DCIT, Circle-2(1)(2), Baroda V. M/s. Welsuit Glass & Ceramics Pvt. Ltd., Vadodara

ITA 1886/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1210 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 16-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Opportunity of cross examination; Condonation of delay; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 11

Judgement Text

ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 1 OF 21 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: JUSTICE P P BHATT, PRESIDENT AND PRAMOD KUM AR, VICE PRESIDENT] ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(2), BARODA. ............ APPELLANT VS. WELSUIT GLASS & CERAMICS PVT. LTD., .... RESPONDENT AT & POST GAVASAD, NEAR DGS GAS STATION, OPP. HALDYAN GLASS TAL: PADRA, DIST. VADODARA. [PAN: AAACW 1720 G] APPEARANCES BY VINOD TANWANI FOR THE APPELLANT K.C.THAKER FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 04.06.2019 DATE OF PRONOUNCING THE ORDER : 04.06.2019 O R D E R PER PRAMOD KUMAR, VICE PRESIDENT: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 08.05.2017 PASSED BY THE LD. CIT(A) IN THE MA TTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 FOR THE ASSE SSMENT YEARS 2008-2009. 2. GRIEVANCES RAISED BY THE ASSESSING OFFICER ARE A S FOLLOWS :- 1. ON THE FACTS OF THE CASE AND ON THE CIRCUMSTANC ES AND IN LAW, THE CIT(A)-2, VADODARA ERRED IN HOLDING THAT ONCE DEMA ND CUM SHOW CAUSE NOTICE AND THE ORDER OF COMMISSIONER OF CENTRAL EXCISE ON THE BASIS OF WHICH THE ASSESSMENT ORDER U/S.143(3) R.W.S. 147 HAD BEEN PAS SED ARE QUASHED, THE ADDITION MADE IN THE ASSESSMENT ORDER BY RELYING UP ON THE DEMAND CUM SHOW CAUSE AND THE ORDER OF THE EXCISE COMMISSIONER HAS TO BE AUTOMATICALLY DELETED WITHOUT APPRECIATING THAT THE AO HAD NOT O NLY RELIED ON THE DEMAND CUM SHOW CAUSE NOTICE AND ORDER OF COMMISSIONER OF CENTRAL EXCISE AND CUSTOM, VADODARA, BUT HAD ALSO INDEPENDENTLY CORROB ORATED THE FACTS FOR DETERMINING THE PROFIT EARNED FROM SUPPRESSED SALES , AS IS EVIDENT FROM THE FINDINGS RECORDED IN PARA NO.14 AND 15 OF THE ASSES SMENT ORDER. 2. ON THE FACTS OF THE CASE AND ON THE CIRCUMSTANCE S AND IN LAW, THE CIT(A)-2, VADODARA ERRED IN HOLDING THAT ONCE DEMA ND CUM SHOW CAUSE ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 2 OF 21 NOTICE AND THE ORDER OF COMMISSIONER OF CENTRAL EXC ISE ON THE BASIS OF WHICH THE ASSESSMENT ORDER U/S.143(3) R.W.S. 147 HAD BEEN PASSED ARE QUASHED, THE ADDITION MADE IN THE ASSESSMENT ORDER BY RELYING UP ON THE DEMAND CUM SHOW CAUSE AND THE ORDER OF THE EXCISE COMMISSIONER HAS TO BE AUTOMATICALLY DELETED WITHOUT CALLING FOR REMAND REPORT FROM THE AO, AND WITHOUT GIVING AN OPPORTUNITY TO THE AO TO INQUIRE FROM THE COMMISSIO NER OF CENTRAL EXCISE & CUSTOM, VADODARA ABOUT THE ACCEPTANCE OF ORDER OF H ONBLE CESAT AHMEDABAD AND FILING OF APPEAL AGAINST ORDER OF HON BLE CESAT, AHMEDABAD TO HONBLE GUJARAT HIGH COURT. 3. WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, LEA RNED REPRESENTATIVES FAIRLY AGREE THAT THE ISSUE IN THE APPEAL IS NOW COVERED, IN FAVOUR O F THE ASSESSEE, BY A CO-ORDINATE BENCHS DECISION DATED 12.02.2019, IN ITA NOS.23, 24, 25 & 26/AHD/2016, IN ASSESSEES OWN CASE FILED BY THE REVENUE, FOR THE ASSESSMENT YEARS 2006 -07, 2007-08, 2008-09 & 2010-11, WHEREIN THE TRIBUNAL HAS OBSERVED AS FOLLOWS :- 3. WHEN THESE APPEALS WERE CALLED OUT FOR HEARING, LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE ISSUE IN THE APPEALS IS NOW C OVERED, IN FAVOUR OF THE ASSESSEE, BY A CO-ORDINATE BENCHS DECISION DATED 11.07.2018 IN ITA NOS.2783 TO 2787/AHD/2015 IN THE CASE OF DCIT, VADODARA VS. BEL GIUM GLASS & CERAMICS PVT. LTD., VADODARA FOR THE ASSESSMENT YEARS 2005-06 TO 2009-10 WHEREIN THE TRIBUNAL AFTER FOLLOWING THE DECISION OF M/S. ZIRCONIA CERA TECH GLAZES & M/S. GROWMORE CERAMICS VS. DCIT (ITA NOS. 376 & 377/AHD/2016 FOR AYS 2007-08 & 2008-09 AND ITA NOS.988, 989 & 990/AHD/2016 FOR AYS 2006-07 TO 2008-09; ORDER DATED 30.11.2017), HAS OBSERVED AS FOLLOWS :- 6. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF M/ S. ZIRCONIA CERA TECH GLAZES & M/S. GROWMORE CERAMICS (SUPRA). IN THE SA ID DECISION, THE CO- ORDINATE BENCH HAS, INTER ALIA, OBSERVED AS FOLLOWS :- 10. NOW ASSESSEE HAS FILED APPEAL BEFORE US ON THE GROUND RAISED BY ASSESSEE AS ALREADY REPRODUCED IN PARA 2. THE STAND OF THE L D. AUTHORIZED REPRESENTATIVE ON BEHALF OF ASSESSEE IS THAT ADDITIONS HAVEBEEN SOLEL Y MADE ON THE BASIS OF SHOW- CAUSE NOTICE ISSUED BY THE DGCEI WHEREIN, IT WAS OB SERVED THAT ASSESSEE IS ENGAGED IN UNDER VALUATION OF SALES AND CLANDESTINE REMOVAL OF GOODS. THUS, ASSESSING OFFICER HAS REOPENED ASSESSMENT SOLELY ON THE BASIS OF SCN ISSUED BY DGCEI AND ULTIMATELY MADE ADDITIONS OF ESTIMATED GR OSS PROFIT, ON UNDER VALUATION OF SALES AND CLANDESTINE REMOVAL OF GOODS WITHOUT INDE PENDENT APPLICATION OF MIND. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT UN DER EXCISE PROCEEDINGS, ADJUDICATING AUTHORITY PASSED THE ORDER, WHICH WAS ULTIMATELY CARRIED IN APPEAL UPTO HONBLE CESTAT. HONBLE CESTAT VIDE ORDER DATED 12. 02.2015 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT DEP ARTMENT CANNOT ESTIMATE VALUE OF ALLEGED SUPPRESSION OF SALES AS WELL AS CLANDESTINE REMOVAL OF GOODS MERELY ON THE BASIS OF ASSUMPTION AND SURMISES. THE OPERATIVE POR TION OF CESTAT ORDER IS REPRODUCED HERE AS UNDER: 6. IN THESE PROCEEDINGS THE FOLLOWING ISSUES ARE R EQUIRED TO BE DELIBERATED UPON:- (I) WHETHER THE APPELLANTS MENTIONED IN PARA 5.1 AB OVE HAVE INDULGED IN CLANDESTINE MANUFACTURE AND CLEARANCE OF CERAMIC GLAZED MIXTURE (FRIT), IN VIEW OF THE ADJUDICATION ORDERS PASSED T HE ADJUDICATING AUTHORITIES ON THE BASIS OF NATURAL GAS CONSUMPTION NORMS PER METRIC TON? ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 3 OF 21 (II) WHETHER THE APPELLANTS MENTIONED IN PARA 5.1 A ND 5.2 HAVE INDULGED IN UNDERVALUATION OF FRIT AND ALSO CLANDESTINELY CL EARED FRIT AS PER A PERSONAL LEDGERS RETRIEVED FROM A PEN-DRIVE RECOVER ED FROM SANYO AND OTHER PERSONAL RECORDS AND PEN-DRIVES FROM THE CERAMIC TILE MANUFACTURERS READ WITH THEIR STATEMENTS ? (III) WHETHER THE ADJUDICATING AUTHORITIES WERE JUS TIFIED IN DENYING CROSS- EXAMINATION OF WITNESS UNDER THE PROVISIONS OF SECT ION 9D OF THE CENTRAL EXCISE ACT, 1944 READ WITH THE JUDICIAL PRO NOUNCEMENTS ON THE ISSUE? 7. FOR THE PURPOSE OF POINT NO. 6(I) ABOVE AND CLAN DESTINE REMOVAL OF FRIT BY THE FRIT MANUFACTURERS ADJUDICATING AUTHORI TIES HAVE MAINLY RELIED UPON AVERAGE CONSUMPTION OF NATURAL GAS FOR MANUFACTURER S ONE MT OF FRIT BY TAKING DATA EITHER FROM THE APPELLANTS OR BY CONDUC TING 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 CLANDE STINE MANUFACTURE AND CLEARANCES HAVE BEEN EFFECTED BY THE CONCERNED APPE LLANTS. 8. AS PER PARA 3.5 ABOVE, CLANDESTINE MANUFACTURE A ND CLEARANCE OF FRITS BY THE APPELLANTS HAVE BEEN ESTIMATED BY TAKI NG 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 C ONSIDERED BY THE ADJUDICATING AUTHORITIES FOR CALCULATING/ CONFIRMIN G THE DEMANDS AND IMPOSING PENALTIES. FOLLOWING OBSERVATIONS HAVE BEEN MADE B Y THE ADJUDICATING AUTHORITY IN THE CASE OF BELGIUM GLASS & CERAMICS P VT. 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 TH E CALCULATIONS/ ESTIMATIONS MADE BY REVENUE:- 24.4.4. THUS, EVEN BY CONSIDERING THAT 5 NOS. OF K ILN 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 NAT URAL 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 PRO DUCTION OF FRIT PER KILN WOULD BE AT LEAST 266.640 NTS, AND THE TOT AL MINIMUM MONTHLY PRODUCTION FOR ALL THE 5 KILNS WOULD NOT BE LESS THAN 1333.200 MTS. 24.4.5. THE ABOVE PRODUCTION OF M/S. BELGIUM IS FUL LY SUBSTANTIATED FROM THE ANNEXURE F REFERRED SUPRA, WHEREIN IT IS O BSERVED THAT DURING A PERIOD OF 18 MONTHS OUT OF THE TOTAL 65 MO NTHS COVERED THEREIN, THEY HAVE REPORTED PRODUCTION OF FRIT EXCE EDING THE QUANTITY OF 1300 MTS. IN FACT, DURING THE MONTH OF JULY 200 5, THE RECORDED PRODUCTION QUANTITY WAS 2574.500 MTS WITH A TOTAL G AS CONSUMPTION RATE OF 370.557 SCM PER MT, WHICH CLEARLY REVEALS T HAT THE AFORESAID CALCULATED CAPACITY OF 1333 MTS IS THE BAREST MINIM UM. SCRUTINY OF THE CHART, HOWEVER REVEALS THAT DURING 15 MONTHS, T HEY HAVE DECLARED PRODUCTION QUANTITY LESS THAN 1000 MTS PER MONTH EV EN WITH MUCH HIGHER RATE OF GAS CONSUMPTION. DURING 32 MONTHS, THE TOTAL QUANTITY DECLARED BY THEM IN THEIR STATUTORY RECORDS WAS LES S THAN 1275MTS WHEREIN ALSO THE GAS CONSUMPTION WAS EXCEEDING THE AVERAGE REQUIREMENT OF 450SCM PER MT. 24.5.4. THUS THE ABOVE PANCHNAMA PROCEEDINGS, UNAMB IGUOUSLY REVEALED THAT THE NORMAL TIME REQUIRED FOR MANUFACT URING 50 KGS OF FRIT WAS 8 MINUTES, I.E. 100 KGS IN 16 MINUTES AND 1 MT IN 2 HOURS 40 MINUTES. THIS REVEALS THAT ONE KILN CAN MANUFACTUR E 10 MT OF FRIT PER ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 4 OF 21 DAY OF 24 HOURS, WHICH MEANS THAT THE TOTAL QUANTIT Y 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 B E 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 APPEARIN G 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 ABOV E, 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 1 500MT PER MONTH, INDICATES THAT THE PHYSICAL VERIFICATION CON DUCTED AT THE FACTORY AND INFERENCE DRAWN IN RESPECT OF THEIR PRO DUCTION CAPACITY IS FACTUAL. IN ORDER TO HAVE AN IDEA ON THE QUANTUM O F THE SUPPRESSION OF PRODUCTION BY M/S. BELGIUM COL. NO. 7 HAS BEEN A DDED TO THE ANNEXURE-F WHICH INDICATES THE DIFFERENCE OF QUANTI TY ACCOUNTED FOR IN THE OFFICIAL RECORDS AS AGAINST THE AVERAGE PROD UCTION OF 1500MT PER MONTH. THE CHART INDICATES THAT EXCEPT DURING A PERIOD OF 7 MONTHS, THE MONTHLY AVERAGE PRODUCTION NOTICED DURI NG THE AFORESAID PANCHNAMA DATED 26.09.2009 EXCEEDED THE QUANTITY AC COUNTED FOR BY M/S. BELGIUM IN THEIR STATUTORY RECORDS. 8.1 FROM THE ABOVE FINDINGS OF THE ADJUDICATING AUT HORITY GAS CONSUMPTION OF 450 SCM PER MT OF FRIT MANUFACTURE H AS BEEN ARRIVED AT FOR M/S. BELGIUM GLASS & CERAMICS PVT. LIMITED WHICH AC CORDING TO REVENUE WILL GAVE A CAPACITY OF 1333.2 MTS PER MONTH TO THAT APP ELLANT. IN PARA 24.5.4 AND 24.5.5, THE ADJUDICATING AUTHORITY OBSERVED THA T THE NORMAL QUANTITY OF FRIT THAT COULD BE MANUFACTURED BY THIS APPELLANT WILL B E 1500MTS PER MONTH. IT HAS ALSO BEEN FAIRLY MENTIONED BY THE ADJUDICATING AUTHORITY THAT IN CERTAIN MONTHS THE PRODUCTION OF THIS APPELLANT WAS ALSO MO RE THAN 1500MT. ADJUDICATING AUTHORITY HAS ONLY SEEN ONE SIDE OF TH E 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 APP ELLANT 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 CERTIFICATION TO THE CORRECTNESS OF THE DATA MAINTAINED BY THE APPELLANT . THE VERY FACT THAT USING GAS CONSUMPTION METHOD AND TIME TAKEN FOR PACKING F INISHED GOODS ADOPTED BY THE LOWER AUTHORITIES GIVES DIFFERENT ESTIMATION S OF MANUFACTURE AND CLEARANCES BY THIS APPELLANT, THE SAME CANNOT BE TA KEN AS A CORRECT/ DEPENDABLE METHOD FOR CALCULATING CLEARANCES AND IS ALSO NOT PRESCRIBED. IN THE CASE OF BELGIUM GLASS & CERAMIC PVT. LIMITED, A S PER ANNEXURE-F TO THE SHOW CAUSE NOTICE DATED 08.10.2009, GAS CONSUMPTION S OF 383.715SCM AND 321.959 SCM FOR MANUFACTURING ONE MT HAVE ALSO BEEN INDICATED IN THE RECORDS OF THE APPELLANTS ALONGWITH HIGHER CONSUMPT ION OF GAS. IT IS NOT UNDERSTOOD AS TO WHY AN ARBITRARY FIGURE OF 450SCM PER MT IS REQUIRED TO BE TAKEN FOR ESTIMATING THE PRODUCTION/ CLEARANCE OF F INISHED GOODS FRITS. IN THE SAME ANNEXURE-F THE UNITS OF ELECTRICITY CONSUMED I N CERTAIN MONTHS IS LESS THAN 55 UNITS AND IS EVEN AS LOW AS 40.153 UNITS. THE ABOVE DATA OF THE APPELLANT CONTAINED IN ANNEXURE-F TO THE SHOW CAUSE NOTICE DATED 08.10.2009 REFLECTS THAT RECORDS MAINTAINED BY THIS APPELLANT ARE GENUINE AND CORRECT. THERE IS NO CORROBORATING EVIDENCE OF EXC ESS/ SHORT RAW MATERIALS OF FRIT PROCURED CLANDESTINELY BY THIS APPELLANT OR AN Y OF THE 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 WH EN CRORES OF CASH HAS BEEN ALLEGED TO HAVE BEEN TRANSFERRED TO THE APPELL ANTS 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 T HE GAS SUPPLIED BY GAIL VARY IN GCV (GROSS CALORIFIC VALUE) AND NCV (NET CALORIF IC VALUE) WHICH ALSO EFFECT CONSUMPTION OF GAS ALONGWITH THE TYPE OF FRI T GRADE MANUFACTURED. IT IS ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 5 OF 21 OBSERVED FROM THE GROUND (D), OF THE GROUNDS OF APP EAL FILED BY M/S. BELGIUM GLASS & CERAMIC PVT. LIMITED, IN THE CASE OF BELGIU M 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 PIYUSH MAKADIA, DIRECTOR OF THE APPELLANT HAS AGREE D TO CONSUMPTION OF 450SCM/PMT (PLUS/MINUS) 10% GAS CONSUMPTION. THE A BOVE CALCULATIONS ARE THUS BASED ON STATEMENT OF SHRI PIYUSH MAKADIA, DIRECTOR REPRODUCED IN OIO DATED 23.03.2011 AT PARAS 53 & 54. HOWEVER, S UCH 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 C LEARANCES HAVE BEEN ESTIMATED ON THE BASIS OF NATURAL GAS CONSUMPTION, THERE IS NO EVIDENCE OF EXCESS RAW MATERIAL PURCHASED BY THE APPELLANTS. N O 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 TRANSPO RTATION FROM THE FACTORY PREMISES OF THE APPELLANTS. IN THIS REGARD APPELLA NTS HAVE RELIED UPON THE CASE LAWS OF ARYA FIBERS PVT. LIMITED VS. CCE, AHME DABAD-II [2014 (311) ELT 529 (TRI. AHMD.)]AND GUPTA SYNTHETICS LIMITED V S. 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 RELEVAN T AND IS REPRODUCED BELOW:- 38. IT WAS, THEREFORE, THE SUBMISSION OF THE LD. S ENIOR ADVOCATE THAT, IN THREE CASES CITED BY THE LD. SPECIAL COUNS EL FOR THE REVENUE, THIS TRIBUNAL AND HONBLE HIGH COURT OF GUJARAT HAD TAKEN A VIEW THAT THERE WAS NO NEED TO PROVE SUCH CLANDESTINE CLEARAN CE WITH MATHEMATICAL PRECISION. THESE WERE CASES WHERE EVID ENCE WAS AVAILABLE REGARDING UNACCOUNTED DUTY PAID GOODS BEI NG FOUND, SHORTAGE OF FINISHED GOODS FOUND AND EVIDENCE REGAR DING SUPPLY OF RAW MATERIALS AND RECEIPT OF COMMISSION BY BROKERS, WHICH WERE ALL TANGIBLE EVIDENCE OF CLANDESTINE CLEARANCES. IT WAS FURTHER SUBMITTED BY THE LD. SENIOR ADVOCATE THAT THE CASES CITED BY HIM WERE CASES WHERE NO SUCH EVIDENCE WAS AVAILABLE AT ALL AND THE LAW LAID DOWN AS APPLICABLE TO SUCH CASES, TO WHICH CATEGORY THE PRE SENT CASE BELONGS. 40. AFTER HAVING VERY CAREFULLY CONSIDERED THE LAW LAID DOWN BY THIS TRIBUNAL IN THE MATTER OF CLANDESTINE MANUFACT URE AND CLEARANCE, AND THE SUBMISSIONS MADE BEFORE US, IT IS CLEAR THA T THE LAW IS WELL- SETTLED THAT, IN CASES OF CLANDESTINE MANUFACTURE A ND CLEARANCES, CERTAIN FUNDAMENTAL CRITERIA HAVE TO BE ESTABLISHED BY REVENUE WHICH MAINLY ARE THE FOLLOWING : (I) THERE SHOULD BE TANGIBLE EVIDENCE OF CLANDESTIN E MANUFACTURE AND CLEARANCE AND NOT MERELY INFERENCES OR UNWARRANTED ASSUMPTIONS; (II) EVIDENCE IN SUPPORT THEREOF SHOULD BE OF : (A) RAW MATERIALS, IN EXCESS OF THAT CONTAINED AS P ER THE STATUTORY RECORDS; (B) INSTANCES OF ACTUAL REMOVAL OF UNACCOUNTED FINI SHED GOODS (NOT INFERENTIAL OR ASSUMED) FROM THE FACTORY WITHOUT PAYMENT OF DUTY; (C) DISCOVERY OF SUCH FINISHED GOODS OUTSIDE THE FA CTORY; (D) INSTANCES OF SALE OF SUCH GOODS TO IDENTIFIED P ARTIES; ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 6 OF 21 (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 NEC ESSARY FOR MANUFACTURE OF GOODS OTHERWISE MANUFACTURED AND VALIDLY CLEARED ON PAYMENT OF DUTY; (G) STATEMENTS OF BUYERS WITH SOME DETAILS OF ILLIC IT MANUFACTURE AND CLEARANCE; (H) PROOF OF ACTUAL TRANSPORTATION OF GOODS, CLEARE D WITHOUT PAYMENT OF DUTY; (I) LINKS BETWEEN THE DOCUMENTS RECOVERED DURING TH E SEARCH AND ACTIVITIES BEING CARRIED ON IN THE FACTO RY OF PRODUCTION; ETC. NEEDLESS TO SAY, A PRECISE ENUMERATION OF ALL SITUA TIONS 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 TH E FACTS OF EACH CASE. WHAT ONE COULD, HOWEVER, SAY WITH SOME CERTAI NTY IS THAT INFERENCES CANNOT BE DRAWN ABOUT SUCH CLEARANCES ME RELY 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 C ASE, WITHOUT ONE OR MORE OF THE EVIDENCES REFERRED TO ABOVE BEING PR ESENT. IN FACT, THIS BENCH HAS CONSIDERED SOME OF THE CASE-LAW ON THE SU BJECT 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 29-7-201 3, WHEN THE PRESENT CASE WAS BEING ARGUED BEFORE US, PERHAPS, N OT AVAILABLE TO THE PARTIES. HOWEVER, WE HAVE, IN THAT DECISION, AP PLIED THE LAW, AS LAID DOWN IN THE EARLIER CASES, SOME OF WHICH NOW H AVE BEEN PLACED BEFORE US. THE CRUX OF THE DECISION IS THAT RELIANC E ON PRIVATE/INTERNAL RECORDS MAINTAINED FOR INTERNAL CONTROL CANNOT BE T HE SOLE BASIS FOR DEMAND. THERE SHOULD BE CORROBORATIVE EVIDENCE BY W AY 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-ORDI NATE BENCH OF THIS TRIBUNAL HAS, IN ANOTHER DECISION, REPORTED IN THE E.L.T. ISSUE OF 5-8- 2013 (AFTER HEARINGS IN THE PRESENT APPEALS WERE CO NCLUDED), ONCE AGAIN REITERATED THE SAME PRINCIPLES, AFTER CONSIDE RING THE ENTIRE CASE-LAW ON THE SUBJECT [HINDUSTAN MACHINES V. CCE [2013 (294) E.L.T. 43]. MEMBERS OF BENCH HAVING HEARING INITIAL LY DIFFERED, THE MATTER WAS REFERRED TO A THIRD MEMBER, WHO HELD THA T CLANDESTINE MANUFACTURE AND CLEARANCES WERE NOT ESTABLISHED BY THE REVENUE. WE ARE NOT GOING INTO IT IN DETAIL, SINCE THE LEARN ED COUNSELS ON EITHER SIDE MAY NOT HAVE HAD THE OPPORTUNITY OF EXA MINING THE DECISION IN THE LIGHT OF THE FACTS OF THE PRESENT C ASE. SUFFICE IT TO SAY THAT THE SAID DECISION HAS ALSO TABULATED THE ENTIR E CASE-LAW, INCLUDING MOST OF THE DECISIONS CITED BEFORE US NOW , CONSIDERED THEM, AND COME TO THE ABOVE CONCLUSION. IN YET ANOT HER DECISION OF A CO-ORDINATE BENCH OF THE TRIBUNAL [PAN PARAG INDIA V. CCE, 2013 (291) E.L.T. 81], IT HAS BEEN HELD THAT THE THEORY OF PREPONDERANCE OF PROBABILITY WOULD BE APPLICABLE ONLY WHEN THERE ARE STRONG EVIDENCES HEADING ONLY TO ONE AND ONLY ONE CONCLUSION OF CLAN DESTINE ACTIVITIES. THE SAID THEORY, CANNOT BE ADOPTED IN CASES OF WEAK EVIDENCES OF A DOUBTFUL NATURE. WHERE TO MANUFACTURE HUGE QUANTITI ES OF FINAL PRODUCTS THE ASSESSEE REQUIRE ALL THE RAW MATERIALS , THERE SHOULD BE ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 7 OF 21 SOME EVIDENCE OF HUGE QUANTITIES OF RAW MATERIALS B EING PURCHASED. THE DEMAND WAS SET ASIDE IN THAT CASE BY THIS TRIBU NAL. 8.3 APPELLANTS HAVE ALSO RELIED, INTER-ALIA, ON THE JUDGMENT OF ALLAHABAD HIGH COURT IN THE CASE OF CCE, MEERUT-I VS. RA CAST INGS PVT. LIMITED [2012 (26) STR 262 (ALL.)], WHICH IS UPHELD BY THE HON'BL E SUPREME COURT AS REPORTED IN 2011 (269 ELT A108. THE FACTS OF THIS C ASE AND THE ORDERS OF THE ALLAHABAD HIGH COURT IS AS FOLLOWS:- [ORDER]- THESE APPEALS UNDER SECTION 35-G OF THE C ENTRAL 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 R ESPONDENTS AND QUASHED THE ORDER PASSED BY THE ADJUDICATING AUTHOR ITY. 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 EXCIS E DUTIES. THE SUPERINTENDENT 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 PE RIOD 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 O F THE ACT. VARIOUS ALLEGATIONS HAVE BEEN MADE IN THE SHOW CAUS E NOTICES AND FROM THE PERUSAL OF THE SHOW CAUSE NOTICES IT APPEA RS THAT THE EXCESS PRODUCTION HAS BEEN ESTIMATED ON THE BASIS OF THE H IGHER 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 CL ANDESTINE REMOVAL OF THE GOODS. 3. BEING AGGRIEVED BY THE IMPUGNED ORDERS, THE RESP ONDENTS FILED APPEALS BEFORE THE CUSTOMS, EXCISE & SERVICE TAX AP PELLATE 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 DETERMINING THE DUTY LIABILITY, THAT TOO ON IMAGINARY BASIS, ESPECIALLY WHEN RULES 173E MANDATORILY REQUIRES THE COMMISSIONER TO PRESCRIBE/FIX NORM FOR ELECTRICITY CONSUMPTION F IRST AND NOTIFY THE SAME TO THE MANUFACTURERS AND THEREAFTER ASCERTAIN THE REASONS FOR DEVIATIONS, IF ANY, TAKING ALSO INTO ACCOUNT THE CO NSUMPTION OF VARIOUS INPUTS, REQUIREMENTS OF LABOUR, MATERIAL, POWER SUP PLY AND THE CONDITIONS FOR RUNNING THE PLANT TOGETHER WITH THE ATTENDANT FACTS AND CIRCUMSTANCES. THE TRIBUNAL FURTHER OBSERVED THAT N O EXPERIMENT HAVE BEEN CONDUCTED IN THE FACTORIES OF THE APPELLA NTS FOR DEVISING THE CONSUMPTION NORMS OF ELECTRICITY FOR PRODUCING ON MT OF STEEL INGOTS. TRIBUNAL ALSO OBSERVED THAT THE ELECTRICITY CONSUMPTION VARIES FROM ONE HEAT TO ANOTHER AND FROM ONE DATE TO ANOTH ER AND EVEN FROM ONE HEAT TO ANOTHER WITHIN THE SAME DATE. THER EFORE, NO UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD OF ELEC TRICITY CONSUMPTION CAN BE ADOPTED FOR DETERMINING THE EXCI SE DUTY LIABILITY THAT TOO ON THE BASIS OF IMAGINARY PRODUCTION ASSUM ED BY THE REVENUE WITH NO OTHER SUPPORTING RECORD, EVIDENCE O R DOCUMENT TO JUSTIFY ITS ALLEGATIONS. THE TRIBUNAL HAS ALSO CONS IDERED THE REPORT OF DR. BATRA, WHICH HAS BEEN RELIED UPON FOR MAKING TH E ALLEGATIONS THAT THERE WAS HIGHER ELECTRICITY CONSUMPTION. IT APPEAR S THAT DR. BATRA IN HIS REPORT HAS OBSERVED THAT FOR THE PRODUCTION OF 1 MT OF STEEL INGOTS, 1046 UNITS ELECTRICITY REQUIRED. ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 8 OF 21 8.4 IN VIEW OF THE SETTLED PROPOSITION OF LAW LAID DOWN ABOVE, ESTIMATION OF QUANTITY OF GOODS MANUFACTURED AND CLANDESTINE R EMOVAL OF GOODS BY THE APPELLANTS CANNOT BE SLAPPED ON THE BASIS OF AVERAG ES 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 MANUF ACTURED IS NOT COVERED BY ANY NOTIFICATION ISSUED UNDER SECTION 3A OF THE CEN TRAL EXCISE ACT, 1944 WHERE COMPOUNDED LEVY HAS BEEN PRESCRIBED AND CAPAC ITY OF THE UNIT IS REQUIRED TO BE FIXED ON GAS CONSUMPTION BASIS, AS D ONE BY THE REVENUE. IT IS OBSERVED THAT REVENUE HAS ATTEMPTED TO ADOPT AN EST IMATION METHOD FOR DEMANDING DUTY AND PROVING CLANDESTINE REMOVAL WHIC H 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 REMAN DED THE CASE TO THE ADJUDICATING AUTHORITY TO GET, INTER-ALIA, SOME MOR E STUDIES DONE ON 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 BEL OW:- 3.2 WITH REGARD TO CONSUMPTION OF GAS, LEARNED ADV OCATE 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 WHIC H AFFECT THE CONSUMPTION OF GAS AND THERE CANNOT BE A FIXED RATI O OF CONSUMPTION OF GAS FOR A SPECIFIC FRIT OUTPUT. HE ALSO ARGUED T HAT IN OCTOBER, 2007, THERE WAS A CHANGE IN THE MANAGEMENT AND THE NEW MA NAGEMENT TOOK A SERIES OF STEPS TO IMPROVE QUALITY OF FRIT A ND MADE THE GAS CONSUMPTION EFFICIENT. THEY ALSO INSTALLED THREE NE W REFRACTORY KILN WITH GREATER PRODUCTION CAPACITY AND USED SUPERIOR REFRACTORIES WHICH WERE BETTER MAINTAINED FROM TIME TO TIME. HE DREW A TTENTION OF THE BENCH TO THE FACT THAT SERVICES OF A CERAMIC CONSUL TANT WAS ENGAGED TO GET BETTER YIELD. HE RELIED UPON THE SUBMISSIONS AND RECORDS TO SHOW THE PURCHASE OF NEW KILN AND GENERATING SET. I T WAS DUE TO THESE EFFORTS THAT THE RATIO OF GAS CONSUMPTION FRO M 2008-09 ONWARDS WENT DOWN FROM 844 SCM/MT TO 286 SCM/MT AS INDICATE D IN PARA 13.2 OF ORDER-IN-ORIGINAL DATED 10-5-2011. THAT BEF ORE 2008 THERE WAS NO GENERATOR AVAILABLE WITH APPELLANT AND EVERY TIME THERE WAS A POWER FAILURE, LARGE QUANTITIES OF GAS WAS USED IN RE-FIRING THE KILN. HE PRODUCED DOCUMENTS RELATING TO INSTALLATION OF D G SET. HE REFERRED TO THE PURCHASE BILLS TO SHOW SUPERIOR QUA LITY OF REFRACTORIES REPLACED IN THE KILNS AFTER 2008-09. HE ARGUED THAT AS PER THE STATEMENT OF SHRI BALKRISHNA THAKKAR HIMSELF, WHICH IS RECORDED BY THE DEPARTMENT, THERE CANNOT BE ANY FIXED RATIO OF GAS CONSUMPTION AND THAT AFTER THE NEW MANAGEMENT TOOK OVER, THEY H AVE IMPROVED THE EFFICIENCY OF THE UNIT AND THAT MERE GAS CONSUM PTION CANNOT BE USED AS A FACTOR FOR CLANDESTINE MANUFACTURE AND RE MOVAL. HE EXPLAINED THAT FRIT CONSISTS OF TWO COMPONENTS I.E. GLASS AND SILICONE DIOXIDE. THAT THE MELTING POINT OF GLASS IS VERY HI GH AND OTHER MATERIALS CALLED FLUXES ARE ADDED, AS PER EXPERT CO NSULTATIONS, TO LOWER MELTING POINT SUCH AS BORAX, BORIC ACID AND Z INC OXIDE, ETC. THAT WHEN FLUXES ARE USED, THE MELTING POINT REQUIR ED FOR MANUFACTURE OF FRIT IS REDUCED. LEARNED ADVOCATE RE FERRED TO EXTRACTS FROM THE BOOK, INDUSTRIAL CERAMICS BY FELIX SINGER AND THE BOOK GLASSING AND DECORATION OF CERAMICS TILES BY AUTORI VARI AND EXTRACTS FROM THE JOURNAL. CERAMIC INDUSTRY, JANUARY, 2000 A S WELL AS VARIOUS EXTRACTS DOWNLOADED FROM INTERNET TO SUPPORT HIS CA SE. HE REFERRED TO THE FOLLOWING DECISIONS TO SUBMIT THAT GAS CONSUMPT ION ALONE CANNOT BE THE SOLE BASIS OF CLANDESTINE MANUFACTURE AND RE MOVAL OF THE FINISHED PRODUCT :- ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 9 OF 21 (I) VISHWA TRADERS PVT. LIMITED V. CCE- [2012 (278 ) E.L.T. 362] (II) CCE V. VISHWA TRADERS PVT. LIMITED - [2013 (28 7) 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, BAS ED ON THE GAS CONSUMPTION OF THE MAIN APPELLANT, IT IS OBSERVED F ROM 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 844 SCM TO 286 SCM. IT HAS BEEN CONTESTED BY T HE APPELLANT THAT GAS CONSUMPTION VARIED FROM SEASON TO SEASON, FROM ONE QUALITY OF FRIT TO OTHER QUALITY OF FRIT, USE OF BETTER TEC HNOLOGY, ETC. IT HAS ALSO BEEN BROUGHT ON RECORD THAT AFTER CHANGE IN THE MAN AGEMENT IN OCT., 2007 AND INSTALLATION OF NEW FURNACES AND NEW REFRA CTORIES, 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 HE ARING REGARDING INSTALLATION OF AN ELECTRICITY GENERATOR AND REPLAC EMENT OF BETTER QUALITY REFRACTORIES IN THE KILNS BY THE MAIN APPEL LANT. UNDER THE ABOVE FACTUAL MATRIX, THE METHOD USED BY THE INVEST IGATION CANNOT BE A SOUND METHOD TO DEMAND DUTY ON ASSUMING 318 SCM O F 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 PARA 4(XI) TO (XXXIII) OF THE ORDER-IN-ORIGINAL DATED 10-5-2011. IT IS OBSERVED THAT DURING CONDUCTING OF GAS CONSUMPTION STUDIES ON 23/ 24-2-2010 BY INVESTIGATION ONLY FRIT PRODUCT CODE OP 202WAS BEIN G MANUFACTURED. IT HAS BEEN CONTESTED BY THE APPELLANT THAT DIFFERE NT FRIT PRODUCT CODES MAY CONSUME DIFFERENT QUANTITIES OF GAS. AS THE APP ELLANT IS NOT UNDERTAKING THE MANUFACTURE OF ONE STANDARD PRODUCT , IN THE INTEREST OF JUSTICE, IT WILL BE APPROPRIATE TO CONDUCT A FEW MORE REPRESENTATIVE STUDIES OF DIFFERENT FRIT PRODUCT CODES IN ORDER TO ARRIVE AT A MORE REALISTIC GAS CONSUMPTION PMT OF FRIT MANUFACTURED. 8.6 IN VIEW OF THE ABOVE OBSERVATIONS MADE BY THIS BENCH IT HAS ALREADY BEEN HELD THAT METHOD ADOPTED BY THE INVESTIGATION TO ESTIMATE CLANDESTINE REMOVAL OF FINISHED GOODS IS NOT SOUND AND HAS TO B E DISCARDED. HOWEVER, REVENUE WAS GIVEN AN OPPORTUNITY TO STRENGTHEN THEI R CASE BY CORROBORATING EVIDENCE WITH SOME MORE FACTUAL DATA FROM ADDITIONA L STUDIES. NO APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ABOVE ORD ER PASSED BY THIS BENCH. IT IS ALSO OBSERVED FROM 3.2 OF THE REMAND ORDER THAT APPELLANT HAS MADE CERTAIN CHANGES IN THE PLANT AND MACHINERY AND OTHER METHODOLOGIES TO REDUCE GAS CONSUMPTION. EVEN IN THE REMAND PROCEED INGS ALSO ADJUDICATING AUTHORITY HAS NOT COUNTERED THE ARGUMENTS TAKEN BY THE APPELLANT 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 SEN IOR ADVOCATE ALSO ARGUED THAT SIMILAR MODERNIZATION IN PROCESSES OF MANUFACT URE, AS UNDERTAKEN BY M/S. WELLSUIT GLASS IN THE MANUFACTURE OF FRIT, HAV E ALSO BEEN UNDERTAKEN BY OTHER APPELLANTS. NO FINDINGS HAVE BEEN GIVEN BY T HE ADJUDICATING AUTHORITIES IN COUNTERING THE CLAIMS OF THE APPELLANTS, JUSTIFY ING THE MODERNIZATION DONE TO REDUCE CONSUMPTION OF GAS FROM TIME TO TIME. NO EXPERT OPINION HAS BEEN ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 10 OF 21 OBTAINED BY THE REVENUE TO CHALLENGE THE GAS CONSUM PTION PATTERN ADOPTED BY THE APPELLANTS TO INDICATE THAT CLAIM OF THE APP ELLANTS WAS WRONG. 8. IN VIEW OF THE ABOVE OBSERVATIONS AND JUDICIAL P RONOUNCEMENTS, METHODOLOGY ADOPTED BY THE ADJUDICATING AUTHORITIES IN ESTIMATING AND DEMANDING DUTY FROM THE APPELLANTS; BASED ON CONSUM PTION 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(I II) ARE CONCERNED, IT HAS BEEN HELD BY THE ADJUDICATING AUTHORITIES THAT UNDERVALUATION AND CLANDESTINE REMOVAL STAND PROVIDED IN VIEW OF THE P EN-DRIVES, AJTAK XYZ OF SANYO, PERSONAL LEDGER OF COMET, PRIVATE DIARIES/ W RITING PADS AND THE STATEMENTS OF CERAMIC TILE MANUFACTURERS. APPELLAN TS HAVE ARGUED THAT THE PRINT-OUT TAKEN FROM THE PEN-DRIVE AJTAK XYZ ARE NO T ADMISSIBLE AS A PIECE OF EVIDENCE AS THE SAME ARE NOT THE DOCUMENTS ADMIS SIBLE AS EVIDENCE UNDER THE RELEVANT SECTION OF THE CENTRAL EXCISE AC T, 1944. IT WAS ALSO ARGUED BY THE APPELLANTS THAT THE NUMBER OF PANCHNA MAS RECORDED AND THE OPENING OF THE SAID PEN-DRIVE CLEARLY SUGGEST THAT THE DATA RECOVERED FROM THE PEN-DRIVE IS HIGHLY OBJECTIONABLE, SUSPICIOUS A ND 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 W AS EFFECTED ON 17.7.2008 UNDER A PANCHNAMA AND IT WAS NOT STATED IN THIS PAN CHNAMA THAT THE PEN- DRIVE WAS PUT INSIDE A SEALED COVER. IT HAS BEEN A DMITTED BY SHRI V.N. THAKKAR (SUPERINTENDENT) DGCEI IN THE CROSS-EXAMINA TION BEFORE THE ADJUDICATING AUTHORITY THAT WHEN AN ARTICLE IS SEIZ ED, 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 S EIZED PEN-DRIVE WAS PLACED IN A PAPER COVER AND SEALED WITH ADHESIVE TA PES. IT IS THE CLAIM OF THE APPELLANTS THAT THE WAY THE SAID PEN-DRIVE WAS HAND LED, 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 KEEP ING 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 NO T OPENED ON 30.8.3008 BUT INSTEAD ANOTHER BLACK COLOUR PEN-DRIVE WAS OPEN ED. 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 ARGU MENTS MADE BY THE APPELLANTS THAT WHEN NO DATA WAS FOUND IN TALLY FOL DER 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 T HE REASON FOR NON RETRIEVAL OF DATA ON 06.9.2008 TO BE DUE TO OPERATI ONAL 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 PANCHNA MA 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 PA GES. ANOTHER PANCHNAMA DATED 24.09.2008 INDICATE IN ANNEXURE A3 THAT THE NUMBER OF PAGES OF ACCOUNT AAJTAKWERE 94 AND THE NAME OF APPE LLANT EXISTED AT PAGE 43 AS AGAINST PAGE 30 MENTIONED IN PANCHNAMA DATED 12.09.2008. APPELLANTS HAVE ALSO RAISED THE ISSUE REGARDING DIS CREPANCIES IN THE NAME OF THE PANCH WITNESSES. IT IS ALSO CONTENDED THAT REV ENUE HAD NOT FOLLOWED THE PROCEDURE AS STIPULATED IN SECTION 36B OF THE CENTR AL EXCISE ACT, 1944. IN VIEW OF THE ABOVE DISCREPANCIES THE AUTHENTICITY AN D VERACITY OF DATA RETRIEVED BY INVESTIGATION FROM THE SILVER PEN-DRIV E 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 APPELLA NTS WITH RESPECT TO POINT MENTIONED IN PARA 6 (II). ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 11 OF 21 10. SO FAR AS THE QUESTION MENTIONED AT PARA 6(III) REGARDING DENYING CROSS-EXAMINATION OF WITNESSES WHOSE STATEMENTS WER E USED FOR ESTABLISHING UNDERVALUATION/ CLANDESTINE REMOVAL OF FRIT BASED O N THE PRIVATE RECORDS, THE STATEMENTS OF TILE MANUFACTURERS AND SHROFF/ ANGADI AS IS CONCERNED; IT IS ARGUED BY THE APPELLANTS THAT THE ENTIRE EXERCISE O F SUCH QUANTIFICATION HAS BEEN MADE AS PER THE STATEMENTS OF THE WITNESSES WH OSE CROSS-EXAMINATION HAS NOT BEEN ALLOWED BY THE ADJUDICATING AUTHORITY AS PER SECTION 9D OF THE CENTRAL EXCISE ACT, 1944. APPELLANTS RELIED UPON T HE FOLLOWING CASE LAWS:- (I) J.K. CIGARETTES LIMITED VS. CCE [2009 (242) ELT 189 (DEL.)] (II) CCE, ALLAHABAD VS. GOVIND MILLS LIMITED - [20 13 (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 CIRCUMST ANCES (1) A STATEMENT MADE AND SIGNED BY A PERSON BEFORE ANY CENTRAL EXCISE OFFICER OF A GAZETTED RANK DURING TH E COURSE OF ANY INQUIRY OR PROCEEDING UNDER THIS ACT SHALL BE RELEV ANT, FOR THE PURPOSE OF PROVING, IN ANY PROSECUTION FOR AN OFFENCE UNDER THIS ACT, THE TRUTH OF THE FACTS WHICH IT CONTAINS, - (A) WHEN THE PERSON WHO MADE THE STATEMENT IS DEAD OR CANNOT BE FOUND, OR IS INCAPABLE OF GIVING EVIDENCE , OR IS KEPT OUT OF THE WAY BY THE ADVERSE PARTY, OR WHOSE PRESE NCE CANNOT BE OBTAINED WITHOUT AN AMOUNT OF DELAY OR EX PENSE WHICH, UNDER THE CIRCUMSTANCES OF THE CASE, THE COU RT CONSIDERS UNREASONABLE; OR (B) WHEN THE PERSON WHO MADE THE STATEMENT IS EXA MINED AS A WITNESS IN THE CASE BEFORE THE COURT AND THE C OURT IS OF THE OPINION THAT, HAVING REGARD TO THE CIRCUMSTANCE S OF THE CASE, THE STATEMENT SHOULD BE ADMITTED IN EVIDENCE IN THE INTERESTS OF JUSTICE. (2) THE PROVISIONS OF SUB-SECTION (1) SHALL, SO FAR AS MAY BE, APPLY IN RELATION TO ANY PROCEEDINGS UNDER THIS ACT , OTHER THAN A PROCEEDING BEFORE A COURT, AS THEY APPLY IN RELATIO N TO A PROCEEDING BEFORE A COURT. 10.2 IN THE CASE OF J.K. CIGARETTES LIMITED VS. CCE (SUPRA), FOLLOWING CONCLUSIONS WERE DRAWN BY THE DELHI HIGH COURT, IN PARA 32:- 32. THUS, WE SUMMARIZE OUR CONCLUSIONS AS UNDER:- (I) WE ARE OF THE OPINION THAT THE PROVISIONS OF SE CTION 9D (2) OF THE ACT ARE NOT UNCONSTITUTIONAL OR ULTRA VIRES; (II) WHILE INVOKING SECTION 9D OF THE ACT, THE CONC ERNED AUTHORITY IS TO FORM AN OPINION ON THE BASIS OF MATERIAL ON R ECORD THAT A PARTICULAR GROUND, AS STIPULATED IN THE SAID SECTIO N, EXISTS AND IS ESTABLISHED; (III) SUCH AN OPINION HAS TO BE SUPPORTED WITH REAS ONS; ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 12 OF 21 (IV) BEFORE ARRIVING AT THIS OPINION, THE AUTHORITY WOULD GIVE OPPORTUNITY TO THE AFFECTED PARTY TO MAKE SUBMISSIO NS ON THE AVAILABLE MATERIAL ON THE BASIS OF WHICH THE AUTHOR ITY INTENDS TO ARRIVE AT THE SAID OPINION; AND (V) IT IS ALWAYS OPEN TO THE AFFECTED PARTY TO CHAL LENGE THE INVOCATION OF PROVISIONS OF SECTION 9D OF THE ACT I N A PARTICULAR CASE BY FILING STATUTORY APPEAL, WHICH P ROVIDES FOR JUDICIAL REVIEW. 10.3 IN THE ADJUDICATING PROCEEDINGS, A LIST OF WIT NESSES TO BE RELIED UPON BY THE REVENUE IS DISCLOSED TO THE APPELLANTSALONGW ITH THE SHOW CAUSE NOTICE. THE REASONS FOR RELYING UPON THE STATEMENT S 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 AUTH ORITY SUO-MOTO FOR EXAMINATION IN A QUASI-JUDICIAL PROCEEDINGS FOR CRO SS-EXAMINATION. HOWEVER, AS PER THE PROVISIONS OF SECTION 9D (1)(B) OF THE C ENTRAL EXCISE ACT, 1944, READ WITH THE JUDICIAL PRONOUNCEMENTS RELIED UPON B Y THE APPELLANT EVERY ADJUDICATING AUTHORITY SHOULD CALL THE WITNESSES WH EN REQUESTED BY THE PARTY AGAINST WHOM THOSE STATEMENTS ARE TO BE USED. IF B Y MAKING EFFORTS FOR A FEW OCCASIONS THE WITNESSES SUMMONED DO NOT APPEAR THAN AUTOMATICALLY THE CASE COULD BE MATURE FOR ACCEPTING THE STATEMENTS A S ADMISSIBLE EVIDENCES UNDER SECTION 9(D)(1)(A) OF THE CENTRAL EXCISE ACT, 1944. HOWEVER, IT WAS NOT OPEN TO THE ADJUDICATING AUTHORITIES TO STRAIGH TAWAY REJECT THE REQUEST FOR CROSS-EXAMINATION IN VIEW OF THE LAW LAID DOWN BY T HE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANTS. THE REASONS FOR REJECTING THE APPELLANTS REQUEST FOR NOT ALLOWING ARE ALSO REQUIR ED TO BE INTIMATED TO THE APPELLANTS AS PER THE CASE LAW OF J.K. CIGARETTES L IMITED (SUPRA) SO THAT APPELLANT MAY EXPLORE THE POSSIBILITY OF FILING APP EAL AGAINST SUCH REJECTIONS. THE RATIO LAID DOWN BY THE J.K. CIGARETTES CASE (SU PRA) HAS ALSO BEEN FOLLOWED IN SERIES OF OTHER JUDGMENTS. NO SUCH REJ ECTION ORDERS WERE GIVEN BY THE ADJUDICATING AUTHORITIES SEPARATELY. HON'BL E SUPREME COURT IN THE CASE OF UOI &ANR.VS. GTC INDIA AND ORS IN ORDER DA TED 03.01.1995 ARISING OUT OF SLP (C) NO. 218131/1994 HAS ALREADY LAID THE FOLLOWING RATIO: SPECIAL LEAVE GRANTED. HEARD. THE IMPUGNED ORDER DATED 05.9.94 HAS TO BE READ ALO NGWITH SECTION 9D OF THE CENTRAL EXCISE AND SALT ACT, 1944. SO RE AD, THERE IS NO INFIRMITY IN THE IMPUGNED ORDER. IT MAY, HOWEVER, BE CLARIFIED THAT IN CASE RELIANCE IS PLACED ON THE PROVISIONS OF SECTION 9D OF THE ACT IN RESPECT OF A NY PARTICULAR WITNESS, INTIMATION OF THE SAME IS REQUIRED TO BE G IVEN TO THE RESPONDENTS AND IT WOULD BE OPEN TO THE RESPONDENTS TO APPROACH THE HIGH COURT AGAINST THE ORDER MADE BY THE AUTHOR ITY IN THAT BEHALF. THAT APPEAL IS DISPOSED OF IN THESE TERMS. NO COS TS. FURTHER IN PARA 16 AND 19 OF CASE LAW A.TAJUDEEN VS . UOI[2015 (317) ELT 177 (SC)] APEX COURT VERY RECENTLY HELD A S FOLLOWS ON ADMISSIBILITY OF STATEMENTS AND CROSS-EXAMINATION:- 16. HAVING GIVEN OUR THOUGHTFUL CONSIDERATION TO T HE AFORESAID ISSUE, WE ARE OF THE VIEW THAT THE STATEMENTS DATED 25-10-1989 AND 26-10-1989 CAN UNDER NO CIRCUMSTANCES CONSTITUTE TH E SOLE BASIS FOR RECORDING THE FINDING OF GUILT AGAINST THE APPELLAN T. IF FINDINGS COULD BE RETURNED BY EXCLUSIVELY RELYING ON SUCH ORAL STATEM ENTS, SUCH STATEMENTS COULD EASILY BE THRUST UPON THE PERSONS WHO WERE BEING PROCEEDED AGAINST ON ACCOUNT OF THEIR ACTIONS IN CO NFLICT WITH THE PROVISIONS OF THE 1973 ACT. SUCH STATEMENTS OUGHT N OT TO BE READILY ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 13 OF 21 BELIEVABLE, UNLESS THERE IS INDEPENDENT CORROBORATI ON OF CERTAIN MATERIAL ASPECTS OF THE SAID STATEMENTS, THROUGH IN DEPENDENT 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. SAHIRABANU AT THE FIRST OPPORTUNITY RESILEDFROM THE STATEMENTS WHICH ARE NO W SOUGHT TO BE RELIED UPON BY THE ENFORCEMENT DIRECTORATE, TO SUBS TANTIATE THE CHARGES LEVELLED AGAINST THE APPELLANT. WE SHALL NO W ENDEAVOUR TO EXAMINE WHETHER THERE IS ANY INDEPENDENT CORROBORAT IVE EVIDENCE TO SUPPORT THE ABOVE STATEMENTS. 17 &18 .. .. 19. WE SHALL NOW DEAL WITH THE OTHER INDEPENDENT EV IDENCE WHICH WAS SOUGHT TO BE RELIED UPON BY THE ENFORCEME NT DIRECTORATE TO ESTABLISH THE CHARGES LEVELLED AGAINST THE APPEL LANT. AND BASED THEREON, WE SHALL DETERMINE WHETHER THE SAME IS SUF FICIENT ON ITS OWN, OR IN CONJUNCTION TO THE RETRACTED STATEMENTS REFERRED TO ABOVE, 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 I N HIS RESPONSE TO THE MEMORANDUM DATED 12-3-1990 HAD EXPRESSLY REFUTE D 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 HAYADBASHA, WOULD NOT LED CREDIBILITY TO THE SAME. SUCH CREDIBILITY WOULD ATT ACH TO THE MAHAZAR ONLY IF THE SAID TWO INDEPENDENT WITNESSES WERE PRO DUCED AS WITNESSES, AND THE APPELLANT WAS AFFORDED AN OPPORT UNITY TO CROSS- EXAMINE THEM. THE AFORESAID PROCEDURE WAS UNFORTUNA TELY NOT ADOPTED IN THIS CASE. BUT THEN, WOULD THE PREPARATI ON OF THE MAHAZARAND THE FACTUM OF RECOVERY OF A SUM OF RS. 8 ,24,900/- ESTABLISH THE GUILT OF THE APPELLANT, INSOFAR AS TH E VIOLATION OF SECTION 9(1)(B) OF THE 1973 ACT IS CONCERNED? IN OUR CONSID ERED VIEW, EVEN IF THE MAHAZARIS ACCEPTED AS VALID AND GENUINE, THE SA ME IS WHOLLY INSUFFICIENT TO ESTABLISH, THAT THE AMOUNT RECOVERE D FROM THE RESIDENCE OF THE APPELLANT WAS DISPATCHED BY ABDUL HAMEED, A RESIDENT OF SINGAPORE, THROUGH A PERSON WHO IS NOT AN AUTHORISED DEALER IN FOREIGN EXCHANGE. EVEN, IN RESPONSE TO TH E MEMORANDUM DATED 12-3-1990, THE APPELLANT HAD ACKNOWLEDGED THE RECOVERY OF RS. 8,24,900/- FROM HIS RESIDENCE, BUT THAT ACKNOWL EDGMENT WOULD NOT ESTABLISH THE VIOLATION OF SECTION 9(1)(B) OF T HE 1973 ACT. IN THE ABOVE VIEW OF THE MATTER, WE ARE OF THE OPINION THA T THE EXECUTION OF THE MAHAZARON 25-10-1989, IS INCONSEQUENTIAL FOR TH E DETERMINATION OF THE GUILT OF THE APPELLANT IN THIS CASE. IN VIEW OF THE ABOVE, BY NOT ALLOWING THE CROSS-EXA MINATION OF THE RELIED UPON WITNESSES UNDER SECTION 9D OF THE CENTR AL EXCISE ACT, 1944, THE EVIDENTIARY VALUE OF SUCH STATEMENTS DOES NOT SURVI VE AND IS REQUIRED TO BE DISCARDED. WE ACCORDINGLY HOLD SO. 11. IT IS ALSO THE CASE OF THE APPELLANTS THAT ALL THE TRANSACTIONS ARE MADE BY THE APPELLANTS AT THE FACTORY GATE. THAT ONLY E XACT AMOUNT OF ADDITIONAL CONSIDERATION RECEIVED BY EACH APPELLANT HAS TO BE ADDED TO THE TRANSACTION VALUE AND THAT NO SUCH QUANTIFICATION HAS BEEN DONE BY THE REVENUE WHICH COULD BE ATTRIBUTED TO EACH MANUFACTURER. THAT REV ENUE CAN NOT ADOPT ANY BEST JUDGMENT VALUATION METHOD AS SUGGESTED IN CENT RAL EXCISE VALUATION RULES EVEN IF ALL THE STATEMENTS/ DOCUMENTS RELIED UPON BY THE REVENUE ARE PRESUMED TO BE CORRECT ADMISSIBLE AS EVIDENCES. 12. BEFORE GIVING OBSERVATIONS ON THIS ARGUMENT RAI SED BY THE APPELLANTS, IT WILL BE RELEVANT TO GLANCE THROUGH THE RELEVANT PORTION OF THE PROVISIONS OF ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 14 OF 21 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 CHA RGEABLE 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 ASSES SEE, 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 TH E GOODS ARE OT SOLD, BE THE VALUE DETERMINED IN SUCH MANNER AS MAY BE PRESCRIBED. (2) . (3) . (A) . (B) . (D) TRANSACTION VALUEMEANS THE PRICE ACTUALLY PAID OR PAYABLE FOR THE GOODS, WHEN SOLD, AND INCLUDES IN ADDITION TO T HE AMOUNT CHARGED AS PRICE, ANY AMOUNT THAT THE BUYER IS LIAB LE TO PAY TO , OR ON BEHALF OF, THE ASSESSEE, BY REASON OF, OR IN CONNEC TION WITH THE SALE, WHETHER PAYABLE AT THE TIME OF THE SALE OR AT ANY O THER TIME, INCLUDING, BUT NOT LIMITED TO, ANY AMOUNT CHARGED F OR, OR TO MAKE PROVISION FOR, ADVERTISE OR PUBLICITY, MARKETING AN D SELLING ORGANISATION EXPENSES, STORAGE, OUTWARD HANDLING, S ERVICING, 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 VALU E OF THE GOODS CLEARED BY THE APPELLANTS IS NOT DETERMINABLE AT THE FACTOR Y GATE AND THEREFORE, SOME OTHER METHOD UNDER THE CENTRAL EXCISE VALUATION RUL ES IS REQUIRED TO BE ADOPTED TO ARRIVE AT THE ASSESSABLE VALUE. RATHER THE CASE OF THE REVENUE ON VALUATION IS THAT CERTAIN ADDITIONAL CONSIDERATI ON 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 T HE PRESENT CIRCUMSTANCES AND FACTUAL MATRIX THE EXACT AMOUNT OF SUCH ADDITIO NAL CONSIDERATION WAS REQUIRED TO BE DETERMINED FOR ADDITION TO THE TRANS ACTION VALUE EVEN IF ALL THE STATEMENTS AND DOCUMENTS WERE HELD TO BE ADMISSIBLE EVIDENCE AND SATISFIED THE TEST OF SECTION 9D OF THE CENTRAL EXCISE ACT, 1 944. IN APPEAL NOS. E/11960/2013 AND E/12386/2014, THE VALUATION HAS BE EN ENHANCED SOLELY BASED ON THE ASSUMPTION THAT AFTER BOOKING OF THE C ASE THESE APPELLANT ENHANCED THEIR PRICES. IN THE CASE OF TRANSACTION VALUE REALM THE SAME PRODUCT CAN BE SOLD AT DIFFERENT PRICES AS PER SECT ION 4 OF THE CENTRAL EXCISE ACT, 1944 UNLESS ACTUAL ADDITIONAL CONSIDERATION HA S BEEN SHOWN TO HAVE FLOWN BACK TO THE APPELLANTS. APPELLANTS IN THESE APPEALS AND IN APPEAL NOS. E/13720/2014 AND E/534/2011 HAVE ALSO NOT ADMITTED DURING INVESTIGATION THAT THEY HAVE RECEIVED ANY ADDITIONAL CONSIDERATIO N. IN OTHER APPEALS ON THE ISSUE OF UNDERVALUATION INVESTIGATION ATTEMPTED TO SHOW THE FLOW BACK OF SUCH ADDITIONAL CASH FLOW THROUGH THE STATEMENTS OF CERA MIC TILE MANUFACTURER AND THE STATEMENTS OF SHROFFS AND ANGADIAS. THE AMOUNT SO WORKED OUT HAS BEEN WORKED OUT TO BE RS. 38,95,860/- AS PER THE ST ATEMENT OF SHRI JAYESH PATEL, PROP. OF M/S. KEVEL MENTIONED IN PARA 9.3.3 OF 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 ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 15 OF 21 MANUFACTURERS AND AT THE SAME TIME MENTIONS THAT TH E NAMES OF THE FRIT MANUFACTURERS ARE NOT WRITTEN AGAINST EACH PAYMENT IN THE CONCERNED DOCUMENTS. UNDER THE ABOVE FACTUAL MATRIX APPELLAN TS HAD THE RIGHT TO CROSS- EXAMINATION THE WITNESSES ESPECIALLY SHROFFS AND AN GADIAS AS TO WHAT PORTION OF SUCH PAYMENT BELONGS TO A PARTICULAR APP ELLANT. AS MENTIONED IN THE DEFINITION OF TRANSACTION VALUE IN PARA 11.1 AB OVE, 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 P ER SECTION 4 EVEN THE SAME PRODUCT COULD BE SOLD AT DIFFERENT PRICES DEPE NDING UPON SEVERAL MARKET FACTORS AND ALL THESE PRICES WILL BE ACCEPTA BLE 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 AC T, 1944. IN THE ABSENCE OF EXACT QUANTIFICATION OF CASH RECEIVED BY INDIVIDUAL FRIT MANUFACTURER, TRANSACTION VALUE CANNOT BE ENHANCED EVEN IF THERE ARE HALF COOKED CIRCUMSTANTIAL EVIDENCES TO THE PROCEEDINGS INDICAT ING SUSPECTED UNDERVALUATION. IT IS NOW WELL UNDERSTOOD THAT SUS PICION HOWSOEVER GRAVE CANNOT TAKE THE PLACE OF AN EVIDENCE. THEREFORE, I T MAY NOT BE CORRECT TO HOLD THAT PREPONDERANCE OF PROBABILITY SHOULD ALWAY S 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 VS. UOI (SUPRA) PREPONDERANCE OF PROBABILI TY CANNOT ALWAYS BE ALLOWED IN FAVOUR OF THE REVENUE WHEN THERE IS NO I NDEPENDENT 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 O RDER, ARE ALLOWED WITH CONSEQUENTIAL RELIEFS, IF ANY. MISCELLANEOUS APPLIC ATIONS ARE ALSO DISPOSED OF ACCORDINGLY. IN THIS BACKGROUND, LD. AUTHORISED REPRESENTATIVE S UBMITTED THAT HONBLE CESTAT HAS CONSIDERED THE MERIT OF THE CASE, RELEVA NT MATERIAL I.E PEN DRIVE AND ALSO STATEMENTS RECORDED BY EXCISE AUTHORITIES. ALL SUCH THREE QUESTIONS AS DISCUSSED IN ITS ORDER HAVE BEEN DECIDED IN FAVOUR OF ASSESSEE. SO FAR AS CIT(A)S OBSERVATION ARE CONCERNED THAT RELIEF GRANTED BY TH E CESTAT IS HIGHLY TECHNICAL, IT WAS SUBMITTED BY THE LD. AUTHORISED REPRESENTATIVE THAT SUCH OBSERVATIONS ARE DEVOID OF MERIT. CESTAT HAS PASSED DETAILED REASONE D ORDER. AS REGARD TO CIT(A)S OBSERVATION AS TO OPPORTUNITY OF CROSS EXAMINATION OF PERSONS WHOSE STATEMENTS HAVE BEEN RECORDED, LD. AUTHORISED REPRESENTATIVE S UBMITTED THAT IT IS ABSOLUTELY ILLOGICAL ON THE PART OF THE LD. CIT(A) TO SEEK AN OPPORTUNITY OF EXAMINATION OF THE STATEMENTS RECORDED BY THE RELEVANT EXCISE AUTHORIT IES. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT EXCISE DEPART MENT PREFERRED AN APPEAL AGAINST ABOVE MENTIONED ORDER OF CESTAT BEFORE APEX COURT W HICH ACCORDING TO AR WAS DISMISSED AS WITHDRAWN VIDE ORDER DATED 27/01/2016 AND COPY OF SAME IS PLACED ON PAGE 327-328 OF PAPER BOOK. CONTENT OF THE SAME ARE REPRODUCED AS UNDER: IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS.OF 2016 D NO.39019/2015 COMMISSIONER OF CENTRAL EXCISE & ST, AHMEDABAD III ..APPELLANT(S) VERSUS ZIRCONIA CERA TECH. GLAZES PVT LTD & ANR...RESPONDE NT(S) ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 16 OF 21 ORDER LEARNED ADDITIONAL SOLICITOR GENERAL SEEKS LEAVE TO WITHDRAW THE APPEALS WITH A LIBERTY TO APPROACH THE HIGH COURT IN VIEW O F 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, .APPE LLANT(S) AHMEDABAD - III VERSUS ZIRCONIA CERA TECH. GLAZES PVT LTD & ANR..RESPOND ENT (S) (WITHAPPLN. (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. NITESHDARYANANI, ADV. MR. B. KRISHNA PRASAD, AOR FOR RESPONDENT (S) MR. M. Y. DESHMUKH AOR UPON HEARING THE COUNSEL THE COURT MADE THE FOLLOWI NG ORDER LEARNED ADDITIONAL SOLICITOR GENERAL SEEKS LEAVE TO WITHDRAW THE APPEALS WITH A LIBERTY TO APPROACH THE HIGH COURT IN VIEW OF THE S TATUTORY 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 OU R NOTICE THAT EVEN THE TAX APPEAL BEING TAX APPEAL NOS.733 & 734 OF 2016 PREFE RRED 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 T 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 ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 17 OF 21 HONOURABLE MR.JUSTICE R.P.DHOLARIA DATE : 13/11/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] BY WAY OF THIS PETITION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, PETITIONER HAS PRAYED FOR AN APPROPRIATE WRIT, DIRE CTION 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 DATED30.03. 2013 PASSED BY THE COMMERCIAL TAX OFFICER(4), MEHSANA BY WHICH AN ORDE R OF REASSESSMENT HAS BEEN PASSED BY THE COMMERCIAL TAX OFFICER DIRECTING THE PETITIONER TO PAY AN AMOUNT OF RS.21,52,832/ TOWARDS THE BALANCE TAX UND ER THE GUJARAT VALUE ADDED TAX ACT, 2003[HEREINAFTER REFERRED TO AS VAT ACT] AND ALSO DIRECTED TO PAY 150%PENALTY I.E. RS.32,29,248/AND IN ALL RS. 73,19,630/. [2.0] FACTS LEADING TO THE PRESENT SPECIAL CIVIL AP PLICATION IN NUTSHELL ARE AS FOLLOWS: [2.1] THAT THE PETITIONER IS A DEALER REGISTERED UN DER THE VAT ACT. THAT THE PETITIONER IS EXCISABLE TO TAX ON THE BASIS OF ITS TURNOVER UNDER THE VAT ACT. FOR THE FINANCIAL YEAR 2006-07,THE PETITIONER FILED ITS RETURN WITH THE AUTHORITIES UNDER THE ACT. SUCH RETURN WAS PROCESSED BY THE AUT HORITIES AND THE ORDER THEREON WAS PASSED AND ACCORDINGLY THE PETITIONER P AID THE VALUE ADDED TAX OF RS.2,06,448/. [2.2] A NOTICE CAME TO BE ISSUED ON 14.03.2012 BY T HE ADJUDICATING AUTHORITY INDICATING THAT FOR THE PERIOD FROM 01.04.2007 TO 3 1.03.2008,HE HAS REASON TO BELIEVE THAT TAXABLE TURNOVER OF THE PETITIONER ASSESSEE HAS ESCAPED ASSESSMENT. THAT PETITIONER WA S REQUIRED TO ATTEND THE OFFICER ON 31.03.2012. THAT THE PETITIONER APPE ARED BEFORE THE COMMERCIAL TAX OFFICER ASSESSING OFFICER AND SUBM ITTED THAT THEY HAVE COME TO KNOW THAT AUTHORITY HAS RECEIVED CERTAIN IN FORMATION FROM CENTRAL EXCISE I.E. DGCEI AND ON THE BASIS OF THE SHOW-CAUS E NOTICE ISSUED BY THE CENTRAL EXCISE DEPARTMENT, ADJUDICATING AUTHORITY H AS INTENDED TO ENHANCE THE SALES AND ALSO INTENDED TO REASSESS UNDER SECTI ON 35(1) OF THE VAT ACT IT WAS ALSO SUBMITTED THAT EXCEPT THE SHOW-CAUSE NOTIC E ISSUED BY THE CENTRAL EXCISE DEPARTMENT, THERE IS NO MATERIAL TO SHOW THA T THE PETITIONER HAD SUPPRESSED THE SALES AND HAS EVADED THE TAX LIABILI TY. THAT SOLELY ON THE BASIS OF THE SHOW-CAUSE NOTICE ISSUED BY THE CENTRA L 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 WO ULD 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 LIABL E TO PAY BALANCE OFRS.21,52,832/- TOWARDS VAT. CONSEQUENTLY, BY ORDE R DATED 30.03.2013,THE AO HAS PASSED THE REASSESSMENT ORDER DIRECTING THE PETITIONER TO PAY THE BALANCE AMOUNT OF RS.21,52,832/- ALONG WITH INTERES T UPTO31.03.2013 AND HAS ALSO IMPOSED THE PENALTY AT THE RATE OF 150% I. E. IN ALL RS.73,19,630/.FEELING AGGRIEVED AND DISSATISFIED WI TH THE IMPUGNED ORDER, THE PETITIONER THE PETITIONER HAS PREFERRED THE PRE SENT 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 ENTERT AINED THE PRESENT PETITION. ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 18 OF 21 [2.4] THE PETITIONER HAS CHALLENGED THE IMPUGNED OR DER PASSED IN REASSESSMENT PROCEEDINGS, WHICH IS PASSED SOLELY ON THE BASIS OF THE SHOW- CAUSE NOTICE ISSUED BY THE EXCISE DEPARTMENT AND TH E ADDITIONS ARE MADE. LEARNED COUNSEL APPEARING ON BEHALF OF THE PETITION ERS HAS VEHEMENTLY SUBMITTED THAT THIS SHOULD BE WHOLLY IMPERMISSIBLE. [3.0] SHRI PARIKH, LEARNED ADVOCATE APPEARING ON BE HALF OF THE PETITIONER HAS HEAVILY RELIED UPON THE DECISION OF THIS COURT IN T HE CASE OF FUTURA CERAMICS PVT. LTD. VS. STATE OF GUJARAT RENDERED IN SPECIAL CIVIL APPLICATION NO.6500/2012 AND RELYING UPON THE SAID DECISION, IT IS SUBMITTED THAT SIMILAR REASSESSMENT ORDER PASSED BY THE AO SOLELY ON THE B ASIS OF THE SHOW CAUSE NOTICE ISSUED BY THE EXCISE DEPARTMENT HAS BEEN SET ASIDE BY THIS COURT. THEREFORE, IT IS REQUESTED TO QUASH AND SET ASIDE T HE IMPUGNED ORDER PASSED BY THE AO. [4.0] SHRI JAIMIN GANDHI, LEARNED AGP APPEARING ON BEHALF OF THE RESPONDENT IS NOT IN A POSITION TO DISPUTE THE ABOVE. HE IS AL SO NOT IN A POSITION TO DISPUTE THAT SIMILAR REASSESSMENT ORDER HAS BEEN SET ASIDE BY THIS COURT IN THE CASE OF FUTURA CERAMICS PVT. LTD. (SUPRA). HOWEVER, SHRI GANDHI, LEARNED AGP APPEARING ON BEHALF OF THE RESPONDENT HAS REQUESTED TO RESERVE THE LIBERTY IN FAVOUR OF THE AO AND/OR APPROPRIATE AUTHORITY TO PA SS REASSESSMENT ORDER AFRESH IN ACCORDANCE WITH LAW AND ON MERITS. [4.1] SHRI PARIKH, LEARNED ADVOCATE APPEARING ON BE HALF OF THE PETITIONER HAS SUBMITTED THAT IT MAY BE OBSERVED THAT FRESH REASSE SSMENT ORDER CAN BE PASSED IN ACCORDANCE WITH LAW AND ONLY IF THE SAME IS PERMISSIBLE UNDER THE LAW. [5.0] HAVING HEARD SHRI PARIKH, LEARNED ADVOCATE AP PEARING ON BEHALF OF THE PETITIONER AND SHRI GANDHI, LEARNED AGP APPEARING O N BEHALF OF THE RESPONDENTS AND HAVING GONE THROUGH THE IMPUGNED OR DER PASSED BY THE AO, IT APPEARS THAT THE REASSESSMENT ORDER HAS BEEN PAS SED 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 ONCLU DED WAS REOPENED ON THE PREMISE THAT DURING THE EXCISE RAID, IT WAS REV EALED THAT THE PETITIONER HAD CLANDESTINELY REMOVED GOODS WITHOUT PAYMENT OF EXCI SE DUTY. THE SALES TAX DEPARTMENT, THEREFORE, FORMED A BELIEF THAT VALUE O F 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 CO NSIDERED 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 CAU SE NOTICE ISSUED BY THE EXCISE DEPARTMENT HAS BEEN SET ASIDE BY THE DIVISIO N 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 CULMINAT ING INTO ISSUANCE OF A SHOW CAUSE NOTICE FOR RECOVERY OF UNPAID EXCIS E DUTY AND PENALTY IN A GIVEN CASE SUFFICIENT TO REOPEN PREVIO USLY CLOSED ASSESSMENT. IN THIS CASE, HOWEVER, WE ARE NOT CALLE D UPON TO JUDGE THIS ISSUE AND WOULD THEREFORE NOT GIVE ANY DEFINIT E OPINION. THE QUESTION, HOWEVER, IS WHETHER ON A MERE SHOW CAUSE ISSUED BY THE EXCISE DEPARTMENT, THE SALES TAX DEPARTMENT CAN MAK E ADDITIONS FOR THE PURPOSE OF COLLECTING TAX UNDER THE GUJARAT VAL UE ADDED TAX ACT WITHOUT ANY FURTHER INQUIRY. IF THE ASSISTANT COMMI SSIONER OF COMMERCIAL TAX HAS UTILIZED THE MATERIAL COLLECTED BY THE EXCISE DEPARTMENT; INCLUDING THE STATEMENTS OF THE PETITIO NER AND OTHER RELEVANT WITNESSES AND HAD COME TO AN INDEPENDENT O PINION THAT THERE WAS IN FACT EVASION OF EXCISE DUTY BY CLANDES TINE REMOVAL OF GOODS, HE WOULD HAVE BEEN JUSTIFIED IN MAKING ADDIT IONS FOR THE PURPOSE OF VAT ACT. IN THE PRESENT CASE, HOWEVER, N O 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 ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 19 OF 21 CONCLUDE THAT THERE WAS A CASE OF CLANDESTINE REMOV AL OF GOODS WITHOUT PAYMENT OF TAX UNDER THE VAT ACT. MERELY BE CAUSE THE EXCISE DEPARTMENT ISSUED A SHOW CAUSE NOTICE, THAT CANNOT BE A GROUND TO PRESUME AND CONCLUDE THAT THERE WAS EVASI ON OF EXCISE DUTY IMPLYING THEREBY THAT THERE WAS ALSO EVASION O F TAX UNDER THE VAT ACT. IT IS NOT EVEN THE CASE OF THE DEPARTMENT THAT SUCH SHOW CAUSE NOTICE PROCEEDINGS HAS CULMINATED INTO ANY FI NAL ORDER AGAINST THE PETITIONER. WE WONDER WHAT WOULD HAPPEN TO THE ORDER OF REASSESSMENT, IF ULTIMATELY THE EXCISE DEPARTMENT W ERE TO DROP THE PROCEEDINGS WITHOUT LEVYING ANY DUTY OR PENALTY FRO M THE PETITIONER. ALL IN ALL, THE ASSTT. COMMISSIONER HAS ACTED IN A MECHANICAL MANNER AND PASSED FINAL ORDER OF ASSESSMENT MERELY ON THE PREMISE THAT THE EXCISE DEPARTMENT HAS ISSUED A SHOW CAUSE NOTICE AL LEGING CLANDESTINE REMOVAL OF THE GOODS. SUCH ORDER, THERE FORE, CANNOT BE SUSTAINED AND IS ACCORDINGLY QUASHED. WHEN THE ORDE R IS EX FACIE ILLEGAL AND WHOLLY UNTENABLE IN LAW, MERE AVAILABIL ITY OF ALTERNATIVE REMEDY WOULD NOT PRECLUDE US FROM INTERFERING AT TH IS STAGE IN A WRIT PETITION. [6.0] IN VIEW OF THE ABOVE DECISION OF DIVISION BEN CH OF THIS COURT, THE IMPUGNED REASSESSMENT ORDER DESERVES TO BE QUASHED AND SET ASIDE. HOWEVER LIBERTY CAN BE RESERVED IN FAVOUR OF THE DE PARTMENT TO PASS AN ORDER AFRESH IN ACCORDANCE WITH LAW AND ON MERITS AFTER G IVING AN OPPORTUNITY TO THE PETITIONER AND IF PERMISSIBLE UNDER THE LAW NOW. [6.1] IN VIEW OF THE ABOVE AND FOR THE REASONS STAT ED ABOVE, PETITION SUCCEEDS. IMPUGNED ORDER PASSED BY THE COMMISSIONER TAX OFFICER(4), MEHSANA [ANNEXUREE] TO THE PETITION] DATED 30.03.20 13 IS HEREBY QUASHED AND SET ASIDE. HOWEVER, IT IS OBSERVED THAT THE SAM E 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 FAVO UR OF THE DEPARTMENT TO PASS REASSESSMENT ORDER AFRESH IN ACCORDANCE WITH L AW 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 EXT ENT. 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 SU BMITTED THAT ADDITIONS BE DELETED IN BOTH THE YEARS. ON OTHER HAND LD. DEPART MENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND CONTENDED THAT ORDER CESTAT IS TECHNICAL ONE SO SAME SHOULD BE IGNORED AND ORDERS OF AUTHORITIES BE LOW BE UPHELD IN BOTH 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 T HE EXCISE DEPARTMENT THAT ASSESSEE HAS NOT DECLARED ACTUAL ASSESSABLE VALUE O F GOODS MANUFACTURED AND CLEARED FROM FACTORY. BASED ON ABOVE DGCEI ISSUED S HOW-CAUSE NOTICE DATED 19/04/2010, EXCISE DEPARTMENT CONCLUDED THAT ASSESS EE WAS ENGAGED IN UNDER VALUATION OF SALES AND CLANDESTINE REMOVAL OF GOODS . ONLY ON THE BASIS OF SAME ASSESSING OFFICER REOPENED ASSESSEES INCOME TAX AS SESSMENT FOR THE YEARS UNDER CONSIDERATION AND MADE ADDITION OF ESTIMATED GROSS PROFIT ON UNDER VALUATION SALES AND CLANDESTINE REMOVAL OF GOODS. THE REVENUE HAS B ROUGHT NOTHING ON RECORD THAT IT HAS APPLIED ITS MIND OVER AND ABOVE THE CONTENTS O F SHOW-CAUSE NOTICE IN QUESTION THUS THERE IS LACK OF INDEPENDENT APPLICATION OF MI ND ON BEHALF OF REVENUE IN THESE MATTERS. ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 20 OF 21 12. WITHOUT PREJUDICE TO ABOVE, WE FIND THAT IN EXC ISE PROCEEDINGS, CONCERNED AUTHORITIES PASSED ORDER AGAINST ASSESSEE AND MATTE R WAS CARRIED UP TO CONCERNED HONBLE CESTAT. HONBLE CESTAT VIDE ITS ORDER DATED 12/02/2015 AS DISCUSSED ABOVE, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE HOLDING THAT EXCISE DEPARTMENT COULD NOT ESTIMATE VALUE OF ALLEGED SUPP RESSION OF SALES AS WELL AS CLANDESTINE REMOVAL OF GOODS MERELY ON THE BASIS OF ASSUMPTION AND SURMISES. THE 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 G RANTED BY HONBLE CESTAT WAS HIGHLY TECHNICAL. 13. WE ALSO FIND THAT EXCISE DEPARTMENT CARRIED MAT TER BEFORE HONBLE APEX COURT WHEREIN SAME WAS DISMISSED AS WITHDRAWN AS ME NTIONED ABOVE. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE IN THIS REGARD. 14. WE ALSO FIND THAT TAX APPEAL BEING TAX APPEAL N O.733 AND 734 OF 2016 PREFERRED BY THE LD. EXCISE DEPARTMENT BEFORE HONB LE GUJARAT HIGH COURT CAME TO BE DISMISSED VIDE ORDER DATED 07/12/2016, AS MENTIO NED ABOVE. AGAIN NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE IN THIS REGARD AS WELL. IN THIS BACKGROUND, WE FIND THAT THE ORDER PASSED BY H ONBLE CESTAT HAS ACHIEVED THE FINALITY AGAINST THE REVENUE. AS WE HAVE OBSERVED E ARLIER 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 ADDITI ONS 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 TH E APPEALS FILED BY THE ASSESSEE ARE ALLOWED. 4. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. 5. RESPECTFULLY FOLLOWING THE TRIBUNALS DECISION D ATED 12.02.2019 (SUPRA), WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH OF JUNE, 2019. SD/- SD/- JUSTICE P P BHATT PRAMOD KUMAR (PRESIDENT) (VICE PRESIDENT) AHMEDABAD, THE 4 TH DAY OF JUNE, 2019 PBN/* ITA NO.1886/AHD/2017 ASSESSMENT YEAR: 2008-09 PAGE 21 OF 21 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD