2017 (11) TMI 1261 - AT - Central Excise

Clandestine removal - MS ingots - whether the appellant, during the impugned period, has actually manufactured MS ingots in excess of what was recorded in their records and removed the said quantity clandestinely without payment of duty? - demand was raised mainly on the ground of Technical Opinion, which was prepared based on the electricity consumption - Held that - electricity consumption cannot be the only factor for determining the duty liability that too on imaginary basis without having tenable evidence of clandestine manufacture and clearance of goods - The excess consumption of electricity, no doubt raises suspicion with regard to quantum of action. However, mere suspicion cannot lead to demand. Electricity consumption can vary from one unit to another and can vary in the same unit in different conditions. There is no justification for upholding the duty demand only on the basis of projected production based on electricity consumption figures. The other evidences submitted by the Revenue, by itself do not lead to conclusion of clandestine manufacture or clearance. At best it can raise doubt in our mind regarding the actual production accounted However, suspicion, however grave, cannot take the place of tangible evidence. Reliance placed in the case of R A Castings Pvt. Ltd. Vs. CCE 2008 (6) TMI 197 - CESTAT NEW DELHI . Appeal allowed - decided in favor of appellant.

Issues:
1. Confirmation of Central Excise duty demand and penalty against the appellants.
2. Imposition of personal penalty on the Director.
3. Allegations of excess consumption of electricity and clandestine removal of goods.
4. Discrepancies in physical verification of finished goods and raw materials.
5. Allegations of utilizing ingot moulds for suppressed production.
6. Falsely recorded income from commodity trading and sale of slag.
7. Legal arguments regarding duty demand and evidence presented by both parties.

Analysis:

1. The appellants challenged the Order-in-Original confirming the Central Excise duty demand and penalty imposed. The Commissioner upheld the demand of ?8,15,89512/- along with interest and imposed a penalty of an equal amount. Additionally, a personal penalty of ?1.5 crore was levied on the Director.

2. The case revolved around allegations of abnormal electricity consumption leading to suspicions of excess production of M.S. Ingots and clandestine removal without duty payment. Discrepancies were noted during physical verification of finished goods and raw materials, indicating a shortage of 18.600 MT of M.S. Ingots.

3. The Revenue presented evidence including discrepancies in the purchase of ingot moulds, falsely recorded income from commodity trading, and sale of slag to cover up clandestine activities. The appellants contested these allegations, arguing that the duty demand was solely based on electricity consumption without concrete evidence of clandestine removal.

4. The Tribunal analyzed the Technical Opinion report on electricity consumption for M.S. Ingots production. The appellants argued that factors like power supply, raw materials, machinery breakdowns, and labor skill could impact electricity consumption, challenging the norm of 830 units per MT. The Tribunal emphasized the need for tangible evidence to prove clandestine activities.

5. Referring to the case law of R A Castings Pvt. Ltd., the Tribunal concluded that mere suspicion based on excess electricity consumption is insufficient to establish clandestine removal. The lack of concrete evidence and reliance on projected production figures led to the setting aside of the duty demand and penalties imposed.

6. The judgment highlighted the importance of tangible evidence in proving allegations of clandestine activities, emphasizing that suspicion alone cannot justify duty demands. The Tribunal set aside the impugned order and allowed the appeal, emphasizing the need for concrete proof in such cases.

This detailed analysis of the legal judgment showcases the complexities involved in determining duty liability and the significance of tangible evidence in proving allegations of clandestine activities in excise matters.

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