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TMI Blog2008 (6) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal No. 33/Commr /Mrt.I/2007 dated 30-7-2007 and Order-in-Original No. 32/Commr/Mrt.I/2007 dated 30-7-2007 passed by the Commissioner, Customs Central Excise, Meerut-I. The Commissioner, vide Order-in-Original No. 33/Commr/Mrt.I/2007 dated 30-7-2007, while granting certain relief, has confirmed the Central Excise duty amounting to Rs. 2,77,69,628/- under Section 11A(2) of the Central Excise Act, 1944 together with interest and imposed equivalent amount of penalty under Section 11AC ibid on M/s. R.A. Castings (P) Ltd. (appellants in appeal E/3097/07). He also imposed personal penalty of Rs. 5 lakhs each on the Directors of the Company. He further imposed personal penalty of Rs. 1 lakh each on Shri Kamlesh Gupta, proprietor of M/s. Gupta Associates and Shri Ashok Gupta, Director of M/s. RJD Stock Brokers Pvt. Ltd., amongst others. The Commissioner, vide Order-in-Original No. 32/Commr/Mrt I/2007 dated 30-7-2007, while granting certain relief, has confirmed the Central Excise duty amounting to Rs. 98,66,104/- under Section 11A(2) of Central Excise Act, 1944 together with interest and imposed equivalent amount of penalty under Section 11AC ibid on M/s. Kamakhya Steels Pvt. Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial statements and in fact, have procured fictitious entries of income/profit after providing cash to such persons who provided fictitious entries, to balance losses of their balance sheets which appeared to be coming up into their books of accounts on account of loading of all manufacturing expenses inclusive of actual 'electricity charges' incurred on the quantum of actual production of M.S. Ingots, though they accounted for less quantity of production of M.S. Ingots in their production records. 6. After following the necessary adjudication proceedings, the Commissioner passed the impugned orders as referred to above. In the said orders, he observed as under: "While arriving at the conclusion of electricity consumption required to manufacture 1 ton of M.S. Ingots, Dr. Batra has considered a number of factors like basic principle and design of induction furnace, stirring effect in induction furnace, use of capacitors, melting practice, furnace capacity, heat balance, electricity load, slag rate, thermal efficiency, electrical efficiency etc. I find that the report is exhaustive and all the factors affecting the production of M.S. Ingots by induction furnace have been disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) The IIT, Kanpur have clearly stated by their letter dated 4/5-12-2007 that they do not have any report on productivity of induction furnace against project no. C-MET/20000217 and that the report was prepared by the concerned faculty member and not by the Institution so it is not available with them. Therefore, the appellants maintained that based on the personal view of any individual, the central excise authorities cannot make out a case of assumed production imagined by them and alleged clandestine removal thereof. (iii) Without prejudice to the above, the data sought to be relied upon in the report of late Shri Batra appears to be from some technical literature of 1977 of Moscow and 1985 of USA and there is nothing relevant out of the same to the period, product, technology and furnace of the appellant. The alleged report is unsigned and has no factual basis or experiment conducted by its author in any furnace. A purely academic/theoretical write up cannot be the basis for the central excise authorities to raise demand and imagine the same as applicable universally and binding on every one. The factors taken in Mr. Batra's report are per se exclusively connected with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that all these have been duly verified, audited both under the Company law and under the Income Tax Special Audit and accepted not only of them but also of the brokers concerned. The Central Excise authorities have no power in law to determine the legality or other wise of the financial transactions of the appellants and to disregard the profits from share dealing, which have been duly verified, accepted and assessed to income-tax by income-tax authorities. Therefore, the action of the Revenue by disbelieving and disregarding the profits from share trading transactions and to assume the same to be sale proceeds of ingots clandestinely manufactured and cleared is totally without jurisdiction. (vii) They had earlier an old and outdated furnace of 2.5 MT capacity which was dismantled because of total uneconomic and non-usable position and the new furnace of 4 MT was installed on 21-8-2004 in which commercial production started on 5-10-2004 and thereafter the production improved because of the furnace being new with higher capacity. In the whole show cause notice, the Revenue has proceeded on the assumption that 1046 units would be required for producing 1 (one) tonne of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /07 dated 28-8-2007 and No. 44-46/Commr/CX/2007 dated 10-12-07 respectively have dropped the entire demand which were issued based on Mr. N.K. Batra's opinion. (ix) He pointed out that the cross-examination of the investigating officer and the various share brokers was most essential as the alleged statements of the share brokers were obtained under coercion and duress by the investigating officer behind their back and used against them to disregard the accounts and financial records as well as share dealing and profits derived therefrom. They were denied the opportunity to cross-examine them in spite of repeated requests made for the purpose. 9. The ld. Advocate, Shri L.P. Asthana, representing appellant-company M/s. Kamakhya Steels (Pvt.) Ltd. and their Directors advanced arguments more or less on the same lines as advanced by the ld. Advocate Shri R. Santhanam. He stated that the report given by Shri Batra in his individual capacity cannot be given the status and the credibility, which a report of the IIT will enjoy as the report of IIT will have inputs of different experts and collective analysis by the Institute, entailing responsibility and reputation of the Institute. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of electricity consumption, without any corroboration. He also cited several case laws in support of his argument that the burden of proof in the case of clandestine removal is on the Department and it cannot be discharged on the basis of suspicions and surmises. (vii) The second aspect relied upon in the order of the Commissioner is mention of profits on account of trading of shares, commission etc. in the balance sheet of the appellants. The ld. Commissioner has relied upon certain statements, which were subsequently retracted. He also did not allow cross-examination of the persons whose statements were recorded under duress and coercion. Thus on the basis of such statements, the facts as stated in the balance sheet cannot be rejected. It is a settled principle of law that if there is a conflict between the documentary and oral evidence, preference should be given to the documentary evidence. In this connection, provisions of Section 92 to 96 of the Evidence Act are also relevant. Moreover, these incomes were disclosed to the income-tax authorities, who alone were competent to decide upon the true nature of the profits, whether they were from trading of shares, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report, the ld. S.D.R. contended as under: (i) The report was given by an eminent Professor of Material and Metallurgy Engg of an eminent Institution i.e. IIT, Kanpur and no discredit can be given to the report only on the ground that an official copy of the report is not available in the office of the IIT; (ii) A bare perusal of the report will show that it is a scientific report; (iii) The report is categorically supported and collaborated by a report of NISST relied upon by the appellants, where also exactly similar norms have been arrived at; (iv) In the article Electric Steel Making Technology in 21st Century published by R.P. Varsney, 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. These figures are within the range given in Dr. Batra's report; (v) In the case of Nagpal Steels Ltd. v. CCE, Chandigarh reported in 2000 (125) E.L.T. 1147 also norm of 851 units for manufacture of 1 MT tones ingots has been accepted by the Tribunal. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this is a case of clear cut fraud and clandestine clearance. No plea can be entertained that demand for clandestine clearance of goods should be raised within the normal period of limitation. 17. The ld. S.D.R. also relied upon the following decisions of the Supreme Court and the Tribunal: (i) CC, Madras and Others v. D. Bhoormull - 1983 (13) E.L.T. 1546 (S.C.) (ii) Triveni Rubber and Plastics v. CCE, Cochin - 1994 (73) E.L.T. 7 (S.C.) (iii) Gulabchand Silk Mills (P) Ltd. v. CCE, Hyderabad-II - 2005 (184) E.L.T. 263 (Tri.-Bang.) (iv) Nagpal Steel Ltd. v. CCE, Chandigarh - 2000 (125) E.L.T. 1147 (T). 18. We have carefully considered the rival submissions and perused the records. Since all the appeals arise of the Orders-in-Original both dated 30-7-2007 and the issue involved in both the orders is common, all appeals are being taken up for disposal by the common order. 19. The main question to be decided in the instant appeals here is whether the appellants during the period December 2001 to March, 2005 have actually manufactured M.S. Ingots in excess of what has been recorded in their statutory records and removed the said quantity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking into consideration the ground realities of the functioning of the factories. High consumption of electricity by itself cannot be the ground to infer that the factories engaged in suppression of production of steel ingots. The reasons for high consumption of electricity in the case of the appellants' factories have not at all been studied and analysed by the Revenue independently. Instead, the norm of 1046 units fixed as per Dr. Batra's report has been blindly applied to the appellants' cases to work out the excess production. This approach is flawed and does not have sanctity. 21. The law is well settled that the electricity consumption cannot be the only factor or basis for determining the duty liability that too on imaginary basis especially when Rule 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Therefore, there can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial 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. In the instant case, no such evidences to the above effect have been brought on record. 22.1 For want of evidence relating to the above points, clandestine removal cannot be sustained merely on the basis of the technical opinion report of Mr. Batra. In this connection, the following case laws are relied: (i) Emmtex Synthetics Ltd. v. Commissioner of Central Excise, New Delhi reported in 2003 (151) E.L.T. 170 (Tri.-Del.); (ii) Commr. of Central Excise, Chennai v. Dhanavilas ( Madras ) Snuff Co. reported in 2003 (153) E.L.T. 437 (Tri.-Chennai); (iii) Commissioner of Central Excise, Madurai v. Madras Suspensions Ltd. reported in 2003 (156) E.L.T. 807 (Tri.-Chennai); (iv) Commissioner of Central Excise, Coimbatore v. Sangamitra Cotton Mills (P) Ltd. reported in 2004 (163) E.L.T. 472 (Tri.-Chennai); (v) Commissioner of Central Excise Coimbatore v. Velavan Spinning Mills reported in 2004 (167) E.L.T. 91 (Tri.-Chennai); (vi) M. Veerabadhran others v. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is not required to be investigated by the income-tax officer under the Indian Income-tax Act, that too by ignoring the necessary certificates produced by the petitioner-company." Applying the ratio of this decision, the Central Excise authorities have no jurisdiction to examine or determine whether the share transactions of the assessee-company are genuine or not and whether the income from share trading duly verified, accepted, and assessed to the income-tax authorities could be disregarded by them to treat the same as proceeds of ingots alleged to have been clandestinely produced and sold by the appellants. The entire action of the Revenue in this regard is without jurisdiction. 26. The Central Excise authorities cannot ignore the facts, records, documents and transactions actually carried out and reflected in the books of accounts and records duly assessed, audited and accepted by other revenue authorities. 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 reques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat their annual production was below the exemption limit. Further, the norms were fixed after study of production of the factory. In the instant case, the circumstances are totally different. Hence the ratio of the aforesaid case law cannot be applied in the instant case. (iii) In the case of Gulabchand Silk Mills (P) Ltd., excess goods were found in the factory premises and discrepancies in stock were also revealed. Vehicle carrying non-duty paid goods without invoice was intercepted. Managing Director and Accountant also admitted payment of lesser duty. Others also stated that they did not receive any Delivery Challan or invoice along with the goods. The ratio of decision of the above said case is not applicable in the instant case as the facts and circumstances are totally different. It may be emphasised that the instant case has been booked only on the basis of theoretical conclusions drawn on the basis of the 'technical opinion report' of Shri N.K. Batra, Professor of I.I.T., Kanpur and no evidence relating to clandestine manufacture and removal of goods is on record. (iv) In the case of Nagpal Steel Ltd., there was seizure of excisable goods, second consignment of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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