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TMI Blog2017 (11) TMI 1852X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 & 377/Ahd/2016 for Asst. Years 2007-08 & 2008-09. Assessee has taken following Grounds: 2.1 For Asst. Year 2007-08: 1. The learned C.I.T.(A) has erred in law and on facts in holding that the reasons recorded by the Assessing Officer are proper and that the proceedings u/s.147 of the Act are valid and thereby rejecting the appellant's ground against the reassessment proceedings. 2. The learned C.I.T.(A) has further erred in law and on facts in upholding the addition of Rs. 88,03,348/- on the ground of alleged undervaluation of sale and of Rs. 2,08,00,924/- being the estimated G.P. on alleged clandestine removal of goods. 3. On the facts and in the circumstances of the case and in law the learned C.I.T.(A) ought to have quashed the proceedings u/s.147 of the Act being invalid and ought to have annulled the assessment made in pursuance of invalid proceedings, and ought to have deleted the addition of Rs. 88,03,348/- and 2,08,00,924/-. 4. It is therefore prayed that the proceedings u/s.147 may be quashed being assessment made in pursuance thereof may be annulled and the addition of Rs. 88,03,348/- and Rs. 2,08,00,924/- may be deleted. 5. Your appellant craves lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring ld.Authorised Representative did not press issue of re-opening. So same is dismissed us as not pressed. 6. Coming to the facts of the case on merit, we find that assessing officer referred to the allegations contained in show-cause notice issued by DGCEI and called upon assessee to explain as to why alleged under valuation of sales and alleged value of clandestine production should not be considered for addition in computation of income for year under consideration. For the sake of convenience the contents of said notice are reproduced as under: 1. "An investigation has been carried out by DGCEI, Zonal Unit, Ahmedabad in respect of under-valuation and clandestine manufacture/clearance of Ceramic Glaze Mixture(Frit) by Manufactures of Frit in Gujarat. The show-cause notice (SCN) issued by the office of the DGCEI has been obtained in the case of M/s. Zirconia Cera Tech Glazes. As per the SCN issued by the DGCEI, the assesseei.e M/s. Zirconia Cera Tech Glazes had Glazes had evaded Central Excise duty during the period from 01/04/2006 to 31/03/2007 by way of following activities. a. Undervaluation (i.e. not declaring the actual assessable value of excisable goods manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter is that such statements are recorded at the instance of the officers and are not free and fair in nature. Such oral statements have no evidentiary value, as the same are not corroborated by any independent material particulars. We rely on the judgment of Madras High Court in case of Commissioner of Income Tax vs. VigneshkumarJewellers. iii. The statements of buyers would also reveal that they are also almost same word to word. Further the name of any representative, who collected cash amount, has not been revealed, it is unimaginable that such huge amount of cash could be paid to an unknown person. iv. The DGCEI during the course of framing SCN however ignored these facts and proceeded to use the statements, and estimated the alleged assessable value of the entire production of 'frit' of the whole year working out the huge difference of Rs. 5,79,93,067/- treated as suppression of sales for the F.Y.2006- 07 relatable to A.Y. 2007-08. Further in SCN the DGCEI has estimated the entire sale at flat rate without considering the fact that sale rate to different parties may differ at different times. v. It was also pointed out that out of the 12 parties, three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oinder filed by the appellant. From the assessment order it is perused that appellant had filed return of income on 30/10/2007 declaring total income at NIL which was finalized u/s.143(3) and order was passed on 25/03/2009 determining total income at NIL/-. Thereafter, a letter was received from the Deputy Director of Income-tax (Inv.), Unit-II, Ahmedabad along with Show Cause Notice issued to the appellant by Directorate General of Central Excise Intelligence, Ahmedabad (DGCEI). From the show cause notice, it was noticed that appellant was engaged in various types of modes & methods of tax evasion which resulted into escapement of huge tax for the year under consideration. In such facts, case of the appellant for the year under appeal was reopened u/s.147 of the IT Act. After recording the reasons for reopening, notice u/s. 148 of the Act was issued on 21/03/2013. In response to the notice issued appellant requested to treat the original return filed on 30/10/2007 as return filed in response to notice u/s.148. Further, statutory notices u/s.143(2) and u/s.142(1) were issued and served to the appellant. To elaborate the matter, it is perused that in this case on the basis of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year under appeal, the amount of under valuation has been worked out at Rs. 5,79,93,067/- [as mentioned in Annexure C-1 (Sr. No. 1 to 124) of SCN issued by DGCEI and the amount of Clandestine removal goods has been worked out at Rs. 13,70,28,488/- as mentioned in Annexure C- 2 (Apr-06 to Mar-07) of SCN issued by DGCEI. AO has concluded that appellant had shown G.P. at a rate of 15.18% for the year under appeal hence, for the purpose, 15.18% G.P rate adopted at 15.18%. Accordingly, 15.18% of total undervalued sales is worked out at Rs. 88,03,348/- (15.18% of Rs. 5,79,93,067/-) is added to the Total income of the appellant. Similarly 15.18% of the value of clandestine removal goods for the year under consideration is worked out at Rs. 2,08,00,924/- (15.18% of Rs. 13,70,28,488/-) and is added to total income of the appellant. Appellant before me contended that AO in making addition of Rs. 88,03,348/- being element of profit on the alleged undervalued sales of Rs. 5,79,93,067/-and of Rs. 2,08,00,924/- being element of profit on the alleged value of aalleged clandestine removal of goods of Rs. 13,70,28,488/- has entirely relied upon the Show Cause Notice issued by the DGCEI for pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Ceramic Glazed Mixture (Frit) in view of the adjudication orders passed on the basis of natural gas consumption norms per metric ton? * Whether the appellants had indulged in undervaluation of frit and also clandestinely cleared frit as per personal ledgers retrieved from a pen-drive recovered and other personal records read with their statements? * Whether the adjudicating authorities were justified in denying crossexamination of witness under the provisions of Section 9D of the Central Excise Act, 1944 read with the judicial pronouncements on the issue. It is perused from the common order of CESTAT that clandestine manufacture arid clearance of frit by the appellant have been estimated by taking different gas consumption norms which either got suggested by the appellant or worked out by the Investigation, Average gas consumption from 263 SCMs to 484 SCMs were fixed for different appellants and were considered by the adjudicating authorities for calculating/confirming the demands and imposing penalties. On the above lines, Hon'ble CESTAT has concluded in Paras. 8, 9 & 10 that the methodology adopted by the Adjudicating authorities in estimating and demanding duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s opened but contents of the silver pen-drive were not opened on 30.8.3008 but instead another black colour pen-drive was opened. On 06.9.2008 under a Panchnama the said silver pen-drive taken out of the sealed cover and on opening this pen drive in the Tally Folder, no data was found to be available. However, under another Panchnama dated 12.09.2008, when the said silver pen-drive was opened data was found in Tally Folder which is the relied upon as Aajtak XYZ. There is a strong force in the arguments made by the appellants that when no data was found in Tally folder on 06.9.2008, how the relied upon documents got generated on 12.09.2008. Shri V.N. Thakkar, Superintendent in his cross-examination explained the reason for non retrieval of data on 06.9.2008 to be due to operational lack, but he admitted that no mention of any operational lack is made in the Panchnama dated 06.9.2008. Further, it is observed that in Panchnama dated 12.09.2008, the print out of account AJTAK taken contained 52 pages and account of appellant Wellsuit appeared at page 30 out of 52 pages. Another Panchnama dated 24.09.2008 indicate in Annexure A3 that the number of pages of Account Aajtakwere 94 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s examined as stated by the Hon'ble CESTAT. The Hon'blejurisdictional Tribunal has decided one M/s. Prima Ceramics Pvt Ltd in ITANo. 453/Ahd/2013, which is one of the 22 cases involved having identicalissue. Hon'ble Tribunal has given the directions to decide this case asunder: "......to decide the same afresh in accordance with law on merit in the light ofthe order of the Excise and Custom Tribunal, to be passed in this case, after allowing reasonable opportunity of hearing to both the parties. We direct accordingly." Following the above directions of the Hon'ble ITAT, the case of the appellant was remanded to Assessing officer and directed to give fresh opportunity to the appellant to produce books of accounts and to provide opportunity to cross-examine of various statements recorded and evidences collected during the action conducted by the Excise Department and the detailed Show Cause Notice prepared by the DGCEI and Followed by the Assessing officer. Assessing Officer has submitted a detailed remand report the relevant part is again reproduced hereunder: "(8) Now coming, to the issues which were raised by the assessee during the appellant stage, first, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 16,69,70,770/-) was made to the total income of the assesses. (10) Further, regarding the contention of the assessee that no opportunity of cross examination of details was accorded to the assessee during the assessment proceedings, it is to state that during the remand proceedings, vide this office order short entry dated 24/09/2015 the A.R. of the assessee was given the opportunity for cross examination of record. However, in response, the AR stated that since they have already received the relevant documents during the assessment proceedings. Thus, there was no need for further cross verification as the assessee has received the relevant documents during the assessment proceedings. However, the AR on that day only submitted the copy of order passed by the appellate Tribunal of Central Excise in which the issue in question was allowed in favour of the assessee in compliance to CIT(A) letter dated 08/05/2015, in which the assessee has been asked to furnish all the relevant paper/details as directed by ClT(A) Further as directed by Hon'ble CIT(A) that ate the details and books of account of theassessee to be called for therefore in compliance to the above direction, var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven in remand proceedings and that the AR replied that the relevant documents have teen received during the assessment proceedings and therefore there wasno need for "cross verification of record". As is evident from the above, as per the direction of the Hon'ble ITAT vide order dated 05/09/2013 in the case of Prima Ceramics Pvt Ltd and other 22 cases including appellant, a reasonable opportunity of being heard and opportunity of cross examination on the basis of evidences collected by DGCEI and relied upon by the assessing officer was granted to the appellant by the assessing officer. The opportunity granted was denied by the appellant simply stating in his letter that since they already received the relevant documents during the assessment proceedings, there was no need for further cross verification as the appellant had received the relevant documents during the assessment proceedings. However, the AR on that day only submitted the copy of order passed by the appellate Tribunal of Central Excise in which the issue in question was allowed in favour of the assessee. assessing officerhas further requested the appellant to produce the books of accounts and relevant documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as on those evidences which was collected and was in possession of Excise Department which were very well mentioned in the show cause letter of Addl. DGCEI and order passed by the Commissioner of Central Excise-III, Ahmedabad in the case of the appellant. The case was remanded to the AO to confront the appellant on these issues as well as to give opportunity to the appellant to produce the books in support of the claim which was not relied upon by the AO and the books were rejected. Appellant has not availed the opportunity with the plea that the AO has to follow the order of the Hon'ble CESTAT and directions of Hon'ble Jurisdictional ITAT which is well discussed in above paragraphs. The denial of opportunity by the appellant indicates that the issue is still very live in the case of the appellant as reported by the AO also as Central Excise Department has further preferred appeal before the Apex Court against the order of CESTAT which was decided on the basis of technicalities and judicial pronouncements. The case was remanded to the AO with a specific direction to give opportunity of being heard and opportunity of cross examination on the basis of facts, findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was collected in cash and was also not shown in the invoices raised. In the statement recorded of Shri JagdishbhaiGovindbhai Patel, partner of M/s Satyam Ceramic, Lakhdirpur Road, Morbi, he has admitted that there was undervaluation of cermic frit as they were getting invoices from the suppliers @ 7/- to Rs. 12/- which was paid through cheques, however for the difference in value of frit, which was Rs. 20/- to Rs. 30/- per kg, the balance was paid in cash. Similar Statement; has been given by Shri BalubhaiAmarsinhbhai Patel, partner of M/s. Leo Ceramic, Morbi; Shri KishorebhaiRaghavjibhai Patel, partner of M/s Priya Gold Ceramics, Morbi; Shri SureshbhaiKarsanbhaiFefar, partner of M/s Omson Ceramic, Morbi; Shri LaljibhaiVishrarnbhyai Patel, partner of AM/s Swagat Ceramic, Morbi; Shri JitendrabhaiPurchottamdasRojmala, partner of M/s. Silk Ceramics, Morbi; Shri ChhaganbhaiValjibhai Patel, Director of M/s Sacmi Ceramic Pvt Ltd, Morbi; Shri ChamanbhaiJirrajbhai Patel, Director of M/s Square Ceramic Pvt Ltd, Morbi and various other persons to whom appellant had business with. From the above, it is very clear that appellant was engaged in under valuation of goods and Clandestine Removal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants mentioned in Para 5.1 and 5.2 have indulged in undervaluation of frit and also clandestinely cleared frit as per a personal ledgers retrieved from a pen-drive recovered from SANYO and other personal records and pen-drives from the ceramic tile manufacturers read with their statements ? (iii) Whether the adjudicating authorities were justified in denying cross-examination of witness under the provisions of Section 9D of the Central Excise Act, 1944 read with the judicial pronouncements on the issue? 7. For the purpose of point No. 6(i) above and clandestine removal of frit by the frit manufacturers adjudicating authorities have mainly relied upon average consumption of natural gas for manufacturers one MT of frit by taking data either from the appellants or by conducting some gas consumption studies. Besides certain studies/ data with respect to average packing time taking for filling of finished goods (Frit) in the plastic bags and consumption of electricity units per MT of Frit on the basis of appellants records, have also been used to support that clandestine manufacture and clearances have been effected by the concerned appellants. 8. As per Para 3.5 above, cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of frit per day of 24 hours, which means that the total quantity of frit produced by M/s. Belgium with their 5 Kilns is 50MTs per day. Thus, it is observed that normal quantity of frit which could be produced in the factory of M/s. Belgium by using 5 Kilns at a time, would be 1500MT per month. 24.5.5 Comparison of the monthly production of frit accounted for by M/s. Belgium in their statutory records as appearing in Col. No. 2 of the Annexure-F vis-a-vis the actual quantity which would have produced by them in their factory as discussed above, fully substantiates large scale suppression of production by them. The fact that the quantity recorded in their statutory records during some months, exceeds the aforesaid average quantity of 1500MT per month, indicates that the physical verification conducted at the factory and inference drawn in respect of their production capacity is factual. In order to have an idea on the quantum of the suppression of production by M/s. Belgium Col. No. 7 has been added to the Annexure-F which indicates the difference of quantity accounted for in the official records as against the average production of 1500MT per month. The chart indicates that excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other appellants. There is no seizure of clandestinely removed goods from any of the appellants or any excess stock of finished goods. No cash has been seized from any of the premises searched by the Revenue when crores of cash has been alleged to have been transferred to the appellants across the country. There is also no evidence of excess procurement of raw materials. It is also claimed by the appellants that calorific value of the gas supplied by GAIL vary in GCV (Gross Calorific Value) and NCV (Net Calorific Value) which also effect consumption of gas alongwith the type of frit grade manufactured. It is observed from the ground (d), of the grounds of appeal filed by M/s. Belgium Glass & Ceramic Pvt. Limited, in the case of Belgium that such documentary evidences of gas having different GCV and HCV exist on records. This argument has been brushed aside by the adjudicating authority that Shri PiyushMakadia, Director of the appellant has agreed to consumption of 450SCM/PMT (plus/minus) 10% gas consumption. The above calculations are thus based on statement of Shri PiyushMakadia, Director reproduced in OIO dated 23.03.2011 at Paras 53 & 54. However, such statements can not be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds (not inferential or assumed) from the factory without payment of duty; (c) Discovery of such finished goods outside the factory; (d) Instances of sale of such goods to identified parties; (e) Receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) Use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) Statements of buyers with some details of illicit manufacture and clearance; (h) Proof of actual transportation of goods, cleared without payment of duty; (i) Links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal. 8.3 Appellants have also relied, inter-alia, on the judgment of Allahabad High Court in the case of CCE, Meerut-I vs. RA Castings Pvt. Limited [2012 (26) STR 262 (All.)], which is upheld by the Hon'ble Supreme Court as reported in 2011 (269 ELT A108. The facts of this case and the orders of the Allahabad High Court is as follows:- "[Order]- These appeals under Section 35-G of the Central Excise Act, 1944 (hereinafter referred to as the Act) are against the order of the Tribunal dated 19-6-2008 [2009 (237) E.L.T. 674 (Tri. - Del.)], by which the Tribunal has allowed the appeals of the respondents and quashed the order passed by the adjudicating authority. 2. The Respondent Nos. 1 and 2 were involved in the manufacturing of MS ingots and in respect thereof had maintained the books of account as provided under the Central Excise Rules and were furnishing the returns and paying the central excise duties. The Superintendent issued the show cause notices dated 1-12-2006 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was higher electricity consumption. It appears that Dr. Batra in his report has observed that for the production of 1 MT of steel ingots, 1046 units electricity required. 8.4 In view of the settled proposition of law laid down above, estimation of quantity of goods manufactured and clandestine removal of goods by the appellants cannot be slapped on the basis of averages arrived and calculated based on norms of gas consumption in manufacture of 1 MT of frit. It is rightly contested by the appellants that frit manufactured is not covered by any notification issued under Section 3A of the Central Excise Act, 1944 where Compounded Levy has been prescribed and capacity of the unit is required to be fixed on gas consumption basis, as done by the Revenue. It is observed that Revenue has attempted to adopt an estimation method for demanding duty and proving clandestine removal which is not prescribed by law. 8.5 In the case of appellant M/s. Wellsuit Glass & Ceramics Pvt. Limited - [2014 (304) ELT 618 (Tri. Ahmd.)], this Bench remanded the case to the Adjudicating authority to get, inter-alia, some more studies done on the gas consumption per metric tonne of different grades. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as borax, boric acid and zinc oxide, etc. That when fluxes are used, the melting point required for manufacture of frit is reduced. Learned advocate referred to extracts from the book, Industrial Ceramics by Felix Singer and the book Glassing and Decoration of Ceramics Tiles by Autorivari and extracts from the journal. Ceramic Industry, January, 2000 as well as various extracts downloaded from internet to support his case. He referred to the following decisions to submit that gas consumption alone cannot be the sole basis of clandestine manufacture and removal of the finished product :- (i) Vishwa Traders Pvt. Limited v. CCE- [2012 (278) E.L.T. 362] (ii) CCE v. Vishwa Traders Pvt. Limited - [2013 (287) E.L.T. 243] (iii) Mukesh Dye Work v. CCE - [2006 (196) E.L.T. 237] (iv) Southern Ispat Limited v. CCE - [2009 (248) E.L.T. 270] (v) SVM Cera Tea Limited v. CCE - [2013 (292) E.L.T. 580] 4 .. 5 .. 6. On the issue of clandestine removal of frit, based on the gas consumption of the main appellant, it is observed from Para 13.2 of the order-in-original dated 10-5-2011 that records maintained by main appellant show the gas consumption for making 1 MT of frit from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as to why the steps taken by them from time to time, does not effect gas consumption. On a specific query from the Bench, the learned Senior Advocate also argued that similar modernization in processes of manufacture, as undertaken by M/s. Wellsuit Glass in the manufacture of frit, have also been undertaken by other appellants. No findings have been given by the Adjudicating authorities in countering the claims of the appellants, justifying the modernization done to reduce consumption of gas from time to time. No expert opinion has been obtained by the Revenue to challenge the gas consumption pattern adopted by the appellants to indicate that claim of the appellants was wrong. 8. In view of the above observations and judicial pronouncements, methodology adopted by the Adjudicating authorities in estimating and demanding duty from the appellants; based on consumption of natural gas, electricity consumed and packing time taken; is not acceptable and is required to be rejected. 9. Sofar as points mentioned at Paras 6(ii) and 6(iii) are concerned, it has been held by the adjudicating authorities that undervaluation and clandestine removal stand provided in view of the pen-drives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation explained the reason for non retrieval of data on 06.9.2008 to be due to operational lack, but he admitted that no mention of any operational lack is made in the Panchnama dated 06.9.2008. Further, it is observed that in Panchnama dated 12.09.2008, the print out of account AJTAK taken contained 52 pages and account of appellant Wellsuit appeared at page 30 out of 52 pages. Another Panchnama dated 24.09.2008 indicate in Annexure A3 that the number of pages of Account Aajtakwere 94 and the name of appellant existed at page 43 as against page 30 mentioned in Panchnama dated 12.09.2008. Appellants have also raised the issue regarding discrepancies in the name of the panch witnesses. It is also contended that Revenue had not followed the procedure as stipulated in Section 36B of the Central Excise Act, 1944. In view of the above discrepancies the authenticity and veracity of data retrieved by investigation from the silver pen-drive is not reliable and can not be accepted as a piece of evidence in deciding the case of undervaluation and clandestine removal against the present appellants with respect to point mentioned in Para 6 (ii). 10. So far as the question mentioned at Para 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while invoking Section 9D of the Act, the concerned authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established; (iii) such an opinion has to be supported with reasons; (iv) before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion; and (v) it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review." 10.3 In the adjudicating proceedings, a list of witnesses to be relied upon by the Revenue is disclosed to the appellants alongwith the show cause notice. The reasons for relying upon the statements are also available from the facts narrated in the show cause notice. It is not necessary that all the witnesses should be called by the Adjudicating authority suo-moto for examination in a quasi-judicial proceedings for cross-examination. However, as per the provisions of Section 9D (1)(b) of the Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly be thrust upon the persons who were being proceeded against on account of their actions in conflict with the provisions of the 1973 Act. Such statements ought not to be readily believable, unless there is independent corroboration of certain material aspects of the said statements, through independent sources. The nature of the corroboration required, would depend on the facts of each case. In the present case, it is apparent that the appellant - A. Tajudeen and his wife T. Sahira Banu at the first opportunity resiled from the statements which are now sought to be relied upon by the Enforcement Directorate, to substantiate the charges levelled against the appellant. We shall now endeavour to examine whether there is any independent corroborative evidence to support the above statements. 17 & 18 .. .. 19. We shall now deal with the other independent evidence which was sought to be relied upon by the Enforcement Directorate to establish the charges levelled against the appellant. And based thereon, we shall determine whether the same is sufficient on its own, or in conjunction to the retracted statements referred to above, in deciding the present controversy, one way or the othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements/documents relied upon by the Revenue are presumed to be correct admissible as evidences. 12. Before giving observations on this argument raised by the appellants, it will be relevant to glance through the relevant portion of the provisions of Section 4 of the Central Excise Act, 1944 alongwith definition of transaction value:- "4. VALUATION OF EXCISABLE GOODS FOR PURPOSES OF CHARGING OF DUTY OF EXCISE. (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are to sold, be the value determined in such manner as may be prescribed. (2), (3) to (a), (b)** ** **: (d) transaction value means the price actually paid or payable for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OIO dated 23.03.2011 in the case of M/s. Belgium Glass & Ceramics. This statement clearly conveys that amount of Rs. 38,95,860/- was paid to various frit manufacturers and at the same time mentions that the names of the frit manufacturers are not written against each payment in the concerned documents. Under the above factual matrix appellants had the right to cross-examination the witnesses especially Shroffs and Angadias as to what portion of such payment belongs to a particular appellant. As mentioned in the definition of Transaction Value in Para 11.1 above, only actual price paid or payable has to be added to the transaction value and not a hypothetical value based on averaging of prices or standardizing of frit grades. As already mentioned under the realm of transaction value as per Section 4 even the same product could be sold at different prices depending upon several market factors and all these prices will be acceptable as permissible transaction value. Present Section 4 does not go by the concept of Normal Price of the old Section 4 of the Central Excise Act, 1944. In the absence of exact quantification of cash received by individual frit manufacturer, transaction value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OF 2016 D No.39019/2015 COMMISSIONER OF CENTRAL EXCISE & ST, AHMEDABAD - III .....APPELLANT(s) VERSUS ZIRCONIA CERA TECH. GLAZES PVT LTD. & ANR...RESPONDENT(S) ORDER Learned Additional Solicitor General seeks leave to withdraw the appeals with a liberty to approach the High Court in view of the statutory requirement. Leave and liberty granted. The appeals are dismissed as withdrawn. J. (MADAN B. LOKUR) J. (R.K. AGRAWAL) NEW DELHI JANUARY 27, 2016 *** ITEM NO. 6 COURT NO.8 SECTION III SUPREME COURT OF INDIA RECORD OF PROCEEDINGS Civil Appeal Diary No(s).39019/2015 COMMISSIONER OF CENTRAL EXCISE &ST, .......Appellant(s) AHMEDABAD - III VERSUS ZIRCONIA CERA TECH. GLAZES PVT LTD. & ANR........Respondent (s) (with appln. (s) for condonation of delay in filing appeal.) Date : 27/01/2016 This appeal was called on for hearing today. CORAM : HON'BLE MR. JUSTICE MADAN B. LOKUR HON'BLE MR. JUSTICE R.K. AGRAWAL For Appellant(s) Mr. N.K, Kaul, ASG Mr. Tara Chandra Sharma, Adv Mr. Nitesh Daryanani, Adv. Mr. B. Krishna Prasad, AOR For Respondent (s) Mr. M. Y. Deshmukh AOR UPON hearing the counsel the Court made the following ORD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Tax Officer - Assessing Officer and submitted that they have come to know that authority has received certain information from central excise i.e. DGCEI and on the basis of the show-cause notice issued by the Central Excise Department, adjudicating authority has intended to enhance the sales and also intended to reassess under section 35(1) of the VAT Act It was also submitted that except the show-cause notice issued by the Central Excise Department, there is no material to show that the petitioner had suppressed the sales and has evaded the tax liability. That solely on the basis of the show-cause notice issued by the Central Excise Department, the AO came to the conclusion that there was a sale of Rs. 17,45,46,653/- and accordingly at the rate of 4%, the tax liability would be Rs. 67,13,333/-against which the credit of Rs. 43,54,053/- is adjusted. The petitioner is liable to pay the VAT of Rs. 23,59,280/- and giving the credit of Rs. 2,06,448/- paid by the petitioner towards the tax, the petitioner is liable to pay balance of Rs. 21,52,832/- towards VAT. Consequently, by order dated 30.03.2013, the AO has passed the reassessment order directing the petitioner to pay the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rikh, learned advocate appearing on behalf of the petitioner and Shri Gandhi, learned AGP appearing on behalf of the respondents and having gone through the impugned order passed by the AO, it appears that the reassessment order has been passed by the AO solely on the basis of show cause notice issued by the Excise Department. It can be seen that the assessment which was previously concluded was reopened on the premise that during the excise raid, it was revealed that the petitioner had clandestinely removed goods without payment of excise duty. The Sales Tax Department, therefore, formed a belief that value of the goods + excise duty evaded and formed part of turnover of the assessee for the purpose of tax under the VAT Act. Identical question came to be considered by this Court in the case of Futura Ceramics Pvt. Ltd. (supra) and a similar reassessment order which was passed on the basis of the show cause notice issued by the Excise Department has been set aside by the Division Bench of this Court by observing as under: "It may be that the raid carried out by the Excise duty and the material collected during such proceedings culminating into issuance of a show cause notice for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits after giving an opportunity to the petitioner and if permissible under the law now. 6.1 In view of the above and for the reasons stated above, petition succeeds. Impugned order passed by the Commissioner Tax Officer(4), Mehsana [Annexuree] to the petition] dated 30.03.2013 is hereby quashed and set aside. However, it is observed that the same shall not affect the proceedings under the Central Excise Act for which the show cause notice has been issued. A liberty is also reserved in favour of the department to pass reassessment order afresh in accordance with law and on merits and after giving fullest opportunity to the petitioner and if permissible under the law now. Rule is made absolute to the aforesaid extent. In the facts and circumstances of the case, there shall be no order as to costs. Sd/- (M.R. SHAH, J.) Sd/- (R.P. DHOLARIA, J.)' In this background ld. Authorised Representative submitted that additions be deleted in both the years. On other hand ld. Departmental Representative supported the orders of authorities below and contended that order CESTAT is technical one so same should be ignored and orders of authorities below be upheld in both the years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble CESTAT has achieved the finality against the revenue. As we have observed earlier that only Excise Department action was basis of additions before us in both the years which does not survive for the reasons discussed above, so the basis of additions made by the Revenue does not survive. 15. In view of the above additions made on account as alleged valuation of sales and clandestine removal of goods do not survive and same are directed to be deleted in both the assessment years. In the result both the appeals filed by the assessee are allowed. 16. Now we take up appeals in case of Grow more Ceramics Pvt. Ltd. in ITA Nos. 988, 989 & 990/Ahd/2016 for Asst. Years 2006-07, 2007-08 & 2008-09, respectively. Following Grounds has taken by the assessee: 16.1 For Asst. Year 2006-07: 1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of Assessing Officer in reopening the assessment u/s.147 of the Act. In the facts and circumstances of the case, learned CIT(A) ought to have held that the action of reopening is without jurisdiction and not permissible either in law or on facts. 2. The learned CIT(A) has erred both in law and on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in confirming the action of learned Assessing Officer in holding that the appellant has undervalued sales amounting to Rs. 6,02,56,820/-. 4. The learned CIT(A) has erred both in law and on the facts of the case in confirming addition of Rs. 90,38,523/- after applying gross profit rate of 15% on alleged undervalued sales. 5. The learned CIT(A) has erred in law and on facts of the case in confirming the action of learned Assessing Officer in holding that the appellant has clandestinely removed goods amounting to Rs. 60,54,462/-. 6. The ld. CIT(A) has erred both in law and on the facts of the case in confirming an addition of Rs. 9,08,169/- after applying gross profit rate of 15% on alleged clandestine removal of goods. 7. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 8. The learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Assessing Officer in initiating penalty u/s 271(l)(c) of the Act. 17. Assessee is a Pvt. Ltd. company and engaged in business of manufacturing of Ceramics Glaze Mixture, frit. Return of income for Asst. Year 2006-07 was filed on 07/12/2006 declaring total income of Rs. NIL/- and same was processed u/s.143(1) of the Act. Thereafter, notice u/s.148 of the Act issued on 26.03.2013 for reopening assessment and in response to the same assessee submitted to treat the original return as return in response to notice u/s.148 of the Act. The reopening of the assessment was made for simple reason that DGCEI, Ahmedabad carried out search operation wherein it was allegedly found that assessee was evading payment of Excise duty and clandestine removal goods, parallel under invoices. Accordingly DGCEI issued show cause notice taking the total turnover of Rs. 4,93,75,020/- for the period 01/04/2005 to 31/03/2006 i.e. assessment year 2006-07 and therefore reopened income Tax assessment u/s. 148 for A.Y. 2006-07. 18. Assessee challenged reasons for re-opening assessment u/s. 148 of the Act and same was rejected. Thereafter notice u/ss. 143 (2) with 142(1) of the Act was issued and served upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant as declaring in their central excise invoices only a part of the actual transaction value manufactured and cleared from their factory. Differential value of 1 frit, over and above the value declared in the invoices, was collected by them from their buyers in cash. The observation and finding given in Show cause notice was on the basis of investigations and evidences gathered by the officials of Excise Department which clearly proved that appellant had suppressed the sale value by way of undervaluation of invoices as well as clandestine removal of goods from their premises. The suppression was revealed on the basis of finding during the course of investigations by the DGCEI and as mentioned in detail in the Show Cause Notice contained in letter F. No. DGCEI/AZU/36(4) 134/2009-10 1842 dated 9.02.2010. It was revealed from the Show Cause Notice of the DGCEI that appellant was showing sale value of Frit at Rs. 10/- per kg. whereas the actual price was at. Rs. 20/- to 30/- per kg. The amount shown in the invoices were being collected through cheques whereas the remaining amount was being collected by cash. Further it was also found that appellant was declaring less production tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as determined and had been subject matter of appeal before the Hon. Central Excise & Service Tax Tribunal, WZB, Ahmedabad. It is stated that the Hon'ble CESTAT has decided the said appeals in favour of the "appellants by a common appellate order dt. 12-05-2015. The Hon. CESTAT has held that no case of undervaluation of sales or of clandestine Removal of frit has been made out and accordingly quashed the adjudication orders passed by the Central Excise authorities on the basis of the Show Cause Notice of the DGCEI. Further appellant has contended and relied on the decision of the Hon'ble ITAT Bench decision in the case of Prima Ceramics Pvt. Ltd. involving facts similar to the appellant's case that the appeal should be decided in the light of the order of the Excise and Custom Tribunal, It is contended that Hon'ble ITAT had followed the above referred order in another case involving identical facts, M/s. Welsuit Glass & Ceramics Pvt. Ltd. while deciding cross appeals by the Department vide order dated 20/06/2014. The appellant has also argued that AO has not rejected books of account and made addition for gross profit of under valuation and clandestine removal of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturers. Appellants have argued that the print-out taken from the pen-drive AJTAK XYZ are not admissible as a piece of evidence as the same are not the documents admissible as evidence under the relevant Section of the Central Excise Act, 1944. It was also argued by the appellants that the number of Panchnamas recorded and the opening of the said pen-drive clearly suggest that the data recovered from the pen-drive is highly objectionable, suspicious and not acceptable. It is observed from the case records of Wellsuit Glass & Ceramic Pvt. Limited [E/13720/2014] that seizure of the said pen-drive was effected on 17.7.2008 under a Panchnama and it was not stated in this Panchnama that the pen-drive was put inside a sealed cover. It has been admitted by Shri V.N. Thakkar (Superintendent) DGCEI in the cross-examination before the Adjudicating authority that when an article is seized, the same is placed in a sealed cover and mention of the same is made in the Panchnama. It is also admitted by Shri Thakkar that as he remembers the seized pen-drive was placed in a paper cover and sealed with adhesive tapes. It is the claim of the appellants that the way the said pen-drive was handled, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /clandestine removal of frit based on the private records, the statements of tile manufacturers and Shroff/Angadias is concerned; it is argued by the appellants that the entire exercise of such quantification has been made as per the statements of the witnesses whose cross-examination has not been allowed by the adjudicating authority as per Section 9D of the Central Excise Act, 1944." From the above it is perused that the Hon'ble CETAT finding on the order of the Commissioner of Central Excise-III, Ahmedabad is on highly technical grounds citing various decisions of tribunals and various judicial pronouncements regarding under valuation of goods and on account of Clandestine Removal of goods and also appellant was not given opportunity of cross-examination on the statements recorded of various persons related to the appellant for the production of their goods. However, with due respect to Hon'ble CESTAT's decision it is seen that nowhere Hon'ble CESTAT has dealt the evidences collected by the Investigating Authorities of Central Excise though mentioned in the body of the order by way of Annexures by the Commissioner of Central Excise-III, Ahmedabad which are stil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Department as seized at the time of search conducted in its premises on 29/08/2008 by DGCEI, Zonal Unit, Ahmedabad. However, since the appellant has demanded the same before the Hon'ble CIT(A), vide its rejoinder/rebuttal dated 12/01/2016, in which they claim before the Hon'ble CIT(A) that no cross-examination opportunity was given by the ACIT, Mehsana. In this regard, it is to state that the decision of A.ys. 2006 07, 2007-08, 2008-09 was not only on the basis of information received from the Excise Department, but also on the basis of the statement recorded at the time of assessment proceeding by then AO of one of the Director Shri Harshad Patel, which is also formed part of the assessment order. Therefore, before finalizing the issue, it consider essential to impart justice by providing opportunity of cross-examination of Shri Harshad Patel, Director for all the years i.e. A.ys.2006 07, 2007-08, 2008-09, 2009-10 and the date of compliance was fixed on 29/02/2016. However on 29/02/2016. Shri Harshad Patel was not produced before the undersigned. The AR attended the office of the undersigned at around 4:30 P.M., with incomplete sets of books, when he wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining the under valuation of goods and Clandestine Removal. In response thereto appellant submitted the same submission submitted during the assessment proceedings and no original bills/vouchers were produced before the AO. AO therefore was of the view that appellant do not have any material evidence on record which it can rely. It is further observed from copy of order sheet provided by AO which pertains to remand proceedings along with remand report dated 7th March, 2016, AO has provided opportunity to appellant to cross-examine Mr. Harshad Patel, director of company for all the three years because during the search and post search investigation by excise department, he has admitted that rates charged were much lower than the actual selling price and clandestine removal of goods but said director was not produced before AO in spite of providing sufficient opportunity. Even during remand proceedings, appellant has not submitted complete set of books of account even though it was specifically asked to produce production register, stock register which form one of the essential element of additions. Considering the directions as well as after considering issues involved on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and did not produce the books of account and on such facts, the appeal is decided in the basis of evidences gathered by the Excise Department which was followed by the AO and made the disallowance and addition to the total income of the appellant on the grounds that Partners of the appellant company and others in their statements had accepted and stated how the modus operandi was carried out by them for undervaluation of goods and clandestine removal; the statement recorded with regard to frit and Show Cause letter regarding books which was rejected by the AO. During the course of Investigation a statement of Shri Harshadbhai C Patel, director of appellant company was recorded on oath on 30/1/2010 by the Central Excise Authorities and during the search operation he has very categorically admitted in his statement that rates charged were much lower than the actual selling price and also accepted the fact that appellant company was involved in parallel invoices. Even during the course of search conducted by excise authorities, various materials were found which reveal the above fact of under invoicing and issuance of parallel Invoices. The above fact is also substantiated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Central Excise duty us Nil claiming the benefit of Notifn. No. 8/2003-S.T. dtd. 01-03-2003, alongwith VAT @ 4% amounting to Rs. 3,280/. total amount of Rs. 85,280/-, we have cleared the above-mentioned quantities of "Opaque " and "TR" grade to M/s. Seron Ceramics Pvt. Ltd. and received the total value of Rs. 85,280/-. I further state the above invoices have been shown in the official invoices issued by our company during the financial year 2007-08 and received the payment of the total value mentioned in the above invoice. Further, as regards the "Original of Buyer copy of Invoice No. 132 dtd. 08-08-2007 issued by my company in favour M/s. Uday Industries for supply of 200bags i.e. 10000 kgs. of Ceramic glaze mixture Chemicals, describing the quality as "TR", at the rate of Rs. 71- per kg., having value of Rs. 70,000/-, showing Central Excise duty as Nil in view of benefit of Exemption under Notifn. No. 8/2003-C.E. dtd. 01-03-2003 and VAT @ 4 % as Rs. 2,800/-. showing the total value of Rs. 72,800/-, I state that the above quantity of "TR" grade frit from our company has been sold to M/s. Uday Industries under the above invoice, however, the said invoice has been a "Parallel in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Shri Nileshbhai M Ghodasara, director of Seron Ceramics Pvt. Limited was recorded on 07th January 2010 wherein he has stated that during the period 2004-05 to 2007-08, manufacturers were showing value of frit at Rs. 7/- to Rs. 12/- per kg. and from 2008-09, increased the prices from Rs. 20/- to Rs. 30/- per kg. which were the actual value and hence in the past period, over and above, the invoice amount, they were paying remaining amount in cash directly to the frit manufacturers. Similarly, in the statement recorded of Shri Jayendrabhai Kababhai Kalaria, partner of M/s. Atlas Industries, Morbi, he has admitted that they had purchased opaque quality frits and sometimes transparent quality also. However, the quality of both the opaque and transparent frit received were the same. He also confirmed that there was undervaluation of ceramic frit as they were getting invoices from the suppliers @7/- to Rs. 12/- per kg. which was paid in cheque. The balance was collected in cash and was also not shown in the invoices raised. In the statement recorded of Shri Jagdishbhai Govindbhai Patel, partner of M/s. Satyam Ceramic, Lakhdirpur Road, Morbi, he has admitted that there was undervaluat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in making the addition of Rs. 74,06,253/- on account of under valuation and addition of Rs. 79,86,892/- on account of Clandestine Removal of frits to the total income of the appellant is held justified and is hereby confirmed. Relevant grounds of appeal are therefore, rejected. 6. Next ground of appeal against charging of interest u/ss.234B and 234C of the Act being mandatory and consequential to the determination of total income is decided as such. 7. In the result, appeal is dismissed." 20. Before us ld. Authorised Representative submitted that he is not pressing the issue of re-opening so same is dismissed as not pressed in all three years. 21. Now Coming to the additions on merit raised parallel under invoicing according Excise Department took turnover of Rs. 4,93,75,020/-for A.Y. 2006-07 in excise matter and impugned additions were made on the basis excise proceedings as mentioned above in all three years which were confirmed by the ld. CIT(A) in all three years. 22. Ld. Authorised Representative submitted that Excise matter was carried before Hon'ble CESTAT wherein order was passed o 12/05/2015 in favour of assessee which has been reproduced in Para 10 of this orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter in favour of the assessee as discussed in the order of the CESTAT. In our considered opinion and in the facts and circumstances of the case ld. CIT(A) was not justified in observing that relief granted by Hon'ble CESTAT was highly technical. 25. It is pertinent to mention here that in connected matter we also find that Excise Department carried matter before Hon'ble Supreme Court wherein same was dismissed as withdrawn. Nothing contrary was brought to our knowledge on behalf of Revenue in this regard. 26. We also find in connected matter that Tax Appeal being Tax Appeal Nos. 733 and 734 of 2016 preferred by the Ld. Excise Department before Hon'ble Gujarat High Court came to be dismissed vide order dated 07/12/2016 as discussed earlier. Again nothing contrary was brought to our knowledge on behalf of Revenue in this regard as well. 27. In this background, in our considered opinion orders passed by the Hon'ble CESTAT in these years have achieved finality against the revenue. As we have observed earlier that only Excise Department action was basis of additions in all the three years which does not survive for the reasons stated therein, so the basis of add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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