9911796707
TMI Blog2014 (3) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... essee could import only that much quantity of gold that was exported - By making misdeclaration therefore, the assessee was seriously reducing quantity of gold that would be available for import against the export undertaken by it - The analysis made by the Customs authorities also matched with that of the assessee’s own declaration regarding purity of gold. The difference between the two sets of declarations was not minor or insignificant - It could not have been passed off as mixing of impurity or error in measuring standards - It was simply a case where the assessee utterly failed to explain the considerable difference in the gold quantity in two sets of documents maintained by itself - the contention that in absence of proof of local sale, it must be presumed to have been exported, is fallacious - It is not even the case of the assessee, barring his explanation about the higher purity of gold being exported when lower purity gold is declared in the export documents, that such gold was in some form or the other, separately or independently exported - When the authorities did not accept the assessee’s explanation, it comes to a situation where such differential quantity of gol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urity less than the said percentage and in many cases of 91.66%. The assessee had also, during the same period, manufactured gold ornaments with 20, 18, 14 Carat gold. In all such categories also, similar discrepancies were noticed. The Assessing Officer, therefore, called upon the assessee to explain such discrepancies. The assessee contended that the actual export of gold ornaments was of higher purity but declaration was for the standard minimum percentage required for specified carat of gold ornaments which were being exported. This was done to ensure that the stringent international standards of purity were not breached even accidentally or erroneously in order to avoid rejection of the export consignment. The importer would, however, pay only for the purity of gold agreed upon. The difference would be recovered by the assessee through higher labour charges. 4. The Assessing Officer painstakingly recorded the discrepancies, traced the manufacturing process and the export procedure and concluded that, ...Thus, the scrutiny of all these facts and figures shows that the purity of 22 Carat recorded in the books of account actually mean 0.917 fineness. Thus, a gold mass which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00% 4.2 The details of export of 18 carat purity ornaments are also examined as under : For ornaments of 18 carat purity Weight in Grams as shown in the assessee s books i] Weight of ornaments exported 16.700 ii] Fineness of items exported 0.750 iii] Fineness on conversion into 0.999 fineness 12.537 iv] Replenishment of gold in terms of 0.999 fineness by the Government of India 12.537 through the SBI. v] Additional replenishment in view of the Government s ExportImport policy @ 10% in terms of fineness of 0.999 1.253 vi] % of gold exported 75.07% [12.537/16.700 x 100] vii] % of gold content in the finished product as per entries passed in the assessee s books 80% viii] Replenishment by the Govt. of India 75.07% ix] % of additional replenishment @ 10% on the original replenishment but treated 10% as purchase vide export invoice. For ornaments of 14 carat purity Weight in Grams as shown in the assessee s books i] Weight of ornaments exported 2.800 ii] Fineness of items exported 0.5834 iii] Fineness on conversion into 0.999 fineness 1.636 iv] Replenishment of gold in terms of 0.999 fineness by the Government of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the above factual analysis shows that the assessee has been showing excess consumption of standard gold than what is actually required. In fact, the excess consumption of standard gold is counter balanced by showing proportionately low consumption ratio of alloys. 17. Further, it is also apparently clear that the assessee has not suffered any manufacturing loss or wastage of gold in the process of manufacture. Had it been so the composition of gold and alloy would not have been 100 : 7.100 in 22 carat purity account. As per the assessee s contention, the issue of gold with every 7.100 grams of alloy is 100 grams for manufacture of 22 carat ornaments. As per the assessee, the weight of the finished product in 22 Carat is 107.100 grams. Had there been any manufacturing loss, the weight of finished product would have been less than 107.100 grams say 106.100 grams or so. This phenomenon is not observed even in the manufacture of ornaments with the purity of 20 carat, 18 carat and 14 carat. In the 20 carat, 18 carat and 14 carat accounts the assessee shows production of 118.500 grams, 125 grams and 160 grams on every 100 grams of consumption of standard gold. Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain appreciated the evidence on record and observed, inter alia, as under : 2.14 I have carefully considered the facts of the case and submissions of the learned counsel of the appellant. The undisputed fact is that while in the books of account the percentage of gold content in the gold ornaments and jewellery is shown at 93.37% as per the export invoice and Customs Certification, it is 91.7% only. In other words, it is even admitted by the appellant firm that the gold content in reality is more than shown in the export invoice. The reason given for such difference is that the appellant firm being an exporter has to meet stringent quality standard of foreign countries to which it is exporting its ornaments. In order to avoid the risk of goods being rejected on account of not being according to the prescribed hallmark, it is making its ornaments of a slightly higher purity than required. It is also contended that loss on account of such extra gold put in is made up by charging higher labour charges. It is also argued that the appellant is maintaining regular books of account and also statutory registers under the Gold Control Act meticulously and the Assessing Officer has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority, the fineness of gold is again shown at 0.9167. In the export invoice at page 262 of paperbook, the fineness is again shown at 0.9167. In the bill issued to Bindhi Jewellers USA Limited, the purity of gold is not mentioned, even though there is a column for the same. In the bank certificate of export, page 268 of the paper book, fineness of gold is again mentioned at 0.9167. Thus, there is not a single document in which appellant has mentioned the fineness or purity of gold in accordance with the books of account. If the percentage of purity of gold in the ornaments exported was higher than the one required under the international standard, the appellantfirm would have lost nothing by mentioning the correct percentage of purity because in so far as the purity was above 91.67%, it has nothing to worry about. On the other hand, by showing higher content of gold, it would have benefited by becoming entitled for importing more gold. I am, therefore, inclined to agree with the finding of the Assessing Officer that excessive consumption of gold has been shown in the books of account and such excess consumption of gold has been utilized for making unaccounted sales of gold. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed earlier) he has applied his mind to this issue and found that invariably in each and every export document prepared by the assessee the fineness is shown as 91.67% (0.9167). The assessee has miserably failed to explain the difference between 93.37% as shown in its books of account and the above mentioned figure of 91.67% shown in the export document. The ons is on the assessee to show how the excess consumption of gold has taken place. The difference is so substantial that it cannot be claimed as wastage in the manufacturing process. In view of the fact that the assessee has received the gold ornaments of the prescribed quality from the Karigars and such final product has been exported as per the export documents. We are of the view that the cast on the assessee by the finding of the Assessing Officer has not been discharged. The only inference is that the excess gold shown as consumed in the manufacturing has been sold locally by the assessee outside its books of account. This is because as far as the export sales are concerned, the quantity and purity of the gold ornaments exported have been certified by the Customs authorities and subjudiced to the hallmarking in the importin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gold of 22 carat. Even when such ornaments were received back after preparation, they were tested, certified and recorded in the assessee s records. It was thereafter not possible for any mischief or modification, particularly looking to the certificate issued by the Gems Jewellery Export Promotion Council. Counsel pointed out that 22 carat of gold or for that matter any other carats would not have precise purity and would have a range of fineness of gold. He drew our attention to the specifications laid down by the Bureau of Standards, which provides as under: 1. 22.3 Carat gold : It shall be of fineness not less than 970. 2. 22 Carat gold : It shall be of fineness not less than 916.6. 3. 21 Carat gold : It shall be of fineness not less than 875. 4. 18 Carat gold : It shall be of fineness not less than 750. 5. 14 Carat gold : It shall be of fineness not less than 583.3. 6. 12 Carat gold : It shall be of fineness not less than 500. 7. 9 Carat gold : It shall be of fineness not less than 375. 7.1 Counsel therefore urged that the gold ornaments manufactured and exported by the assessee retained the same purity of 22 Carat [or other specifications as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old ornaments, according to the assessee s records having purity of 93.37%. The very same ornaments when were exported, the assessee recorded its purity as 91.66%. Some of these ornaments also were subject to actual test by the Customs authorities. The result also matches the assessee s claim of gold purity of 91.66%. Thus, in fact, there was considerable discrepancy between the two sets of documents pertaining to the same set of gold ornaments is undeniable. The assessee owed an explanation and had a duty to reconcile this discrepancy. The authorities found that the assessee failed in doing so. This was on the premise that the assessee s explanation was found unacceptable and inadequate. The assessee s only explanation was that the ornaments actually carried purity of 93.37% but were reflected in the export documents having purity of 91.66%. This according to the assessee was done because the importers had desired such level of purity whereas the assessee to err on safer side, used more gold so that the stringent international standards were not even unintentionally breached, which would incur liability of rejection of the consignment. 8.2 Such explanation of the assessee was r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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