Custom, Excise & Service Tax Tribunal
Cce, Jaipur-I vs M/S.Shiv Prasad Mills Pvt.Ltd on 10 April, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066. DIVISION BENCH Court No.3 Appeal No.E/57192/2013-EX (Arising out of OIO No.91/2012 (CE)-Commr dt.28.12.12 passed by the CCE, Jaipur) Date of Hearing/Decision: 10.04.2015 For approval and signature: Honble Mr.Rakesh Kumar, Member (Technical) Honble Mr.S.K.Mohanty, Member (Judicial) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether Their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? CCE, Jaipur-I Appellant Vs M/s.Shiv Prasad Mills Pvt.Ltd. Respondent
Present for the Appellant: Shri R.K.Grover, DR Present for the Respondent:Shri Bipin Garg, Advocate Coram: HonbleMr.Rakesh Kumar, Member (Technical) HonbleMr.S.K.Mohanty, Member (Judicial) FINAL ORDER NO.51555/2015 PER: RAKESH KUMAR The facts leading to filing of this appeal are, in brief, as under:
1.1 The respondent are rerolling mills engaged in the manufacture of MS rolled products i.e. bars, angles and flats chargeable to Chargeable to duty under chapter 72 of Central Excise Tariff. For manufacture of MS rolled products, raw material is MS ingots which they purchased from the various ingots manufacturers. One of the raw material suppliers is M/s.NirmalInductomelt Pvt.Ltd. (hereinafter referred to as NIPL). The premises of NIPL were searched by the Central Excise officers and on examination of their record, it was found that NIPL cleared 160.73 MT of MS ingots to the respondent company during the period 2.8.2005 to 1.10.2005 whereas in the record of the respondent company the actual receipt of only 100.27 MT of MS ingots was shown to be from NIPL. The remaining quantity 60.46 MT of MS ingots appeared to have been received without payment of duty from NIPL. It was also noticed that the quantity of 60.46 MT received from NIPL was not entered by the respondent in their books of accounts, while the NIPL could not produce any central excise invoice in respect of balance quantity of 60.46 MT supplied to the respondent. M/s.NIPL filed application before settlement commission accepting certain duty evasion for settlement of their matter.
1.2 The department was of the view that the entries in the books of accounts of M/s. NIPL showing unaccounted sale of MS ingots without issue of invoices show that the respondent received unaccounted MS ingots which were used in the manufacture of rolled products which, in turn, were cleared without payment of duty. However, the duty demand against the respondent is not based on receipt of accounted MS ingots from M/s.NIPL. The duty demand against the respondent is on the basis of electricity consumption. In this regard, the investigating officers in respect of another rolling mills M/s.Shree Sharma Steel Rolling Mills Pvt.Ltd., Jhotwara (hereinafter referred to as SSSRM) determined its power consumption in respect of rolled products as 102.09 units per MT. Adopting this ratio to the respondent unit, the investigating officers estimated their production of rolled product during the period December, 03 to September, 06 by dividing total power consumption by 102.09. On this basis, their production was estimated as 22089.51 MT whereas the assessee had recorded only 9737.57 MT of the finished goods in their production accounts during the same period. On the basis of estimated production determined in this manner, the duty of Rs.3,71,24,264/- has been demanded on the alleged clandestine removal of rolled products. The matter was adjudicated by the Commissioner vide Order-in-Original dated 28.12.12 by which the Commissioner dropped the proceedings against the respondent.
1.3 The above order of the Commissioner was reviewed by the Committee of Chief Commissioners and the Committee of Chief Commissioners passed an order directing the Commissioner, Jaipur to file an appeal to the Tribunal for correct determination of certain point arising out of this impugned order as mentioned in the review order. This order had been passed by the Committee of Chief commissioners under section 35E(1). In pursuance of this review order passed by the Committee of Chief Commissioners, the Commissioner has filed this appeal before the Tribunal.
2. Heard both sides.
3. Shri R.K.Grover, ld.DR assailed the impugned order of the Commissioner by reiterating the grounds of appeal in the revenues appeal and emphasised that the fact that during the period from August, 05 to 1.10.05, the respondent received about 160.73 MT of MS Ingots from NIPL while in the records of the respondent, the receipt of only 100.27 MT of MS Ingots was shown from NIPL, that the remaining quantity of 60.46 MT was received without payment of duty and was used for unaccounted manufacture of rolled products. He, therefore, pleaded that the production of the respondent during the period from December, 03 to September, 06 has been correctly determined by applying the ratio of power consumption determined in the case of M/s. SSSRM as 102.09 units per MT. He relied on the judgement of the apex court in the case of CC, Madras vs. D.Bhoormull-1983 (13) ELT 1546 (SC) wherein the apex court has held that the department is not required to establish allegation against the assessee with mathematical precision and only preponderance of probability is required to be established. He also emphasised that power consumption in the case of respondent is 231.59 units per MT of rolled products as against 102.09 units per MT in case of SSSRM for which there is no explanation. He also pleaded that the Commissioners reliance on the judgement of Tribunal in case of R.A. Casting Ltd. Vs. CCE, Meerut reported in 2009 (237) ELT 674 (Tri.-Del.) is not correct and that this judgement of the Tribunal is not applicable to this case as the power consumption is not the sole evidence and it is corroborated by the evidence of purchase of unaccounted raw materials together with confessional statements of the supplier unit NIPL. He, therefore, pleaded that the impugned order is not correct.
4. Shri Bipin Garg, the learned Counsel for the respondent, pleaded that the allegation of receiving 60.46 MT of unaccounted MS ingots during the period from August, 05 to October, 05 is based only on the entries of ledger book account of NIPL, that these documents recovered from a third party cannot be used against the respondent without permitting the cross examination to the respondent; that though M/s.NIPL had gone to settlement commission and accepted certain tax evasion, this cannot be treated as admission of tax evasion on the part of the respondent, that in this regard, he relies on the judgement of the Tribunal in the case of Bosch Chassis Systems India Ltd. Vs. CCE, Delhi-III-2008 (232) ELT 622 (Tri.-LB), that the power consumption of M/s.SSSRM cannot be applied to the unit of the respondent as rolling mills of M/s.SSSRM is automatic rolling mills while the respondents rolling mill is manual, there is big difference in the efficiency of two rolling mills; that as discussed by the Commissioner in para 54 of his order, National Institute of Secondary Steel Technology, established by the Ministry of Steel, Govt.of India conducted a study and submitted a technical report on performance and energy consumption of re-rolling mills, where electricity consumption was arrived at 215 units per MT, while average consumption of the respondent unit is 231.59 units per MT, that as discussed by the Commissioner in para 55 of the impugned order, Commercial Taxation Department of Rajasthan had issued notification under compounded levy scheme in respect of re-rolled products of mild steel, that in this notification power consumption norms for medium scale re-rolling unit is 225 units per MT, that in view of this, adopting power consumption 102.09 MT units of M/s.SSSRM in respect of respondent is totally arbitrary, that if the production is estimated on the basis of power consumption of 225 units per MT as mentioned in the Rajasthan Governments notification, there would be no unaccounted production, that allegation of unaccounted production merely on the basis of power consumption norm of another rolling mill, is not sustainable, that in this regard, that he relies upon the judgement of Honble Allahabad High Court in the case of CCE, Meerut-I vs. R.A.Castings Pvt.Ltd. reported in 2011 (269) ELT 337 (Alld.) and an SLP filed by the department against the order of the High Court has been dismissed by the judgement of Apex Court reported in 2011 (269) ELT A-108 (SC), and that in view of this, there is no merit in the appeal filed by the Revenue.
5. We have considered the submissions made from both sides and perused the records.
6. The allegation of duty evasion against the respondent is based on the following evidence (1) Private ledger book recovered from the factory premises of M/s.NIPL which had entries regarding supply of MS ingots to a number of re-rolling mills including the respondent unit as per these entries during the period from 02.08.2005 to 1.10.2005, the respondent had received 60.46 MT of MS Ingots from m/s.NIPL without any accountal. On this basis, the department has alleged that the respondent unit were indulging in duty evasion by receiving unaccounted MS Ingots and using the same in the unaccounted manufacture of rolled products.
(2) Power consumption ratio of the respondents unit is 231.59 units per MT while power consumption ratio of M/s.SSSRM is 102.09 units per MT. On this basis, it has been alleged that the respondent has inflated their power consumption and thereby have under reported their production of rolled products.
7. Coming to the first piece of evidence the private ledger book of M/s.NIPL which contain the details relating to supply of MS Ingots to the respondent unit during the period August, 05 to October, 05, it is seen that other than the entries in the private ledger book of M/s.NIPL and the statement of the concerned person of NIPL, there is no evidence in support of the departments allegation that during the above mentioned period, the respondent received 60.46 MT of MS Ingots from NIPL without any invoices. It is well settled law that on the basis of records recovered from a third party, the allegation of duty evasion cannot be made against an assessee unless cross examination of the persons from whom possession the records had been recovered, has been allowed, which has not been done in this case. Moreover, just because, M/s.NIPL had filed application before the settlement commission and had admitted certain quantum of duty evasion, it cannot be treated as an admission of receipt of unaccounted MS ingots by the respondent, and in this regard, we are supported by the decision of the larger bench of the Tribunal in the case of Bosch Chassis Systems India Ltd. Vs. CCE, Delhi-III-2008 (232) ELT 622 (Tri.-LB). Therefore, merely on the basis of entries in the ledger book recovered from M/s.NIPL which indicated the supply of certain quantity of MS Ingots to the respondent during August,05 to October, 05, it cannot be concluded that the respondent were indulging in duty evasion by under reporting the production of rolled products. Moreover, on the basis of entries in the private ledger book of M/s.NIPL, at the most duty could be demanded only on rolled product manufactured out of 60.46 MT of MS Ingots by treating the ledger entries of M/s.NIPL as correct. But the department has not demanded duty on this basis. The department has made its case on the basis that the respondent by showing inflated power consumption of 231.59 units per MT while their actual power consumption should be 102.09 units per MT have under reported their production of rolled products. This power consumption ratio has been adopted from M/s.SSSRM and the same has been applied in the case of respondents unit without conducting any experiment. There is absolutely no justification for adopting power consumption norm of M/s.SSSRM to the unit of the respondent as while the rolling mills of M/s.SSSRM is automatic rolling mills, the respondents rolling mill is manual. Moreover, no experiment has been conducted by the department to ascertain as to whether the rolling mills of the respondent is comparable with the rolling mills of M/s.SSSRM in terms of technology and production. Besides this, we also find that that National Institute of Secondary Steel Technology, established by the Ministry of Steel, Govt.of India conducted a study and submitted a technical report on performance and energy consumption of re-rolling mills, where electricity consumption was arrived at 215 units per MT and Government of Rajasthan in the notification issued under compounded levy scheme for charging sales tax from rolling mills has mentioned power consumption of the medium size rolling mill as 225 units per MT. In view of this, there is absolutely no justification for adopting power consumption norm of 102.09 units per MT of M/s.SSSRM in respect of the respondent. Ld.DR has cited the judgement of the Apex Court in the case of Triveni Rubber & Plastics vs. CCE-1994 (73) ELT 7 (SC) wherein the apex court held that where the accounts have been found to be fabricated and untrue, the figures of raw materials utilized or the particulars of labour employed may not be available, the demand arrived at by assessing normal production on the basis of electricity consumed, cannot be faulted. In our view, this judgement is with regard to Rule 173E of the erstwhile Central Excise Rules, 1944, and as such, the same is not applicable to the facts of this case. Rule 173E provided for determination of normal production by a manufacturing unit and that could be adopted as basis for allegation of duty evasion, in case his actual production drastically varied from the normal production. But in this case, no experiment has been conducted by the department, in respect of the respondents unit to determine their actual power consumption. Before adopting power consumption ratio of M/s.SSSRM and applying it to the respondents unit absolutely no study has been conducted to establish as to whether the rolling mill of the respondent is comparable with the rolling mill of M/s.SSSRM.
8. In view of above discussion, we do not find any infirmity in the impugned order. The revenues appeal is dismissed.
(Pronounced in the open court)
(S.K.MOHANTY) (RAKESH KUMAR)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)
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