Judgment:
D.G. Karnik, J.
1. This appeal is directed against the common judgement and order dated 9th May 2008 passed by the Customs, Excise and Service Tax Tribunal (for short 'the Tribunal') filed by the respondent 1 and its directors.
2. The first respondent herein is a Private Limited Company and the second and third respondents are its Directors. The respondent 1 is engaged in the manufacture and production of CTD bars. A show cause cum demand notice was issued to the first respondent by the Joint Commissioner, Central Excise, Thane-1 proposing recovery of excise duty of Rs. 11,06,430/- alleging clandestine clearance by the respondents 1, 2 and 3 of 471.075 metric tonnes of CTD Bars valued at Rs. 69,15,183/-. The respondent 1 approached the Settlement Commission for settlement vide its application dated 8th July 2004. During the pendency of the proceedings before the Settlement Commission, the Joint Commissioner Central Excise issued an addendum/corrigendum dated 19th October 2004 for recovery of excise duty of Rs. 3,61,49,740/- and penalty on the allegation that the respondents 1 to 3 had made a clandestine clearance of 14,618.950 metric tonnes of CTD Bars valued at Rs. 22,59,35,872/-. By its order dated 13th September 2005, Settlement Commission rejected the application made by the respondent 1 for settlement and sent back the case to the Commissioner of Central Excise for disposal of the show cause notice in accordance with law. On 13th December 2005, the Commissioner, Central Excise Thane-I, passed an order confirming excise duty of Rs. 3,61,49,740/- and penalty for clandestine clearance of CTD bars. Aggrieved by the order, the respondents preferred an appeal before the Tribunal which by its order dated 9th May 2008 confirmed the duty and demand of Rs. 11,06,430/- for clandestine removal of the goods as alleged in the first show cause notice as also imposition of penalty to the extent of Rs. 3,00,000/- for such clandestine removal. The Tribunal however set aside the balance demand of Rs. 3,50,43,610/- made in the addendum/corrigendum notice and reduced the penalty to Rs. 3,00,000/- only. Aggrieved by the order of the Tribunal the Commissioner of Central Excise is in appeal.
3. While approaching the Settlement Commission for settlement the respondent 1 had admitted clearance without payment of duty to the extent of 471.075 metric tonnes of C.T.D Bars as was alleged against it in the first show cause notice dated 1st June 2004. The duty on the said clearance amounting to Rs. 11,06,430/- has been confirmed by the Tribunal. No appeal has been filed and in our opinion rightly so, in view of the admission by the respondent 1 before the Settlement Commission. The short question that arises for our consideration is whether the Tribunal in any way erred in holding that the appellant had not proved the clandestine removal of any further goods as alleged for the addendum/corrigendum show cause notice dated 19th October 2004, and consequently setting aside the demand made therein.
4. Mr. R.V. Desai, learned Senior Advocate appearing for the Revenue took us through the order in original passed by the Commissioner of Central Excise, Thane dated 30th December 2005 and submitted that the Tribunal was not justified in setting aside the well reasoned order passed by the Commissioner. Learned Counsel submitted that on the basis of a specific information that the respondent 1 was evading the Central Excise Duty, the officers of the excise department carried out search on 23rd and 26th June 2003 of the factory and office premises of the respondent 1, the premises of their customers M/s.Navinchandra Steel Ltd. (the respondent No. 6 herein) and the premises of the transporters who had transported the goods from the factory of respondent 1 to respondent 6. C.T.D Bars of 311.039 M.Tonnes were found in the factory as against the quantity of 322.425 M.Tonnes shown in the stock register. Thus there was a shortage of 11.035 metric tonnes of C.T.D Bars. There was however no difference between the stock register and the actual quantity of the M.S. Ingots used as a raw material for production of C.T.D. Bars. On further investigation carried out by the Central Excise Authorities, it was discovered that the furnace oil consumed during the relevant period i.e from April 2002 to 23rd June 2003 was much higher than that would have ordinarily been required for the production of C.T.D bars during that period. The Commissioner noted that about 50 litres of furnace oil is required for the purpose of production of 1 Metric Tonnes of C.T.D Bars. On the basis of consumption of the furnace oil, the Commissioner estimated the quantity of the C.T.D Bars produced by he respondent No. 1 and after giving credit for the C.T.D Bars shown to have been produced and cleared as per the records, held that the balance quantity of C.T.D Bars must have been produced and clandestinely cleared by the respondent 1. The Commissioner accordingly held that respondent 1 was liable to pay Excise duty for the clandestine removal of C.T.D. Bars and the penalty as mentioned earlier.
5. Mr. Desai, supporting the decision of the Commissioner submitted that the Commissioner was entitled to estimate the production of C.T.D Bars on the basis of the consumption of the furnace oil. In support, he referred to and relied upon a decision of the Supreme Court in Triveni Rubber and Plastics v. Collector of Central Excise, Cochin : 1994(73) E.L.T. 7
6. We have perused the order of the Tribunal. In paragraph 3 of the order, the Tribunal has noted the contention of the Revenue that the total furnace oil consumed during the period April 2002 to 22nd June 2003 was 11,32,600 litres. The Tribunal also noted that the Commissioner had on the assumption that 50 litres of furnace oil is required for production of one metric tonnes of C.T.D Bars held that the respondent 1 would have produced 22,640 Metric Tonnes C.T.D. Bars. The respondent 1 had shown to have produced only 8,021.050 Metric Tonnes of C.T.D. Bars and paid excise duty on them. According to the Commissioner, there was thus a shortage of about 14,618 Metric Tonnes of the C.T.D. Bars shown to have been produced on the basis of consumption of furnace oil. The Tribunal however did not agree with the conclusion of the Commissioner that the respondent No. 1 had suppressed the production to the extent of 14,618 metric tonnes.
7. Rule No. 173-E of the Central Excise Rules deals with the determination of normal production and reads thus:
Rule 173-E. Determination of normal production - Any Officer duly empowered by the Collector in this behalf may fix the quantum and period of time when the production in the assessee's factory was considered normal by such officer having regard to the installed capacity of the factory, raw material utilisation, labour employed, power consumed and such other relevant factors as he may deem appropriate. The normal quantum of production during a given time so determined by such officer, shall form the norm. The assessee shall, if so required by the said officer, be called upon to explain any shortfall in production during any time as compared to the norm. If the shortfall is not accounted for to the satisfaction of the said officer, he may assess the duty due thereon to the best of his judgment, after giving the assessee a reasonable opportunity of being heard.
When there is an allegation that the manufacturer has produced more goods and has clandestinely cleared them and the actual production is required to be estimated for the purpose of ascertaining normal production and clandestine removal, the Revenue is entitled to consider and have regard to the installed capacity of the factory, raw material utilization, labour employed, power consumed and such other relevant factors as may be deemed appropriate. In Triveni Rubber and Plastics v. Collector of Central Excise, (Supra) the Supreme Court has held:
On a reading of Rule, we cannot agree that the officer empowered by the Collector of the Collector cannot determine the normal production unless all the factors mentioned in the Rule are present simultaneously. The Rule does not say so nor is it capable of being so interpreted.
8. In Triveni Rubber, the Supreme Court has not laid down that the normal production can be determined only on the basis of energy consumed ignoring all other factors. All that the Supreme Court has said is that for determining normal production all factors mentioned in Rule 173-E need not be present simultaneously. In a given case, where the accounts are fabricated the figures of raw material consumed or labour employed are not available it may not be possible to consider all the factors mentioned in Rule 173-E for determining the production. In such a case, figures of energy used may be considered for the purpose of estimating the production. In the present case, M.S. Ingots is the basic raw material used in the manufacture of C.T.D. Bars. M.S Ingots is an excisable commodity. Credit of tax paid on M.S. Ingots was available to the respondent 1 while paying duty on the final product. The figures of M.S. Ingots need were available in the stock register and the actual stock tallied with the figures in the stock register. The Commissioner did not consider the figures of the basic raw material viz. M.S.Ingots consumed for estimating the production. He only relied upon the consumption of furnace oil which is used for firing the furnace in which M.S. Ingots were converted into the molten steel before production of C.T.D Bars. The respondent 1 had given reasonable explanation for higher consumption of the furnace oil. According to it, during the relevant period the furnace was damaged and had developed a large hold in the roof. This resulted in the loss of heat resulting in higher consumption of furnace oil. Extensive repairs were carried out to the furnace during the years 2002-2003 and 2003-2004. About Rs. 44 lakhs were spent on the repairs to the furnace and the expenditure was accounted for in the books. Payment was made to the Chartered Engineer by cheque on 17th January 2003 i.e. prior to the commencement of the investigation in the present case. The certificate of the Chartered Engineer regarding the repairs carried out was produced before the Commissioner. The material on record showed that the roof of the furnace had developed a large hole resulting into a huge heat loss. Though statements of the Directors of the respondent No. 1 and some other persons were recorded, the statement of the Chartered Engineer who had certified the repair work was not recorded. If his certificate was to be disbelieved the Revenue could have and ought to have recorded his statement and/or called him for cross-examination. The Tribunal has held that the respondent 1 had explained the higher consumption of furnace oil and therefore the ratio of the case of Triveni Rubber (Supra) was not applicable to the present case. We find that on facts the Tribunal has properly distinguished the decision of the Supreme Court in Triveni Rubber (supra) and concur with the finding of fact recorded by the Tribunal that the furnace was severely damaged and on account of the consequent heat loss consumption of the furnace oil alone was not sufficient to estimate the production of C.T.D. Bars. The Tribunal has considered the admission of the respondent 1 before the Settlement Commission about the removal of the goods contained in the first show cause notice for which a duty of Rs. 11,06,430/- has been imposed with a find of Rs. 3,00,000/- . Counsel for the Revenue was not able to point out that there was any admission regarding the alleged clandestine removal of any larger quantity than the one shown in the first show cause notice. The respondent 1 has not admitted clandestine removal of C.T.D. Bars as alleged in the addendum/corrigendum show cause notice. The burden of proving clandestine removal as alleged in the addendum show cause notice was on the appellant which has not been discharged. The Tribunal, as the last fact finding authority, has held that the clandestine removal alleged in the addendum show cause notice was not proved. The view taken by the Tribunal is clearly a possible view of facts and there is nothing on record to show that the Tribunal has ignored or failed to take into consideration any relevant fact or that the view of the Tribunal is in any way perverse.
9. For these reasons, there is no merit in the appeal which is hereby dismissed summarily.