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TMI Blog1976 (4) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... so levied. In the initial appeal canvassed before the first appellate authority under s. 31, the AAC reduced the addition to 75 per cent of the net book results and refixed the assessable turnover at Rs. 4,75,698.39. He also reduced the penalty under s. 12(3) to Rs. 10,500. Not satisfied with the extent of relief obtained the appellants have resorted to this second appeal under s. 36 seeking appropriate relief. 3. The learned counsel for the appellants vividly presented the procedure of production and handling of goods involved in the disputed appeal. He basically contended that the accounts wee adequately supported by acceptable records and that there was no scope or basis for resort to the estimated assessment. He also elaborated the procedure of maintenance of the stock records both at the factory and at the office. With reference to the significant inspection done on 12th Sept., 1972 and comparision with precise particulars of stocks of the various article enumerated he outlined that there could be no possibility for the alleged variations. He vividly argued that various type of wastages emanated at the several stages of production. Most of the wastages could be possibly ploug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced billets. Rough sheets of 14 kgs. are claimed to have been generally produced out of these billets. These sheets were further pressed to reduce them to thickness of lower kg. say 20, 21 etc. In the process of such pressing and securing shapes certain cuttings emanated. The production of circle out of square sheets results in cutting. The above cuttings were treated as basic scrap and against ploughed back to the initial process of manufacture of billets. From the sheets and circles produced, the appellants issued them to out-workers for the manufacturer of vessels. The out-workers are paid at agreed wage rates. Certain percentages of wastages occurred even out of these handlings. It is thus found, on a close consideration of the above processes that wastages inevitably incident at various stages; as inseparable and unavoidable incidents in the production phenomenon. The cry of the grievances of the appellants is that adequate consideration has not been given by the lower authorities to the various wastages which emanated at different stages as outlined above. 7. The assessing authority advanced as many as 9 defects in respect of the estimated assessment. The first appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -250 9-6-72 1,961-250 90-000 2,051-250 1,006-300 1,044-950 12-6-72 1,044-950 603-790 1,648-740 685-300 963-440 14-6-72 963-440 99-700 1,063-140 - 1,063-140 11-7-72 1,063-140 - 1,063-140 178-700 884-440 17-8-72 884-440 - 884-440 210-900 673-540 18-8-72 673-540 - 673-540 83-350 590-190 16-9-72 590-190 - 590-190 379-500 210-690 21-9-72 210-690 - 210-690 186-250 24-440 .According to this detailed statement the appellants should have held a stock of at least 590,190 kgs. of aluminium ingots, i.e. about 30 pieces of ingots on 12th Sept., 1972. But the inspecting authorities found no stock at all. Looked at from any angle there is an unavoidable discrepancy existence, in regard to disposal of aluminium ingots. Looked at from any angle it is specifically clear that the positions of the ingots as found in inspection etc. are not properly and completely reflected in the accounts produced before the Department. This aspect has to be naturally considered adversely against the appellants. 8. The second defect pertaining to furnishing of stock particulars; the 8th defect pertaining to lack of adequate manufacturing account with correlated stock c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng inevitable occurrence of scrap at every intermediary stage, irrecoverable wastage to an insignificant extent unavoidably existed in all the processes. Their Lordship observed that the ingots bars, etc. which being manufactured as sheets, circles, etc. and trimming etc. to secured required standard shapes etc. resulted in scrap which was again put back along with raw scrap for the purpose of recycling in production. (iii) The Supreme Court of India in Union of India vs. Ramanlal, while considering the meaning of manufacture and levy of excise duty under Central Excise and Sales Tax Act, 1944 dealt with the details of production process leading to the emergence of circles from scrap. While outlining such process, they indicated that basic alloys were melted and next converted into billets. The billets were sent to the rolling mills which converted them as uncut circles. These uncut circles had to undergo a further change before reaching the final stage and shape, wherein the process of trimming had to be employed to secure the shape. Analogous position exists in the case of the appellants before us also. An additional feature is the issue of circles etc. to out-workers for the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring plates, sheets, circles etc. nearly 50 per cent of the former becomes scrap………". Thus Supreme Court after making allowance for all incidents have allowed an overall percentage of 50 per cent of the ingots slabs, scraps, billets, used for further manufacture as plates, sheets, circles, etc. It is thus one of the admitted features of the aluminium manufacturing process with which the appellants are engaged, that about 50 per cent of the ingots, slabs, and billets used for further manufacture of plates, sheets, etc. generally become scrap and have to be melted and recycled over again into production. 12. (i) We, however, desired to have a statistical approach from the records of the appellants themselves. The authorities and placed before us certain records recovered from the trade location of the appellants. They considered that these records reflect realistic transaction which are not precisely reflected in the accounts produced before the Department. We analysed one of the important books which contains details of issues of raw material into production and details of circles delivered to office. From the commercial procedure adopted by the appellants, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 45.74 per cent. The State Representative similarly states that the absence of precise manufacturing and stock control records, process-wise or stage-wise has got its own significance. (iv) From the available records, we are unable to specifically made out a precise percentage of scrap disposal from the billets utilised and the quantity features involved in recycling by way of reploughing into the production. In the absence of precise statistical particulars and in consideration of the stock discrepancy made out in the shop inspection, we feel that the quantities recovered have to be reasonable estimated. Such an estimate was however to be based on closely approsimated realistic trends available or secured. 13. Taking into consideration, the entirety of the above factual and statistical details, the available accounting records and the generalised view for the similar line of trade indicated by the Supreme Court in the decision of 1975 Tax LR 2143, (Aluminium Corporation of India Ltd. vs. Union of India). We feel that the adoption of 50 per cent for recovery of circles from the billets would be appropriate. If such a position were to be adopted, the following discrepancies wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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