2008 (9) TMI 866 - HC - Central Excise

Whether the balance sheet of a factory prepared by a professional qualified Chartered Accountant a legally recognized certificate holder with the Institute of Chartered Accountants in terms of the Company Act on the basis of facts and figures so provided by the respondent can be ignored on irrelevant and arbitrary grounds? Held that - The balance sheet prepared by the Chartered Accountant can be ignored on relevant and good grounds. The grounds assigned by the Commissioner as also the Tribunal are good and valid grounds. We are of the opinion that the balance sheet prepared by the qualified Chartered Accountant is not conclusive proof in regard to the production. Accordingly we answer the reference against the department and in favour of the assessee and it is held that the balance sheet prepared by the Chartered Accountant was not ignored on irrelevant or arbitrary grounds.

Summary

Issues:
- Discrepancy in production figures between balance sheet and RT-12 returns.
- Whether the balance sheet prepared by a Chartered Accountant can be ignored on irrelevant grounds.

Issue 1: Discrepancy in production figures
The case involved M/s. Universal Polythene Industries, Patna, manufacturing ACSR Squirrel Conductors. The Central Excise Authorities alleged that the manufacturer suppressed production by 230 kilometers in 1989-90 and 44.260 kilometers in 1990-91, leading to duty evasion of Rs. 2,89,772. The Commissioner initially dropped the charge of clandestine removal due to lack of corroboratory evidence. The subsequent appeal by Central Excise Authorities was dismissed by the Customs, Excise and Gold (Control) Appellate Tribunal. The Commissioner then filed a reference under Section 35-H of the Central Excise Act, 1944, questioning whether the balance sheet figures could be ignored.

Issue 2: Ignoring the balance sheet prepared by a Chartered Accountant
The Court directed the Tribunal to determine if the balance sheet prepared by a Chartered Accountant, based on the manufacturer's provided data, could be disregarded. The Central Government Counsel argued that the balance sheet, certified by a qualified Chartered Accountant, should not be ignored. However, the Court held that the balance sheet and RT-12 returns may not always align, and the credibility of each should be evaluated based on the specific circumstances. The Court emphasized that a plausible explanation by the manufacturer for discrepancies could be considered. Ultimately, the Court ruled that the balance sheet prepared by a Chartered Accountant was not conclusive proof of production and could be disregarded on valid grounds. The reference was answered against the department, supporting the manufacturer's position.

In conclusion, the judgment addressed the discrepancy in production figures and the relevance of the balance sheet prepared by a Chartered Accountant. It highlighted the need to assess the credibility of both the balance sheet and RT-12 returns based on the case's specifics and valid grounds. The decision favored the manufacturer, emphasizing the importance of further material to determine the accuracy of production figures.