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TMI Blog2022 (9) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... uced during the previous three months? - HELD THAT:- There is no evidence that it had been modified during the three month period. Therefore, the quantity of MS Ingots produced in one batch/heat will be more or less be similar to the quantity produced in another batch. At any rate, there cannot be a very large variation - the average quantity of 8.447 tons of ingots per batch reckoned by the Adjudicating Authority for confirming the demand is correct and calls for no interference. The submission of the learned Counsel that only 6 or 6.5 M.T. can be produced per heat is inconsistent with the data which is undisputed and is available on record. The duty of central excise is leviable for the manufacture of the goods although it is payable on removal or at the end of the month. If there is no manufacture there cannot be any demand of duty. To the extent the manufacture was shown by the appellant in its excise returns, duty has already been paid. It is this excess manufacture which has not been reflected in the excise returns which is in dispute. This manufacture has not been determined by the Revenue out of thin air but has been worked out on the basis of the records of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal No. E/53286 of 2018 is filed by Shri Brij Narayan Singh [Singh] assailing personal penalty of Rs. 50,000/- imposed upon him. 2. The assessee is a manufacture of Mild Steel Ingots [M.S. Ingots] and is registered with the Central Excise Department. The Directorate General of Central Excise Intelligence [DGCEI] received intelligence that the assessee was suppressing the production of its finished products and subsequently clearing the same clandestinely without payment of central excise duty and started investigation. The officers searched the premises of the factory of the assessee and the residence of the Director on 18.10.2012 and seized some documents. They also took stock of the goods and found a shortage of 102.170 M.T. of Ingots. They also recorded statements of various persons during investigation. After completing the investigation, a show cause notice dated 06.11.2013 was issued by the DGCEI, demanding a duty of Rs. 7,93,16,068/- towards the central excise duty on the clandestinely removed goods along with interest and proposing imposition of penalties. This demand was on following 4 counts :- (a) Rs. 7,25,92,853/- was based on electricity consumption in the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MS Ingots produced on 17.10.2012 is indicated as 34325 kg. whereas the corresponding figures in the production report were only 34374 kg. ; (iv) In any case, the demand based on assumed average production is not sustainable as there is no clinching evidence to establish any clandestine removal. No buyer of the cleared goods was identified and no transporter or driver was identified or questioned. To manufacture MS Ingots of the quantity indicated more raw material would have been required and no such suppliers of raw material were identified or questioned nor any shortage of raw materials found at the time of stock taking. Further, the sale of such large quantity of goods would result in large cash transactions of over Rs. 4.5 crores and no cash was seized by the Department or detected. There is not even a single case of seizure of any consignment of clandestinely procured raw material or clandestinely produced finished products. (v) None of the statements recorded during investigations are relevant as evidence in view of section 9D of Central Excise Act, which was not followed ; (vi) Since the Commissioner has already dropped the demand of Rs. 7,25,92,853/- he should hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order and submits that to the extent the demand was not sustainable, it has already been dropped by the Commissioner in the impugned order. The only two items of dispute are the demand on account of the number of heats produced and the quantity of steel per heat and secondly the demand on account of the invoices. 7. He submits that as far as the quantity of steel produced based on the number of heats is concerned, the appellant has furnaces in which steel scrap is melted and thereafter it is poured into moulds which results in production of ingots. Each batch of melting is referred to as heat. The appellant has maintained a notebook which was seized during the search. The heats are numbered serially by the appellant and in this notebook the number of heats produced is mentioned datewise along with the carbon percentage and manganese percentage etc., in respect of each batch. It is not in dispute that this notebook was seized from the appellant and as can be seen from Annexure F to the appeal each page of this notebook was stamped and signed by the appellant. This notebook, however, does not mention how much quantity was manufactured in each heat. He submits that manufacture of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays cannot be extrapolated to the production during the previous three months, learned Authorized Representative submits that production reports were the appellant s private records and during search only records of these three days were available. The appellant had not produced records of the previous period. Only the number of heats on each date was available in the notebook seized from the appellants. It is possible that the appellant was destroying the production reports and, therefore, production reports for the entire period were not available. Therefore, the demand of duty based on this production reports needs to be upheld. 12. As far as the demand of Rs. 6,12,193/- based on parallel set of invoices is concerned, learned Authorized Representative submits that the question is not of extra copy of the invoices being kept, but two invoices of the same number being generated by the appellant with different names and different quantities of goods and duty being paid only on one. While this practice may be going on for long, the demand has been made only in respect of 12 invoices which were actually recovered during investigation. Therefore, the demand on this count also needs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc., are tested and are recorded in the notebook. However, this notebook does not indicate what quantity of ingots are produced in each batch. In a batch manufacturing process, the quantity produced per batch depends on the size of the batch which, in turn, depends on the capacity of the machinery/plant. In this case, that size is the capacity of the furnace. This capacity does not vary every day, but is fixed unless the capacity is altered by adding new furnaces or replacing the existing ones. Therefore, it is reasonable to presume that the capacity of one batch will be more or less consistent with that of another. However, considering the nature of the material used, namely, scrap, the size of the batch may not be as accurate as in some other industries, such as, pharmaceutical industry. 17. According to the appellant, the capacity of each batch is only 6 M.T. or a maximum of 6.5 M.T. and ingots more than this cannot be produced per heat. It is not in dispute that the production reports for the period 14.10.2012, 16.10.2012 and 17.10.2012 maintained by the appellant are its internal records recovered during search. These are enclosed as Annexure G at pages 135 to 140 of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the ingots by hammering and are known as runners and risers (as opposed to ingots). What is significant is the weight indicated in the production report nowhere specifies that it is weight of the runners and risers. The runners and risers and ingots are two distinct goods known to the industry and the weight in the production reports was only of the ingots and there is no mention of runners and risers. 19. We proceed to examine how robust and consistent is the data in the production reports. We find that in each and every batch if the total length of the ingots together and the total weight is considered, the weight of the ingots per inch of length gives to 1.96 kg., as below :- Weight of MS ingots per inch of length as per the data in the production reports of the appellant Heat No. Date No. of ingots Length (inches) weight (kg) Total length of ingots in inches Weight per ingot (kg) weight (kg) per inch length of ingot (1) (2) (3) (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eight of the ingot = 3.5 inches which is equal to 3.5x 2.54 = 8.89 cm Width of the ingot = 4.5 inches which is equal to 4.5 x2.54 =11.43cm One inch length of ingot = 1 x2.54 cm Volume of one inch length of ingot = 8.89 x11.43x2.54 = 258 cubic centimeters Average density of the MS ingot as per the above records = 1.96 kg/258 cubic centimeters = 7.59 g/cc 20. We further find that according to the appellant itself the cross-section of the ingots is 3.5 inches X 4.5 inches. If the total volume of the ingots per inch is converted into cubic centimeters and the weight of 1.96 kg. per inch is considered, the density of the MS Steel ingots produced by the appellant is consistently around 7.59 gms. per cubic centimeter which is consistent with the density of the mild steel. Therefore, we do not find any inconsistency in the production records for the three days. We find the data is reliable and robust. 21. The next question is if this data can also be used to determine how much quantity of ingots were produced during the previous three months. We find that the cross-section of the ingots, the total length of ingots produced, weight per inch of the ing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a detailed production report. As discussed above, the production reports are consistent and robust and they indicate that about 8.447 M.T. of MS Ingots were produced per heat. The goods having been manufactured must have been either removed from the factory or must have been lying in the factory and the stock was taken surplus of ingots to the extent indicated have been found. Evidently, they must have been removed and whether they were sold or removed otherwise is a different question. Merely, because the buyers of clandestinely removed goods and the transporters could not be found the manufacture of these goods cannot be denied when the appellant s own records indicate the manufacture. 25. Learned Counsel for the appellant also submitted that the statements recorded during the investigations were not admissible as they have not been put to the procedure required under section 9D of the Central Excise Act. We agree. Even if the statements are ignored, details of actual manufacture itself are available in records kept by the appellant in the form of number of heats on every day for three months and the quantity produced per heat for a period of three days. There is no eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T of runners and risers to self in Vehicle No. CG04G 3191 similarly for each of the 12 invoices there is another invoice with the same number. 30. Learned Counsel for the appellant submits that they were extra copies of invoice and there is no bar on the assessee maintaining extra copies of invoices under central excise rules. We agree that there is no bar on maintaining extra copies of invoices, but if it be so, the invoice of the same number should, regardless of the number of copies, have the same details of the goods, value, vehicle, consignee etc. There cannot be two invoices with the same number with different dates and different quantities and with paying duty on the one and not paying duty on another. Maintaining a parallel sets of invoices is a well known modus operandi for clandestine removal of goods. If the parallel invoices are not detected, they can be destroyed by the assessee after clandestinely removing goods against them without paying duty or even indicating duty and then and recovering the duty from the customers and not paying the duty to the Revenue. However, Revenue can only book a case against the appellant to the extent it finds evidence. In this case, o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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