ACIT, Jaipur V. M/S PUSHP ENTERPRISES, Jaipur

ITA 659/JPR/2012

• Counselvise Citation: 65923114 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROLEE AGARWAL
• Assessee Lawyers: S L PODDAR
• Keywords: Business income; Business expenditure; Assessment record

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 659/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 THE A.C.I.T. CIRCLE-4, JAIPUR. CUKE VS. M/S PUSHP ENTERPRISES, H-780-A, ROAD NO. 13, VKI AREA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AABFP 2279 F VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SMT. ROLEE AGARWAL (CIT D.R.) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 17/11/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 13/02/2015 VKNS'K @ ORDER PER: R.P. TOLANI, J.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 25/04/2012 BY THE LEARNED CIT(A)-II, JAIPUR FOR A.Y . 2009-10. RESPECTIVE GROUNDS OF APPEAL ARE AS UNDER: ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS), HAS ERRED IN:- (I) DELETING THE ADDITION OF RS. 1,35,56,787/-MADE BY A.O. ON ACCOUNT OF CONCEALED SALES OF SCRAP WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE COULD NOT GIVE EVIDENCE REGARDING NON RETURN OF THE SCRAP BY THE VENDORS/SU B- VENDORS DOING JOB WORK FOR IT AND IT IS MOST UNLIKE LY THAT ASSESSEE WILL ALLOW VENDORS/SUB-VENDORS TO KEEP SCRAP WITH THEM, ON WHICH IT IS PAYING EXCISE DUTY ITSELF. (II) DELETING THE ADDITION OF RS. 2,33,96,017/- MAD E BY A.O. ON ACCOUNT OF CONCEALED SALES WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. (III) DELETING THE ADDITION OF RS. 19,13,583/- ON A CCOUNT OF EXCISE DUTY ON SALE OF SCRAP PAID BY THE ASSESSEE WI THOUT APPRECIATING THE FACT THAT SALE OF SUCH SCRAP WAS NO T DECLARED BY THE ASSESSEE IN ITS P&L ACCOUNT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM DERIVING INCOME FROM MANUFACTURING AND JOB WORK OF B ALL BEARINGS WHICH ARE MAINLY SOLD TO SKF INDIA LTD. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THOUGH THE ASSESSEE HAS CLAIMED EXCISE DUTY PAYABLE QUA TH E SCRAPE GENERATED NO CORRESPONDING INCOME FROM SALE OF SCRAPE WAS SHOW N BY THE ASSESSEE. ASSESSEE IN THIS BEHALF REPLIED THAT THE MAJOR WORK IS CARRIED OUT BY THE ASSESSEE THROUGH JOB WORKERS/ SUB VENDORS INCLUDING THE ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 3 ASSOCIATE CONCERN M/S NOBLE INDUSTRIES. AS PER PREV ALENT TRADE PRACTICE THE SCRAPE GENERATED AT THEIR PREMISES IS RETAINED BY THEM AND NOT RETURNED TO THE ASSESSEE. THE JOB WORK CHARGES ARE FI XED KEEPING IN VIEW THE BENEFIT OF SCRAPE VALUE AVAILED BY SUCH JOB WORKERS. SINCE ASSESSEE DID NOT SALE ANY SCRAPE IN THIS YEAR NO PR OCEEDS WERE SHOWN. CONFIRMATIONS FROM JOB WORKERS WERE ALSO PRODUCED. 2.1 APROPOS EXCISE DUTY PAID QUA SCRAPE VALUE IT WAS CONTENDED THAT AS PER EXCISE RULES THE ASSESSEE WAS LIABLE TO PAY E XCISE DUTY ON NOTIONAL % OF SCRAPE WHICH IS GENERATED DURING THE P ROCESS CARRIED OUT BY THE VENDORS ALSO. THIS IS A STATUTORY LIABILITY WH ICH IS TO BE BORNE BY THE ASSESSEE, SAME BEING A BUSINESS LIABILITY WAS TO BE ALLOWED. 2.2 A.O. FURTHER REQUIRED THE ASSESSEE TO FILE COPI ES OF EXCISE RETURNS I.E. ER-1 MONTHLY FORM SUBMITTED BEFORE 10 TH DAY OF ENSUING MONTH IN RELATION TO MAINTENANCE OF THE RECORD FOR PRODUCTIO N AND REMOVAL OF GOODS AND CENVAT CREDIT. FROM THE FIGURES OF VALUATI ON OF EXCISABLE SALES MENTIONED IN FORM ER-1 AND SALE VALUE SHOWN IN ASSESSEES MANUFACTURING/TRADING ACCOUNT, A DIFFERENCE OF RS. 2,69,37,325/-WAS SEEN, WHICH THE LD. AO ASKED THE ASSESSEE TO RECONCI LE. 2.3 THE ASSESSEE IN REPLY CONTENDED THAT THE VALUE SHOWN IN FORM ER-1 WAS FOR CALCULATION OF AD VALOREM EXCISE DUTY O F TRANSACTION, IT ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 4 REPRESENTED EXCISE ASSESSABLE VALUE OF MANUFACTURED BALL BEARINGS. THE ASSESSEE FILED THE RECONCILIATION IN THIS BEHALF, W HICH IS AS UNDER:- DOMESTIC SCRAP TOTAL SALES AS PER TAX AUDIT REPORT 312374005.80 1313524.50 313687530.30 ADD: SALES RETURN AND SHORT RECEIPT ADJUSTED WITH SALES ACCOUNT NOW SHOWN IN ER-1 RETURNS 13823864.56 0.00 13823864.56 ADD: SALES OF INSERT NET OF P&L A/C 21677.00 0.00 21677.00 ADD: VALUE OF NON RETURNABLE SCRAP FROM SUB VENDOR 0.00 13556787.50 13556787.50 LESS: NON EXCISABLE GOODS SOLD NOT SHOWN IN ER-1 465000.00 0.00 465000.00 SALES AS PER ER - 1 325754547.36 14870312.00 340624859.36 THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE AS SESSEES EXPLANATION AND MADE THE ADDITION BY FOLLOWING OBSER VATIONS:- THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN CONSIDERE D BUT NOT FOUND TENABLE REASONS AS UNDER:- I) THE ASSESSEE HAVE PAID THE JOB WORK AMOUNTING TO RS. 3,55,96,219/- TO M/S NOBEL INDUSTRIES, WHICH IS THE ENTITY COVERED U/S 40A(2)(B) AND IT IS PERTINENT TO NOTE T HAT THE FIRM IS CLOSELY RELATED TO THE PARTNER OF THE FIRM. FOR ARGUMENT IF IT MAY BE PRESUMED THAT THE SCRAP WILL B E REMAINED WITH THE VENDORS THEN IT IS CLEAR THAT THE FIRM HAS ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 5 TRANSFERRED HIS PROFIT TO THE RELATIVE OF THE PARTN ERS OF THE FIRM AND IT IS NOT ADMISSIBLE. II) THE ASSESSEE HAS NOT PRODUCED ANY PERSONS OR ANY EVIDENCE WHICH SHOWS THAT THE VENDOR HAVE DECLARED TH E INCOME FOR SALE OF THE SAID SCRAP. MOREOVER, ON EXAMINATION OF THE ASSESSMENT RECORD OF THE M/S NOB EL INDUSTRIES, HE HAS NOT RECEIVED ANY RECEIPT OF ACCO UNT OF THE SALE OF THE SCRAP WHICH WAS GENERATED FROM THE JO B WORK OF M/S PUSHP ENTERPRISES. III) IT IS UNREASONABLE AND NOT ADMISSIBLE WHEN THE ASS ESSEE HIMSELF DECLARED THE SALE OF THE SCRAP IN ER-1 AND MAKE THE PAYMENT OF EXCISE DUTY THEREON, HOW A PRUDENT PE RSON WOULD GIVE THE SCRAP AMOUNTING TO RS. 1,35,56,787/- TO THE OTHER PERSONS WITHOUT ANY BENEFITS. IV) THE ASSESSEE HAS ALSO DECLARED RECEIPTS FROM JOB WOR K AMOUNTING TO RS. 2,05,87,743/- AND AGAINST THAT JOB , THE ASSESSEE HAS NOT DECLARED ANY SALES OF SCRAP. IN THESE CIRCUMSTANCES, IT IS CLEAR THAT THE EXPLAN ATION OF THE ASSESSEE IS NOTHING BUT COOKED STORY WHICH IS NOT AD MISSIBLE THEREFORE, AS SHOW CAUSE GIVEN TO THE ASSESSEE A SUM OF RS. 1,35,56,787/- IS ADDED BACK IN THE INCOME OF THE AS SESSEE TREATING THE SAME AS CONCEALED SALE OF THE SCRAP. 2.2 APROPOS THE OTHER ISSUE IN SECOND GROUND I.E. A DDITION ON ACCOUNT OF CONCEALED SALES, BRIEF FACTS OF THE CASE ARE THA T THE MAIN CUSTOMER ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 6 FOR PURCHASE OF BEARINGS MANUFACTURED BY THE ASSESS EE IS SKF INDIA LTD.. THE ASSESSEE RAISED BILLS ACCORDING TO AGREED PRICE, ON RECEIPT SOME OF THE GOODS ARE FOUND DEFECTIVE OR INFERIOR I N QUALITY AND ARE REJECTED BY SKF INDIA LTD. WHICH ARE SUBJECTED TO N EGOTIATIONS. QUA THE GOODS REJECTED, THE ASSESSEE HAS TO ADJUST VARI OUS DEBIT NOTES/SALES RETURN/RATE DIFFERENCE/SHORT RECEIPTS, CONSEQUENTLY THE INVOICES ARE SUBJECT TO SETTLEMENT IN THIS BEHALF. THE DIFFERENCE IN SALE VALUE IN THE BOOKS OF ASSESSEE AND SKF WAS ATTRIBUTABLE TO SUCH S ETTLEMENTS, DETAILED REPLY ALONG WITH SKFS CONFIRMATION WAS FILE D. ASSESSING OFFICER HOWEVER, DID NOT ACCEPT AND MADE THE ADDITION. THE TO TAL ADDITION CAME TO RS. 2,33,96,107/-, WHICH INCLUDES THE ADDITION OF RS. 1,35,56,787/-. 2.3 QUA THIRD GROUND, AS ALREADY MENTIONED BRIEF FA CTS ARE THAT THE ASSESSING OFFICER FOUND THAT ASSESSEE HAD CLAIMED A N AMOUNT OF RS. 19,13,583/- ON ACCOUNT OF EXCISE AND SALES ON SCRAP (NON-REFUNDABLE). SINCE NO SALE OF SCRAP WAS SHOWN BY THE, THE ASSESSI NG OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THIS EXCISE AMO UNT SHOULD NOT BE DISALLOWED. THE ASSESSEE CATEGORICALLY REPLIED THAT I T HAS TO PAY EXCISE DUTY ON SCRAP GENERATED IN ITS FACTORY AS WELL AS SC RAP GENERATED AT VENDORS/ JOB WORKERS PREMISES ON A NOTIONAL BASIS. TH IS EXCISE DUTY IS ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 7 TO BE PAID BY THE ASSESSEE IRRESPECTIVE OF SALE ON A NOTIONAL % OF GENERATION OF SCRAP. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE ASSESSEES EXPLANATION AND MADE THE ADDITION IN THI S BEHALF. 3. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL B EFORE THE LEARNED CIT(A), WHO HAD DELETED THE ADDITIONS BY HOLDING THAT : (I) THE FORM ER-1 WAS MAINTAINED BY THE ASSESSEE FOR THE ASSESSABLE VALUE OF THE GOODS FOR EXCISE DUTY PURPO SES AS PER THE STATUTORY REQUIREMENT. THE FIGURE MENTIONED THEREIN WAS NOT THE SALE FIGURE AND WAS MAINTAINED ONLY FOR ASCERTAINMENT OF ASSESSEES EXCISE DUTY LIABILITY ON AD VALOREM BASIS. THE ACTUAL SALE FIGURE BETWEEN ASSESSEE AND SKF ARE REFLECTED IN ASSESSEES TRADIN G/MANUFACTURING ACCOUNT WHICH IS DULY AUDITED. THE ASSESSEE HAS PROPE RLY EXPLAINED THE ALLEGED DIFFERENCE AND RECONCILED THE SAME. WHILE R EFERRING THE CANVAT CREDIT ON INPUTS, THE LEARNED CIT(A) FURTHER OBSERVE D THAT PRIOR TO 01/4/2000 THAT MATERIAL SENT FOR JOB WORKERS WAS TO B E RECEIVED BY THE ASSESSEE BACK WITHIN 180 DAYS AND THE MANUFACTURER WA S LIABLE TO PAY AMOUNT EQUIVALENT TO CENVAT CREDIT. AFTER 01/4/2000, THE RULES WERE AMENDED AND THERE WAS NO PROVISION UNDER CENVAT CREDI T RULES THAT THE WASTE AND SCRAP GENERATED DURING THE PROCESSING WAS TO BE RETURNED TO THE MANUFACTURER. THERE WAS NO MATERIAL A VAILABLE ON ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 8 RECORD TO SUGGEST THAT ANY SCRAP OR WASTAGE WAS RECEI VED BACK BY THE ASSESSEE AND WAS SOLD BY IT AND THE ABSENCE OF ANY E VIDENCE OF EITHER THE RECEIPT OF SCRAP OR THE SALE OF SCRAP, THE ADDI TION CANNOT BE MADE ON ASSUMPTION BY THE ASSESSING OFFICER. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF CIT VS. SHOORJI VALLABHDAS AND CO. 46 ITR 144 AND IN THE CASE OF STATE BANK OF TRAVANCORE VS. CIT 158 ITR 102. THE ASSESSEE PROVIDED COMPLETE NAMES AND ADDRESSES OF T HE JOB WORKERS/SUB-VENDORS ALONG WITH THEIR PAN NUMBERS ON WH ICH THE REMAND REPORT WAS CALLED. ON EXAMINATION OF M/S NOBL E INDUSTRIES, IT WAS FOUND THAT NO SCRAP WAS RETURNED TO THE ASSESSEE. CONSEQUENTLY, THE ADDITION OF RS. 1,33,56,787/- WAS DELETED. 3.1 APROPOS THE SECOND GROUND, THE LEARNED CIT(A) D ELETED THE ADDITION BY FOLLOWING OBSERVATIONS:- I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. AS PER EXCISE RETURN ER-1, THE ASSESSEE HAD REDUCED TH E SALES RETURN/RATE DIFFERENCE/SHORT RECEIPTS AND OTHER DEB IT NOTES WHICH WERE ADJUSTED AGAINST THE SALES FROM THE TOTAL TURNOVER. THE ASSESSEE FILED RECONCILIATION STATEME NT FOR THE SAME BUT THE AO BRUSHED ASIDE THE SAME ALLEGEDLY ON THE GROUND THAT THE AMOUNT OF RATE DIFFERENCE COULD NOT BE DEDUCTED FROM THE SALES DECLARED IN ER-1 RETURN BEC AUSE THE SALES DECLARED IN ER-1 RETURN WAS ON THE BASIS OF TH E QUANTITY ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 9 AND THE ORIGINAL BILLS AND IT COULD NOT HAVE INCLUD ED THE INVOICES THROUGH SUPPLEMENTARY INVOICES AND RATES H AD ALREADY BEEN CONSIDERED AS GENUINE BY THE PURCHASER I.E. SKF INDIA LTD. HOWEVER IT WAS FACTUALLY INCORRECT SINCE R ATE DIFFERENCE AND REJECTION HAD BEEN RIGHTLY REDUCED F ROM THE FIGURES OF SALES SUBMITTED TO THE EXCISE DEPARTMENT . ON CAREFUL CONSIDERATION OF FACTS, I FIND THAT THE AO HAS BROUGHT TO TAX THE AMOUNT OF RS. 1,35,56,787/- TWICE I.E. FI RST ON ACCOUNT OF CONCEALED SALE OF SCRAP AND SUBSEQUENTLY AS UNDERSTATED SALES WHICH TANTAMOUNTS TO DOUBLE ADDIT ION. THE APPELLANT HAD CLAIMED AN AMOUNT OF RS.29,50,662/- O N ACCOUNT OF RATE DIFFERENCE FROM SKF INDIA LTD. THE A O HAS NOT ALLOWED THE RATE DIFFERENCE SIMPLY ON THE GROUND THA T THE AMOUNT WAS RAISED THROUGH SUPPLEMENTARY INVOICES. ON THE OTHER HAND, THE APPELLANT HAS FILED SUFFICIENT DOCU MENTARY EVIDENCE IN FORM OF CORRESPONDENCE WITH SKF INDIA LT D. TO SHOW THAT THE RATE DIFFERENCE OF RS 31,26,856/- WAS N OT ALLOWED BY ITS PRINCIPAL M/S SKF INDIA LTD. THE APPEL LANT HAD RIGHTLY REDUCED THE SAME FROM THE TOTAL TURNOVER IN THE ER-1 RETURN FILED WITH THE EXCISE DEPARTMENT. THE APPELLAN T HAD FURTHER CLAIMED AN AMOUNT OF RS 98,39,230/- ON ACCO UNT OF RAW MATERIAL RATE DIFFERENCE BETWEEN HSS MATERIAL AND RAW MATERIAL AS PER CONTRACT. THE AO HAS NOT ALLOWED THE RATE DIFFERENCE SIMPLY ON THE GROUND THAT THE AMOUNT WAS RAISED THROUGH SUPPLEMENTARY INVOICES. HOWEVER ON PERUSAL O F THE VARIOUS DOCUMENTS FILED BY THE APPELLANT, THE RATE DIFFERENCE ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 10 OF RS 98,39,230/- IS FOUND TO BE IN ORDER. THE APPEL LANT HAD RAISED THE INVOICE NO. 1528 DATED 20.09.2008 FOR AN AMOUNT OF RS 25,93,355/- TO M/S SKF INDIA LTD., HOWEVER M/S SKF INDIA LTD. PAID AN AMOUNT OF RS. 12,34,549/- AGAINS T THIS INVOICE AND THEREFORE THERE WERE SHORT RECEIPTS TO T HE EXTENT OF RS 13,58,806/-. THE APPELLANT HAD RAISED THE INV OICE NO. 1539 DATED 22.09.2008 FOR AN AMOUNT OF RS. 33,96,27 5/- TO M/S SKF INDIA LTD., HOWEVER M/S SKF INDIA LTD. PAID AN AMOUNT OF RS. 22,27,394/- AGAINST THIS INVOICE AND THEREFORE THERE WERE SHORT RECEIPTS TO THE EXTENT OF RS. 11,68 ,881/-. THE APPELLANT HAD RAISED THE INVOICE NO. 1540 DATED 22.09.2008 FOR AN AMOUNT OF RS 56,07,531/- TO M/S S KF INDIA LTD., HOWEVER M/S SKF INDIA LTD PAID AN AMOUNT OF RS 31,45,428/- AGAINST THIS INVOICE AND THEREFORE THER E WERE SHORT RECEIPTS TO THE EXTENT OF RS 24,62,103/-. THE APPELLANT HAS FILED COMPLETE DETAILS CONTAINING DESCRIPTION O F RAW MATERIAL FOR RATE DIFFERENCE ALONG WITH COPIES OF IN VOICES. THE APPELLANT HAS ALSO FILED COPIES OF INVOICES FOR RAT E DIFFERENCE OF RS. 42,07,979/-, RS. 3,54,904/- AND RS. 2,86,557 /- ON ACCOUNT OF HSS RAW MATERIAL RATE DIFFERENCE. THE PRI NCIPAL M/S SKF INDIA LTD. VIDE THEIR LETTER DATED 19.03.20 09 HAD INFORMED THE APPELLANT THAT THE RATE DIFFERENCE RAI SED THROUGH SUPPLEMENTARY INVOICES NO. 1959, 1960 AND 1961 WAS N OT ACCEPTABLE TO THEM. THE APPELLANT HAD RIGHTLY REDUCE D THE SAME FROM THE TOTAL TURNOVER IN THE ER-1 RETURN FIL ED WITH THE EXCISE DEPARTMENT. FURTHER THE APPELLANT HAD RAISED THE ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 11 INVOICES BEARING NO. 1523 TO 1527 DATED 20.09.2008 FOR RS 65,91,015/- HOWEVER M/S SKF INDIA LTD HAD PAID AN AM OUNT OF RS. 36,40,336/-. THUS THERE WERE SHORT RECEIPTS OF RS. 29,50,682/- WHICH WERE REDUCED BY THE APPELLANT FROM THE TOTAL TURNOVER IN THE ER-1 RETURN. THOUGH THE AO HA D DISALLOWED THE RATE DIFFERENCE OF RS 31,26,865/-, YE T THE AMOUNT WAS INADVERTENTLY TAKEN AT RS. 1,35, 56,787/- WHILE MAKING THE ADDITION ON ACCOUNT OF UNDERSTATED SALES ON PAGE 8 OF THE ASSESSMENT ORDER. SINCE THE RATE DIFFERENC E OF RS. 31,26,865/- AND RS. 98,39,230/- IS SUPPORTED BY THE NECESSARY DOCUMENTARY EVIDENCE, THE ADDITION MADE B Y THE AO HAS NO LEGS TO STAND AND CANNOT BE SUSTAINED. HO WEVER I FIND THAT M/S SKF INDIA LTD. HAD REJECTED THE MATER IAL SENT THROUGH INVOICES BEARING NO. 276 DATED 25.01.2008 A ND 281 DATED 28.01.2008 AMOUNTING TO RS 1,76,179/-. THE MAT ERIAL WAS REJECTED IN AY 2008-09 ITSELF AND WAS ALLOWABLE IN THAT YEAR ONLY. HOWEVER THE APPELLANT HAS CLAIMED THE SAM E IN THE CURRENT YEAR BY PASSING JOURNAL ENTRY ON 07.02.2009 . HOWEVER SUCH A CLAIM IS NOT ALLOWABLE IN THE YEAR UND ER REFERENCE. I THEREFORE DIRECT THE AO TO RESTRICT TH E ADDITION TO RS. 1,76,179/- INSTEAD OF RS.2,33,96,017/- MADE BY HIM. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 3.2 APROPOS THE THIRD GROUND, THE LEARNED CIT(A) DEL ETED THE ADDITION BY FOLLOWING OBSERVATIONS:- ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 12 I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APP ELLANT. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD PAID THE EXCIS E DUTY OF RS 19,13,583/- ON NON RETURNABLE SCRAP AND IT WAS TH E LIABILITY OF THE ASSESSEE AS PER RULE 4(6) OF THE CENTRAL EXC ISE RULE 2002 READ WITH PARA 3.18 OF CHAPTER V OF SUPPLEMENTA RY MANUAL OF INSTRUCTION. THOUGH THE AO HAD TREATED THE NON RETURNABLE SCRAP AS CONCEALED SALES YET ON THE OTHE R HAND, THE PAYMENT OF EXCISE DUTY ON THE SAME HAD NOT BEEN ALLOWED TO THE APPELLANT. THE LIABILITY OF EXCISE DUT Y WAS OF THE PRINCIPAL MANUFACTURER AND VENDORS HAD NO LIABI LITY FASTENED TO HIM. THE LEDGER ACCOUNT OF EXCISE DUTY PERTAINING TO THE YEAR UNDER REFERENCE WAS ALSO SUBMITTED. IT I S NOT IN DISPUTE THAT THE APPELLANT HAD PAID THE EXCISE DUTY OF RS 19,13,583/- ON VARIOUS DATES AND SAME IS ALLOWABLE A S AN EXPENDITURE. I THEREFORE DIRECT THE AO TO DELETE TH E ADDITION OF RS. 19,13,583/- MADE BY HIM. THIS GROUND OF APPEA L IS ALLOWED. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. APROPOS THE FIRST GROUND OF APPEAL, THE LD. CIT D .R. CONTENDS THAT IN THIS BUSINESS, THE SCRAP IS NECESSARILY GENERATE D AND THE ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE THE ALLEGED BUSINE SS PRACTICE TO THE EFFECT THAT THE SCRAP GENERATED BY THE JOB WORKERS I S RETAINED BY THEM. IN ABSENCE OF ANY SUCH PRACTICE, THE ASSESSING OFFI CER WAS JUSTIFIED IN ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 13 HOLDING THAT THE SCRAP WAS RECEIVED BACK BY THE ASSE SSEE AND SOLD OUTSIDE THE BOOKS. THEREFORE, THE ADDITION IN THIS BEHALF IS FULLY JUSTIFIED. 6.1 APROPOS THE SECOND GROUND, IT IS CONTENDED THAT THE DIFFERENCE IN THE FIGURES VALUE OF THE GOODS MANUFACTURED AND SOL D BY THE ASSESSEE IN EXCISE REGISTER ER-1 AND BOOKS OF ACCOUNT IS SIG NIFICANT AND THE SAME HAS NOT BEEN PROPERLY ANSWERED BY THE ASSESSEE. THE L EARNED CIT(A) ON ASSUMPTION HAS HELD THAT ER-1 REGISTER REFERS TO THE EXCISABLE VALUE, WHICH IS DIFFERENT THAN THE ACTUAL VALUE. SIMILARLY, IN RESPECT OF THE DIFFERENCE ATTRIBUTABLE TO THE DIFFERENCE OF ACCOUN T OF ASSESSEE AND SKF INDIA LTD., PROPER RECONCILIATION HAS NOT BEEN PROV IDED. 6.2 APROPOS THE THIRD GROUND, IT IS CONTENDED THAT WHEN THE ASSESSEE IS NOT SHOWING ANY SALE OF SCRAP THEN THERE IS NO JU STIFICATION IN ALLOWING THE EXCISE DUTY PAYABLE BY THE ASSESSEE IN THIS BEH ALF. 7. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT I N EARLIER YEARS AND IN SUBSEQUENT YEARS, THE ASSESSMENTS HAVE BEEN MADE ON THE CLEAR UNDERSTANDING THAT THE JOB WORK SCRAPE IS RETAINED B Y THE JOB WORKERS. IT HAS BEEN WRONGLY HELD BY THE ASSESSING OFFICER TH AT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE IN THIS BEHALF. THE ASSESSE E ADDUCED THE EVIDENCE OF M/S NOBLE INDUSTRIES FROM WHOM THE JOB WO RK OF ABOUT 3.56 CRORES WERE DONE, WHICH HAS MADE A SALE OF SCRA P OF RS. ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 14 7,47,109/- AND OFFERED IN ITS INCOME, WHICH IS PART OF PAPER BOOK. LD. CIT(A) HAS REFERRED TO THE CASE OF M/S ROCKET ENGINE ERING CORPORATION VS. CCE 2006(193) ELT 33 (CESTAT), WHERE IT WAS HELD TH AT THE SCRAPE WAS NOT REQUIRED TO BE RETURNED TO PRINCIPAL VENDOR. FURTHER THE ASSESSEE REQUIRED TO PAY AND DUTY ON THE SCRAPE GEN ERATED AT THE PREMISES OF JOB WORKERS SINCE CENVAT CREDIT RULES AF TER 01/04/2000 MADE SUCH PROVISION. THIS VIEW WAS CONFIRMED IN CCE VS ROCKET ENGINEERING CORPORATION (2008) 223 ELT 347 (BOMBAY HIGH COURT DB) AND IT WAS FOLLOWED IN EMCO LTD. VS. CCE (2008) 223 E LT 613 (CESTAT). THE LEARNED ASSESSING OFFICER HAS BROUGHT NOTHING ON RECORD TO INDICATE THAT THE ASSESSEE IN ANY MANNER INDULGE D IN ANY OUT OF BOOKS SALE OF SCRAPE. THE ASSESSEES PREMISES ARE EX CISE BOUND AND ANY INCOMING MATERIAL WILL BE ENTERED INTO THE CORRE SPONDING REGISTER. THUS, NOTHING HAS BEEN BROUGHT ON RECORD BY ASSESSIN G OFFICER TO HOLD AN ADVERSE VIEW THAT ANY SCRAP WAS RECEIVED BACK OR S OLD OUTSIDE THE BOOKS OF ACCOUNT. 7.1 APROPOS SECOND GROUND, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT IT IS A COMMON KNOWLEDGE THAT THE DUTY OF EXCISE IS ON THE BASIS OF AD VALOREM, WHICH IS A FIXED EXCISABLE VALUE OF THE GOODS STIPULATED BY THE CENTRAL EXCISE RULES, THUS IT IS A STATUTORY VALUE ON ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 15 WHICH EXCISE IS LEVIED AND ER-1 IS MAINTAINED TO FUL FILL THAT STATUTORY REQUIREMENT. THIS IS NOT AND CANNOT BE COMPARED WITH THE ACTUAL SALE PRICE REALIZED BETWEEN TWO BUSINESS ENTITIES. THE DUTY OF EXCISE DOES NOT DEPEND ON THE ACTUAL SALE VALUE I.E. EVEN IF TH E ASSESSEE HAS INCURRED A LOSS THE DUTY IS PAYABLE AD VALOREM, THU S ON REMOVAL OF GOODS FROM EXCISABLE PREMISES ASSESSEE HAS TO PAY T HE EXCISE DUTY ON THE STIPULATED EXCISABLE VALUE. THE LEARNED ASSESSIN G OFFICER HAS ADOPTED THE FIGURES OF TWO DIFFERENT TYPES OF VALUES , WHICH ARE FUNDAMENTALLY UNCOMPARABLE. THE EXCISE RECORD OF THE ASSESSEE HAS BEEN ACCEPTED, IN VIEW THEREOF, THERE IS NO JUSTIFIC ATION IN HOLDING THAT THERE IS A DIFFERENCE IN EXCISABLE VALUE AND SALE T RANSACTION. THE LEARNED CIT(A) HAS DULY APPRECIATED ALL THE ASPECTS OF THE M ATTER AND BY DETAILED FINDINGS HAS HELD THAT NO SUCH ALLEGED DIF FERENCE EXISTS. 7.3 APROPOS THE THIRD GROUND, IT IS CONTENDED THAT THE EXCISE DUTY IS STATUTORY LIABILITY AND ONCE THIS BEING SO, THE AMO UNT IS ELIGIBLE, THE LEARNED CIT(A) HAS REFERRED TO RELEVANT AMENDMENT IN RULE 4(6) OF CENTRAL EXCISE RULES, 2002 IN THIS BEHALF, WHICH NOT IONALLY PRESCRIBES PERCENTAGE OF EXCISE DUTY LIABILITY EVEN IF THE SCR AP IS NOT RECEIVED BACK BY THE ASSESSEE. THE LIABILITY IS CREATED BY A STAT UTE, THE PAYMENT ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 16 THEREOF IS ALLOWABLE BUSINESS EXPENDITURE. THE ORDER OF THE LEARNED CIT(A) MAY BE CONFIRMED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. APROP OS THE FIRST GROUND I.E. THE ADDITION ON ACCOUNT OF ALLEGED SALE OF SCR AP, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) INASMUCH AS NOTH ING HAS BEEN BROUGHT ON RECORD BY LEARNED ASSESSING OFFICER THA T THE ASSESSEES JOB WORKERS RETURNED ANY SCRAP TO ASSESSEE. NOTHING HAS ALSO BEEN BROUGHT ON RECORD TO DEMONSTRATE IN ANY WAY THAT ASSESSEE IN DULGED IN ANY SALE OF SCRAP OUTSIDE THE BOOKS OF ACCOUNT. THIS IS FURTH ER INDICATED BY NEW CENVAT CREDIT RULES, WHICH HOLDS THAT THE SCRAP WAS N OT REQUIRED TO BE RETURNED TO THE ASSESSEE. THE SAME IS REFERRED TO BY THE JUDGMENT IN THE CASE OF M/S ROCKET ENGINEERING CORPORATION VS. CCE (SUPRA). THE ASSESSEE FURTHER PROVIDED EVIDENCE FROM M/S NOBLE I NDUSTRIES, WHICH HAS DONE A JOB WORK OF 3.56 CRORES AND HAS SHOWN THE INCOME ATTRIBUTABLE TO SALES OF SCRAPE OF RS. 747109/-, IN ITS BOOKS. THESE FACTS AND OBSERVATIONS DEMONSTRATE THAT THE ASSESSEE DID NOT RECEIVE ANY SCRAP BACK FROM JOB WORKERS. THERE BEING NO EVIDENCE WHATSOEVER SUGGESTING ANY UNACCOUNTED SALES BY THE ASSESSEE, T HE ORDER OF LEARNED ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 17 CIT(A) ON THESE ISSUES IS UPHELD. THIS GROUND OF REV ENUES APPEAL IS DISMISSED. 8.1 APROPOS THE SECOND GROUND, WHICH INCLUDES THE A DDITION AMOUNT OF RS. 1,35,56,787/- RELATING TO CONCEALED SALE OF SCRAP, THE BALANCE AMOUNT TO DIFFERENCE SHOWN BY THE ASSESSEE AS RECEIV ABLE FROM SKF AND THE PAYABLE AMOUNT IN THE BOOKS OF SKF, THE ASS ESSEE HAS DEMONSTRATED THAT THE DIFFERENCE WAS DUE TO THE DISP UTES PERTAINING TO DEFECTIVE AND INFERIOR QUALITY OF GOODS. THE ASSESSE E USED TO ACCOUNT FOR THE ACTUAL INVOICE VALUE WHEREAS THE PURCHASES WE RE ACCOUNTED BY SKF NOT ON THE BASIS OF THE SALES BILLS BUT ON THE BASIS OF SETTLED AMOUNTS QUA THESE INVOICES. ALL THESE ISSUES HAVE B EEN DISCUSSED IN DETAILS BY THE LEARNED CIT(A) AS MENTIONED ABOVE. I N VIEW THEREOF, WE SEE NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE ALSO, WHICH IS UPHELD. THE SECOND GROUND OF REVENUE APPEAL IS DISMISSED. 8.2 APROPOS THE THIRD GROUND THE ASSESSEE DEMONSTRA TED THAT AS PER RULE 4(6) OF THE CENTRAL EXCISE RULES, THE ASSESSEE WAS LIABLE FOR EXCISE DUTY ON THE NOTIONAL VALUE OF NONRETURNABLE SCRAP. THUS, THE ASSESSEE HAS TO FACE THE SITUATION WHERE THE SCRAPE WAS NOT RE TURNABLE TO IT AND ON TOP OF THAT THE EXCISE DUTY ON SUCH SCRAPE WAS AL SO PAYABLE BY THE ASSESSEE AS PER EXCISE RULES. IN VIEW THEREOF, THE E XCISE DUTY IN RESPECT ITA 659/JP/2012_ ACIT VS. M/S PUSHP ENTERPRISES 18 OF UNRETURNED SCRAP BECOMES A STATUTORY/LEGAL LIABI LITY OF THE ASSESSEE, WHICH IS ALLOWABLE BUSINESS EXPENDITURE. THE LEARNED C IT(A) HAS CONSIDERED THE ISSUE IN RIGHT PERSPECTIVE AND WE SEE NO INFIRMITY IN ITS ORDER ON THIS GROUND, THE SAME IS UPHELD. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/2015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 13 TH FEBRUARY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE A.C.I.T., CIRCLE-4, JAIPUR.. 2. IZR;FKHZ @ THE RESPONDENT- M/S PUSHP ENTERPRISES, JAIPUR. 3. VK;DJ VK;QDRVIHY @ THE CIT(A)-II,JAIPUR. 4. VK;DJ VK;QDR @ CIT, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 659/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR