2009 (7) TMI 949 - AT - Central Excise

Stay/Dispensation of pre-deposit - Clandestine manufacture - Held that - It is thus clear that once the quantum of production can be ascertained on the basis of electricity consumption by the factory the variation of the quantum of production can certainly be related to the variation in the consumption of electricity. That being so, that, in a given case it may not be possible to arrive at the exact figure of production on account of certain loss of electricity in the process of manufacture, but certainly an approximate figure in that regard can be ascertained. In such a case, primarily it is for the manufacturer to satisfy the adjudicating authority as to the exact quantum of production during the period based on consumption of electricity in that regard.

Issues Involved:
1. Challenge to the findings based on the consumption of electricity.
2. Invocation of the extended period of limitation.
3. Non-disclosure of documents related to other companies.
4. Basis for duty liability and penalty imposition.
5. Prima facie case for waiver of pre-deposit.

Detailed Analysis:

1. Challenge to the Findings Based on the Consumption of Electricity:
The appellants contended that the findings were solely based on the consumption of electricity without corroborative evidence. They argued that the authorities ignored documentary evidence provided by them and did not conduct any tests regarding production capacity vis-`a-vis electricity consumption. However, the tribunal noted that the duty liability findings were based on an analysis of all materials on record, including the excessive consumption of electricity, which was corroborated by other evidence. The tribunal held that the contention regarding the absence of corroborative evidence was devoid of substance, as the adjudicating authority had considered the documents produced by the appellants but gave more credence to other materials placed on record by the department.

2. Invocation of the Extended Period of Limitation:
The appellants argued that there was no cause for invoking the extended period of limitation as no action was taken for nearly one and a half years after furnishing the materials asked for. The tribunal found that the authorities were justified in invoking the extended period of limitation due to the clandestine production and removal of goods, which was supported by evidence of excessive electricity consumption and undisclosed supply of raw materials.

3. Non-Disclosure of Documents Related to Other Companies:
The appellants claimed that documents related to M/s. Shree Sharma Steel Rolling Mills (P) Ltd. and Nirmal Inductomelt Pvt. Ltd., which were the basis for initiating action against them, were not furnished. The tribunal noted that the statements of directors of these companies and the chart prepared in relation to the supply of raw materials were disclosed to the appellants, and there was no suppression or non-disclosure of records. The tribunal found no substance in the appellants' contention regarding the failure to disclose documents.

4. Basis for Duty Liability and Penalty Imposition:
The tribunal observed that the duty liability was not solely based on electricity consumption but also on the fact that there was an undisclosed supply of excess raw materials to the appellants' factory, which was established by cogent evidence. The findings disclosed that during the relevant period, there was excessive consumption of electricity and recovery of final goods, with no satisfactory explanation from the appellants. The tribunal referred to the Supreme Court's decision in Triveni Rubber and Plastics, which held that electricity consumption could form the basis for determining duty liability in cases of clandestine production and removal. The tribunal also distinguished the present case from the Oudh Sugar Mills case, where the liability was based on assumptions rather than factual data.

5. Prima Facie Case for Waiver of Pre-Deposit:
The tribunal emphasized that the scope of inquiry at the stay application stage was limited to finding out if a prima facie case for waiver of pre-deposit was made out. It concluded that the appellants had not made out a prima facie case for a total waiver of duty demanded. However, considering the financial hardship to the appellants and the interest of the revenue, the tribunal directed the appellants to deposit one-third of the duty demanded along with interest and one-third of the penalty within eight weeks. The directors were also directed to deposit specified amounts as penalties within the same period.

Conclusion:
The tribunal disposed of the stay applications by directing partial deposits and set a date for reporting compliance. The observations made were for the purpose of deciding the stay application and would not affect the merits of the appeals.

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