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TMI Blog2022 (4) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... f the transporters to hold that the appellants had procured bogus purchase invoices and cleared excisable ingots in the garb of traded goods. In this context, the appellants have contended that the trading income relates to supply of angles, flats, channels, etc. and such trading activities were undertaken at the appellant s Bhilai Unit and not from the appellants factory. On examination of case records, we also find that the transporters in their statements also stated that they had not transported MS angles, channels, flats etc., from the appellants Bhilai Unit to their buyers. Further, it is not the case of Revenue that the sale proceeds of the traded goods were not received by the appellants from their buyers. Therefore, there is no basis to allege that the amount generated in the above manner had any nexus with the sale of ingots by the appellants. Thus, there is gross violation of the principles of natural justice and as such, no negative inference can be drawn from the transporters statement relied upon by the adjudicating authority. The burning loss in this case was less than 10%, except for the year 2005-06, when the same was 11.1% and marginally in the higher side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case, leading to these appeals are as under: 1.1 M/s Orange City Alloys Pvt. Ltd. (for short, referred to as the appellant No.1 ), having their factory at Khasara No 40/2, Village-Bhilgaon, Kamptee Road, Nagpur are engaged in the manufacture of MS Ingots, falling under Chapter sub-heading No. 72061090 of the schedule to Central Excise Tariff Act, 1985. Such goods are manufactured by using electric induction furnaces. The main raw materials for manufacture of MS Ingots are Sponge Iron, Iron Steel scrap, Pig Iron and Ferro Alloys etc. The appellant No.1 are also availing Cenvat Credit of duty paid on inputs in terms of Cenvat Credit Rules, 2004 as amended. They had purchased Induction furnace of 8 MT capacity from M/s. Megatherm Electronic, Pvt. Ltd., Kolkata (for short, referred to as M/s Megatherm ) in the year 2001, which is in use by them since then. They use electricity supplied by Maharashtra State Electricity Board. The raw materials are charged in the crucible of induction furnace to convert the same into molten mass, which is poured in the moulds to obtain ingots/runners/risers and the said process is termed as one heat. 1.2 Up to the period 30.06.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of manufacture by melting sponge iron ranges between 815 to 1046 KWH. The article published by Shri R.P. Varshney, Executive Director, All India Induction Furnace Association, New Delhi was also referred to by the department, wherein it has been shown that the power consumption for manufacture of 1 MT of ingot in the induction furnace is in the range from 650 units to 820 units, depending upon the percentage mix of sponge iron and scrap. Apart from the above evidences, the department had also relied upon the details of truck owners obtained from the Road Transport Authority and the statements recorded from the transporters, who were engaged for transporting the goods belonging to the appellant No.1. 1.4. Upon detailed investigation into the matter, the department had concluded that the appellant No.1 had suppressed the production of ingots and removed the same without payment of Central Excise duty. Accordingly, show cause proceedings were initiated by the department against all the appellants, proposing confirmation of the Central Excise duty demand along with interest and for imposition of penalties. The matter arising out of the show cause notices, were adjudicated vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clandestine activity of production and clearance of the excisable goods. He further submitted that several factors are involved to ascertain the actual consumption of electricity for manufacture of the resultant final product, which were not considered or analysed by the original authority. 2.2. Learned Advocate further submitted that placing reliance on the technical opinion report of Dr. N. K. Batra, IIT-Kanpur is incorrect inasmuch as such report was furnished by him in his individual capacity, the fact of which had also been acknowledged by the authorities in the said institution. He also submitted that Dr. N.K. Batra had not been cross-examined by the department in presence of the appellants and thus, such report cannot be relied upon for a conclusion that excess goods were clandestinely manufactured and removed by the appellant, without payment of Central Excise duty. Similarly, with regard to the article published by Shri R.P. Varshney, Learned Advocate submitted that the author vide his letter dated 25.04.2008 had confirmed that the report was prepared in the year 1989-90 for Concast steel making, since the process of steel making through Induction Furnaces was in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ELT 187 (Jhar.) (iv) CC C.Ex. Vs. Venus Alloy Pvt. Ltd. 2016 (337) ELT 561 (T) (v) Andaman Timber Industries Vs. CCE 2015 (324) ELT 641 (SC). (vi) CCE Vs. Shiv Prasad Mills Pvt. Ltd. 2015 (329) ELT 250 (T) (vii) CCE Vs. J.J. Re-Rollers 2017 (348) ELT 99 (T) (viii) Kamboj Ispat P. Ltd. Shri Chatar Singh Vs. CCE 2016 (1) TMI CESTAT Mumbai, (ix) Nabha Steels Ltd. Vs. CCE 2016 (344) ELT 561 (T) (x) Mittal Pigment Pvt. Ltd. Vs. CCE 2018 (360) ELT 157 (T)-Affirmed by Rajasthan High Court in 2018 (360) ELT A40 (Raj.) and by Rajasthan High Court in 2018 (16) GSTL 41 (Raj.) (xi) CCE Vs. Ramadevi Steels Pvt. Ltd. 2017 (345) ELT 128 (T) (xii) CCE ST Vs. Shridhar Castings Pvt. Ltd. 2018 (6) TMI 476 CESTAT Mumbai (xiii) Meenakshi Re-Rollers Pvt. Ltd., Shri Nikhil Bansal Vs. CCE 2017 (5) TMI 601 CESTAT MUMBAI (xiv) Bhawani Shankar Castings Ltd. Vs. CCE 2009 (246) ELT 332 (T) (xv) Southern Ispat Ltd. Vs. CCE 2009 (248) ELT 270 (T) (xvi) Saravana Alloys Steels Pvt.Ltd. Vs. CCE 2011 (274) ELT 248 (T) 3. On the other hand, the Learned AR appearing for Revenue reiterated the find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anges between 555 to 754 KWH and the requirement in case of manufacture by melting sponge iron ranges between 815 to 1046 KWH. 3 Article by R.P. Varshney, Executive Director, All India Induction Furnace Association, New Delhi The power consumption for manufacture of 1 MT tones of ingots for Induction Furnace, has been shown to range from 650 units to 820 units, depending upon the percentage mix of sponge iron and scrap. 7. Based on above evidences, the department had alleged that the electricity units consumed by the appellants ranges between 1314 Units/MT to 1663 Units MT, which is much higher than the electricity consumption mentioned in the aforementioned reports furnished by the expert in the field of metallurgy. 7.1 From the documents available in the case files, we find that on 24.3.2006, the department officers had conducted two continuous heats in the furnace installed in the factory of the appellant No.1 and observed that the power consumption was 1008 Units/ MT and 1058 Units/MT. Such report of the department reflects that there was fluctuation of 50 units in the course of a single day in two conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no more alive.Therefore, we are of the view that the impugned orders, placing blind reliance on Dr.Batra s report, without further corroboration of facts and records, cannot be sustained for confirmation of the adjudged demands. 7.4 Insofar as the contents of the article written by R. P. Varshney, Executive Director, All India Induction Furnace Association, New Delhi in the year 1989-90 are concerned, Shri. Varshney himself vide his letter dated 18.3.2008 and 25.4.2008 had clarified that the contents of the articles written by him in the year 1989-90 is outdated and needs to be updated. Further, Shri R.P. Varshney also stated that his article prepared in 1989-90 was for Comcast Steel making and not for Induction Furnace and that power consumption for production of one tonne of steel could be1000 unit to 1800 units per MT. From the contents of above letters, it transpires that Shri Varshney was not very much clear about the requirement of actual power consumption in the type of furnace installed in the appellants factory. On the contrary, we find that National Institute of Secondary Steel Technology (NISST), Mandi, Gobindgarh (Punjab) in their report prepared in June-July 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges : Even though the appellants have shown income from hire charges, however neither of the assets viz. crane, truck, lorry, loaders, etc. were owned by the Company and shown in the balance sheet. As per the department, the said income was apparently declared to accommodate the income out of sale proceeds of clandestinely removed Ingots. (iii). Burning Loss: The appellants have shown very high burning loss between 8% - 11% to accommodate the alleged unaccounted production of ingots. (iv). Documents resumed from M/s. ABC Weighbridge: (a) Some entries in the register resumed from ABC Weighbridge refer to Hardik , Saggu and Orange . As per the department, such entries relate to the appellants. (b) Reliance is placed on Statement dated 20.8.2008 of Mr. Bharat Doshi, Director of the appellants, Statement dated 27.10.2005 of Mr. Sahil Sewakram Meshram, authorised person of M/s. ABC Weighbridge, Statement dated 7.11.2005 of Mr. Rajesh Rangrao, owner of Prakash Transporter Statement dated 8.8.2006 of Mr. Gurmeet Singh, Transporter. (c) On comparison of such entries with statutory records of the appellants, some entries were found reflected in both sets of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een duly verified, accepted and assessed by the income-tax authorities. We are in complete agreement with such contentions of the appellants inasmuch as, there are no statutory requirements under the Central Excise law to maintain records with regard to the income generated from other sources, concerning trading of goods etc. Since the Income Tax assessment, as assorted by the appellants was completed by the Income Tax authorities, without raising any further demands, the veracity of the transactions made under a different statute cannot be questioned by the Indirect Tax authorities. It is an undisputed fact on record that the authorities, authorised and empowered under the Central Excise statute to look after the affairs of the present appellants, have never verified the aspects of generation of profit on sale of trading goods or otherwise from their counterparts posted in the Income Tax department. Thus, in the absence of proper substantiation of the case by Revenue, we have no hesitation to note that in absence of any plausible evidence to the contrary, there is no other option left with us, but to accept the contentions of the appellants that Revenue had not booked the case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original authority has completely brushed aside such submissions. On the contrary, we find that no iota of evidence to such effect was relied upon by the Revenue to substantiate such charge. We find from the available records that the allegation of clandestine removal of ingots cannot be made against the appellants on the basis of some entries figuring in the ABC weighbridge records. In this context, we have perused the replies filed by the appellants before the adjudicating wing, by convincing that there is no discrepancy in the records maintained by the appellant regarding receipt of raw materials and sale of finished product. It is a settled law that the third party s records cannot form the basis of clandestine removal, unless corroborated by independent evidence, which is lacking in these cases. Thus, records recovered from ABC Weighbridge by the department to allege suppressed production and clearance of ingots by the appellants without payment of excise duty, is not sustainable under the law. 9. The law is well settled that to prove clandestine removal, the department has to produce evidence of purchase of additional raw material, sale of clandestinely removed goods, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty officers, discrepancy in the stock of raw materials and final products; (iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters documents, such as LRs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v) Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal. .. 27. Since the incriminating statements of the share brokers etc. have been relied upon in the proceedings, it was incumbent upon the Revenue to produce them as well as the investigating officer for cross-examination by the appellants, as was repeatedly requested by them. In the absence of the same, the statements of the share brokers etc. cannot be relied upon. Even if, for the sake of argument, it is accepted that the income shown in the balance sheets is not the income derived from the sources declared by the appellants, there is nothing on record to link it with the so called clandestine removal of the goods and that cannot be made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of electricity supply, power transmission losses, decrease in efficiency of plant and machinery and consumption of roughly 20% power in Auxiliary Load. He has not accepted the allegation of clandestine removal in his statement .. 90.8 In the present appeals, none of the so called other evidences referred in the impugned Orders prove clandestine clearance. The primary evidence of department is admittedly excess electricity consumption based on benchmark adopted allegedly from report of Dr.Batra, which was already held to be arbitrary by Hon ble Tribunal in R.A. Castings (supra). Thus, in my opinion the primary evidence relied in the impugned order is itself inadmissible, and no other evidence in the instant case proves clandestine production and clearance to sustain the demand. It is contended by Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Castings (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. The Revenue sought to rely on an order passed by Tribunal in Gulabchand Silk Mills Pvt. Ltd. v. CCE, Hyderabad-II, 2005 (184) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no details about the proportion of manufacture of these items or the nature of standard machinery used in the manufacture. It is also not known what will be the normal consumption per machine for a given period of time when in continuous normal operation. We have only electricity consumption for few months in 2008- 2009 and certain calculation based on purported average electricity used for production of 1 M.T. of final product. We are also not very clear as to how 91 units are considered as standard for calculation as nothing is recorded regarding the nature of machinery and the consumption capacity of said machinery. We find that the calculation made is completely presumptive. 6. Further, we find that the trading income of the respondent was sought to be linked to the sale on clandestine clearance of the manufactured goods. We find that for such assertion to be established, first of all, that the trading income should be proved to be not on account of trading and secondly, it should be proved that such income is actually from the sale of clandestinely manufactured and cleared excisable goods. While precise evidence to tally the income may not be possible, at least demon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the revenue was that the assessee had not recorded the production in their factory premises and clandestinely removed the goods. To come to such conclusion, the Revenue relied upon the electricity consumption and the statements of various transporters. The Tribunal had allowed the appeal of the assessee by holding that there is no evidence which indicated that assessee had procured raw materials which were unaccounted. The allegations of clandestine removal of manufactured goods is very serious allegation and needs to be substantiated by Revenue authorities with tenable evidence to show that there was large scale manufacturing of commodities. 9.6 We find that similar views were also expressed by different judicial forums in the cases, relied upon by the appellants. It has consistently been held that high consumption of electricity by itself not a ground to infer suppression of production. The onus is on the department to prove allegation of clandestine removal with positive and concrete evidence. 10. The ratio of the decisions cited by the learned AR for Revenue is distinguishable from the facts of the present case, inasmuch as there were existence of direct an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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