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TMI Blog2016 (12) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... per the choice of the respondents, such type of reports will be relied upon and in fact, this has happened in this case. Several Orders- in-Original have been pointed out during the course of arguments by the counsel for the petitioners wherein electricity consumption pattern allegation levelled in show cause notice and ultimately after adjudication, the show cause notice has been dropped. Thus, without experiment is being carried out at the premises of the noticees, use of any of the committee's report for electricity consumption pattern always leads to arbitrariness on the part of the respondent-department. Whenever arbitrariness is present, equality is absent. Equalities and arbitrariness are strong enemies of each other. When equality is present, arbitrariness is absent. The Order-in-Original is based upon mere presumptions and possibilities, and, nothing has been proved at all by the respondents, especially unaccounted manufacturing of M.S. Ingots and the clandestine removal thereof - matter is remanded for adjudication of the show cause notice dated 04.09.2014 and the matter will be decided afresh, keeping in mind the aforesaid principles, especially if the respondents are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. ● The whole show cause notice is issued upon presumptions and surmises about unaccounted manufacturing of M.S. Ingots and clandestine removal of the final product and nothing has been proved by the respondents. Only on the basis of presumptions, the show cause notice has been decided. The consumption of electricity pattern which is referred in the show cause notice as well as in the Order-in- Original, is absolutely baseless. It is submitted by the counsel for the petitioner that looking to Annexure -RUD-7 as referred in para 4 of the show cause notice, reveals the electricity consumption per M.T. , which is absolutely in consonance with the report given by the Joint Plant Commissioner constituted by the Ministry of Steel, Government of India and as per this report, the consumption can be 1800 KWH/T ( as referred in paragraph no 20 of a decision reported in 237 ELT 674 in the case of R.A. Casting (Private) Ltd. Vs. CCE, case. Thus, there is no scientific survey carried out by the respondents which can lead to conclusive evidence of unaccounted manufacturing of M.S. Ingots and clandestine removal thereof. ● It is further submitted by the counsel for the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so been dismissed, and b. W.P. No. 173 of 2014 decided on 22.04.2014 by the Calcutta High Court. ● Counsel for the petitioners has pointed out that in several similarly situated cases, in which Dr. N.K. Batra report has been referred and relied upon, for proving clandestine removal of the finished products, in the show cause, ultimately in the Orders-in-Original, the show cause notices have been dropped by the adjudicating authority itself. The similarly situated cases are as under:- a. Globe Steel Alloys Pvt. Ltd, the Order-in- Original :02/Central Excise/commr /2015 dated 31.03.2015, copy whereof has been given by the counsel to the counsel for the respondents. b. M/s. Madhura Ingots Steel Co. Pvt. Ltd. Order-in-Original:07/ Central Excise/commr/2015 dated 19.05.2015. c. M/s. Jagannath Cement Works Pvt. Ltd being Order-in-Original:31/Denovo/Commr/2015 dated 15.12.2015. d. M/s. Kamsa Steel Pvt. Ltd. being Order-in- Original:33/ commr/2015 dated 21.12.2015, and several other orders, copies of which have been given to this Court and given to the respondents. ● On the basis of aforesaid decisions, it is submitted by the counsel for the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Batra's report is not an only ground as mentioned in the show-cause notice, there are several grounds, like high cost of production vis-a-vis income from sale, unrealistic low amount of expenditure incurred on salary of employees and manufacturing activity incurs losses and still petitioner no.1 continues, whereas in the profit loss account from the non-core activities, profit has been shown by manipulating books of account. In detail, consumption of electricity pattern has been mentioned in Annexure-RUD-7, which is referred in paragraph-4 of the show- cause notice. Similarly, other grounds have also been dealt with in detail, in the Order-in-Original. Very meager amount of salary has been paid by these petitioners to their employees, there is a loss caused to the petitioner No.1 since long, still they are continuing in the manufacturing activities and the petitioners are showing profit in their profit loss account by showing the profit from the non-core activities and no satisfactory explanation has been given by these petitioners. This aspect of the matter has been mentioned in detail in the Order-in-Original and hence, this Court may not entertain this writ petition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight from 2003 onwards, in not a single matter decided by the Commissioner or by the Tribunal or by any adjudicating authority, the department has produced Dr. N.K. Batra for cross examination by any assessee in whole of India. Nobody knows the authenticity of Dr. N.K. Batra's report. Nobody is error proof authority much less Dr. N.K. Batra. Hence, his cross examination is must. His report is not a conclusive piece of evidence as per Indian Evidence Act, 1972. v. Several decisions have been given by the Tribunals which have been confirmed by the High Courts that electricity consumption alone if adopted as a basis of the demand, the same is not tenable.The respondents can take the electricity consumption pattern as a corroborative piece of evidence, but, in absence of substantive proofs like- (a) Details about the purchase of the raw material within the manufacturing units and no entries are made in the books of account or in the statutory records. (b) Manufacturing of finished product with the help of the aforesaid raw material, which is not mentioned in the statutory records. (c) Quantity of the manufacturing with reference to the capacity of production by the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being heard, but while passing the Order-in-Original, the adjudicating authority has not dealt with the main contention advanced on behalf of the petitioner and no reasons have been assigned for differing with the decisions relied upon by the petitioner, particularly, the decision rendered in the case of R.A. Castings Ltd. In this context, reference may be made to the decision of the Hon ble Supreme Court in the case of Assistant Commissioner, Commercial Tax Department, Works Contract Act and Leasing, Kota Vs. Shukla and Brothers, reported in (2010) 4 Supreme Court Cases 785. In the said decision, the Hon ble Supreme Court, vide Para-14, has held as under:- 14. The principle of natural justice has twin ingredients: firstly, the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind. Violation of either of them could in the given facts and circumstances of the case, vitiate the order itself. Further, the Hon ble High Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing upon the electricity consumption pattern, experiment in the very same unit ought to have been carried out for manufacturing of 1 MT of the finished product or for at least 1000 such unit, if any other product is involved, so that average consumption of electricity can be accurately measured by the respondent-department. Electricity consumption, which is based upon Dr. N.K. Batra's report is absolutely useless, with reference to the units for which allegation is levelled for clandestine removal without carrying out any experiment of consumption of electricity in the very same unit. Hence, we, hereby direct the respondents, henceforth not to use Dr. N.K. Batra report against any noticee especially when the department is levelling allegations of clandestine removal of finished products, unless, the experiment of consumption of electricity is carried out at the factory premises of the very same assessee/noticee. The consumption of the electricity depends upon the efficiency of the machines also. It also depends upon the fact whether the noticee is utilizing obsolete machinery or modern machinery. Dr. N.K. Batra might have carried out experiment in a factory where there may be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Tax is on manufacture and it is to be proved beyond doubt that the goods have been actually manufactured, which are leviable to excise duty. Unfortunately, no positive evidence is coming on record to that effect. Article 265 of the Constitution of India says that no tax shall be levied or collected except by authority of law. Unless the manufacture of the steel ingots is proved to the hilt by authentic, reliable and credible evidence, duty cannot be demanded on the basis of hypothesis and theoretical calculations, without taking into consideration the ground realities of the functioning of the factories. High consumption of electricity by itself cannot be the ground to infer that the factories were engaged in suppression of production of steel ingots. The reasons for high consumption of electricity in the case of the appellants' factories have not at all been studied and analysed by the Revenue independently. Instead, the norm of 1046 units fixed as per Dr. Batra's report has been blindly applied to the appellants' cases to work out the excess production. This approach is flawed and does not have sanctity. 21. The law is well settled that the electricity consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise, Chennai v. Dhanavilas (Madras) Snuff Co. reported in 2003 (153) E..T. 437 (Tri.-Chennai); (iii) Commissioner of Central Excise, Madurai v. Madras Suspensions Ltd. reported in 2003 (156) E.L.T. 807 (Tri.- Chennai); (iv) Commissioner of Central Excise, Coimbatore v. Sangamitra Cotton Mills (P) Ltd. reported in 2004 (163) E.L.T. 472 (Tri- Chennai); (v) Commissioner of Central Excise Coimbatore v. Velavan Spinning Mills reported in 2004 (167) E.L.T. 91 (Tri.- Chennai); (vi) M. Veerabadhran and others v. Commissioner of Central Excise, Chennai-II reported in 2005 (182) E.L.T. 389(T)= 2005 (98) ECC 790 (T). 23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. (c) Report of NISST, Mandi Gobindgarh given in June-July, 2006. (d) Report of Executive Director, All India Induction Furnace Association, New Delhi, and all these reports say different electricity consumption, per ton. These facts have been referred in paragraph nos. 19 20 of the decision reported in 237 ELT 674 and the same reads as under :- 19. The main question to be decided in the instant appeals here is whether the appellants during the period December 2001 to March, 2005 have actually manufactured M.S. Ingots in excess of what has been recorded in their statutory records and removed the said quantity clandestinely from their factory without payment of duty. The excess production has been worked out on the basis of electricity consumption for which the standard norms are imported from report of late Mr. N.K. Batra, Professor of Material and Metallurgical Engineers, IIT Kanpur. 20. We find that the following reports have been referred to either by the appellants or the Revenue laying down the norms for the consumption of electricity for the manufacture of one MT of steel ingots: (i) 555 to 1046 (KWH/T) as per Dr. Batra's report; (ii) 180 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the noticees, use of any of the committee's report for electricity consumption pattern always leads to arbitrariness on the part of the respondent-department. Whenever arbitrariness is present, equality is absent. Equalities and arbitrariness are strong enemies of each other. When equality is present, arbitrariness is absent. 6. Hence, this Court is remanding the matter to the Commissioner, Central Excise Service Tax, Ranchi. This Court is not much going into detail of further arbitrariness in the Order-in-Original about the lower remuneration to the employees of the petitioner no. 1 as well as the manufacturing unit is running in loss and the profit is made from non-core activities etc. There appears to be very high sounding reasons, but, if they are viewed with zoom lens camera, it appears that nothing is proved by the respondents. Low remuneration is a relative word and therefore, statement of the employees of the noticee, ought to have been reduced to writing by the respondents- department. If the employees are stating that they are getting more remuneration than what is shown in the books of account by the noticee, then these statements ought to have been reduced i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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