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TMI Blog2007 (11) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... ants. They visited the appellants unit arid took stock of the stock available. There were certain discrepancies. Further on a very detailed investigation, they found that the appellants had not been showing the actual production in the statutory records. There was evidence for clandestine removal also. Statements of various persons concerned were taken. On the basis of the investigation, show cause notices were issued to all the appellants. The Commissioner after conducting the proceedings, passed the impugned order. In the impugned order, duty has been demanded to the tune of Rs. 4,57,49,000/- for the period from September, 2000 to April, 2005. Equal penalty under Section 11AB has been imposed. Further, penalty of Rs. 10,00,000/- has been imposed on the main appellants. Penalties have also been imposed on the other appellants who were concerned with the activity of clandestine production and removal. The appellants strongly challenge the impugned order of the Commissioner. Therefore, they have come before this Tribunal for relief. 3 . Shri C. Shivadass, learned Advocate appeared on behalf of the appellants and Shri R.P. Raheja, learned JCDR for the revenue. 4 . We heard both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at the production. It was urged that the appellants manufactured billets and rolled products. Furnace oil is actually not a raw material. Furnace oil is more in the nature of a consumable used for heating the furnace and heating of the furnace cannot be said to reflect the actual quantity of final product produced. It was submitted that a reasonable basis for estimating the quantity of final product produced would be to ascertain what is the principal raw material required for the manufacture of finished products. The Commissioner of Central Excise, Meerut in his Trade Notice No. 41/84, dated 25-3-1984 has published the list of principal raw materials for each excisable commodity. For iron and steel products falling under Chapters 72 73, the principal raw material prescribed by the department are (a) steel ingots (b) semi finished steel (c) scrap or (d) pipes-plates or sheets or skelp or strips or pillets. Form the above it is seen that furnace oil is not mentioned as a raw material at all. When a particular item can never be considered as a principal raw material an estimation on the basis of the consumption of the said item cannot be done. The learned Advocate relied on a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure and that steel re-rolling mill with higher consumption could get the norm refixed for higher consumption by producing relevant consumption data. Even the Govt. of India has recognized that there is no such thing as standard average consumption of furnace oil and the consumption could be a variable factor due to several parameters that go into the working of re-rolling mills. The learned Advocate invited our attention to the published balance sheets of two companies namely Tulsyan NEC Limited and Shyam SEL Ltd. In respect of Tulsyan, it was shown that the average consumption for the year 2003-2004 was 56 liters for every MT and for 2004-2005 it was 58. In respect of the other company the average consumption for 2003-2004 was 63.5 litres for every MT of rolled product produced. Therefore it was urged that the industry average of the consumption of furnace oil is about 59 to 60 litres for every MT while the appellants average consumption is about 62 litres which compares favourably with industry average. 10. Our attention was also invited to the report given by the Petroleum Conservation Research Association of the Ministry of Petroleum and Natural gas. The PCR in their letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of furnace oil, invocation of longer period is not sustainable. They relied on the decision in the case of Maruthi Udyog Ltd. v. CCE [2002 (147) E.LT. 881] 13 . An amount of Rs. 14,33,177/- is based on the shortages of the finished product when the departmental officers visited the unit on two different occasions. A quantity of 280.400 MT of billets wore found in excess on 2-4-2005 and quantity of 162.607 MT of billets was found short on 15-4-2005. The Commissioner has added both the quantity to arrive at a net quantity of 443.007 MTs and demanded duty of Rs. 14,15,076/- and education cess of Rs. 28,101/-. This is seriously challenged by the appellants. It was submitted that the addition of a quantity found short and the quantity found in excess cannot be tallied. Evidently the excess quantity of billets found on 2-5-2005 would have been consumed in the manufacture of rolled products. The stock of rolled products found on 15-4-2005 shows an excess of stock. The shortage of billets to the extent of 162.607 cannot be considered in isolation as there is a correspondingly an excess stock of 603 MT of rolled products. If at all there could, be a demand it can only be on the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere should be sufficient corroborative evidence. In the absence of corroboration, it is very difficult to establish clandestine removal for a period of 5 years as has been done by the adjudicating authority. There is also no finding with regard to the consumption of electricity. Another point urged by the learned Advocate is that the adjudicating authority adopts entirely a different stand which is not there in the show cause notice and he is adopting the consumption of 58 litres without issue of show, cause notice to the appellants. Therefore, the order travels far beyond the scope of the show cause notice. In view of all the above observations the demand of duty on account of consumption of furnace oil cannot be sustained. Therefore, we set aside the demands to the tune of Rs. 4,30,70,253/- plus Rs. 57,831/- education cess based on furnace oil consumption. As regards the duty on shortage, to the tune of Rs. 14,33,177/-, the Commissioner had combined the excess and shortage and arrived at the duty liability. This cannot be done. We hold that the appellant is liable to pay duty only on the quantity of 162.60 MT of billets which were found short. On 15-4-05. Hence, we confirm the du ..... X X X X Extracts X X X X X X X X Extracts X X X X
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