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TMI Blog2018 (1) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... and mis roll of 78.265 MT. We find that this fact is not considered by the ld. CIT(A) while deciding this issue. Had the ld. CIT(A) taken into account this fact that this addition would not have been sustained. - Decided against revenue. - ITA No. 143/JP/2017, C.O. No. 06/JP/2017 And ITA No. 143/JP/2017 - - - Dated:- 24-1-2018 - SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM For The Revenue : Shri Jagdish Chand Kulhari (JCIT) For The Assessee : Shri Manish Agarwal (CA) ORDER PER: KUL BHARAT, J.M. The appeal by revenue and cross objection by assessee arise from the order dated 09/12/2016 of the Ld. CIT (A)-I, Jaipur pertaining to the assessment year 2010-11. Effective grounds of appeal as well as C.O. are as under:- Ground in Revenue Appeal. (i) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in restricting the trading addition of ₹ 52,35,630/- to ₹ 20,11,527/- while upholding rejection of books of account made by the A.O.. Ground in assessee s Cross Objection (i) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming trading a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and excess stock of 202.995 MT of finished goods MS TMT bar valued at ₹ 52,35,630/- (APB 23) and the said quantity of good was confiscated by the DGCEI officials. Immediately on the very next date of survey, assessee vide letter dt. 24.12.2009 has made retraction (APB 25). Since no itemwise list of stock found was given a request was made by the assessee to the DGCEI officials to take the print outs of such lists from the weighing machine thus on 22/01/2010 data of the machine was retrieved in the presence of excise officials (APB 24) when it was found from the memory that item-wise actual physical weighment was not done as no such data is available in the machine. The assessee company immediately submitted these facts supported with documentary evidences to the concerned officials but the Additional Commissioner of the Central Excise Commissionerate -I passed the order by discarding the submissions and evidences filed by the assessee. Aggrieved with same the assessee company filed the appeal u/s 35 of the Central Excise Act on 12.10.2011 with Commissioner Customs and Central Excise (Appeals-1) who though upheld the duty on shortage and also on excess stock of finished good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock stated in the said Panchnama dated 23.12.2009 is not actual and correct. The survey officials supplied the copy of above Panchnama dated 23.12.2009 to the authorized signatory of the assessee but did not supply the copies of the WEIGHING SLIPS in support of their claim that both Input (MS Ingots) and finished goods (TMT) Bars were actually weighed in the factory premises before ascertaining shortage / excess of input and finished goods. Very next day of seizure and confiscation of goods in the factory premises the Director of the assessee company Shri Arun Jain made a protest to the DGCEI office, Jaipur against the incorrect allegation of shortage of raw material and excess of finished goods observed on 23.12.2009 (APB 25). In view of the above factual position stated in the foregoing paras it is humbly submitted that the findings of the adjudicating authority that Mr. Arun Kumar Singh (authorized signatory at the factory of the assessee) admitted the correctness of the Panchnama dated 23.12.2009 or Mr. Arun Jain, Director admitted the excess stock of 202.955 MT have no legs to stand. Further it is also important to note that the survey officers never provided the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either lying with the assessee company or used in the production of MS Bars. However, the Id. CIT(A) has held in the appellate order that assessee had sold 39.09 MT of stock at ₹ 10,74,819/- (page 16-17 para xi). Since the allegation of the Excise officials was that there was shortage of 250.04 MT of MS Ingots and 202.950MT excess stock of finished MS Bars, this difference in the weighment may be due to human error, impliedly the quantity of raw material issued for production was not reduced from the stocks of raw material and simultaneously the stock of finished goods was not increased by the same quantity. But in totality the stock of the assessee firm remains the same. Further we would like to submit that the nature of manufacturing process in which the assessee is involved is such which includes the movement of heavy raw material either in the form of Ingots or scrap material and it is practically not possible to weigh the exact quantity of raw material each time it is put in the furnace for production of rolls. Thus the excess finished MS Bars lying in stock of the assessee company was on account of conversion of raw material into finished goods. And further that after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes for estimating the weight of raw material of irregular shape and size. Accordingly the difference of weight is to be seen in this background that the exact weight of raw material has not been determined and it is being taken on estimated basis, then considering the total weight of raw material, there is only minor difference, which needs to be ignored on the facts and circumstances of the case. Accordingly the observation of Ld. CIT(A) that the appellant has produced 242.04 MT of finished goods as against 202.95 MT of the excess stock of finished goods so found during the course of survey, is without considering the reality and practicality of peculiar facts of this case where weight of raw material was not actually taken but was taken on estimated basis at the time of survey and without appreciating that in such a situation there is bound to be some minor differences, more particularly considering that actual weighment of scrap was not at all considered and in the instant case it has not been done. Accordingly finding of Ld. CIT(A) of balance shortage of raw material being converted into finished goods and sold is not tenable in view of aforesaid submissions and consequent di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year under consideration is better than earlier years and thus does not call for any trading addition. In the event, the Ld. CIT(A) was not satisfied with the GP / NP rate declared by the assessee for the year under consideration, then at best GP rate of last year (i.e. 3.06%) could have been considered by Ld. CIT(A) whereas the GP rate of 3.20% so taken by Ld. CIT(A) is without any basis, without any comparable case and without considering earlier year GP / NP vis-a-vis the GP / NP of the year under consideration of the appellant. 7. On the contrary, the ld. DR has vehemently supported the order of the Assessing Officer and submitted that the ld. CIT(A) was not justified in restricting the addition. 8. We have heard the rival contentions of both the parties and perused the material available on the record. The ld. CIT(A) has decided the issue by holding as under: (x) It is an undisputed fact that on the date of survey by DGCEI on 23/12/2009, there was shortage of raw material of 250.04 MT valued at ₹ 54,50,562/- and excess stock of finished goods of 202.995 MT valued at ₹ 62,40,494/-. It has increased the stock of finished goods by 202.995 MT and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess finished stock of 202.995 MT, it was noted that the said stock was valued at ₹ 55,80,405/- i.e. @ ₹ 27,496/- per MT. Thus, the stock of 39.09 MT is valued at ₹ 27,496/- per MT and it is held that the appellant has sold 39.09 MT of finished stock valued at ₹ 10,74,819/- out of its books of accounts. (xii) I have already upheld the rejection of books of accounts of the appellant u/s 145(3) of the Act. It has been held in a number of judicial pronouncements that after rejecting the books of accounts, the past trading results are to be kept in view while applying the GP rate. It would be appropriate to reproduce hereunder the past trading results of the appellant company as under: FY Turnover Gross Profit G.P% Net Profit (loss) NP% 2007-08 105,62,17,373/- 3,35,50,742/- 3.17% 1,16,76,460/- 1.09% 2008-09 135,70,70,031/- 4,15,42,786/- 3.06% 1,29,95,367/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, we direct the Assessing Officer to delete the addition sustained by the ld. CIT(A). Accordingly, ground raised in the C.O. is allowed. 9. Now we take revenue s appeal in ITA No. 143/JP/2017. In this appeal, the only issue involved is restricting the trading addition to ₹ 20,11,527/- instead of ₹ 52,35,630/- made by the Assessing Officer. The ld DR has vehemently supported the order of the Assessing Officer. On the contrary, the ld AR has reiterated the submissions as made in the written submissions. 10. We have considered the rival contentions of both the parties and perused the material available on the record. So far the action for restricting the addition by the ld CIT(A), we are of the view that the ld. CIT(A) has considered the facts and coupled with the facts that the first appellate authority of the Central Excise Department has given some relief to the assessee. Even the Assessing Officer has not carried out any independent enquiry on the basis of the information received from the Central Excise Department, therefore, the ground raised in the revenue s appeal is hereby dismissed. 11. In the result, the appeal of the revenue is dismissed and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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