Shri Ghasi Lal Sharma, Director vs Cce, Jaipur I

Excise Appeal No. 1137 of 2009 with Misc. Application No. 53565 of 2014 and

Excise Appeal Nos. 1138-1139 of 2009

[Arising out of the Order-in-Original No. 05/2009 (C.E.) Commissioner dated 03/02/2009 passed by The Commissioner of Central Excise, Jaipur  I.]

For Approval and signature :

Honble Shri Rakesh Kumar, Member (Technical)

Honble Ms. Sulekha Beevi C.S., Member (Judicial)

1. Whether Press Reporters may be allowed to see :

the Order for publication as per Rule 27 of the

CESTAT (Procedure) Rules, 1982?

2. Whether it would 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 :

Department Authorities?

M/s Shree Sharma Steel Rolling Mills Pvt. Ltd. ]

Shri Ghasi Lal Sharma, Director ] Appellants

Shri Murari Lal Sharma, General Manager ]

Versus

CCE, Jaipur  I Respondent

Appearance

S/Shri R. Santhanam and Bharat Agarwal, Advocates  for the Appellants.

Shri Ranjan Khanna, Authorized Representative (DR)  for the Respondent.

CORAM : Honble Shri Rakesh Kumar, Member (Technical)

Honble Ms. Sulekha Beevi C.S., Member (Judicial)

Final Order No. 51759-51761/2015 Dated : 21/05/2015

Per. Rakesh Kumar :-

The facts leading to filing of these appeals are, in brief, as under.

1.1 M/s Shree Sharma Steel Rolling Mills Pvt. Ltd., Industrial Area, Jhotwara, Jaipur (hereinafter referred to as SSSRM) are manufacturers of TMT bars and rods chargeable to Central Excise duty under Chapter Heading 72.14 of the Central Excise Tariff. While Shri Ghasi Lal Sharma is the Director of SSSRM and Shri Murari Lal Sharma is its General Manager. On 10/09/05, the Jurisdictional Central Excise officers visited the factory of the appellant company. In course of search of the factory certain loose papers/sheets containing details of despatch of TMT bars and receipt of raw material MS Ingots were recovered from the custody of Shri Murari Lal Sharma, General Manager and some other records were found from the factory office, which were taken over under a resumption memo detailing the taken over documents against Sl. No. 1 to 21. Subsequently, while taking round of the factory, some records kept in a lag were recovered from a room in the factory and these records appeared to be containing despatch sheets of bars and receipt of MS Ingots and also hand-written ledger books pertaining to the period from April 2005 to September 2005 (upto 08/09/05). These documents were also taken over by the Central Excise officers under a separate resumption memo, the detail of which are mentioned against Sl. No. 1 to 10 of the resumption memo prepared on the spot in presence of Shri Ghasi Lal Sharma, the Director of the appellant unit. Both Shri Ghasi Lal Sharma and Murari Lal Sharma who were present at the time of search of the factory on 10/09/05 in their statement recorded on the spot under Section 14 of the Central Excise Act, 1944 stated that the records found in the factory pertain to the sale of the finished goods and purchase of raw material and other different transactions.

1.2 During scrutiny and examination of the various records of the unit taken over by the Central Excise officers on 10/09/05 it appeared that a file containing pages from 1 to 517 mentioned at Sl. No. 21 of the resumption memo was containing delivery orders and date-wise details of receipt and despatch i.e. daily receipt/despatch sheets for the period from 01/08/05 to 31/08/05. The daily receipt and despatch sheets were containing the detail of despatch of TMT bars (Saria) under the heading Saria I and Saria II and the receipt of MS Ingots. Besides the entries of Saria I and Saria II, there were entries relating to clearance of rejections/scrap. While against the despatch entries relating to Saria I bill numbers were mentioned, there was no mention of the bill numbers against the entries pertaining to Saria II. Similar type of daily receipt/despatch sheets were found pertaining to period July 2005, September 2005 (upto 08/09/2005) and also for the months of April 2005, May 2005 and June 2005. The entry regarding despatch of Saria, whether Saria I or Saria II contained details like date of despatch, vehicle number in which despatched, quantity, customers name as well as the rate.

On inquiry with Shri Ghasi Lal Sharma about the documents recovered from the factory consisting of delivery orders, daily despatch and receipt sheets, Nakal Bahi, Roz Namcha and private ledgers, he in his statements dated 10/09/05 and 12/09/05, stated that the documents pertain to despatch of finished goods and receipt of MS Ingots. In the statement dated 12/09/05 Shri Ghasi Lal Sharma also stated that their factory had been started since 1996 for manufacture of Saria (MS Bars) and MS Angles but the year from 2002 only TMT bars (Sarias) are being only manufactured and their capacity for manufacture of Saria is 5 MT per hour and that in course of manufacture of Saria from MS Ingots, there is 4% burning loss. In this statement he also stated that they do not manufacture big gauge Saria which they cannot manufacture and in case of supply orders for big gauge Sarias, they purchase the same from other manufacturers. He, however, stated that there has been no such purchase of big gauge Saria from other manufacturers during the last six months as per his knowledge. Inquiry was made with Shri Murari Lal Sharma, General Manager of the appellant company and he in his statement dated 10/09/05 corroborated the statement of Shri Ghasi Lal Sharma.

In this statement Shri Murari Lal Sharma was questioned about the despatch entries pertaining to Saria I and Saria II and he stated that while Saria I is soft Saria, the Saria II is hard Saria and the process of manufacturing is different. He, however, stated that there is no difference in the rate and use for Saria I and Saria II.

1.3 In course of inquiry it was found that while private ledger, Roz Nama and Nakal Bahi had been written by an employee Shri Shiv Charan, the other documents  the daily receipt and despatch sheets were being prepared by Shri Murari Lal Sharma and the delivery orders were being signed by Shri Ghasi Lal Sharma. On the date of search on 10/09/05, the Investigating Officers were told by Shri Murari Lal Sharma that the private ledger/Nakal Bahi had been written by Shri Shiv Charan who is not present and that he will be produced the next day. Though the officers repeatedly asked Shri Ghasi Lal Sharma and Shri Murari Lal Sharma to produce Shri Shiv Charan who is the clerk who had written Nakal Bahi and private ledger, but Shri Shiv Charan was never produced.

1.4 On the basis of the daily receipt and despatch sheets, Nakal Bahi, Roz Namcha and private ledger, the Investigating officers prepared 4 charts  Chart A, Chart B, Chart C and Chart D in which they listed out the despatch entries during the period from April 2005 to 08/09/2005 pertaining to Saria II and pertaining to the steel scrap and rejects in respect of which there was no invoices. Since, there was no explanation from Shri Ghasi Lal Sharma or Shri Murari Lal Sharma as to why there are no bills or invoices in respect of these clearances and since there were no Central Excise invoices issued in respect of these despatches, the officers were of the view that these goods had been cleared clandestinely without payment of duty. The Chart A, pertains to the clearances during the month of July 2005, Chart B, pertains to the clearances during August 2005, Chart C, pertains to the clearances during period from 01/09/05 to 08/09/05 and Chart D, pertains to the clearances from 1st April 2005 to 30/06/2005. These charts were shown to Shri Ghasi Lal Sharma and Shri Murari Lal Sharma and both of them initialled the same without expressing any objection about their correctness. On the basis of these charts, it has been alleged that during the period from 01/04/05 to 08/09/05 the appellant company cleared Saria (TMT Bars) and small quantity of scrap and rejects without payment of duty which in respect of these goods was Rs. 7,22,15,192/-. The total value of the goods which appeared to have been cleared clandestinely was Rs. 45.55 crores.

1.5 From the daily receipt and despatch sheets and the private ledger book, the officers also compiled the details of the receipt of MS Ingots during the period from 1st April 2005 to 08/09/2005 and in this regard they prepared two charts Chart G and Chart H. While Chart G, is for receipt of MS Ingots during period from 1st April 2005 till 30th June 2005, the Chart H, is in respect of receipt of MS Ingots during the period from 1st July 2005 to 08/09/2005. The figures regarding receipt of MS Ingots mentioned in these charges are those which appeared to have been received from the Ingots suppliers without any invoice. These charts were also shown to Shri Ghasi Lal Sharma and Shri Murari Lal Sharma. As per these Charts during the period from April 2005 to 08/09/2005 the appellant company had received total of 5050 MT of MS Ingots from various suppliers without any invoices and it appeared that this receipt of MS Ingots had not been accounted for. However, the Department does not demand duty on the basis of unaccounted receipt, but this unaccounted receipt is being used by the Department as an evidence in support of its allegation of unaccounted manufacture and clandestine removal of Saria by the appellant company during the period from April 2005 to 08/09/2005.

1.5.1 It was found that even after the search of the factory on 10/9/05, the Appellant company had continued to receive unaccounted ingots from M/s Nirmal Inductomelts Pvt. Ltd. till 01/10/05. On the basis of the quantity of MS Ingots received during this period, it was estimates by the offices at after taking into account 8% burning loss, 202.88 MT of TMT bars had been manufactured without any accounted and these bars had been cleared clandestinely. Duty demand of Rs. 6,77,061/- is on this basis.

1.6 The Investigating officers found that during July 2005 and August 2005 the production of MS Bars (Saria) as recorded by the appellant company was 1682.6 MT and 2307.7 MT respectively and during these months their electricity consumption was 393188 units and 534874 units respectively. However, since in terms of the seized daily receipt and despatch sheets, during months of July 2005 and August 2005 there were unaccounted sales of 2529.86 MT and 2570.14 MT respectively of Saria, according to the Department the actual production during the months of July 2005 and August 2005 was 4212.46 MT and 4877.84 MT respectively. Thus, according to the Investigating Officers, while actual production during the months of July 2005 and August 2005 was 9090.3 MT of Saria, the total power consumption during these two months was 928062 units. On this basis, the Investigating officers were of the view that average power consumption for production of per MT of Saria in the appellants units is 102.09 units. The officers applied this power consumption norm for the period from April 2002 to March 2005 and accordingly divided the total power consumption during the period from April 2002 to March 2005 by 102.09 MT and on this basis estimated the production of Saria, and on comparing the production estimated in this manner with the production of Saria during April 2002 to March 2005 period, as recorded by SSSRM in their records, it has been alleged that the balance amount not recorded in the Central Excise records had been manufactured and clandestinely cleared without payment of duty. The duty demand of Rs. 16,38,63,265/- is on this basis.

1.7 It is in view of the above investigation, that a show cause notice dated 09/02/07 was issued to the appellant company for recovery of total Central Excise duty amounting to Rs. 23,58,86,027/- alongwith education cess of Rs. 23,27,336/- under proviso to Section 11A (1) of Central Excise Act, 1944 alongwith interest on it under Section 11AB and also for imposition of penalty on the appellant company under Section 11AC of Central Excise Act, 1944 and imposition of penalty under Rule 25 of the Central Excise Rules, 2002 on Shri Ghasi Lal Sharma and Shri Murari Lal Sharma. Since, the appellant company had paid an amount of Rs. 60 lakhs during investigation, the show cause notice also sought appropriation of this amount against the above-mentioned duty demand.

1.8 The above show cause notice was adjudicated by the Commissioner vide order-in-original dated 04/02/09 by which the above-mentioned duty demand was confirmed in toto against the appellant company alongwith interest on it under Section 11AB and amount of Rs. 60 lakhs also paid prior to the show cause notice was ordered to be appropriated against this demand. Beside this, while penalty of amount equal to the duty demand confirmed was imposed on the appellant company under Section 11AC, penalty of Rs. one crore was imposed on Shri Ghasi Lal Sharma, Director under Rule 26 of the Central Excise Rules and penalty of Rs. 5,00,000/- was imposed on Shri Murari Lal Sharma under Rule 26 of the Central Excise Rules. Against this order of the Commissioner, these three appeals have been filed alongwith stay applications.

1.9 In respect of stay application filed by the appellants, the Tribunal vide order dated 08/12/11 had directed the appellant company to pre-deposit an amount of Rs. 6 crores for compliance with provision of Section 35F within the period specified in this order and report compliance on 16/03/12. The appellant company challenged this order before Honble Rajasthan High Court and the Honble Rajasthan High Court while confirming the Tribunals stay order extended the period of pre-deposit. The appellant complied with the Tribunals order regarding pre-deposit as modified by Honble Rajasthan High Court. Subsequently, the stay on recovery was extended. The Revenue, however, filed a petition before Honble Rajasthan High Court against the Tribunals order extending the stay, praying for the vacation of the stay on recovery. Honble Rajasthan High Court vide order dated 01/12/14 directed the Tribunal to decide the appeals as expeditiously as possible, preferably within the period of six months from the date of the order. In accordance with the above order of Honble Rajasthan High Court, these appeals were heard on 20th May, 2015 and 21st May, 2015.

2. Heard both the sides.

3. Shri R. Santhanam, Advocate and Shri Bharat Agarwal, Advocate representing the appellants made the following submissions :-

(a) The duty demand of Rs. 7,28,92,253/- is based on alleged unaccounted manufacture and clandestine removal of Saria as detailed in Chart A, Chart B, Chart C and Chart D annexed to the show cause notice. The details in these charts have been taken from the daily receipt and despatch sheets recovered from the factory premises in respect of which according to the Department, there were no invoices issued by the appellants. In this regard, the Department has treated all the despatch entries under the heading Saria II and in respect of which, according to the Department, there are no invoices, as clandestine removal of Saria. This allegation of the Department is without any basis, as all the despatch entries pertaining to Saria II are actually the sales of CTD bars which were not being manufactured by the appellant company, but were being purchased from other manufacturers. The sales of the CTD bars were being made by M/s Meenakshi Steels, a Proprietary concern of Shri Ghasi Lal Sharma. All the sales/ despatch of Saria II are the sales of CTD bars by M/s Meenakshi Steels for which the regular bills had been issued and these bills had also been recovered from the factory ;

(b) Though the entries in the daily receipt and despatch sheets mentioned the buyers names also, no inquiry has been conducted with the buyers even though the telephone numbers of the buyers had been provided by Shri Ghasi Lal Sharma ;

(c) Shri Ghasi Lal Sharma in his statement had clearly stated that they do not manufacture the Saria of higher gauges and that whenever they receive an order for supply of such Sarias, the same are purchased from outside ;

(d) from the very beginning, the stand of the appellant company had been that the its manufacturing capacity is 5 M.T. per hour. The appellant companys factory normally works in two shifts and, therefore, assuming that the factory has worked every day during the month, in two shifts its maximum production capacity would be only 2400 M.T. per month, while if the allegation of the Department relating to the clandestine removal of Saria worth about Rs. 45 crores during period from 1st April 2005 to 08/09/2005 is accepted, it would imply that the rolling mill had manufactured the Sarias several times its capacity of production. The appellant unit has no capacity to produce the quantity of CTD bars which they are alleged to have produced and clandestinely cleared ;

(e) The appellant had also filed Chartered Engineers certificate certifying that the appellant unit manufactures only TMT bars and TMT bars are different in their physical properties from CTD bars and that the appellant unit has no facility to manufacture CTD bars. The despatch of Saria II mentioned in the despatch sheets are the clearances of CTD bars which had not been manufactured by the appellant, but had been procured from the outside and sold by the trading of M/s Meenakshi Steels ;

(f) The Department alleges that during the period from 1st April, 2005 to 08/09/2005, the appellant unit had received 5050 MT of unaccounted MS Ingots and in this regard the Department uses as corroboration of the statement of three suppliers. However, the cross examination of the concerned persons of the suppliers has not been allowed and hence no reliance can be placed on those statements. Merely on the basis of entries regarding unaccounted receipt of MS Ingots, the Department cannot allege that the appellant during the period from April 2005 to September 2005 had received 5050 MT of unaccounted MS Ingots which had used on unaccounted production of Saria ;

(g) The Apex court in the case of Kishin Chand Chela Ram vs. Commissioner of Income Tax reported in AIR 1980 SC 2117 and also in the case of Shalimar Rubber Industries vs. Collector of Central Excise, Cochin reported in 2002 (146) E.L.T. 248 has held that oral statement of the supplier regarding supply of certain goods to an Assessee cannot be used against that assessee without permitting the cross examination of the supplier;

(h) The Department had booked the cases of duty evasion against the suppliers of Ingots but on appeals being filed to Tribunal against those orders, the same have been allowed by the Tribunal ;

(i) Shri Santhanam in view of the above submissions, pleaded that the duty demand of Rs. 7,28,92,253/- in respect of alleged clandestine removal of Saria and small quantity of scrap rejects is without any basis. He pleaded that this matter may be remanded to the Commissioner for denovo adjudication as in respect of number of other allegations based on the statements of raw material supplier their cross examination had not allowed and certain records on which this duty demand is based have not been supplied and have not been verified for corroboration.

(j) With regard to the duty demand of Rs. 16,38,63,265/- for the period from April 2002 to March 2005 based on the power consumption ratio of 102.09 MT, he pleaded that this power consumption ratio has been determined arbitrarily. He pleaded that for determining this power consumption ratio, the Department took the production of the Saria recorded in statutory records during July 2005 and August 2005 and for this recorded production of Saria, has added the alleged clearances of Saria  II during those months based on the daily receipt and despatch sheets and has assumed the quantity alleged to have been cleared clandestinely during these months as having been produced during the same months, for which there is no justification. Moreover when the allegation of clandestine removal during July 2005 and August 2005 is without any basis, there is no justification for backing into account the clandestine clearances during these two months for determining the power consumption ratio. He also pleaded that other than the assumed power consumption of 102.09 MT, there is absolutely no evidence of any unaccounted purchase of raw material or evidence of clandestine removal for the period from April 2002 to March 2005 and, hence, the duty demand of Rs. 16,38,63,265/- for this period, based on purely assumed power consumption is without any basis. At the time of search of the factory of the appellant company on 10/09/05 no stock of finished products and raw material had been checked and no discrepancy had been found.

(k) The entire case against the appellant company is based on the records seized from the factory premises. The Investigating officers have mis-interpreted the despatches of Saria  II to be the TMT bars manufactured by the appellant while Saria II sales are Sales of CTD bars purchased appellant company from M/s Meenakshi Steels from outside and supplied to various parties and, therefore, in respect of sales of Saria II there would be no service tax liability. He also pleaded that number of transactions of Saria II on commission basis, wherein the supply of CTD bars had directly supplied to the customers of M/s Meenakshi Steels and M/s Meenakshi Steels had only collected the commission.

He pleaded that these aspects have been over-looked by the Adjudicating Authority.

Shri Santhanam accordingly pleaded that the impugned order is not sustainable.

4. Shri Ranjan Khanna, the learned DR, while reiterating the findings of the Commissioner in the impugned order, made the following submissions :-

(1) the factory premises of the appellant had been visited by the Central Excise officers on 10/09/05 and in course of search, certain loose papers/sheets containing details of the despatch of the goods had been recovered from the custody of the Murari Lal Sharma, General Manager of the appellant company and on further examination various documents lying in the factory office of the appellant company had been recovered. These documents marked 1 to 21 had been taken over under a resumption memo. Subsequently while taking round of the unit with the Director a lag was found in one of the rooms of the factory and that lag was found to be containing the receipt and despatch sheets of Sarias manufactured and MS Ingots received also the ledger books for period from April 2005 to 09/08/2005. These documents were recovered under a separate resumption memo drawn on the same day. At that time the statements of Shri Ghasi Lal Sharma and his General Manager Shri Murari Lal Sharma were recorded in course of which they were questioned about contents of the seized/resumed documents and they stated that these documents relate to the despatch of finished goods manufactured in the factory and purchase of raw material i.e. MS Ingots, beside several other documents. Both the statements dated 12/09/05 of Shri Ghasi Lal Sharma and Shri Murari Lal Sharma have not been retracted till date. These statements are admissible as evidence in view of judgment of the Apex court in the case of CCE, Mumbai vs. Kalvert Foods India Pvt. Ltd. reported in 2011 (270) E.L.T. 643 (S.C.).

(2) The duty demand of Rs. 7,28,92,253/- against the appellant company is based on the documents called -

(a) delivery orders which had been signed by Shri Ghasi Lal Sharma or his son Shri Sharvan Sharma ;

(b) daily receipt/despatch sheets signed by Shri Murari Lal Sharma ;

(c) Nakal Bahi/Roz Namcha (daily book) prepared by Shri Shiv Charan and

(d) private ledger book also prepared by Shri Shiv Charan. Shri Shiv Charan was not present in the factory at the time of its search on 10/09/05. Though Shri Ghasi Lal Sharma and Shri Murari Lal Sharma had promised to produce the Shiv Charan who has written Nakal Bahi/Roz Namcha and private ledger but he has not been produced so far. Based on the entries regarding despatch of Saria II and scrap/ rejects in the daily receipt despatch sheets for which there are no invoices, the Investigating officers have prepared for the charts A, B, C and D. In these charts those entries have been included which are in respect of despatch of Sarias II and scrap/rejects in respect of which there were no invoices issued by the appellant company and, hence, these despatches represent clandestine removals of Sarias and scrap. These charts had been shown to Shri Ghasi Lal Sharma and Shri Murari Lal Sharma and the same had been initial by them without any comment or protest. While Chart is in respect of alleged clandestine clearances of goods during July 2005, Chart B is in respect of alleged clandestine removal during August 2005, Chart C is in respect of alleged clandestine removals during April 2005 to June 2005 and Chart D is in respect of alleged clandestine removals during period from 1st September 2005 to 8th September 2005. Shri Murari Lal Sharma in his statement dated 02/8/06, after stating that he fully agrees with his statements given by him on 10/9/05, 21/9/05 and 28/9/05, on being asked about the Charts A, B, C and D stated that he fully agrees with the same and that he has compared the charts with the day book/delivery orders.

As regards Shri Ghasi Lal Sharma, he in his statement dated 27/4/06 stated that he has seen the material received and despatch chart prepared by the officials on the basis of the seized documents and these charts have been prepared from the documents seized from the factory. Shri Ghasi Lal Sharma in his further statement dated 15/5/06 has once again confirmed that he has seen the charts A to H prepared by the Investigating officers and put his signatures on the same and that the charts A, B and C have details of Saria despatches from the factory, that the chart D contains the details of Saria despatches from the factory during September and the chart G & H are in respect of receipt of the MS Ingots during April 2005 to 08/09/2005 period. Shri Ghasi Lal Sharma in his statements dated 27/4/06 and 15/5/06 never stated that the despatch of Saria II on the basis of which the charts A, B, C and D have been prepared, pertain to the sales of CTD bars traded from the factory and similarly in the statements of Shri Murari Lal Sharma also while agreeing with the Charts A, B, C and D, no statement had been made, that the clearances mentioned in these charts are the clearances of CTD bars purchase from other manufacturers.

The above statements of Shri Murari Lal Sharma and Shri Ghasi Lal Sharma have not been retracted by them ;

(3) Shri Ghasi Lal Sharma in his statement dated 12/09/05 had stated that they cannot manufacture the big gauge Saria, the same are purchased from the outside, but at the same time Shri Ghasi Lal Sharma in this statement also stated that as per his knowledge there is no purchase of Saria during last six months and thus Shri Ghasi Lal Sharma in his statement has denied any trading activity in the factory during last six months. The Saria  II sales are during this period only.

(4) As regards the appellants plea that the production capacity of their rolling mills is 5 MT per hour, that they normally operate in two shifts and on this basis they cannot manufacture more than 2400 MT in a month, this plea had never been made before the original Adjudicating Authority

(5) During the period from 1st April 2005 to 08/09/2005 a total of about 5050 MT unaccounted MS Ingots have been received by the appellant company from 18 Ingots manufacturers out of which inquiry was conducted with three manufacturers  M/s Gee Diamond Steels ; (b) M/s Amar Pratap Steel and (c) M/s Nirmal Inductomelts Pvt. Ltd. and all of them in their statement have confirmed supply of the quantity of MS Ingots which is reflected in the appellants ledger book. Even after the search of the appellant companys premises on 10/9/05 it was found that M/s Nirmal Inductomelts Pvt. Ltd., Jaipur had despatched certain quantity of MS Ingots without any invoices out of which, after taking into account the burning loss, the appellant company would have manufactured 202.88 MT of MS Ingots. The duty demand of Rs. 6,77,061/- out of total duty demand of Rs. 7,28,92,253/- based on the documents recovered from the factory is on this basis. M/s Nirmal Inductomelts Pvt. Ltd. in respect of clandestine removal of MS Ingots, to the appellant unit and to a number of other rolling mill had filed an application before the Settlement Commission admitted the duty evasion and their matter has been settled by the Settlement Commission.

(6) As regards the appellants plea that despatch of Saria  II in the daily receipt and despatch sheets are the sales of CTD bars by trading company M/s Meenakshi Steels who had purchased the CTD bars from other manufacturers, this plea is not acceptable and is an afterthought for the reason that  (a) both Shri Murari Lal Sharma and Shri Ghasi Lal Sharma in their statements recorded on 10/9/05 have stated that the documents recovered from the factory pertain to the goods manufactured and cleared from the factory and (b) in their subsequent statements Shri Ghasi Lal Sharma had admitted trading only in respect of the bigger gauges of the TMT bars which they do not manufacture and had also stated that there has been no purchase of any higher gauges Sarias during last six months. In those statements neither Shri Murari Lal Sharma nor Shri Ghasi Lal Sharma mentioned M/s Meenakshi Steels made the claim that the despatch of Saria  II reflected in the daily receipt and despatch sheets are of sales of CTD bars of M/s Meenakshi Steels. Pointing out to Commissioner findings in para 66.06 of the impugned order Shri Khanna pleaded that as observed by the Commissioner, the price of Saria I and Saria II is the same while the value of TMT bars is more than CTD bars. Therefore, the claim of the appellant company that the despatch of Saria II are, in fact, the sales of CTD bars purchased by M/s Meenakshi Steels from other manufacturers is totally incorrect.

(7) Shri Khanna also pointed out to the statements of Shri Shri Murari Lal Sharma and Shri Ghasi Lal Sharma wherein on being shown the charts A, B, C & D prepared on the basis of daily receipt and despatch sheets for the month of April 2005 and 08/09/2005 they had stated that these charts contain the details of despatch of finished goods from their factory. The appellant company has not sought any permission from the Jurisdictional Central Excise Authorities for receipt of duty paid goods from outside for trading the same from the factory premises. For this reason also the claim of the appellant company that Saria II are CTD bars which had been purchased from outside by M/s Meenakshi Steels and sold from the factory premises is totally incorrect.

(8) Even in their reply dated 23/5/07 and at the time of personal hearing on 19/6/07, 31/10/07, 27/5/08 the appellants never mentioned that the despatches of Saria II mentioned in the daily receipt and despatch sheets for the period from April 2005 to 08/09/2005 are actually the sales of CTD bars traded by the trading firm M/s Meenakshi Steels owned by Shri Ghasi Lal Sharma. Shri Khanna, therefore, pleaded that the duty demand of Rs. 7,28,92,253/- is on sound footing as it is based on concrete evidence on record.

(9) As regards the duty demand of Rs. 16,38,63,265/- for the period from April 2002 to March 2005 based on the power consumption ratio of 102.09 units per MT of rolled products, Shri Khanna pleaded that the power consumption ratio of 102.09 units per MT of rolled products had been determined on the basis of actual production during July 2005 and August 2005 and actual power consumption during these two months. He pleaded that while the quantum of power consumption during July 2005 and August 2005 is not disputed, the appellant had under reported the production of Sarias during these two months and actual production of Saria during these two months had been determined on the basis of the documents recovered from the factory i.e. daily receipt and despatch sheets. He, therefore, pleaded that on the basis of the actual production of Saria during July 2005 and August 2005 the power consumption ratio of 102.09 units per MT had been correctly determined and therefore there is no infirmity in the impugned order confirming demand of Rs. 16,38,63,265/- during the period from April 2002 to March 2005.

5. We have considered the submissions from both the sides and perused the records.

6. The undisputed facts are that the appellants are manufacturers of Thermo Mechanically Technically Bars (TMT Bars). The duty demand of Rs. 7,28,92,253/- including duty demand of Rs. 6,77,071/- based on alleged unaccounted receipt of MS Ingots by SSSRM from Nirmal Inductomelt Pvt. Ltd. for the period from 1st April 2005 to 08/09/2005, is based on the documents recovered from the appellants factory on 10/09/05 which consist of  (a) delivery orders (b) daily receipt and despatch sheets and (c) Nakal Bahi, Roz Nama and private ledger. There is no dispute that the delivery orders are signed by Shri Ghasi Lal Sharma, Director of the appellant company or his nephew Shri Sharvan Sharma. The daily receipt and despatch sheets have been prepared by/signed by Shri Murari Lal Sharma, the General Manager. There is also no dispute that the Nakal Bahi/Roz Nama and private ledger book have been prepared by their clerk Shri Shiv Charan who have not been produced before the Investigating Officer. On the basis of the entries regarding despatch of the goods which were in respect of Saria II and in respect of which there were no Central Excise invoices issued, the Investigating Officers have prepared in the Charts A, B, C and D alleging that the despatches of Saria II and of scrap/rejects for which no invoices have been prepared are clandestine removal of the finished goods.

The plea of the appellant is that the despatches of Saria II mentioned in the daily receipt and despatch sheets are in fact the sales of CTD bars made by a trading company M/s Meenakshi Steels owned by Shri Ghasi Lal Sharma and that Saria II are not the goods manufactured by the appellant. In this regard they refer to the bills/cash memo issued by M/s Meenakshi Steels which according to them had been recovered from the factory alongwith other documents which have been ignored by the Investigating Officers. The departments contention, on the other hand, is that firstly, at the time of search of the factory premises both Shri Ghasi Lal Sharma and Shri Morari Lal Sharma, in their respective statement recorded on that day had accepted that the documents recovered from the factory pertain to the goods manufactured and cleared from the factory and secondly both Shri Ghasi Lal Sharma and Shri Morari Lal Sharma in their subsequent statements recorded on different dates over a period of about one year have never claimed that Saria II mentioned in the daily receipt and despatch sheets are CTD bars being traded by M/s Meenakshi Steels and on the contrary both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma in their several statements, which have given on different dates, and which have not been retracted have accepted that they have seen the Charts A, B and C prepared by the Investigating officers and the same pertain to the finished goods cleared from the factory.

It is also pleaded by the Department that price of Saria I and Saria II is same while TMT bar is much costlier than the CTD bars and, hence, the appellants claim regarding despatch of Saria II being sales of CTD bars by M/s Meenakshi Steels cannot be accepted.

6.1 On considering the rival submissions on this point we are of the view that the entries regarding despatches of Saria II in the daily receipt and despatches sheets recovered from the factory premises have to be treated as clearances of TMT bars only as  the price of Saria I and Saria II is same, while TMT Bar is much costlier that the CTD bar and, therefore, the appellants claim that Saria II despatches are the sales of CTD bar by M/s Meenakshi Steel made from the appellants factory is difficult to accept. Moreover both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma in their statements given over a period of one year and which have not been retracted, have stated that the documents recovered from the factory pertain to the finished goods cleared from the factory. If this is so, their claim that despatches of Saria II from the factory are the sales of CTD bars made from the factory which has been purchased from the outside is difficult to accept, more so, as no intimation had been given by the appellant company to the Jurisdictional Central Excise Authorities regarding receipt of duty paid CTD bars from outside and their sale from the factory.

It is also seen that the claim that the clearances of Saria II mentioned in the daily receipt and despatch sheets are clearances of CTD bars made by M/s Meenakshi Steels as trading activity, was for the first time about 1= year after the issue of show cause notice and even after personal hearing before the Commissioner. No such claim had been made during investigation. Even if the appellants plea that the bills issued by M/s Meenakshi Steels regarding sale of CTD bars had been recovered from the factory but the same were ignored is accepted, there is no explanation as to why during investigation of this matter, when Shri Ghasi Lal Sharma and Shri Murari Lal Sharma were repeatedly questioned and their several statements were recorded, this plea was not made. In view of this, the appellants plea made long after the issue of show cause notice and even the after conclusion of the personal hearing that the despatches of Saria II, as reflected in the daily receipt and despatch sheets recovered from the factory, are the sales of CTD bars made by a group trading concern M/s Meenakshi Steel cannot be accepted.

In view of this, we hold that the duty demand of Rs. 7,22,15,192/- based on the Chart A, B, C and D, which, in turn, have been prepared on the basis of daily receipt and despatch sheets and delivery orders recovered from the factory premises has to be upheld.

7. As regards the duty demand of Rs. 6,77,061/- for the period from 10/09/05 to 01/10/05, this duty demand is based on the records recovered from the appellant company which indicated that during this period they had received certain quantity of MS Ingots from Nirmal Inductomelts Pvt. Ltd. without any invoices. In this regard we find that the inquiry has been conducted with Shri B.B. Modik of Nirmal Inductomelts Pvt. Ltd. who had accepted the sale of this quantity to the appellant company. Beside this, Nirmal Inductomelts Pvt. Ltd. have also filed an application before the Settlement Commission admitting their duty liability in respect of the goods clandestinely cleared by them to the appellant company as well as to a number of other rolling mill and their matter had been settled by the Settlement Commission. In view of this, it has to be held that during the period from 10/09/05 to 01/10/05 the appellant company received certain quantity of MS Ingots from Nirmal Inductomelts Pvt. Ltd. without any accountal which has obviously been used for manufacture of TMT bars and after taking into account 8% burning loss, the bars estimated to have been manufactured are 202.888 MT on which the duty liability is Rs. 6,77,061/-. In view of this, we hold that duty demand of Rs. 6,77,061/- has also to be upheld.

8. Coming to the duty demand of Rs. 16,38,63,265/- this duty demand is for the period from April 2002 to March 2005. For this period, neither there is any evidence of unaccountal purchase of MS Ingots, the raw material nor there is any evidence of any clandestine removal in form of any document having been recovered from the factory showing any despatches without any Central Excise invoices. This demand is purely based on the Departments stand that for production of 1 MT of rolled products, 102.09 units of electricity is required. On this basis, the production during the period from April 2002 to March 2005 has been estimated by dividing the total power consumption by 102.09 MT and by comparing this estimated production with the production of rolled products as recorded by the appellant in their books of accounts, the duty of Rs. 16,38,63,265/- has been demanded on the balance quantity. The key question in respect of this duty demand is as to whether the determination of power consumption norm of 102.09 MT is correct or not. In this regard, the Department has given the details of its calculation in Annexure IV of the show cause notice.

As per the calculation in Annexure IV of the show cause notice, the Department has determined the actual production during the months of July 2005 and August 2005 by adding to the recorded production of 3990.30 MT during these two months, the alleged production of 5100 MT based on the unaccounted sales of this quantity as per the records. Thus according to the officers during July 2005 and August 2005 the total production of the appellants factory was 3990.3 + 5100 MT i.e. 9090.3 MT. The power consumption ratio of 102.09 MT has been determined by dividing the total power consumption of 9,28,062 units during July 2005 and August 2005 by 9090.3 MT. In our view, this method of calculating the power consumption norm is not correct as the sales of 5100 during July 2005 and August 2005 could be of the production during the previous months also and it is not necessary that the unaccounted goods weighing 5100 MT, sold during July 2005 and August 2005 may have been manufactured during these months only. For determining the power consumption ratio, what is required is the total power consumption during a particular period and the actual production during that period.

For this purposes, the goods sold during that period cannot be assumed to have been produced during that month. Other than, this basis of determining power consumption ratio in Annexure IV, no other evidence has been produced by the Department in support of its claim of power consumption norm of 102.09 MT in as much as neither any technical literature of the supplier of the rolling mill has been produced nor any actual experiment in this regard was conducted. It is well settled law that merely on the basis of power consumption norm which has not been determined by actual experiment, duty demand against an assessee cannot be confirmed when there is no corroboration experiment regarding receipt of unaccounted experiment and despatch of finished product. In view of this, we hold that the duty demand of Rs. 16,38,63,265/- is not sustainable and has to be set aside.

9. In view of the above discussion, while the duty demand of Rs. 16,38,63,265/- is set aside, the duty demand of Rs. 7,28,92,253/- is upheld alongwith interest. The penalty on the appellant company under Section 11AC is also be reduced to Rs. 7,28,92,253/-.

10. As regards penalty under Rule 26 on Shri Ghasi Lal Sharma, Director of the appellant company and Shri Murari Lal Sharma, General Manager of the appellant company, the same is reduced to Rs. 10,00,000/- (Rupees Ten Lakhs) and Rs. 50,000/- (Rupees Fifty Thousand) respectively. The appeals filed by the appellants are thus partly allowed. The miscellaneous application filed by the Department also stands disposed.

(Dictated and pronounced in open court.)

(Rakesh Kumar)

Member (Technical)

(Sulekha Beevi C.S.)

Member (Judicial)

PK

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