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TMI Blog2023 (10) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in ITA No. 5076/Del/2017 for assessment year 2008-09. 3. Briefly the facts are, the assessee is a resident corporate entity stated to be engaged in the business of manufacturing and trading in Mentha Oil products. As stated by the Assessing Officer, the assessee is the flagship company of the group and the group has established four partnership firms, namely, M/s. Ambika International, M/s. Shiva Mint Industries, M/s. Jay Ambey Aromatics and M/s. Fine Aromatics. The aforesaid partnership firms are located in Jammu and were availing deduction under Section 80IB of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). He observed, as per an investigation carried out by the Central Excise Department, Jammu, it was found that the aforesaid four partnership firms have indulged in booking expenses towards purchases from non-existing parties solely for the purpose of getting refund of the excise duty paid on account of benefit granted to manufacturing units in the state of Jammu & Kashmir. He observed, the four partnership firms having manufacturing units in Jammu, claimed to have purchased the raw materials from petty dealers/agents and thereafter undertaking some proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, books of account, vouchers etc. in support of the purchases. He also observed that the assessee produced toll tax receipts with proper stamping as well as purchase bills bearing the stamping of the Border Check Post. Thus, he observed that the purchases cannot be treated as bogus. Accordingly, he deleted the additions made by the Assessing Officer. 5. Before us, learned Departmental Representative took us through the observation of the Assessing Officer in the assessment order and submitted, not only the investigation carried out by the Central Excise Department but even in course of search and seizure operation conducted by Income Tax Department, it was found that the entities from whom the suppliers of the assessee purchased raw materials/goods were non-existent/bogus entities, hence, the purchases made from them were also bogus. He submitted, since, the purchases made by the four Jammu bases entities are bogus; the sales made by them, in turn, to the assessee are certainly bogus. He submitted, as per the investigation carried out by the Central Excise Department and the Investigation Wing of the Department, the group entities of the assessee at Jammu were set up only for av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Jammu based entities to be genuine, the sales of those materials effected by them to the assessee cannot be treated as non-genuine. Thus, he submitted, since, the additions were not based on any incriminating material found as a result of search, the additions cannot be sustained. In support of such contention, he relied upon the decision of the Hon'ble Supreme Court in case of PCIT Vs. Abhisar Buildwell Pvt. Ltd reported in 149 taxmann.com 399 (SC). 8. We have considered rival submissions and perused the materials on record. A careful reading of the assessment order clearly reveals that based on information/material received as a result of investigation carried out by the Central Excise Department, Jammu, the Assessing Officer found that certain purchases made by the four Jammu based partnership firms belonging to the assessee group are non-genuine. Since, such purchases by the four partnership firms were held as nongenuine, the corresponding sales of finished products, which are raw materials for the assessee, were held to be non-genuine and accordingly additions have been made. However, from the facts and materials on record, it is observed, in course of proceedings before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of raw material and finished goods. We further take note of the fact that the during the period of investigation itself , the appellants were allowed to continue their activity by procuring inputs from UP based supplier and selling goods manufacturing to their buyers. During the course of investigation, itself shows that the allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants had not manufactured the goods during the impugned period. Moreover, as per the report of Jurisdictional Commissioner to Chief Commissioner dated 21.05.2010 reveals as under: "5. Thus, the off icers of Meerut- II Commissionerate, instead of selecting the consignments where no excisable goods were manufactured/supplied, have generalized that all the purchases of crude Mentha oil by these Mentha units located at Jammu were bogus units, these units did not have any infrastructure to manufacture the said products, were non-functional and Transporters who did not tum up for tendering statements were declared non-existent etc. however, on close scrutiny of the records, the following facts emerges: (i) Most of the consignments of raw material were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted by the Commissioner of Central Excise, Merrut is not sustainable. 8. Further, we take note of the fact that during the period of investigation itself the appellant continued their activity by procuring inputs from UP and selling the goods after manufacturing to the U.P based buyers and the Department allowed to continue the same during the course of investigation which shows that the allegation on the basis of investigation conducted at the end of Commissioner of Central Excise, Merrut is not sustainable that the appellant is not manufacturer the goods. Admittedly, duty is payable on the manufacture of goods and as per the report of the Commissioner of Central Excise, Jammu dated 25.02.2010, it has been revealed as under: "5. Thus the officers of Merrut-II Commissionerate, instead of selecting the consignments where no excisable goods were manufactured/supplied, have generalized that all the purchases of crude Mentha oil by these Mentha units located at Jammu were bogus units, these units did not have any infrastructure to manufacture the said products, were non-functional and Transporters who did not tum up for tendering statements were declared non- existent etc. ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gations in the Show Cause Notice was that M/s Arora Aromatics did not receive inputs on which they availed Cenvat credit basically on the contention of Revenue that M/s Ruchi Infotech System, Jammu did not have facility to manufacture the inputs received by M/s Arora Aromatics and that the goods did not move from Jammu & Kashmir to the appellants factory and therefore, Cenvat credit was not admissible. The evidence submitted by the appellant in the farm of Order-in-Original passed by Commissioner of Central Excise, Jammu on 31/03/2008, wherein it was held that M/s Infotech System, Jammu was manufacturing the goods was not accepted by the Original Authority stating that the said Commissioner, Jammu did not see himself that the goods have been manufactured. If such a logic is accepted then the basic system of assessment by Authorities under tax statute needs to be concluded to have been not properly understood by the Adjudicating Authority. The present system of assessment in Central Excise is record based. The Officer assessing the duty is not required to be present when the goods are being manufactured to witness the process of manufacture. The adjudication is to be done on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces available on record, we hold that the appellant were manufacturing unit in the state of Jammu & Kashmir is entitled for benefit of the exemption Notification No. 56/2002-CE dated 14.11.2002 and claimed the refund of duty paid through PLA. In view of this, we set aside the impugned order and allow the appeal with consequential relief if any." 12. We also take note of the fact that in appeal No.E/61568/2018 in the case of Fine Aromatics and Appeal No.E/61569/2018 in the case of Ambika International, the show cause notices were issued earlier on the ground of undervaluation, prior to issue of impugned show cause notices and charge of undervaluation has been dropped. When there is charge of undervaluation against the appellants and the said charge has been dropped, therefore, the impugned show cause notices alleging that the appellants are not manufacturing the goods and only issuing the cenvatable invoices enabling the buyers to avail inadmissible Cenvat credit, are not sustainable. 13. In view of the above analysis, we hold that the appellants are manufacturers during the impugned period and paid the duty on the goods manufactured by them, therefore, duty on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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