TaxTMI 
TaxTMI 
2014 (3) TMI 651
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....ficate issued by the Gems & Jewellery Export Promotion Council and the receipts from the artisans ?" 2. In Question No. 1 referred to above, though the figure is Rs. 21,31,418/-, counsel for both the sides pointed out that the correct figure is Rs. 28,31,418/-. We would, therefore, refer to such correct figure in consideration of the said question. 3. Briefly stated, the facts are that the appellantassessee was in the business of manufacturing and export of gold ornaments. For the A.Y 198990, return filed by the assessee came up for scrutiny before the Assessing Officer. The Assessing Officer noticed discrepancy in the weight of gold consumed by the assessee in preparation of the gold ornaments as compared to the weight of gold recorded at the time of export of such ornaments. In the nutshell, it appeared that the assessee was manufacturing and exporting gold ornaments of 22 Carat purity. In the documents recording manufacture of such ornaments, after they were received from karighars, the percentage or fineness of the gold recorded was 93.37%. In the export documents as well as in the certificate by the Customs authorities, the ornaments were shown to be carrying gold purity....
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....ion into 0.999 9978.593 [iv] Replenishment of gold in terms of 0.999 fineness by the Government of India through the SBI 9978.593 [v] Additional replenishment in view of the Government's Export Import Policy @ 2% in terms of fineness of 0.999 fineness 199.571 [vi] Additional replenishment of 199.571 when converted into fineness of 0.917 217.170 [vii] % of gold exported [9978.593/10870x100] 91.79% [viii] % of gold content in the finished product as per entries passed in the assessee's books [100/107.100x 100] 93.37% [ix] Replenishment by the Government 91.79% [x] % of additional replenishment @ 2% of the original but treated as purchase vide Export invoice 2.00% 4.2 The details of export of 18 carat purity ornaments are also examined as under : For ornaments of 18 carat purity Weight in Grams as shown in the assessee's books i] Weight of ornaments exported 16.700 ii] Fineness of items exported 0.750 iii] Fineness on conversion into 0.999 fineness 12.537 iv] Replenishment of gold in terms of 0.999 fineness by the Government of India 12.537 through the SBI. v] Additional replenishment i....
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....% 4.93% 4.92% ie. 4.93% 4 14 Carat 62.50% 37.50% 58.42% 41.57% 4.1 ie. 4.00% Thus, the above factual analysis shows that the assessee has been showing excess consumption of standard gold than what is actually required. In fact, the excess consumption of standard gold is counter balanced by showing proportionately low consumption ratio of alloys. 17. Further, it is also apparently clear that the assessee has not suffered any manufacturing loss or wastage of gold in the process of manufacture. Had it been so the composition of gold and alloy would not have been 100 : 7.100 in 22 carat purity account. As per the assessee's contention, the issue of gold with every 7.100 grams of alloy is 100 grams for manufacture of 22 carat ornaments. As per the assessee, the weight of the finished product in 22 Carat is 107.100 grams. Had there been any manufacturing loss, the weight of finished product would have been less than 107.100 grams say 106.100 grams or so. This phenomenon is not observed even in the manufacture of ornaments with the purity of 20 carat, 18 carat and 14 carat. In the 20 carat, 18 carat and 14 carat accounts the assessee shows pro....
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.... inter alia, as under : " 2.14 I have carefully considered the facts of the case and submissions of the learned counsel of the appellant. The undisputed fact is that while in the books of account the percentage of gold content in the gold ornaments and jewellery is shown at 93.37% as per the export invoice and Customs Certification, it is 91.7% only. In other words, it is even admitted by the appellant firm that the gold content in reality is more than shown in the export invoice. The reason given for such difference is that the appellant firm being an exporter has to meet stringent quality standard of foreign countries to which it is exporting its ornaments. In order to avoid the risk of goods being rejected on account of not being according to the prescribed hallmark, it is making its ornaments of a slightly higher purity than required. It is also contended that loss on account of such extra gold put in is made up by charging higher labour charges. It is also argued that the appellant is maintaining regular books of account and also statutory registers under the Gold Control Act meticulously and the Assessing Officer has not found any defect in the same. Now, so far as the arg....
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....9167. In the export invoice at page 262 of paperbook, the fineness is again shown at 0.9167. In the bill issued to Bindhi Jewellers USA Limited, the purity of gold is not mentioned, even though there is a column for the same. In the bank certificate of export, page 268 of the paper book, fineness of gold is again mentioned at 0.9167. Thus, there is not a single document in which appellant has mentioned the fineness or purity of gold in accordance with the books of account. If the percentage of purity of gold in the ornaments exported was higher than the one required under the international standard, the appellantfirm would have lost nothing by mentioning the correct percentage of purity because in so far as the purity was above 91.67%, it has nothing to worry about. On the other hand, by showing higher content of gold, it would have benefited by becoming entitled for importing more gold. I am, therefore, inclined to agree with the finding of the Assessing Officer that excessive consumption of gold has been shown in the books of account and such excess consumption of gold has been utilized for making unaccounted sales of gold. Therefore, the addition made on account of excessive con....
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....d found that invariably in each and every export document prepared by the assessee the fineness is shown as 91.67% (0.9167). The assessee has miserably failed to explain the difference between 93.37% as shown in its books of account and the above mentioned figure of 91.67% shown in the export document. The ons is on the assessee to show how the excess consumption of gold has taken place. The difference is so substantial that it cannot be claimed as wastage in the manufacturing process. In view of the fact that the assessee has received the gold ornaments of the prescribed quality from the Karigars and such final product has been exported as per the export documents. We are of the view that the cast on the assessee by the finding of the Assessing Officer has not been discharged. The only inference is that the excess gold shown as consumed in the manufacturing has been sold locally by the assessee outside its books of account. This is because as far as the export sales are concerned, the quantity and purity of the gold ornaments exported have been certified by the Customs authorities and subjudiced to the hallmarking in the importing countries. It is pertinent to observe in this conn....
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....ived back after preparation, they were tested, certified and recorded in the assessee's records. It was thereafter not possible for any mischief or modification, particularly looking to the certificate issued by the Gems & Jewellery Export Promotion Council. Counsel pointed out that 22 carat of gold or for that matter any other carats would not have precise purity and would have a range of fineness of gold. He drew our attention to the specifications laid down by the Bureau of Standards, which provides as under: " 1. 22.3 Carat gold : It shall be of fineness not less than 970. 2. 22 Carat gold : It shall be of fineness not less than 916.6. 3. 21 Carat gold : It shall be of fineness not less than 875. 4. 18 Carat gold : It shall be of fineness not less than 750. 5. 14 Carat gold : It shall be of fineness not less than 583.3. 6. 12 Carat gold : It shall be of fineness not less than 500. 7. 9 Carat gold : It shall be of fineness not less than 375." 7.1 Counsel therefore urged that the gold ornaments manufactured and exported by the assessee retained the same purity of 22 Carat [or other specifications as the case may be] irrespective of whether it had purity....
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....aving purity of 93.37%. The very same ornaments when were exported, the assessee recorded its purity as 91.66%. Some of these ornaments also were subject to actual test by the Customs authorities. The result also matches the assessee's claim of gold purity of 91.66%. Thus, in fact, there was considerable discrepancy between the two sets of documents pertaining to the same set of gold ornaments is undeniable. The assessee owed an explanation and had a duty to reconcile this discrepancy. The authorities found that the assessee failed in doing so. This was on the premise that the assessee's explanation was found unacceptable and inadequate. The assessee's only explanation was that the ornaments actually carried purity of 93.37% but were reflected in the export documents having purity of 91.66%. This according to the assessee was done because the importers had desired such level of purity whereas the assessee to err on safer side, used more gold so that the stringent international standards were not even unintentionally breached, which would incur liability of rejection of the consignment. 8.2 Such explanation of the assessee was rejected by the three authorities below. We are also ....