TaxTMI 
TaxTMI 
2015 (3) TMI 357
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....me-tax (Appeals) for the detailed reasoning given in his order. Being aggrieved with the order of the learned Commissioner of Income-tax (Appeals) now the assessee is in appeal before us. 2.1. In the course of the assessment proceedings the Assessing Officer noticed that assessee in Schedule 16 of its profit and loss account had shown the value of raw material consumed at Rs. 23,65,44,763. However, in the tax audit report, following details were reflected : (a) Gross profit/turnover 37,84,66,557/69,40,81,281 54.53 Opening stock 7,93,70,383 Add : Purchases 24,26,30,735 Excise duty paid 3,93,68,317 Manufacturing expenses 3,82,42,406 Total 39,96,11,841 Less : Sales 69,40,81,281 Closing stock 8,39,97,117 Total 77,80,78,398 Gross profit 37,80,78,398 2.2. The Assessing Officer required the assessee to furnish details of material consumed along with its reconciliation with the tax audit report. The assessee filed follo....
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....nd it had no relation with consumption of raw materials. The assessee further explained that it was providing after sales services to its customers and, therefore, the assessee had sold components and spares to its customers after making proper testing with regard to their usefulness and this had been shown as raw materials removed as such. Therefore, sales value of components could not be reduced while calculating the raw materials consumed for production of finished goods. 2.4. It was explained that sale of raw materials of Rs. 1,68,83,741, which were sold after testing and processing excise duty as per law, had been charged on these components. The cost of material sold was included in material consumed. The Assessing Officer, however, did not accept the assessee's contention for the following reasons : "The assessee in its letter dated December 21, 2011 has claimed that this reflects the sales value of components and spares made during the year. However, the same is not factually correct since the stock and production of goods manufactured during the year has been shown separate....
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.... components were classified as under : (a) Raw material sold as such (b) Components (c) Traded goods. 2.7. In regard to raw material sold as such, the assessee clarified that it is registered with the central excise since its products are subject to excise duty. As per the excise laws, the Cenvat credit was available if excise duty had been paid on input. The raw material or component on which the assessee had paid excise duty sold to the customers for maintenance of the equipment were classified as raw materials removed as such. Further, the assessee-company had charged excise duty on the material so sold which is evident from the invoices which were filed during the course of assessment proceedings. 2.8. The learned Commissioner of Income-tax (Appeals) deleted the addition for the following reasoning : (i) The confusion was caused because of various terminology used in Note 16 of S....
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....ere accepted in the earlier years. 2.9. Aggrieved, the Revenue is before us. 3. We have considered the submissions of both parties and have perused the record of the case. The short dispute is whether the assessee has claimed inflated cost of products by first claiming it as a part of cost of production of manufactured goods and also as raw material removed as such, shown under the head "sales". It is not disputed that the assessee is providing after sales services also and the spare parts and components are either manufactured by the company or are purchased from vendors. If the products are sourced from direct manufacturers, excise duty was charged by the vendor. If the same was being sourced from the dealers, except first/ second stage dealers, excise duty was not charged by them. In the process of providing after sales services, the assessee replaced worn out and defective components with spare parts and components which was purchased from vendors and after testing and configuring according to the specific machines. The assessee had classified its components under three heads, viz. "raw material sold as such", "components" and "traded goods". In order to appreciate the co....