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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 ..... ore, the shortage ascertained during the course of stock-taking are on the basis of assumption and presumption. The same is not sustainable. As in this case it is claimed that physical stock taking has been done, but which is next to impossible to weighment of such a huge quantity in 10.30 hrs. without deployment of excess labour and transporting vehicles and the shortage is also of the negligible quantity of their production, in that circumstances, we hold that the shortages of finished goods are calculated on the basis of assumption and presumption. In the absence of any documentary evidences, therefore, relying on the above cited decision of this Tribunal, which has been affirmed by the Hon ble High Court, the demand of Rs.10,82,271/- confirmed against the assessee is set aside. Denial of Cenvat credit of Rs.19,71,832/- - HELD THAT:- It is 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 circumstances, the Cenvat credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out on the basis of figures recorded in case of assessee No.1, cannot be made applicable to work out quantum of production of sponge iron during the material period of demand. The said input-output ratio cannot remain fixed due to variable factors prevailed in the character of all the constituent raw material, especially, that of Iron Ore, largely due to variation in Fe(T) of the Iron Ore. As Fe(T) content in the Iron Ore varies, standard norms cannot be achieved 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 - the Ld.Adjudicating authority has rightly dropped the demand on the basis of input output ratio. Also, no penalty is imposable on the assessee. Appeal disposed off. - Excise Appeal Nos.158, 161, 165, 166 of 2012 - FINAL ORDER NO. 75907-75910/2023 - Dated:- 4-7-2023 - SHRI ASHOK JINDAL, MEMBER (JUDICIAL) AND SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL) Shri K.K. Anand, Advocate Shri S.K.Mohapatra, G.M. for the Assessee Shri J. Chattopadhyay, Authorized Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Rs.70,00,000/- (Rupees seventy lakh only) voluntarily deposited by the Noticee No.1 towards Central Excise duty, interest and penalty to the Government Account. (vi) I confirm the demand of the CENVAT duty amounting to Rs.1,57,958/-, Education Cess amounting to Rs.3,159/- and Secondary Higher Education Cess amounting to Rs.1,580/- altogether amounting to Rs.1,62,697/- (Rupees one lakh sixty two thousand six hundred ninety seven only) being the amount of duty evaded by the Noticee No.2 in respect of finished excisable goods namely Rejected Melting Scrap cleared during the period from 27.01.2008 to 21.10.2008 in terms of proviso to sub-section (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944; (vii) I hereby drop the demand of CENVAT duty amounting to Rs.6,30,83,612/- as Central Excise duty, Rs.12,61,672/- as Education Cess and Rs.5,05,360/- altogether amounting to Rs.6,48,50,644/- (Rupees six crore forty eight lakh fifty thousand six hundred forty four only) being the amount of duty alleged to have been evaded by the Noticee No.2 in respect of finished excisable goods namely Sponge Iron cleared during the period from 2006-07 to 200910; (v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of conditions laid down in 1st and 2nd proviso to Section 11AC of the Central Excise Act, 1944. (xii) I also order for appropriation of Rs.18,00,000/- (Rupees eighteen lakh only), voluntarily deposited by the Noticee No.2 against the instant demand, interest, penalty etc. to the Government Account. (xiii) I confirm the demand of the CENVAT duty amounting to Rs.6,27,129/-, Education Cess amounting to Rs.12,543/- and Secondary Higher Education Cess amounting to Rs.6,271/- altogether amounting toRs.6,45,943/- (Rupees six lakh forty five thousand sine hundred forty three only) being the amount of duty evaded by the Noticee No.3 in respect of finished excisable goods namely MS Rejected Ingots/Shorts and Light Melting/Local Scrap cleared during the period from September 2008 to November 2008 in terms of proviso to subsection (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944; (xiv) I confirm the demand of the CENVAT duty amounting to Rs.90,758/-, Education Cess amounting Rs.1,815/- and Secondary Higher Education Cess amounting to Rs.908/- altogether amounting to Rs.93,481/-(Rupees Ninety three thousand four hundred eighty one only) being the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d finished goods was conducted wherein shortage of finished goods was detected as under:- Product Qty. Sponge Iron 5.055 MT Billets 15.46 MT Ingots 0.705 MT Silico Manganese 87.002 MT Ferro Manganese 50.99 MT TOTAL 159.212 MT 3. It was also alleged that the suppliers namely Neo Metaliks Ltd. and KIC Metaliks Ltd. issued 36 invoices to the appellant, but the assessees received only the invoices and not the physical goods which has been diverted and therefore, the assesses are not entitled to take Cenvat credit of 750 MT of Pig iron on the strength of 36 invoices issued by the above said suppliers. It was also found that the assessee has cleared melting scrap without payment of duty. Further from the records, it was revealed that during the financial year 2004-05 the quantity of iron ore of 1,06,309 MT was consumed to manufacture 70,872 MT of Sponge Iron therefore, input output ratio works out to 1.50:1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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, the said demand of Rs.1,62,697/- is not being contested by the assessee and the same is confirmed. A demand of Rs.10,82,271/- confirmed against the assessee on account of shortage of finished goods, the Ld.Counsel for the assessee submits that it is evident that on 05.02.2008 13.30 hrs., the factory of the assessee were visited and there was a finished stock of 618932 MT was available in their records and it is very strange how such a huge quantity can be weighed in such a short span of time. As for weighing of such huge quantity 619 trucks are required and in 10.30 hrs. time, the weighment of 619 trucks cannot be done in any stretch of means. Therefore he submits that demand has been raised against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, the said demand is not sustainable against the assessee and he drew our attention to the records before us, which shows that out of 36 consignments only 9 consignments were having mention of containers whereas in 3 cases quantity is less than 27.5 MT, but he fairly conceded that with regard to Cenvat credit pertained to 9 consignments are having mention of container numbers, the assessee is reversing cenvat credit and which has already been reversed. For denial of Cenvat credit, he relied on the decision of this Tribunal in the case of CCE, Chandigarh v. Shakti Roll Cold Strips Pvt.Ltd. [2008 (229) ELT 661 (P H)] which has been affirmed by the Hon ble Apex Court reported in 2009 (242) ELT A-83 (SC). He also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 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. Heard the parties, considered the submissions. 15. After hearing the parties we find that the demand has been proposed in the show cause notice on the following grounds.:- (a) Clearance of melting scrap clandestinely without payment of duty of Rs.1,62,697.00. (b) Demand of shortage of finished goods of Rs.10,82,271/- (c) Denial of Cenvat credit of Rs.19,71,832/-. (d) Demand of Rs.6,48,48,644/- on account of input output ratio. (a) Clearance of melting scrap clandestinely without payment of duty. 16. The appellant has conceded the said demand of Rs.1,62,692/- stating that the said clearance may be negligible and in such a big plant, therefore, to buy peace they are admitting the said demand and paid the duty. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 inventory position. In such a situation it is but natural that minor variation (0.5% and below) do occur during reconciliation. The explanations provided by the assessee during the original proceedings have been accepted by the lower authority and he allowed the possibility of shortages and excesses in respect of various individual category of raw materials and finished goods. However, he confirmed the reversal of credit in respect of raw material found short after netting of excess with shortage among various varieties. Same method has been adopted for finished goods also. We find that the shortages and excesses found during physical stock verification which remained unreconciled are within the tolerance limit keeping in view the thousands o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes 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. No. From To Seizure Sl. No. Page No. Date DO No. C.E. Invoice No. Trailer No. Weight Seizur e Sl. No. Page No. Contai ner No. Trai ler No. Remar ks 1 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 5 05.04.07 NML/DO/ 0607/946 DATED 29.03.07 165 WB 15A 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46 DATED 29.03.07 278 WB 73 5102 22.680 08/SSI /OFF/0 9 8 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 5 12.04.07 NML/DO/ 0607/946 DATED 29.03.07 328 NL 02 3582 22.040 08/SSI /OFF/0 9 9 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 5 13.04.07 NML/DO/ 0607/946 DATED 29.03.07 362 WB 73 3884 8.570 08/SSI /OFF/0 9 10 Neo Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 5 10.04.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 KIC Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 98 06.12.07 559 DATED 28.11.200 7 5190 WB 23A 5496 27.500 08/SSI /OFF/0 9 26 KIC Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 98 10.12.07 559 DATED 28.11.200 7 5286 WB 23A 5494 27.500 08/SSI /OFF/0 9 27 KIC Metaliks Ltd. Jai Balaji Unit-IV 04/SSI/OF F/10 98 13.12.07 559 DATED 28.11.200 7 5320 WB 37 1270 19.070 08/SSI /OFF/0 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laji 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. Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A 0405 27.5 08/SSI/ OFF/09 2 CXNU 321120 3 WB 15A 0405 19/04/2 007 3 Neo Metal ics Ltd. Jai Bal aji UIV 04/S SI/ OFF/ 10 7 18.04. 07 NML/DO /06-07/958 dated 30.03.07 533 WB 11A 4074 27.5 08/SSI/ OFF/09 3 CXNU3 212637 WB 11A 4074 19/04/2 007 4 Neo Metal ics Ltd Jai Bal aji UIV 04/S SI/ OFF/ 10 7 20.04. 07 NML/DO /06-07/958 dated 30.03.07 593 WB 29 3621 1.07 08/SSI/ OFF/09 3 RPGU 2034186 WB 29 3621 22/04/2 007 5 Neo Metal ics Ltd. Jai Bal aji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived 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 cleared on payment of duty. The Tribunal also found that the Department has not been able to prove that any other alternative raw material was received and used in the final products. The Tribunal also held that the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsignments 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 consumed and sponge iron produced as per balance sheet and in conformities with ER-6 Returns for the material period. (iv) The same ratio alleged to have been maintained during 2005-06, which has been computed on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aries 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-IV (assessee No.2) in his statement dated 05.12.2018, stated that production of Sponge Iron is recorded on the basis of total consumption of Iron Ore and Fe(T) contents of the Ore. (xv) We find that deposition of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 filed appeal before the Tribunal challenging the said order and explained that their manufacturing activities as to how they were engaged in manufacture for themselves as well as they have been carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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