2015 (9) TMI 405 - AT - Central Excise

Cenvat Credit - Waiver of pre-deposit - abnormal consumption of inputs i.e. pig iron, scrap, CPC production apart from low production yield resulting in high utilization of Cenvat credit - majority order - Held that - in this case the applicant has produced 2 reports showing consumption pattern of the input which show that the pattern the consumption shown by the applicant is correct. Further, in the case of Sanco Plastics Pvt. Ltd. (2003 (11) TMI 519 - CESTAT, NEW DELHI) this Tribunal has held that in view of the conflicting opinion brought on record by both the sides for consumption pattern and the allegation is not proved by tangible evidence, in that case allegation is not sustainable. In this case also no investigation took place and there is no allegation that the applicant has not received the input or cleared input/finished goods clandestinely. Further, when the applicant is filing ER-6 returns regularly showing their consumption pattern, in these circumstances, the applicant prima facie having a case on limitation also. I concur with the view taken by the Hon ble Member Judicial relying on the decision of Adit Ispat (2013 (11) TMI 439 - CESTAT NEW DELHI) to make pre-deposit of ₹ 30.00 lakhs at this stage. - Stay granted partly.

Issues Involved:
1. Alleged excess consumption of raw materials (pig iron, scrap, CPC) and high utilization of Cenvat credit.
2. Reliance on NIT Raipur's report versus Chartered Engineer's certificate.
3. Pre-deposit amount for hearing the appeal.
4. Difference of opinion between judicial and technical members on the quantum of pre-deposit.

Detailed Analysis:

1. Alleged Excess Consumption and High Utilization of Cenvat Credit:
The Revenue conducted investigations and scrutinized the raw materials consumed by the appellant in their induction furnace division. They concluded that the appellant had recorded abnormal consumption of pig iron, scrap, and CPC production, apart from low production yield, resulting in high utilization of Cenvat credit. It was held that the appellant had taken Cenvat credit on an excess quantity of these materials without actual use in manufacturing their final product. Consequently, a demand for duty of Rs. 5,69,46,336/- was confirmed, along with interest and a penalty.

2. Reliance on NIT Raipur's Report versus Chartered Engineer's Certificate:
The appellant argued that the Revenue's case was based on theoretical input/output ratios and the opinion of NIT Raipur, without concrete evidence of non-receipt of inputs or clearance of the same after availing credit. The appellant presented a Chartered Engineer's certificate indicating that the raw material procured was in accordance with the finished goods manufactured. The adjudicating authority rejected this certificate without justifiable reasons. The appellant also submitted a certificate from the National Institute of Secondary Steel Technology, supporting their defense that the raw material procured was sufficient.

3. Pre-deposit Amount for Hearing the Appeal:
The Tribunal considered a recent order in a similar case (Adit Ispat v C.C.E, Raipur) where the appellant was directed to deposit Rs. 25 lakhs out of a total duty of Rs. 5.53 crores. Following this precedent, the Tribunal directed the appellant to deposit Rs. 30 lakhs as a condition for hearing their appeal, within 8 weeks, with the balance amount of duty and penalty waived and its recovery stayed during the appeal's pendency.

4. Difference of Opinion on Quantum of Pre-deposit:
There was a difference of opinion between the judicial and technical members regarding the pre-deposit amount. The Judicial Member (Archana Wadhwa) ordered a deposit of Rs. 30 lakhs, following the precedent in Adit Ispat. However, the Technical Member (Manmohan Singh) opined that the charges by the Revenue were not unfounded based on the NIT Raipur report and suggested a higher pre-deposit of Rs. 1.25 crores. The Technical Member emphasized that the high proportion of carbon in the raw materials used was not technically feasible for manufacturing the final product, indicating possible excess receipt and abnormal consumption of raw materials.

Resolution of Difference of Opinion:
The third member (Ashok Jindal) was called to resolve the difference. After considering both sides, it was concluded that the decision in Aditi Ispat was not entirely applicable as it also considered financial hardship, which was not pleaded by the appellant in the current case. However, the third member concurred with the Judicial Member's view, directing a pre-deposit of Rs. 30 lakhs, considering the conflicting opinions on the consumption pattern and the lack of concrete evidence of non-receipt or clandestine clearance of inputs.

Final Order:
The majority order directed the appellant to make a pre-deposit of Rs. 30 lakhs within 8 weeks as a condition for hearing their appeal, with the matter to come up for compliance on 26-5-2014.

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