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TMI Blog2020 (2) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted by the respondent in entering the goods in the production records only after the completion of quality control checks. Undisputedly though production was happening on the national/ public holidays, the goods could not have been entered in the production records awaiting the quality inspection which would happen on subsequent days. After comparing all the records and returns it is found that production declared by the respondents in the ER- 1 returns is higher than the production recorded in the private records. Nothing has been put forth in the appeal by the revenue that the findings and discussions are incorrect in any way. ER- return is the statutory return prescribed under Central Excise Law. If the total production declared in ER-1 return is higher than that computed production on the basis of private records, there are no merits in submission made by the revenue, that production in RG-1 register do not tally with private records. Hence the issue on this account is answered in favour of the respondents. CENVAT credit - HELD THAT:- It may be pointed out that admissibility of CENVAT Credit is linked to the fact of receipt of duty paid inputs within the manufactory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable with separate name, form and tariff heading. 2.2 During course of visit undertaken by the Officers of DGCEI to the premises of respondent and on scrutiny of records resumed from their premises relating to production and clearance including private records relating consumption of electricity and statements of various persons recorded revealed- There was shortage of stock 84.434 MT Steel Wires was found. Duty involved ₹ 2,83,698/- on the shortage was paid by the respondents on the day of visit; From the record of electricity consumption for 03.02.2004 (one day prior to day of visit) it was observed that average electricity consumption per MT of Ingots was 775 units (KWH). On the basis of this they had suppressed the production of Steel Ingots to the tune of ₹ 16285.199 MT involving Central Excise Duty ₹ 3,24,44,351/-. Though the electricity was consumed at each stage of production everyday on certain days there was no corresponding entry in the statutory production records. The duty short paid on account of such non entry in the record of productions was ₹ 13,78,322/- on Steel Ingots, ₹ 33,84,443/- on Billets, ₹ 44,12,069/-on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty two thousand three hundred and forty seven only) should not be demanded and recovered from them in terms of proviso to Section 11A(1) of Act on account of 976.227 MT of steel wires detailed under paragraph 6.7 10.1.1 and computed at Annexure C1(vi) to this notice; g. ₹ 1,68,63,657/- (Rupees One Crore Sixty Eight Lakh Sixty Three thousand six hundred and fifty seven only) should not be demanded and recovered from them in terms of proviso to Section 11A(1) of Act on account of 3625.324 MT of steel wires detailed under paragraph 7 10.2 and computed at Annexure C2 to this notice; h. ₹ 3,24,44,351/- (Rupees Three Crore twenty four Lakh forty four thousand three hundred and fifty one only) should not be demanded and recovered from them in terms of proviso to Section 11A(1) of Act on account of 16285.199 MT of steel ingots detailed under paragraph 6.5 10.4 and computed at Annexure C4 to this notice; i. ₹ 2,33,698/- being the amount involved on 84.434 MT of steel wires found short on physical verification on 04.02.2004 and which was paid by the assessee on that day itself vide PLA Entry Sl No 22 for ₹ 50,000/- and RG23A Part-II Entry Sl No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngots on the basis of the electricity consumption, the order of adjudicating authority is erroneous as the power/ electricity consumption of 775 KWH/ PMT of Steel Ingots was not made on the basis of any tests conducted by the respondent or any agency appointed but was determined on the actual production records for the day prior to the day of visit made available by the respondents. Since this has been determined on the basis of normal production made the and not in the test environment, it reflects the actual per consumption per metric ton of ingot and can be basis for determination of normal production for the past period. The decision of tribunal in the appellants own case is distinguishable on this account. Adjudicating authority was not correct in dropping the demand in respect of the production done on the days of holidays when the electricity consumption was same to that of normal day of production. Adjudicating authority was wrong in accepting the contention of the respondents that production on the holidays was not entered in the production records for the reason that there was no quality control available on those days. Respondents have made submissions in this respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be sustained as has been held by the Commissioner in the impugned order; They had properly accounted for the production of excisable goods produced on public holidays. Since the production could not have been accounted on the day of production being public holiday, the same has been accounted on subsequent days. All such goods have been duly accounted in the production records and cleared on the payment of duty. The order of Commissioner on this account cannot be challenged. In respect of the reconciliation between private records and exercise records they have complete co-relation and reconciliation available which was duly verified, analyzed and accepted by the Commissioner; The review Committee has accepted the order of Commissioner dropping the demand in respect of the job work done by them for others. The logic of such acceptance should have been extended in respect of remaining transactions, records and documents; There is no suppression of any production nor any wilful misstatement by the respondent assessee. Hence the demand made in the show cause notice has been rightly vacated by the adjudicating authority. Commissioner has while confirming the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wire rods weighing 49.2 MT in 256 bundles, that were lying in the factory of the notices in coil form, was not counted while working out shortages in the factory. And this fact has been duly incorporated at page 3 of the Annexure to Panchnama dated 4.2.2004. I reproduce the relevant stock taking portion from panchnama which I as follows: iv) Wire rods in coil form (old and rusted stock) said to be scarp. 1. Wire rods of average weight 200 kgs- total weight of 206 bundles = 41.2 MT 2. Wire rods of average weight 160 kgs total weight of 50 bundles= 8 MT Total weight of rusted wire rods in coil form i.e 256 bundles= 49.2 MT The notice has placed on record the stock taking facts in a tabulate form as below: Stock taking on 4.2.2004 Physical Verification Non Alloy 1863 coils X 200 kgs 372.6 29X 135 3.915 105 X 150 15.775 14 X 200 2.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nama. I have also noticed that the notice had earlier deposited an amount of ₹ 2,83,698/- which is equivalent to duty leviable on 84.434 MTs of wire rods. However, since there is an error apparent on record, hence, noticee s act of deposit of the said amount does not vitiate their rights and they are entitled to claim relief on this count. The said amount remains as deposit with the Government, till the amount is appropriated after determination of duty liability. Thus I find that actual shortage in stocks of wire rods was 35.134 MT only. Admitting the stock taking report to be correct, the demand for central excise duty on shortage of only 35.134 MT of wire rods amounting to ₹ 1,18,050/- is sustainable. 4.3.2 We are in total agreement with the reasoning adopted by the Commissioner in above referred paragraphs. In fact the rusted wire rods found during the course of stock taking an recorded in the panchnama have arisen out of the stock of wire rods recorded in the production records maintained by the respondents, and hence they continue to be part of the stock available with them. It is not the case of the department in appeal that this rusted stock have been acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 October 2003 888 units 9 Jan 2004 903 units I observe, for instance, if during the months of August 2001, some demand of ingot section is worked out, the production figures have been worked out by dividing the total power consumption by 980 units. For October 2001, the production figures have been worked out by dividing the total power consumption by 947 units. For Jan 2002, the production figures have been worked out by dividing the total power consumption by 1028 units and so on. I find that hen a bench mark of 775 units has been adopted in the show cause notice then production figures should have been worked out accordingly. I find that the power consumption in the range of 903-1028 is acceptablehere to DGCEI. In the same show cause notice I observe that the duty has been demanded where the power consumption is more than 775 unit/ PMT. No justification for adopting such bench marks has been given in the notice. 3.44 In the show cause notice, the variation/ fluctuation of pwer consumption per MT of Ingot produced was noticed at 1017 units, 972 units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l either. Further, Rules do not stipulate that production in statutory records has to be entered on the same day, when they are produced. Quality inspection, in fact, is an integral part of production process, and it is an accepted procedure in Central Excise Rules, and there are umpteen number of products wherein the manufacture is considered complete only after quality control certifies it to be of desired quality or specifications, and hence to be entered in RG-1 records. On the basis of facts brought before me I conclude that recording of production by the noticee, after quality control clearance, is in order and does not violate any provision of Central Excise rules. The explanation of the noticee that there was production on the national holidays, but in absence of quality control staff, no production was entered in RG-1 records on the said days, but entered in their statutory records only on subsequent days after quality control check found it in order and hence acceptable. Hence demand of duty based on account of this allegation is not sustainable. 4.5.2 Commissioner is correct in his conclusion that the goods were entered in the production records maintained by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 3 4 5 Jan- 02 2726.710 2542.390 127.934 2670.324 56.386 Feb 2703.2 49 2566.3 78 157.37 4 2723.7 52 - 20.503 Mar 2614.369 2450.431 117.761 2568.192 46.177 Apr 2751.9 84 2551.0 67 257.92 9 2808.9 96 - 57.012 May 2507.2 47 2382.1 65 123.25 6 2505.4 21 1.826 Jun 2642.0 10 2548.4 28 156.93 4 2705.3 62 - 63.352 July 2690.0 67 2675.7 60 1.035 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2766.6 43 2543.2 53 8.765 2552.0 18 214.62 5 Nov 2650.4 07 2422.4 00 8.908 2431.3 08 219.09 9 Dec 03 3057.3 75 2864.4 45 30.762 2895.2 07 162.16 8 Jan- 04 3046.7 75 2703.7 85 100.85 4 2804.6 39 242.13 6 69525. 019 65903. 695 1343.7 91 67247. 486 2277.5 33 Then we can compare the ER-1 figures with RG-1 figures figure for the entire period which are as below: Period Official Production Difference (1-4) As per ER-1 As per (RG-1) Annex C-2 8 9 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nov 2656.656 2422.400 234.256 Dec03 3068.896 2864.445 204.451 Jan- 04 3005.865 2703.785 302.080 68221.443 65903.695 2317.748 I observe that from the figures worked out above, production in private records is 2277.533 MT more than the combined figures of RG-1 and Job work. But in the ER-1 the production is more than the production shown in the RG-1 records by 2317.748 MT. (Fig in MT) Prod. As per Pvt records = 69525.010 Prod. As per ER-1 = 68221.443 Difference = 1303.576 Job work done (For others) = 1343.791 More prod. As per records = 40.215 3.28 The difference of 40.215 MT is explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of investigating officer is that he has not considered the production figures of job-work that te noticee did for other Central Excise assessees. The job work records were duly resumed by the DGCEI. The fact of job work figures does not find any place in the duty calculation charts relied upon in the show cause notice. Central Excise duty liability was to be discharged by the principal manufacturer and not the job worker i.e. the noticee in this case.. The investigating officer, by not taking into account the fact of job work, found private figures on higher side as compared to RG-1 figures. No further explanation/ discussion is required when the facts prove that the investigating officer has worked out the production data without considering working/ production aspect in totality. The production figures submitted to the department in the shape of ER-1 returns and job work data are correct and confirm that the allegation of of suppressed production is incorrect. I conclude that demand of differential duty on this ground cannot sustain. 4.6.2 Commissioner has in above quoted para carefully analyzed and compared the production data in the statutory returns/ records ..... X X X X Extracts X X X X X X X X Extracts X X X X
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