Commissioner Of Central Excise vs M/S. Satguru Cement Pvt. Ltd

[Arising out of Order-In-Original No. 15/Commr/CEx/IND/2010 dated 5.5.2010 and 17/Commr/CEx/IND/2010 dated 7.5.2010 both passed by Commissioner of Central Excise & Customs, Indore]

For approval and signature:

Honble Mr Ashok Jindal, Member (Judicial)

Hon'ble Mr. B Ravichandran , Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

Commissioner of Central Excise Appellants

Indore

Vs.

M/s. Satguru Cement Pvt. Ltd. Respondent

Shri Rajesh Bansal, Managing Director

Shri Badri Bansal, Director

Shri Mohanlal Bansal, Director

Shri Jagdish Chandra Gupta, Proprietor

Shri R K Bajaj, Proprietor

AND

M/s. Satguru Cement Pvt. Ltd. Appellants

Shri Mohanlal Bansal, Director

Shri Badri Bansal, Director

Shri Rajesh Bansal, Managing Director

Shri R K Bajaj, Proprietor

Shri Jagdish Chandra Gupta, Proprietor

Vs

Commissioner of Central Excise Respondent

Indore

Appearance:

Shri M S Negi, AR for the Revenue

Shri K K Anand, Advocate for the assessee

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Mr. B Ravichandran, Member (Technical)

Date of Hearing /decision: 20.7.2015

FINAL ORDER NO. A/52415 -52426/2015-EX(DB)

Per Ashok Jindal :

Assessee M/s. Satguru Cement Pvt. Ltd. (Satguru) and the co-noticees to the show cause notice as well as Revenue are in appeals against the impugned order.

2. The brief facts of the case are that the M/s. Satguru is the main party who is manufacturer of Ordinary Portland Cement (OPC). On 30.3.2007, a search was conducted by Director General Central Excise Intelligence wherein statement of Director Shri Badrilal Bansal, Manager Shri Dharmaendra Goyal were recorded. Certain loose papers for the period January, 2007 to March, 2007 were also received and seized which pertains to the clearance that apart from the clearance recorded in their statutory accounts. As per these slips, M/s. Satguru has cleared 18007.75 MT of cement during the period. On the basis of said clearance and corresponding consumption of electricity during the said period, it was arrived that M/s. Satguru were consuming 74 unit of electricity to manufacture 1 MT of cement. On the said basis, for the period February, 2006 to December, 2006, it was alleged that M/s. Satguru has cleared 46744 MT of cement without payment of duty. Therefore, a show cause notice was issued to demand the duty for the period February, 2006 to March, 2007 by applying the formula to say that for production of 1 MT of cement 74 units of power is required, hence M/s. Satguru has cleared clandestinely cement to the tune of 46744 MT without payment of duty. Consequently, the demand of duty was proposed to be confirmed amounting to Rs.1,72,27,997/-. The show cause notice was adjudicated and relying on the earlier proceedings against M/s. Satguru, the demand has been confirmed on the basis of electricity consumption and it was held that for manufacture of 1MT of cement, 155 units of power is required. On the basis of said formula, the demand of duty was reduced to Rs. 48,75,016/- along with interest and equivalent amount of penalty on M/s. Satguru and penalties of Rs.5 lakh each on Shri Rajesh Bansal, Shri Badri Bansal, Shri Mohanlal Bansal, Shri Jagdish Chandra Gupta and Shri R K Bajaj. M/s. Satguru along with co-noticees are in appeals against the said part of the order and Revenue is in appeal against the dropping of demand proposed in the show cause notice. Hence, all the parties are before us.

3. As issue involved is common and all the appeals are arising out of common order, therefore, the same are disposed of by a common order.

4. Shri K K Anand, learned Counsel for the parties appeared before us and submits that prior to impugned proceedings, a search was also conducted in the factory of M/s. Satguru on 29.10.2004 wherein certain records were seized and on the basis of those records, a show cause notice dated 19.12.2005 was issued wherein it was alleged that power consumed to manufacture of 1 MT of cement, electricity is 72.6 units. After issuance of show cause notice, the learned Commissioner obtained Chartered Engineers certificate dated 23.2.2006 from Shri Prakash Chandra Jain who certified that power consumption to manufacture of 1 MT of cement is 228 units. Another Chartered Engineer, Shri K M Thombre also inspected the factory and issued a certificate dated 7.3.2006 to certify that power consumption of electricity to manufacturer 1 MT of cement is 231.39 units. Another Chartered Engineer, Shri Akhilesh Pandit also inspected the unit and issued a certificate dated 14.3.2006 and certified that electric energy required for production of 1 MT cement is 230.85 unit. In those proceedings, the Commissioner after relying upon the above certificates, dropped the demand of duty which was based on power consumption.

However, he confirmed certain demands on account of recovery of loose papers during search operation of the factory. The said order was challenged by both the parties before Tribunal and this Tribunal vide order dated 27.11.2009 remanded the matter back for denovo adjudication. In denovo adjudication, the department obtained expert opinion from Centre of Energy Studies and Research M P Urja Vikas Nigam which is a Government of Madhya Pradesh Enterprises with regard to installed capacity of M/s. Satgurus unit and about the power consumption required to manufacture cement. They visited their factory on 9.3.2010 and certified that power consumption of the plant was 212.29 units per ton of cement and the annual capacity of the plant was 29280 MT per annum. He also stated that detailed energy audit of SCPL Jeerabad, Dhar of the appellant unit was conducted by Centre of Energy Studies and Research in February, 2008 and the energy consumption was opined for manufacture of 1 MT of cement is 218.61 units of power. The annual capacity was calculated by Centre of Energy Studies and Research, Indore in March 2010 which states that annual capacity of the plant is 29280 MT.

Therefore, he submits that the capacity of their plant is 29280 tons per annum. He submits that in remand proceedings in the earlier case, the adjudicating authority took the average of 72.36 units as proposed in the show cause notice and 222.9 units as per the report and arrived at a decision that requirement of 155 units of power to manufacture per MT of cement is appropriate and adjudicated the matter. The said order was challenged before this Tribunal wherein this Tribunal has set aside the demand confirmed on the basis of electricity consumption on average basis. He further submits that as in the show cause notice the demand is based on the electricity consumption, the same is not sustainable. Therefore, impugned order is to be set aside on this ground only. He further submits that installed capacity of the unit has also been examined and it was held that the production capacity of the appellant is around 30,000 MT of cement per annum. If said installed capacity is considered, in that case also the allegation of manufacture of such a huge quantity does not arise. Therefore, impugned order is to be set aside and the appeals to be allowed.

5. With regard to the submissions of the Revenue-appellants, he submits that Revenues basic contention is that learned Commissioner has erred in taking the average consumption of electricity for production of 1 MT of cement. Infact their ground is that as documents seized during the course of investigation corroborates electric consumption of 74 units for manufacture of 1MT of cement, has been ignored by the learned Commissioner to demand duty. Therefore, Revenues main contention is that electricity consumption of 74 units for manufacture of 1MT cement is to be considered, which is not tenable in the light of decision of Tribunal in their own case for the earlier period.

6. On the other hand, learned AR opposed the contention of learned Counsel and submits that Shri Jagdish Agrawal, Director of M/s. Satguru in his statement has stated that their production capacity is 200 MT of cement per day and if same is assumed / taken as correct, in that case, the annual production capacity of the unit would be 60,000 MT per year. Therefore, the production capacity as well as electricity consumption corroborates the fact of clandestine removal of cement from their factory. In these circumstances, the impugned order is to be modified and the duty be demanded as proposed in their show cause notice.

7. Heard the parties. Considered the submissions.

8. In this case, admittedly the search was conducted in the factory premises of the assessee on 30.3.2007 and certain records were seized which pertained for the period January, 2007 to March, 2007. The departmental officers without doing any other exercise, compared the clearance during that period for electricity consumption and made the basis to determine the manufacturing capacity of the plant and concluded that M/s. Satguru has cleared 18000 MT of cement without payment of duty in that period. Consequently, for the impugned period on the basis of the formula for manufacture of 1 MT of cement, how much electricity is consumed the whole demand is proposed. Infact in assessees own case for the earlier period, this Tribunal vide Order No.52006  52008/2015 dated 25.06.2015, this Tribunal has held that demand on the basis of electricity consumption is not sustainable by observing as under:

6.5. The revenue in its appeal mainly questions the Commissioners findings regarding the power consumption norm being 155 Units per M.T. But there is nothing in revenues appeal to explain as to how the power consumption norm of 72.36 unit per M.T. determined by the investigating officer is correct, when the study conducted by Centre of Energy Studies & Research on the Departments request revealed that the power consumption of the plant is 212 unit per M.T., which compares favourably with the power consumption norm determined by two other Chartered Engineers, Shri Prakash Chandra Jain and Shri K.M. Tampre. The Revenues appeal also mentions that the Commissioner has failed to appreciate the fact that the assessees premises were searched once again by the DGCI on 30th March, 2007 and during the course of investigation at that time also, on comparison of power consumption and the actual production during January 2007 to March, 2007, the power consumption ratio was found to be 74 unit per M.T. which is close to the figure arrived at 72.36 Unit per M.T. However, it has not been explained in the Revenues appeal as to on what basis the ratio of 74 Units per M.T. had been determined. It is well settled law that merely on the basis of power consumption norm and that too when there are serious doubts about its correctness, duty demand cannot be confirmed against an assessee, when there is no other corroborative evidence of unaccounted purchase of raw-material and clearance of unaccounted production. In view of this, we hold that the duty demand for the period from 01.04.2001 to 31.03.2003 based on the power consumption norm is not sustainable and, accordingly, the Commissioners order confirming duty demand of Rs.26,12,951/- for the period from 01.04.2001 to 31.03.2004 has to be set aside.

9. While arriving at the said decision, this Tribunal relied on the decision of this Tribunal in the case of R A Castings Pvt. Ltd. vs. CCE Meerut I reported in [2009 (237) ELT 674 (Tri-Del)] which was confirmed by Allahabad High Court reported in [2011(269) ELT 337(All)] which was further confirmed by Honble Apex Court reported in [2011 (269) ELT A 108 (SC)]. Therefore, we hold that demand on the basis of electricity consumption to manufacturer the cement for whole of the period is not sustainable. We further found that during the course of investigation, certain documents were resumed and on the basis of those documents, electricity consumption was derived, the same was made basis of demand which is set aside. Further, the contention of M/s. Satguru is that their production capacity is only 30,000 MT per annum, although the documents seized during the course of investigation reveals that M/s. Satguru has cleared 18,000 MT cement clandestinely, as M/s. Satguru have no capacity to manufacture such a huge quantity of cement during the impugned period, the demand of duty for clearance of that huge quantity is not possible, therefore, the credence to the said argument required to be considered by the adjudicating authority.

10. We further find that expert Chartered Engineer opinion were obtained during the earlier proceedings where all the Chartered Engineers revealed that for manufacture of 1MT of Cement, the electricity required ranges between 212 to 230 units, which cant be the basis of demand. Alternatively, the demand could have been calculated on the basis of their installed production capacity in the factory which could have been considered by the adjudicating authority.

11. As we have already observed that in the impugned order, the only basis for the demand of duty is electricity consumption but no comments have been made by the adjudicating authority to demand on the basis of documents seized during the course of investigation. Therefore, the matter needs examination at the end of adjudicating authority to consider the allegations and the basis of demand in the show cause notice and thereafter to consider the defense taken by the noticees to the show cause notice, particularly with regard to annual production capacity, thereafter to arrive at the decision whether any demand is sustainable against the appellant or not and to pass order in accordance with the law.

12. With these terms, we set aside the impugned order and remand the matter back to the adjudicating authority to decide the issue as discussed above after affording opportunity to the noticees to the show cause notice to present their case.

( operative part of the order pronounced in the open court )

( Ashok Jindal ) Member(Judicial)

( B Ravichandran )

Member(Technical)

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