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TMI Blog2015 (3) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... crape of ₹ 747109/-, in its books. These facts and observations demonstrate that the assessee did not receive any scrap back from job workers. There being no evidence whatsoever suggesting any unaccounted sales by the assessee, the order of learned CIT(A) on these issues is upheld. - Decided in favour of assessee. Unaccounted sale of scrap - the balance amount to difference shown by the assessee as receivable from SKF and the payable amount in the books of SKF - CIT(A) deleted the addition - Held that:- The assessee has demonstrated that the difference was due to the disputes pertaining to defective and inferior quality of goods. The assessee used to account for the actual invoice value whereas the purchases were accounted by SKF not on the basis of the sales bills but on the basis of settled amounts qua these invoices. All these issues have been discussed in details by the learned CIT(A) as mentioned above. In view thereof, we see no infirmity in the order of the learned CIT(A) on this issue also, which is upheld. - Decided in favour of assessee. Excise duty on sale of scrap paid by the assessee - CIT(A) deleted the addition - Held that:- the assessee demonstrated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the assessee through job workers/sub vendors including the associate concern M/s Noble Industries. As per prevalent trade practice the scrape generated at their premises is retained by them and not returned to the assessee. The job work charges are fixed keeping in view the benefit of scrape value availed by such job workers. Since assessee did not sale any scrape in this year no proceeds were shown. Confirmations from job workers were also produced. 2.1 Apropos excise duty paid qua scrape value it was contended that as per excise rules the assessee was liable to pay excise duty on notional % of scrape which is generated during the process carried out by the vendors also. This is a statutory liability which is to be borne by the assessee, same being a business liability was to be allowed. 2.2 A.O. further required the assessee to file copies of excise returns i.e. ER-1 monthly form submitted before 10th day of ensuing month in relation to maintenance of the record for production and removal of goods and CENVAT credit. From the figures of valuation of excisable sales mentioned in form ER-1 and sale value shown in assessee's manufacturing/trading account, a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a prudent person would give the scrap amounting to ₹ 1,35,56,787/- to the other persons without any benefits. iv) The assessee has also declared receipts from job work amounting to ₹ 2,05,87,743/- and against that job, the assessee has not declared any sales of scrap. In these circumstances, it is clear that the explanation of the assessee is nothing but cooked story which is not admissible therefore, as show cause given to the assessee a sum of ₹ 1,35,56,787/- is added back in the income of the assessee treating the same as concealed sale of the scrap. 2.2 Apropos the other issue in second ground i.e. addition on account of concealed sales, brief facts of the case are that the main customer for purchase of bearings manufactured by the assessee is SKF India Ltd.. The assessee raised bills according to agreed price, on receipt some of the goods are found defective or inferior in quality and are rejected by SKF India Ltd. Which are subjected to negotiations. Qua the goods rejected, the assessee has to adjust various debit notes/sales return/rate difference/short receipts, consequently the invoices are subject to settlement in this behalf. The difference i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of scrap, the addition cannot be made on assumption by the Assessing Officer. Reliance was placed on the decision in the case of CIT Vs. Shoorji Vallabhdas and Co. 46 ITR 144 and in the case of State Bank of Travancore Vs. CIT 158 ITR 102. The assessee provided complete names and addresses of the job workers/sub-vendors along with their PAN numbers on which the remand report was called. On examination of M/s Noble Industries, it was found that no scrap was returned to the assessee. Consequently, the addition of ₹ 1,33,56,787/- was deleted. 3.1 Apropos the second ground, the learned CIT(A) deleted the addition by following observations:- I have duly considered the submissions of the appellant. As per excise return ER-1, the assessee had reduced the sales return/rate difference/short receipts and other debit notes which were adjusted against the sales from the total turnover. The assessee filed reconciliation statement for the same but the AO brushed aside the same allegedly on the ground that the amount of rate difference could not be deducted from the sales declared in ER-1 return because the sales declared in ER-1 return was on the basis of the quantity and the origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of ₹ 24,62,103/-. The appellant has filed complete details containing description of raw material for rate difference along with copies of invoices. The appellant has also filed copies of invoices for rate difference of ₹ 42,07,979/-, ₹ 3,54,904/- and ₹ 2,86,557/- on account of HSS raw material rate difference. The principal M/s SKF India Ltd. vide their letter dated 19.03.2009 had informed the appellant that the rate difference raised through supplementary invoices No. 1959, 1960 and 1961 was not acceptable to them. The appellant had rightly reduced the same from the total turnover in the ER-1 return filed with the Excise Department. Further the appellant had raised the invoices bearing No. 1523 to 1527 dated 20.09.2008 for ₹ 65,91,015/- however M/s SKF India Ltd had paid an amount of ₹ 36,40,336/-. Thus there were short receipts of ₹ 29,50,682/- which were reduced by the appellant from the total turnover in the ER-1 return. Though the AO had disallowed the rate difference of ₹ 31,26,865/-, yet the amount was inadvertently taken at ₹ 1,35, 56,787/- while making the addition on account of understated sales on page 8 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition in this behalf is fully justified. 6.1 Apropos the second ground, it is contended that the difference in the figures value of the goods manufactured and sold by the assessee in excise register ER-1 and books of account is significant and the same has not been properly answered by the assessee. The learned CIT(A) on assumption has held that ER-1 register refers to the excisable value, which is different than the actual value. Similarly, in respect of the difference attributable to the difference of account of assessee and SKF India Ltd., proper reconciliation has not been provided. 6.2 Apropos the third ground, it is contended that when the assessee is not showing any sale of scrap then there is no justification in allowing the excise duty payable by the assessee in this behalf. 7. Learned counsel for the assessee contends that in earlier years and in subsequent years, the assessments have been made on the clear understanding that the job work scrape is retained by the job workers. It has been wrongly held by the Assessing Officer that the assessee did not produce any evidence in this behalf. The assessee adduced the evidence of M/s Noble Industries from whom the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount is eligible, the learned CIT(A) has referred to relevant amendment in Rule 4(6) of Central Excise Rules, 2002 in this behalf, which notionally prescribes percentage of excise duty liability even if the scrap is not received back by the assessee. The liability is created by a statute, the payment thereof is allowable business expenditure. The order of the learned CIT(A) may be confirmed. 8. We have heard the rival contentions of both the parties and perused the material available on the record. Apropos the first ground i.e. the addition on account of alleged sale of scrap, we find no infirmity in the order of the learned CIT(A) inasmuch as nothing has been brought on record by learned Assessing Officer that the assessee's job workers returned any scrap to assessee. Nothing has also been brought on record to demonstrate in any way that assessee indulged in any sale of scrap outside the books of account. This is further indicated by new Cenvat Credit Rules, which holds that the scrap was not required to be returned to the assessee. The same is referred to by the judgment in the case of M/s Rocket Engineering Corporation Vs. CCE (supra). The assessee further provided e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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