AI Drafter 
TaxTMI 
TaxTMI 
2017 (11) TMI 1852
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....s. Zirconia Cera Tech Giazes in ITA No.376 & 377/Ahd/2016 for Asst. Years 2007-08 & 2008-09. Assessee has taken following Grounds: 2.1 For Asst. Year 2007-08: 1. The learned C.I.T.(A) has erred in law and on facts in holding that the reasons recorded by the Assessing Officer are proper and that the proceedings u/s.147 of the Act are valid and thereby rejecting the appellant's ground against the reassessment proceedings. 2. The learned C.I.T.(A) has further erred in law and on facts in upholding the addition of Rs. 88,03,348/- on the ground of alleged undervaluation of sale and of Rs. 2,08,00,924/- being the estimated G.P. on alleged clandestine removal of goods. 3. On the facts and in the circumstances of the case and in law the learned C.I.T.(A) ought to have quashed the proceedings u/s.147 of the Act being invalid and ought to have annulled the assessment made in pursuance of invalid proceedings, and ought to have deleted the addition of Rs. 88,03,348/- and 2,08,00,924/-. 4. It is therefore prayed that the proceedings u/s.147 may be quashed being assessment made in pursuance thereof may be annulled and the addition of Rs. 88,03,348/- and....
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....of but same was not accepted by the Assessing Officer. Same was upheld by the CIT(A). At the outset of hearing ld.Authorised Representative did not press issue of re-opening. So same is dismissed us as not pressed. 6. Coming to the facts of the case on merit, we find that assessing officer referred to the allegations contained in show-cause notice issued by DGCEI and called upon assessee to explain as to why alleged under valuation of sales and alleged value of clandestine production should not be considered for addition in computation of income for year under consideration. For the sake of convenience the contents of said notice are reproduced as under: 1. "An investigation has been carried out by DGCEI, Zonal Unit, Ahmedabad in respect of under-valuation and clandestine manufacture/clearance of Ceramic Glaze Mixture(Frit) by Manufactures of Frit in Gujarat. The show-cause notice (SCN) issued by the office of the DGCEI has been obtained in the case of M/s. Zirconia Cera Tech Glazes. As per the SCN issued by the DGCEI, the assesseei.e M/s. Zirconia Cera Tech Glazes had Glazes had evaded Central Excise duty during the period from 01/04/2006 to 31/03/2007 by way of follow....
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.... they paid something over and above the invoice price for the purchase so as to use these statements to allege suppression of sales price in our case. The fact of the matter is that such statements are recorded at the instance of the officers and are not free and fair in nature. Such oral statements have no evidentiary value, as the same are not corroborated by any independent material particulars. We rely on the judgment of Madras High Court in case of Commissioner of Income Tax vs. VigneshkumarJewellers. iii. The statements of buyers would also reveal that they are also almost same word to word. Further the name of any representative, who collected cash amount, has not been revealed, it is unimaginable that such huge amount of cash could be paid to an unknown person. iv. The DGCEI during the course of framing SCN however ignored these facts and proceeded to use the statements, and estimated the alleged assessable value of the entire production of 'frit' of the whole year working out the huge difference of Rs. 5,79,93,067/- treated as suppression of sales for the F.Y.2006- 07 relatable to A.Y. 2007-08. Further in SCN the DGCEI has estimated the entire sal....
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....as well. The operative portion of CIT(A) order is reproduced as under : "5.6 I have considered the facts of the case, assessment order, submission made by the appellant, remand report and rejoinder filed by the appellant. From the assessment order it is perused that appellant had filed return of income on 30/10/2007 declaring total income at NIL which was finalized u/s.143(3) and order was passed on 25/03/2009 determining total income at NIL/-. Thereafter, a letter was received from the Deputy Director of Income-tax (Inv.), Unit-II, Ahmedabad along with Show Cause Notice issued to the appellant by Directorate General of Central Excise Intelligence, Ahmedabad (DGCEI). From the show cause notice, it was noticed that appellant was engaged in various types of modes & methods of tax evasion which resulted into escapement of huge tax for the year under consideration. In such facts, case of the appellant for the year under appeal was reopened u/s.147 of the IT Act. After recording the reasons for reopening, notice u/s. 148 of the Act was issued on 21/03/2013. In response to the notice issued appellant requested to treat the original return filed on 30/10/2007 as return f....
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....ond doubt that appellant was involved in undervaluation of sale invoices, thereby suppressing the sales and also had understated the production and its unaccounted sale of such clandestine production, For the year under appeal, the amount of under valuation has been worked out at Rs. 5,79,93,067/- [as mentioned in Annexure C-1 (Sr. No. 1 to 124) of SCN issued by DGCEI and the amount of Clandestine removal goods has been worked out at Rs. 13,70,28,488/- as mentioned in Annexure C- 2 (Apr-06 to Mar-07) of SCN issued by DGCEI. AO has concluded that appellant had shown G.P. at a rate of 15.18% for the year under appeal hence, for the purpose, 15.18% G.P rate adopted at 15.18%. Accordingly, 15.18% of total undervalued sales is worked out at Rs. 88,03,348/- (15.18% of Rs. 5,79,93,067/-) is added to the Total income of the appellant. Similarly 15.18% of the value of clandestine removal goods for the year under consideration is worked out at Rs. 2,08,00,924/- (15.18% of Rs. 13,70,28,488/-) and is added to total income of the appellant. Appellant before me contended that AO in making addition of Rs. 88,03,348/- being element of profit on the alleged undervalued sales of Rs. 5,79,93....
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....ed by CESTAT, it is highly technical and relief is given to the appellant and other 22 appellants on the basis of technical grounds like- * Whether the appellants had indulged in clandestine manufacture and clearance of Ceramic Glazed Mixture (Frit) in view of the adjudication orders passed on the basis of natural gas consumption norms per metric ton? * Whether the appellants had indulged in undervaluation of frit and also clandestinely cleared frit as per personal ledgers retrieved from a pen-drive recovered and other personal records read with their statements? * Whether the adjudicating authorities were justified in denying crossexamination of witness under the provisions of Section 9D of the Central Excise Act, 1944 read with the judicial pronouncements on the issue. It is perused from the common order of CESTAT that clandestine manufacture arid clearance of frit by the appellant have been estimated by taking different gas consumption norms which either got suggested by the appellant or worked out by the Investigation, Average gas consumption from 263 SCMs to 484 SCMs were fixed for different appellants and were considered by the adjudicating....
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....nchnama was made on 30.8.2008 where the said pen-drive was mentioned to have been taken out of a sealed cover when the first Panchnama never mentioned keeping the said pen-drive in a sealed cover. It is also observed that on 30.8.2008 the sealed cover was opened but contents of the silver pen-drive were not opened on 30.8.3008 but instead another black colour pen-drive was opened. On 06.9.2008 under a Panchnama the said silver pen-drive taken out of the sealed cover and on opening this pen drive in the Tally Folder, no data was found to be available. However, under another Panchnama dated 12.09.2008, when the said silver pen-drive was opened data was found in Tally Folder which is the relied upon as Aajtak XYZ. There is a strong force in the arguments made by the appellants that when no data was found in Tally folder on 06.9.2008, how the relied upon documents got generated on 12.09.2008. Shri V.N. Thakkar, Superintendent in his cross-examination explained the reason for non retrieval of data on 06.9.2008 to be due to operational lack, but he admitted that no mention of any operational lack is made in the Panchnama dated 06.9.2008. Further, it is observed that in Panchnama dated 12....
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....ion of goods which were collected and on that basisAcdl. DGCE had show-caused the appellant. Various statements wererecorded of the partners and the technical persons of various concernsfrom whom appellant used to purchase or sold the products which arealso not cross examined as stated by the Hon'ble CESTAT. The Hon'blejurisdictional Tribunal has decided one M/s. Prima Ceramics Pvt Ltd in ITANo. 453/Ahd/2013, which is one of the 22 cases involved having identicalissue. Hon'ble Tribunal has given the directions to decide this case asunder: "......to decide the same afresh in accordance with law on merit in the light ofthe order of the Excise and Custom Tribunal, to be passed in this case, after allowing reasonable opportunity of hearing to both the parties. We direct accordingly." Following the above directions of the Hon'ble ITAT, the case of the appellant was remanded to Assessing officer and directed to give fresh opportunity to the appellant to produce books of accounts and to provide opportunity to cross-examine of various statements recorded and evidences collected during the action conducted by the Excise Department and the detailed Show Caus....
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....70,28,488/ . Similarly, for A.Y.2008-09, considering the undervaluation of sale at Rs. 6,08,09,785/- the then A.O added to the total income of the assesseers. 92,30,925/- on account of under valuation. And similarly addition on account of clandestine removal which corner to Rs. 2,53,46,163/- (i.e. 15.18% of Rs. 16,69,70,770/-) was made to the total income of the assesses. (10) Further, regarding the contention of the assessee that no opportunity of cross examination of details was accorded to the assessee during the assessment proceedings, it is to state that during the remand proceedings, vide this office order short entry dated 24/09/2015 the A.R. of the assessee was given the opportunity for cross examination of record. However, in response, the AR stated that since they have already received the relevant documents during the assessment proceedings. Thus, there was no need for further cross verification as the assessee has received the relevant documents during the assessment proceedings. However, the AR on that day only submitted the copy of order passed by the appellate Tribunal of Central Excise in which the issue in question was allowed in favour of the assessee in ....
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.... to submit that this observation is not relevant keeping in view thefact that the AO has computed the total income on the basis of the profit as per books of accounts. This would show that the books of accounts and the book result has been accepted. Paragraph 2(10) The assessing officer has mentioned that opportunity for "cross examination of record" was given in remand proceedings and that the AR replied that the relevant documents have teen received during the assessment proceedings and therefore there wasno need for "cross verification of record". As is evident from the above, as per the direction of the Hon'ble ITAT vide order dated 05/09/2013 in the case of Prima Ceramics Pvt Ltd and other 22 cases including appellant, a reasonable opportunity of being heard and opportunity of cross examination on the basis of evidences collected by DGCEI and relied upon by the assessing officer was granted to the appellant by the assessing officer. The opportunity granted was denied by the appellant simply stating in his letter that since they already received the relevant documents during the assessment proceedings, there was no need for further cross verification as th....
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....ation of goods and freight and unaccounted production. It is not out of place to mention that these facts were not dealt by the Hon'ble ITAT in the order passed CESTAT has given relief on the basis of7 technical ground but Income-tax Department has not examined the Partners of the company and other persons whose statements were recorded on oath during the search action by the Excise Department as well as on those evidences which was collected and was in possession of Excise Department which were very well mentioned in the show cause letter of Addl. DGCEI and order passed by the Commissioner of Central Excise-III, Ahmedabad in the case of the appellant. The case was remanded to the AO to confront the appellant on these issues as well as to give opportunity to the appellant to produce the books in support of the claim which was not relied upon by the AO and the books were rejected. Appellant has not availed the opportunity with the plea that the AO has to follow the order of the Hon'ble CESTAT and directions of Hon'ble Jurisdictional ITAT which is well discussed in above paragraphs. The denial of opportunity by the appellant indicates that the issue is still very....
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....aiKababhaiKalaria, partner of M/s.AtlasIndustries, Morbi, he has admitted that they had purchased opaquequality frits and sometimes transparent quality also. However, the qualityof both the opaque and transparent frit received were the same. He alsoconfirmed that there was undervaluation of ceramic frit as they weregetting invoices from the suppliers @ 7/- to Rs. 12/- per kg, which waspaid in cheque. The balance was collected in cash and was also not shown in the invoices raised. In the statement recorded of Shri JagdishbhaiGovindbhai Patel, partner of M/s Satyam Ceramic, Lakhdirpur Road, Morbi, he has admitted that there was undervaluation of cermic frit as they were getting invoices from the suppliers @ 7/- to Rs. 12/- which was paid through cheques, however for the difference in value of frit, which was Rs. 20/- to Rs. 30/- per kg, the balance was paid in cash. Similar Statement; has been given by Shri BalubhaiAmarsinhbhai Patel, partner of M/s. Leo Ceramic, Morbi; Shri KishorebhaiRaghavjibhai Patel, partner of M/s Priya Gold Ceramics, Morbi; Shri SureshbhaiKarsanbhaiFefar, partner of M/s Omson Ceramic, Morbi; Shri LaljibhaiVishrarnbhyai Patel, partner of AM/s Swagat Ceramic, Mo....
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....order is reproduced here as under: "6. In these proceedings the following issues are required to be deliberated upon:- (i) Whether the appellants mentioned in Para 5.1 above have indulged in clandestine manufacture and clearance of Ceramic Glazed Mixture (Frit), in view of the adjudication orders passed the adjudicating authorities on the basis of natural gas consumption norms per metric ton? (ii) Whether the appellants mentioned in Para 5.1 and 5.2 have indulged in undervaluation of frit and also clandestinely cleared frit as per a personal ledgers retrieved from a pen-drive recovered from SANYO and other personal records and pen-drives from the ceramic tile manufacturers read with their statements ? (iii) Whether the adjudicating authorities were justified in denying cross-examination of witness under the provisions of Section 9D of the Central Excise Act, 1944 read with the judicial pronouncements on the issue? 7. For the purpose of point No. 6(i) above and clandestine removal of frit by the frit manufacturers adjudicating authorities have mainly relied upon average consumption of natural gas for manufacturers one MT of frit by taking....
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....e of gas consumption. During 32 months, the total quantity declared by them in their statutory records was less than 1275MTs wherein also the gas consumption was exceeding the average requirement of 450SCM per MT. 24.5.4. Thus the above Panchnama proceedings, unambiguously revealed that the normal time required for manufacturing 50 Kgs of frit was 8 minutes, i.e. 100 Kgs in 16 minutes and 1 MT in 2 hours 40 minutes. This reveals that one Kiln can manufacture 10 MT of frit per day of 24 hours, which means that the total quantity of frit produced by M/s. Belgium with their 5 Kilns is 50MTs per day. Thus, it is observed that normal quantity of frit which could be produced in the factory of M/s. Belgium by using 5 Kilns at a time, would be 1500MT per month. 24.5.5 Comparison of the monthly production of frit accounted for by M/s. Belgium in their statutory records as appearing in Col. No. 2 of the Annexure-F vis-a-vis the actual quantity which would have produced by them in their factory as discussed above, fully substantiates large scale suppression of production by them. The fact that the quantity recorded in their statutory records during some months, exceeds the a....
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....ating the production/ clearance of finished goods Frits. In the same Annexure-F the units of electricity consumed in certain months is less than 55 units and is even as low as 40.153 units. The above data of the appellant contained in Annexure-F to the show cause notice dated 08.10.2009 reflects that records maintained by this appellant are genuine and correct. There is no corroborating evidence of excess/ short raw materials of frit procured clandestinely by this appellant or any of the other appellants. There is no seizure of clandestinely removed goods from any of the appellants or any excess stock of finished goods. No cash has been seized from any of the premises searched by the Revenue when crores of cash has been alleged to have been transferred to the appellants across the country. There is also no evidence of excess procurement of raw materials. It is also claimed by the appellants that calorific value of the gas supplied by GAIL vary in GCV (Gross Calorific Value) and NCV (Net Calorific Value) which also effect consumption of gas alongwith the type of frit grade manufactured. It is observed from the ground (d), of the grounds of appeal filed by M/s. Belgium Glass & Cerami....
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....t the law is wellsettled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) Raw materials, in excess of that contained as per the statutory records; (b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) Discovery of such finished goods outside the factory; (d) Instances of sale of such goods to identified parties; (e) Receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) Use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) Statements of buyers with some details of illicit manufacture and clearance; (h) Proof of actual transportation of goods, cleared without payment of....
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....e said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal. 8.3 Appellants have also relied, inter-alia, on the judgment of Allahabad High Court in the case of CCE, Meerut-I vs. RA Castings Pvt. Limited [2012 (26) STR 262 (All.)], which is upheld by the Hon'ble Supreme Court as reported in 2011 (269 ELT A108. The facts of this case and the orders of the Allahabad High Court is as follows:- "[Order]- These appeals under Section 35-G of the Central E....
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....on MT of steel ingots. Tribunal also observed that the electricity consumption varies from one heat to another and from one date to another and even from one heat to another within the same date. Therefore, no universal and uniformly acceptable standard of electricity consumption can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. The Tribunal has also considered the report of Dr. Batra, which has been relied upon for making the allegations that there was higher electricity consumption. It appears that Dr. Batra in his report has observed that for the production of 1 MT of steel ingots, 1046 units electricity required. 8.4 In view of the settled proposition of law laid down above, estimation of quantity of goods manufactured and clandestine removal of goods by the appellants cannot be slapped on the basis of averages arrived and calculated based on norms of gas consumption in manufacture of 1 MT of frit. It is rightly contested by the appellants that frit manufactured is not covered by any notification issued under Sect....
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....ctories replaced in the Kilns after 2008-09. He argued that as per the statement of Shri Balkrishna Thakkar himself, which is recorded by the department, there cannot be any fixed ratio of gas consumption and that after the new management took over, they have improved the efficiency of the unit and that mere gas consumption cannot be used as a factor for clandestine manufacture and removal. He explained that frit consists of two components i.e. glass and silicone dioxide. That the melting point of glass is very high and other materials called fluxes are added, as per expert consultations, to lower melting point such as borax, boric acid and zinc oxide, etc. That when fluxes are used, the melting point required for manufacture of frit is reduced. Learned advocate referred to extracts from the book, Industrial Ceramics by Felix Singer and the book Glassing and Decoration of Ceramics Tiles by Autorivari and extracts from the journal. Ceramic Industry, January, 2000 as well as various extracts downloaded from internet to support his case. He referred to the following decisions to submit that gas consumption alone cannot be the sole basis of clandestine manufacture and removal of the fi....
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....y this Bench it has already been held that method adopted by the investigation to estimate clandestine removal of finished goods is not sound and has to be discarded. However, Revenue was given an opportunity to strengthen their case by corroborating evidence with some more factual data from additional studies. No appeal has been filed by the Revenue against the above order passed by this Bench. It is also observed from 3.2 of the remand order that appellant has made certain changes in the plant and machinery and other methodologies to reduce gas consumption. Even in the remand proceedings also adjudicating authority has not countered the arguments taken by the appellant as to why the steps taken by them from time to time, does not effect gas consumption. On a specific query from the Bench, the learned Senior Advocate also argued that similar modernization in processes of manufacture, as undertaken by M/s. Wellsuit Glass in the manufacture of frit, have also been undertaken by other appellants. No findings have been given by the Adjudicating authorities in countering the claims of the appellants, justifying the modernization done to reduce consumption of gas from time to time. No e....
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....ut contents of the silver pen-drive were not opened on 30.8.2008 but instead another black colour pen-drive was opened. On 06.9.2008 under a Panchnama the said silver pen-drive taken out of the sealed cover and on opening this pen drive in the Tally Folder, no data was found to be available. However, under another Panchnama dated 12.09.2008, when the said silver pen-drive was opened data was found in Tally Folder which is the relied upon as Aajtak XYZ. There is a strong force in the arguments made by the appellants that when no data was found in Tally folder on 06.9.2008, how the relied upon documents got generated on 12.09.2008. Shri V.N. Thakkar, Superintendent in his cross-examination explained the reason for non retrieval of data on 06.9.2008 to be due to operational lack, but he admitted that no mention of any operational lack is made in the Panchnama dated 06.9.2008. Further, it is observed that in Panchnama dated 12.09.2008, the print out of account AJTAK taken contained 52 pages and account of appellant Wellsuit appeared at page 30 out of 52 pages. Another Panchnama dated 24.09.2008 indicate in Annexure A3 that the number of pages of Account Aajtakwere 94 and the name of ap....
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....ho made the statement is examined as a witness in the case before the Court and the Court is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court." 10.2 In the case of J.K. Cigarettes Ltd. v. CCE (supra), following conclusions were drawn by the Delhi High Court, in Para 32:- "32. Thus, we summarize our conclusions as under:- (i) We are of the opinion that the provisions of Section 9D (2) of the Act are not unconstitutional or ultra vires; (ii) while invoking Section 9D of the Act, the concerned authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established; (iii) such an opinion has to be supported with reasons; (iv) before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the....
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....ions of Section 9D of the Act in respect of any particular witness, intimation of the same is required to be given to the respondents and it would be open to the respondents to approach the High Court against the order made by the authority in that behalf. That appeal is disposed of in these terms. No costs." Further in Paras 16 and 19 of case law A. Tajudeen v. UOI [2015 (317) ELT 177 (SC)] Apex court very recently held as follows on admissibility of statements and cross-examination:- "16. Having given our thoughtful consideration to the aforesaid issue, we are of the view that the statements dated 25-10-1989 and 26-10-1989 can under no circumstances constitute the sole basis for recording the finding of guilt against the appellant. If findings could be returned by exclusively relying on such oral statements, such statements could easily be thrust upon the persons who were being proceeded against on account of their actions in conflict with the provisions of the 1973 Act. Such statements ought not to be readily believable, unless there is independent corroboration of certain material aspects of the said statements, through independent sources. The nature of the c....
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.... the opinion that the execution of the mahazaron 25-10-1989, is inconsequential for the determination of the guilt of the appellant in this case." In view of the above, by not allowing the cross-examination of the relied upon witnesses under Section 9D of the Central Excise Act, 1944, the evidentiary value of such statements does not survive and is required to be discarded. We accordingly hold so. 11. It is also the case of the appellants that all the transactions are made by the appellants at the factory gate. That only exact amount of additional consideration received by each appellant has to be added to the transaction value and that no such quantification has been done by the Revenue which could be attributed to each manufacturer. That Revenue can not adopt any best judgment valuation method as suggested in Central Excise Valuation Rules even if all the statements/documents relied upon by the Revenue are presumed to be correct admissible as evidences. 12. Before giving observations on this argument raised by the appellants, it will be relevant to glance through the relevant portion of the provisions of Section 4 of the Central Excise Act, 1944 alongwi....
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..... E/11960/2013 and E/12386/2014, the valuation has been enhanced solely based on the assumption that after booking of the case these appellant enhanced their prices. In the case of transaction value realm the same product can be sold at different prices as per Section 4 of the Central Excise Act, 1944 unless actual additional consideration has been shown to have flown back to the appellants. Appellants in these appeals and in Appeal Nos. E/13720/2014 and E/534/2011 have also not admitted during investigation that they have received any additional consideration. In other appeals on the issue of undervaluation investigation attempted to show the flow back of such additional cash flow through the statements of ceramic tile manufacturer and the statements of Shroffs and Angadias. The amount so worked out has been worked out to be Rs. 38,95,860/- as per the statement of Shri Jayesh Patel, Prop. Of M/s. Kevel mentioned in Para 9.3.3 of OIO dated 23.03.2011 in the case of M/s. Belgium Glass & Ceramics. This statement clearly conveys that amount of Rs. 38,95,860/- was paid to various frit manufacturers and at the same time mentions that the names of the frit manufacturers are not written a....
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....ion are concerned that relief granted by the CESTAT is highly technical, it was submitted by the ld. Authorised Representative that such observations are devoid of merit. CESTAT has passed detailed reasoned order. As regard to CIT(A)'s observation as to opportunity of cross-examination of persons whose statements have been recorded, ld. Authorised Representative submitted that it is absolutely illogical on the part of the ld. CIT(A) to seek an opportunity of examination of the statements recorded by the relevant Excise authorities. Ld. Authorised Representative further submitted that Excise Department preferred an appeal against above mentioned order of CESTAT before Apex Court which according to AR was dismissed as withdrawn vide order dated 27/01/2016 and copy of same is placed on Pages 327-328 of Paper Book. Content of the same are reproduced as under: "IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOs.OF 2016 D No.39019/2015 COMMISSIONER OF CENTRAL EXCISE & ST, AHMEDABAD - III .....APPELLANT(s) VERSUS ZIRCONIA CERA TECH. GLAZES PVT LTD. & ANR...RESPONDENT(S) ORDER Learned Additional Solicitor General see....
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.... Commercial Tax Officer(4), Mehsana by which an order of reassessment has been passed by the Commercial Tax Officer directing the petitioner to pay an amount of Rs. 21,52,832/towards the balance tax under the Gujarat Value Added Tax Act, 2003[hereinafter referred to as "VAT Act"] and also directed to pay 150% penalty i.e. Rs. 32,29,248/and in all Rs. 73,19,630/. 2. Facts leading to the present special civil application in nut shell are as follows: 2.1 That the petitioner is a dealer registered under the VAT Act. That the petitioner is excisable to tax on the basis of its turnover under the VAT Act. For the financial year 2006-07, the petitioner filed its return with the authorities under the Act. Such return was processed by the authorities and the order thereon was passed and accordingly the petitioner paid the value added tax of Rs. 2,06,448/. 2.2 A notice came to be issued on 14.03.2012 by the adjudicating authority indicating that for the period from 01.04.2007 to 31.03.2008, he has reason to believe that taxable turnover of the petitioner assessee has escaped assessment. That petitioner was required to attend the officer on 31.03.2012. That the petit....
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....earing on behalf of the petitioner has heavily relied upon the decision of this Court in the case of Futura Ceramics Pvt. Ltd. v. State of Gujarat rendered in Special Civil Application No.6500/2012 and relying upon the said decision, it is submitted that similar reassessment order passed by the AO solely on the basis of the show cause notice issued by the Excise Department has been set aside by this Court. Therefore, it is requested to quash and set aside the impugned order passed by the AO. 4. Shri Jaimin Gandhi, learned AGP appearing on behalf of the respondent is not in a position to dispute the above. He is also not in a position to dispute that similar reassessment order has been set aside by this Court in the case of Futura Ceramics (P.) Ltd. (supra). However, Shri Gandhi, learned AGP appearing on behalf of the respondent has requested to reserve the liberty in favour of the AO and/or appropriate authority to pass reassessment order afresh in accordance with law and on merits. 4.1 Shri Parikh, learned advocate appearing on behalf of the petitioner has submitted that it may be observed that fresh reassessment order can be passed in accordance with law and onl....
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....AT Act. Merely because the Excise Department issued a show cause notice, that cannot be a ground to presume and conclude that there was evasion of excise duty implying thereby that there was also evasion of tax under the VAT Act. It is not even the case of the Department that such show cause notice proceedings has culminated into any final order against the petitioner. We wonder what would happen to the order of reassessment, if ultimately the Excise Department were to drop the proceedings without levying any duty or penalty from the petitioner. All in all, the Asstt. Commissioner has acted in a mechanical manner and passed final order of assessment merely on the premise that the Excise Department has issued a show cause notice alleging clandestine removal of the goods. Such order, therefore, cannot be sustained and is accordingly quashed. When the order is ex facie illegal and wholly untenable in law, mere availability of alternative remedy would not preclude us from interfering at this stage in a writ petition." 6. In view of the above decision of Division Bench of this Court, the impugned reassessment order deserves to be quashed and set aside. However liberty ....
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....s passed order against assessee and matter was carried up to concerned Hon'ble CESTAT. Hon'ble CESTAT vide its order dated 12/02/2015 as discussed above, has decided the issue in favour of the assessee holding that Excise Department could not estimate value of alleged suppression of sales as well as clandestine removal of goods merely on the basis of assumption and surmises. The CESTAT having considered the relevant facts of the case as well as relevant material i.e. Pen drive and statement recorded by the Excise Department has decided the matter in favour of the assessee as discussed above. In these circumstances Ld. CIT(A) was not justified in observing that relief granted by Hon'ble CESTAT was highly technical. 13. We also find that Excise Department carried matter before Hon'ble Apex Court wherein same was dismissed as withdrawn as mentioned above. Nothing contrary was brought to our knowledge on behalf of Revenue in this regard. 14. We also find that Tax Appeal being Tax Appeal Nos.733 and 734 of 2016 preferred by the Ld. Excise Department before Hon'ble Gujarat High Court came to be dismissed vide order dated 07/12/2016, as mentioned above. Again not....
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....e passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. Assessing Officer in levying interest u/s 234A/B/C/D of the Act. 9. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. Assessing Officer in initiating penalty u/s 271(l)(c) of the Act. 16.2 For Asst. Year 2007-08: 1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of Assessing Officer in reopening the assessment u/s.147 of the Act. In the facts and circumstances of the case, learned CIT(A) ought to have held that the action of reopening is without jurisdiction and not permissible either in law or on facts. 2. The learned CIT(A) has erred both in law and on the f....
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.... 3. The learned CIT(A) has erred in law and on facts of the case in confirming the action of learned Assessing Officer in holding that the appellant has undervalued sales amounting to Rs. 5,09,28,045/-. 4. The learned CIT(A) has erred both in law and on the facts of the case in confirming addition of Rs. 76,39,207/- after applying gross profit rate of 15% on alleged undervalued sales. 5. The learned CIT(A) has erred in law and on facts of the case in confirming the action of learned Assessing Officer in holding that the appellant has clandestinely removed goods amounting to Rs. 69,80,511/-. 6. The ld. CIT(A) has erred both in law and on the facts of the case in confirming an addition of Rs. 10,47,077/-after applying gross profit rate of 15% on alleged clandestine removal of goods. 7. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law ....
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....ssessment order, submission made by the appellant, remand report and rejoinder filed by the appellant. On perusal of assessment order it is observed that a letter was received from the Deputy Director of Income-tax (Inv.), Unit-II, Ahmedabad along with Show Cause Notice issued to the appellant by Directorate General of Central Excise Intelligence, Ahmedabad (DGCEI). From the show cause notice, it was noticed that appellant was engaged in various types of modes & methods of tax evasion which resulted into escapement of huge tax for the year under consideration. In such facts, case of the appellant for the year under appeal was reopened U/s.147 of the IT Act. After recording the reasons for reopening, notice u/s. 148 of the Act was issued on 26/03/2013. In response to the notice issued appellant requested to treat the original return filed on 07/12/2006 as return filed in response to notice u/s 148. Further, statutory notices u/s 143(2) and u/s 142(1) were issued and served to the appellant. To elaborate the matter, it is perused that in this case on the basis of intelligence gathered by DGCEI as well as the documentary evidences recovered from the premises, a search operation was co....
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....y DGCEI and the amount of Clandestine removal goods has been worked out at Rs. 5,32,45,944/- as mentioned in Annexure D-2 (Apr-05 to Mar-06) of SCN issued by DGCEI]. AO has concluded that appellant had shown G.P. at a rate of 15% for the year under appeal hence, for the purpose, 15% G.P rate adopted at 15%. Accordingly, 15% of total undervalued sales is worked out at Rs. 74,06,253 (15% of Rs. 4,93,75,020/-) is added to the total income of the appellant. Similarly 15% of the value of clandestine removal goods for the year under consideration is worked out at Rs. 79,86,892/- (15% of Rs. 5,32,45,944/-) and is added to total income of the appellant. Appellant before me contended that AO in making addition of Rs. 74,06,253/- being element of profit on the alleged undervalued sales of Rs. 4,93,75,020/-and of Rs. 79,86,892/- Being element of profit on the alleged value of alleged clandestine removal of goods of Rs. 5,32.45,944/-has entirely relied upon the Show Cause Notice issued by the DGCEI for proposing the additions in his show cause notice dt. 10/03/2014 reproduced in assessment order under appeal and also in making the impugned additions. Further, appellant has also conten....
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....ying cross-examination of witness under the provisions of Section 9D of the Central Excise Act, 1944 read with the judicial pronouncements on the issue. It is perused from the common order of CESTAT that clandestine manufacture and clearance of frit by the appellant have been estimated by taking different gas consumption norms which either got suggested by the appellant or worked out by the Investigation. Average gas consumption from 263 SCMs to 484 SCMs were fixed for different appellants and were considered by the adjudicating authorities for calculating/confirming the demands and imposing penalties. On the above lines, Hon'ble CESTAT has concluded in Paras. 8, 9 & 10 that the methodology adopted by the Adjudicating authorities in estimating and demanding duty from the appellants based on consumption of natural gas electricity consumed and packing time taken, as not acceptable and required to be rejected. The paras, are reproduced hereunder: "8. In view of the above observations and judicial pronouncements, methodology adopted by the Adjudicating authorities in estimating and demanding duty from the appellants; based on consumption of natural gas, electricit....
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....s found in Tally Folder which is the relied upon as Aajtak XYZ. There is a strong force in the arguments made by the appellants that when no data was found in Tally folder on 06.9.2008, how the relied upon documents got generated on 12.09.2008. Shri V.N. Thakkar, Superintendent in his cross-examination explained the reason for non-retrieval of data on 06.9.2008 to be due to operational lack, but he admitted that no mention of any operational lack is made in the Panchnama dated 06.9.2008. Further, it is observed that in Panchnama dated 12.09.2008, the print out of account AJTAK taken contained 52 pages and account of appellant Wellsuit appeared at page 30 out of 52 pages. Another Panchnama dated 24.09.2008 indicate in Annexure A3 that the number of pages of Account Aajtak were 94 and the name of appellant existed at page 43 as against page 30 mentioned in Panchnama dated 12.09.2008. Appellants have also raised the issue regarding discrepancies in the name of the panch witnesses. It is also contended that Revenue had not followed the procedure as stipulated in Section 36B of the Central Excise Act, 1944. In view of the above discrepancies the authenticity and veracity of data retriev....
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....he light of the order of the Excise and Custom Tribunal, to be passed in this case, after allowing reasonable opportunity of hearing to both the parties. We direct accordingly." Following the above directions of the Hon'ble ITAT, the case of the appellant was remanded to AO and directed to give fresh opportunity to he appellant to produce books of account and to provide opportunity to cross-examine of various statements recorded and evidences collected during the action conducted by the Excise Department and the detailed Show Cause Notice prepared by the DGCEI and followed by the AO. AO has submitted a detailed remand report which is reproduced herein above. Appellant was provided opportunity to file rejoinder and a copy of the remand report of the AO was provided to the appellant has filed rejoinder which is reproduced herein above. It is further observed that AO vide its letter dated 07/03/2016 has also submitted following report. 2. This is with respect to the appellant proceedings for the A.ys.2006-07, 2007-08, 2008-09 pending before the Hon'ble CIT(A). In this regard, it is to state that vide this office Letter dated 12/02/2016, the assessee was speci....
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....fore, it is requested to Hon'ble CIT, to please decide the issue on the basis of facts and material on record. As the appellant is just trying to delay the procedure before the CIT(A) for A.ys.2006-07, 2007-08, 2008-09 with the sole motive to delay reassessment proceedings for A.Y.2009-10 and A.Y.2010-11, it is therefore requested to kindly dispose the appeal as early as possible so that this office can decide the identical issue in above mentioned assessment year. Photocopies of the order sheets for both the years as well as copies of covering letters of submissions filed on 01/03/2016 are annexed herewith." As is evident from the direction of the Hon'ble ITAT vide order dated 05/09/2013 reproduced, in the case of Prima Ceramics Pvt Ltd. and other 22 cases including appellant, a reasonable opportunity of being heard and opportunity of cross-examination on the basis of evidences collected by DGCEI and relied upon by the AO was granted to the appellant by the AO. The opportunity granted was denied by the appellant simply stating in his letter that since they already received the relevant documents during the assessment proceedings, there was no need for fur....
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....n of goods and freight and unaccounted production. It is not out of place to mention that these facts were not dealt by the Hon'ble ITAT in the order passed CESTAT has given relief on the basis of technical ground but Income-tax Department has not examined the Partners of the company and other persons whose statements were recorded on oath during the search action by the Excise Department as well as on those evidences which was collected and was in possession of Excise Department which were very well mentioned in the show cause letter of Addl. DGCEI and order passed by the Commissioner of Central Excise-III, Ahmedabad in the case of the appellant. The case was remanded to the AO to confront the appellant on these issues as well as to give opportunity to the appellant to produce the books in support of the claim which was not relied upon by the AO. Appellant has not availed the opportunity with the plea that the AO has to follow the order of the Hon'ble CESTAT and directions of Hon'ble Jurisdictional ITAT which is well discussed in above paragraphs. The denial of opportunity by the appellant indicates that the issue is still very live in the case of the appellan....
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....2003 and VAT @ 4 % as Rs. 2,800/, showing the total value of Rs. 72,800/-. Further, you ore also been shown the official ledger of M/s. Uday Industries in your favour for the year 2007-08, wherein on left hand side, showing the details of value, date of purchase and Invoice/bill No. of supplier i.e. M/s. Growmore Ceramics P. Ltd. and on Right hand-side, showing the payments, the date of payment made. Cheque Nos. & date, for the purchases made by you. Alongwith this, you ore showing the Invoice No. 132 dtd. 10-08-2007 of M/s. Growmore Ceramics Pvt. Ltd., issued in the name of M/s. Seron Ceramics Pvt. Ltd. for 6000 kgs. of Ceramic Glaze Mixture Chemicals- "Opaque " grade @ Rs. 9/-, having Assessable value of Rs. 54,000/-, and 4000 kgs. Ceramic Glaze Mixture Chemicals - "TR" grade, @ Rs. If- per kgs., having assessable value of Rs. 28,000/-, total value as Rs. 82,000/- and showing Central Excise duty as Nil claiming the benefit of Notifn. No. 8/2003-S.T. dtd. 01-03-2003. alongwilh VAT @ 4 % amounting to Rs. 3,280/-, total amount of Rs. 85,280/-. Copies of both the invoices are scanned herein below. Please explain the same in detail? A.18: Sir, after carefully going through, t....
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....issue in case of parallel invoice also, we issue- three copies, out of which the "Original" and 'Duplicate' copies were sent to the buyer alongwith the goods and 'Triplicate copy was retained by us. Further, "Triplicate for assessee" copy of the Parallel invoice No. 132 dtd. 08-08-2007, which we retained with us as per routine procedure, I confirm that after dispatch and receipt of the frit cleared under Parallel invoice, we have destroyed the same and we have not kept any records. Further, on being asked the raw materials purchase and consumption of it, in the production of above-mentioned 10000 kgs. of "TR" grade frit, I State that we had purchased the required raw materials in cash for manufacture of above quantity of "TR" grade frit and that we had not accounted for the said raw materials in our books of account. Regarding the invoices of raw material purchase or its copies, I state that we have purchased the required raw materials in cash and after receipt of the raw materials purchase in cash at our factory premises, we use to destroy the said invoices.--." All the buyers of Frit whose statements were recorded had confirmed that the quality of fr....
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.... Chhaganbhai Valjibhai Patel, Director of M/s. Sacmi Ceramic Pvt. Ltd. Morbi; Shri Chamanbhai Jirrajbhai Patel, Director of M/s. Square Ceramic Pvt. Ltd. Morbi and various other persons. From the above, it is very clear that appellant was engaged in under valuation of goods and Clandestine removal of frits. It was for the appellant to prove that the allegations made against it are not correct by producing books of account and the facts against evidences collected during the search operation by the Excise Department which was not done by the appellant and hence the only conclusion that can be drawn is that appellant was involved in the practice of undervaluation of goods and removal of clandestine of goods. It is pertinent to note that appellant has indulged in under invoicing of sales bills and were recording sales below at sale value which is supported by various evidences found during the course of search carried out by excise department along with statement of director reproduced herein above wherein he has categorically admitted that there are recording sales below its actual value which prove beyond doubt that appellant is not maintaining proper books of account. The ....
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....discussed above notice u/s.148 of the Act was issued for reopening however assessing officer rejected the contentions of the assessee made impugned additions u/s.143(3) read with section 147 of the Act, which was confirmed by the ld. CIT(A) in all three years. Accordingly, we find that the basis of addition is contents of show-cause notice issued by the Excise Department. An investigation was carried out by DGCEI at assessee premises, wherein it was alleged by the Excise Department that assessee has not declared actual assessable value of goods manufactured and cleared from factory. Based on the same DGCEI issued show-cause notice, Excise department concluded that assessee was engaged in under valuation of sales and clandestine removal of goods. Only on the basis of same Assessing officer reopened assessee's income tax assessment for the years under consideration and made addition of estimated Gross Profit on under valuation sales and clandestine removal of goods. The Revenue has brought nothing on record that it has applied it's mind over and above the contents of show-cause notice in question thus there is lack of independent application of mind on behalf of revenue in....