2. Following appellants filed appeals against the confirmation of demands and imposition of penalties :

3. Brief facts of the case are that the manufacturing companies are engaged, during the material period, in the manufacture and sale of MS Ingots. The manufacturing companies used induction furnaces for melting sponge iron/MS scrap for manufacturing their final product for which they consumed electricity received from the Maharashtra State Electricity Board. The investigation was conducted and during investigation it was found that the manufacturing companies clandestinely manufactured and cleared their final product without payment of duty during the respective periods of dispute. In all the cases the Revenue is relying upon the data relating to energy consumption. As per the Revenue the manufacturing units are showing more electricity consumption for production per MT of MS ingots. The case of the Revenue mainly rests upon the study conducted by Dr. N.K. Batra, Professor of IIT, Kanpur. As per the study conducted by Dr. N.K. Batra for the manufacture of 1 MT of MS Ingots the electricity consumption should be between 555 units and 1046 units and the Revenue is also relying upon the opinion given by All Indian Induction Furnace Association and as per the opinion 820 KW of electricity energy is required for manufacture of 1 MT of MS Ingots. Based on both the opinions, the Revenue has taken 1026 KW per MT as standard for consumption and quantum of Ingots and consequently the demand of duty in all the cases. The case of the Revenue is that if 1026 KW of electricity is used for the manufacture of 1 MT of MS Ingots then during the period in dispute all the manufacturers should have manufactured the quantities on which demands were confirmed. Show cause notices were issued for demanding duty on the above mentioned basis by invoking extended period of limitation and for imposition of penalties. Vide different adjudication orders the demands were confirmed with interest and penalties were imposed.

4. During the pendency of the appeals and arguments, the Revenue also filed Miscellaneous applications for producing additional evidence in respect of quantum of electricity consumed for the subsequent period to show that same units were consuming less electricity for the manufacture of per one MT of MS Ingots.

5. The learned senior counsel on behalf of the appellants submitted that during the period in dispute the appellants were paying appropriate amounts of duty on the actual production of the final product and Revenue without raising any objection accepting the same. In the present cases the duty demand has been quantified not on the actual clearance of goods rather based on deemed production by applying a formula i.e. Deemed Production = Electricity Consumed ÷ 1026 in absence of any evidence of actual production and clearance of excisable goods. The contention is that as per the provision of Section 3 of the Central Excise Act, 1944, the duty of excise is to be levied on the goods actually produced and not based on some deemed production based on a formula. The only exception of this scheme of charging duty on the basis of actual production is compounded levy scheme under Section 3A of the Central Excise Act, 1944 where the duty is charged on the basis of factor which are indicative of production but not actual production as such. In the present case, the Revenue wants to levy duty on the basis of deemed production arrived at by taking into consideration the consumption of electricity as 1026 units per MT which is not permissible.

6. The appellants heavily relying upon the decision in the case of R.A. Castings Pvt. Ltd. v. CCE reported in whereby the demand which is based only on consumption of electricity is set aside by the Tribunal. Revenue challenged the order before the Hon’ble Allahabad High Court and the Hon’ble Allahabad High Court vide order dated 9-9-2010 in Appeal No. 67/2009 dismissed the appeal filed by Revenue. Against the decision of the Hon’ble Allahabad High Court, the Revenue filed SLP and the Hon’ble Supreme Court dismissed the SLP vide order dated 31-1-2011 after condoning the delay. This view is followed by the Tribunal in the case of CCB v. Venus Alloys Pvt. Ltd. vide order dated 20-3-2012 in appeal No. E/3191/2007.

7. The Tribunal in the case of R.A. Castings (supra) has taken into consideration the basis for demand which is also in the present case and held that in absence of any other evidence demand cannot be made only on the basis of electricity consumption. The appellant also relied upon the decision of the Tribunal in the case of Amar Ispat Ltd. v. CCE reported in .

8. In the present case, there is no evidence on record in respect of unaccounted raw material for the manufacture of unaccounted ingots and in respect of clandestine clearance. No experiment was conducted in the factories regarding actual consumption of electricity. In the case of appellant M/s. SRJ Preeti Steel Pvt. Ltd., the experiment was conducted for two hours in the factory and the Revenue has noted in the heat conducted that the total electricity consumption is 1496 units. The experiment was conducted on 4-3-2009. This experiment shows the electricity consumption for the manufacture of one MT is also most the same as the consumption of electricity as per the appellants records.

9. Appellant also asked for copy of the report of Dr. N.K. Batra from the IIT, Kanpur and the Deputy Registrar, R&D of IIT, Kanpur vide letter dated November 1, 2007 informed that no technical opinion report of productivity of induction furnace by Dr. N.K. Batra is available on the record of IIT. Since Dr. N.K. Batra is expired therefore he was not available for cross-examination to test the basis of the report on the basis of which the demands are confirmed.

10. Appellant also relied upon the decision of the Tribunal in the case of Pharma Pvt. Ltd. v. Commissioner of Central Excise - to submit that the burden to prove clandestine removal is on the Revenue. To prove clandestine removal the Revenue has to produce evidence of purchase of additional raw material, sale of clandestinely removed goods, mode of payment, flowback of the fund, transport report for movement of raw material and finished products etc. In the present case, there is no such evidence produced by the Revenue nor any documents recovered from the manufacturer’s place in this regard. For manufacture of ingots no doubt the electricity is also a major input. The other raw materials such as sponge iron/scrap is also required. There is not even an iota of evidence on record in respect of receipt of any unaccounted raw material or clearance of ingots without payment of duty.

11. In view of this the contention of the appellant is that the demands are not sustainable.

12. The Revenue submitted that in respect of the furnaces the appellants failed to produce any evidence regarding consumption of electricity for the manufacture of ingots as per the product literature. During the pendency of the appeals, the Revenue contacted the manufacturers of furnace i.e. M/s. Electrotherm System and procured the catalogue of the furnaces of various capacity and as per the statement of the Vice-President of the firm only 535 units of electricity is required to melt 875 kg. of steel scrap and 970 kg. of iron scrap. This shows that the applicants were showing more electricity consumption to suppress the production. The Revenue also submitted that there cannot be general presumption that the production of a commodity cannot be determined on the basis of electricity consumption. In the present cases, electricity is the major input/consumable required for production of MS Ingots. Therefore, the production of ingots can be determined on the basis of units of electricity consumption.

13. Revenue also submitted that in some cases the Revenue obtained G7 forms from the Electricity Board which is the record of daily consumption of electricity. Units who were having furnaces are under statutory obligation to maintain such records in G7 Forms and in the present cases all of them have not maintained such record.

14. Revenue submitted that the Tribunal in the case of R.A. Castings (supra), the decision relied upon by the appellant, proceeded with the presumption that the law was well settled that electricity consumption cannot be the only factor for determining duty liability. The Hon’ble Allahabad High Court upheld the decision of the Tribunal in the case of R.A. Castings (supra) on the ground that the findings of the Tribunal were based on materials on record and the findings cannot be said to be without any material and could not be held to be perverse. The Hon’ble High Court nowhere held that production of steel ingots cannot be determined on the basis of electricity consumed.

15. In respect of the experiment conducted by the Excise Officers in one of the manufacturing unit to determine the consumption of electricity, the contention is that observing the process of manufacture or recording of some data thereby the officers cannot be considered as an experiment.

16. The Revenue relied upon the decision of the Hon’ble Supreme Court in Triveni Rubber & Plastics reported in (S.C.) whereby the Hon’ble Supreme Court upheld the demand which is based on capacity of the unit.

17. The contention is also that the Revenue also produced evidence in support of the allegation that the production cost is more than the value at which the goods have been cleared. The contention is that it is not possible that the appellants are selling the goods at losses. The Revenue also produced certain orders passed in the case of some of the manufacturers where the demands were made on the basis of clandestine clearance whereby the manufacturers approached the Settlement Commission and settled the dispute.

18. Revenue also relied upon the decision in Ratan Steel v. CCE, Chennai reported in 2008-TIOL-1454-CESTAT-MAD = (Tri.-Chennai) to submit that the demand can be made on the basis of excess consumption of power.

19. In reply the learned senior counsel submitted that the additional evidence which now the Revenue wants to produce is subsequent to the period in dispute in the appeals and the same has been obtained after the orders passed by the adjudicating authority. The contention is that the demand cannot be sustained based on the very evidence which was collected after the adjudication order and relied upon the decision of the Hon’ble Supreme Court in the case of Mohinder Singh Gill v. CCE, New Delhi reported in AIR 1978 SC 851. The contention is also that the evidence which is the period covered other than the period in dispute is irrelevant to decide the issue and the Revenue cannot go beyond the scope of the show cause notice.

20. It is also submitted by the learned senior counsel that no reliance can be placed on the decision of the Settlement Commission which is based on the finding that case and the issues were settled. The application made before the Settlement Commission is not an admission of guilt and the Larger Bench decision in the case of Bosch Chassis Systems India v. CCE, Delhi reported in (LB).

21. We find that the demand is confirmed on the basis of electric consumption for manufacture of ingot. The Revenue is heavily relying upon the opinion of Dr. N.K. Batra, Professor of IIT, Kanpur. In that report, Dr. N.K. Batra opined that 555 to 1046 units is required to produce one MT of MS Ingots. Revenue also relied upon the opinion of All India Induction Furnace Association. Dr. Batra could not be cross-examined as he is no more. The appellants made a request to IIT, Kanpur to supply the copy of the opinion and the IIT, Kanpur vide letter dated 1-11-2007 informed that no such opinion is available in records. During arguments, Revenue produced the data of electric consumption in respect of the units for the period after the adjudication order to show that subsequently the manufacturing units were showing less electric consumption than during the period in dispute for the manufacture of per MT MS ingots. This shows that during the period in dispute, the manufacturing units were showing higher consumption of electricity to suppress the production. If this data is taken into consideration, the case of the Revenue still remains on the basis of electric consumption only.

22. Revenue also, during arguments, produced some orders passed by the Settlement Commission whereby the matter regarding clandestine clearance was settled. We find that the Larger Bench in the case of Bosch Chassis Systems India Ltd. v. CCE, Delhi-II reported in (LB) held that filing an application before the Settlement Commission for waiver of interest, penalty and immunity from prosecution and suo motu payment of duty does not mean admission of allegations of fraud. Revenue also during arguments submitted that some of the manufacturers disclosed undisclosed income before Income Tax authorities. The argument is that these circumstances show that manufacturers are suppressing the production of excisable goods to evade payment of duty.

23. On the contrary the appellants rely upon the decision of the Tribunal in the case of R.A. Castings Pvt. Ltd. v. CCE, Meerut reported in where the demand is confirmed on the basis of electric consumption based on the report of Dr. N.K. Batra and after taking into consideration the income from other sources in the Balance-sheet confirmed the demand. The Tribunal set aside the demand. The Tribunal held as under :

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 clandestinely from their factory without payment of duty. The excess production has been worked out on the basis of electricity consumption for which the standard norms are imported from the report of late Mr. N.K. Batra, Professor of Material and Metallurgical Engineers, IIT Kanpur.

20. We find that the following reports have been referred to either by the appellants or the Revenue laying down the norms for the consumption of electricity for the manufacture of one MT of steel ingots :

(i)      555 to 1046 (KWH/T) as per Dr. Batra’s report;

(ii)     1800 KWH/T as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India;

(iii)    1427 KWH/T as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006;

(iv)    650 units to 820 units/MT as per the Executive Director, All India Induction Furnace Association, New Delhi;

(v)     851 units/MT in the case of Nagpal Steel v. CCE, Chandigarh reported in .

20.1 From the perusal of these reports, we find that wide variations in the consumption .of electricity have been reported for the manufacture of one MT of steel ingots. This renders the norm of 1046 units adopted by the Revenue as arbitrary. Why not adopt the norm of 1800 KWH/T or 1427 KWH/T or 650 to 820 units/MT or 851 units/MT as per various reports referred to above or why not adopt some figure between 555 to 1046 units as norm as per Dr. Batra’s report?

20.2 We note that no experiments have been conducted in the factories of the appellants for devising the consumption norms of electricity for producing one MT of steel ingots. It is the basic philosophy in the taxation matters that no tax can be levied on the basis of estimation. In this case, there is added problem. Estimation of production fluctuates widely depending upon the fact as to which report is adopted. Tax is on manufacture and it is to be proved beyond doubt that the goods have been actually manufactured, which are leviable to excise duty. Unfortunately, no positive evidence is coming on record to that effect. Article 265 of the Constitution of India says that no tax shall be levied or collected except by authority of law. Unless the manufacture of the steel ingots is proved to the hilt by authentic, reliable and credible evidence, duty cannot be demanded on the basis of hypothesis and theoretical calculations, without 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 were 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 be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. In the following case laws, it has been held that the consumption of the electricity alone is not sufficient to determine the production :

(i)      Pure Enterprises (P) Ltd. v. CCE, Rajkot - (Tri.)

(ii)     Kapadia Dyeing, Bleaching and Finishing Works v. CCE, Surat - (Tribunal)

(iii)    A. Arti Leathers (P) Ltd. v. CCE & C, Ahmedabad - (Tri.-Mum.)

(iv)    Parshuram Cement Ltd. v. CCE, Lucknow - (Tri.-Del.)

(v)     Mukesh Dye Works v. CCE, Mumbai-VI - (Tri.-Mum.)

(vi)    Hans Castings Pvt. Ltd. v. CCE, Kanpur - (Tri.)

(vii)   M/s. Padmanabh Dyeing and Finishing Works v. CCE, Vadodara - (Tri.)

(viii)  M/s. Madhu Products v. CCE, Hyderabad - 1999 (111) E.L.T. 197 (Tri.).

22. The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to :

(i)      Receipt of raw material inside the factory premises, and non-accountal thereof in the statutory records;

(ii)     Utilization of such raw material for clandestine manufacture of finished goods;

(iii)    Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products;

(iv)    Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters’ documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial 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 (Tri.-Del.);

(ii)     Commr. of Central Excise, Chennai v. Dhanavilas (Madras) Snuff Co. reported in (Tri.-Chennai);

(iii)    Commissioner of Central Excise, Madurai v. Madras Suspensions Ltd. reported in (Tri.-Chennai);

(iv)    Commissioner of Central Excise, Coimbatore v. Sangamitra Cotton Mills (P) Ltd. reported in (Tri.-Chennai);

(v)     Commissioner of Central Excise, Coimbatore v. Velavan Spinning Mills reported in (Tri.-Chennai);

(vi)    M. Veerabadhran & Others v. Commissioner of Central Excise, Chennai-II reported in (T) = 2005 (98) ECC 790 (T).

23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law.

24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained.

24. In respect of unexplained income shown in the Balance-sheet the Tribunal held that onus is on the Revenue to show that the same is in respect of clandestine removal. The Revenue filed appeal before the Hon’ble Allahabad High Court and the Hon’ble Allahabad High Court dismissed the appeal as reported in CCE v. R.A. Castings Pvt. Ltd. reported in (All HC). The Hon’ble High Court held as under :

3. Being aggrieved by the impugned orders, the respondents filed appeals before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi. The Tribunal observed that it is settled principle of law that the electricity consumption cannot be the only factor or basis for determining the duty liability, that too on imaginary basis, especially when Rules 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. The Tribunal further observed that no experiment have been conducted in the factories of the appellants for devising the consumption norms of electricity for producing on MT of steel ingots. Tribunal also observed that the electricity consumption varies from one heat to another and from one date to another and even from one heat to another within the same date. Therefore, no universal and uniformly acceptable standard of electricity consumption can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. The Tribunal has also considered the report of Dr. Batra, which has been relied upon for making the allegations that there was higher electricity consumption. It appears that Dr. Batra in his report has observed that for the production of 1 MT of steel ingots, 1046 units electricity required.

4. So far as the various after allegations relating to the fictitious firms and the income from the share trading, the Tribunal recorded the finding that since the incriminating statements of 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 requested by them. In the absence of the same, the statements of the share brokers etc. cannot be relied upon. The Tribunal further observed that even if, for the sake of argument, it is accepted that the income shown in the balance-sheets is not the income derived from the sources declared by the appellants, there is nothing on record to link it with the so called clandestine removal of the goods.

25. Against the decision of the Hon’ble High Court, the Revenue filed SLP in the Hon’ble Supreme Court and the same was dismissed after condoning the delay reported as CCE v. R.A. Castings Pvt. Ltd. reported in . In the case of Amar Ispat (supra) the Tribunal also held that only electricity consumption cannot be made basis to demand.

26. Further we find that the Revenue heavily relied upon the decision of the Hon’ble Supreme Court in Triveni Rubber and Plastics v. CCE reported in (S.C.) to submit that demand can be confirmed on the basis of installed capacity.

27. We find that in the case of Triveni Rubber and Plastics (supra), the Managing Partner of the factory admitted removal of excisable goods without making any entry in the statutory records and also admitted that they were doctoring their accounts so as to show that actual production was below the exemption limit. In these circumstances the Hon’ble Supreme Court upheld the demand on installed capacity of the unit. The Revenue also relied upon the decision of the Tribunal in the case of Rattan Steel Works v. CCE reported in 2008-TIOL-1454-CESTAT-MAD to submit that demand can be made on the basis of power consumption. We have gone through the decision. We find that there was an evidence by way of statements of traders who had arranged sale of clandestinely removed goods to the dealers in Kerala. On the basis of statements made by the brokers and bills the Revenue quantified the demand. In view of this evidence the demand was confirmed. In the present case we find there is no such evidence regarding clandestine clearance of goods. Therefore, the ratio of the above decisions are not applicable to the facts of the present case.

28. In the present case, there is no evidence produced by the Revenue on record regarding use of unaccounted raw material for manufacture of goods and clandestine clearance of the goods.

29. Further we find that Revenue relying upon the opinion of Dr. N.K. Batra, Professor of IIT, Kanpur wherein he opined that for manufacture of one Ton of MS Ingots the electricity consumption is 555 to 1046 units. The reasons of variation is not clear. In the present case, the Revenue confirmed the duty demand by taking into consideration the consumption of electricity as 1026 units per Ton. The basis for taking 1026 units per MT is not clear in the adjudication order. The Revenue also produced evidence during the argument from the manufacturer of furnaces i.e. M/s. Electrotherm Systems whereby it has been dislosed that 353 units of electricity is required to melt 875 kg of steel scrap and 970 kgs of iron scrap. In the present case there is no evidence regarding quantity and quality of raw material received by appellant which is used as per Revenue in the manufacture of clandestinely removed MS Ingots. The Revenue is assuming 1026 units are used for the manufacture of one MT of MS Ingots. Demand cannot be made on the basis of assumption in the absence of evidence to support allegation of clandestine removal.

30. The issue regarding undisclosed income in the Balance-sheet is also decided by the Tribunal in the case of R.A. Castings (supra). The Tribunal held that in absence of evidence that undisclosed income in respect of clandestinely removed goods demand cannot be made. Therefore, the amounts which were disclosed to the Income Tax Department cannot be held to be the sale proceeds of clandestinely removed goods in absence of such evidence.

31. In the present appeals we find that evidence relied upon in the show cause notices and in the adjudication orders is the same as in the case of R.A. Castings Pvt. Ltd. (supra) such as opinion of Dr. N.K. Batra and All India Induction Furnace Association. The same opinion is taken into consideration for confirming the demands. As the Tribunal in the case of R.A. Castings Pvt. Ltd. (supra) set aside the demand, based on above mentioned opinions, hence the ratio of above decision is fully applicable on the facts of the present cases.

32. In view of the discussion and in view of the decision of the Tribunal in the case of R.A. Castings Pvt. Ltd. (supra) the impugned orders are set aside and the appeals are allowed.

(Order pronounced on__________________.)

32A. [Order per : P.K. Jain, Member (Technical)]. - I have gone through the order recorded by learned Hon’ble Vice-President. My views on various issues involved in the present batch of appeals are at variance with the learned Hon’ble Vice-President and therefore a separate order is being recorded.

33. Brief facts, as also the arguments of both sides, have been recorded in brief by the learned Hon’ble Vice-President. However, there are certain additional facts/arguments both on the side of appellants as also Revenue which would be discussed while examining the respective issues.

34. Central Excise Act was enacted in 1944 and Central Excise Rules were also framed in the same year and these Rules were in use till 2001. From time-to-time many amendments have been carried out in both the Act and the Rules. Initially the Rules prescribed for controlling the entire process of production and clearance of goods, right from raw materials to finished product. Assessment of duty was to be completed by the Central Excise Officer before the goods were cleared/removed from the factory. Duty payment had to be made in advance. Even the raw materials were to be kept in Bonded Room/Warehouse within the factory. Finished products were also required to be kept in such Bonded Rooms/Warehouse before clearance and practically at each stage of production accounts were required to be maintained and movement of raw materials and finished goods even within factory were to be in physical presence of Central Excise officers. Later on certain amount of trust was placed on the manufacturers and a system of self-removal was prescribed wherein presence of Central Excise officer was not necessary before clearance of the goods. Goods were to be cleared based upon duty assessed on gate passes by the manufacturer. Even in the scheme of Self-Removal Procedure, movement of raw material, etc. was controlled/monitored by Central Excise officials. All the documents prescribed under the law were required to be pre-authenticated on each page by the Central Excise officers and could have been used only after such authentication. In last 30 years, step by step, number of simplifications were done in these procedures. Increasingly higher level of trust was bestowed on the manufacturers.

35. In 2002, new Central Excise Rules, 2002 were notified by the Government. Under the new Rules, entire scheme of control has been done away with and full trust is reposed in the manufacturer. Manufacturer’s own records are accepted instead of statutorily prescribed registers/forms. Even the visit of Central Excise officials to any factory are restricted and controlled by internal administrative mechanism. Under Central Excise Rules, 2002, Rule 6 deals with assessment of duty, Rule 8 deals with manner of payment, Rule 9 deals with the registration, Rule 10 deals with the daily stock account, Rule 11 is relating to goods to be removed on invoice and Rule 12 is relating to filing of returns. If one goes through these rules, it would be found, in essence, a manufacturer is required to take registration only once (at the time of starting the factory). Manufacturer can produce the goods without any supervision, interference, or control of Central Excise officials. Law requires manufacturer to maintain daily stock account. Rules do not prescribe any specific format of daily stock account. The said rule reads as under :

“Rule 10. Daily stock account. - (1) Every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding descriptions of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid.”

Further Rule 11 prescribes that the goods are required to be removed on an invoice. Rule 6 which is relating to assessment of duty reads as under :

Rule 6. Assessment of duty. - The assessee shall himself assess the duty payable on any excisable goods :

Provided that in case of cigarettes, the Superintendent or Inspector of Central Excise shall assess the duty payable before removal by the assessee.

It can be seen from the above rule, the assessee is required to himself assess the duty payable and there is no role of Central Excise officials in the assessment of duty. Rule 12 prescribes filing of return. The returns are required to be filed on monthly or quarterly basis in the format prescribed.

36. It will, thus, be seen from the scheme of administration, once in life time registration is required to be taken by a manufacturer, thereafter he has to himself assess duty and file the returns which are accepted as such. Format of the return is such that the officers can only scrutinize the arithmetical accuracies indicated therein. From the above scheme of administration it can be seen that total trust has been reposed on the manufacturer who himself assesses his duty liability, deposits in the bank and files periodical returns.

37. The scheme of administration has been briefly described to examine and understand the conduct of the appellants in these appeals as also what is expected and what can be done by the Central Excise officials in situations in the present set of appeals. As long as manufacturers/assessees follow the procedure and assesses duty liability truthfully, there is no difficulty. However, there can be situations where certain abnormalities or glaring abnormalities are observed/comes to the notice of the officials, which have implication on duty assessed and paid by the manufacturer. On asking about the reasons for such abnormalities, manufacturer assessee does not provide any specific reasons/explanations to such abnormalities. The Central Excise Officer thereafter based upon available information and best judgment demands certain Central Excise duty, which according to him is the minimum duty under-assessed/evaded by the manufacturer. During the adjudication/appellate proceedings, again the manufacturer assessee does not give any specific/cogent explanation to the glaring abnormalities but only questions the Central Excise Officers the basis of computations and that Central Excise Officer has failed to produce evidence relating to other aspects such as procurement of other raw material or clearance of finished goods or other technical reasons so that no step towards finding out the truth can be ventured. Incidentally, returns even do not envisage giving details of supplier or quantity of raw materials or other purchases or full details of finished goods or buyers.

38. In all the appeals, appellants are manufacturer of M.S. Ingots, which are produced by Induction Furnace method. Main inputs are (i) scrap/sponge iron, and (ii) electricity. M.S. Ingots in turn are used in the rolling mills mainly in the production of bars/rods which are used in the construction of buildings/ structures. Out of the two main inputs, substantial scrap in turn is available from sources such as demolition of old buildings, iron and steel structures, old machinery etc. Such a scrap is normally called as bazaar scrap. No duty is required to be paid on such scrap and therefore credit of duty in respect of such inputs is ‘nil’.

39. It is also to be noted that out of two inputs, records relating to scrap/sponge iron as also final product viz. M.S. Ingots are within the control of manufacturer. Electricity is the only main input, whose records are not controlled by manufacturers and are also available from Electricity Boards or Electric Supply Companies which are generally Government owned/controlled.

40. Here, it will be necessary to look at the basis on which Revenue is claiming that self-assessment made by the appellants are not proper and related records and returns filed do not represent the TRUTH and appellants have suppressed the production and clearance of goods.

M/s. SRJ Peety

(a)     Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 125% of sale price of ingots shown to have been manufactured, making the production commercially unviable and unsustainable in the long run.

(b)     The sanctioned auxiliary load was only 7.8% of total sanctioned load but was claimed to be 25% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c)     Shri Surendra Shantilal Peety, M.D. of M/s. SRJ Peety Steels Pvt. Ltd., in his statement dated 23-12-2006 & 23-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) & in the capacity of authorised person of M/s. Shree Om Rolling Mills Pvt. Ltd., recorded by DGCEI, Zonal Unit, Mumbai, confirmed that M/s. SRJ Peety Steels Pvt. Ltd. had supplied about 275 & 13.5 MT of M.S. Billets to M/s. Shree Om Rolling Mills Pvt. Ltd. without payment of C. Ex. Duty against cash payments and also stated that being unaccounted clearances, the same had not been accounted for. Thus, M/s. SRJ Peety Steels Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 288.500 MT of M.S. Ingots & Billets valued at Rs. 47,75,200/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein. SCN No. DGCEI/MZU/I & I. S. ‘C’/12(4)34/2007, dated 4-5-2007, referred at Para 9 of the SCN & at Para 8D of the Addendum to SCN issued by CCE, Aurangabad.

(d)    Clandestine clearance in above case was admitted before the Department as well as Settlement Commission. In Settlement Commission Order Nos. 460 to 477/Admission copy, Final Order/CEX/JNA/YDN/GMD/SBG/2007 and 478/Final Order CEX/KNA/2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 7.79 lakhs.

(e)     Even before Income Tax authorities, the appellant accepted their revised assessment indicating suppression production of Ingots. Commissioner of Income Tax (Appeals) confirmed net addition of income of Rs. 23.5 lakhs on account of suppressed production of ingots for assessment years 2001-02 to 2006-07.

M/s. Kalika Steel Alloys Pvt. Ltd.

(a)     Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 130% of sale price of ingots shown to have been manufactured, making the manufacturing commercially unviable and unsustainable in the long run.

(b)     NIL production was shown on a number of days while electricity consumption was very high (in the same range as on other days when there was substantial production) indicating that the appellant was engaged in suppression of production.

                M/s. Kalika Steel Alloys Pvt. Ltd.

(c)     The sanctioned auxiliary load was only 6% of total sanctioned load but was claimed to be 25%-30% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(d)    (i) Shri Ghanshyam Chunnilal Goyal, Director of M/s. Kalika Steel Alloys Pvt. Ltd. in his statement, dated 15-1-2007 (referred in the SCN) recorded under Section 14 of the Central Excise Act, 1944 by DGCEI, Zonal Unit, Mumbai, confirmed the facts mentioned by Shri Anil Nandkishore Goyal, Director of M/s. Kalika Steel Alloys Pvt. Ltd. in his statement dated 23-12-2006 that M/s. Kalika Steel Alloys Pvt. Ltd. had supplied 122 M.T. of M.S. Ingots to M/s. Kalika Re-Rollers Pvt. Ltd. without payment of C. Ex. Duty for which cash payments were received and also stated that no records were maintained for such unaccounted clearances.

(ii) Shri Anil Nandkishore Goyal, Director of M/s. Kalika Steel Alloys Pvt. Ltd. in his statement dated 23-7-2013 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that M/s. Kalika Steel Alloys Pvt. Ltd. had supplied 122 & 31 M.T. of M.S. Ingots to M/s. Kalika Re-Rollers Pvt. Ltd. without payment of C. Ex. Duty and without maintaining any records.

Thus, M/s. Kalika Steel Alloys Pvt. Ltd., had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 153 M.T.s of M.S. Ingots without payment of C. Ex. Duty involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

(iii)   As per Panchanama for search carried out by DGCEI on 16 to 18 Aug. 2006 at the factory premises (a) Physical Stock of raw materials i.e. Sponge Iron, Cast/Pig Iron, Scrap was founded to be 799.180 M.T. as against book balance of 915.225 M.T. & (b) The physical stock of M.S. Ingots was 47.340 M.T. as against book balance of 80.945 M.T., resulting into shortages of 116.045 M.T. of raw materials & 33.605 M.T. of M.S. Ingots.

(iv)   From the Private Records in the form of ‘Kachha Chitti’ recovered during search from Shri Girish Keshav Barwar, Supervisor of M/s. KSAPL, revealed clandestine removal of 485.700 M.T. of M.S. Ingots from M/s. KSAPL to M/s. KRRPL vide vehicle no. MCB 8888. This fact was also confirmed in his statement dated 16-8-2006 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) by Shri Sunil Prabhudas Godhwani, Acountant of M/s. KSAPL.

(v)     Apart from confirming the above facts, Shri Ghanshyam Chunnilal Goyal, Director of M/s. Kalika Steel Alloys Pvt. Ltd., mentioned that financial crisis was the reason of the clandestine removals & admitted 16.200 M.T. (121 pieces) of M.S. Ingots cleared on 16-8-2006 (involving duty of Rs. 15,93,378/-) without payment of C. Ex. Duty to M/s. KRRPL.

Thus, in both the cases, M/s. Kalika Steel Alloys Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 535.505 M.T. of M.S. Ingots & shortages of raw materials of Sponge Iron of 116.045 M.T.s and the value of the impugned goods was Rs. 1,23,80,794/- involving duty of Rs. 20,20,546/- and involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

M/s. Kalika Steel Alloys Pvt. Ltd. had deposited an amount of Rs. 25 lakhs towards duty liability.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4)176/2006, dated 4-5-2007, referred at Para 11 of the SCN issued by CCE, Aurangabad.

(e)     Clandestine clearance in above case was admitted before the Department as well as Settlement Commission.

(f)      In Settlement Commission Order Nos. 460 to 477/ Admission copy, Final Order/CEX/JNA/YDN/GMD/SBG/2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 20.21 lakhs for themselves and Rs. 26.46 lakhs for their Rolling Mills.

Even before Income Tax authorities, the appellant accepted suppression of production of Ingots.

M/s. Bhagyalaxmi Steel

(a)     Even if only the cost of electricity and raw material is added as per B/S, it comes to 103% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run.

(b)     The sanctioned auxiliary load was only 6.67% of total sanctioned load but claimed to be 25% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c)     Wide variation in electricity consumption noticed though there was no change in equipment or operating environment.

M/s. Gajalaxmi Steel Pvt. Ltd.

(a)     Even if cost of electricity and raw material is added as per Balance Sheet, it comes to 93% of sale price of ingots shown having been manufactured which hardly leaves any scope for other expenses like wages, overheads, interest and profit etc. making the manufacturing commercially unviable and unsustainable in the long run.

(b)     NIL production was shown on a number of days while electricity consumption was very high indicating that the appellant was engaged in suppression of production.

M/s. Gajalaxmi Steel Pvt. Ltd.

(c)     The sanctioned auxiliary load was only 9.11% of total sanctioned load but claimed to be 20% by appellant in their Section 14 statement indicating their intention not to disclose true facts to Department.

(d)    (i) Shri Narender Ramvilas Agarwal, Ex-Director, M/s. Pawan Re-Rolling Mills Pvt. Ltd. in his statement dated 19-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had received 40 M.T.s of M.S. Ingots from M/s. Gajlaxmi Steel Pvt. Ltd. without any bill in cash.

(ii)    Shri Dinesh Satyanarayan Bharuka, Director, M/s. Rutuja Ispat Pvt. Ltd. in his statement dated 8-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had stated that they had received 105 M.T. of M.S. Ingots from M/s. Gajlaxmi Steel Pvt. Ltd. without payment of C. Ex. duty.

(iii)   Shri Gopikishan R. Jajoo, Director, M/s. Gajlaxmi Steel Pvt. Ltd. in his statement dated 19-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had supplied 105 M.T. of M.S. Ingots to M/s. Rutuja Ispat Pvt. Ltd. & 40 M.T. of M.S. Ingots to M/s. Pawan Re-Rolling Mills Pvt. Ltd. without payment of C. Ex. duty.

Thus, M/s. Gajlaxmi Steel Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 145 M.T. of M.S. Ingots valued at Rs. 24,81,000/- involving duty of Rs. 4,04,899/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4) 49/2007, dated 4-5-2007, referred at Para 9 of the SCN issued by CCE, Aurangabad.

(e)     Clandestine clearance in above case was admitted before the Department as well as before Settlement Commission. In Settlement Commission Order No. 460 to 477/ Admission copy, Final Order/CEX/JNA/YDN/GMD/SBG/2007 and 478/Final Order CEX/KNA/2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 4.05 lakhs.

(f)      Even before Income Tax authorities, they accepted revised assessment, indicating suppression of production of Ingots.

1. M/s. Mahaveer Steel

(a) Even if only cost of electricity and raw material is added as per Balance Sheet it comes to 130% of sale price of ingots shown to have been manufactured, making the manufacturing commercially unviable and unsustainable in the long run.

(b) NIL production was shown on a number of days while electricity consumption was very high indicating that the appellant was engaged in suppression of production.

Mahaveer Steel & Re-Rolling Mills Pvt. Ltd.

(c) The sanctioned auxiliary load was only 10.95% of total sanctioned load but was claimed to be 20% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

M/s. Matsyodari Steel

(a)     Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 134% of sale price of ingots shown to have been manufactured, making the manufacturing commercially unviable and unsustainable in the long run.

(b)     The sanctioned auxiliary load was only 4.76% of total sanctioned load but was claimed to be 20% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c)     (i) Shri Vijay Brindaban Mittal, Director, M/s. Shiv Shakti Steel Re-Rolling Mills Pvt. Ltd. in his statement dated 23-12-2006 & 23-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had procured 198.695 M.T.s of M.S. Ingots from M/s. Matsyodari Steel & Alloys Pvt. Ltd. (ii) Shri Vijay Brindaban Mittal, Authorised Signatory, M/s. Matsyodari Steel & Alloys Pvt. Ltd. in his statement dated 12-1-2007 & 23-7-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had supplied 217 M.T.s of M.S. Ingots without cover of CE invoice and without payment of CE duty and had received the payments for the same in cash.

Thus, M/s. Matsyodari Steel & Alloys Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 217 M.T.s of M.S. Ingots valued at Rs. 34,08,300/- involving duty of Rs. 5,56,235/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4)36/2007, dated 4-5-2007, referred at Para 9 of the SCN issued by CCE, Aurangabad.

(d) Clandestine clearance in a specific case was admitted before the Department as well as Settlement Commission.

In Settlement Commission Order Nos. 460 to 477/Admission copy, Final Order/CEX/JNA/YDN/GMD/SBG/2007 and 478/Final Order CEX/KNA/ 2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 5.56 lakhs.

M/s. Adinath Concast

(a)     Even if only cost of electricity and raw material is added as per B/S, it comes to 113% of sale price of ingots shown to have been manufactured, making the manufacturing commercially unviable and unsustainable in the long run. Though the unit is stated to be running in losses, as per Affidavit dated 6-8-2013 filed before the Tribunal, a 12 M.T. capacity melting furnace purchased from M/s. Electrotherm India Ltd. which is in operation of manufacturing of ingots from 2-8-2005 onwards.

(b)     The sanctioned auxiliary load was only 8% of total sanctioned load but was claimed to be 25%-30% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c)     (i) Shri Narender Ramvilas Agarwal, In-Charge, M/s. Mahalaxmi Re-Rolling Mills & Shri Vijay Laxmi Narayan Agarwal, Proprietor, M/s. Vijay Rolling Mills (now M/s. Mahalaxmi Re-Rolling Mills) in their statement dated 19-1-2007 & 25-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had stated that they had received 45 M.T.s of M.S. Ingots from M/s. Adinath Concast Pvt. Ltd.

(ii) Shri Narender Khanyalal Pahade, Manager, M/s. Adinath Steel Re-Rolling Mills in his statement dated 23-12-2006 & dated 23-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that they had received 13.975 & 48 M.T.s of M.S. Ingots from M/s. Adinath Concast Pvt. Ltd. without payment of C. Ex. duty.

(iii) Shri Narender Khanyalal Pahade, Director, M/s. Adinath Concast Pvt. Ltd., in his statements dated 15-1-2007, 5-2-2007 & 23-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had supplied 14 M.T.s of M.S. Ingots to M/s. Adinath Steel Re-Rolling Mills, 45 M.T.s of M.S. Ingots to M/s. Vijay Rolling Mills (now M/s. Mahalaxmi Re-Rolling Mills) & 48 M.T.s of M.S. Ingots to M/s. Adinath Steel Re-Rolling Mills without payment of C. Ex. duty.

Thus, M/s. Adinath Concast Pvt. Ltd., had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 107 M.T.s of M.S. Ingots valued at Rs. 19,33,100/- involving duty of Rs. 3,15,482/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4)176/2006, dated 4-5-2007 & 5-3-2009 referred at Para 11 of the SCN & Para 11A of the Addendum to SCN issued by CCE, Aurangabad.

(d)    Clandestine clearance in a specific case was admitted before the Department as well as Settlement Commission. In Settlement Commission Order Nos. 460 to 477/Admission copy, Final Order/CEX/JNA/YDN/GMD/SBG/2007 and 478/Final Order CEX/KNA/2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 3.15 lakhs.

(e)     Labour quarters rent and weighbridge charges shown in financial accounts are unbelievably high;

M/s. Jalana Siddhivinayak

(a)     Even if only cost of electricity and raw material is added as per B/S, it comes to 103% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run.

(b)     The sanctioned auxiliary load was only 7.4% of total sanctioned load but was claimed to be 25% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c)     NIL production was shown on a number of days while electricity consumption was very high as is clear from the Table below :

(d)    (i) Shri Sunil R. Agarwal, Partner, M/s. Roopam Steel Re-Rolling Mills Pvt. Ltd. in his statement dated 23-12-2006, 16-1-2007 & 23-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that they had procured 263.995, 63.590 & 5.110 M.T.s of M.S. Ingots from M/s. Jalana Siddhi Vinayak Alloys Pvt. Ltd. without payment of C. Ex. duty.

(ii) S/Shri Dinesh O. Agarwal, Umesh O. Agarwal, Directors, M/s. Jalana Siddhi Vinayak Alloys Pvt. Ltd. & Shri Sunil R. Agarwal, Authorised Person, M/s. Jalana Siddhi Vinayak Alloys Pvt. Ltd. in their statements dated 11-1-2007, 24-1-2007 & 23-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that they had cleared 265, 65 & 5.500 M.T.s of M.S. Ingots without payment of C. Ex. duty and had received the payments for the same in cash.

Thus, M/s. Jalana Siddhi Vinayak Alloys Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 335.500 M.T.s of M.S. Ingots valued at Rs. 55,28,630/- involving duty of Rs. 9,02,272/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4)176/2006, dated 4-5-2007, referred at Para 11 of the SCN issued by CCE, Aurangabad.

(e)     Clandestine clearance for above case admitted before the Department as well as Settlement Commission. In Settlement Commission Order Nos. 460 to 477/Admission copy, Final Order/CEX/JNA/YDN/GMD/SBG/2007 and 478/Final Order CEX/KNA/2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 9.02 lakhs.

M/s. Meta Rolls & Commodities

(a)     High electricity consumption against very low production was noticed on a number of days.

(b)     The sanctioned auxiliary load was only 6.6% of total sanctioned load but was claimed to be 25%-30% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c)     (i) Shri Santosh Gopalkrishan Mundada, Director, M/s. Rajuri Steels Pvt. Ltd. in his statement under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had stated that they had procured 243.745 M.T.s of M.S. Ingots from M/s. Meta Rolls & Commodities Pvt. Ltd. without payment of C. Ex. duty.

(ii) Shri Dwarikaprasad B. Soni, Director, M/s. Meta Rolls & Commodities Pvt. Ltd. had in his statement dated 16-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that they had cleared 245 M.Ts. of M.S. Ingots without payment of C. Ex. duty and had received the payment in cash.

Thus, M/s. Meta Rolls & Commodities Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 245 M.T.s of M.S. Ingots valued at Rs. 40,55,000/- involving duty of Rs. 6,61,776/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

SCN No. DGCEI/MZU/I & I S ‘C’/ 12(4)176/2006, dated 4-5-2007, referred at Para 11 of the SCN issued by CCE, Aurangabad.

(d)    Clandestine clearance in above case was admitted before the Department as well as Settlement Commission. In Settlement Commission Order Nos. 460 to 477/Admission copy, Final Order/CEX/JNA/YDN/GMD/SBG/2007 and 478/Final Order CEX/KNA/2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 6.62 lakhs.

M/s. Mauli Steel

(a)     Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 107% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run.

(b)     The sanctioned auxiliary load was only 8.83% of total sanctioned load but claimed to be 30% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c)     Credit balance written off in Balance Sheet, Rs. 7.97 lakhs in 2004-05 and 35.73 lakhs in 2005-06 but no documentary evidence produced.

(d)    (i) Shri Mukesh D. Gupta, Director, M/s. K.M. Re-Rolls Pvt. Ltd. in his statement dated 23-12-2006 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had procured 27.905 M.T.s of M.S. Ingots from M/s. Mauli Steel Pvt. Ltd.

(ii) Shri Mukesh D. Gupta, Director, M/s. Mauli Steel Pvt. Ltd. in his statement dated 12-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had supplied 28 M.T.s of M.S. Ingots to M/s. K.M. Re-Rolls Pvt. Ltd.

Thus, M/s. Mauli Steel Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 28 M.T.s of M.S. Ingots valued at Rs. 4,92,060/- involving duty of Rs. 80,305/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4)176/2006, dated 4-5-2007, referred at Para 11 of the SCN issued by CCE, Aurangabad.

M/s. Nilesh Steel

(a) Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 109% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run.

(b) The sanctioned auxiliary load was only 6% of total sanctioned load but claimed to be 20% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c) (i) Shri Sanjay Ramkishan Mantri, Proprietor, M/s. Dhanlaxmi Re-Rolling Mills, in his statement dated 8-1-2007 & 26-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had procured 748.620 & 37.970 M.T.s of M.S. Ingots from M/s. Nilesh Steel & Alloys Pvt. Ltd. without payment of CE duty.

(ii) Shri Sanjay Ramkishan Mantri, Director, M/s. Nilesh Steel & Alloys Pvt. Ltd., in his statement dated 8-1-2007 & 26-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had supplied 790 M.T.s of M.S. Ingots without cover of CE invoice & without payment of CE duty & had received the payments for the same in cash.

Thus, M/s. Nilesh Steel & Alloys Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal 790 M.T.s of M.S. Ingots valued at Rs. 1,34,71,600/- involving C. Ex. duty of Rs. 21,98,565/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4)38/2007, dated 4-5-2007, referred at Para 10 of the SCN & Para 10A of Addendum to SCN issued by CCE, Aurangabad.

(d) Clandestine clearance for above case admitted before before the Department as well as Settlement Commission. Settlement Commission Order Nos. 460 to 477/Admission copy, Final Order CEX/JNA/YDN/ GMD/SBG/2007 and 478/Final Order CEX/KNA/2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 21.99 lakhs.

M/s. Om Sairam Steel

(a) Even if only cost of electricity and raw material is added as per Balance Sheet, then it comes to 132% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run.

(b) The sanctioned auxiliary load was only 7% of total sanctioned load but claimed to be 25%-30% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c) (i) Shri Dinesh Satyanarayan Bharuka, Director, M/s. Rutuja Ispat Pvt. Ltd. in his statement dated 8-1-2007 & 23-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) stated that they had received 120 M.T. & 35.465 M.T. of M.S. Ingots from M/s. Om Sairam Steel & Alloys Pvt. Ltd. without payment of C. Ex. Duty.

(ii) Shri Rajendra Satyanarayan Bharuka, Director, M/s. OSRSAPL in his statement dated 19-1-2007 & 27-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had supplied 50 M.T. of M.S. Ingots to M/s. Pawan Re-Rolling Mills, 103 M.T. of M.S. Ingots to M/s. Mahalaxmi Re-Rolling Mills, without the cover of C.Ex. Invoice and without payment of C. Ex. duty.

(iii) Shri Dinesh Satyanarayan Bharuka, Authorised Person for M/s. OSRSAPL, in his statement dated 23-3-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) admitted that they had supplied 36 M.T. of M.S. Ingots to M/s. Rutuja Ispat Pvt. Ltd. without payment of duty and without accounting for the same in their records.

Thus, M/s. Om Sairam Steel & Alloys Pvt. Ltd., had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestinely removed 309 M.T.s of M.S. Ingots valued at Rs. 54,94,070/- involving duty of 8,95,632/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein, out of which Rs. 2,25,000/- voluntarily deposited towards duty liability.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4)176/2006, dated 4-5-2007, referred at Para 11 of the SCN issued by CCE, Aurangabad.

(d) Clandestine clearance for above case admitted before the Department as well as Settlement Commission. In Settlement Commission Order Nos. 460 to 477/Admission copy, Final Order/CEX/JNA/YDN/GMD/ SBG/2007 and 478/Final Order CEX/KNA/2007, dated 12-12-2007, the appellant accepted duty liability of Rs. 8.97 lakhs.

(e) Credit balance written off amounting to Rs. 71.04 lakhs & Rs. 25.32 in Balance Sheets, but these amounts were paid in lakhs to the creditors who confirmed the fact; the financial accounts were fabricated to mislead the Department.

(f) Burning loss claim was reduced by Income Tax assessing authority by 1% and 0.5%, which was accepted by assessee indicating that the resultant additional income was on account of suppressed production of ingots;

M/s. Ahmednagar Alloys

(a) Even if cost of electricity & raw material is added as per Balance Sheet, it comes 98% of sale price of Ingots shown having been manufactured which hardly leaves any scope for other expenses like wages, overheads, interest and profit etc. making the manufacturing commercially unviable and unsustainable in the long run.

(b) The sanctioned auxiliary load was only 15.35% of total sanctioned load but claimed to be 36% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c) NIL production shown on a number of days despite considerably high electricity consumption.

Appellant: M/s. Ahmednagar Alloy Pvt. Ltd.

(d) Clandestine removal of 504.145 MTs of ingots during Aug-Oct. 2006 admitted by appellant.

(e) Rs. 1,30,000/- added to income by Dy. Commissioner of Income Tax for A.Y. 2005-06 on account of suppressed production by assessee.

M/s. Saptashrungi Alloys

(a)     Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 101% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run.

(b)     The sanctioned auxiliary load was only 6.25% of total sanctioned load but claimed to be 20% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

M/s. Rishi Steel

(a)     Even if only cost of electricity and raw material is added as per B/S, it comes to 144% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run.

(b)     The sanctioned auxiliary load was only 13% of total sanctioned load but claimed to be 20% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c)     (i) Shri Narender Ramvilas Agarwal, In-Charge, M/s. Mahalaxmi Re-Rolling Mills & Shri Vijay Laxmi Narayan Agarwal, Propritor of M/s. Vijay Rolling Mills (now known as Mahalaxmi Re-Rolling Mills) in their statements dated 19-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had admitted that they had received 70 M.T.s of M.S. Ingots from M/s. Rishi Steel & Alloys Pvt. Ltd. without any bill in cash.

(ii) Shri Dinesh Satyanarayan Bharuka, Director, M/s. Rutujalspat Pvt. Ltd. in his statement dated 8-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had stated that they had received 125 M.T.s of M.S. Ingots from M/s. Rishi Steel & Alloys Pvt. Ltd. without the cover of C. Ex. invoice & without payment of C. Ex. duty.

(iii) Shri Radheshyam R. Agarwal, Director, M/s. Rishi Steel & Alloys Pvt. Ltd. in his 2 statements dated 19-1-2007 under Section 14 of the Central Excise Act, 1944 (referred in the SCN) had stated that they had cleared aforesaid 195 M.T.s of M.S. Ingots from without the cover of C. Ex. invoice & without payment of C. Ex. duty.

Thus, M/s. Rishi Steel & Alloys Pvt. Ltd. had admitted under Section 14 of CEA, 1944, committing purposefully grave act of clandestine removal of 195 M.T.s of M.S. Ingots valued at Rs. 33,91,800/- involving duty of Rs. 5,53,542/- involving duty of Rs. 7,79,313/- with the sole intention of evading C. Ex. Duty involved therein, out of which M/s. Rishi Steel & Alloys Pvt. Ltd. had voluntarily deposited Rs. 2 lakhs towards duty liability.

SCN No. DGCEI/MZU/I & I S ‘C’/12(4)176/2006, dated 4-5-2007, referred at Para 11 of the SCN issued by CCE, Aurangabad.

(e)     Rs. 59.25 lakhs was detected as undisclosed income by Income Tax Deptt. in 2004-05.

M/s. Regent Steel

(a) Even if only cost of electricity and raw material is added as per Balance Sheet, it goes up to 120% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run. Though the unit is stated to have been running in losses, as per Affidavit dated 7-8-2013 filed before the Tribunal, in the year 2000 they had refurbished & upgraded old induction furnace of 3.5 M.T. to 8 M.T. capacity from the same furnace manufacturer i.e. M/s. Electrotherm India Ltd. which is being operation in the production of ingots since 16-11-2000 onwards.

(b) The sanctioned auxiliary load was only 13.98% of total sanctioned load but was claimed to be 20% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

M/s. Jailaxmi Castings

(a) Even if only cost of electricity and raw material is added as per Balance Sheet, it comes to 118% of sale price of ingots shown to have been manufactured making the manufacturing commercially unviable and unsustainable in the long run.

(b) The sanctioned auxiliary load was only 10.68% of total sanctioned load but claimed to be 20% by appellant in their Section 14 statement indicating their intention not to disclose true facts to the Department.

(c) Appellant paid Rs. 5.5 lakhs as duty in a case of clandestine removal of ingots involving duty of Rs. 17 lakhs, booked by DGCEI.

40.1 It is to be noted that G-7 statement, indicating daily consumption of electricity was not made available by appellants but could be obtained for very short periods from MSEB.

41. In view of above, Revenue came to the conclusion that return filed by the appellants and hence self-assessment made by the appellants do not reflect the TRUTH and appellants have indulged in suppression of production and clandestine clearance. For estimating the production, they mostly relied upon data relating to energy consumption, which were obtained from MSED or appellants themselves. According to Revenue, electricity in the range of 555-1026 units are required for production of one M.T. of M.S. Ingots. This was based upon a study conducted by Prof. N.K. Batra of IIT, Kanpur. Reliance was also placed on the opinion given by All India Induction Furnace Association who have opined that 820 units of electricity would be required to manufacture one M.T. of M.S. Ingots. The manufacturer of the induction furnace M/s. Electrotherm (India) Ltd., vide their letter dated 22-6-2006 addressed to a manufacturer viz. M/s. Trimurthi Ispat Ltd. has clarified the range of electricity consumption as 600 to 625 units per MT without sponge iron and 660 to 690 units per MT with 50% sponge iron. The average of range indicated by Prof. Batra would be approximately 800 units, which is very close to 820 units indicated by the All India Furnace Association. Revenue, in its best judgment took 1026 units per M.T. (which is most favourable to appellants) as the standard for estimating the production of M.S. Ingots. Duty was demanded for the differential quantity of the estimated production and that shown in returns/self-assessment. In number of cases in connection with other investigations by the DGCEI certain documents were recovered from certain persons/appellants, appellants had admitted those liabilities and paid duty either on their own or on approaching the Settlement Commission. While demanding duty in the impugned orders, such amounts have been subtracted. Thus the duty demanded is based upon estimated production minus self-assessed duty minus duty paid as per Settlement Commission’s orders (wherever applicable).

42. An interesting development took place after issuance/adjudication of above demands. Jurisdictional Central Excise Officials started general surveillance on units manufacturing M.S. Ingots. Perhaps in view of general surveillance as also the fact that self-assessment based upon electricity consumption more than 1026 units is not acceptable to department, appellants modified their self-assessment pattern. During this period (July/August 2009 to January 2010), the electricity consumption per M.T. of M.S. Ingots came down to somewhere around 1000 units/M.T. It is to be noted that there was no change in the technology or machinery manufacturing the M.S. Ingots during this period/period covered by demand notices. There is no change in the composition of inputs. Table below shows the electricity consumption of various appellants.

43. Both sides were heard extensively on number of days. Learned senior advocate for the appellants have not disputed any of the details mentioned earlier. Thus the details which clearly indicates that returns filed/self-assessment made by the appellants do not reflect the TRUTH is not controverted. Learned senior advocate has mainly argued based upon various judgments of Hon’ble Supreme Court, various Courts and this Tribunal against the basis of estimated production and hence suppression of production. It would therefore be appropriate to examine various contentions/case laws relied upon by the appellants.

44. One of the contentions raised by the learned senior advocate for the appellants is that as per Article 265 of the Constitution of India no tax shall be levied or collected except by authority of law. Ld. senior advocate has further argued that under Section 3 of the Central Excise Act, 1944 duty of Excise is to be levied on goods actually produced and not based on some deemed production as per some formula. There can be no two opinions that no tax can be levied or collected without authority of law. It is not under dispute that the appellants were manufacturing MS Ingots, billets which are leviable to Excise duty and therefore, tax has to be levied and collected on such goods and this is as per law. The learned senior advocate has also stated that Excise duty is to be levied on goods actually produced and not based on some deemed production as per some formula. We entirely agree that duty of Excise is to be levied on goods actually produced. However, the question is, whether appellants have shown truthfully the entire quantity of goods produced or not. In case they have shown in their records the entire quantity of goods actually produced there cannot be two opinions that no further duty is required to be paid. However, in case a manufacturer is not showing the entire quantity of goods actually produced in his returns or self-assessment, the question is what is required to be done. There can be situations where based upon information/intelligence, department raids a manufacturer or other places and certain documents are recovered from the manufacturer or his customer or from some other persons and it is possible to know precisely the quantity of suppressed production and other details. In such situation duty can be demanded based upon such incriminating documents indicating the suppressed production and clearance of goods. This can be based upon information/intelligence. Even in such cases it is not necessary that all the documents or complete details are recovered. Moreover, there can be situations where though prima facie it is established that manufacturer has suppressed the correct quantum of production. However, from the records maintained by the manufacturer (which are not truthful), it is not possible to know precisely the quantity of the suppressed production of goods and thereafter cleared without payment of duty or recording the details in record. In such a situation what is required to be done. Whether in the absence of precise details, untrue and incorrect self-assessment/returns to be accepted and no duty can be demanded; or based upon the available details Central Excise official resorts to best judgment-assessment. Undoubtedly before resorting to the best judgment-assessment, Central Excise officer will be required to furnish details to the manufacturer and the manufacturer would have an opportunity to rebut the method of computation or explain the factors/information.

45. It is, by now, an established law that taxation is a civil obligation. In the present cases, the manufacturers are required to fulfil this civil obligation truthfully. Leave alone duty, even in respect of penalty relating to taxation matter the Hon’ble Supreme Court has been taking a consistent view that mens rea is not required for imposition of penalty under the taxation law until and unless a particular section requires so. In the case of Gujarat Travancore Agency v. Commissioner of Income Tax reported in (S.C.), the Hon’ble Supreme Court observed as under :

4. Learned Counsel for the assessee has addressed an exhaustive argument before us on the question whether a penalty imposed under Section 271(1)(a) of the Act involves the element of mens rea and in support of his submission he has placed before us several cases decided by this Court and the High Courts in order to demonstrate that the proceedings by way of penalty under Section 271(l)(a) of the Act are quasi criminal in nature and that, therefore, the element of mens rea is a mandatory requirement before a penalty can be imposed under Section 271(1)(a). We are relieved of the necessity of referring to all those decisions. Indeed, many of them were considered by the High Court and are referred to in the judgment under appeal. It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what it intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by and the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(l)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum Volume 85, page 580, Paragraph 1023 :

“A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws.”

46. In our view, as mentioned earlier, since normally the assessment is to be made by the manufacturer himself and in case the Central Excise officers have some reasons to believe or based upon any other input that the self-assessment has not been done truthfully, the Central Excise official can indicate these reasons/details to the manufacturer and the manufacturer in turn can give his explanation and based upon the explanation the Central Excise official could decide whether self-assessment is correct or arrive at the correct assessment of duty. In case it is not possible to arrive at the precise duty amount, the duty will be required to be computed based upon the best judgment based upon the available details including the details submitted by the assessee in pursuance of notice.

47. In all the appeals covered by this order, the conduct of the appellants in the past have not been above board as is evident from para 40 above and there have been number of cases booked against them by different wings of Revenue including the period involved. Such conduct is evident from show cause notices issued to various appellants which in turn include details of other show cause notices. Those were the cases where precise details with respect to certain clearances could be recovered. In large number of cases during investigation, manufacturers have admitted about clearance of goods without payment of duty without recording in their records etc. In a number of cases, they have gone to the Settlement Commission and admitted duty liability and the matters were settled. In the present set of appeals, in addition to such specific recoveries already made, duty has been demanded based upon the electricity consumption. It is to be noted that variation in consumption of electricity is not limited to a few percentage but is very very high (even after taking 1026 units as basis for PMT of MS Ingots) as is evident from the table below. -

In some cases, for days/weeks together, there is large consumption of electricity but no production. All such discrepancies have been detailed in the demand notices. However, there is no explanation whatsoever for any of these discrepancies. During the hearing before this Tribunal for any query, the only answer of the learned senior advocate was the Tribunal decision in the case of R.A. Castings. We have therefore carefully gone through the Tribunal’s decision in the case of R.A. Castings. The decision in the case of R.A. Castings is based upon the following observation :

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 173B 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 be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. In the following case laws, it has been held that the consumption of the electricity alone is not sufficient to determine the production :

(i)      Pure Enterprises (P) Ltd. v. CCE, Rajkot - (Tri.)

(ii)     Kapadia Dyeing, Bleaching and Finishing Works v. CCE, Surat - (Tri.)

(iii)    A. Arti Leathers (P) Ltd. v. CCE & C, Ahmedabad - (Tri.-Mum.)

(iv)    Parshuram Cement Ltd. v. CCE, Lucknow - (Tri.-Del.)

(v)     Mukesh Dye Works v. CCE, Mumbai-VI - (Tri.-Mum.)

(vi)    Hans Castings Pvt. Ltd. v. CCE, Kanpur - (T)

(vii)   M/s. Padmanabh Dyeing and Finishing Works v. CCE, Vadodara - (T)

(viii) M/s. Madhu Products v. CCE, Hyderabad - 1999 (111) E.L.T. 197 (T).”

48. The essence of Tribunal’s decision in the case of R.A. Castings is that Rule 173E prescribes a procedure which could be followed by the Commissioner and fix a norm for electricity consumption. The norm has to be fixed and notified to the manufacturer. It is only after following this procedure that the demand of duty based upon the electricity consumption can be made. This procedure is mandatory in law. In the absence of such a procedure being followed demand cannot be made based upon electricity consumption. In the present set of appeals, the demands are for the period 2003 onwards. New Central Excise Rules, 2002 came into force from 1-3-2002 and under the said new Rules there is no provision corresponding to Rule 173E of the Central Excise Rules, 1944. Thus the pre-requisite on which the said judgment proceeded is not at all relevant/applicable for the period involved in the present appeals.

49. The other contention of the appellants that the electricity consumption cannot be the only factor or basis for determining the duty liability as held by this Tribunal in the case of R.A. Castings Pvt. Ltd. (supra). In the case of R.A. Castings Pvt. Ltd., eight case laws were relied upon to come to this observation. In our view while as a general proposition, one may state that electricity consumption cannot be the only factor or basis for determining the production or duty liability. However, in our view, this aspect is required to be examined with reference to the manufacturing process, the commodity being manufactured and in value terms electricity consumed in production of one unit of product i.e. value of electricity consumed vis-à-vis value of one unit of final product. In larger number of commodities though electricity may be important input but may not be very significant in value terms. However, there are commodities/manufacturing process where electricity consumption is very significant in the basket of cost of various inputs. Any prudent businessman will in such commodities will monitor consumption pattern and take steps to minimize the consumption of electricity. We entirely agree with learned AR that based upon electricity consumption, quantity of production of items like caustic soda can be precisely computed. Even in case of M.S. Ingots using Induction Furnace, production can be estimated within few per cent accuracy. In the present set of cases, production is estimated after erring in favour of appellant only.

50. The learned AR has correctly pointed out that out of eight case laws (mentioned in para 47 above) relied upon in the case of R.A. Castings Pvt. Ltd., only the case law relating to Hans Casting Pvt. Ltd. was relating to production of M.S. Ingots. It is also noted that the Tribunal in the case of Hans Castings Pvt. Ltd., Kanpur v. CCE - (Tri.) has observed as under :

“8. Heard the submissions of both sides. We note that the basic issue in all the three appeals is the same as to whether there was sufficient evidence to prove that power consumption per tonne was based on evidence or records seized from the appellants or was based on any experiment conducted in the premises of the appellants. We have heard the submissions made by both sides and we note that in all the three cases, neither there was a norm of consumption of power nor was any evidence in the form of private records seized, nor was based on any norm fixed by the Department under Rule 173E. We are, therefore, of the view that the matter is fit to go back by way of remand since there are no findings based on records in support of the conclusion arrived by the Collector. We, therefore, set aside the impugned order and remand the matter to the Collector of Central Excise concerned for de novo decision after taking into account the pleas made by the appellants in regard to power consumption and, if necessary, to conduct experiments spread over a period of 10 days in the factory of the appellants and, if necessary, in one or two more factories similarly placed to arrive at the figure of power consumption for production of one M.T. of ingots. Similarly, all other matters in these appeals shall also be decided by the Collector afresh. The appellants shall be at liberty to add or produce such additional evidence as they consider necessary in support of their contentions.

9. The appeals are, therefore, allowed by way of remand.”

(Emphasis supplied)

Thus the Tribunal has remanded the matter back to the adjudicating authority to determine the quantity of production of steel based on the factual data of electricity consumption per MT to be collected by department by observing the actual consumption for a number of days in the premises of similar units. Thus it is very clear that this Tribunal had taken a view in past that quantity of production in case of M.S. Ingots can be determined based on the factual data of electricity consumption per ton. Other case laws mentioned in the R.A. Casting covered industrial oxygen, manmade fabrics, leather goods, cement, biscuits etc. We agree that in respect of such commodities one has to first examine whether electricity is significant or main input. It is possible that electricity may not be that significant input, and therefore input-output correlation may be difficult. However, in our view the same is not true for commodities like MS ingots being manufactured through induction furnace. In fact, scrap/sponge iron and electricity are only two major inputs. All other inputs do not contribute to a significant percentage in terms of value of the inputs/final product. In our view, in a situation like this any prudent manufacturer will monitor the consumption pattern vis-à-vis per unit of final product. Variation of 100-150 units per MT will change the whole of business economics.

51. It is observed that a lot of emphasis is given by the learned senior advocate for the appellants that the decision of the Tribunal in R.A. Castings was further upheld by the Hon’ble Allahabad High Court and thereafter by the Hon’ble Supreme Court. The Hon’ble Allahabad High Court in the said case as reported in (All.), has observed as under :

“5. On consideration of the aforesaid findings, we are of the view that the findings of the Tribunal are based on the material on record and they cannot be said to be without any material and perverse. We find that the Revenue has invoked the proviso to Section 11A(1) of the Act but no case has been made out in the show cause notices or in the adjudication order that there were any mis-statement, suppression of fact or fraud on the part of the respondents. No substantial question of law arises from the order of the Tribunal.” (Emphasis supplied)

52. It would thus be seen that the Hon’ble Allahabad High Court has found that no substantial question of law is arising out of the order of the Tribunal. The Hon’ble Allahabad High Court also not decided or laid any law in the said judgment. The Hon’ble Allahabad High Court has also noted the Tribunal’s observation that Rule 173E mandatorily requires the Commissioner to prescribe/fix the norms for electricity consumption and notify the same to the manufacturer. We also note that the Hon’ble Apex Court has not gone into any question of law but dismissed the petition for special leave to appeal. We are therefore, of the view that the said judgment of the Tribunal in the case of R.A. Castings has to be examined in the facts of each case and cannot be applied blindly. The Hon’ble Supreme Court in the case of Sushil Suri v. Central Bureau of Investigation & Anr. - (2011) 5 SCC (708) observed

“Each case depends on its own facts and a close similarity between one case and another is not enough because either a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide case by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line of case falls, the broad resemblance to another case is not at all decision.”

As mentioned earlier, there is no rule corresponding to Rule 173E in the new Central Excise Rules, 2002 and therefore no mandatory requirement under the new rules requires the Commissioner to prescribe/fix norms for electricity consumption first and notify the same to the manufacturer. We have also noted that even in the case of Hans Castings Pvt. Ltd. (supra) this Tribunal has taken a view to determine production based upon electricity in respect of this very commodity and that also by conducting experiment after remand order (and obviously for period subsequent to the period). We also note various cases made against the appellants and their own admissions and subsequent settlement. We also note the electricity consumption pattern July, 2009-January, 2010. In view of above, we are of the view, the Tribunal’s decision in the case of R.A. Castings cannot be applied in the present set of appeals.

53. As far as reasons about the drastic variation and very high electricity consumption are concerned, it is observed that there is no specific explanation whatsoever from the appellants to justify the drastic variation in consumption of electricity from time-to-time. Further after issuance of the show cause notices, and when Revenue started keeping general surveillance on the appellants units even though there was no change in the furnace or the raw material composition, the consumption of electricity drastically came down and became close to what is proposed in the show cause notice. Here again, there is no explanation from appellants whatsoever why and how the electricity consumption came down especially when electricity is so critical in the manufacture of ingots and slight variation of which will change the entire economy relating to production and marketing of the said goods.

54. During the initial arguments, the learned senior advocate for the appellants was asked by this Bench that since electricity is a very important and is one of the two main inputs viz. scrap/sponge iron and electricity is critical component in the manufacture of MS ingots using induction furnace whether appellants had any correspondence with the manufacturer of induction furnaces about the electricity consumption, as one would normally expect such correspondence (it was possible that the claim of the manufacturer about electricity consumption may be exaggerated), the learned senior advocate, during the next hearing, submitted affidavits of all the appellants stating that (i) the furnace manufacturer had not given any commitment for any specific electricity consumption in respect of furnaces supplied to them; (ii) neither invoice nor any other documents received from the furnace manufacturer at the time of purchase showed any range of electricity consumption per ingots produced; they also stated that furnace supplier M/s. Electro Thermo Systems Ltd. was contacted by them in March 2013. Further M/s. Electro Therm Systems Ltd. has not submitted any specific electricity consumption. These affidavits were filed by the learned senior advocate before the Bench. In rebuttal to the said affidavits, a miscellaneous application was filed by the Revenue indicating -

(i) subsequent to filing of the affidavits the department approached M/s. Electro Therm Systems Ltd. to ascertain the facts and collected information from them on electricity consumption per M.T. of ingots produced and as per the statement of their Vice-President only 535 units of electricity is required to melt 875 kg of steel scrap and 970 kg of iron scrap. Further only 700 units are required to melt 1165 kg of steel scrap and 1280 kg of iron scrap. Revenue contended that in view of the said position, the affidavits filed by the appellants are contrary to the above facts and misleading; (ii) Revenue also submitted the factual data of electricity consumed for production of one MT of ingots as observed from the appellants own records to rebut the statement that no specific per consumption is noticed in respect of Electro Therm Systems furnace.

55.1 The learned senior advocate though did not oppose allowing of the miscellaneous application filed by Revenue, and in fact stated that this can be taken on record however, in the written submissions as also up to some extent has indicated a catena of case laws to argue that fresh evidences adduced before the CESTAT cannot be taken into account. The learned senior advocate quoted the following case laws :

(i)      Mohinder Singh Gill v. CEC, New Delhi - AIR 1978 SC 851;

(ii)    Bush India Ltd. v. Union of India - (Bom.);

(iii)   Bata India Ltd. v. CCE, Calcutta - ;

(iv)   CCE, Bangalore v. Vaigai Thread Processor Ltd. - ;

(v)     Prakash Pipes and Industries Ltd. v. CC - ;

(vi)   United Machinery Works Pvt. Ltd. v. CCE, Coimbatore - ;

(vii)  Jain Exports Pvt. Ltd. v. Union of India - (S.C.).

55.2 We note that Rule 23 of CESTAT (Procedure) Rules, 1982 provides for admission of additional evidence. There can be no doubt that the said power has to be exercised sparingly and judicially. The power has to be used for bringing out TRUTH so that justice triumphs. In the present case, the so-called additional evidence is nothing but appellants own data relating to power consumption for the subsequent period, when Revenue started keeping general surveillance. Moreover, data is not for one or two days but for about six months. In fact, in our view, this data is a far better substitute of what was earlier envisaged under Rule 173E of Central Excise Rules, 1944. This data which is appellant’s own, goes to the very root of dispute. Appellants were given ample chance to rebut the data or provide explanation for the same. However, no explanation whatsoever is coming forward. Revenue has submitted these in rebuttal to the affidavits submitted by various appellants.

55.3 We have gone through the case laws listed earlier mentioned by ld. senior advocate for the appellants. In the case of Mohinder Singh Gill v. CCE, New Delhi - AIR 1978-SC-851, certain action was taken by the Chief Election Commissioner based upon the inputs from the Returning Officer, Election Observer etc. The said action of C.E.C. was under challenge before the Hon’ble Supreme Court. At the time of hearing before the Hon’ble Supreme Court certain additional explanation were submitted by the said officials. The fresh affidavits of the officials were obviously to justify the action taken by them. It is in this context that the Hon’ble Supreme Court held that validity of action taken by statutory functionaries is to be judged by reasons so mentioned in the order and cannot be supplemented by fresh reasons in the shape of affidavits or otherwise. The situation in the present case is entirely different. It is a case of determination of civil obligation and the so called additional evidence are nothing but appellants’ own data (or conduct) obtained subsequent to issuance of the show cause notices/adjudication or the information collected from furnace manufacturer. It is not the case of the appellant that they have modified the furnaces or inputs are different or something else has happened which would justify lower consumption of electricity for the subsequent period. In our view, the objection is only to circumvent and justify the untruthful self-assessment done by them.

55.4 The second case law quoted by the appellants is relating to Bush India Ltd. (supra). In the said case the Bush India were importing certain equipments viz. Garrad Record Changer Deck and selling the same under their own brand name after putting in wooden boxes. At the time of import, Bush India was paying c.v. duty as complete equipment. The issue was whether such a process (putting in wooden boxes) amounts to manufacture. The Hon’ble Bombay High Court took the view that it does not amount to manufacture. The Revenue had tried to bring in an affidavit of new Assistant Collector saying that the said goods cannot be marketed to general public without being put into the said wooden boxes. It is in that context that the Hon’ble Bombay High Court has stated that raising of new ground is not admissible. It may be noted that in the present case Revenue is only citing appellants own data. There is no challenge to the said data by the appellants. There is no challenge about any modification of furnace or any other reason so as to justify drastically lower consumption of electricity in the subsequent period. In view of this, we find that the facts of present batch of cases are different and the said case law is not applicable.

55.5 In the case of Bata India Ltd., Calcutta (supra) the issue was relating to valuation of shoes. Appellant’s claim was that Bata brand shoes were sold through their own outlets alone. At the Tribunal stage, Revenue wanted to produce an evidence that Bata brand shoes are also sold in the wholesale lot to independent buyer. Evidence was for a different period. In those circumstances the Tribunal had taken a view that evidence is not contemporaneous in nature and therefore is not admissible.

55.6 In the case of CCE v. Vaigai Thread Processors Ltd. (supra) Revenue wanted to produce additional test results, in addition to what was produced during the adjudication, which were not there before the lower authorities. It is in these circumstances that the Tribunal refused to admit the additional evidence.

55.7 In the case of Prakash Pipes and Industries Ltd., certain additional evidence in the form of opinion was sought to be produced. The Tribunal observed that this additional evidence is not in continuation of the previous opinion obtained by the party. Since the previous opinion did not refer to exemption Notification No. 340/86 and related to Import Trade Control aspect only and under such circumstances the Tribunal refused to admit new evidence.

55.8 In the case of United Machineiy Works Pvt. Ltd. (supra), appellant wanted to produce large number of documents relating to assessment, correspondence with various authorities and all these documents were available with the appellant even before the adjudication and under these circumstances the Tribunal refused the request for production of additional evidence. It may be mentioned that the case was relating to clubbing of clearance made by another unit.

55.9 In the case of Jain Exports Pvt. Ltd. v. Union of India, the Hon’ble Supreme Court did not allow production of additional evidence. In the said case the Hon’ble Supreme Court observed as under :

“12. Before we part we must mention that after counsel for the importers could not secure an adjournment when the matter was taken up for hearing on 23rd April, 1993, he argued the matter at length. It was only during the course of the hearing that we inquired of him if he could point out from the record whether or not the transaction had yielded any profit. When he could not give a satisfactory reply he again asked for an adjournment to produce the relevant material which we declined. The hearing concluded on the same day. Notwithstanding the same their advocate on record filed a letter dated 28th/30th April, 1993 stating that an application was moved for rehearing because a very crucial document having a direct bearing was not brought to the notice of the Court. Even with these applications Nos. I.A. 3 & 4 of 1993 the so-called crucial document was not appended. In these applications the re-hearing was sought on the very same grounds on which an adjournment was sought earlier. This was followed by yet another communication which included a certificate of the Chartered Accountant to which was appended a statement of accounts showing that the importers had incurred a substantial loss in the sale of highseas basis. We are indeed surprised at the attitude of the learned Advocates representing the importers. It betrays a misconception that any document can be produced at any time and stage of the proceedings and the Court can be expected to reassemble to give a fresh hearing or a second innings to fill the gaps left by the importers because of their default merely because they have the means to afford it. We cannot countenance such a demand and must deprecate it strongly. We do so and reject both the applications. To allow them would encourage multiplicity of hearings and create a wrong precedent.”

55.10 Facts and circumstances of all the above cases are totally different than the facts and circumstances of the present case. In the present case, the so-called additional evidence are nothing but the electricity consumption details of the appellants themselves. These are after booking and adjudication of the present set of cases. This data is undoubtedly available to the appellants themselves. The data is for a period of six months and would take care of all general explanation. The data goes to the root of the matter. We also note that the learned senior advocate for the appellants did not oppose the miscellaneous application. However in the written submissions and during arguments he tried to argue that these details should be ignored.

55.11 Under the circumstances, we do not find any reason to ignore this data. Learned AR also submitted a catena of case laws (numbering 32) to support that additional evidence can be taken by the Court at any stage, if it is interest of justice, of course, after affording an opportunity to rebut the same by the other side. In particular ld. AR drew our attention to Hon’ble Supreme Court judgment and Calcutta High Court judgment in the following cases :

(i)      (S.C.) North Eastern Railway Admn., Gorakhpur;

(ii)    (S.C.) Mohanlal Shamji Soni;

(iii)   (S.C.) Kemtech International Pvt. Ltd.;

(iv)   (Cal.) Southern Cooling Tower (P) Ltd.;

(v)     (Cal.) Best Liquifiable Gases Ltd.

We have gone through all the case laws quoted by ld. AR we consider it suffice to quote from Hon’ble Supreme Court in the case of North Eastern Railway Admn., Gorakhpur (supra). Hon’ble Supreme Court in the said judgment observed as under :

“12. Though the general rule is that ordinarily the appellate court should not travel outside the record of the lower court and additional evidence, whether oral or documentary is not admitted but Section 107 C.P.C., which carves out an exception to the general Rule, enables an appellate court to take additional evidence or to require such evidence to be taken subject to such conditions and imitations as may be prescribed. These conditions are prescribed under order 41 Rule 27 C.P.C. Nevertheless, the additional evidence can be admitted only when the circumstances as stipulated in the said Rule are found to exist. The circumstances under which additional evidence can be adduced are :

(i) the court from whose decree the appeal is preferred has refused to admit evidence which ought to have been admitted, [clause (a) of sub-rule (1)], or

(ii) the party seeking to produce additional evidence, established that notwithstanding the exercise of due diligence, such evidence was not within the knowledge or could not, after the exercise of due diligence, be produced by him at the time when the decree appealed against was passed, [clause (aa), inserted by Act 104 of 1976], or

(iii) the appellate court requires any document to be produced or any witness to be examined to enable it to pronounce judgment, or for any other substantial cause, [clause (b) of sub-rule (1)].

13. It is plain that under clause (b) of sub-rule (1) of Rule 27 order 41 C.P.C., with which we are concerned in the instant case, evidence may be admitted by an appellate authority if it ‘requires’ to enable it to pronounce judgment ‘or for any other substantial cause’. The scope of the Rule in particular of clause (b) was examined way back in 1931 by the Privy Council in Parsotim Thakur v. Lal Mohar Thakur - AIR 1931 PC 143. While observing that the provisions of Section 107 as elucidated by order 41 Rule 27 are clearly not intended to allow litigant, who has been unsuccessful in the lower court, to patch up the weak parts of his case and fill up omissions in the court of appeal, it was observed as follows :

“Under clause (1)(b) it is only where the appellate court ‘requires it, (i.e. finds it needful) that additional evidence can be admitted. It may be required to enable the court to pronounce judgment or for any other substantial cause, but in either case it must be the court that requires it. This is the plain grammatical reading of the sub-clause. The legitimate occasion for the exercise of this discretion is not whenever before the appeal is heard a party applies to adduce fresh evidence, but ‘when on examining the evidence as it stands some inherent lacuna or defect becomes apparent.”

14. Again in K. Venkataramiah v. A. Seetharama Reddy - AIR 1963 SC 1526 : (1964) 2 SCR 35 a Constitution Bench of this Court while reiterating the afore-noted observations in Parsotim case (supra) pointed out that the appellate court has the power to allow additional evidence not only if it requires such evidence ‘to enable it to pronounce judgment’ but also for ‘any other substantial cause’. There may well be cases where even though the court finds that it is able to pronounce judgment on the state of the record as it is, and so, it cannot strictly say that it requires additional evidence ‘to enable it to pronounce judgment’, it still consider that in the interest of justice something which remains obscure should be filled up so that it can pronounce its judgment in a more satisfactory manner. Thus, the question whether looking into the documents, sought to be filed as additional evidence, would be necessary to pronounce judgment in a more satisfactory manner, has to be considered by the Court at the time of hearing of the appeal on merits.

15. Insofar as the principles which govern the question of granting or disallowing amendments under Order 6 Rule 17 C.P.C. (as it stood at the relevant time) are concerned, these are also well settled. Order 6 Rule 17 C.P.C. postulates amendment of pleadings at any stage of the proceedings. In Pirgonda Hongonda Patil v. Kalgonda Shidgonda Patil - AIR 1957 SC 363 which still holds the field, it was held that all amendments ought to be allowed which satisfy the two conditions : (a) of not working injustice to the other side, and (b) of being necessary for the purpose of determining the real questions in controversy between the parties. Amendments should be refused only where the other party cannot be placed in the same position as if the pleading had been originally correct, but the amendment would cause him an injury which could not be compensated in costs. (Also see Gajanan Jaikishan Joshi v. Prabhakar Mohanlal Kalwar - (1990) 1 SCC 166.).

16. These are the broad principles to be kept in view while dealing with applications under order 41 Rule 27 and Order 6 Rule 17 C.P.C.”

56. The learned senior advocate for the appellants quoted the following case laws to argue that evidence of period other than period of dispute are irrelevant :

(i)      CCE, Coimbatore v. Cambodia Mills Ltd. - (Mad.);

(ii)    M. Veervadran v. CCE, Chennai-2 - ;

(iii)   Emami Ltd. v. CCE, Kolkata-1 - ;

(iv)   Reckit & Colman of India Ltd. v. CCE - (S.C.)

56.1 We have gone through the said judgments. In the case of Combodia Mills Ltd., appellant was manufacturing yarn of different counts and duty varied with count and goods manufactured on a particular date was found to be of different count and department wanted to use the test results of the goods produced for the other period also. In this context the Tribunal observed as under :

“5. Insofar as the quantity in respect of which the additional demand could be made, the demand made was for all the quantities manufactured subsequent to the date of the lots drawal of the sample on 17-7-1986. The demand proceeds on the assumption that after the drawal of samples from the lots manufactured on 17-7-1986, production that took place thereafter was of yarn with excess counts. No material is available to sustain such a presumption. The result of the test of the sample drawn on 28-8-1986 would certainly show that the yarn manufactured on that day was of a higher count and if the stocks available with the manufacturer on that day had also been ascertained and samples had been drawn from those stocks that would show that the stock on hand also contained the yarn on excess count.”

56.2 In the case of M. Veervadran (supra), this Tribunal observed that the quantitative yardstick for raising the subject demand is not discernible from the document, nor could ld. SRD explained it to us despite her best efforts. It is unintelligible. The demand seems to be based on certain weighment of finished goods, said to be conducted by the officers. Manufacturers have denied that any weighment was done. It is in this context that Tribunal took the view that demand cannot be raised on the basis of some formula devised from facts pertaining to goods produced after the said period. This is clearly distinguishable from the facts of present case. Here demands though raised on the basis of Prof. Batra’s report but are supported by appellants own data though for the subsequent period.

56.3 In the case of Emami Ltd. (supra), the issue was whether or not goods contain Ethyl Alcohol. Test were conducted which showed absence of Ethyl Alcohol and these test results were sought to be applied for a different period and it is in this context that the Tribunal has taken a view that test results of the samples for a different period cannot be applied. In the present case, there is no dispute about the final product or inputs. It is about quantity of electricity consumed in the production of one unit of finished product. In our view the said case law has no application in the present cases.

56.4 In the case of Reckit & Colman of India Ltd. (supra), the Hon’ble Supreme Court set aside the order passed by the Tribunal on the ground that the plea was never canvassed by Revenue. The Hon’ble Supreme Court observed as under :

“3.1 It will be remembered that the case of the Revenue, which the appellant had been required to meet at every stage from the show cause notice onwards, was that the said product was a preparation based on starch. Having come to the conclusion that the said product was not a preparation based on starch, the Tribunal should have allowed the appeal. It was beyond the competence of the Tribunal to make out in favour of the Revenue a case which the Revenue had never canvassed and which the appellants had never been required to meet. It is upon this ground alone that the appeal must succeed.”

56.5 Thus in our view, none of the four case laws quoted by the ld. Senior Advocate help in the facts and circumstances of the case. Here, all that is being said is that demand raised by Revenue is supported by appellants own conduct/data for the period subsequent to that of present proceedings. By not permitting such data, we will only be obstructing the TRUTH to come out. Such a proposition has to be rejected.

57.1 In show cause notices issued to present appellants, there are reference to other show cause notices issued to the appellants, wherein appellants during investigations have admitted clandestine clearance in their statements under Section 14 of the Central Excise Act. Appellants had also gone to Settlement Commission to settle that duty liability, interest etc. In fact the show cause notices not only details these but also extends benefit of duty so paid. These details have been used by ld. AR to further Revenue’s case that conduct of the appellants have not been above board and they have admitted to duty evasion in respect of the period covered by the present demand.

57.2 The learned senior advocate also pleaded that no reliance can be placed on another show cause notices. In support of this contention appellant has cited the Order-in-Original No. E/75/CX/Commr/2009, dated 28-8-2009. However a copy of the said Order-in-Original was not submitted. Only one page of the said order was submitted. We do not find anything in the said page which is of relevance in the present case.

57.3 The learned senior advocate also relied upon the case law in the case of Commissioner of Customs v. Indian Spinners reported in (Tri.-Mum.). In the said case Tribunal dismissed appeal filed by Revenue against reduction of penalty by Collector (Appeals). A reference application was made by the Revenue against the said order. The Tribunal took a view that question of penalty has to be decided with reference to each case, each adjudication being a separate proceedings and past history is not an ingredient thereof under Section 129B of the Customs Act. The Tribunal in the said case has also held that there are other avenues open to the Customs like prosecution or preventive detention in dealing with such proceedings. We do not find any relevance of this case law in the facts and circumstances of the present cases. Here other show cause notices are part and parcel of the demand notices under appeal and are being cited only to tell the conduct of appellants during the period of present demands.

58.1 The learned senior advocate also quoted following case laws in support of his contention that filing of application before Settlement Commission is not admission of guilt :-

(i) Bosch Chassis Systems India Ltd. v. CCE, Delhi-II - (LB);

(ii) Indian Oil Corporation Ltd. v. CCE, Mumbai-II - .

58.2 In the first case, the Larger Bench of this Tribunal, observed as under :

“13. In the above view of the matter, Issue Nos. 2 and 3 are answered in the negative, that is, in favour of the assessee and against the Revenue, and it is held that the mere filing of application before Settlement Commission under Section 32E of the Act for waiver of interest, penalty and immunity from prosecution and suo motu payment of duty as per show cause notice may not necessarily per se construed as admission of the allegations in the show cause notice as regards the fraud, collusion etc. Inference in this regard may be drawn from the contents of the application, that is, pleadings of the applicant and finding of the Settlement Commission, if any. Issue No. 1 pertains to the merits of the case and parties generally agreed that the same may be decided by the Division Bench at the stage of final disposal of the appeal.”

58.3 The facts in second case were that the appellant had taken Cenvat credit on the strength of supplementary invoice issued by Chennai Petroleum Corporation Ltd. (CPCL). Against CPCL department had issued show cause notice for demanding additional duty on the goods alleging that the noticee (CPCL) had suppressed material facts with intent to evade duty. CPCL had approached the Settlement Commission and accepted payment of additional duty invoking extended period of limitation. After payment of said duty, CPCL issued supplementary invoices for the said additional duty. On the strength of these supplementary invoices Indian Oil Corporation Ltd. took credit. The department was of the view that the appellant is not entitled to take credit on the strength of supplementary invoices under Rule 9(1)(b) of the Cenvat Credit Rules, 2004. It is in this context that the Tribunal took a view that mere approaching the Settlement Commission does not amount to admission of guilt.

58.4 In the appeals under consideration, Active Directors of the appellants have categorically admitted in their statements recorded under Section 14 of the Central Excise Act, 1944 before DGCEI officials clandestine clearance of final product. After issuance of the show cause notices they approached the Settlement Commission and settled the duty evaded. The two cases quoted by the ld. Senior Advocate do not help in the facts and circumstances of the present demands.

59.1 Ld. senior advocate for the appellant has quoted the Hon’ble Supreme Court’s judgment in the case of State of West Bengal and Others v. Md. Khalil and Another - 2000 Indlaw SC 40 to argue that nothing can be presumed in Taxation Law unless specifically sanctioned by Statute. In the said case entry tax was being demanded on the goods found from the respondent. Respondent’s claim was that he has not brought the goods from outside into Calcutta but has purchased locally. It is in those circumstances that the Hon’ble Supreme Court has made the said observation. It is for the department to first prove that the respondent has brought the goods from outside Calcutta. In the present cases, it is not in dispute that appellants are manufacturer of M.S. Ingots. They were self-assessing duty/filing returns. Issue is that self-assessment/returns do not reflect true position and production is suppressed. It is based upon cogent evidence.

59.2 We note that Hon’ble Supreme Court in the case of Kanungo & Co. v. Collector of Customs - (S.C.) has observed as under :

“13. ... What the impugned order does is that it refers to the evidence on the record which militates against the version of the appellant and then states that the appellant had not been able to meet the inferences arising therefrom. In our opinion, the High Court was right in holding that the burden of proof had shifted on to the appellant after the Customs authorities had informed appellant of the results of the enquiries and investigations.”

59.3 We also note that Hon’ble Supreme Court in the case of Collector of Customs v. D. Bhoormull - reported in (S.C.) has laid down principles relating to burden of proof, as under :

“It cannot be disputed that in, proceeding for imposing penalties, under Clause (8) of S. 167 to which S. 178A does not apply, the, burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus, cast by it, we must pay due regard to other kindred principles, no less fundamental, of universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree; for, in all human affairs, absolute certainty is a myth, and as Prof. Brett felicitously puts it all exactness is a fake” El Dorado of absolute proof being unattainable, the law accepts for it, probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus, legal proof is not necessarily perfect proof; often it is nothing more than a prudent man’s estimate as to the probabilities of the case.

31. The other; cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered to use the words of Lord Mansfield in Batch v. Archer(l) “according to the proof which it was in the power of one side to prove, and in the power of the other to have contradicted”. Since it is exceedingly difficult, if not absolutely impossible, for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as parts of its primary burden.”

Above cases though were pronounced in connection with smuggling of goods but are equally applicable for evasion of any duty as both smuggling of goods or evasion of duty have similar economic consequences.

60.1 There is no explanation to various issues raised by the Revenue. Ld. Senior Advocate has quoted four cases to support that there cannot be presumption of clandestine clearance and number of judgments to support that clandestine clearances case needs to be established with cogent evidences of extra raw material procurement, sale, transport etc. These propositions are required to be examined with reference to facts and circumstances of each case. Cases where suppression in production/clandestine clearance is few percentage of total production are different from cases where certain facts indicate suppression of production to the extent of 25-50% even by conservative estimate. Observations made in any case by Hon’ble Supreme Court, Hon’ble High Courts or this Tribunal are generally with reference to facts and circumstances of that case and cannot be blindly applied to all cases. We examine the cases quoted by ld. Senior Advocate.

60.2 First case quoted is relating to CCE, Chandigarh v. Nachiketa Paper Ltd. - (P & H). In the said case, officials visited the unit and certain shortage of raw materials and finished goods were found. Respondent paid duty relating to the said goods. The issue before the Hon’ble High Court was relating to the imposition of penalty on the respondent. In this context the Tribunal had taken a view that there is no evidence relating to fraud, collusion or wilful misstatement or suppression of facts for imposing penalty under Section 11AC, which was upheld by the Hon’ble High Court.

60.3 Second case quoted is CCE & ST, Daman v. Nissan Themoware Pvt. Ltd. - (Guj.). In this case departmental official visited the respondent’s unit. On stock taking they found shortage of one raw material and all other raw materials were found to tally. Department took the view that the said raw material has been used in the manufacture of the final goods and accordingly duty was demanded on the final product which was paid by the respondent. Department issued show cause notice for duty as also penalty. The Tribunal taking into fact that all the raw materials except one was found to tally, took a view that it cannot be said that shortage of one raw material is due to the use of the same in the manufacture of the final product and therefore duty demand on the final product and imposition of penalty is not justified. This was upheld by the Hon’ble Gujarat High Court.

60.4 Third case quoted is relating to Prabhu Lala Ram Ratan Das Pvt. Ltd. v. CCE - . In this case also, there were shortage of raw material viz. raw tobacco to the extent of 3% which respondent explained is due to dryness. However, the department took the view that the said raw materials has been used for the production and clandestine removal of finished product. The same was set aside by the Tribunal.

60.5 Another case cited by the learned senior advocate is of Chetak Mfg. Co. v. CCE, Vapi - . There again only one raw material was found short and the department demanded duty on the finished product on the assumption that the same has been used in the manufacture of finished goods. The Tribunal held that department cannot ask duty on finished goods but can ask respondent to reverse the Cenvat credit availed on the said raw material.

60.6 The learned senior advocate quoted the Hon’ble Supreme Court judgment in the case of Oudh Sugar Mills Ltd. v. Union of India - 1978 (2) E.L.T. (J172) (S.C.). In the said case Oudh Sugar Mills Ltd. were manufacturing roughly 12 lakhs maunds of sugar in a year. Department issued a show cause notice alleging that 11606 maunds of sugar has been clandestinely cleared by the unit. The calculation was based upon report of Assistant Chemical Examiner relating to the accounts of the amount of mixed juice. The Hon’ble Supreme Court observed that the alleged quantity is less than of 1% of their annual production and the computation of sugar is based upon the amount of the mixed juice. It is in these circumstances that the Hon’ble Supreme Court has taken the view that allegations based only on calculation of raw material fed into the process or on working of machinery as noted during test inspection being based only on inferences involved unwarranted assumption.

60.7 Another case quoted by the learned senior advocate is J.A. Naidu, Etc. Etc. v. State of Maharashtra - (S.C.). The case is relating to a criminal complaint against J.A. Naidu and others relating to conviction and the said case law has no application for determining the duty liability which is the civil obligation. The standard of evidences in the two proceedings are entirely different.

60.8 Another case quoted is relating to K. Rajagopal v. CCE - . In the said case, certain private note-books were recovered during the search from the premises of the appellant. At the time of raid and the seizure of the note book, the accountant was very much present. On the basis of the said note-book the department came to the conclusion that certain raw materials have been purchased and in turn are used in the manufacture of goods (fire-works) and duty was demanded. The Tribunal took the view that raw materials were such which are covered under Explosives Act and can be supplied only by a person having licence under the Explosives Act. Moreover the said raw materials are required to be purchased only through Governmental sources. No investigation was done by the department to know the source of such raw materials and therefore demand of duty on fire-works presumed to be manufactured from such material was set aside.

60.9 Another case quoted is Ghodavat Pan Masala Products Ltd. v. CCE - . In the said case a note-book was found and it was seen that there is a difference between the quantity of production of the finished goods between the note-book and RG1. Duty relating to this difference was confirmed by the Tribunal. However duty based upon the theoretical calculation of P.L.R. which is not the main input of the appellant was set aside. In this case statement of the parties were retracted and there were no corroborative evidence.

60.10 Another case is relating to Mukesh Dye Works v. CCE - . In the said case demand was made on the manmade fabrics alleged to have been removed without payment of duty based upon electricity consumption. In the said case, the Tribunal took the view that department did not avail the facility under Rule 173 of the Central Excise Rules. Even the details of the electricity consumption was not furnished to the appellant and it cannot be presumed that for all the five years exactly similar type of fabrics have been manufactured. It is in these circumstances that the demand was set aside.

60.11 Similar is the position in the case of Padmanabh Dyeing & Finishing Work v. CCE - . Here also the commodity was manmade fabrics and the reasons for the earlier case are equally applicable to this case.

60.12 Another case is relating to Amar Ispat (P) Ltd. v. CCE - . Here the demand was made based upon the electricity consumption. It was observed that the consumption has fluctuated from month to month and therefore adoption of one particular month’s electricity consumption cannot be an appropriate basis for determining production and for demanding duty. It is to be noted that in this case the energy consumption for a particular month was 700 unit per MT and Revenue wanted to use this figure to compute duty liability for all other months and as per the records of the appellant the average electricity consumed was 876 units per MT. In the present demands, department has computed the demand based upon average consumption of 1026 units which is far more higher than either 700 units or 876 units.

60.13 Another case quoted is Southern Ispat Ltd. v. CCE - . Here again the Tribunal took a view that electricity consumption depends upon several factors not controverted by Revenue and the appellant had produced correspondence with the Kerala State Electricity Board regarding voltage fluctuation and other problems being faced by them.

60.14 In none of above mentioned cases, facts and circumstances are comparable to the facts and circumstances in the present cases. We have to therefore, examine the impugned orders with reference to details of present case alone.

(i) On the contrary, we find that Hon’ble Supreme Court in the case of Triveni Rubber and Plastics v. Commissioner of Central Excise, Cochin reported in (S.C.) has held that demand arrived at by the assessing normal production on the basis of electricity consumed cannot be faulted. In facts and circumstances of the present cases, we find that this decision is squarely applicable to the present cases. Hon’ble Supreme Court observed :

4. It is argued by Mr. Anam that the only basis of the estimate of the production is the consumption of the electricity during the said period. What happened in this case is this : The Collector took the period from October 1979 to May 1980 as the base period. He ascertained the quantity of tread-rubber produced and the quantity of electricity energy consumed. Adopting the ratio between the consumption of electricity and the quantum of tread-rubber produced during the base period he estimated the production of tread-rubber during the disputed period on the basis of electricity consumed. Mr. Anam, submits that during the base period, the electricity meter was not recording properly and that it was running in the reverse direction. We have been unable to appreciate this contention. If the meter was running in a reverse direction during the base period, it would not have recorded any consumption. But evidently that was not what happened. The meter did record the consumption. One could understand the appellant saying that the meter recorded less than the actual consumption, but that was not his case. Nor could he produce any material in support of the said allegations. Mr. Anam relied upon a letter dated 16-11-1985 from the Assistant Executive Engineer, Electrical-Major Section, Changanacherry, in support of his contention. Firstly, this letter has been obtained long after the order of the Collector. Secondly, this letter says that the meter was running in reverse direction. This theory is unacceptable in the circumstances of the case, as pointed out hereinbefore.”

(ii) We find that similar view was taken by this Tribunal in the following cases relating to M.S. Ingot :

(a)     Rattan Steel Works v. CCE, Chennai - reported in 2008-TIOL-1454-CESTAT-AD-MAD;

(b)     Nagpal Steel Ltd. v. CCE - (Tri.);

(c)     Hans Casting Pvt. Ltd. v. CCE, Kanpur - (Tri.).

62. From the foregoing evidences and analysis, we have absolutely no doubt that the appellants were not doing self-assessment truthfully and contents of monthly returns were not truthful. Undoubtedly, they were indulging suppression of production and therefore, evading duty. Similarly, the daily records of production and clearance were not truthful.

63. The next issue is quantum of suppression of production and duty evaded. How much additional quantity of M.S. Ingots/goods were produced and to whom such goods are cleared are not disclosed by the appellants. Under the circumstances, it is not possible to precisely quantify the same. In the facts and circumstances of the appeals, only way out is to estimate on the basis of electricity consumption. We find following in the show cause notice or during arguments or from various open sources, or electricity consumed in the subsequent period, etc.-

(i) Letter of Induction Furnace Manufacturer’s dated 22-6-2006, indicates the energy consumption as follows :

(a)      with 100% clear scrap - 600-625 kwh/ton;

(b)      with 60% sponge iron 600-695 kwh/ton.

Appellant’s have contended that M/s. Electrotherm have gone back on their letter. We are of the view that this is only to save their buyers of furnace from the present cases. We also note that during the course of hearing, Revenue obtained a general leaflet of the same manufacturer. This leaflet indicates power consumption with difference frequency and voltages as under :

The said leaflet was explained by Shri Tushar Javi, Vice-President, M/s. Electrotherm under Section 14 statement. Shri Tushar Javi has explained the energy consumption in the range of 598 to 674 units/PMT. We also note that the claim of manufacturer of Furnace may be in idle condition and in real life power consumption may be higher, say by 10-15%. Even then the consumption will be at the most in the range of 700-800 units.

(ii) Shri R.P. Varshey, Executive Director, All India Induction Furnace Association (AIIFA) has also indicated power consumption in the range of 650-820 unit/MT in his article. We note that later on, Shri Varshey has gone back. In our view, article was written in a normal situation uninfluenced by department or appellants or similarly placed persons and at that time Shri Varshey would not have imagined that the content of article can be used against the members of the association, we therefore do not give any credence to such going back after long long time.

(iii) The report “iron & steel vision” on the website (available to all) of Indian Bureau of Mines shows power consumption as 700 units/PMT.

(iv) Website of Weigang Jinhuaxin Electric Furnace Manufacturers Manufacturing Co. Ltd. shows 500 units/PMT for 11 Ton Furnace;

(v) Website of steelworld.com indicates power consumption as 700 units/PMT;

(vi) An article published in International Journal of Engineering & Technology indicates the electricity consumption as 700 units/PMT;

(vii) An Article on website ispatguru.com indicates electricity consumption as 540-550 units/PMT;

(viii) Prof. Batra’s report indicates power consumption in the range of 525-1046 units/PMT depending upon efficiency and other factors. We note that average of the said range will be 785 units PMT;

(ix) This Tribunal in the case of Nagpal Steel Ltd. v. CCE, Chandigarh reported in (Tri.) in a similar situation has observed as under :

“13. Expert opinion was obtained by the Department from Shri P.K. Goel, Executive (Finance) of M/s. Mohta Alloys and Steel Works Limited, Ludhiana, Shri S.K. Sharma, a resident of Ludhiana and an Engineer, Shri R.N. Mishra, Production Manager of M/s. Raj & Sandeep, Ludhiana and Shri S.C. Ojha, Works Manager of M/s. Prontos Limited, on consumption of electricity per M.T. of Steel Ingots and it was noticed that the consumption of electricity ranged between 750 KWH to 800 KWH (Units). Enquiries caused with M/s. Hindustan Brown Boveri Limited, the supplier of Furnaces to the Appellants, indicated that power consumption to super heat and melt down in respect of Arc furnace and induction furnace was 485 KWH and 540 KWH respectively. Since electricity was one of the main raw materials, for manufacture of steel ingots, 851 KWH (Units) of electricity per MT of Steel Ingots was taken as the norm for ascertaining the production of ingots. On comparison of the production figure of steel ingots recorded in the two heat registers maintained by melters with the production recorded in the Central Excise records, it was found that during the period January, 1990 to 10-10-1990, the appellants had suppressed production of 4062.797 MT of Steel ingots. These registers were, however, subsequently found missing from the records.”

(x) In the case of Bhagwati Ispat Pvt. Ltd. reported in 2006-TIOL-350-CESTAT, average consumption of electricity during Sept. 1997 to March 1998 was found to be 861 units PMT while for whole year it was 941 units;

(xi) In the case of Amar Ispat (P) Ltd. reported in (Tri.-Mum.) the average consumption was 876 units/PMT, and Revenue wanted to compute the production based upon 700 unit/PMT which was average consumption for one month.

64. From the foregoing, it appears that actual power consumption will be in the range of 700-850 units PMT depending upon various factors. We note that in these cases, Revenue has taken 1026 units PMT as the norm for estimating the production and consequences thereto. We are of the view this criterion cannot be considered as unrealistic or unreasonable. In fact, it is very conservative. In the circumstances, the error is in favour of appellants only. In view of this, we hold that demands raised cannot be considered on the higher side.

65. We also note that subsequent to the proceedings in the impugned orders, general surveillance and perhaps realizing that production less than 1026 units PMT will not be acceptable to department and may lead to further demands, data of appellants themselves shows consumption per MT near about 1026 units PMT adopted in the impugned order.

66. Keeping in view the fact that self-assessment and returns were not representing the truth and production has been suppressed and suppressed production and clearance have been shown in the statutory returns and documents, these are clear case of evading duty with wilful intent, extended period of limitation is correctly invoked and penalties on the assessees are correctly imposed. Various other appellants are active senior management officials/owners/partners, the said manipulation could not have happened without their active support, we therefore hold that penalties are correctly imposed.

69. We accordingly upheld the impugned orders and dismiss all the appeals.

DIFFERENCE OF OPINION

In view of difference of opinion between the Vice-President and Member (Technical), the following point of difference is placed before the Hon’ble President for reference to the 3rd Member :

(a)     Whether in view of the discussion in paras 1 to 31 and in view of the decision of the Tribunal in the case of R.A. Castings Pvt. Ltd. (supra) the impugned orders are to be set aside and the appeal allowed;

OR

(b)     Whether in view of the discussion in paras 32A-68 above and in view of the Hon’ble Supreme Court’s judgment in the case of Triveni Rubher & Plastics (supra) and this Tribunal’s decision in the case of Rattan Steels Works (supra), Nagpal Steel Ltd. (supra) and Hans Casting Pvt. Ltd. (supra), the impugned orders are to be upheld and all the appeals dismissed.

(Pronounced in Court on 31-1-2014)

 [Order per : M.V. Ravindran, Member (J)]. - All these Difference of Opinion are placed before me as per the direction of Hon’ble President to resolve the following differences :-

(a)     Whether in view of the discussion in Paras 1 to 31 and in view of the decision of the Tribunal in the case of R.A. Castings Pvt. Ltd. (supra) the impugned orders are to be set aside and the appeal allowed.

OR

(b)     Whether in view of the discussion in Paras 32 to 68 above and in view of the Hon’ble Supreme Court’s judgment in the case of Triveni Rubber & Plastics (supra) and this Tribunal’s decision in the case of Rattan Steels Works (supra), Nagpal Steel (supra) and Hans Castings Pvt. Ltd. (supra), the impugned order are to be upheld and all the appeals dismissed.

71. The said Difference of Opinion was argued on 11th, 12th and 13th June, 2014. The appellant-assessees were represented by ld. Counsels Shri Prakash Shah, Dr. G.K. Sarkar, Shri Pramod Kumar, whereas Shri K.M. Mondal, Special Counsel appeared on behalf of the Revenue.

The Miscellaneous applications listed are disposed of as not pressed by both sides.

72. The amounts confirmed in the Orders impugned in these appeals are recorded in Para 2 of the Order by the Vice-President. Brief common facts are recorded by Hon’ble Vice-President in his order. The Revenue’s contentions in each of the case in these appeals are recorded in paras 40 to 42 of the Separate Order passed by the Hon’ble Member (T).

73. The Hon’ble Vice-President held that in the fact situation of the instant case, the demand cannot be confirmed solely on the basis of deemed production arrived at on the basis of electricity consumption as suggested in report of Dr. Batra, and allowed the appeals for lack of any cogent material evidencing receipt of unaccounted raw material, unaccounted production, clandestine clearance, unaccounted receipts and payments etc. The Hon’ble Vice-President held that there is no evidence of use of unaccounted raw material for manufacture and clandestine clearance of goods, and the demand is confirmed by assuming that 1026 units would be consumed in manufacture of 1 MT of MS Ingots, by taking into account the opinion of Dr. Batra of IIT, Kanpur which suggested electricity consumption of 555 to 1046 units for production of 1 Ton of MS Ingots. There is no evidence of quality and quantity of raw material received by the appellants for manufacture and clandestine clearance, and the demand cannot be sustained on assumptions and presumptions. Heavy reliance is placed by the Hon’ble Vice-President on the detailed judgment of Tribunal in R.A. Castings Pvt. Ltd. v CCE, 2009 (273) E.L.T. 674, in which demand based not on the actual production and clearance, but only on electricity consumption in manufacturing of MS Ingots on the basis of same report of Dr. Batra was set aside by relying on various decision, and it was held that in absence of any other evidence demand cannot be made only on the basis of electricity consumption. This detailed judgment in R.A. Castings case was upheld by Hon’ble Allahabad High Court, and thereafter even SLP of Revenue thereagainst was dismissed. Hon’ble Vice President had applied the said precedent in R.A. Castings (supra) since, even in the appeals in question, there is no evidence on record in respect of unaccounted raw material for the manufacture of unaccounted ingots and clandestine clearance, either no experiment was conducted in the factories regarding actual consumption of electricity, or if the experiment was conducted in the factory, the electricity consumption was found to be higher than that opined by Dr. Batra and was as per the appellants’ records at that time.

74. On the other hand, Hon’ble Member (T) upheld the impugned Orders and dismissed the appeals by upholding demand based on deemed production arrived as per formula based on report of Dr. Batra by relying on curtained discrepancies on which as per the Hon’ble Member (T) satisfactory explanations were not forthcoming and mainly on the basis of evidence placed on record by the Revenue vide Misc. Application filed during pendency of the appeals which contained data of electricity consumed in the factories of the appellants for producing 1 MT of MS Ingots in a subsequent period mainly after adjudication of the case. Hon’ble Member (T) mainly placed reliance on the following four judgments -

(i)      Triveni Rubber & Plastics - (S.C.),

(ii)    Ratan Steel v. CCE, Chennai - (T-Chennai)

(iii)   Nagpal Steels Ltd. v. CCE, Chandigarh - (T-Del.)

(iv)   Hans Casting Pvt. Ltd. v. CCE, Kanpur - (T-Del.)

75. For sake of brevity the arguments and contentions of both sides as recorded in the separate orders passed by the Hon’ble Members are not reproduced. On the difference of opinion, both sides have argued on the same lines and the contentions advanced by them have already been recorded by the Hon’ble Members. The main contention of the appellants is that as per the provision of Section 3 of the Central Excise Act, 1944, the duty of Excise is to be levied on the goods actually produced and not based on some deemed production based on any formula taken from any Report. The only exception of this scheme of charging duty on the basis of actual production is compounded levy scheme under Section 3A of the Central Excise Act, 1944 where the duty is charged on the basis of factor which are indicative of production but not actual production as such, but by following statutory procedure which require issuance of specific notification in this regard. Moreover, even in such cases where production is deemed for payment of duty, to fix norms for “deemed production” are first prescribed, and after notifying the same to the manufacturer, the prescribed norms are applied prospectively. In the present case, the Revenue wants to levy duty on the past period on the basis of “deemed production” arrived at by Revenue by taking into consideration the consumption of electricity as 1026 units per MT, which is not permissible. Nothing can be presumed in Taxation Law unless specifically sanctioned by Statute, as held in State of West v. Md. Khalil and Another - 2000 Indlaw SC 40. Moreover, IIT, Kanpur vide letter dated 1-11-2007 had informed that no technical opinion report of productivity of induction furnace by Dr. N.K. Batra is available on the record of IIT. Due to Dr. N.K. Batra’s sad demise, he was not available for cross-examination to test the basis of the report on the basis of which the demands are confirmed. It was contention of the appellants that to prove clandestine removal the Revenue has to produce evidence of purchase of additional raw material, sale of clandestinely removed goods, mode of payment, flow back of the fund, transport report for movement of raw material and finished products etc. In the present case, there is neither no such evidence is produced by the Revenue, nor any documents recovered from the manufacturer’s place in this regard indicate illicit removals. For manufacture of ingots no doubt the electricity is also a major input, but the other raw materials such as sponge iron/scrap is also required. There is not even an iota of evidence on record in respect of receipt of any unaccounted raw material or clearance of ingots without payment of duty. It was also shown during the hearing that the alleged dates when no production was recorded in factories of some appellants despite there being electricity consumption, were in fact Holidays and on those days only maintenance or trials were conducted leading to power consumption but Nil production. It was also submitted that the impugned Orders cannot be sustained on the basis of evidence of power consumption collected after the passing of adjudication order for a subsequent period by relying upon the decision of the Hon’ble Supreme Court in the case of Mohinder Singh Gill v. CCE, New Delhi, AIR 1978 SC 851 & Jain Exports Pvt. Ltd. v. Union of India, . The Revenue cannot go beyond the scope of the show cause notice. It was submitted that evidence of period other than period of dispute are irrelevant. Moreover, the Hon’ble Vice-President has opined that even if this subsequent data is taken into consideration, the case of the Revenue still remains on the basis of electric consumption only. So far as the earlier cases settled by the Settlement Commission are concerned, it was submitted that those proceeding’s cannot be reopened as per the statutory scheme under Section 32M of the Central Excise Act, and in any event it was shown from the impugned Orders that adjudicating authority had recorded specific finding that the same cannot be relied for adjudicating the present cases. Department has not preferred any appeal, nor they filed any cross-objections against this finding of the Commissioner. It was also submitted that even otherwise each adjudication is a separate proceedings to be decided based on evidences of that case, and that filing of application before Settlement Commission in past cannot be considered in this case as admission of guilt. Although in some cases the Income Tax proceedings for undisclosed Income are referred, however admittedly the demand is not on that basis even in those cases. Appellants relied upon a judgment in Ravi Foods Pvt. Ltd. v. Commissioner of Central Excise, (T-Bang.) wherein despite some admission before the Income Tax Authority it was held that since no corroborative evidence of clandestine manufacture of final products was found by Central Excise Authorities in their investigation, it could not be said that there was clandestine removal of goods. Moreover, even in respect of unexplained income appearing in the Balance-sheet the Tribunal held in R.A. Castings (supra), that onus is on the Revenue to show that the same is in respect of clandestine removal. Some factual errors in the allegations of the Revenue as recorded in the Order passed by the Hon’ble Member (T) were also pointed out on behalf of the appellants inasmuch as it was shown that in the case of SRJ Peety Steels Pvt. Ltd., which was taken up as the lead matter for arguments -

(i)      As against alleged figures of “79.76% to 104.58%” recorded in para 5 of SCN (at Page 100) the Revenue erred in alleging that only cost of electricity and raw material when added as per Balance Sheet was “125%” of sale price of ingots,

(ii)    As against “roughly 20%” recorded in para 8 of SCN, erroneously it was projected that the appellant had claimed in his statement 25% auxiliary load,

(iii)   SCN and Addendum relied only on statements dated 3-5-2008 and 25-3-2009 of Shri S.S. Peety, and none of the statements of year 2006 or 2007, referred by Revenue for opposing the appeal, were even relied in the instant SCN and Addendum thereto. Evidence in the cases already settled, on which the Commissioner himself had not placed any reliance, were being erroneously relied by the Revenue, that too when even cross-objection were not filed by the Department.

(iv)   Revenue’s claims regarding Income Tax proceedings were also misplaced and misconceived. In fact, in Income Tax proceedings it was held that power consumption cannot be basis to allege clandestine removal.

Some other judgments of this Hon’ble Tribunal: Sarvana Alloys Steel Pvt. Ltd., (Tri-Bang.) and Southern Ispat Ltd., (T-Bang.), wherein the demand based on power consumption were set aside, were also cited. It was emphasized that there cannot be presumption of clandestine clearance and that clandestine clearances case needs to be established with cogent evidences. Report of Dr. Batra was at the instance of Central Excise Department and was thus available with the Department since year 2000. Even the letter dated 28-2-2006 of DG (Audit) is amongst relied upon documents wherein by relying on said report of Dr. Batra, Commissioners were instructed to investigate unaccounted production if any after collecting corroborative evidence on the following points -

“(i)    Procurement of additional raw material for manufacture of unrecorded production.

(ii)     Transportation of raw material and finished goods

(iii)    Documents/records relating to unrecorded production

(iv)    Assessable value how and why the steel ingots are sold at the value barely able to cover the electricity charge.

(v)     Pattern of sale of finished goods - whether any cash sales, sales through dealer, to related person and receipt of any additional consideration or flowback, presence of unexplained other income or miscellaneous income or availment of unsecured loans by the party may also be investigated for their genuineness.

(vi)    Any other evidence related to clandestine manufacture and clearance of steel ingots.”

It was also shown that physical verification of even Auxiliary Load was conducted by the department with the help of a Chartered Engineer in the factory of appellant Kalika Steel & Alloys Pvt. Ltd., and the report shows that it was about 18.31%, and the electricity actually consumed for production of 1 MT in that factory was found as 1371.43 units per MT, which was as per their records for that period. In another unit of the appellant SRJ Peety Steels Pvt. Ltd., the department conducted trial run and found that electricity consumption was 1496 units for manufacturing 1 MT of MS Ingots, which also was as per the records of that period. Thus actual verification in the units of the appellants, at the relevant time, were mechanically discarded by Commissioner in the impugned Orders as they did not support the charge of clandestine production and clearance. Even after having Report of Dr. Batra as well as instructions issued by DG (Audit), the department could not collect evidence of clandestine manufacture or clearance, and the charge of clandestine manufacture and clandestine clearance, can be sustained only if series of assumptions are made, which is not permissible as per the 1978 (2) E.L.T. J172 (S.C.). The appellants have also shown that in their replies filed before the Adjudicating Authority they had inter alia relied upon the following material -

(i)      Letters dated 18-3-2008 and 25-4-2008 of R.P. Varshney [All India Induction Furnaces Association] informing that his Article prepared in 1989-90 was for Concast Steel making and not for Induction Furnace, and that power consumption can be 1000 unit to 1800 units per MT,

(ii)    Letter dated 5-4-2008 of Electrotherm agreeing with the views of Induction Furnace Association,

(iii)   Letter dated 9-8-2008 of Electrotherm to one Trimurti Ispat suggesting reasons which lead to high power consumption,

(iv)   Letter issued by IIT, Kanpur, to show that report of Dr. Batra was not issued by IIT, Kanpur,

(v)     Report issued by National Institute of Secondary Steel Technology (NISST), Mandi Gobindgarh suggesting power consumption up to 1427 units per MT.

(vi)   Report of Joint Plant Committee constituted by Govt. of India in 2004 titled “Survey of Electric Furnace Industries in India” suggesting power consumption of 1800 units PMT.

It was further emphasized on behalf of the appellants that the facts of the present cases were more akin to those in R.A. Castings (supra), as compared to the facts of the above referred four cases heavily relied by the Hon’ble Member (T). Moreover, the judgment in R.A. Casting (supra) was delivered after considering the judgments in Triveni Rubber & Plastics (supra), Nagpal Steels Ltd. (supra) and Hans Casting Pvt. Ltd. (supra). In the common written submissions filed by the appellants.

76. On the other hand the Revenue submitted that there cannot be general presumption that the production of a commodity cannot be determined on the basis of electricity consumption. In the present cases, electricity is the major input/consumable required for production of MS Ingots. Therefore, the production of ingots can be determined on the basis of units of electricity consumption. It was further submitted that in respect of the furnaces the appellants failed to produce any evidence regarding consumption of electricity for the manufacture of ingots as per the product literature. During the pendency of the appeals, the Revenue contacted the manufacturers of furnace i.e. M/s. Electrotherm System and procured the catalogue of the furnaces of various capacity and as per the statement of the Vice-President of the firm only 535 units of electricity is required to melt 875 kg of steel scrap and 970 kg of iron scrap. This according to Revenue shows that the applicants were showing more electricity consumption to suppress the production. Moreover the production cost was more than the value at which the goods have been cleared and it is not possible that the appellants are selling the goods at losses. The Revenue also produced certain orders passed in the case of some of the manufacturers where the demands were made in past alleging clandestine clearance in respect of which the manufacturer-appellants had approached the Settlement Commission and those disputes were settled before issuance of the show cause notices in the instant case. Some of the manufacturers had in past demand of Income Tax for undisclosed income. In some units on certain days there was power consumption but no corresponding production at all. These circumstances according to Revenue show that the conduct of the appellants in the past have not been above board and these manufacturers were indulging in suppression of the production of excisable goods to evade payment of duty. Judgments in Melton India v. Commissioner Trade Tax, UP, 2007-TIOL 14 SC CT, Rajmoti Industries v. Jt. Commissioner of Income Tax, 2014-TIOL-203-HC-AHM-IT and an order dated 28-9-2010 in Venkata Raimana Stone Crushers Co. v. State of A.P. of Sales Tax Appellate Tribunal were cited by the Revenue pertaining to other statutes (other than Central Excise Act) where demand was made on the basis of electricity consumption. It was submitted that progressively higher level of trust was bestowed on the manufacturers who themselves assesses their duty liability and file periodical returns. Therefore, if the manufacturers are unable to provide any specific reasons/explanations to any abnormalities pointed out to them, it shall be open for a Central Excise Officer to ascertain based upon available information and best judgment the deemed production and the minimum evaded Central Excise duty. During the period (July/August 2009 to January 2010), the electricity consumption per M.T. of M.S. Ingots for these manufacturers was about 1000 units/M.T. without any evidence of any change in the composition of inputs, facilities or furnaces. Reliance was placed on order 41 Rule 27 of Civil Procedure Code and it was submitted that in light of judgment of Hon’ble Apex Court in North Eastern Railway Admn., Gorakhpur, 2012 (28) S.T.R. (S.C.) these additional evidences can be relied for sustaining the adjudication order, although the same were not considered in adjudication. It was submitted that by applying the test of probability the impugned orders can be thus confirmed, and in the facts of the instant cases decision in R.A. Castings (supra) may not be applied. Reliance was also placed on Collector of Customs v. D. Bhoormull, (S.C.) to emphasize that in adjudication proceedings each link of chain was not required to be proved with mathematical precision.

77. Both sides were heard at length on 11th, 12th and 13th June, 2014. Written Submissions were also filed by both sides. I have carefully considered the entire record, various judgments and the written submissions, of both the sides. I have carefully perused the findings recorded by both the Members in their separate Orders.

78. For deciding the difference of opinion I have first ascertained the factual position in light of the evidence discussed by the Hon’ble Members and findings recorded by the Commissioner in the impugned Orders. It is seen from the impugned Orders that so far as the present appellants are concerned, even where the department has actually conducted trial run to verify actual power consumption in production of one Metric Ton of M.S. Ingots, the same was found higher than that in Dr. Batra’s report, and was also as per the consumption recorded for that period. Other reports showing higher consumption of electricity were also placed on record by the appellants. Factors leading to higher power consumption were also discussed in the replies. However the adjudicating authority has brushed such

“12(4) The department, for calculating the quantity of suppressed production, has considered the upper limit of the consumption range of Dr. Batra’s Report i.e. 1026 units and in cases where the consumption is more than 1026 units per metric tonne, allegation of suppression and clandestine removal has been made…..”

“12(5) The Assessee have countered the department’s allegation by relying on the reports of the National Institute of Secondary Steel Technology (NISST) June-July 2006 and the Joint Plant Committee constituted by the Ministry of Steel, in 2004. According to these reports, the average consumption of electricity PMT of ingots is 1427 (NISST), and as per the JPC Report 1800 units are required to produce 1 tonne of ingots from scrap. The energy consumption is more if sponge iron is used as input…………..I find that while adopting the NISST report in its defence the assessee has not furnished any data on, or evidence of, the variable factors which have contributed to higher electrical consumption in production in his factory. He has not furnished any evidence to support his contention that the induction furnace in his factory requires higher electrical power than the 1026 units indicated by Dr. Batra’s report. The argument of the assessee is not convincing and appears to be merely a theoretical assertion unsubstantiated by any evidence. I am therefore unable to accept the Assessee’s defence on this point.”

“13(3) It has been contended by the assessee that the department has done specific verification of electricity consumption in their plant and the consumption was found to be 1496 units. I find that such a test was conducted only once and not over a period of time to accept this as a norm…..”

“13(4) It has also been contended by the assessee that there are several factors due to which consumption of electricity varies and they have indicated the names of such variables……”

“14(3)(1) The instances quoted above create a doubt in the mind of any reasonable person as to the veracity and truthfulness of the assessee’s claims when any such is made on the merits of the case.”

“15(1) ………About 90% of the raw material used by the assessee is sponge iron, which does not require any pressing by press machine……..”

“(21) The Assessee has constantly argued that the department has not adduced any evidence of clandestine removal & the demands are based only on theoretical calculations of electricity consumption and are not sustainable as the same are based on assumptions & presumptions………”

From the above findings of the Commissioner, it is evident that the demand alleging clandestine removal and suppression has been made mainly on the basis of the report of Dr. Batra, in preference to other available reports produced by the appellants which show higher consumption of electricity. Even the actual consumption found by the department on physical verification in the unit of the appellant was more than the highest reported by Dr. Batra. The raw material consumed as per findings of Commissioner comprised about 90% of Sponge Iron, which could have increased the power consumption as per available reports. Admittedly, the power consumption could have varied for various reasons which were placed before the Commissioner, and it was also contended that there was no evidence adduced for alleged clandestine removal. The various circumstances narrated in the impugned order however created doubt in the mind of the Commissioner. It was however categorically recorded in para 19 by the Commissioner that no reliance was placed on evidence relied upon in proceedings which were settled by accepting the argument that each case has to be treated as a separate case based on its own merits and dealt with accordingly.

“19. There are other instances of central excise violations detected by other agencies where the assessee was found to be involved. In one instance the assessee had approached the Settlement Commission, admitted the evasion offence of an identical nature and had obtained immunity from criminal proceedings. The assessee has however argued that each case has to be treated as a separate case based on its own merits and dealt with accordingly. The argument of the assessee is accepted. No reliance has been placed on evidence relied upon in Central Excise proceedings. The findings in this case are based only on material and evidences that have been brought on record in the instant case.”

I am therefore of the opinion that reliance now placed by the Revenue on the evidence in earlier cases which were already settled, is totally misplaced, when these findings of Commissioner are not even challenged by Revenue. Both sides have categorically submitted that the impugned Orders in all appeals are similar and that demand has been confirmed mainly on account of excess consumption of electricity by applying Dr. Batra’s report as a yardstick.

79. No incriminating statement recorded in the instant case has been brought to my notice by the department. In the matter of SRJ Peety, on being asked to clarify on higher consumption of electricity than in Dr. Batra’s report, in his statement dated 3-5-2008, Shri S.S. Peety gave many reasons such as unscheduled shut downs in supply of electricity and furnace, unskilled labour, furnace efficiency, model of furnace, units required in burning loss of inputs, power voltage fluctuation, inferior quality of scrap, tripping of electricity supply, power transmission losses, decrease in efficiency of plant and machinery and consumption of roughly 20% power in Auxiliary Load. He has not accepted the allegation of clandestine removal in his statement.

80. The impugned Order raises doubts on the statement of Shri S.S. Peety on the allegation that for getting sanction of electricity in the factory, in the application to MSEB, the declared Auxiliary Load was only 7.8%. The claim of roughly 20% Auxiliary Load was therefore excessive as per the Commissioner. However, it is shown from records by the advocate for the appellant that in the matter of another appellant Kalika Steel & Alloys Pvt. Ltd., on physical verification with help of a Chartered Engineer, Auxiliary Load was found by the department itself as 18.31%, i.e. much higher than that that in its application to MSEB. He contended that thereafter the Department stopped verification of actual Auxiliary load in other factories, and is relying only on the applications. It was also pointed out that the electric meter and connection for the Auxiliary and the main load is one and the same. In my opinion, the allegation concerning claim of higher Auxiliary Load do not support the allegation of clandestine removal in any manner. It is also seen that even in the case of R.A. Castings (supra) a report showing Auxiliary Load to the extent of 35% was available, as recorded in para 8(viii) of the said judgment.

81. So far as submission of daily consumption of electricity in G-7 form is concerned, the Addendum dated 2-4-2009 to the show cause notice itself records in para 7A that -

“7A During the statement of Shri Surendra S. Peety, Director of the company recorded under Section 14 of the Central Excise Act, 1944 before the Superintendent (Prev.) on 3-5-2008 he stated that they have not maintained the G-7 forms daily as it is not a mandatory requirement by MSEDCL……..The G-7 forms were not maintained by the assessee on daily basis. Only one entry in each month was made in the G-7 Forms.”

Therefore, non-submission of G-7 forms on daily basis by the appellants do not advance the case of Revenue, and the findings of the Commissioner in this regard are erroneous. In any event, G-7 forms are also only to record power consumption in the relevant time, which is available in the electricity bills of relevant time, which are not in dispute.

82. It is also seen that letter dated 28-2-2006 of DG (Audit) is amongst relied upon documents wherein by relying on said report of. Dr. Batra, Commissioners were instructed to investigate unaccounted production if any after collecting corroborative evidence on the following points -

“(i)    Procurement of additional raw material for manufacture of unrecorded production.

(ii)     Transportation of raw material and finished goods

(iii)    Documents/records relating to unrecorded production

(iv)    Assessable value how and why the steel ingots are sold at the value barely able to cover the electricity charge.

(v)     Pattern of sale of finished goods - whether any cash sales, sales through dealer, to related person and receipt of any additional consideration or flowback, presence of unexplained other income or miscellaneous income or availment of unsecured loans by the party may also be investigated for their genuineness.

(vi)    Any other evidence related to clandestine manufacture and clearance of steel ingots.”

It cannot be ignored that despite these clear instructions the Revenue in the subject show cause notice issued on 9-5-2008 and even in addendum thereto on 2-4-2009, could not lead any evidence of the nature specified in this letter of DG (Audit). More so, when the law in regard to allegations of clandestine removal is clear that the same has to be established by Revenue by adducing positive evidence and cannot be merely on hypothesis.

83. It is also seen that the demands are for the period 2003 onwards. New Central Excise Rules, 2002 came into force from 1-3-2002 and under the said new Rules there is no provision corresponding to Rule 173E of the Central Excise Rules, 1944. In this regard the Commissioner has recorded the following findings after considering the judgment in R.A. Castings (supra) and Triveni Rubber (supra) -

“11(1) …………I find that Hon’ble CESTAT, after discussing various reports relied upon by department and the appellants, have held in Para 21 of their order that electricity consumption alone cannot be the sole factor or basis for determining the duty liability. It appears that the Hon’ble Tribunal has distinguished the facts before them vis-à-vis those presented before the Apex Court in the case of Triveni Rubber and Plastics, [ (S.C.)]. Though the then existing Rule 173E of CER, 1944 referred to in the said Apex Court judgment no longer exists now, the principle laid down therein is very much relevant as electricity consumption, being a major input, can be used to work out the actual production…....”

The Commissioner has thus recognized that the Tribunal in R.A. Castings (supra) distinguished the judgment in Triveni Rubber (supra) on facts. Even if it is assumed that principles of Rule 173E of Central Excise Rules, 1944 would still apply, despite there being no similar provision in the present Central Excise Rules, it cannot be ignored that .these Rules empowered the Commissioner to fix normal production having regard to various factors including installed capacity of the factory, raw material utilization, labour employed, power consumed and such other relevant factors as he may deem appropriate. If this Rule would be applicable, the Commissioner could have fixed normal production as per data from the manufacturer’s own factory, which shall form the norm, so as to assess shortfall in production compared to such norm in absence of satisfactory explanation for shortfall in production. In the instant case, based on installed capacity, raw material utilization and the power consumption in the premises of the appellants no norm was specified by the Commissioner, rather the demand was based on external report of Dr. Batra. No such legislative sanction now exists for M.S. Ingots and Billets, unlike some products like Pan Masala, manufacture of which attracts Section 3A and specific notification to that effect has been issued, and thus deemed production can form the basis of demand.

84. In Triveni Rubber (supra), there existed a legislative sanction in the form of Rule 173E to estimate production based on electricity consumption, based on internal benchmarking, which was applied for a prospective period. Unlike the instant case, evidently, in that matter there was admission of clandestine clearance and doctoring of accounts. From Para 4 of the said judgment it is seen that the Collector took the period from October 1979 to May 1980 as the base period, and based on actual production in that period, calculated deemed production for a prospective period, thus by adopting an internal norm, and did not apply any external report. This case was considered by Tribunal in para 28 of RA Castings (supra) and has been distinguished on facts. It was observed that in the case of Triveni Rubber (supra), the issue before the Hon’ble Supreme Court as discussed in para 2 of the judgment was altogether different and was relatable to the production in excess of the ceiling limit of production, which the Hon’ble Court found, was based upon lot of evidences like statements of various persons and doctored accounts. The officers found that a substantial quantity of tread rubber was removed from the factory without making an entry and the Managing Partner had admitted not only removing of goods without any entry but doctoring their accounts so as to show that their annual production was below the exemption limit. Further, the norms were fixed after study of production of the factory in past. In the instant case, the department conducted verification in the factories of the appellants but found that electricity consumption was much higher than what was suggested in report of Dr. Batra. I am therefore of the opinion that the Vice-President rightly relied on the ratio laid down in R.A. Castings (supra) and distinguished the judgment in Triveni Rubber (supra) on facts of that case.

85. I find that in the peculiar facts in the above appeals, the Revenue’s reliance on judgments in Nagpal Steel (supra), Hans Casting (supra) and Rattan Steel Works (supra) cannot sustain the finding recorded by the Commissioner in the impugned Orders.

86. In Nagpal Steel (supra) there was clear evidence of clandestine clearance as discussed in paras 14-17 of the order. Out of 417 weighments, 111 weighments were not reflected in books of accounts. Consignment of ingots were being transported second time on earlier used gate pass. The driver admitted that he had already transported one consignment of ingots on the same gate pass and that the ingots loaded in the truck were being transported on the very same gate pass. There were other statements confirming clandestine clearance. There was an internal production/monthly report for the period covered under SCN. The General Manager (Technical) of the Appellant Company, in his statement stated that during his service with the Appellants, he was asked to prepare this type of report on production/monthly report for submission to the Managing Director. In R.A. Castings case, this judgment in Nagpal’s case was considered and was distinguished in view of the above facts. Such evidences are not forthcoming in present appeals.

87. In Hans Castings Private Limited (supra) appeal was actually allowed by way of remand on the ground that sufficient evidence was not available to prove that power consumption per tonne was based either on evidence on records seized from the appellants, or on any experiment conducted in the premises of the assessee. On the other hand, in the instant appeals, there is no evidence of clandestine clearance, and so far as power consumption is concerned, in fact experiment was carried out by the department in the factories of the appellants but in the experiment power consumption was found much higher than that suggested in Dr. Batra’s report.

88. In Rattan Steel Works (supra), unlike the instant appeals, there were incriminating Statements recorded from scrap dealers, brokers in iron & steel trade products, bill traders, transporters, people maintaining weigh bridges and dealers in MS rounds suggesting large scale evasion of Central Excise duty by Rattan Steels. Further, Duty was quantified on the basis of the depositions of brokers and bill traders and not on the basis of electricity consumption as such. There was also confessional statement of assessee admitting clandestine clearance. Power consumption figure of Rattan Steel itself for earlier period as per their own record was taken for consideration in the case as evident from Para 2 of the order, whereas in the impugned orders in the present appeals, the benchmark of electricity consumption is Prof. Batra Report. In the instant appeals the electricity consumption per unit of ingot produced, as a matter of fact has progressively gone down over a period of time. In any event in Rattan Steel Works, the appeal of the assessee therein was allowed and department’s appeal was dismissed by holding that ingredients of the proviso to Section 11A did not exist for invoking extended period. Therefore, I am of the opinion that Hon’ble Vice-President rightly distinguished this judgment on facts of that case.

89. In CCE, Calcutta v. Alnoori Tobacco Products - (S.C.), while dealing with the application of precedents, the Hon’ble Supreme Court observed thus :

“Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.”

Applying the said ratio, I find that the judgments relied by the Revenue do not help them in sustaining the impugned Orders in the peculiar facts.

90. It is also seen that the Hon’ble Vice-President correctly opined that the judgment in R.A. Castings (supra) is squarely applicable in the facts of the instant appeals. In R.A. Castings the electricity consumption was 2072 to 2443 units per MT, which is higher than the average electricity consumption in the instant appeals.

90.1 The Commissioner in the orders impugned in the instant appeals was having the following reports and clarifications for his consideration -

(i)      555 to 1046 units PMT as per Dr. Batra’s report;

(ii)    1800 units PMT as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India;

(iii)   1427 units per MT as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006;

(iv)   650 to 820 units/MT as per Article of the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney);

(v)     1000 to 1800 units per Ton or even higher, as per Letters dated 18-3-2008 and 25-4-2008 of same Mr. R.P. Varshney [All India Induction Furnaces Association] informing that his Article prepared in 1989-90 was for Concast Steel making [thus not for Induction Furnace],

(vi)   620 to 690 units/MT as per Letter dated 22-6-2008 from Electrotherm,

(vii)  Letter dated 9-8-2008 of Electrotherm to a client suggesting reasons which lead to high power consumption, and another Letter dated 5-4-2008 of Electrotherm agreeing with the views of Induction Furnace Association and informing that it is very difficult to define any range of power consumption.

90.2 As against this, in para 20 of the Order, the Tribunal in R.A. Castings (supra) considered different electricity consumption figures for production of 1 MT of MS Ingots, reported in following different reports -

(i)      555 to 1046 (KWH/T) as per Dr. Batra’s report;

(ii)    1800 KWH/T as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India;

(iii)   1427 KWH/T as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006;

(iv)   650 units to 820 units/MT as per the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney);

(v)     851 units/MT in the case of Nagpal Steel v. CCE, Chandigarh reported in .

90.3 After perusal of these reports, Tribunal opined that wide variations in the consumption of electricity have been reported for the manufacture of one MT of steel ingots, and that this renders the norm of 1046 units adopted by the Revenue as arbitrary. After this finding, which is upheld by the Hon’ble Allahabad High Court and even SLP has been dismissed, there was no reason for the Commissioner in the instant cases to consider the norm of 1026 units allegedly as per report of Dr. Batra, for arriving at deemed production. Moreover, the trial run conducted by the department had proved that at that time power consumption was actually higher than that reported in Dr. Batra’s report.

90.4 It is also seen that the allegations levelled in R.A. Castings (supra) were mainly -

(i)      inordinately high electricity consumption without any explanation,

(ii)    sale of Ingots at a huge loss over last 4-5 years which was economically and commercially not possible,

(iii)   generation of fictitious profits in the balance sheets by depositing huge amount of cash with the stock brokers and receiving cheques of profits against the cash so deposited,

(iv)   claim of High Auxiliary load of about 35%.

However the Tribunal in categorical terms held that no demand can be upheld based on electricity consumption as such because the clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to -

(i) Receipt of raw material inside the factory premises, and non-accountal thereof in the statutory records;

(ii) Utilization of such raw material for clandestine manufacture of finished goods;

(iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products;

(iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters’ documents, such as L.R.s, statements of lorry drivers, entries at different check posts, forms of the Commercial 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.

90.5 However, since no such evidences were brought on record, the Appeal of R.A. Castings was allowed for want of evidence relating to the above points, with further finding that the Revenue, not having conducted any experiment whatsoever, cannot be permitted to justify the demands raised. Similar is the fact situation in the instant appeals.

90.6 The evidence as per Revenue in the instant appeals are -

(a)     High electricity consumption without any explanation,

(b)     Sale of Ingots at loss, which was economically and commercially not possible,

(c)     Discrepancies in financial accounts in some cases and/or any proceedings under Income Tax,

(e)     Past case settled before Settlement Commission.

 So far as the proceedings already settled are concerned, the Commissioner is not relying on the same and the findings of the Commissioner, as recorded earlier, have not been challenged by the Revenue. All these other allegations were also levelled in R.A. Castings (supra). It was further observed in R.A. Castings (supra) that it would be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. It was further held that -

“23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive, at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law.

24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained.”

90.8 In the present appeals, none of the so called other evidences referred in the impugned Orders prove clandestine clearance. The primary evidence of department is admittedly excess electricity consumption based on benchmark adopted allegedly from report of Dr. Batra, which was already held to be arbitrary by Hon’ble Tribunal in R.A. Castings (supra). Thus, in my opinion the primary evidence relied in the impugned order is itself inadmissible, and no other evidence in the instant case proves clandestine production and clearance to sustain the demand. It is contended by Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Castings (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. The Revenue sought to rely on an order passed by Tribunal in Gulabchand Silk Mills Pvt. Ltd. v. CCE, Hyderabad-II, , however the same was also considered in R.A. Castings (supra). It has been contention of the department that the Department is not required to prove its case to its mathematical precision, by relying on judgment of the Hon’ble Supreme Court in the case of D. Bhoormull - (S.C.) relied upon by the Commissioner as well as the Hon’ble Member (Technical). It is seen that even this judgment was considered in R.A. Castings (supra).

91. There can be no dispute on the fact that in adjudication proceedings, the charge of clandestine removal is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions. Regarding the claim of the Revenue that subsequent to passing of impugned orders the power consumption for manufacturing one MT of Ingots has reduced in factories of all the appellants, I am of the view that it cannot be a basis to sustain the findings in the impugned orders by assuming that there could not be any reason for lower consumption of electricity during the subsequent period. I also agree with the finding of the Hon’ble Vice-President that in any event, this additional material is also only of power consumption.

92. In written submissions of Revenue, it has also been contended that Report of JPC suggesting electricity consumption up to 1800 units PMT was for electric arc furnace and not induction furnace. However, the appellant has contended that productivity in electric arc furnance is higher than induction furnace. In any event, in the impugned orders, there is no such reason to discard the report and in any event the letter of Mr. R.P. Varshney suggesting that electric consumption in induction furnace can be upto 1800 units per MT is also on record. Since, varying reports are on record, the ratio of R.A. Castings (supra) is squarely applicable.

93. Revenue, also relied on the judgment of the Hon’ble Supreme Court in the case of Melton India v. The Commissioner Trade Tax, U.P. - 2007-TIOL-14-SC-CT, the judgment of the Hon’ble Gujarat High Court in the case of Rajmoti Industries v. Joint Commissioner of Income Tax, 2014-TIOL-203-HC-AHM-IT, and an unreported order dated 28-9-2010 of Andhra Pradesh Sales Tax Tribunal (Visakhapatnam Bench) in the case of Venkata Raimana Stone Crushers Company v. State of Andhra Pradesh. In the case of Melton India (supra), for the norm of power consumption, actual electricity consumption of the assessment year 2000-01 was taken as ‘norm’ and the same was applied in subsequent assessment years 2001-02 and 2002-03. This was followed by the Sales Tax Tribunal in the order cited by Revenue. In the case of Rajmoti industries, facts of the case are that for the assessment year 2005-06, the Assessing Officer rejected the books of accounts of the assessee and made various additions, not only for the reason of unexplained wide fluctuations in the productivity as compared to that in A.Y. 2004-05, but also because the assessee therein had not recorded the work-in-progress in the books of accounts. I am therefore of the opinion that these cases, apart from being under Statutes other than Central Excise Act, do not in any manner help in sustaining the findings recorded in the impugned Order. In none of these cases any theoretical report was relied for arriving at deemed production.

94. Further, in Sarvana Alloys Steels Pvt. Ltd., (Tri.-Bang.) similar order based on power consumption was held unsustainable and the appeal was allowed after considering inter alia the judgments in D. Bhoormull (supra), Gulabchand Silk Mills (supra), as also Hans Casting (supra). In A.K. Alloys, (Tri.-Del.) the Tribunal followed the decision of R.A. Castings (supra) and allowed the appeal, as the demand was based mainly on the evidence of power consumption without any evidence of clandestine removal.

95. I therefore concur with the findings of the Hon’ble Vice-President and in my opinion, the judgment in R.A. Castings (supra) would be squarely applicable in the facts of the instant case in all the appeals.

96. Registry to place the files before the Bench for passing orders.

(Pronounced on 17-7-2014 at Ahmedabad)

MAJORITY ORDER

97. In view of the majority view, the impugned orders are set aside and the appeals are allowed.

(Pronounced in Court on 30-7-2014)