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TMI Blog2023 (7) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... stock taking in terms of proviso to sub-section (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944; (ii) I confirm the demand of CENVAT duty amounting to Rs.99,255/-, Education Cess amounting to Rs.1,985/- and Secondary & Higher Education Cess amounting to Rs.992/- altogether amounting to Rs.1,02,232/- (Rupees one lakh two thousand two hundred thirty two only) evaded by the Noticee No.1 out of the total demand of Rs.4,79,62,368/- (Rupees four crore seventy lakh sixty two thousand three hundred sixty eight only) in respect of finished excisable goods namely Sponge Iron cleared during the period from 2006-07 to 200910 in terms of proviso to sub-section (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944 and the rest of the demanded amount to the extent of Rs.4,78,60,136/- (Rupees four crore seventy eight lakh sixty thousand one hundred thirty six only) is set aside; (iii) I also charge the interest to the tune of Rs.16,083/- (Rupees sixteen thousand eightly three only) against the Noticee No.1 leviable on the aforesaid amounts of duty in terms of Section 11AB of the Central Excise Act, 1944; (iv) I impose penalty to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,015/- and Secondary & Higher Education Cess amounting to Rs.10,508/- altogether amounting to Rs.10,82,272/- (Rupees ten lakh eight two thousand two hundred seventy two only) being the amount of duty evaded by the Noticee No.2 in respect of finished excisable goods namely pig iron, sponge iron, Silico Manganese & Ferro Manganese found short in course joint physical stock taking in terms of the first proviso to Section 11A(1) of the Central Excise Act, 1944 read with Section 11A(2) of the Central Excise Act, 1944; (x) I also order payment of interest leviable on Noticee No.2 in terms of Section 11AB of the Central Excise Act, 1944 and Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 on the amounts of duty evaded as demanded in clause (vi), (viii) and (ix) above; (xi) I impose penalty to the tune of (Rs.1,62,697/- + Rs.10,82,272/)Rs.12,44,969/- (Rupees twelve lakh forty four thousand nine hundred sixty nine only) upon the Noticee No.2 in terms of Section 11AC of the Central Excise Act, 1944. However, I allow the benefit for payment of reduced penalty i.e. 25% (twenty five percent) of the duty amount to the Noticee No.2 subject to fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 11AC of the Central Excise Act, 1944. However, I allow the benefit for payment reduced penalty i.e. 25% (twenty five percent) of the duty amount to the Noticee NO.3 subject to fulfillment of conditions laid down in 1st and 2nd proviso to Section 11AC of the Central Excise Act, 1944. (xvii) I also order for appropriation of Rs.4,00,000/- (Rupees four lakh only), voluntarily deposited by the Noticee No.3 against the instant demand, interest, penalty etc. to the Government Account. (xviii) I impose penalty to the tune of Rs.10,00,000/- (Rupees Ten lakh only) upon Shri Gaurav Jajodia, Director (Noticee No.4) of M/s. Jai Balaji Industries Limited Unit-1 [Noticee No.1], M/s. Jai Balaji Industries Limtied Unit-IV [Noticee No.2] and M/s. Jai Salasar Balaji Industries (P) Limited, (Noticee No.3) in terms of Rule 26(1) of the Central Excise Rules, 2002. (xix) I impose penalty to the tune of Rs.5,00,000/- (Rupees Five lakh only) upon Shri Satya Narayan Dey Proprietor of M/s. Shyam Sons India (Noticee No.5), 18, Atul Ghosh Lane, Salkia Howrah-711106 in terms of Rule 26(1) of the Central Excise Rules, 2002. Again the said order, both sides are in Appeal. 2. The fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. 4. In view of the above facts and circumstances of the case, show cause notice was issued to the assessees alleging clandestine removal of goods without payment of duty and availment of Cenvat credit on pig iron without receiving the same in the factory premises, to demand of duty and reversal of Cenvat credit along with interest and penalty upon the appellant. The matter was adjudicated and the order was passed as mentioned in paragraph 1 hereinabove, wherein the adjudicating authority dropped the demand sought to be evaded by the assessees on the basis of the input output ratio, but confirmed the demand of duty on account of shortage of finished goods and denial of Cenvat credit on pig iron and also imposed various penalties on the appellants. Against the order of confirmation of demand of duty, reversal of Cenvat credit and imposition of penalty, the assessees are in appeal and against the order of dropping the demand against the assessee, the revenue is in Appeal. 5. Ld.Counsel for the assessees fairly conceded the demand of duty confirmed on account of clearance of melting scrap in the absence of any evidence of clearing the same on payment of duty, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were issued on assessee 1's name but the same pig iron was not received in their manufacturing unit but was handed over to one agent Shri Satya Narayan Dey of Shyam Sons India, who used to load it in the containers and transported the same by means of trailers to Railway sliders at Majherhat Kolkata from where such containers were mounted in railway wagons/rakes for onward transportation and disposal mostly to northern parts of India. These all consignments had a specific quantity of 25.7 MT/28 MT which could not be transported by a trailer without the service of a container. 8. It is his contention that to buy peace the appellant has reversed the cenvat credit pertaining to 9 invoices wherein container number is mentioned. Without admitting the same, it is his contention that to manufacture of their finished goods, which has been cleared on payment of duty such a huge quantity of 750 MT if it was not received in the factory, then from which sources they have procured the pig iron to manufacture their finished goods. The Revenue has failed to prove the source of procurement of pig iron in their factory, which was ultimately used in manufacture of final product. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso submitted that from the production log sheet for the year 2005-06, the assessee themselves have recorded production of sponge iron maintaining input output ratio 1.5:1 throughout the year so it is clear that Fe(T) content in iron ore used throughout the year 2005-06 remained the same. During 2006-07 and onwards the input output ratio has been varied from day to day and even from kiln to kiln of a particular day although it cannot be said that Fe(T) content in the iron ore fed into the kilns on a particular day is varied from kiln to kiln. On the day of search, shortage of physical stock of sponge iron was detected in both the factories and demand on such shortages of sponge iron has also been confirmed by the adjudicating authority. Demand on unaccounted sponge iron collectively weighing 62.740 MT cleared against challans dated 01.12.2008, 02.12.2008 and 03.12.2008 has also been confirmed by the adjudicating authority. So it is an admitted fact that the assesses are engaged in surreptitious manufacture and clandestine clearance of sponge iron. Therefore, the order of the Ld.Commissioner for dropping the demand on the basis of input output ratio is to be set aside. 14. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. Admittedly, no corroborative evidence has been produced by the Revenue in support of their claim, therefore, we hold that demand of duty on shortage of raw material/finished goods against M/s. SSCL is not sustainable, the same is set aside. The said order has been affirmed by the Hon'ble High Court. Further in the case of National Engineering Industries Ltd. (supra), this Tribunal has given an option to deal the issue and observed as under:- "5. The admitted facts of the case are that the assessee is having computerized accounting which manages end to end operations i.e. from the set of procurement of raw material to sale of finished goods. It is also admitted fact that there are large varieties of raw materials, work-in-progress and finished products. The consumption of raw material goods which are used in process of making and the finished goods are not physically numbered and accounted on day-to-day basis. The standardized system of accounting based on measurement and conversion of raw material to finished product on weight/length basis is fed to the computer. The assessee undertakes with the help of cost auditor stock verification on annual basis to reconcile the invent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any documentary evidences, therefore, relying on the above cited decision of this Tribunal, which has been affirmed by the Hon'ble High Court, we set aside the demand of Rs.10,82,271/- confirmed against the assessee. (c) Denial of Cenvat credit of Rs.90,71,832/-. 19. We find that Cenvat credit has been denied to the assessee on the basis of 36 invoices issued by M/s. Neo Metaliks Ltd. and KIC Metaliks Ltd amounting to Rs.19,71,832.00. From the statement of Shri Satya Narayan Dey, which was relied by the adjudicating authority, has stated that he used to load it in the containers and transported the same by means of trailers to Railway sliders at Majherhat Kolkata from where such containers were mounted in railway wagons/rakes for onward transportation and disposal mostly to northern parts of India. These all consignments had a specific quantity of 25.7 MT/28 MT which could not be transported by a trailer without the service of a container. The details of the same is available as under :- Chart showing diversion of Pig Iron through container of Container Corporation of India and otherwise Annexure-P 04/SSI/OFF/10 08/SSI/OFF/0908/SSI/OFF/09 Sl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jai Balaji Unit-IV 04/SSI/OF F/10 7 13.04.07 NML/DO/ 0607/968 DATED 30.03.07 362 WB 73 3884 12.650 08/SSI /OFF/0 9 14 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 7 16.04.07 NML/DO/ 0607/968 DATED 30.03.07 459 WB 23A 1141 26.810 08/SSI /OFF/09 15 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 7 17.04.07 NML/DO/ 0607/968 DATED 30.03.07 520 WB 15A 0405 27.500 08/SSI /OFF/09 16 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 7 18.04.07 NML/DO/ 0607/968 DATED 30.03.07 533 WB 11A 4074 27.500 08/SSI /OFF/0 9 17 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 7 16.04.07 NML/DO/ 0607/968 DATED 30.03.07 444 WB 37 4791 19.710 08/SSI /OFF/0 9 18 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 7 17.04.07 NML/DO/ 0607/968 DATED 30.03.07 513 WB 39 6511 20.120 08/SSI /OFF/0 9 19 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 7 19.04.07 NML/DO/ 0607/968 DATED 30.03.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -IV 04/SSI/OF F/10 98 21.12.07 559 DATED 28.11.200 7 5466 WB 41A 4220 18.170 08/SSI /OFF/0 9 33 KIC Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 98 22.12.07 559 DATED 28.11.200 7 5480 WB 37A 5616 19.110 08/SSI /OFF/0 9 34 KIC Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 98 25.12.07 559 DATED 28.11.2007 5573 WB 41A 3521 19.080 08/SSI /OFF/09 35 KIC Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 98 26.12.07 559 DATED 28.11.2007 5591 WB 25 6233 19.170 08/SSI /OFF/0 9 36 KIC Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 98 28.12.07 559 DATED 28.11.2007 5644 WB 41 1977 8.310 08/SSI /OFF/0 9 20. We have gone through the records and found that out of 36 consignments, 9 consignments were having container numbers and rest of the consignments are not having container number which clearly shows that those consignments were not transported by way of container and if the statement of Shri Satya Narayan Dey is found to be correct, in that circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5520 WB 764689 27.5 08/SSI/ OFF/09 36 ILCU 510650 3 WB 764689 25/12/2 007 21. We also take note of the fact that all these 36 consignments contained 750 MT of pig iron which is alleged that same has not been received by the assessee, therefore the question arises if it has not been received in the factory of the assessee, then how the assessee procured the raw material of pig iron to manufacture sponge iron. The revenue has not come up with any evidence to show that the assessee has procured pig iron from illicit means which has gone in manufacture of sponge iron or have been procured by the assessee from some other means. In the absence of the same, Cenvat credit cannot be denied as held by the Hon'ble Punjab & Haryana High Court in the case of Shakti Roll Cold Strips Pvt. Ltd. (supra), wherein the Hon'ble High Court has observed as under:- "5. We have heard Mr. Kamal Sehgal, learned counsel for the revenue and perused the record. However, we find no force in the contention raised by him. The Tribunal has recorded a finding of fact that the inputs supplied by the respondent were duly received by the manufacturers and were used in the goods manufactured, which were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been recorded in favour of the respondents" 23. In view of this, we hold that the Cenvat credit cannot be denied to the appellant in the facts and circumstances of the case, but cenvat credit on 9 consignments admitted by the assessee is denied. (d) Demand of Rs.6,48,48,644/- on account of input output ratio. 24. We find that demands sought to be confirmed against the assessee on the basis of input output norm in terms of the earlier Financial Year i.e. 2004-05 and 2005-06 for the subsequent financial years as for the earlier input output ratio was 1.5:1 whereas it was increased to 1.59:1, 1.6:1 and so on. 25. We find that - (i) There is no statutory obligation under the Central Excise Act, 1944 and the Rules framed thereunder to maintain standard norms of production in respect of an assessee liable to pay Central Excise duty under Section 3 of the said Act. (ii) There is nothing on record that the assesses herein have ever declared input-output ratio to the Central Excise authority during the material period. (iii) In the SCN, input-output ratio of 1.50:1 has been arrived at for the period 2004-05, based on quantities of Iron Ore consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be made applicable to work out quantum of production of sponge iron during the material period of demand. (xi) We find that while arriving at input-output ratio, certain statements obtained from various functionaries of the assessee companies have been relied upon. While framing the charges, it has been alleged in the impugned SCN that the input-output ratio was pre-fixed before feedment of raw materials, and production of final product i.e. Sponge Iron was being computed applying such pre-fixed input-output ratio on the quantity of iron ore consumed. (xii) All such statements were recorded u/s 14 of the Central Excise Act, 1944 and none of the statements is found to have been retracted subsequently. (xiii) We find that Shri R.N.Goel, General Manager of the assessee No.1, in his statement recorded on 05.12.2018 with reference to Question No.5 and stated that they have no specific norms of ratio for production of finished goods, like Sopnge Iron, Pig Iron, Silico Manganese, Ferro Manganese etc. Against specific query, Shri Goel also categorically stated that production per kiln varies from 38 MT to 40 MT per day. (xiv) Shri Niranjan Gourisarai, General Manager, Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved ad production of Iron Ore. As Fe(T) content in the Iron Ore varies, standard norms cannot be achieved and production of Iron Ore worked out on the basis of such input-output ratio cannot be considered as actual production but estimated one. (xviii) Further, the different factors which attribute to productivity are the Fe content about 65%, moisture, loss of ignition, tumbler index, laterite and porous contents of Iron Ore with minimum fines, standard fixed carbon content in coal without fines and foreign particles, good condition castables etc. and for that matter, yield widely varies even on day to day as well as kiln to kiln basis, is in conformity with the deposition of Md.Yusuf against question No.8. 26. Further, in the impugned order the Ld.Adjudicating authority also examined the above issue and did not rely on the earlier input output ratio to allege that same is to be maintained by the assessee in the subsequent years. 27. A similar view was taken by the Hon'ble Calcutta High Court judgement in the case of CCE, Kolkata-III v. Sai Sulphonate Pvt.Ltd. [2022 (380) E.L.T. 441 (Cal.)], wherein the Hon'ble High Court has observed as under:- "5. The assessee has f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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