2023 (7) TMI 425 - AT - Central Excise

Clandestine Removal - demand on account of the electricity consumption without any corroborative evidence whatsoever in any form - corroborative evidence or not - HELD THAT - There is nothing to indicate that the Appellant has given this as the figure for the normal production in other months. Therefore, there is no basis to adopt this formula to arrive at the alleged clandestine production. The Electricity Bill cannot be exactly co-related with the monthly production in the factory. Apart from this, it is observed from ER-1 Returns that the quantities manufactured in other months have been cleared in the months where the production is shown as Nil - The Audit has failed to take note that the stock can always be sold in the next month. Further, the entire consumption of Electricity unit will not directly result in the finished products. The product will be at several stages as initial product, semi finished product, finished product etc. All these facts have been ignored in their over enthusiasm by Audit to fasten the case on the Appellant. From the Recorded statements, it is seen that the Authorized Signatory has stated the facts and is not any form of any confessional recording about any clandestine manufacture or clearances. After going through these factual details it emerges that the only base on which the demand has been confirmed, is on account of the electricity consumption without any corroborative evidence whatsoever in any form. In the case of M/S UNION ENTERPRISES ANOTHER VERSUS UNION OF INDIA OTHERS 2014 (5) TMI 93 - CALCUTTA HIGH COURT , the Hon ble Kolkata High Court has considered the Allahabad High Court s decision in the case of R. A. Casting on similar issue held that mere excess consumption of electricity without any corroborative evidence relating to the purchase of the raw material, conversion of the raw material into a final products and clearance from the manufacturing unit to the respective buyers are produced does not raise presumption of evading the duty. As per the factual matrix, since the Department has relied on the Electricity consumption alone without any corroborative evidence whatsoever, the decision of the Hon ble High Courts are squarely applicable. Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the demand of Excise duty raised by the audit team based on electricity consumption and ER-1 Returns, the investigation conducted by the Range/Division officials, the Show Cause Notice issued to the Appellant, and the confirmation of the demand by the lower Authorities.

Audit Findings and Appellant's Submissions:
The Appellant, a manufacturer of Copper Enamelled Wire, was audited for the period April 2008 to March 2013, leading to a demand of Rs.5,70,431. The Appellant submitted details including ER-1 Returns and Electricity Bills. The Authorized Signatory stated that the factory was closed in December 2013, explaining the high electricity bill due to the electricity Department's minimum slab criterion. The Appellant argued that the case lacked corroborative evidence and highlighted discrepancies in the audit team's methodology, pointing out that the Department failed to prove clandestine clearance. The Appellant cited relevant case laws to support their case.

Observations and Decision:
The Tribunal considered the audit observations, statements by the Authorized Signatory, and the basis for the demand. It noted that the audit team selectively focused on eight months with Nil production, using electricity consumption to allege clandestine production. However, the Tribunal found flaws in this approach, emphasizing that electricity consumption alone cannot determine duty liability without corroborative evidence. The Tribunal highlighted the importance of considering various factors affecting production and sales, such as stock turnover and production stages. It concluded that the demand was solely based on electricity consumption without supporting evidence.

Legal Precedents and Rulings:
The judgment referenced the case of Union Enterprises Vs Union of India, where the High Court emphasized the need for norms in determining duty liability based on electricity consumption. It also cited the case of Sukh Sagar Metals (P) Ltd Vs Union of India, where the High Court quashed an order due to lack of substantive evidence beyond electricity consumption. These cases underscored that electricity consumption alone is insufficient to establish duty evasion without additional proof of unaccounted manufacturing or clandestine removal.

Final Decision:
Based on the lack of corroborative evidence and reliance solely on electricity consumption, the Tribunal set aside the impugned order and allowed the Appeal with consequential relief, in line with the legal principles established in the cited cases.