2014 (3) TMI 706 - AT - Central Excise

Benefit of Cenvat credit - Availment of Cenvat credit of excess quantity on pig iron, scrap, CPC production without actual use of the same in the manufacture of their final product - difference of opinion - Held that - matter referred to larger bench with the following questions Whether following previous decision of CESTAT in Aditi Ispat partial waiver of pre-deposit is to be ordered as held by Member (Judicial) with a direction to deposit Rs.Thirty lakhs. Or Whether based on the basis of analysis and use of carbon required in manufacture of M.S.Ingots, use of extra carbon utilization through extra consumption of pig iron is to be considered not feasible and thus prima facie partial pre-deposit of Rs.1.25 crores is to be ordered as held by Member (Technical).

Summary

Issues Involved:
1. Alleged excess consumption of raw materials (pig iron, scrap, CPC) and abnormal production yield.
2. Reliance on theoretical input/output ratio and opinion of NIT Raipur by Revenue.
3. Rejection of Chartered Engineer's certificate by adjudicating authority.
4. Determination of pre-deposit amount for appeal hearing.

Detailed Analysis:

1. Alleged Excess Consumption of Raw Materials and Abnormal Production Yield:
The Revenue conducted investigations and scrutinized the raw materials consumed by the appellant in the induction furnace division. They concluded that the appellant recorded abnormal consumption of pig iron, scrap, and CPC production, resulting in high utilization of Cenvat credit. It was held that the appellant took Cenvat credit for excess quantities without actual use in manufacturing the final product. Consequently, a demand for duty of Rs.5,69,46,336/- was confirmed, along with interest and penalties.

2. Reliance on Theoretical Input/Output Ratio and Opinion of NIT Raipur by Revenue:
The appellant argued that the Revenue's case was based solely on theoretical input/output ratios and the opinion of NIT Raipur. They contended that there was no concrete evidence of non-receipt or clearance of inputs after availing credit. They produced a Chartered Engineer's certificate indicating that the raw material procured was consistent with the finished goods manufactured. The adjudicating authority rejected this certificate without justifiable reasons. The appellant also procured a certificate from the National Institute of Secondary Steel Technology to support their defense.

3. Rejection of Chartered Engineer's Certificate by Adjudicating Authority:
The adjudicating authority dismissed the Chartered Engineer's certificate provided by the appellant, which indicated that the raw material procured was in accordance with the quantum of finished goods manufactured. The appellant argued that the NIT Raipur report was not specific to their furnace's performance and did not account for various factors influencing raw material consumption, such as input quality, labor efficiency, and power supply fluctuations.

4. Determination of Pre-deposit Amount for Appeal Hearing:
The Tribunal considered a similar case (Aditi Ispat vs CCE Raipur) where a pre-deposit of Rs.25 lakhs was ordered out of a total duty of Rs.5.53 crores. The Tribunal directed the appellant to deposit Rs.30 lakhs within eight weeks, with the balance amount of duty and penalty waived during the appeal's pendency.

Separate Judgments Delivered by Judges:

- Member (Judicial): Ordered a deposit of Rs.30 lakhs against the demand of Rs.5.69 crores and an equal penalty amount. The Member emphasized treating similar cases consistently at the interim stage.

- Member (Technical): Disagreed with the Rs.30 lakhs pre-deposit, arguing that the quantum should ensure the appellant's right to appeal while safeguarding Revenue interests. Based on the NIT Raipur report and detailed analysis of raw material usage, the Member concluded that a pre-deposit of Rs.1.25 crores was appropriate.

Analysis of Inputs and Outputs:
The NIT Raipur report and the Commissioner's analysis indicated that the appellant's recorded raw material proportions were not technically feasible for manufacturing mild steel ingots with the specified carbon content. The report highlighted that the appellant's recorded usage of pig iron and CPC was significantly higher than necessary, suggesting possible excess receipt and abnormal consumption of raw materials.

Conclusion:
The Tribunal directed a partial pre-deposit of Rs.30 lakhs for the appeal hearing, while the Member (Technical) suggested Rs.1.25 crores based on a detailed analysis of raw material usage and the NIT Raipur report. The difference of opinion was noted, and the matter was referred for resolution on the appropriate pre-deposit amount.