2015 (5) TMI 734 - AT - Central Excise

Clandestine removal of goods - Clearance of goods without payment of excise duty and invoices - Held that - Similar issue has come up in several other cases of similar nature like in the case of RA Castings Pvt. Ltd. Vs. CCE, Meerut-I 2008 (6) TMI 197 - CESTAT NEW DELHI and 2010 (9) TMI 669 - ALLAHABAD HIGH COURT and 2011 (1) TMI 1302 - Supreme Court of India and in the case of Bhavani Shankar Castings Ltd. Vs. CCE Jallandhar 2009 (2) TMI 632 - CESTAT, NEW DELHI 2009 (11) TMI 676 - KARNATAKA HIGH COURT where it has been held the demand can not be sustained merely on the basis of allegation of high consumption of electricity in the absence of any other evidence to substantiate unaccounted production and clandestine removal. The ratio of these judgments are prima facie applicable to the present case. It is however seen that there is this evidence in the form diary entries referred to above atleast to the extent of 395 MT of steel having been removed clandestinely. The duty on this quantity of steel comes to about ₹ 11 lacs. In the case on M/s. Monu Steels, they have in effect admitted that they were indulging in facilitating clandestine clearances from M/s. Nibi Steels and also admitted that 395 MT of MS Ingots were received from M/s. Nibi Steels without invoices. - Partial stay granted.

Summary

Issues: Stay applications against Order-in-Original confirming demand, penalty imposition on companies and director, suppression of production, clandestine removal, electricity consumption variation, capacity utilization, demand calculation basis, evidence of clandestine removal, applicability of previous judgments, pre-deposit order.

1. Stay Applications and Demand Confirmation:
The appellants filed stay applications against an Order-in-Original confirming a demand of Rs. 8,70,21,132 against M/s. Nibi Steel Ltd., with penalties imposed on M/s. Monu Steels and the director of M/s. Nibi Steels. The central issue revolved around the confirmation of the demand and penalties based on alleged suppression and clandestine removal of MS Ingots.

2. Suppression and Clandestine Removal:
The central excise officers conducted searches based on intelligence indicating suppression in MS Ingot production and clandestine removal through M/s. Monu Steels. Evidence, including a diary, suggested that M/s. Nibi Steels had removed 395.120 MT of MS Ingots without paying central excise duty. Discrepancies in electricity consumption and capacity utilization further raised suspicions of suppression.

3. Electricity Consumption and Capacity Utilization:
The appellants argued that the demand calculation solely based on the assumption of 830 units of electricity for 1 MT of MS Ingots was flawed. They contended that electricity consumption varies based on multiple factors and that their capacity utilization exceeding 100% indicated no suppression. The adjudicating authority's reliance on fixed electricity consumption was challenged.

4. Legal Precedents and Evidence Evaluation:
The Tribunal noted previous judgments like RA Castings Pvt. Ltd. and Bhavani Shankar Castings Ltd., emphasizing that high electricity consumption alone does not substantiate unaccounted production and clandestine removal. However, in the present case, evidence of clandestine removal through diary entries and admissions by M/s. Monu Steels supported the demand for duty payment on the removed steel quantity.

5. Pre-Deposit Order and Stay:
The Tribunal ordered a pre-deposit of Rs. 11 lacs, with Rs. 1 lac for M/s. Monu Steels, within four weeks. Compliance was set for a specific date, and the remaining liabilities were stayed pending the appeal. Failure to comply with the pre-deposit would result in the dismissal of the appeals. The pre-deposit order aimed to balance the interests of the appellants and the revenue authorities during the appeal process.