The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the consumption of electricity cannot be the basis to determine the production and clearance of goods for the excise duty demand.
M. J. Steel Re-Rolling Mill, the appellant assessee was engaged in the manufacture of TOR Steel i.e., MS Bars/Flats falling under Central Excise Tariff Act, 1985 and they had been availing Small Scale Industries exemption under Notification No.8/2003-CE declaring that the total value of clearances was less than Rupees one crore.
The assessee appealed against the order passed by the Commissioner of Central Excise (Appeals-I) for confirming the excise duty demand along with the interest and penalty.
During the hearing of the appeal, none appeared on behalf of the assessee and H. Jayathirtha appeared on behalf of the department.
The counsel for the department contended that even though the assessee had claimed that there had been no production of goods during the period in question, however, the electricity consumption recorded when compared to other units indicated that there was manufacture and clearance of finished goods from the factory without raising excise invoices.
The Bench observed that the consumption of electricity cannot be considered as the basis for demanding excise duty on the alleged clandestine removal of the goods and besides the basis of consumption of electricity adopted unilaterally in calculating the manufacture and clearance of finished goods without verification of the same during investigation from the supervisor or the partner, or through any corroborative evidence.
The two-member bench comprising D M Misra (Judicial) and Pullela Nageshwara Rao (Technical) held that the audited balance sheet certified by the Chartered Accountant establishing the total turnover of the assessee during the period which did not exceed Rs.100 lakhs and eligible for the Small Scale Industry Exemption.
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