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2023 (7) TMI 424 - AT - Central ExciseClandestine Removal - melting scrap - excess input output ratio - shortage of finished goods - Cenvat credit on pig iron - receipt of only the invoices and not the physical goods which has been diverted. Clearance of melting scrap clandestinely without payment of duty of Rs.1,62,697.00/- - HELD THAT - The appellant has conceded the said demand of Rs.1,62,692/- stating that the said clearance may be negligible and in such a big plant, therefore, to buy peace they are admitting the said demand and paid the duty. Therefore, the above said demand is confirmed. Demand of shortage of finished goods of Rs.10,82,271/- - HELD THAT - Although it is claimed that stock verification was done physically in the presence of the offices of the assessees, but it is very strange that such a huge quantity of 6189.32 MT be weighed with a short span of time of 10.30 hrs. which is next to impossible and in such a big plant, negligible quantity of shortages were found as per recorded stock and physical stock as claimed. Therefore, the shortage ascertained during the course of stock-taking are on the basis of assumption and presumption. The same is not sustainable. As in this case it is claimed that physical stock taking has been done, but which is next to impossible to weighment of such a huge quantity in 10.30 hrs. without deployment of excess labour and transporting vehicles and the shortage is also of the negligible quantity of their production, in that circumstances, we hold that the shortages of finished goods are calculated on the basis of assumption and presumption. In the absence of any documentary evidences, therefore, relying on the above cited decision of this Tribunal, which has been affirmed by the Hon ble High Court, the demand of Rs.10,82,271/- confirmed against the assessee is set aside. Denial of Cenvat credit of Rs.19,71,832/- - HELD THAT - It is found that out of 36 consignments, 9 consignments were having container numbers and rest of the consignments are not having container number which clearly shows that those consignments were not transported by way of container and if the statement of Shri Satya Narayan Dey is found to be correct, in that circumstances, the Cenvat credit can be denied at the most of the 9 consignments mentioned therein. To buy peace, the assessee has already reversed the Cenvat credit pertained to these 9 consignments. Therefore, as same is not disputed by the assessee, the Cenvat credit pertaining to these 9 consignments are denied. The revenue has not come up with any evidence to show that the assessee has procured pig iron from illicit means which has gone in manufacture of sponge iron or have been procured by the assessee from some other means. In the absence of the same, Cenvat credit cannot be denied as held by the Hon ble Punjab Haryana High Court in the case of COMMISSIONER VERSUS SHAKTI ROLL COLD STRIPS PVT. LTD. 2009 (8) TMI 1125 - SC ORDER , wherein the Hon ble High Court has observed The Tribunal has also noted that the findings of the Commissioner clearly established that RT-12 returns have been assessed finally by the Range Officer which contains all the documents including the invoices under dispute on the basis of which the Modvat Credit has been availed and utilised and that payments for the purchase of the inputs have been made through cheque/demand draft. Thus, the Cenvat credit cannot be denied to the appellant in the facts and circumstances of the case, but cenvat credit on 9 consignments admitted by the assessee is denied. Demand of Rs.6,48,48,644/- on account of input output ratio - HELD THAT - There is no statutory obligation under the Central Excise Act, 1944 and the Rules framed thereunder to maintain standard norms of production in respect of an assessee liable to pay Central Excise duty under Section 3 of the said Act - There is nothing on record that the assesses herein have ever declared input-output ratio to the Central Excise authority during the material period. While computing the input-output ratio of 1.50 1, figures recorded in respect of assessee No.1 during the period of 2004-05 and 2005-06 recorded have been taken into account. The assessee No.1 and assessee No.2 are two distinctly separate units, and also separately registered. It is not on record that in order to calculate the input-output ratio, Iron Ore consumed and sponge iron produced by the assessee No.2 during the year 2004-05 and 2005-06, as considered in case of assessee No.1, have all been considered - the assessee No.2, being a separate legal entity, inputoutput ratio 1.50 1, as worked out on the basis of figures recorded in case of assessee No.1, cannot be made applicable to work out quantum of production of sponge iron during the material period of demand. The said input-output ratio cannot remain fixed due to variable factors prevailed in the character of all the constituent raw material, especially, that of Iron Ore, largely due to variation in Fe(T) of the Iron Ore. As Fe(T) content in the Iron Ore varies, standard norms cannot be achieved ad production of Iron Ore. As Fe(T) content in the Iron Ore varies, standard norms cannot be achieved and production of Iron Ore worked out on the basis of such input-output ratio cannot be considered as actual production but estimated one - the Ld.Adjudicating authority has rightly dropped the demand on the basis of input output ratio. Also, no penalty is imposable on the assessee. Appeal disposed off.
Issues Involved:
1. Clearance of melting scrap without payment of duty. 2. Demand due to shortage of finished goods. 3. Denial of Cenvat credit. 4. Demand based on input-output ratio. Summary: (a) Clearance of Melting Scrap Without Payment of Duty: The appellant conceded the demand of Rs.1,62,697/- for the clearance of melting scrap without payment of duty, stating that the clearance was negligible in such a large plant. The Tribunal confirmed this demand. (b) Demand Due to Shortage of Finished Goods: The Tribunal found it improbable that 6189.32 MT of finished goods could be weighed in a short span of 10.30 hours. The shortages were deemed negligible and based on assumptions. Referencing the case of Sada Shiv Steel Mills, the Tribunal held that the shortage calculations were not sustainable without corroborative evidence. Consequently, the demand of Rs.10,82,271/- was set aside. (c) Denial of Cenvat Credit: The Tribunal examined the denial of Cenvat credit amounting to Rs.19,71,832/- based on 36 invoices from Neo Metaliks Ltd. and KIC Metaliks Ltd. The Tribunal noted that out of these, only 9 consignments had container numbers, indicating possible diversion. The appellant had already reversed the Cenvat credit for these 9 consignments. The Tribunal held that the Revenue failed to prove that the appellant procured pig iron from illicit means. Therefore, the Cenvat credit denial was limited to the 9 consignments, and the rest was allowed. (d) Demand Based on Input-Output Ratio: The Tribunal found no statutory obligation to maintain a standard input-output ratio under the Central Excise Act. The input-output ratio varied due to factors like Fe(T) content in iron ore. The Tribunal noted that the adjudicating authority rightly dropped the demand based on input-output ratio, as there was no declared input-output ratio for the disputed period. The Tribunal referenced the case of CCE, Kolkata-III v. Sai Sulphonate Pvt. Ltd., emphasizing that without evidence of clandestine removal, the demand could not be sustained. Thus, the demand of Rs.6,48,50,644/- was dropped. Final Order: 1. Confirmed the demand of Rs.1,62,697/- for clearance of melting scrap. 2. Denied Cenvat credit on 9 invoices. 3. Set aside the demand of Rs.10,82,271/- for shortage of finished goods. 4. Upheld the order dropping the demand of Rs.6,48,50,644/- based on input-output ratio. 5. No penalties were imposed on the assessee. All appeals were disposed of in these terms.
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