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TMI Blog2015 (8) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... upplies as per NIPL records in respect of which the invoices had been issued. It is on this basis it is alleged that during the period from 02/8/05 to 01/10/05 M/s Everest, M/s MPK and M/s Khetan have received 143.32 MT, 40.21 MT and 39.93 MT of unaccounted MS Ingots from NIPL. However, the duty demand against M/s Everest, M/s MPK and M/s Khetan is not on this basis Thus the evidence in support of Department's allegation of duty evasion against the appellants is - (a) entries in the private ledger book of NIPL which showed supply of certain quantity of MS Ingots to the appellants during period from 02/8/05 to 01/10/05 for which no invoices have been issued by NIPL and (b) power consumption per MT of rolled products in the case of SSSRM - 102,09 units per MT while the same in the case of the appellant units is from 225 units per MT to 275 units per MT. No experiments or studies have been conducted by the Department in respect of the rolling mills of the appellant companies to determine their average power consumption for production of one MT of rolled products. - Commissioner in the order in the case of M/s Everest has accepted that the rolling mills of SSSRM is automatic roll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the records recovered from them, it appeared that M/s Everest during the period from 02/08/05 to 01/10/05 had received 261.96 MTs of MS Ingots from NIPL, but in their records they had shown the receipt of only 118.260 M.T. of MS Ingots from NIPL and 143.32 MT of MS Ingots appeared to have been received by M/s Everest from NIPL without accountal. Similarly, in the case of M/s MPK, from the records of NIPL from 02/8/05 to 01/10/05 it appeared that M/s MPK had received 80.38 MT of MS Ingots from NIPL but M/s MPK in their records had showed only 40.17 M.T. of Ingots and hence the receipt of 40.21 M.T. of MS Ingots by MPK appeared to be unaccounted. In the case of M/s Khetan, it was found that as per the records of NIPL, M/s Khetan during the period from 02/8/05 to 01/10/05 had received 79.95 M.T. of MS Ingots from NIPL but as per the records of M/s Khetan, they had received only 40.03 M.T. and thus it appeared that they had received of 39.53 MT of MS Ingots by M/s NIPL without an accounted. 1.3 M/s NIPL as per their records had supplied the MS Ingots without issue of invoice to a number of other rolling mills also. M/s NIPL filed an application before the Settlement Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 1.5 It is basis of the above investigation that three show cause notices issued to the appellants for demand of the Central Excise duty mentioned above from them alongwith interest thereon under Section 11AB and also for imposition of penalty on them under Section 11AC and the Central Excise Act 1944 and for imposition of penalty on their Directors Shri Suresh Kumar Aggarwal, Shri Suresh Kumar Sharma and Shri Rajendra Kumar Khetan under Rule 26 of the Central Excise Rules. The above show cause notices were adjudicated by the Commissioner of Central Excise, Jaipur one by three separate order-in-original No. 15/09/CE/Commr dated 12/3/09, No. 10/09/CE/Commr dated 12/9/09, No. 10/10/CE/Commr dated 01/4/10 by which the above-mentioned duty demands were confirmed against the appellant companies alongwith interest on the duty under Section 11AB of Central Excise Act, 1944 and beside this, while penalty of equal amount was imposed on each appellant company under Section 11AC ibid, penalty under Rule 26 of the Central Excise Rules, 2002 of ₹ 25,00,000/-, ₹ 10,00,000/- and ₹ 20,00,000/- was imposed on Shri Suresh Kumar Aggarwal, Director M/s Everest, Shri Suresh Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST had conducted study of the power consumption of the appellant unit and according to the report of NISST, which is also part of the records of each of these appeals, the average power consumption of the appellant units is 230 unit per MT, that there is also notification dated 22/8/05 issued by the Government of Rajasthan under the composition scheme for manufacturers of rolled products of mild steel, that this notification has been issued by the Government of Rajasthan for the purpose of charging sales tax and in this notification the average power consumption of the medium size rolling mills manufacturing rolled products from Ingots has been taken as 225 units per MT, that in view of this, adopting the yard stick of 102.09 units per MT of SSSRM to the appellant units is totally arbitrary, that the rolling mill of SSSRM is an automatic rolling mill while the rolling mills of the appellant companies are manual, that the fact that rolling of M/ SSSRM is automatic rolling mill stand admitted by the Commissioner in para 40.05 of its order in the case of M/s Everest but the Commissioner has wrongly dismissed the appellant's plea on the ground that the rolled products being manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst this judgment was rejected by Hon'ble Allahabad High Court vide judgment reported in 2011 (269) E.L.T. 337 (All.) and the SLP filed against the judgment of Hon'ble Allahabad High Court was dismissed by the Apex court in the judgment reported in 2011 (269) E.L.T. A108 (S.C.), that same view has been taken by the Tribunal in the case of Bhawani Shanker Castings Ltd. vs. CCE, Jalandhar reported in 2009 (246) E.L.T. 332 (Tri. - Del.) and the Department's appeal against this judgment was dismissed by Hon'ble Punjab Haryana High Court vide judgment reported in 2012 (275) E.L.T. A57 (P H), that same view has been taken by the Tribunal in the cases of Trikoot Iron and Steel Casting Ltd. vs. CCE, Meerut reported in 2015 (315) E.L.T. 65 (Tri. -Del.) and in the case of Pragati Steels Pvt. Ltd. vs. CCE, Kanpur reported in 2012 (286) E.L.T. 253 (Tri. - Del.), that recently the Tribunal in the case of SRJ Peety Steels Pvt. Ltd. and others vs. CCE, Aurangabad reported in 2014 -TIOL 1530- CESTAT- MUM has held merely on the basis of arbitrarily adopted power consumption norm, as duty demand cannot be confirmed against the steel ingots manufacturers, that Apex court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from NIPL and were using the same for unaccounted manufacture of rolled products, which were being cleared clandestinely without payment of duty and when there is clear evidence on record to prove that the appellant were indulging in duty evasion, their production has been estimated on the basis of their power consumption. He, therefore, pleaded that there is no infirmity in the impugned orders. 5. We have considered the submissions from both the sides and perused the records. 6. The appellant are manufacturers of rolled products, the raw material for which is MS Ingots. There is no dispute that NIPL was one of their supplier of MS Ingots. The investigation in respect of the appellant unit started when the unit of NIPL was visited by the Central Excise officers on 03/10/05 and their sales of MS Ingots to various rolling mills were ascertained on the basis of the entries in their private ledger books. It was found that NIPL were not showing the entire quantity of MS Ingots sold by them to various customers in the RG-1 register and were paying duty on much lesser quantity. Since the appellant unit - M/s Everest, M/s MPK and M/s Khetan were among the customers of NIPL, the quan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and imposing penalty on them can be upheld. 8. The Apex court in the case of Kishan Chand Chela Ram vs. Commissioner of Income Tax reported in 1980(supp) Sec-660(para 6) held that when the allegation of tax evasion against an assessee is based on the entries in records and account books of another person such an allegation of tax evasion cannot be upheld against the assessee unless the cross examination of the person from whom records had been recovered has been allowed. In this case, no such cross examination of the concerned persons of NIPL who had made entries in the ledger books had been allowed. Therefore, the entries in the ledger book of NIPL by themselves cannot be treated as an evidence of the appellants having received certain quantity of unaccounted MS Ingots and having used that quantity in unaccounted production of rolled products and their clandestine clearance. In this regard we are also supported by the Tribunal's judgments in the cases of CCE, Indore vs. Rajratan Synthetics Ltd. reported in 2013 (297) E.L.T. 63 (Tri. - Del.), CCE, Coimbatore vs. Chola Spinning Mills (P) Ltd. reported in 2009 (92) R.L.T. 731 (CESTAT -Che.), Rama Shyama Papers Ltd. vs. CCE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption norm of 180 units per MT is in respect of Ingots based large scale/semi automatic manufacturing units. There is no dispute that the rolling mills of the appellants are not even semi-automatic but are manual and, therefore, in terms of this, notification of the Government of Rajasthan their power consumption norm would be 225 units per MT. In view of this, we hold that the power consumption of SSSRM cannot be applied to the appellant units for estimating their actual production on the basis of their power consumption, more so, when absolutely no study or experiment has been conducted by the Department in support of its claim that the actual power consumption of the appellant unit is 102.09 units per MT. The Apex court in the case of Oudh Sugar Mills Ltd. vs. Union of India (supra) has held that the allegation of clandestine production and removal based only on calculations of raw material fed into the process or working of machinery as noticed during test inspection without any tangible evidence on record in support of clandestine production and its removal, would not be sustainable. In our view, the ratio of this judgment of the Apex court is applicable to this case, as i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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