2015 (8) TMI 389 - AT - Central Excise

Clandestine removal of goods - Non accounting of goods in RG-1 register - Held that - Quantity alleged to have cleared during a particular month based on certain seized documents may not have been manufactured during that month and therefore for the purpose determining power consumption for production of one MT TMT bar/MS bar, this quantity cannot be treated as the quantity produced during that month. Moreover, neither any experiment has been conducted for ascertaining the actual power consumption nor there is any evidence of unaccounted purchase of MS scrap or evidence of clandestine clearance of the finished goods. The only evidence of clandestine clearance of finished goods is in the form of seized documents including computer printouts and shortage of finished goods and duty involved in respect of demand ₹ 1,40,93,563/- based on the same has already been paid. Out of total duty demand of ₹ 11,36,37,891/- while duty demand of ₹ 1,40,93,563/- appears to be sustainable, the balance duty demand ₹ 9,89,44,328/- does not appear to be sustainable. Accordingly, we hold that the amount of ₹ 1,40,93,563/- already paid by the appellant is sufficient for hearing of these appeals. Hence the requirement of pre-deposit of balance amount of duty, interest and penalty by the appellant company and the requirement of pre-deposit of penalty by the other appellants is waived for hearing of their appeals and recovery thereof is stayed - Stay granted.

Summary

Issues:
1. Determination of duty demand based on shortage of finished goods and clandestine removal.
2. Calculation of duty demand based on power consumption.
3. Appeal against the Commissioner's order.

Issue 1: Determination of duty demand based on shortage of finished goods and clandestine removal:
The case involved a factory manufacturing M.S. Ingots, M.S. Bar, and TMT bars. Central Excise Officers found discrepancies during a visit, leading to a duty demand of Rs. 1,40,93,563/- for shortages and clandestine removals. The Commissioner confirmed this duty demand along with penalties. The appellant argued that the duty demand was based on assumptions and lacked concrete evidence. The Tribunal noted that the duty paid by the appellant covered the amount related to shortages and clandestine removals. Therefore, the Tribunal found the duty demand of Rs. 1,40,93,563/- to be sustainable.

Issue 2: Calculation of duty demand based on power consumption:
The duty demand of Rs. 9,89,44,328/- was calculated based on power consumption assumptions. The department determined power consumption per MT of bars and extrapolated production figures for the disputed period. However, the Tribunal observed that the department's assumption that the alleged clandestine clearances corresponded to actual production was flawed. No experiments were conducted to ascertain power consumption accurately. The Tribunal found the lack of evidence of unaccounted raw material purchases or clandestine removals for the disputed duty demand. Consequently, the Tribunal held that the duty demand of Rs. 9,89,44,328/- was not sustainable.

Issue 3: Appeal against the Commissioner's order:
The appellant appealed against the Commissioner's order, arguing against the duty demands and penalties imposed. The Tribunal considered submissions from both sides and examined the records. It concluded that while the duty demand of Rs. 1,40,93,563/- was valid, the duty demand of Rs. 9,89,44,328/- lacked a strong basis. Therefore, the Tribunal waived the requirement for the appellant to pre-deposit the balance amount for hearing the appeal and stayed the recovery of penalties. The stay applications were disposed of accordingly.

This detailed analysis of the judgment highlights the issues surrounding duty demands based on shortages, clandestine removals, and power consumption calculations, providing a comprehensive overview of the Tribunal's decision on each aspect of the case.