Trimurti Ispat Limited vs Commissioner of Central Excise and Customs

Heard.

The learned Advocate appearing for the respondent waives service.

By consent of the parries, the Appeal is taken up for final hearing.

The appellants Trimurti Ispat Limited have filed the above Appeal u/s 35G of the Central Excise Act, 1944 (hereinafter referred to as "the Act") on the following substantial question of law:

Whether in the facts and circumstances of the case, the Hon''ble Tribunal was justified in directing the Appellants to deposit Rs. 1,00,00,000/-under Section 35F of the Act?

According to the Appellants, following are the relevant facts:

The appellants are a company engaged inter-alia in the manufacture of M.S. Ingots, falling under Chapter Heading 72, of the Central Excise Tariff Act, 1985. The said ingots are manufactured from various inputs, namely, sponge iron, pig iron, cast iron and scrap iron and steel and ferro alloys, etc. For manufacture of steel ingots from the aforesaid inputs, the appellants have installed an electric induction furnace having 4 MT capacity in their factory. The appellants also have a kiln and connected machinery to produce sponge iron from the iron ore in the same factory. There is one single electricity meter in which the power consumption in the factory is recorded. Therefore, when both the products i.e. sponge iron and steel ingots are being simultaneously manufactured, the consumption of the power recorded in the factory cannot be attributed exclusively to that for production of ingots.

The factory of the appellants was visited by the Central Excise Officers on 8th December 2005 to verify the power consumption. The panchnama was drawn by the said Officers wherein the details of the electricity consumption and the quantity of ingots produced was recorded. According to the details recorded in the panchnama, 1434.62 units were consumed to produce 1 MT of MS ingots.

The Central Excise Officers once again visited the factory of the appellants on 12th December 2005 and, conducted an experiment to ascertain the actual power consumption for producing 1 MT of steel ingots. According to the details recorded, 1239 units of power was required to produce 1 MT of ingots. The departmental authorities were tentatively of the view that the appellants appeared to have manufactured 43515.43 MTs of MS ingots during the period, whereas the production of 27422.79 MTs was actually recorded in the RG-1 register. The authorities were of the View that the appellants had failed to record the production of 16093.43 MTs in the RG 1 and had removed the said quantity in a clandestine manner. Therefore, vide show cause notice dated 25th February 2008, the appellants were asked to show cause to the respondent. According to the appellants, without granting them a personal hearing to make submissions in support of their case and without allowing cross-examination of the persons and experts whose evidence was relied upon in support of the proposal in the notice, the respondent passed the order-in-original dated 31st March 2009, in terms of which the duty demand of Rs. 3,96,21,849/- is confirmed against the appellants. Penalty of Rs. 3,96,21,849/- is also imposed and recovery of interest u/s 11AB is ordered. The order also appropriated an amount of Rs. 1,36,325/-which was paid by the appellants on 17th December 2005 with reference to the shortage estimated by the department during the stock taking on 8th December 2008. In addition, a penalty of Rs. 40,00,000/- has been imposed on the Director of the appellants u/s 26 of the Central Excise Rules, 2002.

Being aggrieved by the order-in-original dated 31st March 2009, the appellants filed an Appeal alongwith the stay applications before the Appellate Tribunal u/s 35F of the Act. The Appellate Tribunal after hearing the appellants on the stay applications, passed an order dated 22nd March 2010, directing the appellants to pre-deposit Rs. 1,00,00,000/- u/s 35F of the Act, as a condition of hearing the Appeal on merits within eight weeks. The Appellate Tribunal further directed that on compliance of the aforesaid order, there will be waiver of pre-deposit and stay of recovery in respect of the penalties imposed on the appellants and the balance amount of duty. In view thereof, the present Appeal is filed raising the question of law, set out in paragraph 4 above.

It is submitted on behalf of the appellants that though the Central Excise Officers visited the factory of the appellants on 8th December 2005 and 12th December 2005 and prepared panchnamas showing that the power consumption for producing 1 MT of steel ingots would be 1434.62 units and 1239 units, respectively, the department did not take any cognizance of the panchnama drawn on 8th December 2005 recording that 1434.62 units of power is consumed for 1 MT of ingots, but only took cognizance of the panchnama drawn on 12th December 2005 recording that 1239 units of power is consumed for 1 MT of ingots. It is, therefore, submitted on behalf of the appellants that the conduct on the part of the respondent is totally unfair. It is also submitted that the respondent admittedly allowed the appellants to cross-examine one of the witnesses and thereafter, did not allow cross-examination of the other witnesses whose evidence was relied upon by the respondent in support of the proposal in their notice. It is submitted that the finding of the Appellate Tribunal that to allow cross-examination before filing of reply to the show cause notice, is in the normal course alien to the scheme of adjudication, is inconsistent with the procedure adopted by the respondent. It is, therefore, submitted that the order of pre-deposit of Rs. 1,00,00,000/- ordered by the Tribunal is not sustainable in facts and in law and deserves to be set aside.

The learned Advocate for the respondent submitted that since the duty assessed is amounting to Rs. 3,96,21,849/-, the order of pre-deposit of Rs. 1,00,00,000/- is fair and reasonable and need not be interfered with in the above Appeal. However, the learned Advocate appearing for the respondent was unable to explain that though admittedly two panchnamas were drawn by the department at the factory premises of the appellants on 8th December 2005 and 12th December 2005, why the department failed to take cognizance of the results recorded in the panchnama dated 8th December 2005 and only took cognizance of the results of the panchnama dated 12th December 2005. It was also not explained on behalf of the respondent why, after allowing one of the witnesses of the respondent to be cross-examined by the appellants, the other witnesses were not produced for cross-examination. In view thereof, the Tribunal is not justified in passing an order directing the appellants to deposit an amount of Rs. 1,00,000/- as pre-deposit. However, after the aforestated arguments were advanced on behalf of the appellants as well as the respondent, a consensus was reached that the appellants may be allowed to deposit an amount of Rs. 50,00,000/- as pre-deposit instead of Rs. 1,00,00,000/-, as ordered by the Appellate Tribunal vide its order dated 22nd March 2010. Under the circumstances, we pass the following order:

(i) The appellants shall deposit an amount of Rs. 50,00,000/- towards pre-deposit within a period of eight weeks from today.

(ii) Upon deposit of the said amount by the appellants, the Appellate Tribunal shall hear the Appeal filed by the appellants from the order-in-original dated 31st March 2009 passed by the Commissioner of Central Excise and Customs, Nagpur, on merits, without being influenced by any observations made in this order.

(iii) All contentions of the parties are kept open.

(iv) Appeal is disposed of in the above terms.