2022 (1) TMI 864 - AT - Central Excise

Clandestine Removal - mild steel ingots from sponge iron - pig iron - cast iron and scrap evidenced by disproportionate consumption of raw material and energy - corroborative evidences or not - preponderance of probability - HELD THAT - In the absence of any supporting evidence it would appear that the duty leviability on manufacture is sought to be imposed on seeming inefficiency in the production process. There is also no escapement from the factual determination of the trial production in two shifts conducted under the aegis of central excise authorities. The backbone of quasi-judicial determination by preponderance of probability fails at the precipice of the trial production to afford a leap of rational inference which no extent of dogma can bridge. The failure to maintain prescribed records are no less attributable to the lack of monitorial oversight prescribed under Central Excise Rules 2002 than the probability of having been suppressed to disable investigations into possible evasion of duty. That mutual disregard of obligation cannot be the bedrock for presuming clandestine removals by application of formulae - there is nothing on record to indicate that the shortage of raw materials pertains to the period of the impugned demand or that scrap had been procured from unknown sources. These remain as blanks in the jigsaw puzzle assembled by the adjudicating authority to confirm the demands proposed in the respective show cause notices. There is no explanation forthcoming in the impugned orders for discarding of the energy consumption determined during the trial production except to cast doubts by relying upon reports that admittedly did not test the furnace deployed by the appellant-assessee - the singular continuity of adjudicatory evaluation from the earlier period discarded by the Tribunal in the appeal of the very same assessee and individual to the present demand the impugned order is bereft of sufficient facts and evidence to be sustained in appellate proceeding. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Confirmation of duty liability under section 11A of Central Excise Act, 1944 for the periods October 2007 to July 2008 and August 2009 to July 2010.
- Imposition of penalty under rule 25 of Central Excise Rules, 2002 on the assessee and the Director of the appellant-company.

Confirmation of Duty Liability:
The judgment involved four appeals against orders confirming duty liability under section 11A of the Central Excise Act, 1944. The proceedings were initiated based on show cause notices alleging clandestine production of 'mild steel' ingots from various materials. The appellant argued that the demand for the earlier period had been set aside by the Tribunal based on the same evidence. They cited decisions from the Hon'ble High Courts of Allahabad and Jharkhand on the unreliability of standards for inferring clandestine production. The appellant contended that the evidence used to uphold the demand lacked credibility, especially concerning power consumption during controlled operations. The appellant also raised concerns about relying on reports without the availability of authors for cross-examination.

Legal Basis and Precedents:
The appellant's submissions included references to legal precedents such as decisions of the Hon'ble High Court of Bombay and various Tribunal decisions to challenge the basis of the demand. The appellant emphasized the lack of reliability in the evidence used to confirm the demand and highlighted discrepancies in power consumption calculations. The appellant also questioned the authenticity of production slips and the reliance on opinions without the opportunity for cross-examination. These arguments were crucial in challenging the validity of the demand and penalty imposed.

Adjudicating Authority's Approach:
The Authorized Representative argued that the Tribunal's decision in the earlier period did not apply to the present demand. The Representative contended that the circumstantial evidence and preponderance of probability supported confirming the demand. The Representative highlighted the lack of protest by the appellant-Director on the veracity of records and the failure to maintain proper records. The Representative relied on decisions of the Hon'ble Supreme Court and the Tribunal to justify confirming the demand based on circumstantial evidence.

Judgment and Conclusion:
The Tribunal analyzed the evidence presented and found the impugned order lacked sufficient facts and evidence to be sustained in appellate proceedings. The Tribunal noted the lack of supporting evidence, the failure to maintain prescribed records, and the absence of explanations in the impugned orders. The Tribunal concluded that the impugned order was bereft of sufficient facts and evidence, leading to the set aside of the order and allowing the appeals. The judgment was pronounced on 19/01/2022.

This detailed analysis covers the issues of duty liability confirmation under the Central Excise Act, legal basis and precedents cited, the adjudicating authority's approach, and the ultimate judgment of the Tribunal in setting aside the impugned order and allowing the appeals.