2019 (5) TMI 936 - AT - Central Excise

Duty Penalty for clandestine manufacture and removal of goods - MS scrap and MS Ingots - most of the clearance of MS ingots were effected to M/s. Prince TMT steels Pvt. Ltd., their sister unit and M/s. Beepath Castings Pvt. Ltd. - reliance placed on statements of Shri C.K. Abdurahiman, General Manager and Shri Sibiraj, Chemist of the main respondent - demand also based on documents recovered from the premises of he respondents and investigation conducted - revenue neutrality - Confiscation - penalties. HELD THAT - We find that on the basis of the same investigation and the statements of the witnesses and the documents recovered from the premises of the respondents, show-cause notices were also issued to M/s. Prince Rollings (P) Ltd. alleging unaccounted production and clearance. On appeal before the Tribunal, the Tribunal after analyzing the entire evidences on record passed a detailed Final Order in M/S. PRINCE TMT STEELS PVT LTD, M/S. PRINCE ROLLINGS (P) LTD., SRI ANUB SHA, DIRECTOR, SRI. C.K. ABDURAHIMAN, GM, SRI AHMED FAIZAL SHA, DIRECTOR, SRI T.K. ABDUL KARIM, MD VERSUS C.C.,C.E. S. T- CALICUT 2018 (10) TMI 893 - CESTAT BANGALORE and set aside the impugned order by allowing the appeals filed by M/s. Prince TMT Steels (P) Ltd., M/s. Prince Rollings (P) Ltd. and other co-noticees on merits. Penalties were dropped - The present proceedings are also based on the same facts, statements and documents recovered during investigation. Further, it is well settled legal position that the allegation of manufacture and clandestine removal of goods without payment of duty being a serious charge, the burden of proof is on the Revenue. The charge must be proved by producing cogent / positive material evidence of procuring raw materials, manufacture of goods, removal of goods from the factory, receipt of the goods by the buyer and receipt of consideration etc. Thus, the Learned Commissioner has given careful consideration to the facts of the case and has given reasoned findings which are similar to the case, based on same set of facts and investigation, decided by this bench. Therefore, no sufficient cause has been made out by the Revenue so as to necessitate the interference of this bench in the impugned order. Demand set aside - appeal dismissed - decided against Revenue.

Issues Involved:
1. Allegation of clandestine manufacture and removal of steel ingots.
2. Reliance on uncorroborated statements and documents.
3. Seizure and confiscation of 4.544 MT of MS ingots.
4. Evaluation of electricity consumption as evidence.
5. Capacity of the furnace.
6. Revenue neutrality and financial transactions.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Manufacture and Removal of Steel Ingots:
The Revenue alleged that the respondents engaged in unaccounted production and clandestine removal of MS ingots without payment of excise duty. This allegation was primarily based on documents seized during searches, statements of employees, and private records. However, the Commissioner (Appeals) found that the charge of unaccounted production and clearance was not substantiated by concrete evidence. The Tribunal noted that the records maintained by the Chemist and Cashier were not corroborated by independent evidence, and the statements of key individuals were retracted. Furthermore, no discrepancies were found in the physical stock of raw materials and finished goods during the surprise inspection, weakening the allegation of clandestine operations.

2. Reliance on Uncorroborated Statements and Documents:
The Tribunal observed that the statements of Shri C.K. Abdurahiman, Shri V.R. Sibiraj, and Shri Anub Sha, which were initially relied upon by the Revenue, were later retracted. The Commissioner (Appeals) emphasized that retracted statements without corroboration cannot be the sole basis for establishing clandestine manufacture and removal. The Tribunal supported this view, citing legal precedents that require corroborative evidence to validate retracted statements. The Tribunal also noted inconsistencies in the Department's reliance on private records in different proceedings, further undermining their credibility.

3. Seizure and Confiscation of 4.544 MT of MS Ingots:
The Tribunal found that the excess stock of MS ingots seized from M/s. Prince TMT Steels Pvt. Ltd. was based on an estimated weight, leading to a negligible variation of 0.65%. This minor discrepancy, resulting from an approximation rather than actual weighment, was deemed insufficient to justify the seizure and confiscation. The Tribunal highlighted that such minor variations are common in the industry and do not substantiate the charge of clandestine removal.

4. Evaluation of Electricity Consumption as Evidence:
The Revenue argued that excessive electricity consumption indicated unaccounted production. However, the Tribunal noted that the Department did not conduct any tests or trials to determine the average electricity consumption for manufacturing MS ingots. The Tribunal referred to a study conducted by the Kerala VAT Tribunal, which found that 1103.64 units of electricity were required to produce one MT of ingots, contrary to the Department's claim. This discrepancy in electricity consumption further weakened the Revenue's case.

5. Capacity of the Furnace:
The Department alleged that the furnace installed by the respondents had a capacity of 8 MT instead of 6 MT, based on drawings provided by the manufacturer. However, the Tribunal found that the invoice from M/s. Inductotherm (India) Pvt. Ltd. indicated a 6 MT furnace. The Tribunal emphasized that no trial run or technical assessment was conducted to verify the actual capacity of the furnace. In the absence of concrete evidence, the Tribunal concluded that the allegation of suppressed furnace capacity was unsubstantiated.

6. Revenue Neutrality and Financial Transactions:
The Revenue contended that non-duty paid goods have a competitive edge in the market. However, the Tribunal noted that the respondents had imported and procured raw materials and accounted for them in their records. The Tribunal also highlighted that no evidence was presented to show financial transactions related to the alleged clandestine clearances. The Tribunal reiterated that serious charges like clandestine removal require meticulous proof of all elements, including procurement of raw materials, manufacture, removal, transportation, and financial transactions.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s order, dismissing the Revenue's appeals. The Tribunal found that the allegations of clandestine manufacture and removal were not substantiated by concrete evidence. The reliance on retracted statements and uncorroborated documents, discrepancies in electricity consumption, and the unverified furnace capacity weakened the Revenue's case. The Tribunal emphasized the need for corroborative evidence to support serious charges and concluded that the impugned order did not warrant interference.

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