1. These appeals are directed against order-in-original dated September 5, 2005 passed by the Commissioner, Central Excise, Aurangabad whereby the following demands and penalties were confirmed against the appellants:
(i) Duty demand of Rs. 92,12,475 on removal of MS Ingots and of Rs. 73,440 on by-products, viz., runners, risers was confirmed against M/s. Ambika Waste Management Pvt. Ltd.
(ii) Demand of Rs. 39,780 on Cenvatable raw material was confirmed against M/s. Ambika.
(iii) Confiscation of 35.585 metric tonnes of MS ingots valued at Rs. 7,65,078 and 108.180 metric tonnes of MS scrap valued at Rs. 15,14,520 was ordered.
(iv) Penalty of an amount equal to duty was also imposed under section 11AC of the Central Excise Act.
(v) Penalty under rule 26 of Rs. 13,00,000 was imposed upon Shri Ambadas Santosh Nagargoje and of Rs. 7,00,000 on Shri Santosh Nagar-goje, both directors.
(vi) Penalty of Rs. 10,000 each was imposed upon accountant Shri Kishore Hiralal Kothari and Shri Jayant Vasantrao Kulkani.
The brief facts of the case are that the appellant M/s. Ambika Waste Management Pvt. Ltd. are engaged in the manufacture of MS ingots falling under Chapter 72 of the Central Excise Tariff Act, 1985. M/s. Ambika and other appellants were issued show-cause notice dated April 29, 2005 stating that the Revenue officers during their visit to the factory of M/s. Ambika on November 4, 2004 initiated investigation and conducted searches. During stock taking excess stock of 35.585 metric tonnes of MS ingots valued at Rs. 7,65,078 and excess stock of 300 metric tonnes of non-Cenvatable MS scrap was found and the same being unaccounted was seized. From the weighbridge record pertaining to five to six days before the search it was found that 371.980 metric tonnes of MS ingots were consigned to the customers but no Central excise invoices were raised involving duty of Rs. 9,78,902, It was also found that the production of MS ingots per heat was 11 metric tonnes which is ten per cent, more than the declared capacity of 10 metric tonnes of furnace. The appellant voluntarily paid duty of Rs. 55 lakhs against duty worked out. It was alleged that M/s. Ambika has been procuring MS scrap and were not recording the same in the records and was used in unaccounted production and removal of MS ingots. In support of the allegation, reliance was placed on clearances made through transporters and statements of director/employee of M/s. Ambika admitting duty liability. Based upon the average production capacity of plant it was alleged that the appellant, M/s. Ambika has produced 4,914 metric tonnes of MS ingots and cleared the same without payment of duty. To support the above alleged production reliance was placed upon average power consumption of an industrial furnace and average unaccounted receipt of MS scrap per month. The learned Commissioner confirmed the demand and imposed penalties, however he held that out of 300 metric tonnes of seized MS scrap, the quantity of 191.820 metric tonnes, was found to be entered and hence not liable for confiscation.
2. Shri V.M. Doiphode the learned counsel appearing on behalf of the appellants, submits that the demands have been confirmed and penalties have been imposed wrongly. He submits that the allegations in the show-cause notice were mainly based upon the statements dated November 4, 2004 of Shri Kishore Kothari, accountant of the appellant-firm wherein he accepted use of unaccounted scrap in production and his subsequent statements. That the statements of director have also been relied upon by the Commissioner. However the statements have been recorded under pressure and the same are not corroborated with any independent evidence. He submits that the demand of Rs. 92,12,475 on alleged removal of MS ingots has been confirmed by considering the assumed estimated receipt of unaccounted MS scrap of 80 to 100 metric tonnes per month for the period 2000-01 to September, 2004 and for the period October and November, 2004 the demand was made on the basis of dispatch weighing slips. There is no evidence of transportation or receipt or payment of cash of unaccounted alleged receipt of scrap by the appellants. The demand for the period till September, 2004 is based on statement of Shri Kishore Kothari dated April 15, 2005 and compilation statement signed by director Shri Ambadas Nagargoje showing duty liability. There is no evidence of the appellant-firm having received any excess MS scrap than recorded in records. The statement of Shri Kishore was obtained against his will. Shri Kishore in his cross-examination on January 20,2016 has clearly stated that he was looking after financial and not concerned with incoming/outgoing of vehicle. Shri Kishore in his cross-examination has stated that 70 to 80 tonnes of raw material was received in M/s. R.L. Steel where he is accountant and was not received by the appellant-firm. He has given possible production from 70 to 80 tonnes of raw material. As regard clearances of MS ingots from the appellant-factory he submits that though Shri Kishore confirmed the challans showing 86 consignments of transporter of goods but did not state that the same was loaded from the appellant-factory. Shri Umakant Mahajan in his statement dated November 5, 2004 had clearly stated that the weighment of MS scrap and preparation of slips was looked after by Shri Balu Bade and at the time of visit by Shri Ravindra Nagargoje. That statement of Shri Abasaheb Santosh Nagargoje, partner of M/s. R.L. Scrap Merchant was recorded on November 6, 2004 wherein he has nowhere stated that unaccounted scrap was sent to the appellant, but stated that they sent 20 to 22 metric tonnes of all types of scrap purchased in cash to their Ahmednagar office and other scrap to the appellants under excise challan as apparent from his statement. This clearly shows that no excess MS scrap was procured by the appellant. The demand is based upon assumption and presumption and lacks evidence. All the statements recorded by the officers were retracted but the same were misplaced during hearing. He places acknowledged copies of retraction. He submits that the Commissioner has wrongly relied upon some documents of transporters and held that in respect of 86 consignments, the invoices were not issued and further relied upon the statement of Shri Kishore Kothari that these consignments were cleared without payment of duty. The reliance placed upon transporters' challan is misplaced. No investigation was conducted with drivers or owners of trucks or alleged buyers to find out as to whether the goods were cleared by the appellant. That even in some challans the consignors are different persons and not the appellant. He further submits that the learned Commissioner has wrongly held that the normal power consumption is of 700 units per metric tonnes as against 868 shown by the appellant as it is nowhere appearing in records as to from where the average consumption is 700 units was arrived at. He relies upon the letter by DG audit which refers to technical opinion of consumption of 555 to 1026 metric tonnes per unit depending upon thermal mix and nature of raw material. He submits that the reliance has been wrongly placed upon the statements of Shri Kishore Kothari and Shri Umakant Mahajan as none of them was concerned with the activity of weighment of raw material and finished goods. In their cross-examination both of them have denied the contents of the statements and hence the statements cannot be relied upon. That as there is no investigation from even a single transporter or consignee, it cannot be said that the goods were clandestinely removed. He also submits that as far as raw material is concerned except statements there is no corroborative evidence to show that the appellant received any excess raw material. The deposit of duty of Rs. 55 lakhs was made "under protest" during investigation as may be seen from the PLA register and that the same cannot be taken as voluntary payment or acceptance of clandestine removal.
As regard confiscation of 108.180 metric-tonnes of MS scrap he submits that the learned Commissioner out of 300 metric tonnes of MS scrap (raw material) which were alleged to be unaccounted in show-cause notice, held that 191.820 metric tonnes cannot be seized as the same was recorded in goods receipt report but could not be accounted for in Form IV and Cenvat records due to visit of officers and, therefore, ordered confiscation of only 108.180 metric tonnes of scrap pertaining to 35 consignments. The confiscation of the said quantity is illegal as the excess stock has been alleged by comparing the weighbridge slips with the quantity entered in GRR (goods receipt report) of Form IV and alleging that quantity of 108. 180 remained unaccounted. The officers did not verify the goods by physical verification and in the absence of same excess stock of MS scrap cannot be alleged. The quantity of MS scrap lying in stock was 24,246.995 metric tonnes which was not physically verified. The charge is mainly based upon the statement of Shri Umakant Mahajan and Shri Kishore Kothari who stated that the said quantity was not entered whereas the fact is that both these persons were not even remotely connected with operation of weighbridge and goods receipt report. It can be seen from the statement of Shri Mahajan that the said work of weighbridge and preparation of goods receipt report was entrusted to Shri Balu Bade and Shri Ravindra Nagar-goje who were not questioned. When Shri Mahajan and Shri Kishore Kothari are not connected with weighment slips or goods receipt report, their statements cannot be relied upon. Even the weighment slips also show the removal of "rolling" which was not questioned by the Department. Apart from weighment of goods of the factory, the goods of outside parties were also weighed on their weighbridge. Not a single weighbridge slip was found which bears signature of their staff acknowledging the unloading of goods at their factory. Even the slips contained the vehicle number, but no enquiry was made to ascertain the place of unloading of the goods. Whatever MS scrap was received in their factory was properly accounted for.
As regard seizure of finished goods, viz., 35.585 metric tonnes of MS ingots he submits that the opening stock of finished goods was 70.040 metric tonnes while actual weighment in BSR was found to be 75.495 metric tonnes and a 30.130 metric tonnes, of quantity was found to be loaded in a vehicle covered by the invoice. The excess quantity worked out had arisen only due to the reason that the factory was working in three shifts and one entry of finished goods is made after completion of day. The officers during their visit did not let the appellants enter the previous day production which resulted into excess quantity. The officers visited at 11 AM on November 4, 2004 and, therefore, the production after midnight remained unrecorded. The excess found goods were production of previous day which was to be entered in next day morning, the charge of non-accountal of goods is absolutely illegal.
As regard demand of Rs. 73,440 on runners and risers and Rs. 39,780 on Cenvatable raw material, he submits that the demand is based upon the statements of Shri Kishore Kothari and Shri Raju Gorade and entries in loose slips. He submits that the demands are not sustainable as there is no evidence of removal of goods.
3. Shri V.K. Agarwal, the learned Additional Commissioner (Authorised Representative) appearing on behalf of the Revenue reiterates the findings of the impugned order. He has also filed written submission.
4. On careful consideration of the submissions made by both sides and on perusal of records, we find that the demand of Rs. 92,12,475 on MS ingots has been made on the assumption that the estimated receipt of MS scrap in the appellant-unit was 80 to 100 metric tonnes per month. That the appellant-firm had the capacity to manufacture 11 metric tonnes of ingots per heat and as such the capacity of 10 metric tonnes stated by the appellant-firm is incorrect and that the average consumption of unit is 700 units per metric tonnes against consumption of 868 units per metric tonnes of the appellant-unit. The learned Commissioner has also placed reliance upon the statement of Shri Kishor Kothari, accountant of the appellant-unit and Shri Umakant Mahajan and compilation statement signed by director Shri Ambadas Nagargoje.
We find that the allegation of receipt of 80 to 100 metric tonnes of unaccounted scrap per month and estimated production of MS ingots has been made on the basis of statement dated April 15, 2005 of Shri Kishore Kothari and compilation statement signed by the director. We find that the statement of Shri Kishore Kothari and Shri Umakant Mahajan stands negated during their cross-examination but the same was declined to be considered on the ground that the cross-examination were conducted after long time. We are unable to go with the reasoning advanced by the learned Commissioner. The statement of Shri Kishore Kothari cannot be made basis for demand unless the same is corroborated with an independent evidence. Further cross-examination cannot be overlooked on the ground that the same was conducted lately. It is obvious that the cross-examination can be conducted only at the time of adjudication proceedings. Only on the basis of statement of Shri Kishore, it cannot be concluded that the appellant-firm had received unaccounted MS scrap and further to hold that such unaccounted MS scrap was used in the production of unaccounted MS ingots which was cleared clandestinely. In the case of CCE v. Vishnu and Co. P. Ltd :  38 GSTR 11 (Delhi) :  332 ELT 793 (Delhi) the hon'ble court with reference to reliability of statements recorded at the time of investigation held that (page 31 of 38 GSTR) : "Once it is shown that the maker of such statement has in fact resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so much as to admissibility of such statement as much as it is about its 'reliability'. It is the latter requirement that warrants a judicial authority to seek, as a rule of prudence, some corroboration of such retracted statement by some other reliable independent material. This is the approach adopted by the Customs, Excise and Service Tax Appellate Tribunal and the court finds it to be in consonance with the settled legal position in this regard". We find that apart from placing reliance on the statement of Shri Kishore Kothari and compilation statement signed by the director no other evidence of receipt of unaccounted MS scrap has been brought on record. We find from the statement of Shri Abasaheb Santosh Nagargoje, partner of M/s. R.L. Scrap Merchant and director of the appellant-units which was recorded on November 6, 2004 that nowhere he has stated that the unaccounted scrap was sent to the appellant-unit. He has clearly stated that M/s. R.L. has sent 20 to 22 metric tonnes of all types of scrap which was purchased in cash to their Ahmed-nagar office and other scrap to the appellants under excise challan. No evidence in the form of sellers/brokers of such scrap or transportation to the appellant-factory has been brought on record. Further there is no evidence of removal of finished goods, viz., MS ingots without payment of duty from the appellant-factory during these years nor the same has been brought on record. In the absence of any evidence of clearance of finished goods, buyers of such finished goods and receipt of amount no clandestine removal can be established against the appellants. In such view of facts when the alleged receipt of MS scrap itself is not confirmed resultantly the manufacture and clearance of MS ingots does not sustain. The learned Commissioner has contended that the average unit consumption is 700 units per metric tonnes whereas the appellant has shown the average consumption as 868 units per metric tonnes. We find that no physical test was conducted at the appellant-factory to show the consumption otherwise. Even otherwise only on the basis of consumption of electricity it cannot be concluded that the appellant has produced excess quantity. The appellant in their appeal memo has relied upon the letter D.O.F. No. 381/89/06/651 of March, 2006 addressed by the Director General Audit to Chief Commissioner, Ranchi wherein it was directed that if the steel units shows more than 1,000 unit per metric tonnes consumption in that case the investigation should be conducted by recording statements of transporters after collecting corroborative evidence. It has been further stated in the letter that the normal consumption ranges between 555 to 1026 units per metric tonnes. We find that even when the Revenue considers the power consumption of 555 to 1026 of similar units as normal in that case the per unit consumption of 868 cannot be taken as basis for clandestine production and removal. In the case of CCE v. R.A. Castings P. Ltd:  9 GSTR 503 (All) :  269 ELT 337 (All) as upheld by the apex court reported as CCE v. R.A. Castings P. Ltd.  269 ELT A 108 (SC), Savitri Concast Ltd. v. CCE :  329 ELT 213 (Tri.-Delhi), it has been held that the consumption of electricity cannot be a ground to uphold the allegation of clandestine removal. Similarly by showing the excess capacity of furnace it cannot be said that the appellant-unit has produced goods to the fullest capacity of the furnace. The appellant has given a certificate issued by the chartered engineer that the capacity of two furnace installed in the appellant-unit is 5 metric tonnes each. However during the test check by the officers the capacity of molten material was found to be 5.450 metric tonnes and 5.600 metric tonnes in this context we are of the view that if some more quantity can be processed in the furnace than its installed capacity the same cannot be made a ground to allege that the assessee always processed the goods more than the installed capacity. The appellant in his submission has stated that the pressed scrap will take less space rather than non-pressed scrap and therefore the processing capacity of furnace would vary. We are of the view that otherwise also the processing capacity of the furnace would depend upon the nature and quality of raw material as well as other factors. The maximum capacity result of a heat cannot be applied in each and every heat. Therefore the results of yield would vary and cannot remain constant. Even otherwise the capacity of furnace cannot be a ground to demand duty. It has to be shown that the goods were indeed manufactured in the appellant-factory and the same were cleared. In the absence of evidence of receipt of raw material and clearance of finished goods, absence of buyers and receipt of any money consideration, the charges of clandestine removal cannot be sustained.
A demand of Rs. 9,78,902 for the period October and November, 2004 out of the demand of Rs. 92,12,475 is based upon the weighment slips consigned to different buyers. It is alleged that Shri Kishore Kothari accepted the removal of goods without payment of duty. The appellant has contended that the slips were made prior to dispatch and the actual dispatches did not take place. Further that the statement of Shri Kishore Kothari stands retracted and that during the cross-examination stated that he was neither concerned with loading of goods nor despatch of goods. In such circumstances we find that the statement of Shri Kothari cannot be made basis for confirmation of demand. Further the officers did not make any investigation with the transporters/buyers of the goods. It was necessary for them to verify the weighment slips with corroborative evidence. In such case when there is no investigation about removal of the goods, the demand cannot be made. We are therefore of the view that the demand of Rs. 92,12,475 is not sustainable and is set aside.
There is another demand of Rs. 1,13,220 on account of clandestine clearance of runners and risers and Cenvatable re-rollable scrap alleged to have been cleared to M/s. Amar Steel Industries. We find that the demand is based upon the statement of Shri Kothari which already stands retracted and negated during cross-examination. Further to find that the show-cause notice relies upon the statement dated March 18, 2005 of Shri Raju Govinda Gorade, accountant of M/s. Amar Steel who accepted receipt of goods. However we find that except the statement of Shri Raju Gorade nothing has been adduced to show the receipt of goods by M/s. Amar Steel. He stated that he will confirm the facts from the owners of M/s. Amar Steel but there is no investigation or his version on enquiry from owners. As pointed out by the appellant we find that the statement of Shri Raju Gorade has not been adduced as relied upon document in the show-cause notice. In such position we find that the demand cannot be sustained. We, therefore, hold that the demand is not sustainable.
We find that the confiscation of 35.585 metric tonnes of MS ingots valued at Rs. 7,65,078 and 108.180 metric tonnes of MS scrap valued at Rs. 15,14,520 has been confirmed on the ground that such excess stock was admitted by Shri Umakant Mahajan, employee of the appellant-unit. We find that the adjudicating authority in respect of submission of the appellant has termed the same as afterthought. The appellant had argued that the goods were production of night shift of November 4, 2005 which were to be recorded next day, i.e., November 5, 2005 but due to visit of investigation officers the same could not be entered. We find that against the appellant plea that the stock foun
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d in excess pertained to previous day production, no contrary fact is coming on record and their claim has not been held otherwise contrary. Further at the time of the visit of the officers the goods were being cleared legally and no evidence of removal of goods being cleared clandestinely was found. In such case there is no reason to confiscate the goods. Similarly the confiscation of alleged excess stock of 108.180 metric tonnes of MS scrap is not legal as the stock was not physically verified. The excess stock has been alleged only on the basis of weighing slips and it was held that the same were not entered into. We find that there has been no investigation as to whether the goods found stated in weighing slips were consigned to the appellant or came to the appellant factory only for weighment purpose. The reliance placed upon the statement of Shri Kothari has already been retracted during cross-examination. He has stated that he was not concerned with the weighing activity or unloading of goods. Therefore, his statement cannot be made basis for holding such stock as unaccounted. Further from the statement of Shri Ambadas Nagargoje it is appearing that the appellant-unit has consigned only Cenvatable raw material by M/s. R.L. Scrap. The officers should have physically verified the entire stock lying in the factory and then should have come to the conclusion regarding excess stock. Also there is no investigation from the vehicle owners as whether the goods were unloaded in the appellant's factory. In the absence of the same we are of the view that the goods cannot be confiscated. In view of our above findings we, therefore, hold that the demand of duty and confiscation of goods against the appellant-unit is not sustainable. As regard imposition of penalty under rule 26 on Shri Ambadas San-tosh Nagargoje, Shri Santosh Nagargoje, both directors of M/s. Ambika and upon accountant Shri Kishore Hiralal Kothari and Shri Jayant Vasant rao Kulkarni, we find that since the duty demand and confiscation of goods has been set aside, there is no question to impose penalty upon the aforesaid persons. We therefore set aside the penalties imposed upon them. 5. In view of our above discussions and findings, we set aside the impugned order and allow the appeals with consequential reliefs. Accordingly the cross-objections stands disposed of. (Pronounced in the court on March 15, 2017).