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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 ..... Jurisdictional Central Excise Authorities regarding receipt of duty paid CTD bars from outside and their sale from the factory. 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 ₹ 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. During the period from 10/09/05 to 01/10/05 the appellant company received certain quantity of MS Ingots from Nirmal Inductomelts Pvt. Ltd. without any accountal which has obviously been used for manufacture of TMT bars and after taking into account 8% burning loss, the bars estimated to have been manufactured are 202.888 MT on which the duty liability is ₹ 6,77,061/-. In view of this, we hold that duty demand of ₹ 6,77,061/- has also to be upheld. Mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i 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 Excise Act, 1944 stated that the records found in the factory pertain to the sale of the finished goods and purchase of raw material and other different transactions. 1.2 During scrutiny and examination of the various records of the unit taken over by the Central Excise officers on 10/09/05 it appeared that a file containing pages from 1 to 517 mentioned at Sl. No. 21 of the resumption memo was containing delivery orders and date-wise details of receipt and despatch i.e. daily receipt/despatch sheets for the period from 01/08/05 to 31/08/05. The daily receipt and despatch sheets were containing the detail of despatch of TMT bars (Saria) under the heading Saria I and Saria II and the receipt of MS Ingots. Besides the entries of Saria I and Saria II, there were entries relating to clearance of rejections/scrap. While against the despatch entries relating to Saria I bill numbers were mentioned, there was no mention of the bill numbers against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Shiv Charan who is the clerk who had written Nakal Bahi and private ledger, but Shri Shiv Charan was never produced. 1.4 On the basis of the daily receipt and despatch sheets, Nakal Bahi, Roz Namcha and private ledger, the Investigating officers prepared 4 charts Chart A, Chart B, Chart C and Chart D in which they listed out the despatch entries during the period from April 2005 to 08/09/2005 pertaining to Saria II and pertaining to the steel scrap and rejects in respect of which there was no invoices. Since, there was no explanation from Shri Ghasi Lal Sharma or Shri Murari Lal Sharma as to why there are no bills or invoices in respect of these clearances and since there were no Central Excise invoices issued in respect of these despatches, the officers were of the view that these goods had been cleared clandestinely without payment of duty. The Chart A, pertains to the clearances during the month of July 2005, Chart B, pertains to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any accounted and these bars had been cleared clandestinely. Duty demand of ₹ 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 company was 1682.6 MT and 2307.7 MT respectively and during these months their electricity consumption was 393188 units and 534874 units respectively. However, since in terms of the seized daily receipt and despatch sheets, during months of July 2005 and August 2005 there were unaccounted sales of 2529.86 MT and 2570.14 MT respectively of Saria, according to the Department the actual production during the months of July 2005 and August 2005 was 4212.46 MT and 4877.84 MT respectively. Thus, according to the Investigating Officers, while actual production during the months of July 2005 and August 2005 was 9090.3 MT of Saria, the total power consumption during these two months was 928062 units. On this basis, the Investigating officers were of the view that average power consumption for production of per MT of Saria in the appellants units is 102.09 units. The officers applied this power consumption norm for the period from Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 complied with the Tribunals order regarding pre-deposit as modified by Honble Rajasthan High Court. Subsequently, the stay on recovery was extended. The Revenue, however, filed a petition before Honble Rajasthan High Court against the Tribunals order extending the stay, praying for the vacation of the stay on recovery. Honble Rajasthan High Court vide order dated 01/12/14 directed the Tribunal to decide the appeals as expeditiously as possible, preferably within the period of six months from the date of the order. In accordance with the above order of Honble Rajasthan High Court, these appeals were heard on 20th May, 2015 and 21st May, 2015. 2. Heard both the sides. 3. Shri R. Santhanam, Advocate and Shri Bharat Agarwal, Advocate representing the appellants made the following submissions :- (a) The duty demand of ₹ 7,28,92,253/- is based on alleged unaccounted manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 manufactured by the appellant, but had been procured from the outside and sold by the trading of M/s Meenakshi Steels ; (f) The Department alleges that during the period from 1st April, 2005 to 08/09/2005, the appellant unit had received 5050 MT of unaccounted MS Ingots and in this regard the Department uses as corroboration of the statement of three suppliers. However, the cross examination of the concerned persons of the suppliers has not been allowed and hence no reliance can be placed on those statements. Merely on the basis of entries regarding unaccounted receipt of MS Ingots, the Department cannot allege that the appellant during the period from April 2005 to September 2005 had received 5050 MT of unaccounted MS Ingots which had used on unaccounted production of Saria ; (g) The Apex court in the case of Kishin Chand Chela Ram vs. Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 factory premises. The Investigating officers have mis-interpreted the despatches of Saria II to be the TMT bars manufactured by the appellant while Saria II sales are Sales of CTD bars purchased appellant company from M/s Meenakshi Steels from outside and supplied to various parties and, therefore, in respect of sales of Saria II there would be no service tax liability. He also pleaded that number of transactions of Saria II on commission basis, wherein the supply of CTD bars had directly supplied to the customers of M/s Meenakshi Steels and M/s Meenakshi Steels had only collected the commission. He pleaded that these aspects have been over-looked by the Adjudicating Authority. Shri Santhanam accordingly pleaded that the impugned order is not sustainable. 4. Shri Ranjan Khanna, the learned DR, while reiterating the findings of the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ap/ 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 represent clandestine removals of Sarias and scrap. These charts had been shown to Shri Ghasi Lal Sharma and Shri Murari Lal Sharma and the same had been initial by them without any comment or protest. While Chart is in respect of alleged clandestine clearances of goods during July 2005, Chart B is in respect of alleged clandestine removal during August 2005, Chart C is in respect of alleged clandestine removals during April 2005 to June 2005 and Chart D is in respect of alleged clandestine removals during period from 1st September 2005 to 8th September 2005. Shri Murari Lal Sharma in his statement dated 02/8/06, after stating that he fully agrees with his statements given by him on 10/9/05, 21/9/05 and 28/9/05, on being asked about the Charts A, B, C and D stated that he fully agrees with the same and that he has comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 certain quantity of MS Ingots without any invoices out of which, after taking into account the burning loss, the appellant company would have manufactured 202.88 MT of MS Ingots. The duty demand of ₹ 6,77,061/- out of total duty demand of ₹ 7,28,92,253/- based on the documents recovered from the factory is on this basis. M/s Nirmal Inductomelts Pvt. Ltd. in respect of clandestine removal of MS Ingots, to the appellant unit and to a number of other rolling mill had filed an application before the Settlement Commission admitted the duty evasion and their matter has been settled by the Settlement Commission. (6) As regards the appellants plea that despatch of Saria II in the daily receipt and despatch sheets are the sales of CTD bars by trading company M/s Meenakshi Steels who had purchased the CTD bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma. Shri Khanna, therefore, pleaded that the duty demand of ₹ 7,28,92,253/- is on sound footing as it is based on concrete evidence on record. (9) As regards the duty demand of ₹ 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 units per MT of rolled products had been determined on the basis of actual production during July 2005 and August 2005 and actual power consumption during these two months. He pleaded that while the quantum of power consumption during July 2005 and August 2005 is not disputed, the appellant had under reported the production of Sarias during these two months and actual production of Saria during these two months had been determined on the basis of the documents recovered from the factory i.e. daily receipt and despatch sheets. He, therefore, pleaded that on the basis of the actual production of Saria during July 2005 and August 2005 the power consumption ratio of 102.09 units per MT had been correctly determined and therefore there is no infirmity in the impugned order confirming demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndly 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 different dates, and which have not been retracted have accepted that they have seen the Charts A, B and C prepared by the Investigating officers and the same pertain to the finished goods cleared from the factory. It is also pleaded by the Department that price of Saria I and Saria II is same while TMT bar is much costlier than the CTD bars and, hence, the appellants claim regarding despatch of Saria II being sales of CTD bars by M/s Meenakshi Steels cannot be accepted. 6.1 On considering the rival submissions on this point we are of the view that the entries regarding despatches of Saria II in the daily receipt and despatches sheets recovered from the factory premises have to be treated as clearances of TMT bars only as the price of Saria I and Saria II is same, while TMT Bar i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Settlement Commission admitting their duty liability in respect of the goods clandestinely cleared by them to the appellant company as well as to a number of other rolling mill and their matter had been settled by the Settlement Commission. In view of this, it has to be held that during the period from 10/09/05 to 01/10/05 the appellant company received certain quantity of MS Ingots from Nirmal Inductomelts Pvt. Ltd. without any accountal which has obviously been used for manufacture of TMT bars and after taking into account 8% burning loss, the bars estimated to have been manufactured are 202.888 MT on which the duty liability is ₹ 6,77,061/-. In view of this, we hold that duty demand of ₹ 6,77,061/- has also to be upheld. 8. Coming to the duty demand o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 which has not been determined by actual experiment, duty demand against an assessee cannot be confirmed when there is no corroboration experiment regarding receipt of unaccounted experiment and despatch of finished product. In view of this, we hold that the duty demand of ₹ 16,38,63,265/- is not sustainable and has to be set aside. 9. In view of the above discussion, while the duty demand of ₹ 16,38,63,265/- is set aside, the duty demand of ₹ 7,28,92,253/- is upheld alongwith interest. The penalty on the appellant company under Section 11AC is also be reduced to ₹ 7,28,92,253/-. 10. As regards penalty under Rule 26 on Shri Ghasi Lal Sharma, Director of the appellant company and Shri Murari Lal Sharma, General Manag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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