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TMI Blog2025 (2) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 : 1.92 in 2008-09 to 1 : 1.87 during the period April 2009 to February 2010. The contents of the Table are all declared figures and are verifiable. There is nothing to indicate that due consideration was given for these submissions by the Adjudicating authority before coming to his conclusions. His conclusions seem to be flowing directly from the input/output ratio adopted by the Dept at the time of issuing the Show Cause Notice. The appellant has filed the Annual Returns showing their input / output ratio for the years 2008-09 and 2009-10, which has not been rebutted by the Revenue by taking up sample production lots. The Revenue has relied solely on the so called expert opinion alone. It is observed from the above decisions as well as the decisions relied within these cases, mere expert opinion on its own, without any cogent, corroborative evidence has no value and does not carry the Revenue further. Whether the clandestine clearance stands proved by the Revenue? - HELD THAT:- The entire focus of the Revenue in this case has been on proving the clandestine manufacture based on the input/output ratio as given by expert third party. There are no effort has been made by the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw material and other manufacturing parameters. The installed capacity of the Kiln is determined/assessed by the Kiln suppliers considering Iron Ore with Ferrous Content (Fe) of 65% of size 5mm-18mm and Coal with Fixed Carbon (FC) of 45% (size 0-18mm). 2. On 27-02-2010 the Preventive Officers of the department conducted search at their factory and office premises and took physical stock of raw materials and finished goods on estimated basis. The physical stock of raw materials etc., were found tallying with the books of accounts. However, a shortage of 12.165 MT of Sponge Iron was detected, on estimate basis. 3. The Show Cause Notice dated 23-08-2012 was issued by Ld. Commissioner alleging clandestine production/removal of 11542.000 MT of Sponge Iron during the period from 2008-09 to 2009-10 (upto 26-02-2010) on the based on the input/output norms of 1:1.67. As per this ratio with the usage of 1.67 MT of iron ore, 1 MT of sponge iron can be manufactured. On the basis of this input/output ratio of 1:1.67 , the Show Cause Notice alleged that during the said period, by consuming 160198 MT of Iron Ore Fe of 63% the Appellant "should have" manufactured "estimated production" of 95927 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l production" and not on any "estimated production". 7.6 The Appellant submits that no duty can be demanded based on Input/Output ratio without considering the quality of raw material and other manufacturing parameter. 7.7 As per RG-1/DSA, ER-1 and ER-4 returns and reflected the same in RG-1/DSA, ER-1 and ER-4 returns During the period under dispute i.e. 2008-09 to 2009-10 (upto 26-02-2010) they have manufactured following quantities of Sponge Iron. TABLE - "A" Year Sponge Iron manufactured (MT) 2008-09 42630.000 2009-10 (upto 26-02-2010) 41755.000 Total 84385.000 7.8 During the period under dispute they have purchased 86% to 94% of inferior quality of Iron Ore as tabulated below. It is stated that high grade Iron Ore contains Fe 63%+ and Iron Ore between Fe 59% to 63% in their quality. TABLE - "B" Purchase of Iron Ore Fe content wise (in MT) Year 2008-09 % 2009-10 (Upto 26-02-2010) % (1) (2) (3) (4) (5) 59-61% 77974.256 54.5% 39738.395 39.95% 61-63% 60064.859 42% 46257.676 46.51% 63%+ 5000.000 3.5% 13457.369 13.54% Total 143039.115 99453.440 7.9 During the period under dispute they had purchased 100% poor quality Coal (i.e. Grade E/F) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contamination of ore is high the yield would come down to 50% which means for 1 MT of Sponge Iron, 2 MT of Iron Ore would be required. 7.15 In the instant case considering the poor quality of Iron Ore and Coal consumed as elaborately setout above and the input/output ratio of 1.87 to 1.92 (average 1.90) is quite normal and no adverse inference can be drawn therefrom. 7.16 The allegations in the instant case are entirely based on theoretical calculation without any cogent, tangible, affirmative and unimpeachable corroborative materials on record evidencing clandestine removal of impugned goods. There is no confession of guilt either. 7.17 The Appellant also relies on the following case laws : (i) Arya Fibres Pvt. Ltd. Vs. CCE (2014) 311 ELT 529 (Tri.-Ahmd.) (Para 40); (ii) Continental Cement Company Vs. UOI (2014) 309 ELT 411 (All.) (Para 12); (iii) CCE Vs. Agrasen Sponge Pvt. Ltd. (2025) 26 Centax 141 (Tri.-Cal.) (Para 17 to 19); (iv) Aryan Ispat and Power Pvt. Ltd. Vs. CCE (2023) (11) TMI 677-CESTAT-KOLKATA [13 to 17]; (v) Jai Balaji Industries Ltd. Vs. CCE reported in 2023-VIL-771-CESTAT-KOL-CE [Para 14.7, Para 15.5]. 7.18 In the instant case there is not a si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the field compared to stock/production recorded in the books. In the instant case the position is just reverse. In the instant case there is purported shortage of 12.165 MT of Sponge Iron contradicts the charge instead of corroborating the same. 7.25 In the impugned order the understatement of production is sought to be corroborated with purported non accountal of consumption of 1136.100 MT of Iron Ore (raw material) on the basis of one "Daily Statement" [Doc. No. 15/2010] during the period from (23-02-2010 to 25-02-2010) which were purportedly utilized for manufacture of 680.305 MT of Sponge Iron involving duty of Rs.7,28,743/- (included in main demand of 11452 MT of Sponge Iron and no separate demand is raised). Understatement of production means the receipt and consumption of raw materials are duly accounted for but the production is suppressed. Here the "Daily Statement" purportedly deals with suppression of raw material which contradicts the allegation. 7.26 The Appellant further submits that in the impugned order on the basis of some "Incoming Memos" [Doc.No.01/2010], (wrongly treated as BIN Cards), for the period 28-01-2010 to 25-02-2010 it is alleged/held that during sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nput/Output ratio. In the instant case none of the ingredients necessary for invoking extended period of limitation does exist. For invoking extended period a clear case of suppression of fact etc. have to be made out which is absent in the instant case. 9.3 In the instant case the average input/output ratio of 1:1.89 is worked out on the basis of ER-1, ER-4 and ER-5 returns filed by the Appellant with the department. In their ER-1 return filed every month the Appellant disclosed the production and clearance of their final products. 9.4 In the ER-4 returns filed on dated 25-11-2009 and dated 30-11-2010 for the year 2008-09 and 2009-10, they inter alia disclosed the production of Sponge Iron and consumption of Iron Ore, Coal etc. 9.5 In their ER-5 return for the year 2008-09 and 2009-10 filed on dated 30-05-2008 and 30-04-2009 the Appellant disclosed the input/output ratio of Iron Ore to Sponge Iron. 9.6 The Appellant submits that by their letters dated 28-11-2008, 04-09-2009, 03-05-2010 and 28-07-2010 (Page 276, 279, 282, 285) they separately submitted the input/output ratio, installed capacity, electricity consumed, production of finished goods and consumption of Iron Ore, Coa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue. While the Revenue has taken the input / output ratio as 1 : 1.67 MT, the appellant contends that the same would be around 1 : 1.90 MT. The shortage of 11,542 MT of sponge iron has been arrived at the basis of the input / output ratio adopted by the Revenue. The appellant contends that if the appellant's input / output ratio is considered, then there would be no question of shortage and hence the resultant allegation of clandestine manufacture and clearance would get negated. 17. On going through the relevant portion of the Show Cause Notice and the Order In Original [ Para 7.9 and 7.9 ], we find that the Revenue has considered the input / output ratio of 1 : 1.67 as sacrosanct based on the expert opinion of Institute of Mineral Technology , Govt of India and another opinion of Popuri Engineering & Consultancy Services, Hyderabad. There is nothing to indicate that the Revenue has made independent study of the working of the appellant's plant to take some sample outputs to study the pattern of input / output ratio. As per the data of Purchase of Iron Ore Fe Content, Grade-wise Coal purchased, Input / output ratio declared by the appellant in their Annual Returns, reprodu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ratio of consumption to production is 1.67:1, they are as under: M/s Popuri Engineering & Consultancy Services, Hyderabad, who are experts in the field of designing/drawing and providing sponge iron technology and who have installed almost all sponge iron plants in Odisha, including that of ASPL, opined that the consumption to production ratio is 1.67:1 and the average power consumption is in the range of 70-100 KWH for production of 1 M.T. of Sponge Iron. ii) M/s Industrial Technical Consultant, Raipur, who are experts in the field of designing/drawing and providing sponge iron technology have opined that the consumption to production ratio is 1.67:1 and the average power consumption is in the range of 90 KWH for production of 1 M.T. of sponge Iron. 2.5. During the period April, 2007 to January, 2010 (excluding the month form July, 2008 to October, 2008), the Noticee has recorded average consumption of 2.32 M.T. of Iron Ore for manufacture of 1 M.T. of Sponge Iron. Taking in account of the input-output ratio of 1.67:1 as per expert opinion, the estimated production of sponge iron comes to 58481.71 M.T., but the Sponge Iron Production recorded in the Daily Stock Account of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol. 3 of Annexure-A attached to the show cause notice and average yield overall had been shown as 77.60% which has been made the basis for issuance of the show cause notice (SCN) as well as for confirming the duty of Central Excise by the impugned order dated 19-5-2009. The department confirmed the duty demand along with interest for the period of five years alleging suppression of clandestine removal of the final product and also imposed penalty mainly based on the production approximation and on the statement of Director of the unit, Shri Agarwal, who is one of the appellants in this case. 6.2 The department has not gone beyond the approximation and the statement of Shri Agarwal. Any prudent person would not so conclude on extra production by approximation and by a mere statement of the Director of the company. Unless there are further corroborations in the form of documentary evidences, which could be like despatch details for the production, receipt details of the said material, transactions of the sale money, transportation details of such goods, details of additional consumption of electricity for such suppressed production a prudent individual would not agree with the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the Annual Returns showing their input / output ratio for the years 2008-09 and 2009-10, which has not been rebutted by the Revenue by taking up sample production lots. The Revenue has relied solely on the so called expert opinion alone. We have observed from the above decisions as well as the decisions relied within these cases, mere expert opinion on its own, without any cogent, corroborative evidence has no value and does not carry the Revenue further. 22. Going by the factual matrix, read with the cited case laws, makes us to come to a conclusion that on the first count of (a) that is whether the clandestine manufacture has taken place, the Revenue has faltered and has effectively failed. On this count alone the impugned order gets dismissed and appeal is allowed. 23. Now we are also required to take up the (b) as to whether the clandestine clearance stands proved by the Revenue. 24. We find that the entire focus of the Revenue in this case has been on proving the clandestine manufacture based on the input/output ratio as given by expert third party. We do not see any effort has been made by the Revenue on this front. We have seen from the above submissions of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey have to manufacture such a huge quantity of acid slurry definitely it requires huge storage capacity for LAB, finished product and spent acid, which is a by-product as the same cannot be thrown out without clearing. Similarly, in the matter of Nova Petrochemicals v. CCE, Ahmedabad-II, this Tribunal in its Final Order Nos. A/11207 11219/2013, dated 26-9-2013 this bench has held as under in Para 40 : "After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenues which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty. (c) Discovery of such fini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the quantity. Further, we also find force in the submission of the appellant that they have manufactured 45115 MT in the year 2009-10 and this shortage, if at all, could be just to the extent of 0.025 %, which is not a very major one. Hence, we set aside this demand on merits. 29. With reference to the confirmation of demand on account of under-valuation of sponge iron, when cleared to their another unit, we find that the Revenue has not brought in any evidence to show as to how this undervaluation would have resulted in any commercial benefit to the appellant. Since the both units share a common balance sheet at the end of the Financial Year and the Excise Duty paid by the appellant is available as eligible Cenvat Credit at the end of the receiving unit, the situation is that of Revenue neutral. Hence, we set aside the confirmed demand of Rs.1,42,845/-. 30. Coming to the arguments of the appellant on account of time bar, we find from the Tables given in the earlier paragraphs that the details of consumption have been filed by way of Annual Returns. All their purchase and sales details are part of their Profit and Loss Account. They have filed their ER 1, ER-5 & ER-5 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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