2012 (9) TMI 170 - AT - Central Excise

Waiver of pre-deposit clandestine removal of goods - manufacture and sale of M.S. ingots Held that - MSEB s G-7 Forms and electricity bills disclosed the actual consumption of electricity and the Revenue has been able to show that the appellants suppressed production of M.S. ingots - when the department discharged their initial burden of proof by showing excess consumption of electricity (a major input) by the appellants the latter did not have any valid explanation to offer. Hence the Revenue cannot be faulted for demanding duty on the steel ingots which could have been manufactured by consuming the excess quantity of electricity - Suppression of relevant facts is inbuilt in clandestine production of excisable goods and its removal without payment of duty and the same prima facie stands established in these cases - assessees directed to deposit

Summary

Issues Involved:
1. Waiver of pre-deposit and stay of recovery.
2. Allegations of clandestine manufacture and clearance of M.S. ingots.
3. Reliance on electricity consumption data for quantification of duty.
4. Validity of extended period of limitation.
5. Evidentiary support for clandestine manufacture claims.
6. Legal precedents and their applicability.
7. Specific findings against individual appellants.

Detailed Analysis:

1. Waiver of Pre-deposit and Stay of Recovery:
The appellants sought a waiver of pre-deposit and stay of recovery concerning the adjudged amounts. The tribunal examined the records and heard arguments from both sides, ultimately deciding that the main demands of duty were based on suppressed electricity consumption.

2. Allegations of Clandestine Manufacture and Clearance:
The department alleged that the assessee-companies clandestinely manufactured and cleared M.S. ingots to evade excise duty. This was primarily based on electricity consumption data, which indicated higher usage than what was accounted for in production records. The department's investigation included data from the Maharashtra State Electricity Board (MSEB) and private records.

3. Reliance on Electricity Consumption Data:
The department used electricity consumption data to estimate the quantity of ingots allegedly manufactured and removed clandestinely. They relied on Dr. N.K. Batra's study, which suggested that electricity consumption for producing one MT of M.S. ingots ranged between 555 KWH and 1046 KWH. The department adopted 1026 KWH per MT as the standard for most cases. The tribunal noted that in some cases, the department also used private records and statements from company employees to support their claims.

4. Validity of Extended Period of Limitation:
The appellants argued against the invocation of the extended period of limitation. However, the tribunal found that the extended period was applicable in cases of clandestine removal of excisable goods. The tribunal noted that suppression of relevant facts is inherent in such cases, justifying the extended period.

5. Evidentiary Support for Clandestine Manufacture Claims:
The tribunal examined various pieces of evidence, including:
- High electricity consumption without corresponding production records.
- Private records indicating higher electricity usage.
- Statements from company employees admitting to manipulation and fabrication of records.
- Financial discrepancies, such as costs of electricity and raw materials exceeding the selling price of ingots.

6. Legal Precedents and Their Applicability:
The tribunal discussed several legal precedents:
- R.A. Castings Pvt. Ltd. v. Commissioner of Central Excise, Meerut-1: The tribunal had previously held that electricity consumption alone could not determine duty liability. However, this case was distinguished as there was no corroborative evidence.
- Triveni Rubber and Plastics v. Collector of Cen. Excise, Cochin: The Supreme Court upheld the estimation of production based on electricity consumption.
- Bhagwati Ispat Pvt. Ltd. v. C.C.E., Bhopal: The tribunal and Supreme Court supported the department's reliance on electricity consumption data for estimating production and duty liability.

7. Specific Findings Against Individual Appellants:
The tribunal noted specific findings against various appellants, such as:
- Shridhar Castings: High electricity consumption with nil production on several days, non-accountal of ferro alloys.
- Ishu Super Steel: High costs of production exceeding transaction values, fictitious entries in financial records.
- Orange City Alloys: Admission of record manipulation, high burning loss to cover unaccounted production.
- Shiva Steel: Issuance of parallel invoices, non-accountal of ferro alloys.
- Kalika Steel Alloys: High electricity consumption with nil production on several days, high costs of electricity and raw materials.

Conclusion:
The tribunal directed all appellants, except Shree Steel Castings, to deposit 50% of the duty demanded and 25% of the penalty imposed within four weeks. Shree Steel Castings made a prima facie case and was granted a stay. The tribunal emphasized that evidence of unaccounted procurement, sale, transportation, and payment for goods was not required when clandestine manufacture and removal were established through other means, such as electricity consumption data.