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TMI Blog2013 (9) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh such burning loss was fully verifiable from the production records as had been maintained on day to day basis, wherein no defects or discrepancy was ever found either by the Excise Authorities or even by the Assessing Officer under the Income Tax Act, 1961 who had carried out in depth examination of the same? (iii).Whether the Tribunal was legally correct in placing reliance on the order passed by it earlier in the assessee's own case for the asessment years 1988-89 and 1989-90 wherein the issue related to the verifiability of production records (maintained by the assessee has per Excise law) and the distinguishing features of manufacturing process did not come up for consideration at all?" The appellant filed an application under section 260A(7) of the Act read with Order XLI Rule 27 of the Civil Procedure Code, 1908 seeking to bring on record the report of the Joint Plant Committee dated 23rd June, 2000 as an additional evidence. The said application was allowed vide order dated 15th May, 2007. Briefly stated the facts giving rise to the present appeal are as follows: The appeal relates to the assessment year 1991-92. The appellant is a Private Limited Company and is enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (1) of Section 145 of the Act has been invoked, the burning loss so determined by the Tribunal is highly excessive and the burning loss declared by the appellant ought to have been accepted. He invited the attention of the Court to the fact that the Commissioner of Income Tax (Appeals) had considered various factors, which the appellant had also placed before the Tribunal, for accepting the burning loss at 4.1% in respect of own production and 4% in conversion work of TISCO billets. According to him the Tribunal had not adverted to the facts mentioned by the Commissioner of Income Tax (Appeals) while reversing his findings. He also submitted that the Joint Plant Committee which is a Committee of Government of India itself had opined that burning loss in respect of normal operation of oil fired RHF's employed in re-rolling sector would be in the range of 3% to 5%, therefore, burning loss declared by the appellant being within the permissible limits ought to have been accepted. Sri S.Chopra, learned senior standing counsel appearing for the Revenue submitted that the order of the Tribunal does not call for any interference. He further submitted that in any event the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have been accepted. It has further been stated before me that the furnace of J.K. Iron & Steel Co. Ltd. is fired by furnace oil and the appellant's furnace is fired by Residual Furnace Oil. This distinctive feature makes a lot of difference; whereas the heating time to which steel ingots are subjected in furnace fired with FURNACE OIL is much less than the heating time to which steel ingots are subjected in furnace fired with RESIDUAL FURNACE OIL and to this effect bills have been produced before me. It has further been stated that J.K. Iron & Steel Col. Ltd. furnace is fed with steel ingots of 3.5" to 4.5" square thick weighing around 100 Kgs. per ingot but in the case of the appellant it is 5" to 6" square thick weighing around 180 Kgs. per ingot and it takes time and, therefore, the burning loss is bound to be more. Burning loss being a function of the time span during which ingots remain in heating chamber of the furnace, and time required for reheating thicker material being longer than that required for reheating thinner material. Stein and Adkinson Furnace is not comparable with the furnace of the appellant. It has further been stated that the case of M/s J.K. Iron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.10.(o) Delay in Heating Due to breakdowns in mill. 5.10.(p) Chimney/Stack height. 5.10.(q) Temperature of exhaust Gases. 5.10.(r) Single Zone or Multi Zone furnace. 5.10.(s) Hearth Slope. 5.10.(t) Recuperators. 5.10.(u) Side Discharge Or End discharge. 5.10.(v) Gas velocity. 5.10.(w) Insulation/Refractory Bricks. 5.10.(x) Size of Work piece. 5.10.(y) Area of contact for heating. 5.10.(z) Rolling time. 5.10.(aa) Rolling Efficiency. 5.10.(ab) Sulfur Presence in Steel and Atmosphere. 5.10.(ac) Carbon content in steel. 5.10.(ad) Degree of Overheating. 5.10.(ae) Twisting and Mechanical Deforming. 5.10.(af) Operator Fault. I have gone through the facts of the case and I have noted that the expert opinion is not conclusive but it lays down a guideline. There may be different varieties of furnaces and the use of raw material may be of different quality and the production also depends on the regular supply of electricity. The appellant has given argument on each and every point to which I agree. The case of J.K. Iron & Steel Co. Ltd. Is not a comparable case and there are distinctive features in the case of the appellant than that of other furnaces and, therefore, to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he C.I.T.(A) seems to have accepted the assessee's objection against the applicability of comparable case of J.K. Iron and Steel Co. Ltd. As well as the Smith report simply on the basis of submissions advanced by the assessee without verifying the facts relating to the difference in the furnace and the medium used for heating by the assessee in these cases. Even otherwise, so far as loss at the stage of rolling is concerned, it is only in the shape of burning of upper carbon layer, if any, available on ingots/billets etc., which is an exceptional distant possibility. The other possibility of loss is during the process of actual rolling during which some piece may get mis-rolled either in the shape or by way of bifurcation of the rolled (lengthwise), which is again quite a distant possibility so far as the TISCO's material is concerned. The material supplied by TISCO being of the constant good quality, the only possibility of its mis-rolling is by way of distortion in shape of not by way of bifurcation. The third possibility of loss is by way of end cuttings. 12. So far as rolling of assessee's own material is concerned, we are of the opinion that there has to be some burning loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming loss after crediting its profit and loss account by the value of left over 10% of the material or without crediting its profit and loss account by that amount. Anyhow, the A.O. Himself having allowed a burning loss @ 2.5% on this account we are seized of the issue only relating to the justification of A.O.'s action or that of C.I.T.(A)'s action The issue relating to the left over material of TISCO i.e. how the assessee has accounted for the left over material or as to whether has accounted for or not at all is not before us and, therefore, we are not going to express our opinion on this point However, the material supplied by the TISCO admittedly has to be of better quality then the ingots/billets manufactured by the assessee from scrap and, therefore, the burning loss during the course of rolling of TISCO material is bound to be less than the burning loss during the course of rolling of assessee's own material. In view of these facts and circumstances, we are of the opinion that the burning loss @ 2.5% as allowed by the A.O., was quite justified. Consequently, The order of the C.I.T.(A) on this point is reversed and that of the A.O. is restored." From a reading of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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