2019 (3) TMI 610 - AT - Central Excise

Clandestine removal - steel ingots - demand based on electricity consumption - Held that - In the absence of any finding of un-accounted expenditure on manufacture or of any evidence of illicit removal, it would appear that there is a fundamental flaw in the findings of the original authority. The adjudication order has relied upon power consumption to allege that there has been an additional production and has applied the per unit rate to this additional production without taking into consideration the indisputability of the total cost of production. In the absence of an attack on the total cost of production, the duty liability discharged on the said value for the entire period of two years is not susceptible to challenge as that which has not been paid as duties of Central Excise - In the absence of any logic for calculation of additional duties, there is no justification for sustaining this impugned order. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Duty liability under section 11A of Central Excise Act, 1944
- Imposition of penalties under section 11AB of Central Excise Act, 1944
- Penalties under rule 25 and rule 26 of Central Excise Rules, 2002
- Allegations of clandestine removal of goods
- Dispute regarding power consumption and its impact on production
- Applicability of Central Excise Valuation Rules
- Validity of findings based on electricity consumption
- Cross-examination and corroborative evidence
- Discrepancies in cost of production and duty liability calculation

Analysis:

The judgment by the Appellate Tribunal CESTAT Bangalore concerns appeals by M/s Bhuwalka Steel Industries Pvt Ltd and others against an order confirming duty liability, interest, and penalties under the Central Excise Act, 1944, related to the alleged clandestine removal of goods. The case revolves around excessive power consumption and its link to production of 'steel ingots' at the Kolar Unit of the appellant's company. The impugned order justified duty computation based on various factors like absence of registers, weighment slips, and electricity expenditure. The appellants contested these findings, arguing that valuation should adhere to Central Excise Valuation Rules and power consumption factors were not adequately considered. They cited the Supreme Court ruling that higher electricity consumption alone is not proof of clandestine removal.

The appellants presented detailed arguments regarding power consumption variations, furnace efficiency, and practical operating parameters affecting energy requirements for steel ingot production. They also questioned the authorities' failure to test production efficiency and reliance on inappropriate rules for valuation. The Authorized Representative referenced tribunal decisions to support the appellants' contentions on power utilization. Despite acknowledging potential issues with downstream unit production, the appellants highlighted the lack of evidence supporting clandestine removal allegations and emphasized the importance of cross-examination and corroborative evidence in such cases.

The Tribunal found flaws in the original authority's findings, noting the absence of evidence for unaccounted expenditure or illicit removal. The judgment criticized the reliance on power consumption alone to allege additional production without considering total production costs. As the duty liability was discharged based on total production costs, the Tribunal deemed the impugned order unjustified and set it aside, allowing the appeals. The judgment emphasizes the importance of logical and evidence-based calculations in determining duty liability, highlighting the need for comprehensive assessments beyond isolated factors like power consumption.

In conclusion, the Tribunal's decision underscores the necessity for thorough evaluation and substantiation of allegations in excise duty cases, cautioning against relying solely on isolated factors like power consumption to establish liability. The judgment emphasizes the significance of adhering to valuation rules, considering total production costs, and ensuring the presence of corroborative evidence and logical bases for duty determinations.