2019 (8) TMI 423 - AT - Central Excise

Clandestine manufacture and removal - mild steel ingots - allegation based on consumption of electricity - period in dispute is from 2003-04 to 2007-08 and beyond - HELD THAT - The derivation of the average power consumption for manufacture of ingots is based on the study conducted by Indian Institute of Technology, Kanpur which may not be applicable for the disputed period in the regime of Central Excise Rules, 2002. The technical report of Dr NK Batra, which has been relied upon, may have been relevant at the point when norms for consumption could be fixed under rule 173E of the erstwhile Central Excise Rules, 1944. The power consumption of the unit appears to have been computed on the basis of certain private production slips that were seized during the search proceedings. These, as pointed out by Learned Counsel, pertains to 2001 and 2002 whereas the demand stands confirmed for the subsequent period. We are unable to fathom the acceptability of reliance on the data, such as it is, pertaining to an earlier period. There is no evidence of any payments having been received from customers of the goods that were allegedly manufactured clandestinely and as the norms applied for computation of production are not applicable to the period of dispute, the consequence arising from shortage of raw materials of various types would not unerringly lead to confirmation of the allegations proposed in the show cause notice - The finding that evasion of duty did occur based on circumstances that are not established and other supplementary evidence is not maintainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved: Alleged clandestine production and clearance of mild steel ingots, adoption of norms of electricity consumption, reliance on production slips, shortage of raw materials, power consumption computation based on seized production slips, applicability of norms for the disputed period, rejection of trial production figures, absence of evidence of payments from customers, evasion of duty, lack of factual support.

Analysis:
1. Alleged Clandestine Production and Clearance of Mild Steel Ingots:
The appeals revolve around the alleged clandestine production and clearance of mild steel ingots by M/s. Shiva Steel Inds (Nagpur) Ltd. The case is based on the assertion that a specific amount of electrical energy is required for the production of one metric ton of finished product. The contention is supported by seized slips related to production and consumption.

2. Adoption of Norms of Electricity Consumption:
The appellant challenges the adoption of norms of electricity consumption as arbitrary. They argue that the reliance on production slips from a period not covered in the show cause notice is erroneous. The appellant also highlights a test conducted by officers demonstrating different energy consumption figures, which were not considered.

3. Reliance on Production Slips and Shortage of Raw Materials:
The respondent, represented by the Authorised Representative, defends the reliance on production slips and shortages found in raw materials like sponge iron, cast iron, and steel scrap. The statement of a key individual acknowledging duty liability due to shortages is emphasized. The authority also considered expert opinions and technical reports on electricity consumption for steel ingots.

4. Applicability of Norms and Rejection of Trial Production Figures:
The tribunal questions the applicability of norms for electricity consumption derived from past studies to the disputed period. The rejection of trial production figures, which indicated higher power consumption, is deemed unacceptable. The tribunal notes that the same power source is used for various activities not directly related to production.

5. Absence of Evidence and Allegations of Evasion of Duty:
The lack of evidence regarding payments from customers for allegedly clandestinely manufactured goods is highlighted. The tribunal concludes that the shortage of raw materials and other circumstances do not definitively prove the evasion of duty. The findings of duty evasion lack factual support.

6. Conclusion and Decision:
Ultimately, the tribunal finds that the impugned orders lack factual support and must be set aside. The appeals are allowed, indicating a ruling in favor of the appellant. The judgment was pronounced in open court on 07.08.2019.

This detailed analysis covers the various issues involved in the legal judgment, providing a comprehensive understanding of the arguments presented and the tribunal's decision.