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TMI Blog2024 (12) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... za, CIT DR ORDER PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: Both appeals have been filed by the assessee against the order under Section 263 passed by the Ld. Principal Commissioner of Income Tax, (in short Ld. PCIT ), Vadodara-1, vide orders dated 24.03.2021 for Assessment Years 2010-11 2011-12. Two assessment years are involved in the instant case but since the facts and issues for consideration are common, both appeals filed by the assessee are being disposed of together by way of a common order, for both the assessment years under consideration. 2. The Assessee has taken the following grounds of appeal:- ITA No.127/Ahd/2021 (A.Y. 2010-11) 1.00 Order passed u/s 263 of the Act is Bad in Law: 1.01 The order passed by the Learned Pr. CIT u/s 263 is bad in law and liable to be quashed. It is submitted that it to be held so now. 1.02 On the facts and circumstances of your appellant s case as well as in law, the ld. Pr. CIT has wrongly assumed jurisdiction u/s 263 of the Act in respect of Value Added Tax (VAT) of Rs. 45,07,004/- involved in purchases of SS Scrap which your appellant had never claimed as expense. Ld. Pr. CIT also erred in not appreciating the fact that the ld. AO has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (which arguments has now been dropped before us). However, Principal CIT observed that the assessee's accounting practices implied that VAT was included in the purchase costs, albeit netted off in the accounts. This was underscored by a Supreme Court ruling affirming that the nature of receipts matters more than how they are recorded. Moreover, the assessee claimed that the Assessing Officer had verified the case and adopted a singular view, which conflicted with the proposed notice under Section 263 of the Act. Principal CIT disagreed with the assessee, and held that the Assessing Officer neglected to inquire about the VAT element in the claimed purchases. Drawing parallels to the Malabar Industrial Co. Ltd. case, Principal CIT held that failure to investigate relevant aspects of the financials rendered the assessment order erroneous and prejudicial to the revenue's interests. Ultimately, Principal CIT held that due to the lack of comprehensive inquiry and the erroneous nature of the original assessment, the order under Section 143(3) of the Act was liable to be set aside. The Assessing Officer was instructed to conduct a fresh assessment, ensuring all relevant elements w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on almost 9000 MT of MS scrap is confirmed on this presumptive basis, assuming that on no occasion such scrap was received by the Appellant. Interestingly, it is already on record that the Appellant Company had not even availed any Cenvat Credit on such domestic MS scrap as per OIO No.03/Jankilal/AC/DIII/Vad-I/17-18 dt.31.5.17, meaning thereby that if one has to generalize in the manner done by revenue department, the Appellant as such never avails any credit on domestic scrap, just like the one instance on record. 6.7 In any case, the cross examination of various witnesses was granted to the Appellant, wherein it transpires that most witnesses have either stated that they do not remember the details of the transaction or that the statements did not correctly bring out the factual matrix involved, leading to the evidentiary value of the oral evidences to be diminished. In certain occasions, the contradicting stand taken by some witnesses in first retracting their statements and then during the course of later proceedings stating that they mistakenly retracted it, leading to strong suspicion on the genuineness of the manner in which the statements were recording and entire investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the inputs as the Cenvat credit Rules 2002/2004. In the case before are M/s. Sree Vishnu Steels and M/s. Lakshmi Traders are second stage dealers whereas M/s. R.K. Steel and Alloys and M/s. Ubique Allays are first stage dealers. Apart from these, department has recorded statement of Shri, Periakanippan, who is also a first stage dealer. Shri A.Periakaruppan, Proprietor of M/s. Sri Raaghavendra Steels, one of the dealers, on 21.08.2007 deposed that they received HR sheet, Cff sheet, HR coil, HR, SR coils from JSW Steel Ltd. and Salem Steel Plant Ltd., and Bold to second stage dealers and few companies. He has unequivocally stated that he used to cut the above goods and sell as per customers requirements. That he had said goods to second stage dealers such as M/s. Sree Vishnu Steels and M/s. Lakshmi Traders, Department has heavily relied upon the statement of ShriK. Veluswamy of M/s. Sree Vishnu Steels and Shri V. Aananthan of M/s. Lakshmi Traders contending that these two have stated that Shri Periakaruppan had sent only invoices without goods. However, Shri A.Periakaruppan, denied the statement of thesetwo persons and categorically reiterated that he had sent the goods (HR coils ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no dispute over this factum, the department in that case found fault with the foctum of the dealers, even after such cutting having issued invoices with the same description and classification as was described in the invoices under which they purchased from manufacturers. 10. Viewed in this light, there is no reason for us not to give credence to the statement of Shri A.Periakaruppan both in his initial statement and also in a subsequent one, who has asserted that he had supplied only such SS coils / plates etc. received from the manufacturers, after cutting them to size as was reauired by SR/PL. We are not able to understand how the department, in the present case, has differed with the stand that was taken in the earlier proceeding and further why statements of A.Periakaruppan have not been relied upon or made part of the SCN. At this juncture, it would be worthwhile to reproduce para-3 of CESTAT Final Order No.946-947/2005 dt. 06,07.2005 in the earlier proceedings as under: 3. The immediate question before me is whether M/s.SR/L are entitled to avail Modvat credit on the cuttings of plates, sheets etc. Supplied by SCPL It is not in dispute that these are cuttings of plates, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso to Section lift. (1) of the Central Excise Act on the ground that SRIPL, Unit-1 have deliberately taken ineligible cenvat credit on non-duty paid scrap by committing fraud with an intention to evade payment of duty and utilising the said credit during the said period. So also, in respect of Appeal E/219/2010, the period involved is September October 2006 and the SCN dt. 09.10.2007 has been issued similarly invoking extended period on the same grounds. We find that major part of the periods sought to be covered in the SCN are beyond the normal period of limitation. Although extended period of limitation has been invoked we are not able to appreciate how there can be an intent to evade payment of duty considering that the major chunk of their final products of these appellants were exported. Appellants have stated that they have not benefited otherwise by taking any irregular credit as alleged by the department. The proviso to Section 11 A (1) would be attracted when there is suppression of facts with intent to evade payment of duty. The department has no case that appellants utilized the alleged wrongly availed credit to discharge duty liability. There is no evidence coming for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate authority therein in para 4.8 of the order has addressed this contention of the appellant and has restricted the demand proposed in the SCN only to the normal period. We therefore find that in the appeals filed by SRIPL unit I II and other co-noticees, there is no justification for invoking extended period of limitation. 15. In the light of discussions made herein above, we have no hesitation in concluding that the proceedings initiated by the department which have resulted in the appeals filed by SRIPL Unit I II and other co-noticees are not only hit by limitation for the predominant period covered in the SCN, but more particularly cannot be sustained on merits. This being so, the impugned orders are set aside. Assessee s appeals NO.E/390/2009, E/367/2009, E/368/2009, E/378/2009, E/219/2010, E/205/2010, E/206/201Q E/216/2010 are allowed with consequential relief, if any, as per law. 16. For these very some reasons, no merit is found in the department appeals No.E/189/2010 E/297/2010for which they are dismissed. 6.12 It was held in the case of Coimbtore Super Alloys (P) Ltd. 2019 (5) TMI 213 - CESTAT CHENNAI that: 5.2 Be that as it may, the allegation is that appellants had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and detecting discrepancy in the records maintained by appellants between description of goods actual received as per material inward register and that furnished in the respective dealer's invoices. 5.6 In any cose, during the course of the hearing, id. Consultant for the appellants has explained that the discrepancy as to the receipt of material in the inward register was due to the fact that appellants had mentioned commercial invoice number and date in the register whereas the department had compared the same with central excise invoices issued by dealer; that apart from this, in their register, appellants had entered the materials received from all the dealers as MS scrap, whereas dealers had mentioned the description as per their purchase invoices. 5.7 It is not the allegation that appellants had only received fake invoices without having made any payment towards the amounts billed in such invoices. Per contra, id. Consultant has contended that the appellant had paid the supplier of raw material by way of cheque, including the excise duty element. 5.8 The id. Consultant has also raised a very pertinent argument that there is no allegation that materials supplied to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material supplied by the dealer. Shri Gapinath further deposed that the department had conducted four Central Excise audits in the past and that no discrepancy in the aval/merit of cenvat credit by appellant was pointed out by audit. It was also deposed that scrap dealers had supplied scrap to appellant and that he did not accept any bill from such dealers without receipt of any goods and denied the allegations that he had insisted for Central Excise invoice from scrap supplier for non-duty paid goods. 5.11 Earlier in these discussions, we had flagged the lack of clarity from the facts on record as to the actual percentage of the total input invoices that were fauna to have discrepancies. In this regard, we find from para 18 of the 010, that during the personal hearing held on 20.03.2011, the Consultant for the appellants had contended that the disputed credit worked out to only 10% and that there was no requirement on the part of appellants to take any erroneous credit. In our view, this averment has lot of implications. When the investigations have found discrepancies in only 10% of the invoices examined for o disputed period of 17 months between June 2005 and November 2006, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the same can be sustained. 9. This brings us to the next question that when the order was passed by PCIT under Section 263 of the Act on 24.03.2021, then at the relevant time CESTAT had not passed the order holding that the purchases made by the assessee were genuine, which came to be passed on a later date on 08.12.2023 and therefore, at the relevant time there was no infirmity in the order passed by PCIT. In this connection it would be useful to refer to the case of CIT vs. A. Yonus Kunju 228ITR 147 (Kerala). The brief facts of the case are that the assessment of the assessee for 1979-80 was completed on November 2, 1982, at an income of Rs. 18,82,700/-. Thereafter, under section 69A of the Income-tax Act, 1961, an addition of Rs. 20,99,440/- was made with reference to an unaccounted investment of 3,852 bags of raw nuts. Information about the existence of unaccounted possession of raw nuts was available from the State Bank of Travancore where the assessee had credit facilities on the pledge of the stock of raw nuts and in regard thereto there was an excess of 3,852 bags in the records of the bank. The assessee had shown 18,507 bags of raw nuts to the bank for enjoying cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, in the income-tax assessment. As the reassessment had proceeded on the basis of the findings in the sales tax assessments and based on the materials recovered in the course of a raid by the Intelligence Wing of the Sales Tax Department, it is rather too late for the Income-tax Officer to turn round and reject the explanation of the assessee which was accepted by the sales tax appellate authority as regards the arrival of goods in the Asramom godowns and Ayathil factory. The reason is that the sales tax appellate authority has found that the delivery notes produced by the assessee before him were relevant material which satisfactorily explained in a majority of cases the arrivals in these branches. Therefore, relevancy of the delivery notes in the context of the explanation of the assessee cannot be brushed aside lightly. The arrivals in the Ashramam godowns and Ayathil factory have been accepted by the sales tax authorities to have come from the head office purchases and represented the branch transactions. Therefore, it cannot be said that the assessee's explanation remained unsubstantiated. 29. In view of the above position it must be stated that the material was on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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