Orange City Alloys Pvt. Ltd. Vs Commissioner of Central Excise (CESTAT Mumbai)
Facts- The Department had gathered information that the appellant No.1 was evading the payment of Central Excise duty through suppression of production in their statutory records and clearing the same without payment of Central Excise duty. The Central Excise officers made simultaneous visits to the factory premises of appellant No.1 and premises of M/s. A. B. C. Weighbridge, Nagpur on 25.10.2005.
During visit, the officers resumed certain records under withdrawal memo and Panchnama both dated 25.10.2005 drawn at respective premises for further verification. On 24.03.2006, the officers of department conducted two heats in the factory of the appellant No.1, which showed the electricity consumption of 1008 units per MT and 1058 units per MT. The officers also recorded the statement dated 18.03.2008 from the appellants No.3 & 4.
Upon detailed investigation into the matter, the department had concluded that the appellant No.1 had suppressed the production of ingots and removed the same without payment of Central Excise duty. Accordingly, show cause proceedings were initiated by the department against all the appellants, proposing confirmation of the Central Excise duty demand along with interest and for imposition of penalties.
Conclusion- We find there are different judicial forums who has held that high consumption of electricity by itself not a ground to infer suppression of production. The onus is on the department to prove allegation of clandestine removal with positive and concrete evidence.
We find that in the instant case, no other criteria has been investigated and established. The whole case is sought to be made by surmises and conjectures. Therefore, we are of the considered opinion that the allegations of clandestine removal against the appellants do not stand judicial scrutiny.
FULL TEXT OF THE CESTAT MUMBAI ORDER
Brief facts of the case, leading to these appeals are as under:
1.1 M/S Orange City Alloys Pvt. Ltd. (for short, referred to as the “appellant No.1”), having their factory at Khasara No 40/2, Village-Bhilgaon, Kamptee Road, Nagpur are engaged in the manufacture of MS Ingots, falling under Chapter sub-heading No. 72061090 of the schedule to Central Excise Tariff Act, 1985. Such goods are manufactured by using electric induction furnaces. The main raw materials for manufacture of MS Ingots are Sponge Iron, Iron & Steel scrap, Pig Iron and Ferro Alloys etc. The appellant No.1 are also availing Cenvat Credit of duty paid on inputs in terms of Cenvat Credit Rules, 2004 as amended. They had purchased Induction furnace of 8 MT capacity from M/s. Megatherm Electronic, Pvt. Ltd., Kolkata (for short, referred to as “M/s Megatherm”) in the year 2001, which is in use by them since then. They use electricity supplied by Maharashtra State Electricity Board. The raw materials are charged in the crucible of induction furnace to convert the same into molten mass, which is poured in the moulds to obtain ingots/runners/risers and the said process is termed as one heat.
1.2 Up to the period 30.06.2005, the above factory was owned by M/s. Saggu Castings Pvt. Ltd.(for short, referred to as the “appellant No.2”), which was subsequently taken over by the appellant No.1. Shri Malkiatsingh Jagatsingh Saggu (for short, referred to as the “appellant No.3”) was the former Director of M/s. Saggu Castings Pvt. Ltd. Shri Bharatbhai B. Doshi (for short, referred to as the “appellant No. 4”) is the Director of the appellant No.1 company and also the partner in other manufacturing and trading companies.
1.3 In this case, the Department had gathered information that the appellant No.1 was evading the payment of Central Excise duty through suppression of production (showing less production than actual) in their statutory records and clearing the same without payment of Central Excise duty. Information was also gathered that in many cases, the material transported to and from the appellant No.1 was weighed at M/s. A. B. C. Weighbridge, situated near Lamba Petrol Pump, Kamptee road, Village Bhilgaon, Nagpur and that the said weighbridge have issued weighment slips for the excisable materials belonging to the appellant No.1. Therefore, the Central Excise officers made simultaneous visits to the factory premises of appellant No.1 and premises of M/s. A. B. C. Weighbridge, Nagpur on 25.10.2005. During visit, the officers resumed certain records under withdrawal memo and Panchnama both dated 25.10.2005 drawn at respective premises for further verification. On 24.03.2006, the officers of department conducted two heats in the factory of the appellant No.1, which showed the electricity consumption of 1008 units per MT and 1058 units per MT. The officers also recorded the statement dated 18.03.2008 from the appellants No.3 & 4. During the course of investigation, the officers also taken note of the letters dated 07.10.2005, 20.10.2005 & 24.10.2005 addressed by the appellants to M/s. Megatherm Electronics Pvt. Ltd. Kolkata and concluded that the average power consumption for manufacturing steel ingots in the appellant No.1’s factory was 900-925 units/MT up to 17.10.2005 and 860 units/MT thereafter. Further, the department had also referred to the technical opinion furnished by Dr. N.K. Batra, Director of IIT, Kanpur to infer that energy requirement of Induction Furnace for manufacture of 1 MT of steel ingots by melting scrap ranges between 555 to 754 KWH and the requirement in case of manufacture by melting sponge iron ranges between 815 to 1046 KWH. The article published by Shri R.P. Varshney, Executive Director, All India Induction Furnace Association, New Delhi was also referred to by the department, wherein it has been shown that the power consumption for manufacture of 1 MT of ingot in the induction furnace is in the range from 650 units to 820 units, depending upon the percentage mix of sponge iron and scrap. Apart from the above evidences, the department had also relied upon the details of truck owners obtained from the Road Transport Authority and the statements recorded from the transporters, who were engaged for transporting the goods belonging to the appellant No.1.
1.4. Upon detailed investigation into the matter, the department had concluded that the appellant No.1 had suppressed the production of ingots and removed the same without payment of Central Excise duty. Accordingly, show cause proceedings were initiated by the department against all the appellants, proposing confirmation of the Central Excise duty demand along with interest and for imposition of penalties. The matter arising out of the show cause notices, were adjudicated vide orders dated 01.06.2009 and 10.06,2010 by the learned Commissioner of Central Excise, Nagpur (for short, referred to as the “impugned orders”), wherein the proposals made against the appellants were confirmed in the following manner:
