9911796707
TMI Blog2017 (11) TMI 1852X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Gross Profit on under valuation sales and clandestine removal of goods. The Revenue has brought nothing on record that it has applied it s mind over and above the contents of show-cause notice in question thus there is lack of independent application of mind on behalf of revenue in these matters. Without prejudice to above, we find that in Excise proceedings, concerned authorities passed order against assessee and matter was carried up to concerned Hon ble CESTAT. Hon ble CESTAT vide its order dated 12/02/2015 as discussed above, has decided the issue in favour of the assessee holding that Excise Department could not estimate value of alleged suppression of sales as well as clandestine removal of goods merely on the basis of assumption and surmises. CESTAT having considered the relevant facts of the case as well as relevant material i.e. Pen drive and statement recorded by the Excise Department has decided the matter in favour of the assessee as discussed above. In these circumstances Ld. CIT(A) was not justified in observing that relief granted by Hon ble CESTAT was highly technical. We also find that Excise Department carried matter before Hon ble Apex Court wherein same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding 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 ₹ 93,30,925/- on the ground of alleged undervaluation of sale and of ₹ 2,53,46,163/- being the estimated G.P. on alleged clandestine removal of goods, and withdrawal of set off of loss of ₹ 8,57,147/-. 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 ₹ 92,30,925/- and 2,53,46,163/- and allowed set off of loss of ₹ 8,57,147/-. 4. It is therefore prayed that the proceedings u/s.147 may be quashed being invalid and the assessment made in pursuance thereof may be annulled and the addition of ₹ 92,30,925/- and of ₹ 2,53,46,163/- may be deleted. 5. Your appellant craves leave to add, alter or amend any ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, under parallel invoices. The value of clandestinely cleared Frit as well as the differential value of undervalued Frits, over and above the value declared in the invoices, was collect by M/s. Zirconia Cera Tech Glazes from its buyers (dealers) in cash. As per the SCN, the total amount of central excise duty evaded by M/s. Zirconia Cera Tech Glazes during the F.Y. 2006-07 towards undervaluation and clandestine removal, as calculated in the Annexure C.1 and C.2 of SCN, is worked out at ₹ 5,79,93,067/-. 2. On verification of the above details it is found that the Amount of ₹ 5,79,93,067/- is the difference of total assessable value of ₹ 3,60,10,500/- as shown by the assessee and the assessable value of ₹ 9,49,75,427/- as per actual rate as worked out by Excise Authority. Vide this office letter dated 11/12/2013 you had been show-caused as why amount of ₹ 5,79,93,067/- should not be added to your total income treating the same as income from undisclosed sources. 3. You are once again requested to show cause as to why amount of ₹ 5,79,93,067/- should not be added to your total income. 4. You are requested to submit your explanation and att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion at all with us during the year under consideration. Accordingly it was shown that the working of difference relatable to the other parties (other than 9 parties) is based on no material, rather entirely based on surmises and conjectures. vi. Without prejudice to the above stated it may also be submitted that if addition ought to be made then also it should be restricted to the element of Gross Profit thereon. G.P. ratio in our product ranges from 6% to 7%. In this regard we rely on judgement of Hon'ble Gujarat High court reported in 258 ITR 654 and 326 1TR 410. vii. We further would like to draw your attention to the matter that we do not agree with the contentions raised by DGCEI in SCN and the said matter is still subjudice. We therefore state that such huge addition should not be made merely on the basis of showcause notice of DGCEI. We request you to drop re-open proceedings u/s.148 of the Income tax Act." 8. The assessee also made various submissions in response to relevant quarries raised by the assessing officer, however assessing officer rejecting the contention of the assessee made addition of ₹ 88,03,348/- on account of alleged under valuation of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red from the premises, a searchoperation was conducted at the premises of the appellant on 28/08/2008.Investigation conducted by DGCEI against the appellant revealed thatthey had not declared the actual assessable value of goods manufacturedand cleared from their registered factory premises. The documentary aswell as oral evidences collected by DGCEI from various buyers clearlyindicated that appellant was declaring in their central excise invoices onlya part of the actual transaction value manufactured and cleared fromtheir factory. Differential value of 1 frit, over and above the valuedeclared in the invoices, was collected by them from their buyers in cash.The observation and finding given in Show cause notice was on the basisof investigations and evidences gathered by the officials of ExciseDepartment which clearly proved that appellant had suppressed the salevalue byway of undervaluation of invoices as well as clandestine removalof goods from their premises. The suppression was revealed on the basisof finding during the course of investigations by the DGCEI and asmentioned in detail in the Show Cause Notice contained in letter F. No.DGCEI/AZU/36(4) 130/2008-09/1836 to 1842 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is show cause notice dtd. 10/03/2014 reproduced in paragraph 4 (pages 3 & 4) of the order under appeal and also in making the impugned additions. Further, appellant has also contended that AO has not dealt with the contentions made in the written submissions dated dt.23/12/2013, 20/02/2014 and reply dated 18/03/2014 to the show cause notice of the AO and AO had proceeded extensively reproduce the paragraphs from the SCN issued by the DGCEI and relying upon the same has proceeded to make the additions referred to above. Further, it is contended that Excise Department had passed the adjudication order on Die basis of the SCN of the DGCEI determining the additional excise duty payable on the values 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 dtd. 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 Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants; based on consumption of natural gas electricity consumed and packing time taken, as not acceptable and required to be rejected. The paras, are reproduced hereunder: "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. So far as points mentioned at Para 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, AJTAK XYZ of SANYO, personal ledger of Comet, private diaries/ writing pads and the statements of ceramic tile manufacturers. 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant 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(iii) regarding denying cross-examination of witnesses whose statements were used for establishing undervaluation/ 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." Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding the deletion of all the addition by the Hon'ble Central Excise and Custom Tribunal, West Zonal Bench, Ahmedabad vide its order dated 12/05/2015 wherein the appeal of the appellant were allowed. In this respect, it is to state that although the appeal of the assessee has been allowed at the tribunal stage, on the basis of the information gathered from Custom, Excise and Sales Tax Department, vide their letter No.CCEIII/ Legal/SLP/08/2015/1296 dated 26/10/2015 as under (Copy of the letter enclosed for ready reference) "In the case, it may kindly be noted that in the case of M/s. Zirconia Cera Tech Glazes, Palaj, Mehsana of the final order No.A/10541- 10571/2015, dated 12.05.2015 of CESTAT, Ahmedabad is being appealed against in the Hon'ble Apex Court Tht proposal for appeal has been accepted by the Chief Commissioner, Central Excise, Ahmedabad Zone and has been sent to the Board for filing Appeal in the matter" Thus, it is clear that the issue is still alive as per the above information received from the Customer & Excise Department. (9) Regarding the rejection of books of account, it is pertinent to mention that in his order, the then A.O. clearly mentioned tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve direction, various documents were called for both the years from the assessee vide this office letter dated 12/10/2015. In response the assessee submitted the same submission submitted during the assessment proceedings. No original bills/vouches were produced by the assessee. Therefore, it is presumed that the assessee do not have any material evidence on record which it can rely. In view of the above factual and legal aspects of the case and taking into account the fact on record that the impugned issue under consideration with Central Excise Department is alive at their level and also the facts emerged during the assessment proceedings viz. rejection of books of accounts, etc. itan safely be said (hat the assessee cannot found to fan eligible to get any relief with respect to tin: impugned additions at this juncture. Accordingly, it is requested to kindly decide the issue in favour of the Revenue taking cognizance of tie case as discussed above." Appellant was provided opportunity to file rejoinder and a copy of the remand report of the Assessing Officer was provided to the appellant. Appellant has filed rejoinder dated 12/12/2015, which read as under: "in this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant documents to verify and examine the issues raised by the Addl. DGCEI in his show cause notice for 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 assessing officer. assessing officertherefore was of the view that appellant do not have any material evidence on record which it can rely. Appellant vide letter dated 12/12/2015 before the undersigned in its written submission in para.2(1) has stated as under: "The AO has mentioned that opportunity for "cross examination of record" was given in remand proceedingand that the AR replied that the relevant documents have been received during the assessment proceeding and therefore, there was no need for cross verification of record." The above plea of the appellant cannot be accepted in the light of the directions of the Hon'ble Tribunal wherein it is very specifically mentioned that "CIT(A) to decide the same afresh in accordance to law on merits in light of the order of Excise & Custom Tribunal to be passed in this case after allowing reasonable op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, findings given in Show Cause Notices issued by the by the Addl. DGCEI, Ahmedabad but appellant voluntarily denied to avail the opportunities and did not produce the books of accounts and on such facts, the appeal is decided on 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 modus operandi was carried out by them for under-valuation 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 PravinbhaiNarshibhai Patel, Partner of M/s Zirconia was recorded on oath on31/3/2010 by the Central Excise Authorises and during the searchoperation he has very categorically admitted in his statement that duringthe period 2006-07 and 2007-03 they were showing assessable value offrit at ₹ 10/- whereas during the year 2009-10- they have substantiallyincreased the value of frit upto 27.50 per kg. All the buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in under valuation of goods and Clandestine Removal of frits. It was for the appellant to prove that the allegations made against it are not correct by producing books of accounts and the facts against evidences collected during the search operation by the Excise Department which was not done by the appellant and hence the only conclusion that can be drawn is that appellant was involved in the practice of undervaluation of goods and removal of clandestine of goods. In view of the above, action of the AO in making the addition of Rs,88,03,348/- on account of under valuation aid addition of ₹ 2,08,00,924/- 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. 5. In the result, appeal is dismissed." CIT(A) also confirmed the addition made by the Assessing Officer in Asst. Year 2008-09. 10. Now assessee has filed appeal before us on the ground raised by assessee as already reproduced in Para 2. The stand of the ld. Authorized Representative on behalf of assessee is that additions havebeen solely made on the basis of show-cause notice issued by the DGCEI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concerned appellants. 8. As per Para 3.5 above, clandestine manufacture and clearance of frits by the appellants 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. Following observations have been made by the Adjudicating authority in the case of Belgium Glass & Ceramics Pvt. Limited (Appeal Nos. 796 to 798/2011) in paras 24.4.4, 24.5.4 and 24.5.5 while passing OIO No. 05/VRC-1/MP/2011 dated 23.03.2011 and justifying the calculations/ estimations made by Revenue:- "24.4.4. Thus, even by considering that 5 nos. of kiln operated by M/s. Belgium during the entire past period, were of lowest size, viz. 146x6, each one of which is having 4000 SCMs of natural gas consumption per day of 24 hours, the net output of ceramic frit per kiln per day by consuming 450 SCMs of gas would not be less than 8.888 MTs. In other words, the minimum monthly production of frit per kiln would be at least 266.64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of 1500MT per month. The chart indicates that except during a period of 7 months, the monthly average production noticed during the aforesaid Panchnama dated 26.09.2009 exceeded the quantity accounted for by M/s. Belgium in their statutory records." 8.1 From the above findings of the adjudicating authority gas consumption of 450 SCM per MT of frit manufacture has been arrived at for M/s. Belgium Glass & Ceramics Pvt. Limited which according to Revenue will gave a capacity of 1333.2 MTs per month to that appellant. In Para 24.5.4 and 24.5.5, the adjudicating authority observed that the normal quantity of frit that could be manufactured by this appellant will be 1500MTs per month. It has also been fairly mentioned by the adjudicating authority that in certain months the production of this appellant was also more than 1500MT. Adjudicating authority has only seen one side of the coin that a production of more than 1500MT is possible, therefore a capacity of around 1300MTs is justified. The other side of coin will be that appellant has also reflected a quantity of more than 1500MTs of Frit manufactured per month in the records. Such a depiction in the books of accounts gives a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 at Paras 53 & 54. However, such statements can not be relied upon unless the cross-examination of the witnesses is extended to the appellants. 8.2 In the remaining cases also where clandestine clearances have been estimated on the basis of natural gas consumption, there is no evidence of excess raw material purchased by the appellants. No shortages/ excess of raw materials or finished goods have been detected any where during the investigations. In none of the cases there is any seized cash or seizure of clandestinely removed finished goods during transportation from the factory premises of the appellants. In this regard appellants have relied upon the case laws of Arya Fibers Pvt. Limited vs. CCE, Ahmedabad-II [2014 (311) ELT 529 (Tri. Ahmd.)]and Gupta Synthetics Limited vs. CCE, Ahmedabad II [2014 (312) ELT 225 (Tri. Ahmd.)]. Para 38 and 40 of the case law of Arya Fibers Pvt. Limited vs. CCE Ahmedabad-II is relevant and is reproduced below:- "38. It was, therefore, the submission of the ld. Senior Advocate that, in three cases cited by the ld. Special Counsel for the Revenue, this Tribunal and Hon'ble High Court of Gujarat had taken a view that there was no need to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case-law on the subject in Centurian Laboratories v. CCE, Vadodara [2013 (293) E.L.T. 689]. It would appear that the decision, though rendered on 3-5-2013, was reported in the issue of the E.L.T., dated 29-7-2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased or consumed and not merely the recording of confessional statements. A co-ordinate Bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntendent issued the show cause notices dated 1-12-2006 asking the respondent to show cause why the demand towards central excise duty may not be confirmed for the period from 2001-02 to 2004-05 by invoking the proviso to Section 11A(1) of the Act and why the penalty should not be imposed under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11AC of the Act. Various allegations have been made in the show cause notices and from the perusal of the show cause notices it appears that the excess production has been estimated on the basis of the higher electricity consumption. The respondents filed their reply. The Commissioner of Central Excise, Meerut-I, vide its order dated 30-7-2007 has confirmed the demand against the respondent nos. 1 and 2 and also imposed the penalty on the respondent nos. 1 and 2 and on other respondents alleged to have been involved in the clandestine removal of the goods. 3. Being aggrieved by the impugned orders, the respondents filed appeals before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi. The Tribunal observed that it is settled principle of law that the electricity consumption can not be the only factor or basis for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gas consumption per metric tonne of different grades. It has been argued by the Revenue that the studies suggested by the Bench are not possible now and such studies are also not possible with respect to the other appellants. Para 3.2 and 6 of the order passed by this Bench in the case of M/s. Wellsuit Glass & Ceramics Limited (supra) are reproduced below:- "3.2 With regard to consumption of gas, learned Advocate relied upon the statements of Shri Balkrishna M. Thakkar, Managing Director, that the consumption of gas would vary on the quality of frit, raw material used, condition of Kiln, gas pressure, fluxes used, etc. It was thus argued that there are various factors which affect the consumption of gas and there cannot be a fixed ratio of consumption of gas for a specific frit output. He also argued that in October, 2007, there was a change in the management and the new management took a series of steps to improve quality of frit and made the gas consumption efficient. They also installed three new Refractory Kiln with greater production capacity and used superior refractories which were better maintained from time to time. He drew attention of the Bench to the fact that se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant show the gas consumption for making 1 MT of frit from 844 SCM to 286 SCM. It has been contested by the appellant that gas consumption varied from season to season, from one quality of frit to other quality of frit, use of better technology, etc. It has also been brought on record that after change in the management in Oct., 2007 and installation of new furnaces and new refractories, the gas consumption has reduced. Further appellant has also brought on record that due to expert consultations and use of certain fluxes also the gas consumptions per MT of frit have come down. Evidences were also brought on record during the course of hearing regarding installation of an Electricity Generator and replacement of better quality refractories in the kilns by the main appellant. Under the above factual matrix, the method used by the investigation cannot be a sound method to demand duty on assuming 318 SCM of gas required for manufacturing one MT of any quality of frit. The improper method adopted by the Revenue for calculating duty was agitated by the appellants before the adjudicating authority as per Paras 4(xi) to (xxxiii) of the order-in-original dated 10-5-2011. It is observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndestine removal stand provided in view of the pen-drives, AJTAK XYZ of SANYO, personal ledger of Comet, private diaries/writing pads and the statements of ceramic tile manufacturers. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (ii). 10. So far as the question mentioned at Para 6(iii) regarding denying cross-examination of witnesses whose statements were used for establishing undervaluation/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. Appellants relied upon the following case laws:- (i) J.K. Cigarettes Limited vs. CCE [2009 (242) ELT 189 (Del.)] (ii) CCE, Allahabad vs. Govind Mills Limited - [2013 (294) ELT 361 (All.)] (iii) Basudev Garg vs. CC [2013 (294) ELT 353 (Del.)] (iv) Swiber Offshore Construction Pvt. Limited vs. Commissioner of Customs, Kandla [2014 (301) ELT 119 (Tri. Ahmd.)] 10.1 Section 9D of the Central Excise Act, 1944 is reproduced below:- 9-D. Relevancy of statements under certain circumstances - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 9D (1)(b) of the Central Excise Act, 1944, read with the judicial pronouncements relied upon by the appellant every adjudicating authority should call the witnesses when requested by the party against whom those statements are to be used. If by making efforts for a few occasions the witnesses summoned do not appear than automatically the case could be mature for accepting the statements as admissible evidences under Section 9(D)(1)(a) of the Central Excise Act, 1944. However, it was not open to the adjudicating authorities to straightaway reject the request for cross-examination in view of the law laid down by the judicial pronouncements relied upon by the appellants. The reasons for rejecting the appellants request for not allowing are also required to be intimated to the appellants as per the case law of J.K. Cigarettes Ltd. (supra) so that appellant may explore the possibility of filing appeal against such rejections. The ratio laid down by the J.K. Cigarettes case (supra) has also been followed in series of other judgments. No such rejection orders were given by the adjudicating authorities separately. Hon'ble Supreme Court in the case of UOI &Anr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in deciding the present controversy, one way or the other. First and foremost, reliance was placed on mahazar executed (at the time of the recovery, from the residence of the appellant) on 25-10-1989. It would be pertinent to mention, that the appellant in his response to the memorandum dated 12-3-1990 had expressly refuted the authenticity of the mahazar executed on 25-10-1989. Merely because the mahazar was attested by two independent witnesses, namely, R.M. Subramanian and Hayad Basha, would not led credibility to the same. Such credibility would attach to the mahazar only if the said two independent witnesses were produced as witnesses, and the appellant was afforded an opportunity to cross-examine them. The aforesaid procedure was unfortunately not adopted in this case. But then, would the preparation of the mahazar and the factum of recovery of a sum of ₹ 8,24,900/- establish the guilt of the appellant, insofar as the violation of Section 9(1)(b) of the 1973 Act is concerned? In our considered view, even if the mahazar is accepted as valid and genuine, the same is wholly insufficient to establish, that the amount recovered from the residence of the appellant was dispat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertise or publicity, marketing and selling organisation expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." 13. It is not the case of the Revenue that the value of the goods cleared by the appellants is not determinable at the Factory gate and therefore, some other method under the Central Excise Valuation Rules is required to be adopted to arrive at the assessable value. Rather the case of the Revenue on valuation is that certain additional consideration coming to the appellant by way of cash flow from the tile manufacturers to the frit manufacturers is required to be added to the assessable value. In the present circumstances and factual matrix the exact amount of such additional consideration was required to be determined for addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial evidences to the proceedings indicating suspected undervaluation. It is now well understood that suspicion howsoever grave cannot take the place of an evidence. Therefore, it may not be correct to hold that preponderance of probability should always be given to the Revenue, as Hon'ble Apex Court in a particular held it to be so. Each case has to be decided in view of the facts of that case. In view of the above observation and the law laid down by the Apex Court in the case of A. Tajudeen v. UOI (supra) preponderance of probability cannot always be allowed in favour of the Revenue when there is no independent corroboration of the facts and the case is made only on the basis of statements which were not allowed to be tested under cross-examination as per Section 9D (1)(b) of the Central Excise Act, 1944. 14. In view of the reasons recorded above, appeals filed by the appellants mentioned in paras 5.1 and 5.2 of this order, are allowed with consequential reliefs, if any. Miscellaneous applications are also disposed of accordingly." In this background, ld. Authorised Representative submitted that Hon'ble CESTAT has considered the merit of the case, relevant material i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral 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. (SANJAY KUMAR-I) (JASWINDER KAUR) AR-CUM-PS COURT MASTER (Signed order is placed on the file)" Ld. Authorised Representative further brought to our notice that even the Tax Appeal being Tax Appeal Nos.733 & 734 of 2016 preferred by the Excise Department before the Hon'ble Gujarat High Court was dismissed vide order dated 07.12.2016. and copy of the same has been annexed as Annexure - 'A' at the Chart filed on behalf of the assessee and relevant portion of the same is reproduced as under: "CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 13/11/2013 JUDGMENT Honourable Mr. Justice Mr. Shah - [1.0] By way of this petition under article 226 of the Constitution of India, petitioner has prayed for an appropriate writ, direction and order quashing and setting aside the show-cause notice dated 14.03.2012[Annexure C to the petition] as well as the impugned order dated 30.03.2013 passed by the Commercial Tax Officer(4), Mehsana by which an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance amount of ₹ 21,52,832/- alongwith interest upto31.03.2013 and has also imposed the penalty at the rate of 150% i.e. in all ₹ 73,19,630/.Feeling aggrieved and dissatisfied with the impugned order, the petitioner has preferred the present special civil application under Article 226 of the Constitution of India. 2.3 At the outset it is required to be noted that we are conscious of the fact that against the impugned order of reassessment the petitioner has a statutory remedy available by way of appeal however, considering the fact in the identical facts and circumstances earlier this Court has entertained the petition and has quashed and set aside the order of reassessment, in the facts and circumstances of the case, we have entertained the present petition. 2.4 The petitioner has challenged the impugned order passed in reassessment proceedings, which is passed solely on the basis of the show-cause notice issued by the excise department and the additions are made. Learned counsel appearing on behalf of the petitioners has vehemently submitted that this should be wholly impermissible. 3. Shri Parikh, learned advocate appearing on behalf of the petitioner has hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice for recovery of unpaid excise duty and penalty in a given case sufficient to reopen previously closed assessment. In this case, however, we are not called upon to judge this issue and would therefore not give any definite opinion. The question, however, is whether on a mere show cause issued by the Excise Department, the Sales tax Department can make additions for the purpose of collecting tax under the Gujarat Value Added Tax Act without any further inquiry. If the Assistant Commissioner of Commercial Tax has utilized the material collected by the Excise Department; including the statements of the petitioner and other relevant witnesses and had come to an independent opinion that there was in fact evasion of excise duty by clandestine removal of goods, he would have been justified in making additions for the purpose of VAT Act. In the present case, however, no such exercise was undertaken. All that the Assessing Officer did was to rely on the show cause notice issued by the Excise Department. Nowhere did he conclude that there was a case of clandestine removal of goods without payment of tax under the VAT Act. Merely because the Excise Department issued a show cause notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the years. 11. We find that the basis of addition is contents of show-cause notice issued by the Excise Department. An investigation was carried out by DGCEI at assessee premises on 25/08/2008, wherein it was alleged by the Excise Department that assessee has not declared actual assessable value of goods manufactured and cleared from factory. Based on above DGCEI issued show-cause notice dated 19/04/2010, Excise department concluded that assessee was engaged in under valuation of sales and clandestine removal of goods. Only on the basis of same Assessing officer reopened assessee's income tax assessment for the years under consideration and made addition of estimated Gross Profit on under valuation sales and clandestine removal of goods. The Revenue has brought nothing on record that it has applied it's mind over and above the contents of show-cause notice in question thus there is lack of independent application of mind on behalf of revenue in these matters. 12. Without prejudice to above, we find that in Excise proceedings, concerned authorities passed order against assessee and matter was carried up to concerned Hon'ble CESTAT. Hon'ble CESTAT vide its order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and on the facts of the case in confirming the action of learned Assessing Officer in estimating income of the appellant, without rejecting books of account of the appellant. 3. 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 undervalued sales amounting to ₹ 4,93,75,020/-. 4. The learned CIT(A) has erred both in law and on the facts of the case in confirming addition of ₹ 74,06,253/- 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 ₹ 5,32,45,944/-. 6. The ld. CIT(A) has erred both in law and on the facts of the case in confirming an addition of ₹ 79,86,892/- 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserves to be quashed. 8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.Assessing Officer in levying interest u/s 234A/B/C/D of the Act. 9. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. Assessing Officer in initiating penalty u/s 271(l)(c) of the Act. 16.3 For Asst. Year 2009-10 : 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 the facts of the case in confirming the action of learned Assessing Officer in estimating income of the appellant, without rejecting books of account of the appellant. 3. 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 undervalued sales amounting to ₹ 5,09,28,045/-. 4. The learned CIT(A) has erred both in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/ss. 143 (2) with 142(1) of the Act was issued and served upon assessee. In response to the same assessee submitted details as called for and produced books of account for verification. Assessing Officer after rejecting contention raised on behalf of assessee adopted Gross Profit @ 15% on undervaluation and clandestine removal of goods accordingly passed assessment order u/s.143(3) r.w.s. 147 of the Act wherein determined total income of Rs,1,53,93,145/- as against the return income of Rs.NIL/-. Assessing officer also calculated tax and charged interest u/s.234B/234C. Similar addition were made in Asst. Years 2007-08 and 2008-09. 19. The matter was carried before first appellate authority wherein various submissions were made opposing addition in question, however Ld. CIT(A) upheld the order of the ld. Assessing Officer by observing as under: "5.6 I have considered the facts of the case, assessment order, submission made by the appellant, remand report and rejoinder filed by the appellant. On perusal of assessment order it is observed that a letter was received from the Deputy Director of Income-tax (Inv.), Unit-II, Ahmedabad along with Show Cause Notice issued to the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther it was also found that appellant was declaring less production than the actual production. The company was showing consumption of 2044.494 SCM of natural gas for manufacturing of 1 MT of frit whereas on verification based on the -figures of average Gas consumption against one MT of frit manufactured when appellant had shown-higher production, and also in view of the statement of Sh. Harshadbhai C Patel, Partner and Production In-charge, it was found that 484 SCM of natural gas was consumed for manufacturing of 1 MT of frit. It was proved beyond doubt that appellant was involved in undervaluation of sale invoices, thereby suppressing the sales and also had understated the production and its unaccounted sale of such clandestine production. For the year under appeal, the amount of undervaluation has been worked out at ₹ 4,93,75,020/- [as mentioned in Annexure D-1 (Sr. Nos. 1 to 505) of SCN issued by DGCEI and the amount of Clandestine removal goods has been worked out at ₹ 5,32,45,944/- as mentioned in Annexure D-2 (Apr-05 to Mar-06) of SCN issued by DGCEI]. AO has concluded that appellant had shown G.P. at a rate of 15% for the year under appeal hence, for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot rejected books of account and made addition for gross profit of under valuation and clandestine removal of goods which is incorrect. Having considered the facts of the case and submissions made and report submitted by the AO. It is seen from the common order passed by CESTAT, it is highly technical and relief is given to the appellant and other 22 appellants on the basis of technical grounds like- * Whether the appellants had indulged in clandestine manufacture and clearance 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 cross-examination 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 and clearance of frit by the appellant have been estimated by taki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adhesive tapes. It is the claim of the appellants that the way the said pen-drive was handled, it is possible that the same could be tempered with as the same was kept in the paper cover sealed with adhesive tapes. A second Panchnama was made on 30.8.2008 where the said pen-drive was mentioned to have been taken out of a sealed cover when the first Panchnama never mentioned keeping the said pen-drive in a sealed cover. It is also observed that on 30.8.2008 the sealed cover was 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order by way of Annexures by the Commissioner of Central Excise-III, Ahmedabad which are still in the possession of Central Excise Department like invoices which were prepared by the appellant in two folds, under valuation of goods which were collected and on that basis Addl. DGCEI had show-caused the appellant. Various statements were recorded of the partners and the technical persons of various concerns from whom appellant used to purchase or sold the products which are also not cross-examined as stated by the Hon'ble CESTAT. The Hon'ble jurisdictional Tribunal has decided one M/s. Prima Ceramics Pvt. Ltd. in ITA No. 453/Ahd/2013, which is one of the 22 cases involved having identical issue. Hon'ble Tribunal has given the directions to decide this case as under: " …… to decide the same afresh in accordance with law on merit in the light of the 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 AO and directed to give fresh opportunity to he ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR attended the office of the undersigned at around 4:30 P.M., with incomplete sets of books, when he was asked to produce production register, stock register which form one of the essential element of addition in all these year. He informed the undersigned that, he will brought the same from the factory premise. However for that undersigned waited till 6:30 P.M. but nothing produced till that time and when one of his staff Shri Manish S. Patel who was present was asked to sign the order sheet, he refused to do the same after taking with the CA, Shri Daxesh M. Thakkar, Advocate on phone Later on next day on 01/03/2016. Neither, no body attended the office, just they submit me photocopy of the various document through Dak. In the absence of verification as given to the assessee, the genuinely of the books cannot be determined. Therefore, it is requested to Hon'ble CIT, to please decide the issue on the basis of facts and material on record. As the appellant is just trying to delay the procedure before the CIT(A) for A.ys.2006-07, 2007-08, 2008-09 with the sole motive to delay reassessment proceedings for A.Y.2009-10 and A.Y.2010-11, it is therefore requested to kindly dispose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial element of additions. Considering the directions as well as after considering issues involved on the basis of facts covered and show cause issued/the following facts are revealed: (1) The reasons for providing the opportunity of being heard and cross-examination to the appellant was as per the directions of the Hon'ble ITAT and also to verify and examine various evidences which was mentioned in the show cause letter issued to the appellant by Addl. DGCEI like the evidences of under valuation of goods, under valuation of freight and evidences mentioned on page Nos.8, 9 & 10 in order dated 29/3/2014 of Commissioner of Central Excise, Ahmedabad. (2) Also, one of the issue like statement recorded of director wherein the director has accepted modus operandi of tax evasion by undervaluation of goods and freight and unaccounted production. It is not out of place to mention that these facts were not dealt by the Hon'ble ITAT in the order passed CESTAT has given relief on the basis of technical ground but Income-tax Department has not examined the Partners of the company and other persons whose statements were recorded on oath during the search action by the Excise Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above fact of under invoicing and issuance of parallel Invoices. The above fact is also substantiated by statement of director recorded by excise authority and relevant portion of said statement is reproduced herein under : Q.18: Shri Harshadbhai Patel, you are being shown the 'Original for Buyer' copy furnished by Shri Ashakbhai Jayrambhai Savsani, Partner of M/s. Uday Industries and M/s. Uday Gold Ceramics, of Invoice No.132 dtd. 08-08-2007 issued by your company in favour M/s. Uday Industries for supply of 200 bags i.e. 10000 kgs. of Ceramic glaze mixture Chemicals, describing the quality as "TR", at the rate of ₹ 7/- per kg., having value of ₹ 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 ₹ 2,800/, showing the total value of ₹ 72,800/-. Further, you ore also been shown the official ledger of M/s. Uday Industries in your favour for the year 2007-08, wherein on left hand side, showing the details of value, date of purchase and Invoice/bill No. of supplier i.e. M/s. Growmore Ceramics P. Ltd. and on Right hand-side, showing the payments, the date of paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 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 invoice" issued by our company, which has issued by our company, alongwith the original invoice No. 132 did. 10-08-2007 and we have not considered the same in our official records. I further state that the above-mentioned Parallel invoice No.132 dtd. 08-08-2007 in favour of M/s. Uday Industries has been issued by our company for supply of 10000 kgs. of "TR" Quality of Ceramic Glaze Mixture i.e. frit from our company to M/s. Uday Industries, however, we have not accounted for the-above quantity of "TR " grade frit in our books of account and Daily Stock Account register, during the material time I state that as like the official invoices issued by us, we issue in case of parallel invoice also, we issue- three copies, out of which the "Original" and 'Duplicate' copies were sent to the buyer alongwith the goods and 'Triplicate copy was retained by us. Further, "Triplicate for assessee" copy of the Parallel invoice No. 132 dtd. 08-08-2007, which we retained with us as per routine proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected 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 undervaluation of cermic frit as they were getting invoices from the suppliers @ 7/- to ₹ 12/- which was paid through cheques, however for the difference in value of frit, which was ₹ 20/- to ₹ 30/- per kg. the balance was paid in cash. Similar Statement has been given by Shri Balubhai Arnarsinhbhai Patel, partner of M/s. Leo Ceramic, Morbi; Shri Kishorebhai Raghavjibhai Patel, partner of M/s. Priya Gold Ceramics, Morbi; Shri Sureshbhai Karsanbhai Fefar, partner of M/s Omson Ceramic, Morbi; Shri Laljibhai Vishrambhai Patel, partner of AM/s. Swagat Ceramic, Morbi; Shri Jitendrabhai Purchottamdas Rojmala, partner of M/s. Silk Ceramics, Morbi; Shri Chhaganbhai Valjibhai Patel, Director of M/s. Sacmi Ceramic Pvt. Ltd. Morbi; Shri Chamanbhai Jirrajbhai Patel, Director of M/s. Square Ceramic Pvt. Ltd. Morbi and various other persons. From the above, it is very clear that appellant was engaged in under valuation of goods and Clandestine removal of frits. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order and same is not being repeated for sake of brevity. In this background ld. Authorised Representative submitted that income tax additions does not survive because basis of the same has already been demolished by the Hon'ble CESTAT as mentioned above. Nothing contrary was brought to notice on behalf of revenue. 23. Now appeal is before us, we find that assessee is 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. As discussed above notice u/s.148 of the Act was issued for reopening however assessing officer rejected the contentions of the assessee made impugned additions u/s.143(3) read with section 147 of the Act, which was confirmed by the ld. CIT(A) in all three years. Accordingly, we find that the basis of addition is contents of show-cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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