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TMI Blog2015 (6) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of the appellant company. In course of search of the factory certain loose papers/sheets containing details of despatch of TMT bars and receipt of raw material MS Ingots were recovered from the custody of Shri Murari Lal Sharma, General Manager and some other records were found from the factory office, which were taken over under a resumption memo detailing the taken over documents against Sl. No. 1 to 21. Subsequently, while taking round of the factory, some records kept in a lag were recovered from a room in the factory and these records appeared to be containing despatch sheets of bars and receipt of MS Ingots and also hand-written ledger books pertaining to the period from April 2005 to September 2005 (upto 08/09/05). These documents were also taken over by the Central Excise officers under a separate resumption memo, the detail of which are mentioned against Sl. No. 1 to 10 of the resumption memo prepared on the spot in presence of Shri Ghasi Lal Sharma, the Director of the appellant unit. Both Shri Ghasi Lal Sharma and Murari Lal Sharma who were present at the time of search of the factory on 10/09/05 in their statement recorded on the spot under Section 14 of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he last six months as per his knowledge. Inquiry was made with Shri Murari Lal Sharma, General Manager of the appellant company and he in his statement dated 10/09/05 corroborated the statement of Shri Ghasi Lal Sharma. In this statement Shri Murari Lal Sharma was questioned about the despatch entries pertaining to Saria I and Saria II and he stated that while Saria I is soft Saria, the Saria II is hard Saria and the process of manufacturing is different. He, however, stated that there is no difference in the rate and use for Saria I and Saria II. 1.3 In course of inquiry it was found that while private ledger, Roz Nama and Nakal Bahi had been written by an employee Shri Shiv Charan, the other documents the daily receipt and despatch sheets were being prepared by Shri Murari Lal Sharma and the delivery orders were being signed by Shri Ghasi Lal Sharma. On the date of search on 10/09/05, the Investigating Officers were told by Shri Murari Lal Sharma that the private ledger/Nakal Bahi had been written by Shri Shiv Charan who is not present and that he will be produced the next day. Though the officers repeatedly asked Shri Ghasi Lal Sharma and Shri Murari Lal Sharma to produce Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the period from April 2005 to 08/09/2005 the appellant company had received total of 5050 MT of MS Ingots from various suppliers without any invoices and it appeared that this receipt of MS Ingots had not been accounted for. However, the Department does not demand duty on the basis of unaccounted receipt, but this unaccounted receipt is being used by the Department as an evidence in support of its allegation of unaccounted manufacture and clandestine removal of Saria by the appellant company during the period from April 2005 to 08/09/2005. 1.5.1 It was found that even after the search of the factory on 10/9/05, the Appellant company had continued to receive unaccounted ingots from M/s Nirmal Inductomelts Pvt. Ltd. till 01/10/05. On the basis of the quantity of MS Ingots received during this period, it was estimates by the offices at after taking into account 8% burning loss, 202.88 MT of TMT bars had been manufactured without any accounted and these bars had been cleared clandestinely. Duty demand of Rs. 6,77,061/- is on this basis. 1.6 The Investigating officers found that during July 2005 and August 2005 the production of MS Bars (Saria) as recorded by the appellant compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned duty demand was confirmed in toto against the appellant company alongwith interest on it under Section 11AB and amount of Rs. 60 lakhs also paid prior to the show cause notice was ordered to be appropriated against this demand. Beside this, while penalty of amount equal to the duty demand confirmed was imposed on the appellant company under Section 11AC, penalty of Rs. one crore was imposed on Shri Ghasi Lal Sharma, Director under Rule 26 of the Central Excise Rules and penalty of Rs. 5,00,000/- was imposed on Shri Murari Lal Sharma under Rule 26 of the Central Excise Rules. Against this order of the Commissioner, these three appeals have been filed alongwith stay applications. 1.9 In respect of stay application filed by the appellants, the Tribunal vide order dated 08/12/11 had directed the appellant company to pre-deposit an amount of Rs. 6 crores for compliance with provision of Section 35F within the period specified in this order and report compliance on 16/03/12. The appellant company challenged this order before Honble Rajasthan High Court and the Honble Rajasthan High Court while confirming the Tribunals stay order extended the period of pre-deposit. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such Sarias, the same are purchased from outside ; (d) from the very beginning, the stand of the appellant company had been that the its manufacturing capacity is 5 M.T. per hour. The appellant companys factory normally works in two shifts and, therefore, assuming that the factory has worked every day during the month, in two shifts its maximum production capacity would be only 2400 M.T. per month, while if the allegation of the Department relating to the clandestine removal of Saria worth about Rs. 45 crores during period from 1st April 2005 to 08/09/2005 is accepted, it would imply that the rolling mill had manufactured the Sarias several times its capacity of production. The appellant unit has no capacity to produce the quantity of CTD bars which they are alleged to have produced and clandestinely cleared ; (e) The appellant had also filed Chartered Engineers certificate certifying that the appellant unit manufactures only TMT bars and TMT bars are different in their physical properties from CTD bars and that the appellant unit has no facility to manufacture CTD bars. The despatch of Saria II mentioned in the despatch sheets are the clearances of CTD bars which had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed production of Saria, has added the alleged clearances of Saria II during those months based on the daily receipt and despatch sheets and has assumed the quantity alleged to have been cleared clandestinely during these months as having been produced during the same months, for which there is no justification. Moreover when the allegation of clandestine removal during July 2005 and August 2005 is without any basis, there is no justification for backing into account the clandestine clearances during these two months for determining the power consumption ratio. He also pleaded that other than the assumed power consumption of 102.09 MT, there is absolutely no evidence of any unaccounted purchase of raw material or evidence of clandestine removal for the period from April 2002 to March 2005 and, hence, the duty demand of Rs. 16,38,63,265/- for this period, based on purely assumed power consumption is without any basis. At the time of search of the factory of the appellant company on 10/09/05 no stock of finished products and raw material had been checked and no discrepancy had been found. (k) The entire case against the appellant company is based on the records seized from the factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai vs. Kalvert Foods India Pvt. Ltd. reported in 2011 (270) E.L.T. 643 (S.C.). (2) The duty demand of Rs. 7,28,92,253/- against the appellant company is based on the documents called - (a) delivery orders which had been signed by Shri Ghasi Lal Sharma or his son Shri Sharvan Sharma ; (b) daily receipt/despatch sheets signed by Shri Murari Lal Sharma ; (c) Nakal Bahi/Roz Namcha (daily book) prepared by Shri Shiv Charan and (d) private ledger book also prepared by Shri Shiv Charan. Shri Shiv Charan was not present in the factory at the time of its search on 10/09/05. Though Shri Ghasi Lal Sharma and Shri Murari Lal Sharma had promised to produce the Shiv Charan who has written Nakal Bahi/Roz Namcha and private ledger but he has not been produced so far. Based on the entries regarding despatch of Saria II and scrap/ rejects in the daily receipt despatch sheets for which there are no invoices, the Investigating officers have prepared for the charts A, B, C and D. In these charts those entries have been included which are in respect of despatch of Sarias II and scrap/rejects in respect of which there were no invoices issued by the appellant company and, hence, these despatches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Ghasi Lal Sharma in this statement also stated that as per his knowledge there is no purchase of Saria during last six months and thus Shri Ghasi Lal Sharma in his statement has denied any trading activity in the factory during last six months. The Saria II sales are during this period only. (4) As regards the appellants plea that the production capacity of their rolling mills is 5 MT per hour, that they normally operate in two shifts and on this basis they cannot manufacture more than 2400 MT in a month, this plea had never been made before the original Adjudicating Authority (5) During the period from 1st April 2005 to 08/09/2005 a total of about 5050 MT unaccounted MS Ingots have been received by the appellant company from 18 Ingots manufacturers out of which inquiry was conducted with three manufacturers M/s Gee Diamond Steels ; (b) M/s Amar Pratap Steel and (c) M/s Nirmal Inductomelts Pvt. Ltd. and all of them in their statement have confirmed supply of the quantity of MS Ingots which is reflected in the appellants ledger book. Even after the search of the appellant companys premises on 10/9/05 it was found that M/s Nirmal Inductomelts Pvt. Ltd., Jaipur had despatched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finished goods from their factory. The appellant company has not sought any permission from the Jurisdictional Central Excise Authorities for receipt of duty paid goods from outside for trading the same from the factory premises. For this reason also the claim of the appellant company that Saria II are CTD bars which had been purchased from outside by M/s Meenakshi Steels and sold from the factory premises is totally incorrect. (8) Even in their reply dated 23/5/07 and at the time of personal hearing on 19/6/07, 31/10/07, 27/5/08 the appellants never mentioned that the despatches of Saria II mentioned in the daily receipt and despatch sheets for the period from April 2005 to 08/09/2005 are actually the sales of CTD bars traded by the trading firm M/s Meenakshi Steels owned by Shri Ghasi Lal Sharma. Shri Khanna, therefore, pleaded that the duty demand of Rs. 7,28,92,253/- is on sound footing as it is based on concrete evidence on record. (9) As regards the duty demand of Rs. 16,38,63,265/- for the period from April 2002 to March 2005 based on the power consumption ratio of 102.09 units per MT of rolled products, Shri Khanna pleaded that the power consumption ratio of 102.09 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the daily receipt and despatch sheets are in fact the sales of CTD bars made by a trading company M/s Meenakshi Steels owned by Shri Ghasi Lal Sharma and that Saria II are not the goods manufactured by the appellant. In this regard they refer to the bills/cash memo issued by M/s Meenakshi Steels which according to them had been recovered from the factory alongwith other documents which have been ignored by the Investigating Officers. The departments contention, on the other hand, is that firstly, at the time of search of the factory premises both Shri Ghasi Lal Sharma and Shri Morari Lal Sharma, in their respective statement recorded on that day had accepted that the documents recovered from the factory pertain to the goods manufactured and cleared from the factory and secondly both Shri Ghasi Lal Sharma and Shri Morari Lal Sharma in their subsequent statements recorded on different dates over a period of about one year have never claimed that Saria II mentioned in the daily receipt and despatch sheets are CTD bars being traded by M/s Meenakshi Steels and on the contrary both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma in their several statements, which have given on differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of this, the appellants plea made long after the issue of show cause notice and even the after conclusion of the personal hearing that the despatches of Saria II, as reflected in the daily receipt and despatch sheets recovered from the factory, are the sales of CTD bars made by a group trading concern M/s Meenakshi Steel cannot be accepted. In view of this, we hold that the duty demand of Rs. 7,22,15,192/- based on the Chart A, B, C and D, which, in turn, have been prepared on the basis of daily receipt and despatch sheets and delivery orders recovered from the factory premises has to be upheld. 7. As regards the duty demand of Rs. 6,77,061/- for the period from 10/09/05 to 01/10/05, this duty demand is based on the records recovered from the appellant company which indicated that during this period they had received certain quantity of MS Ingots from Nirmal Inductomelts Pvt. Ltd. without any invoices. In this regard we find that the inquiry has been conducted with Shri B.B. Modik of Nirmal Inductomelts Pvt. Ltd. who had accepted the sale of this quantity to the appellant company. Beside this, Nirmal Inductomelts Pvt. Ltd. have also filed an application before the Settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio of 102.09 MT has been determined by dividing the total power consumption of 9,28,062 units during July 2005 and August 2005 by 9090.3 MT. In our view, this method of calculating the power consumption norm is not correct as the sales of 5100 during July 2005 and August 2005 could be of the production during the previous months also and it is not necessary that the unaccounted goods weighing 5100 MT, sold during July 2005 and August 2005 may have been manufactured during these months only. For determining the power consumption ratio, what is required is the total power consumption during a particular period and the actual production during that period. For this purposes, the goods sold during that period cannot be assumed to have been produced during that month. Other than, this basis of determining power consumption ratio in Annexure IV, no other evidence has been produced by the Department in support of its claim of power consumption norm of 102.09 MT in as much as neither any technical literature of the supplier of the rolling mill has been produced nor any actual experiment in this regard was conducted. It is well settled law that merely on the basis of power consumption norm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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