2020 (2) TMI 901 - HC - VAT and Sales Tax

Enhancement of turnover - Sodium Silicate - enhancement of turnover on the basis of fuel consumption made by the Assessee - HELD THAT - In the decision relied upon by the learned counsel for the Assessee, MAHABIR PRASAD JAGDISH PRASAD, VARANASI VERSUS COMMISSIONER OF SALES TAX, UP. 1970 (7) TMI 71 - ALLAHABAD HIGH COURT , the Division Bench of the Allahabad High Court held that merely the high consumption of electricity by the Assessee cannot be held to be a material justifying the rejection of the accounts particularly when the Assessee's accounts had been once accepted during the course of regular assessment proceedings. The learned Tribunal has not only relied upon the consumption of fuel by the Assessee to arrive at the estimation of the production and escaped turnover, but has also compared the figures of the sister concerns of the Assessee in the present case, whose production was shown to be much higher during the same contemporary period on the basis of fuel consumption only. The units in question whose cases were compared are also located in the same place in Kuthalam, where the Assessee's unit is also established. It cannot be denied that one of the yardsticks to estimate the production and turnover can be made in fuel consumption as well, the other factors like electricity consumption, consumption of raw materials etc. are also relevant, but it cannot be said that estimation on the basis of fuel consumption is per se liable to be rejected, particularly when the Assessee failed to establish that due to that yardstick of fuel consumption applied, it has resulted in a perverse finding by the learned Tribunal. The learned Tribunal, being the final fact finding body, was entitled to adopt the said criteria in the Second Appeal filed by the Revenue. The said findings of facts unless they are demonstratively shown to be perverse are otherwise binding on this Court, particularly in the writ jurisdiction, invoked by the Assessee - We are not inclined to reverse the view of the Tribunal because we find that the reasons assigned by the learned Tribunal are plausible, reliable and cogent. Once the best judgment assessment is made by the Assessing Authority or even higher Appellate Authorities rejecting the books of accounts for the declared turnover by the Assessee, they are entitled to adopt one or more of such parameters or yardsticks to estimate the production and turnover of the Assessee. The basis adopted by the learned Tribunal cannot be said to be per se wrong and estimate of turnover based upon such calculations cannot be held to be perverse - Petition dismissed.

Summary

Issues:
1. Estimation of turnover based on fuel consumption for a manufacturer of Sodium Silicate.
2. Assessment of turnover for the assessment period 1991-1992 based on fuel consumption estimate.
3. Rejection of accounts based on high electricity consumption and justification for estimation of turnover.

Analysis:

Issue 1: Estimation of turnover based on fuel consumption
The High Court addressed the challenge by an Assessee regarding the estimation of turnover based on fuel consumption for manufacturing Sodium Silicate. The Tribunal had allowed the Revenue's appeal, enhancing the estimate turnover of the Assessee. The Court analyzed the contentions raised by the Assessee's counsel, highlighting factors affecting gas consumption during production, such as varying pressure, raw material forms, and power failures. The Court compared the production and gas consumption of sister concerns to validate the estimation. Relying on precedents like Kalyani Oil Mills and Shanmuga Oil Mills cases, the Court upheld the estimation, emphasizing the correlation between energy consumption and output. The Court concluded that the assessment based on fuel consumption was appropriate, restoring the turnover assessment.

Issue 2: Assessment of turnover for 1991-1992
The Assessee challenged the assessment order for the 1991-1992 period, which was based on fuel consumption estimates. The First Appellate Authority initially favored the Assessee, considering raw material consumption instead of fuel consumption for estimating turnover. However, the Tribunal allowed the Revenue's cross-appeal, enhancing the estimate turnover. The Assessee contested this decision through a Writ Petition. The Court examined the arguments presented, including reliance on the Allahabad High Court's decision regarding high electricity consumption. Ultimately, the Court upheld the Tribunal's decision, emphasizing the reasonableness of the assessment based on fuel consumption.

Issue 3: Rejection of accounts based on electricity consumption
The Court addressed the rejection of accounts based on high electricity consumption and the justification for estimating turnover. The Assessee's counsel referenced a case from the Allahabad High Court to argue against the estimation based on fuel consumption. However, the Court supported the Tribunal's decision, highlighting the cogency of the reasons provided. The Court emphasized the relevance of fuel consumption in estimating turnover and dismissed the Writ Petition, concluding that the Tribunal's findings were reliable and binding.

In conclusion, the High Court upheld the assessment based on fuel consumption for estimating turnover, rejecting challenges raised by the Assessee regarding the methodology. The Court emphasized the importance of considering various factors in production estimation while validating the Tribunal's decision in enhancing the estimate turnover for the Assessee.