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2017 (5) TMI 601 - AT - Central ExciseShortage of finished goods and raw material - manufacture of MS Ingots and Hot Re rolled product falling under chapter 72 of the Central Excise Tariff Act - the major demand of ₹ 6,46,31,888/- has been made against Appellant on the basis of power consumption in the Appellant unit - principles of natural justice - Held that - the demands confirmed on the basis of electric consumption cannot be confirmed without considering the submission of the Appellants. The revenue has not considered the electric consumption for setting up of the Unit and rolling mill as well as electricity consumed in ancilliary uses. However no such exercise was undertaken which itself discard the claim of the revenue. The demand of clandestine removal of goods cannot be raised on the basis of power consumption in absence of any positive evidence of clandestine production and removal - the reasons for high consumption of electricity in the case of the appellants factory have not at all been studied and analysed by the Revenue independently. The clandestine manufacture and removal of excisable goods has to be proved viz. by excess receipt of raw material by the Appellant and non-accountal thereof in the statutory records, manufacture of finished goods, labour employed and payment made to them, packing material used and various factors - in the instant case not a single of such evidences was found. Even the department has not taken any step to investigate any such incidence for the very simple reason that nothing of that nature of evidence available - thus, there is no reason to hold that the demand based upon the electricity consumption is sustainable and hence is set aside. As regard other demands, all other demands are also set aside in the absence of corroborative evidence and lack of investigations on some issue. The Adjudicating authority has also disallowed the credit of ₹ 36720/- on cement and the Appellant has not pressed on contesting the said demand. We therefore hold that the demand of ₹ 36720/- is sustainable. The demands made against the Appellant Unit M/s Meenakshi Re-rollers Pvt. Ltd., except cenvat demand of ₹ 36,720/-, are not sustainable - Consequentially penalties imposed against them are also set aside - Since we have set aside the above duty demands and penalties against the Appellant company, the penalty imposed upon the Director, Shri Nikhil Bansal does not sustain, hence the said penalty is also set aside. Appeal allowed - decided in favor of assessee.
Issues Involved:
1. Demand based on power consumption. 2. Demand based on alleged shortage of MS Ingots. 3. Demand based on alleged shortage of Sponge Iron and Melting material. 4. Demand based on alleged shortage of Silico Manganese. 5. Demand based on unaccounted receipt of raw materials (Ferro Silicon, Silicon Manganese, Sponge Iron). 6. Demand based on alleged clandestine removal of MS Ingots. 7. Disallowance of Cenvat credit on cement. Issue-wise Detailed Analysis: 1. Demand Based on Power Consumption: The major demand of ?6,46,31,888/- was based on the assumption that the appellant's power consumption was excessively high, leading to the conclusion of clandestine production and removal of MS Ingots. The revenue relied on an expert opinion from IIT Kanpur and comparisons with other units. However, the tribunal found that the actual tests conducted by departmental officers showed an average consumption of 1765 units per MT, significantly higher than the standard 1046 units. The tribunal noted that the adjudicating authority failed to consider the electricity consumed in ancillary functions and the initial years of factory setup. It was concluded that demands based solely on power consumption without concrete evidence of clandestine production and removal are not sustainable. The tribunal cited several precedents, including the High Court ruling in CCE Vs. R.A. Castings, where similar demands were set aside. 2. Demand Based on Alleged Shortage of MS Ingots: The demand of ?30,131/- was based on an alleged shortage of 12.911 MT of MS Ingots. The tribunal found that the shortage was determined through eye estimation rather than actual weighment, which is not a reliable method. The officer conducting the verification admitted to an arithmetical error. Consequently, the tribunal held that the demand was not sustainable. 3. Demand Based on Alleged Shortage of Sponge Iron and Melting Material: The demand of ?1,82,888/- was based on the alleged shortage of 80 MT of Sponge Iron, assumed to have been used in the manufacture of 72.632 MT of MS Ingots. Similarly, a demand of ?8,49,015/- was based on the alleged shortage of 1.433 MT of Silico Manganese, assumed to have produced 337.176 MT of MS Ingots. The tribunal found that these shortages were determined without actual weighment and were based on assumptions without concrete evidence of manufacture and removal. Thus, these demands were also set aside. 4. Demand Based on Alleged Shortage of Silico Manganese: The demand of ?21,93,724/- was based on the alleged unaccounted receipt of 929.470 MT of Sponge Iron, assumed to have produced 843.866 MT of MS Ingots. The tribunal noted that the allegations were based on loose papers and statements without further investigation or verification from statutory records. The tribunal found no evidence of unaccounted receipt or manufacture and removal of goods, leading to the conclusion that the demand was not sustainable. 5. Demand Based on Unaccounted Receipt of Raw Materials: - Ferro Silicon: The demand of ?13,80,579/- was based on the alleged unaccounted receipt of 2 MT of Ferro Silicon, assumed to have produced 470.588 MT of MS Ingots. The tribunal found no evidence to support this assumption and noted that Ferro Silicon is used to quench fire, not to increase the weight of MS Ingots. - Silicon Manganese: The demand of ?29,20,916/- was based on the alleged unaccounted receipt of 4.450 MT of Silicon Manganese, assumed to have produced 1047.059 MT of MS Ingots. The tribunal found no evidence of such receipt or production and noted that other raw materials would also be required for such production. - Sponge Iron: The demand of ?21,93,724/- was based on the alleged unaccounted receipt of 929.470 MT of Sponge Iron. The tribunal found no evidence of unaccounted receipt or manufacture and removal of goods. 6. Demand Based on Alleged Clandestine Removal of MS Ingots: - Returned Goods: The demand of ?7,87,047/- was based on the allegation that the appellant removed goods under the guise of duty-paid rejected goods. The tribunal found that the appellant had entered the returned goods in records and cleared them on payment of duty. There was no evidence to support the allegation of manipulation. - Transporter's Record: The demand of ?24,61,052/- was based on transporter's records and octroi receipts. The tribunal found no evidence of the appellant clearing these goods or receiving proceeds from such clearances. - Commission Agent's Statement: The demand of ?3,00,188/- was based on differences in quantities between the commission agent's statement and the appellant's records. The tribunal found that the differences were due to normal weighment variations and there was no evidence of non-recorded clearances. 7. Disallowance of Cenvat Credit on Cement: The adjudicating authority disallowed the credit of ?36,720/- on cement, and the appellant did not contest this demand. The tribunal held that this demand was sustainable. Conclusion: The tribunal set aside all the demands and penalties against the appellant unit, except for the cenvat demand of ?36,720/-. Consequently, the penalty imposed on the director was also set aside. The appeals were disposed of accordingly.
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