Allegation of Clandestine manufacture and removal of Ingots without payment of duty on basis of electricity consumption - a long and tiring journey!
IF you want to know more details of the above case, read on….
This is a case where the department has alleged clandestine manufacture and removal of MS Ingots without payment of duty.
The department has based their allegation on the study conducted by Dr.N.K. Batra, Professor of IIT, Kanpur and the opinion given by All Indian Induction Furnace Association. Inasmuch as the department has come up with a formula that 1026KW of electricity is required to manufacture 1MT of MS ingots. And by taking the electricity bills raised by Maharashtra State Electricity Board as the base, the Revenue has alleged that during the period in dispute all the manufacturers should have manufactured the quantities as alleged in the SCNs.
Vide different adjudication orders the demands were confirmed with interest and penalties were imposed. But naturally, the demands are in crores of rupees.
The appellants, 38 of them which included more than two dozen manufacturers, took the matter to the CESTAT.
And the Division Bench of Shri P G Chacko , Member(J) [writing for the Bench] & Shri S K Gaule , Member (T) while ordering pre-deposit of 50% of the duty and 25% of penalty observed -
"When a person indulges in clandestine manufacture and removal of goods, he will not keep any records - When the department discharged their initial burden of proof by showing excess consumption of electricity (a major input) by the appellants, the latter did not have any valid explanation to offer. Hence the Revenue cannot be faulted for demanding duty on the steel ingots which could have been manufactured by consuming the excess quantity of electricity."
We reported this order dated 28.02.2011 as 2011-TIOL-288-CESTAT-MUM.
Not pleased with this Stay order, one of the appellants SRJ PEETY STEELS PVT LTD filed an appeal before the Bombay High Court citing the Tribunal order in Nasik Strips Pvt. Ltd. vs. Commissioner of Central Excise, Nasik 2010-TIOL-1110-CESTAT-MUM and several other decisions of the CESTAT, wherein, the CESTAT had granted full waiver of the deposit, as an interim relief, where the facts were similar to their case.
Holding that the Tribunal should take a consistent view regarding pre-deposit when the facts and circumstances in the matters before it are similar, the matter was remanded by the High Court. We reported this order dated 20.07.2011 as 2011-TIOL-695-HC-MUM-CX.
The Revenue SLP filed against this order of the High Court was dismissed by the Supreme Court.
In remand proceedings, whereas the Member (Judicial) Shri Ashok Jindal took a view that the facts of the case in hand are similar to the facts of the case of Nasik Strips Pvt Ltd. - & Mithulal Gupta and Bhagwati Ispat Pvt. Ltd. - wherein the Bench has granted unconditional waiver of pre-deposit, he held that the applicant had made out a case of 100% waiver of pre-deposit.
The Member (Technical) Shri P.R.Chandrasekharan took an opposite stand and referring to Orange City case [Order dated 23.11.2011] where in a similar set of circumstances, the Bombay High Court had directed to make a pre-deposit of 25% of demand of duty at the interim stage of stay, directed the present appellant to also make pre-deposit of 25% of the duty adjudged.
The third Member on reference, Shri S.S.Kang , Vice President observed that there is no evidence on record in respect of receipt of unaccounted raw material or clandestine clearance of goods manufactured by the applicant or any admission by the applicant. And holding that the Tribunal decision R.A. Casting - in a similar set of facts had allowed the appeal, the Vice President granted waiver from pre-deposit.
And so, by a Majority decision the appellant was granted waiver from making any pre-deposit.
We reported this order dated 27.02.2013 as 2013-TIOL-1945-CESTAT-MUM.
Incidentally, some of the other appellants [Orange City Alloys Pvt. Ltd. &Ors] who were involved in the Stay order had also filed appeals before the Bombay High Court. Their appeals were heard by a Division Bench other than that which had heard the appeal of SRJ Petty Steels and the Bench observed that it was unable to agree with the decision dated 20.07.2011 remanding the case back to the Tribunal. The Division Bench referred the matter to a Larger Bench. See this order dated 24.10.2011 - 2011-TIOL-661-HC-MUM-CX.
The Larger Bench of the Bombay High Court heard the matter and passed the following order on 09.11.2011-
28) For all the aforesaid reasons, we answer the question referred to us by holding that the Aurangabad Bench in the case of M/s. SRJ Peety Steels Pvt. Ltd. (supra) was not justified in remanding the proceedings back to the CESTAT for reconsideration without expressing its view as to the validity of the impugned order dated 28th February, 2011 or the validity of the orders of the CESTAT in the case of Nasik Strips Pvt. Ltd. (supra) and Mithunlal Gupta (supra). Accordingly, we hold that the decision of the Aurangabad Bench cannot be treated as precedent and the Division Bench of this Court would be within its power to dispose of the appeals on its own merits without being bound by the decision of the Aurangabad Bench in the case of M/s. SRJ Peety Steels Pvt. Ltd. (supra).
See 2011-TIOL-701-HC-MUM-CX-LB.
The appeal filed by Orange City Alloys Pvt. Ltd. was heard by the Division Bench of the High Court and vide Order dated 23.11.2011,the High Court directed the Appellants to make a pre-deposit of twenty five per cent of the demand for duty; dispensed with the deposit of penalty and also directed the Tribunal to dispose of the appeal.
We reported this order as 2011-TIOL-950-HC-MUM-CX.
All the appeals were heard together by the CESTAT.
Again, there was a difference of opinion.
The Vice President Shri. S.S.Kang observed that the case of the Revenue is on the basis of electric consumption only and in view of the Tribunal decision in R A Casting Pvt Ltd which was upheld by the Allahabad High Court and the Supreme Court, the orders are required to be set aside and the appeals were allowed.
However, the Member (Technical) Shri P.K. Jain in a detailed order distinguished the Tribunal order cited of R A Casting & after admitting additional evidence submitted by the Revenue upheld the orders of the adjudicating authorities and dismissed all the appeals.
So, in view of the difference in opinion, the matter came to be referred to the Third Member.
We reported this order dated 31.01.2014 as
Rest as they say is history and as detailed above.