TMI Blog2014 (7) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... Standing Counsel for Central Excise JUDGMENT (Per Honble Sri Justice G. Chandraiah) The appellant/manufacturer had filed the present appeal under Section 35-G of the Central Excise Act, 1944, aggrieved by the order of the Customs, Excise Service Tax Appellate Tribunal (for short the Tribunal), South Zonal Bench at Bangalore, dated 27-04-2004, confirming the order in original of the Commissioner of Central Excise, dated 13-11-1998. 2. The brief facts, from which the order of the Tribunal as well as the Commissioner are mentioned below. 3. The appellant is a small-scale industrial unit engaged in the manufacture of acid slurry, soap oil and waste weak acid since 1989- 90. The business of the appellant is now closed. The main raw materials for manufacture of acid slurry are: linear alkyle benzene (hereinafter referred to as LAB), oleum and water. All the said three raw materials are very much essential for the manufacture of finished goods. The appellant was availing Modvat credit of duty paid on the raw materials after filing necessary statutory declarations before the concerned authorities. There was no discrepancy either in respect of raw materials in stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 944. 7. Aggrieved by the order dated 13-11-1998 passed by the Commissioner of Central Excise, the appellant filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal under Section 35-B of the Central Excise Act, 1944. 8. In the appeal, the appellant had raised as many as 11 questions of law said to be arising from the order of the Tribunal. On perusal of the same, we find that most of them are grounds of appeal rather than questions of law. In that circumstances, we deem it appropriate to frame questions of law. Based on the material available on record and after hearing both the parties, three questions of law are framed for consideration. 1. Whether in the facts and circumstances of the case, the Tribunal was right in affirming the findings of the Commissioner that there was a material in the case with respect to purchase of LAB in the third parties names by the appellant used in manufacture of acid slurry by the appellant and whether the findings of the Tribunal are perverse and based on no material ? 2. Whether in the facts and circumstances of the case, the Tribunal was right in law in not accepting the arguments of the appellant that extended p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer under the Income Tax Act even in cases of illegal businesses, expenses and losses that are required to be allowed. For the purposes of arriving at taxable income, he would submit that modvat credit cannot be denied in the present case. For this proposition, he would rely on the judgment of the Supreme Court reported in COMMISSIONER OF INCOME TAX, GUJARAT Vs. S. C. KOTHARI AIR 1972 SC 391. 10. On the other hand, Dr.K.Manmada Rao, learned counsel appearing for the Department would support the findings of the Tribunal and would point out that it is not a case of no evidence as submitted by the learned counsel for the appellant. He would take us through extensively to the orders of the Commissioner as well as the Tribunal. He would further submit that inasmuch as there was a suppression of huge turnover and clandestine manufacture excisable goods carried on by the appellant, the invocation of the provisions of extended period of limitation cannot be found fault with. He would also submit that there is no justifiable reason for the appellant to be allowed with modvat credit, as there is no material evidencing purchase of the raw material by the appellant. 11. We have consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner, on appreciation of the record before them, the Tribunal had come to a different conclusion and affirmed the findings of the Commissioner. Before us, there is no contra material to dispute the findings as recorded by the Tribunal. It is well settled that in exercise of the appellate power under Section 35-G of the Central Excise Act, this Court is bound by the findings of fact as recorded by the Tribunal. Unless this court comes to a conclusion that such findings are based on no material/no evidence whatsoever and such findings are perverse. In the case on hand, we are unable to persuade ourselves that the findings recorded by the Tribunal are in any way perverse or based on no evidence. Accordingly, question No.1 is required to be answered in the negative and against the appellant. 15. In the light of the findings recorded by the authorities below that there was suppression of manufacture and removal of dutiable product applying the extended period of limitation cannot be faulted and in that view of the matter, question No.2 is also required to be answered in the negative and against the appellant. 16. The very premise on which a show-cause notice was issued re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly if it falls within s. 10(2) (xv) of the Act of 1922 and a penalty cannot be regarded as an expenditure wholly and exclusively laid for the purpose of the business. Moreover disbursement or expense of a trader is something which comes out of his pocket. , A loss is something different. That is not a thing which he expends or disburses. That is a thing which comes upon him abextra (Finlay J., in Allen v. Farquharson Brothers Co.) (3). If the 'business is illegal neither the profits earned nor the losses incur-red would be enforceable in law. But that does not take the profits. out of the taxing statute. Similarly the taint of illegality of the business cannot detract from the losses being taken into account for computation of the amount which can be subjected to tax as profits under s. 1 0 ( 1 ) of the Act of 1922. The tax collector cannot be heard to say that he will bring the gross receipts to tax. He can only tax profits of a trade or business. That cannot be done without deducting the losses and the legitimate expenses of the business. We concur in the view of the High Court that for the purpose of s.10(1) the losses which have actually been incurred in carrying on a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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