Judgment:
1. Appellants filed these appeals against the common adjudication order passed by the Commissioner of Central Excise.
2. Brief facts of the case are that M/s. Somani Iron & Steels Ltd. are engaged in the manufacture of M.S. Ingots and steel castings.
Appellants were also having two sister concerns, viz., M/s. Usha Udyog, Kanpur and M/s. RHL Profiles Ltd., Kanpur having rolling mills. These sister concerns were buying considerable quantity of ingots from M/s.
Somani Iron & Steels Ltd. which were used in the manufacture of final products. On 18.1.93, the factory premises of the appellants as well as of their sister concerns, were searched by the revenue authorities.
During verification of records, it was found that there was an excess of 325 MTs of M.S. Ingots as compared to their recorded balance in their statutory record. A separate show cause notice was issued to the appellants for this excess quantity.
3. During verification of the private records, it was found that from 1.1.93 to 17.1.93, appellants, M/s. Somani Iron & Steels Ltd., recorded the production of 901 MTs of M.S. ingots as against the actual production; of 1622 MTs. On the basis of this shortage, a demand of Rs. 6,63,320 was made.
4. On the basis of above-mentioned shortage, it was alleged that during the period from Feb., 90 to 17.1.93, appellants suppressed the production of 62202 MTs of ingots and this quantity was cleared without payment of duty to their sister concerns. A demand of Rs. 4,39,98,310 was made against the appellants. Show cause notice was also issued to the appellants as well as to their sister concerns for imposition of penalties. The adjudicating authority confirmed the demand and imposed penalty of Rs. three crore upon M/s. Somani Iron & Steels Ltd. under Rule 173Q of the Central Excise Rules. A penalty of Rs. 50 lakh each was imposed on Shri R.K. Somani, M.D., M/s. Somani Iron & Steels Ltd. under Rule 209A of the Central Excise Rules. A penalty of Rs. five lakh was imposed on M/s. RHL Profiles Ltd., and M/s. Usha Udyog each. A further penalty of Rs. 50 lakh was imposed on Shri K.K. Somani, President, M/s. RHL Profiles Ltd. A penalty of Rs. 25 lakh was imposed on Shri K.K. Singh, Manager, M/s. Somani Iron & Steels Ltd. under Rule 209A of the Central Excise Rules.
5. Ld. Sr. Counsel appearing on behalf of the appellants, submits that the allegation of suppression of production is only on the ground that the appellants were recording lesser production in terms of number of heats per day and lesser quantity of production per heat. The private record recovered from the factory premises only relates to the period from 1.1.93 to 17.1.93 and most of the entries alleged to have been made by one Shri Lalit Tewari. No statement of Shri Lalit Tewari was recorded. The allegation against the appellants is that their employee, Shri Lalit Tewari made entries in the private record in a codified manner and there is no evidence on record to show that the relevant records, recovered from the appellants factory, were in the hands of Shri Lalit Tewari.
6. The contention of the appellants is that the production for the period from 17.1.93 to 18.1.93 i.e. two days were not recorded in their statutory records due to the visit of excise officers and this production was not taken into consideration by the adjudicating authority while calculating the excess quantity alleged to have been produced by the appellants during 1.1.93 to 17.1.93.
7. In respect of demand of duty on 62202 MTs. of M.S. ingots, the contention of the appellants is that there is no evidence on record to show that the appellants had suppressed this production. This demand was only calculated on the basis of private records which pertains to the period from 1.1.93 to 17.1.93. This demand is only on the presumption that during the (sic) of January 1993, appellants suppressed the production, therefore, during the period Feb. 92 to 17.1.93 also, appellants suppressed the production and the quantity of production is also calculated on the basis of actual production for the month of Jan. 93. The contention of the appellants is that this demand is not sustainable because it is only based on presumption.
8. Ld. S.D.R., appearing on behalf of the revenue, submitted that as per the recovered private record, the appellants suppressed the production of their final product and according to these private records, the appellants had shown 67 heats whereas in the statutory records, they had shown only 59 heats. During this period, the actual production was 1622 MTs. in 67 heats whereas the appellants had shown the production of only 901 MTs in their statutory record. Appellants also had shown the average production of 11.169 MTs. per heat instead of actual production 12.172 MTs. per heat. For calculating the actual number of heats taken, these figures had been multiplied by 59/67 which appears to be suppression ratio of number of heats, as forthcoming from the record pertaining to the period from 1.1.93 to 17.1.93. In these circumstances, appellants during the period from Jan. 92 to Jan. 93 had shown 9052 heats whereas the actual number of heats come to 10280 and if the production per heat had been taken as 12.172 MTs, then on calculation, the appellants had produced 175830 MTs of finished goods as compared to 114349 MTs recorded in their statutory records. The excess production was cleared to their sister concerns, without payment of duty and the sister concerns also were not maintaining the proper record in respect of ingots received from the appellant firm.
10. In this case, on 18.1.93, the business premises of the appellants as well as their sister concerns were searched and certain private records were taken into possession which show that during this period, the appellants suppressed the production of 721 MTs of ingots.
Appellant's were not denying the recovery of the private records. The appellant's contention is that most of the records are maintained by one Shri Lalit Tewari, which were not examined and without his statement, these records shall not be taken into consideration for confirming the demand on the ground that the appellants suppressed the production, 11. We find that the private records recovered from the appellants premises showing the datewise details in respect of issue of raw material for each heat, the number of heats during the period from 1.1.93 to 17.1.93, which shows excess production than the quantity shown in the statutory record. In these circumstances, from the evidence on record, we find no merits in the arguments of the appellants in respect of demand of Rs. 6,63,320 in respect of 721 MTs of ingots on the ground that the appellants during the period from 1.1.93 to 17.1.93, had not recorded the actual production and suppressed the production of heats.
12. In respect of demand for the period from Feb. 92 to 17.1.93, the demand was calculated on the basis of the quantity of production alleged to have been suppressed during the period from 1.1.93 to 17.1.93. There is no other evidence to show that the appellants were recording less production than the actual, production during this period. The adjudicating authority confirmed this demand for this period by multiplying the excess production for the period from 1.1.93 to 17.1.93.
13. The adjudicating authority in para 196 of adjudication order observed that it is an open secret that industrial units engaged in the manufacture of steel generally resort to the pilferage of power.
Therefore, the power consumption records as maintained by the party and also based on which the U.P. Electricity Board took their charges could not fully relied. We find that these are general observations and without any evidence on records. There is no allegation that the appellants were involved in the theft of electricity. Appellants produced records regarding consumption of electricity during the relevant time to show that from the power consumed by them, the alleged quantity of M.S. ingots cannot be produced. This evidence is not rebutted by the adjudicating authority and the adjudicating authority rejected the same on the basis of general presumption, which is not sustainable.
14. In respect of penalty imposed on sister concerns of appellant firm, there is no evidence on record to show that they were receiving ingots from the appellant firm on which no duty had been paid. The adjudicating authority held that when the goods were cleared without payment of duty, therefore, these will not be shown in respect of their sister concern. We find that this finding is also without any evidence.
We find that in these circumstances, when there is no evidence to show that the sister concerns received any duty paid goods, the penalty on the firms as well as their President/manager are also not sustainable.
15. In view of above discussion, the demand of Rs. 6,63,320 is upheld and the remaining demand is set aside. The penalty on M/s. Somani Iron & Steels Ltd. is reduced to Rs. 50,000 under Section 209A of Central Excise Rules. Penalties on M/s. R.H.L. Profiles and M/s. Usha Udyog are set aside. Consequently, the penalty on Shri K.K. Singh, Managing Director, Usha Udyog is also set aside. The appeals are disposed of as indicated above.