2025 (1) TMI 1032 - AT - Central Excise

Clandestine removal of goods - appellant has shown excess usage of electricity which is used by the appellant for excess production of M.S.Ingots which has been cleared clandestinely by the appellant - extended period of limitation - HELD THAT - As per technical opinion report of IIT Kanpur the consumption of electricity ranges between 555 units to 1026 units which means it depends on the various factors i.e. quality of furnace quality of raw material quality of workers and efficiency thereof and the said report has been discarded by this Tribunal in the case of R.A. Castings P Ltd. 2008 (6) TMI 197 - CESTAT NEW DELHI which has been affirmed by the Hon ble Apex Court. Therefore merely on the basis of excess electricity consumption by the appellant demand alleging clandestine manufacture and removal of goods is not sustainable. As it is declared law that on the basis of excess comsumption of electricity demand cannot be raised on the basis of assumption and presumption. The charge of clandestine manufacture and clearance thereof is to be proved by cogent evidence which Revenue failed to do so. Conclusion - The allegations of clandestine manufacture based solely on electricity consumption data are unsustainable without corroborative evidence. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the demand for duty based on alleged clandestine removal of goods, inferred from excess electricity consumption, is sustainable.
Whether the invocation of the extended period of limitation for issuing the Show Cause Notice is justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of Duty Demand Based on Electricity Consumption

Relevant Legal Framework and Precedents:
The duty demand was based on the assumption that excess electricity consumption indicated clandestine manufacture and removal of goods. The legal precedent set in R.A. Castings P. Ltd. Vs. CCE, affirmed by the Supreme Court, establishes that mere electricity consumption data cannot substantiate allegations of clandestine manufacture unless corroborated by other evidence.
Court's Interpretation and Reasoning:
The Tribunal found that the demand was based solely on electricity consumption, without corroborative evidence. The technical report from IIT Kanpur, which suggested a range of electricity consumption, was deemed insufficient to establish clandestine activity, especially since the Tribunal had previously discarded similar reliance on such reports in R.A. Castings P. Ltd.
Key Evidence and Findings:
The key evidence was the IIT Kanpur report indicating a range of 555 to 1026 units of electricity for producing 1 MT of MS Ingots. The appellant's consumption ranged from 1150 to 1350 units, which was within a plausible range given variations in manufacturing conditions.
Application of Law to Facts:
The Tribunal applied the precedent that electricity consumption alone cannot substantiate clandestine manufacture. Without additional evidence, the demand based on assumptions and presumptions was deemed unsustainable.
Treatment of Competing Arguments:
The appellant argued that the demand was based on assumptions without corroborative evidence, citing R.A. Castings P. Ltd. and Orion Metal Pvt. Ltd. The respondent supported the demand, but the Tribunal found the appellant's reliance on precedent compelling.
Conclusions:
The Tribunal concluded that the demand for duty based on excess electricity consumption was unsustainable without corroborative evidence of clandestine removal.

Issue 2: Invocation of Extended Period of Limitation

Relevant Legal Framework and Precedents:
The extended period of limitation can be invoked in cases of fraud, collusion, or willful misstatement. The appellant challenged the invocation of this period as unjustified.
Court's Interpretation and Reasoning:
The Tribunal did not explicitly rule on the limitation issue, as the primary basis for the demand was found unsustainable.
Conclusions:
The Tribunal's decision to set aside the demand rendered the limitation issue moot.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:
"The charge of clandestine manufacture and clearance thereof is to be proved by cogent evidence which Revenue failed to do so."
Core Principles Established:
The Tribunal reaffirmed that allegations of clandestine manufacture based solely on electricity consumption data are unsustainable without corroborative evidence.
Final Determinations on Each Issue:
The demand for duty based on alleged clandestine removal inferred from electricity consumption was set aside. The appeal was allowed with consequential relief.