TMI Blog2017 (11) TMI 1852X X X X Extracts X X X X X X X X Extracts X X X X ..... ind 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 these matters. Without prejudice to above, we find that in Excise proceedings, concerned authorities 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. 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. We also find that Excise Department carried matter before Hon'ble Apex Court wherein same was dismissed as withdrawn as mentioned above.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 rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Your appellant craves leave to add, alter or amend any ground of hearing. 2.2 For Asst. Year 2008-09: 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 ₹ 93,30,925/- on the ground of alleged undervaluation of sale and of ₹ 2,53,46,163/- being the estimated G.P. on alleged clandestine removal of goods, and withdrawal of set off of loss of ₹ 8,57,147/-. 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 ₹ 92,30,925/- and 2,53,46,163/- and allowed set off of loss of ₹ 8,57,147/-. 4. It is therefore prayed that the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ech Glazes had Glazes had evaded Central Excise duty during the period from 01/04/2006 to 31/03/2007 by way of following activities. a. Undervaluation (i.e. not declaring the actual assessable value of excisable goods manufactured) and b. Clandestine removal i.e. removing the Frit Manufactured clandestinely without payment of excise duty, under parallel invoices. The value of clandestinely cleared Frit as well as the differential value of undervalued Frits, over and above the value declared in the invoices, was collect by M/s. Zirconia Cera Tech Glazes from its buyers (dealers) in cash. As per the SCN, the total amount of central excise duty evaded by M/s. Zirconia Cera Tech Glazes during the F.Y. 2006-07 towards undervaluation and clandestine removal, as calculated in the Annexure C.1 and C.2 of SCN, is worked out at ₹ 5,79,93,067/-. 2. On verification of the above details it is found that the Amount of ₹ 5,79,93,067/- is the difference of total assessable value of ₹ 3,60,10,500/- as shown by the assessee and the assessable value of ₹ 9,49,75,427/- as per actual rate as worked out by Excise Authority. Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssable value of the entire production of 'frit' of the whole year working out the huge difference of ₹ 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 sale at flat rate without considering the fact that sale rate to different parties may differ at different times. v. It was also pointed out that out of the 12 parties, three parties namely Anmol Ceramics, Leo Ceramics Omson Ceramics had not made any transaction at all with us during the year under consideration. Accordingly it was shown that the working of difference relatable to the other parties (other than 9 parties) is based on no material, rather entirely based on surmises and conjectures. vi. Without prejudice to the above stated it may also be submitted that if addition ought to be made then also it should be restricted to the element of Gross Profit thereon. G.P. ratio in our product ranges from 6% to 7%. In this regard we rely on judgement of Hon'ble Gujarat High court reported in 258 ITR 654 and 326 1TR 410. vii. We further would like to draw your attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 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 asthe documentary evidences recovered from the premises, a searchoperation was conducted at the premises of the appellant on 28/08/2008.Investigation conducted by DGCEI against the appellant revealed thatthey had not declared the actual assessable value of goods manufacturedand cleared from their registered factory premises. The documentary aswell as oral evidences collected by DGCEI from various buyers clearlyindicated that appellant was declaring in their central excise invoices onlya part of the actual transaction value manufactured and cleared fromtheir factory. Differential value of 1 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant. Similarly 15.18% of the value of clandestine removal goods for the year under consideration is worked out at ₹ 2,08,00,924/- (15.18% of ₹ 13,70,28,488/-) and is added to total income of the appellant. Appellant before me contended that AO in making addition of ₹ 88,03,348/- being element of profit on the alleged undervalued sales of ₹ 5,79,93,067/-and of ₹ 2,08,00,924/- being element of profit on the alleged value of aalleged clandestine removal of goods of ₹ 13,70,28,488/- has entirely relied upon the Show Cause Notice issued by the DGCEI for proposing the additions in his show cause notice dtd. 10/03/2014 reproduced in paragraph 4 (pages 3 4) of the order under appeal and also in making the impugned additions. Further, appellant has also contended that AO has not dealt with the contentions made in the written submissions dated dt.23/12/2013, 20/02/2014 and reply dated 18/03/2014 to the show cause notice of the AO and AO had proceeded extensively reproduce the paragraphs from the SCN issued by the DGCEI and relying upon the same has proceeded to make the additions referred to above. Further, it is contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral 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 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, electricity consumed and packing time taken; is not acceptable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 retrieved by investigation from the silver pen-drive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 th e 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 Cause Notice prepared by the DGCEI and Followed by the Assessing officer. Assessing Officer has submitted a detailed remand report the relevant part is again reproduced hereunder: ( 8) Now coming, to the issues which were raised by the assessee during the appellant stage, first, issue regarding the deletion of all the addition by the Hon'ble Central Excise and Custom Tribunal, West Zonal Bench, Ahmedabad vide its order dated 12/05/2015 wherein the appeal of the appellant were allowed. In this respect, it is to state that although the appeal of the assessee has been allowed at the tribunal stage, on the basis of the informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, 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 compliance to CIT(A) letter dated 08/05/2015, in which the assessee has been asked to furnish all the relevant paper/details as directed by ClT(A) Further as directed by Hon'ble CIT(A) that ate the details and books of account of theassessee to be called for therefore in compliance to the above direction, various documents were called for both the years from the assessee vide this office letter dated 12/10/2015. In response the assessee submitted the same submission submitted during the assessment proceedings. No original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 the appellant had 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. assessing officerhas further requested the appellant to produce the books of accounts and relevant documents to verify and examine the issues raised by the Addl. DGCEI in his show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 live in the case of the appellant as reported by the AO also as Central Excise Department has further preferred appeal before the Apex Court against the order of CESTAT which was decided on the basis of technicalities and judicial pronouncements. The case was remanded to the AO with a specific direction to give opportunity of being heard and opportunity of cross examination o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pliers @ 7/- to ₹ 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 ₹ 12/- which was paid through cheques, however for the difference in value of frit, which was ₹ 20/- to ₹ 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, Morbi; Shri JitendrabhaiPurchottamdasRojmala, partner of M/s. Silk Ceramics, Morbi; Shri ChhaganbhaiValjibhai Patel, Director of M/s Sacmi Ceramic Pvt Ltd, Morbi; Shri ChamanbhaiJirrajbhai Patel, Director of M/s Square Ceramic Pvt Ltd, Morbi and various other persons to whom appellant had business with. From the above, it is very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture (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 data either from the appellants or by conducting some gas consumption studies. Besides certain studies/ data with respect to average packing time taking for filling of finished goods (Frit) in the plastic bags and consumption of electrici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 aforesaid average quantity of 1500MT per month, indicates that the physical verification conducted at the factory and inference drawn in respect of their production capacity is factual. In ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ceramic Pvt. Limited, in the case of Belgium that such documentary evidences of gas having different GCV and HCV exist on records. This argument has been brushed aside by the adjudicating a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 duty; ( i) Links between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 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 Excise Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w superior quality of refractories 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 manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... listic gas consumption PMT of frit manufactured. 8.6 In view of the above observations made by 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 cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned 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 30.8.2008 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. Anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard. The impugned order dated 05.9.94 has to be read alongwith Section 9D of the Central Excise and Salt Act, 1944. SO read, there is no infirmity in the impugned order. It may, however, be clarified that in case reliance is placed on the provisions 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orised dealer in foreign exchange. Even, in response to the memorandum dated 12-3-1990, the appellant had acknowledged the recovery of ₹ 8,24,900/- from his residence, but that acknowledgment would not establish the violation of Section 9(1)(b) of the 1973 Act. In the above view of the matter, we are of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exact amount of such additional consideration was required to be determined for addition to the transaction value even if all the statements and documents were held to be admissible evidence and satisfied the test of Section 9D of the Central Excise Act, 1944. In Appeal Nos. 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 ₹ 38,95,860/- as per the statement of Shri Jayesh Patel, Prop. Of M/s. Kevel menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horised Representative submitted that Hon'ble CESTAT has considered the merit of the case, relevant material i.e. Pen-drive and also statements recorded by Excise Authorities. All such three questions as discussed in its order have been decided in favour of assessee. So far as CIT(A)'s observation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Department before the Hon'ble Gujarat High Court was dismissed vide order dated 07.12.2016. and copy of the same has been annexed as Annexure - 'A' at the Chart filed on behalf of the assessee and relevant portion of the same is reproduced as under: CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 13/11/2013 JUDGMENT Honourable Mr. Justice Mr. Shah [1.0] By way of this petition under article 226 of the Constitution of India, petitioner has prayed for an appropriate writ, direction and order quashing and setting aside the show-cause notice dated 14.03.2012[Annexure C to the petition] as well as the impugned order dated 30.03.2013 passed by the 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 ₹ 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. ₹ 32,29,248/and in all ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application under Article 226 of the Constitution of India. 2.3 At the outset it is required to be noted that we are conscious of the fact that against the impugned order of reassessment the petitioner has a statutory remedy available by way of appeal however, considering the fact in the identical facts and circumstances earlier this Court has entertained the petition and has quashed and set aside the order of reassessment, in the facts and circumstances of the case, we have entertained the present petition. 2.4 The petitioner has challenged the impugned order passed in reassessment proceedings, which is passed solely on the basis of the show-cause notice issued by the excise department and the additions are made. Learned counsel appearing on behalf of the petitioners has vehemently submitted that this should be wholly impermissible. 3. Shri Parikh, learned advocate appearing 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 reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon to judge this issue and would therefore not give any definite opinion. The question, however, is whether on a mere show cause issued by the Excise Department, the Sales tax Department can make additions for the purpose of collecting tax under the Gujarat Value Added Tax Act without any further inquiry. If the Assistant Commissioner of Commercial Tax has utilized the material collected by the Excise Department; including the statements of the petitioner and other relevant witnesses and had come to an independent opinion that there was in fact evasion of excise duty by clandestine removal of goods, he would have been justified in making additions for the purpose of VAT Act. In the present case, however, no such exercise was undertaken. All that the Assessing Officer did was to rely on the show cause notice issued by the Excise Department. Nowhere did he conclude that there was a case of clandestine removal of goods without payment of tax under the VAT 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on 25/08/2008, 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 above DGCEI issued show-cause notice dated 19/04/2010, 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 these matters. 12. Without prejudice to above, we find that in Excise proceedings, concerned authorities passed order against assessee and matter was carried up to concerned Hon'ble CESTAT. Hon'ble CESTAT vide its order dated 12/02/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e either in law or on facts. 2. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of learned Assessing Officer in estimating income of the appellant, without rejecting books of account of the appellant. 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 ₹ 4,93,75,020/-. 4. The learned CIT(A) has erred both in law and on the facts of the case in confirming addition of ₹ 74,06,253/- 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 ₹ 5,32,45,944/-. 6. The ld. CIT(A) has erred both in law and on the facts of the case in confirming an addition of ₹ 79,86,892/- after applying gross profit rate of 15% on alleged clandestine removal of goods. 7. Both the lower authorities have passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. 16.3 For Asst. Year 2009-10 : 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 facts of the case in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hmedabad carried out search operation wherein it was allegedly found that assessee was evading payment of Excise duty and clandestine removal goods, parallel under invoices. Accordingly DGCEI issued show cause notice taking the total turnover of ₹ 4,93,75,020/- for the period 01/04/2005 to 31/03/2006 i.e. assessment year 2006-07 and therefore reopened income Tax assessment u/s. 148 for A.Y. 2006-07. 18. Assessee challenged reasons for re-opening assessment u/s. 148 of the Act and same was rejected. Thereafter notice u/ss. 143 (2) with 142(1) of the Act was issued and served upon assessee. In response to the same assessee submitted details as called for and produced books of account for verification. Assessing Officer after rejecting contention raised on behalf of assessee adopted Gross Profit @ 15% on undervaluation and clandestine removal of goods accordingly passed assessment order u/s.143(3) r.w.s. 147 of the Act wherein determined total income of Rs,1,53,93,145/- as against the return income of Rs.NIL/-. Assessing officer also calculated tax and charged interest u/s.234B/234C. Similar addition were made in Asst. Years 2007-08 and 2008-09. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom their premises. The suppression was revealed on the basis of finding during the course of investigations by the DGCEI and as mentioned in detail in the Show Cause Notice contained in letter F. No. DGCEI/AZU/36(4) 134/2009-10 1842 dated 9.02.2010. It was revealed from the Show Cause Notice of the DGCEI that appellant was showing sale value of Frit at ₹ 10/- per kg. whereas the actual price was at. ₹ 20/- to 30/- per kg. The amount shown in the invoices were being collected through cheques whereas the remaining amount was being collected by cash. Further it was also found that appellant was declaring less production than the actual production. The company was showing consumption of 2044.494 SCM of natural gas for manufacturing of 1 MT of frit whereas on verification based on the -figures of average Gas consumption against one MT of frit manufactured when appellant had shown-higher production, and also in view of the statement of Sh. Harshadbhai C Patel, Partner and Production In-charge, it was found that 484 SCM of natural gas was consumed for manufacturing of 1 MT of frit. It was proved beyond doubt that appellant was involved in undervaluation of sale invoices, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice of the DGCEI. Further appellant has contended and relied on the decision of the Hon'ble ITAT Bench decision in the case of Prima Ceramics Pvt. Ltd. involving facts similar to the appellant's case that the appeal should be decided in the light of the order of the Excise and Custom Tribunal, It is contended that Hon'ble ITAT had followed the above referred order in another case involving identical facts, M/s. Welsuit Glass Ceramics Pvt. Ltd. while deciding cross appeals by the Department vide order dated 20/06/2014. The appellant has also argued that AO has not rejected books of account and made addition for gross profit of under valuation and clandestine removal of goods which is incorrect. Having considered the facts of the case and submissions made and report submitted by the AO. It is seen from the common order passed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-drive is highly objectionable, suspicious and not acceptable. It is observed from the case records of Wellsuit Glass Ceramic Pvt. Limited [E/13720/2014] that seizure of the said pen-drive was effected on 17.7.2008 under a Panchnama and it was not stated in this Panchnama that the pen-drive was put inside a sealed cover. It has been admitted by Shri V.N. Thakkar (Superintendent) DGCEI in the cross-examination before the Adjudicating authority that when an article is seized, the same is placed in a sealed cover and mention of the same is made in the Panchnama. It is also admitted by Shri Thakkar that as he remembers the seized pen-drive was placed in a paper cover and sealed with adhesive tapes. It is the claim of the appellants that the way the said pen-drive was handled, it is possible that the same could be tempered with as the same was kept in the paper cover sealed with adhesive tapes. A second Panchnama 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the above it is perused that the Hon'ble CETAT finding on the order of the Commissioner of Central Excise-III, Ahmedabad is on highly technical grounds citing various decisions of tribunals and various judicial pronouncements regarding under valuation of goods and on account of Clandestine Removal of goods and also appellant was not given opportunity of cross-examination on the statements recorded of various persons related to the appellant for the production of their goods. However, with due respect to Hon'ble CESTAT's decision it is seen that nowhere Hon'ble CESTAT has dealt the evidences collected by the Investigating Authorities of Central Excise though mentioned in the body of the order by way of Annexures by the Commissioner of Central Excise-III, Ahmedabad which are still in the possession of Central Excise Department like invoices which were prepared by the appellant in two folds, under valuation of goods which were collected and on that basis Addl. DGCEI had show-caused the appellant. Various statements were recorded of the partners and the technical persons of various concerns from whom appellant used to purchase or sold the products which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination opportunity was given by the ACIT, Mehsana. In this regard, it is to state that the decision of A.ys. 2006 07, 2007-08, 2008-09 was not only on the basis of information received from the Excise Department, but also on the basis of the statement recorded at the time of assessment proceeding by then AO of one of the Director Shri Harshad Patel, which is also formed part of the assessment order. Therefore, before finalizing the issue, it consider essential to impart justice by providing opportunity of cross-examination of Shri Harshad Patel, Director for all the years i.e. A.ys.2006 07, 2007-08, 2008-09, 2009-10 and the date of compliance was fixed on 29/02/2016. However on 29/02/2016. Shri Harshad Patel was not produced before the undersigned. The AR attended the office of the undersigned at around 4:30 P.M., with incomplete sets of books, when he was asked to produce production register, stock register which form one of the essential element of addition in all these year. He informed the undersigned that, he will brought the same from the factory premise. However for that undersigned waited till 6:30 P.M. but nothing produced till that time and when one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve any material evidence on record which it can rely. It is further observed from copy of order sheet provided by AO which pertains to remand proceedings along with remand report dated 7th March, 2016, AO has provided opportunity to appellant to cross-examine Mr. Harshad Patel, director of company for all the three years because during the search and post search investigation by excise department, he has admitted that rates charged were much lower than the actual selling price and clandestine removal of goods but said director was not produced before AO in spite of providing sufficient opportunity. Even during remand proceedings, appellant has not submitted complete set of books of account even though it was specifically asked to produce production register, stock register which form one of the essential element of additions. Considering the directions as well as after considering issues involved on the basis of facts covered and show cause issued/the following facts are revealed: (1) The reasons for providing the opportunity of being heard and cross-examination to the appellant was as per the directions of the Hon'ble ITAT and also to verify and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income of the appellant on the grounds that Partners of the appellant company and others in their statements had accepted and stated how the modus operandi was carried out by them for undervaluation of goods and clandestine removal; the statement recorded with regard to frit and Show Cause letter regarding books which was rejected by the AO. During the course of Investigation a statement of Shri Harshadbhai C Patel, director of appellant company was recorded on oath on 30/1/2010 by the Central Excise Authorities and during the search operation he has very categorically admitted in his statement that rates charged were much lower than the actual selling price and also accepted the fact that appellant company was involved in parallel invoices. Even during the course of search conducted by excise authorities, various materials were found which reveal the above fact of under invoicing and issuance of parallel Invoices. The above fact is also substantiated by statement of director recorded by excise authority and relevant portion of said statement is reproduced herein under : Q.18: Shri Harshadbhai Patel, you are being shown the 'Original for Buye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to ₹ 3,280/. total amount of ₹ 85,280/-, we have cleared the above-mentioned quantities of Opaque and TR grade to M/s. Seron Ceramics Pvt. Ltd. and received the total value of ₹ 85,280/-. I further state the above invoices have been shown in the official invoices issued by our company during the financial year 2007-08 and received the payment of the total value mentioned in the above invoice. Further, as regards the Original of Buyer copy of Invoice No. 132 dtd. 08-08-2007 issued by my company in favour M/s. Uday Industries for supply of 200bags i.e. 10000 kgs. of Ceramic glaze mixture Chemicals, describing the quality as TR , at the rate of ₹ 71- per kg., having value of ₹ 70,000/-, showing Central Excise duty as Nil in view of benefit of Exemption under Notifn. No. 8/2003-C.E. dtd. 01-03-2003 and VAT @ 4 % as ₹ 2,800/-. showing the total value of ₹ 72,800/-, I state that the above quantity of TR grade frit from our company has been sold to M/s. Uday Industries under the above invoice, however, the said invoice has been a Parallel invoice issued by our company, which has issued by our company, alongwith the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ghodasara, director of Seron Ceramics Pvt. Limited was recorded on 07th January 2010 wherein he has stated that during the period 2004-05 to 2007-08, manufacturers were showing value of frit at ₹ 7/- to ₹ 12/- per kg. and from 2008-09, increased the prices from ₹ 20/- to ₹ 30/- per kg. which were the actual value and hence in the past period, over and above, the invoice amount, they were paying remaining amount in cash directly to the frit manufacturers. Similarly, in the statement recorded of Shri Jayendrabhai Kababhai Kalaria, partner of M/s. Atlas Industries, Morbi, he has admitted that they had purchased opaque quality frits and sometimes transparent quality also. However, the quality of both the opaque and transparent frit received were the same. He also confirmed that there was undervaluation of ceramic frit as they were getting invoices from the suppliers @7/- to ₹ 12/- per kg. which was paid in cheque. The balance was collected in cash and was also not shown in the invoices raised. In the statement recorded of Shri Jagdishbhai Govindbhai Patel, partner of M/s. Satyam Ceramic, Lakhdirpur Road, Morbi, he has admitted that there was undervaluatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above, action of the AO in making the addition of ₹ 74,06,253/- on account of under valuation and addition of ₹ 79,86,892/- on account of Clandestine Removal of frits to the total income of the appellant is held justified and is hereby confirmed. Relevant grounds of appeal are therefore, rejected. 6. Next ground of appeal against charging of interest u/ss.234B and 234C of the Act being mandatory and consequential to the determination of total income is decided as such. 7. In the result, appeal is dismissed. 20. Before us ld. Authorised Representative submitted that he is not pressing the issue of re-opening so same is dismissed as not pressed in all three years. 21. Now Coming to the additions on merit raised parallel under invoicing according Excise Department took turnover of ₹ 4,93,75,020/-for A.Y. 2006-07 in excise matter and impugned additions were made on the basis excise proceedings as mentioned above in all three years which were confirmed by the ld. CIT(A) in all three years. 22. Ld. Authorised Representative submitted that Excise matter was carried before Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely on the basis of assumption and surmises. The CESTAT having considered the relevant facts of the case and statement recorded by the Excise Department has decided the matter in favour of the assessee as discussed in the order of the CESTAT. In our considered opinion and in the facts and circumstances of the case ld. CIT(A) was not justified in observing that relief granted by Hon'ble CESTAT was highly technical. 25. It is pertinent to mention here that in connected matter we also find that Excise Department carried matter before Hon'ble Supreme Court wherein same was dismissed as withdrawn. Nothing contrary was brought to our knowledge on behalf of Revenue in this regard. 26. We also find in connected matter 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 discussed earlier. Again nothing contrary was brought to our knowledge on behalf of Revenue in this regard as well. 27. In this background, in our considered opinion orders passed by the Hon'ble CESTAT in these years have achieved fina ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
