V. Padmanabhan ORDER
V. Padmanabhan, Member (T)
1. All the present appeals have been filed against the Order-in-Original No. 34/2007 dated 31.07.2007. Four appeals have been filed by the assessee as well as related parties, challenging the demand of Central Excise Duty as well as imposition of penalties on various persons. Revenue has also filed an appeal contending that the demand confirmed in the impugned order has omitted the month of November, 2001, which also falls within the extended period of 5 years.
2. The appellant-assessee is engaged in the manufacture of M.S. Ingots. Department received an intelligence regarding suppression of production by the manufacturers of M.S. Ingots in the form of a technical opinion of IIT Kanpur that an induction furnace unit should consume electricity in the range of 555 to 1046 units for the manufacture of 1 MT of MS ingots. To verify the same, the departmental officers called for the balance-sheet, income ledgers, documents relating to other income, electricity bills, etc for the period 2001-2006. After scrutiny of the details, the Revenue concluded that the assessee had consumed electricity in the range of 1395-2059 units for every 1 MT of MS Ingots. This was considered to be in excess of the suggested guideline by IIT Kanpur. It was further concluded that the selling price of the product of the appellant was below its cost and "other income" shown in the balance-sheet towards receipt by way of share trading and commodity trading were shown fictitiously. After conclusion of verification, SCN was issued and the impugned order was passed in which the assessee was held to have clandestinely cleared the finished products and the income generated from such clandestine clearance was being reflected in their balance-sheet as share trading and commodity trading. Accordingly, duty to the extent of Rs. 2.96 crores was demanded along with interest and penalty of equal amount. Penalties were also imposed on the Directors and other connected persons. Aggrieved by the impugned order, the present appeals have been filed.
3. With the above background, we heard Shri S. Sunil, Advocate on behalf of the appellants as well as Shri H. Saini, DR.
4. The Ld. Counsel for the appellants argued the case as summarized below:
i) The transactions relating to share trading, commodity trading etc., were duly entered in the financial accounts of the appellant, and were reflected in their IT returns, and were also duly audited by their CA.
ii) The raw material purchases, as well as sales of final products were duly accounted by the assessee for in its records.
iii) There was no evidence of any receipt, by the appellant, of unaccounted raw material.
iv) There was no evidence, or allegation, of disposal, by the appellant, of unaccounted ingots.
v) There was no evidence of any clandestine transportation either of inputs or of finished products, and no seizure thereof either.
vi) Electricity consumption depended on various factors.
vii) Consumption of electricity could not, therefore, be the sole basis to allege clandestine removal.
viii) The requisite evidence to establish clandestine removal, was not forthcoming.
ix) The report of Prof. N.K. Batra could not be relied upon, as his credentials were unknown; besides; the report was vague in many respects.
x) Cross examination of the persons whose statements had been relied upon in the SCN, as also of Dr. Batra, was requested, but not permitted.
xi) Since no experiment of electricity consumption was conducted by Revenue in the appellant's factory, no inference can be drawn against the appellant insofar as electricity consumption is concerned in production of M.S. Ingots (final product).
xii) Taking stock of identical contentions, advanced in the context of identical allegations, this Hon'ble Tribunal had, in a self-speaking judgment in R.A. Castings Pvt. Ltd. v. CCE, 2009 (237) ELT 674 (T) held that no finding of clandestine removal could be returned. The said judgment was successively upheld by the Hon'ble Allahabad High Court in CCE v. R.A. Casting Pvt. Ltd., MANU/UP/3378/2010 : 2012 (26) STR 262 (All.) and by the Hon'ble Supreme Court, by dismissal of the SLP of the Revenue, filed there against vide 2011 (269) ELT A1006 (SC).
xiii) The said decisions have also been subsequently followed by this Hon'ble Tribunal, while allowing an appeal involving identical circumstances, in Trikoot Iron & Steel Casting Ltd. v. CCE, MANU/CE/0567/2014 : 2015 (315) ELT 65 (Tri. Del).
xiv) Following R.A. Casting (supra), the CCE has also, in the appellant's own case, dropped the demand for the subsequent period, vide O-in-O dated 28.02.2013.
5. The Ld. DR justified the impugned order. He submitted that the Revenue's appeal is for inclusion of the clearances for the month of November, 2001 also in the demand. He submitted that the share and commodity trading are nothing but fictitious transactions shown to cover up the receipts from clandestine clearances. The price of the final product has been shown by the appellant less than the cost of the item. Accordingly, he submitted that the case has been made not only on the basis of the report of IIT Kanpur; but other evidences also.
6. We have heard both sides and perused appeal record. We find that the Revenue's entire case is based upon the investigations conducted by them in respect of entries made in the balance-sheet. The said entries reflect income of the appellant made through other businesses like share trading, sales commission and commodity trading. It is not disputed on record that income reflected in the balance-sheet stands included by the assessee for payment of Income Tax. Such Income Tax Returns have also been assessed by the Income Tax Department. The said returns have also been audited by their statutory auditor. We would like to observe that Central Excise authorities have no jurisdiction to interfere in the orders passed by Income Tax authorities and to hold that transactions which stand accepted by the Income Tax authorities were not genuine transactions. The Tribunal in the case of R.A. Casting Pvt. Ltd. Vs. CCE Meerut-I [2009 (237) ELT 674 (Tri.)] has dealt with an identical question. By referring to the Hon'ble Gujarat High Court decision in the case of Arabian Express Line Ltd. Vs. Union of India [MANU/GJ/0047/1994 : 1995 ITR 31], it stands held by the Tribunal that law does not entitle the Revenue to disregard all the statutory excise records as well as audited financial accounts and records of the assessee-company, which have been duly verified and accepted by the competent authorities from time to time not only for Central Excise but also for purposes of Income Tax etc. It was further held that the Central Excise authorities have no jurisdiction to examine or determine whether the share transactions of the assessee company are genuine or not and whether the income from share trading duly verified, accepted and assessed to Income Tax authorities could be disregarded by them so as to treat the same as proceeds of ingots alleged to have been clandestinely produced and sold by the appellant s. The entire action of the Revenue was held to be without jurisdiction.
7. The said decision of the Tribunal in the case of R.A. Casting Pvt. Ltd. (supra) Stands confirmed by the Hon'ble Allahabad High Court, when the appeal filed by the Revenue was rejected. Further, the appeal by the Revenue before the Hon'ble Supreme Court also stands rejected. The said decision of the Tribunal was followed in several cases including in the case of Commissioner of Customs and Central Excise Vs. Venus Allows Pvt. Ltd. [Final Order No. A/348/2012-Ex(DB) dated 20.03.2012] as also in the case of R.K. Polytubes & Ors. Vs. CCE, Raipur [Final Order No. A/50276-50277/2014-Ex(DB) dated 17.01.2014] and also in M/s. Trikoot Iron and Steel casting case (supra).
8. Apart from the above, we note that virtually no evidence is produced by the Revenue as regards the clandestine manufacture and clearances of appellants final product. It is well settled law that the allegations of clandestine manufacture and removal are required to be proved by production of sufficient evidence in the shape of production of raw material, the actual manufacture of the goods, transportation of the same or in the shape of identification of the buyers. There is no statement of any persons indicating or admitting that income as reflected by the appellants in balance sheet stands derived from clandestine activities of manufacturer and clearance of their final products.
9. Accordingly, the impugned order is set-aside. The appeal filed by Revenue is dismissed and all the others by the assessee and connected persons are allowed.
(Pronounced in Court on 18.01.2018)
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