tribunal analyzed the evidence and arguments presented by both parties to determine the validity of the appellant's claim.

The Tribunal noted that the Revenue failed to provide any scientific literature or data to establish the normal range for mill scale generation in a hot rolling process. No experiments were conducted to support the Revenue's assertion that mill scale generation should be limited to 1-3%. Additionally, there was no evidence of any variation in raw material stock or seizure of clandestinely removed finished goods. The Respondent had informed the Ministry of Steel about the 10% loss they were incurring, further supporting their claim. The Tribunal emphasized that without concrete evidence to the contrary, it could not be assumed that mill scale generation would always fall within the 1-3% range. The Tribunal upheld the first appellate authority's decision that the onus to prove clandestine manufacture and clearances of finished goods rested with the department, and clandestine removal could not be established based on presumptions, assumptions, or surmises.

Ultimately, the Tribunal rejected the appeal filed by the Revenue, concluding that the appellant's claim of 10% mill scale generation was justified based on the lack of concrete evidence presented by the Revenue to refute it. The decision highlighted the importance of relying on factual evidence rather than assumptions or presumptions in such cases.