Decided on March 19,2015



Rakesh Kumar, Member (T) - (1.)THE facts leading to filing of this appeal by the Revenue are, in brief, as under.
1.1 The respondent are manufacturers of rolled products of Iron and Steel chargeable to Central Excise duty falling under Chapter 72 of the Central Excise Tariff. In course of inquiry conducted in respect of the respondent company, it was found that during 2006 -2007 in their profit and loss account they have shown an income of Rs. 35,05,614/ - from commodity trading in Multi Commodity Exchange of India, Mumbai (MCX) through a Member of the exchange M/s. Ramdoot Management Pvt. Ltd., Kolkata. On inquiry with MCX, the Department was informed by Assistant Vice President (Legal) MCX, Mumbai vide letter dated 29/9/09 that as per their unique client code data base of the exchange, the respondent company M/s. Shiv Real Ispat Pvt. Ltd., Raipur is not a client registered with their Members M/s. Ramdoot Management Pvt. Ltd., Kolkata and that the trades mentioned in the copy of contract notes issued by the Member M/s. Ramdoot Management are not matching with the trades executed in the exchange. On the basis of this letter, the Department was of the view that the transactions of commodity trading shown by the respondent are bogus transactions and that the income of Rs. 35,05,614/ - shown for the year 2006 -2007 is actually the income from the respondent's clandestine removal of their finished goods on which, the duty involved is Rs. 5,77,725/ -.

1.2 It was also found that there was difference between the sales declared in the ER -1 returns filed during different months of 2006 -2007 and also the sales figures as reflected in their books of accounts the figures in the ER -1 returns being lower and the difference was Rs. 6,60,070/ -. The Department was of the view that the value of the goods cleared has been suppressed to this extent and duty payable on which would be Rs. 1,05,611/ -. Further inquiry revealed that average consumption of electricity for production of their finished goods MS Flats, MS Squares, MS Rounds etc. varied from 150 units per M.T. to 786 units per M.T. It was found that even the average annual consumption of electricity also varied from 327 units per M.T. to 402 units per M.T. which appeared to be abnormally high. The capacity utilisation of the respondent company during 2006 -2007 was found to be 31.41% while the same during 2007 -2008 and 2008 -2009 was found to be 43.65% and 64.73% respectively. The Investigating officers were of the view that such low capacity utilisation indicated that the entire production was not being reflected in the books of accounts. Beside this, the value edition during the year 2007 -2008 and 2008 -2009 was found to be 55.31% and 7.12%.

1.3 It is on this basis that the show causer notice dated 09/02/2011 was issued to the respondent for recovery of Central Excise duty of Rs. 6,83,336/ - from the respondent alongwith interest thereon under Section 11AB and also for imposition of penalty on them under Section 11AC. The show cause notice was adjudicated by the Additional Commissioner vide order -in -original dated 30th January 2012 by which he confirmed the duty demand alongwith interest under Section 11AB and imposed penalty of equal amount on the respondent under Section 11AC. However, on appeal being filed to CCE (Appeals), he, vide order -in -appeal dated 21/8/12, holding that the evidence on record is not sufficient to sustain the allegation of duty evasion against the respondent he set aside the Additional Commissioner's order. Against this order of the CCE (Appeals), the Revenue is in appeal.

(2.)HEARD both the sides.
Shri R.K. Grover, the learned DR, assailed the impugned order by reiterating the grounds of appeal and pleaded that when the Assistant Vice President of the MCX has confirmed that as per the records of the Commodity Exchange, the respondent were not registered as a customer of their Member M/s. Ramdoot Management Pvt. Ltd., Kolkata and that the transactions claimed by the appellant were not matching with the transactions executed through their Member M/s. Ramdoot Management, it is very clear that the respondent have shown only bogus transactions regarding sale and purchase on the commodities exchange so as to show the income from the unaccounted sale of their finished product as income from the trading on commodity exchange, that therefore the duty demand of Rs. 5,77,725/ - is on strong footing, that similarly the respondent have not given any explanation for difference between the value of sales figures reflected in the ER -1 return for 2006 -2007 and the value of sales in their books of accounts and hence the excess value of Rs. 6,60,070/ - represents the amount realised by the respondent for the goods cleared clandestinely or on account of under valuation of the goods cleared under the invoices, that the allegation of clandestine clearance is also corroborated by vide fluctuation in the consumption of electricity per M.T. of the rolled products produced which varied from 150 units per M.T. to 786 units per M.T. and if the ratio of 150 units per M.T. of rolled products is adopted, on the basis of their electricity consumption their production during the period of dispute should be 33,007 M.T. as against the production of 13,337 shown by them, that the percentage of capacity utilisation which in the case of the respondent during 2006 -2007 was 37% is also an indication that the appellant were not reflecting their actual production in their books of accounts, that beside this, the value addition based on the cost of production and the sales price realised also shows that the respondent have been under valuing their goods as value addition during 2007 -2008 and 2008 -2009 is 55.37% and - 7.12% respectively which is not possible. He, therefore, pleaded that the impugned order is not correct.

(3.)SHRI Manish Saharan, Advocate, the learned Counsel for the respondent, pleaded that the respondent during 2006 -2007 had earned an income of Rs. 35,05,614/ - from Commodity Trading on MCX, that the transactions in commodity trading were through M/s. Ramdoot Management Pvt. Ltd., Kolkata and payment made to M/s. Ramdoot Management Pvt. Ltd., Kolkata were by account payee cheques, that in any case, since the cross examination of the Assistant Vice President on whose letter the Department has relied upon has not been allowed, no adverse conclusion can be drawn on the basis of the same, that in this regard, he relies upon the judgment of Hon'ble Allahabad High Court in the case of CCE, Meerut I vs. R.A. Castings Pvt. Ltd. reported in : 2011 (269) E.L.T. 337 (All.), wherein Hon'ble High Court has held that when the allegation against the appellant is that they were showing the income from unaccounted sale of their finished product as income from share trading based on the basis of statement of share brokers, this allegation would not be sustainable when the cross examination of the share brokers as well as Investigating officers was not allowed, that in this judgment Hon'ble Allahabad High Court already held that merely on the basis of variation in electricity consumption, the allegation of unaccounted production and its clandestine removal cannot be made against an assessee, that this judgment of Hon'ble Allahabad High Court has been upheld by the Apex court vide judgment reported in 2011 (269) E.L.T. A108 (S.C.), that merely on account of difference between the value of sales as reflected in ER -1 return and as reflected in the balance sheet, the allegation of under valuation cannot be made and that in view of this, there is no infirmity in the impugned order.

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