Custom, Excise & Service Tax Tribunal
M/S. Rm Brothers (Pvt.) Ltd vs C.C.E Jaipur-I on 19 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. E/213/2009 in Misc. No. 51665/2014
Excise Appeal No. E/214/2009
Excise Appeal No. E/215/2009 in Misc No. 51666/2014
Excise Appeal No. E/216/2009
Excise Appeal No. E/265/2009 in Misc No. 52299/2014
Excise Appeal No. E/266/2009 in Misc No. 52300/2014
[Arising out of Order-In-Original No. 47/2008 (C.E.)/Commissioner dated: 30.10.2008 passed by Commissioner of Central Excise Jaipur-I]
For approval and signature:
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Hon'ble 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?
M/s. RM Brothers (Pvt.) Ltd. ...Appellant
Sh. Ashish Jindal
M/s Jagadamba Ispat (A Unit of Piyush Finhold (P) Ltd.)
Sh. Bhanwar Lal Gupta
M/s Amar Pratap Steels (P) Ltd.
Sh. Gurmukh Singh, Director
Vs.
C.C.E Jaipur-I Respondent
Appearance:
Mr. B L Narsimhan, Advocate for the Appellants Mr. Yashpal Sharma, DR for the Respondent CORAM:
Hon'ble Mr. Rakesh Kumar, Member (Technical) Hon'ble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing.19.03.2015 FINAL ORDER NO. 50905-50910 /2015-Ex(Br) Per Rakesh Kumar (for the Bench):
The facts leading to filing of these appeals are, in brief, as under:
1.1 The appellants M/s R M Brothers (P) Ltd. located at Jothwara, Jaipur (hereinafter referred to as RMB), M/s Jagdamba Ispat (P) Ltd. having their factory at VKI area Jaipur (hereinafter referred to as JI) and M/s Amar Pratap Steels (P) Ltd. having their factory at Bagru, Jaipur (hereinafter referred to as APSPL) are manufacturers of MS Ingots. On 10.09.2005, the premises of M/s Shri Sharma Steel Rolling Mills (P) Ltd. located at Jothwara, Jaipur, (hereinafter referred to as SSSRM) were searched and from their premises, private ledger account was recovered. M/s SSSRM are manufacturers of bars and rods for which the raw material is MS Ingots which was being purchased by them from several ingots manufacturers involving RMB, JI and APSPL. In the private ledger account recovered from factory of SSSRM, entries regarding purchase of MS Ingots from a number of ingot manufacturers were found and those purchases had not been recorded in their statutory records and books of accounts. Among the suppliers of MS Ingots, as per the private ledger account of SSSRM, were RMB, JI and APSPL. Since, M/s SSSRM accepted the unaccounted purchase of MS Ingots from RMB, JI and APSPL, inquiry was made in respect of these ingots manufacturers. Though, Sh. Ashish Jindal, Director, RMB, Sh. Bhanwar Lal Gupta, Director, JI and Sh. Gurmukh Singh, Director, APSPL denying having supplied any unaccounted MS Ingots to SSSRM on the days mentioned in the private ledger account, mentioned above of SSSRM, the officers enquired into the electricity consumption of these ingot manufacturers. In this regard, it was found that while average power consumption per metric ton of RMB, JI and APSPL was 1427 units per MT, 1319 units per MT and 1795 units per MT respectively, the power consumption of another manufacturer M/s Nirmal Inductomelt Pvt. Ltd., Jaithputa Jaipur (NIPL) was 689 units per metric ton. The investigating officers were of the view that higher power consumption in the case of RMB, JI and APSPL is on account of gross under reporting of the production of MS Ingots. In this regard it may also be mentioned that proceedings had been initiated against NIPL for recovery of duty from them on alleged unaccounted manufacture and clearance of MS Ingots and in this regard they had gone to the Settlement Commission and had settled their matter.
1.2 The Investigating officers by adopting the power consumption of 689 units per metric ton in case of NIPL estimated the production of MS Ingots in case of RMB, JI and APSPL on the basis of power consumption of these parties during the period from April 2002 to September 2006, December 2004 to September 2006 and April 2005 to September 2006 respectively, and accordingly, determined their production of MS Ingots during the above period as 38788.486 MT, 16792.957 MT and 17003.16 MT respectively. It is on this basis that the following Show Cause Notices were issued to RMB, JI and APSPL for demand of duty alleged to have been evaded in respect of unaccounted manufacture and clearance of MS Ingots.
(i) SCN dated 8.6.2007 was issued to RMB for demand of duty of Rs. 9,32,49,161/- on alleged clandestine removal of MS Ingots during the period from April 2002 to September 2002 along with interest thereon under section 11AB and for imposition of penalty on them under section 11AC and also for imposition of penalty under Rule 26 of the Central Excise Rules, 2002, on Sh. Ashish Jindal, Director of RMB.
(ii) SCN dated 18.6.2007 issued to JI for demand of duty amounting to Rs. 4,64,35,362/- on alleged clandestine removal of MS Ingots during period from December 2004 to September 2006 along with Interest thereon Under section 11AB and imposition of penalty on them under section 11AC and penalty under Rule 26 of the Central Excise Rules, 2002 on Sh. Bhanwar Lal Gupta, Director of JI.
(iii) SCN dated 31.03.2008 was issued to APSPL for demand of duty amounting to Rs. 4,95,38,311/- along with interest thereon under section 11AB in respect of alleged clandestine clearances of MS Ingots during period from April 2005 to September 2006 and also for imposition of penalty on them under section 11AC and imposition of penalty under Rule 26 of the Central Excise Rules on Sh. Gurmukh Singh, Director of APSPL.
1.3 The above SCNs were adjudicated by three separate orders, each dated 30.10.2008 passed by the Commissioner of Central Excise, Jaipur by which the above mentioned duty demands were confirmed along with interest and penalty of equal amount were imposed under section 11AC on the appellant companies and beside this, penalty under Rule 26 of the following amount was imposed on the Directors of the appellant companies.
(i) Sh. Ashish Jindal, Director of RMB Rs. 50 Lac, Sh.
(ii) Bhanwar Lal Gupta, Director of JI Rs. 25 Lac and
(iii) Sh. Gurmukh Singh, Director of APSPL Rs. 25 Lac.
Against the above orders passed by the Commissioner, these appeals have been filed. The Miscellaneous applications have been filed for extension of stay.
2. Heard both the sides.
3. Sh. B L Narsimhan, Advocate the Ld. Counsel for the Appellant, pleaded that the allegation of duty evasion and against the appellants is based only on:-
(a) private ledger accounts recovered from SSSRM, which contain some entries regarding supply of MS Ingots by the appellants to SSSRM on certain dates in respect of which no invoices had been issued by the appellants; and
(b) the assumption that production of one metric ton of MS Ingots consumes 689 units of electricity, that the ratio of 689 units of per metric ton of MS Ingots produced has been adopting from M/s NIPL, that there is absolutely no justification for adopting the power consumption ratio of 698 units per metric ton to the case of the appellants, inasmuch as each of these three appellants had got a study conducted in respect of their units by National Institute of Secondary Steel Technology of the Ministry of Steel, Government of India and based on the study conducted by this institute, the power consumption of RMB, JI and APSPL had been found to be 1427 units per MT, 1319 units per MT and 1795 units per MT of MS Ingots, that if this ratio of power consumption is adopted, there would be no duty demand against the appellants, that the Tribunal in the case of Motilal Agarwal Steels Pvt. Ltd. vs CCE Kanpur reported in 2010-TIOL-1036-CESTAT-Del has held that power consumption ratio of one induction furnace unit cannot be applied to other induction furnace, as the power consumption ratio in an induction furnace unit would depend upon various factors like age of the machinery number of heats during each day, frequency of power break downs etc., that the same view has been taken by the Tribunal in the case of Pragati Steels Pvt. Ltd. vs CCE Kanpur reported in 2012 (286) ELT 253 (Tri.-Del), that the Tribunal in the case RA Castings Pvt. Ltd. vs CCE Meerut-I reported in 2009 (237) ELT 674 (Tri. Del), has held that without conducting any experiment regarding power consumption in respect of an induction furnace unit, an arbitrary norm of 1046 units of electricity for manufacture of one metric ton of steel ingots cannot be adopted, and that merely on the basis of power consumption allegation of, unaccounted manufacture and clandestine removal of MS Ingots would not be sustainable, that this judgment of the Tribunal has been upheld by Honble Allahabad High Court vide judgment reported in 2011 (269) ELT 337 All., and the judgment of Honble Allahabad High Court has been affirmed by the Apex Court vide judgment reported in 2011 (269) ELT A108 (SC), that same view has been taken by the Tribunal in the case of CCE Jaipur vs Veenus Alloys Pvt. Ltd. reported in 2012-TIOL-2016-CESTAT-DEL, and also in the case of SRJ Peety Steels Pvt. Ltd. & Ors. vs CCE Aurangabad reported in 2014-TIOL-582-CESTAT-MUM and 2014-1530-CESTAT-MUM, that though in the private ledger account recovered from SSSRM there were some entries regarding receipt by of MS Ingots on certain dates from RMB, JI and APSPL, merely on the basis of those entries, the allegation of clandestine removal of MS Ingots by RMB, JI and APSPL to SSSRM cannot be made, as the cross the examination of the concerned persons maintaining the private ledger account of SSSRM had not been allowed, and other than the entry in the private ledger account of SSSRM, there is no evidence regarding any unaccounted supply of MS ingots by the appellants to SSSRM on the dates mentioned in the Private ledger account of SSSRM, and that in view of this, the impugned orders are not sustainable.
4. Sh. Yahspal Sharma, the Ld. DR defended the impugned order by reiterating the findings of the Commissioner in the impugned order and pleaded that the ratio of 689 units per MT has been adopted from M/s NIPL, that though M/s NIPL had shown a much higher power consumption ratio, subsequently on the basis of the evidence regarding unaccounted manufacture and clearance of MS Ingots which they themselves admitted before the Settlement Commission, their average power consumption was worked out to 689 units per metric ton, that in the case of RMB, JI and APSPL, the power consumption per metric ton of MS Ingots produced has been inflated on account of under reporting of the production of MS Ingots, that the fact of duty evasion by unaccounted manufacture of MS Ingots and clandestine removal is clear from the entries regarding receipt of MS Ingots on certain dates in the private ledger account being maintained by SSSRM, that no credibility can be attached to the report of National Institute of Secondary Steel Technology regarding power consumption ratio in respect of RMB, JI and APSPL, that actual power consumption of these units is around 689 units per MT and based on this, their actual production would be much higher than the production reported by them. Sh. Sharma, therefore, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records. The evidence relied upon by the Department in support of duty evasion against RMB, JI and APSPL can be summarized as under:
(i) Private ledger account recovered from SSSRM which contain entries regarding supply of MS Ingots by RMB, JI and APSPL to SSSRM on certain dates and in respect of those supplies, there were no invoices issued by the appellants.
(ii) Power consumption per MT of MS Ingots in case of another induction furnace unit in Jaipur M/s NIPL is 689 units per MT.
6. As regards the private ledger account recovered from SSSRM which contained entries regarding supply of MS Ingots by the appellants to them, these accounts being third Party documents could be used against the appellants, only if, the cross examination of the persons from whom these documents have been recovered had been allowed. This is necessary in view of the Apex Court judgment in the case of Kishan Chand Chellaram vs CIT reported in 1980 (supp) Supreme Court 660. In this case, the cross examination of the concerned persons of SSSRM had not been allowed. In view of this, merely on the basis of the entries in the private ledger account maintained by SSSRM regarding supply of MS Ingots by the appellants to them the allegation of clandestine removal of MS Ingots against the Appellant against the appellants would not be sustainable more so, when other than the ledger entries of SSSRM there is no other evidence of clandestine removal of MS Ingots by the appellants to SSSRM.
7. As regards the allegation that the actual power consumption in respect of the appellants unit is 689 units per MT and their higher power consumption per MT is on account under reporting of the production by them, we find that the ratio of 689 units per MT is in respect of NIPL and the Tribunal in its series of judgment in the cases of Motilal Agarwal Steels Pvt. Ltd. vs CCE Kanpur (supra) and Pragati Steels Pvt. Ltd. vs CCE Kanpur (supra), has held that power consumption of one induction furnace unit cannot be applied to another induction furnace unit as the power consumption for production of one MT of MS Ingots would depend upon various factor like age of the machinery, technology used, type of furnace, power supply pattern, the type of scrap used etc., and for this purpose, the only reliable method would be to conduct actual experiment. In this case, admittedly, on the request of the appellants, National Institute of Secondary Steel Technology of the Ministry of Steel, Government of India had conducted experiments and on the basis of their report, the power consumption in case of RMB, JI and APSPL is 1427 units per MT, 1319 units per MT and 1795 units per MT respectively. When the studies regarding power consumption for per MT of MS Ingots produced has been conducted in respect of the appellants unit by an Institute of the Government of India, there is no reason for discarding the report of that Institute and adopting the power consumption of 689 units per MT in respect of another induction thermal unit of M/s NIPL. There is absolutely no evidence of procurement of raw material scrap/ sponge iron or any other evidence regarding clandestine clearance and transportation of the finished products. In view of this, merely on the basis of power consumption of the appellant unit and an arbitrarily adopted ratio of 689 units MT which does not pertain to these units the allegation of unaccounted production of MS Ingots and its clandestine removal would not be sustainable.
8. In view of the above discussion, the impugned orders are not sustainable. The same are set aside. The appeals are allowed. Miscellaneous applications for extension of stay also stand disposed of.
(Dictated and pronounced in open court) (Rakesh Kumar) Member (Technical) (S.K. Mohanty) Member(Judicial) Neha Page | 8