ORDER
K.K. Usha, President
1. Challenge in this appeal at the instance of the assessee is against the order passed by the Commissioner dated 19-12-97. The appellant is engaged in the manufacture of M.S. Ingots and M.S. Castings under Chapter Heading 7206.90 of Central Excise Tariff Act 1985. Pursuant to the order passed by the Hon’ble High Court of Bombay sanctioning scheme of Amalgamation, Shree Saibaba Castings Pvt. Ltd. got amalgamated with the appellant company. As per the terms of the scheme all debts, liabilities, duties and obligations of Shree Saibaba Castings Pvt. Ltd. are transferred to the appellant company. It is under these circumstances the adjudicating order against Shree Saibaba Castings Pvt. Ltd. is challenged by the appellant herein.
2. The assessee was served with a show cause-cum-demand notice in 1995 alleging that they have produced 44625.554 M.T. of M.S. Ingots during the period 25-7-91 to 30-6-95. The quantity of ingots was assessed on the basis of the average percentage of Manganese in M.S. Ingots at the rate of 0.43 and that the appellant had received 307.203 M.T. of Manganese Alloys of Silicon Manganese of which the average yield of Manganese is 62.5% which works out to 191.890 M.T. It was alleged that on the above basis the actual quantity of M.S. Ingots that could have been manufactured theoretically would be 44625.554 M.T. whereas the production recorded in R.G. I Register was only 33933.953. It was, therefore, alleged that there was a suppression of production of 10691.601 M.T. during the period from 25-7-91 to 30-6-95. A further SCN was issued for the period from 1-7-95 to 30-11-95 demanding duty of Rs. 10,02,241/-. Later a corrigendum dt. 18-12-96 was issued demanding interest under Section 11AB and imposing mandatory penalty under Section 11AC of the Central Excise Act.
3. The appellant in their reply to the SCN contended that Manganese contained in M.S. Ingots varies from 0.43 to 0.60% and therefore, the calculation made by the Department on the basis of 0.43% is not correct. It was further submitted that at the time of mixing Manganese for the melt, there is an average wastage of 20% and that while calculating the theoretical production this wastage or burning loss was not taken into consideration. They had also placed before the authorities an opinion of Professor of Metallurgical Sciences, I.I.T., Mumbai in support of the above contention. It was also pointed out by the assessee that the theoretical production was worked out on the basis of purchase of Manganese Alloys namely Silicon Manganese and not on the basis of the actual consumption thereof in the factory during the material period. They submitted a certificate of their Chartered Accountant indicating the consumption of M.S. Ingots and submitted that if the production is calculated on the basis of actual consumption of the raw material during the material period and the wastage of 20% is also taken into account the production recorded in the statutory records would be correct. The assessee further pointed out that Commissioner had not taken into consideration the production/manufacture of C.I. Moulds wherein also the same quantity/percentage of Manganese is consumed.
4. After hearing the assessee, the Commissioner passed the impugned order confirming the demand contained in the SCN dt. 20-11-95 to the tune of Rs. 33,48,826.86. The penalty of Rs. 35 lacs was also imposed. The plant and machinery were directed to be confiscated under Rule 173Q(2) and redemption fine of Rs. 20 lakhs was imposed. There is a demand for recovery of interest under Section 11AB of the Central Excise Act. The proceedings initiated in the SCN dt. 13-12-95 was dropped.
5. Before us the ld. Counsel for the appellant reiterated the contention raised before the Commissioner. He further pointed out the SCNs issued to other manufacturers namely Shahaji Alloys Steel Pvt. Ltd. and M/s. Karam Alloys Pvt. Ltd. who were also engaged in manufacturing M.S. Ingots on similar basis, were later dropped by the Commissioner of Central Excise & Customs, Aurangabad. Copies of the proceedings were placed before us. Apart from the above, another SCN issued to the appellant dt. 3-7-96 for the period 1-12-95 to 31-5-96, an identical grounds was also dropped by the Addl. Commissioner of Central Excise under his Order-in-Original No. 168/97, dt. 19/21-1-98.
6. After hearing both sides, we find that the allegation of the suppression of production and alleged clandestine removal are based merely on the figures obtained on arthmetical calculation. The statement made by one of the employees is also relied on. We find merit in contention raised by the appellant that the statement given by Shri Hariharsingh Hanumansingh by self will not be sufficient to support the finding apart from the fact that the statement on two dates had given different figures. He is not a technically qualified person to give such technical data. In the Final Order No. 168/97 which is passed in the appellants, case itself, the adjudicating authority had rejected identical basis on which allegation of suppression of production and clandestine removal was made against the assessee. Reference is also made in the above order to the statement of Shri Hariharsingh Hanumansingh. It is observed therein that there was no reference to the percentage of Manganese, present in scrap used in the furnace. According to the adjudicating authority, the percentage of Manganese varies in the scrap from lot to lot depending on whether the scrap is new or old or whether the scrap was from those products which already have a high percentage Manganese. During the course of manufacture of ingots, certain quantities of slags would form so also runners and risers. A certain quantity of Manganese will be utilised in slags as well as runners and risers. For working out the quantity of Manganese used what has to be taken into consideration is the quantity actually issued and not the quantity received in the factory. It was also held that since Silicon Manganese are received in gunny bags in the form of powder also, there will be a shortage during transporting and handling within the factory which can affect the production by 20%. The adjudicating authority came to the conclusion that the average of 0.43% of pure Manganese is only an assumed figure and on that basis, no calculation would be possible. Ultimately the demand on the SCN was dropped as the method adopted therein would not prove suppression of production or clandestine removal. The above finding of the adjudicating authority was not challenged by the Revenue. Apart from the above as contended by the appellant in the case of two other similar manufacturers of M.S. Ingots identical view was taken by the adjudicating authority while dropping the SCN.
7. We do not find any reason to take a different basis in the facts of the present case. We, therefore, hold that the demand made on the basis of figures obtained on theoritical calculations cannot be sustained. In the result, the impugned order is set aside and the appeal stands allowed.
The operative portion of this order was pronounced in the open Court on 19-9-2002.