ITO, Ludhiana V. M/s Arora Alloys Ltd., Ludhiana

ITA 78/CHANDI/2012

• Counselvise Citation: 7821514 RSA 2012
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Unexplained investment; Depreciation; Onus to prove
• Section: 143(3); 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 78/CHD/2012 ASSESSMENT YEAR: 2008-09 THE ITO, VS M/S ARORA ALLOYS LTD., WARD-1(1), LUDHIANA LUDHIANA PAN NO. AABCA5309C (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JAISHREE SHARMA RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 01.03.2012 DATE OF PRONOUNCEMENT : 01.03.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A)-1, LUDHIANA DATED 2.11.2011 RELATING TO ASSE SSMENT YEAR 2008-09. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING TH E ADDITION OF RS. 91,89,357/- MADE ON ACCOUNT OF UNEXPLAINED SALES, WHEREAS THE SAME ISSUE IS CONTES TED BY THE DEPARTMENT BEFORE THE HON'BLE HIGH COURT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 , THE DECISION OF WHICH IS STILL PENDING. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE DERIVES INCOME FROM MANUFACTURING OF STEEL INGOTS AND STEEL CASTINGS FROM ITS 2 FURNACE. ON 25.3.2004, AN INSPECTION WAS CARRIED O UT BY THE EXCISE AUTHORITIES AT THE PREMISES OF THE ASSESSEE AND DUR ING THAT INSPECTION, THE CONCERNED REVENUE DEPARTMENT HAD NOTICED THAT SALES HAD BEEN SUPPRESSED BY THE ASSESSEE; BEING RAW MATERIAL PURCHASED AND F INISHED GOODS SOLD IN CASH IN OPEN MARKET, NOT ACCOUNTED IN THE REGULAR B OOKS OF ACCOUNT OF THE ASSESSEE. FOR THE YEAR UNDER CONSIDERATION, THE AS SESSEE FILED ITS RETURN DECLARING TAXABLE INCOME AT RS. 4,92,190/- ON 17.9. 2008, WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (I N SHORT 'THE ACT') AT THE SAME INCOME. THE CASE OF THE ASSESSEE FOR ASSESSME NT YEAR 2005-06 WAS MADE U/S 143(3) READ WITH SECTION 148 OF THE ACT V IDE ORDER DATED 31.12.2009 AND THE ADDITIONS EXCEEDING RS. 10 LAKH S WERE MADE AND HENCE THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION WAS PICKED UP FOR SCRUTINY BY THE ASSESSING OFFICER. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 91,89,357/- ON ACCOUNT OF PROFIT ON SO CALLE D UNEXPLAINED SALES NOT REFLECTED IN THE BOOKS OF ACCOUNT AS PER DETAILS GI VEN IN PARAS 4 TO 12 OF THE ASSESSMENT ORDER. 4. ON APPEAL, THE CIT(A) DELETED THE ADDITION FOR T HE REASONS STATED IN PARAS 7, 8 & 9 OF THE IMPUGNED ORDER. PARAS 7 TO 9 OF THE ORDER OF CIT(A) READS AS UNDER:- 7. I HAVE CONSIDERED THE BASIS OF ESTIMATE OF UNACCOUNTED PRODUCTION MADE BY THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR ON THE ISSUE. IT IS CLEAR THAT THE ASSESSING OFFICER APART FORM WORKING OUT PER UNIT ELECTRICITY CONSUMPTION TO PRODUCE ONE METRIC TON OF STEEL INGOTS HAS RELIED UPON THE ASSESSMENT ORDER FRAMED IN THE CASE OF THE ASSESSEE FOR A.Y. 2005-06 WHICH IN TURN WAS BASED UPON THE CONFESSIONAL STATEMENT OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY BEFORE 3 THE CENTRAL EXCISE AUTHORITY ON 25/3/2004. THE ADDITION MADE IN THE CASE OF THE ASSESSEE ON THE BASIS OF INFORMATION RECEIVED FROM EXCISE AUTHORITIES FOR A.Y. 2004-05 AND 2005-06 HAD BEEN DELETED BY CIT(A)-I , LUDHIANA AND THE ORDER OF THE CIT(A)-I, HAS BEEN CONFIRMED BY HON'BLE ITAT A BENCH, CHANDIGARH VIDE THEIR ORDER DATED 24/6/2011. THE HON'BLE TRIBUNAL HAS HELD THAT STATEMENT OF SH. HARMESH ARORA BEFORE THE EXCISE AUTHORITIES CAN NOT BY ITSELF FORM THE BASIS FOR MAKING THE IMPUGNED ADDITIONS AND THE AO HAD GIVEN NO OTHER BASIS TO SUPPORT THE ADDITIONS. 8. THE ASSESSING OFFICER, FOR THE YEAR UNDER CONSIDERATION HAS WORKED OUT AN ADDITIONAL BASIS TO SUPPORT THE CASE MADE OUT FOR THE A.Y. 2004-05 AND 2005-06 BY HIGHLIGHTING THAT THE PER UNIT CONSUMPTION OF ELECTRICITY OF THE ASSESSEE COMPANY WAS EXCESSIVE. THE AR WITH REFERENCE TO THIS BASIS TAKEN BY THE AO HAS RELIED UPON THE ORDER OF HON'BLE SUPREME COURT OF INDIA DATED 31/1/2011 IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE, MEERUT VS. R.A CASTING (P) LTD. WHEREIN THE HON'BLE APEX COURT HAS UPHELD THE ORDER OF CUSTOM, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL AND HELD THAT THE FINDINGS OF THE TRIBUNAL WERE BASED ON MATERIAL ON RECORD. THE HON'BLE APEX COURT RECORDED AS UNDER:- 'BEING AGGRIEVED BY THE IMPUGNED ORDERS, THE RESPONDENTS FILED APPEALS BEFORE THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI . THE TRIBUNAL BY THE IMPUGNED ORDERS ALLOWED THE APPEALS, 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 MANDATORY REQUIRES THE COMMISSIONER TO PRESCRIBE/FIX NORM FOR ELECTRICITY CONSUMPTION FIRST AND NOTIFY THE SAME TO THE MANUFACTURES AND THEREAFTER ASCERTAIN THE REASONS FOR DEVIATIONS, IF ANY, TAKING ALSO INTO ACCOUNT THE CONSUMPTION OF VARIOUS I NPUTS, REQUIREMENTS OF LABOUR, MATERIAL, POWER SUPPLY AND THE CONDITIONS FOR RUNNING THE PLANT TOGETHER WITH THE ATTENDANT FACTS AND CIRCUMSTANCES. THE TRIBUNAL FURTHER OBSERVED THAT NO EXPERIMENTS 4 HAVE BEEN CONDUCTED IN THE FACTORIES OF THE APPELLANTS FOR DEVISING THE CONSUMPTION NORMS OF ELECTRICITY NORMS OF ELECTRICITY FOR PRODUCING ONE MT OF STEEL INGOTS. TRIBUNAL ALSO OBSERVED THAT THE ELECTRICITY CONSUMPTION VARIES FROM ONE UNITS TO ANOTHER AND FROM ONE DATE TO ANOTHER AND EVEN FROM ONE HEAT TO ANOTHER WITHIN THE SAME DATE. THEREFORE, NO UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD OF ELECTRICITY CONSUMPTION CAN BE ADOPTED FOR DETERMINING THE EXCISE DULY LIABILITY THAT TOO ON THE BASIS OF IMAGINARY PRODUCTION ASSUMED BY THE ' REVENUE WITH NO OTHER SUPPORTING RECORD, EVIDENCE OR DOCUMENT TO JUSTIFY ITS ALLEGATIONS. THE TRIBUNAL HAS ALSO CONSIDERED THE REPORT OF DR. BATRA, WHICH HAS BEEN RELIED UPON FOR MAKING THE ALLEGATIONS THAT THERE WAS HIGHER ELECTRICITY CONSUMPTION. IT APPEARS THAT DR. BATRA IN HIS REPORT HAS OBSERVED THAT FOR THE PRODUCTION OF 1 MT OF STEEL INGOTS, 1046 UNITS ELECTRICITY REQUIRED.' 9. THE PERUSAL OF JUDGEMENT OF HON'BLE APEX COURT AS DETAILED ABOVE SHOWS THAT ELECTRICITY CONSUMPTION CAN NOT BE TAKEN TO BE A RELIABLE BASIS FOR ESTIMATING THE PRODUCTION OF A PARTICULAR UNIT FOR THE PURPOSES OF IMPOSITION OF EXCISE DUTY. THE MAIN REASON FOR THE SAME IS THAT THE CONSUMPTION OF ELECTRICITY DEPENDS UPON VARIOUS FACTORS LIKE TYPE QUALITY OF SCRAP USED, NUMBER OF BREAK DOWNS, QUALITY OF THE LABOUR / SUPERVISORY STAFF, DILIGENC E OF THE MANAGEMENT ETC. THEREFORE, THE ASSESSING OFFICERS ACTION IN ESTIMATING ASSESSEE COMPANYS PRODUCTION ON THE BASIS OF ALLEGED EXCESSIVE CONSUMPTION OF ELECTRICITY IS ERRONEOUS AND FALLACIOUS. THE ADDITION MADE IS THEREFORE, DELETED . 5. GROUND NO. 2 OF THE APPEAL READS AS UNDER:- 2. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING TH E ADDITION OF RS. 25,70,931/- MADE ON ACCOUNT OF UNEXPLAINED PURCHASES, WHEREAS THE SAME ISSUE IS CONTESTED BY THE DEPARTMENT BEFORE HON'BLE HIGH COU RT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004 -05, THE DECISION OF WHICH IS STILL PENDING. 5 6. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 2 5,30,931/- ON ACCOUNT OF ALLEGED INVESTMENT OUT OF UNEXPLAINED SOURCES OF PURCHASE OF RAW MATERIAL OUTSIDE THE BOOKS OF ACCOUNT U/S 69 OF THE ACT AS P ER PARA 13 OF THE ASSESSMENT ORDER. 7. ON APPEAL, THE CIT(A) DELETED THE ADDITION OBSE RVING AS UNDER:- 1 0. THE GROUND OF APPEAL AT SR. NO. 5 PERTAINS TO THE CLAIM OF THE AR THAT THE THAT THE AO HAS WRONGLY MA DE AND ADDITION OF RS. 25,70,931/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PURCHASE OF RAW MATERIAL. THE ADDITION MADE BY THE AO IS DELETED KEEPING INTO VIEW THE DETAILED JUDGEMENT WITH REFERENCE TO GROUND OF APPEAL AT SR. NO. 3 AS ABOVE . 8. WE WILL DECIDE BOTH THE GROUNDS IN SUCCEEDING PA RAGRAPHS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE IS SUE RAISED VIDE GROUND NO.1 OF THE APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF ITAT A BENCH, CHANDIGARH DATED 24.6. 2011 IN ASSESSEES CASE IN ITA NO. 319/CHD/2008 RELATING TO ASSESSMENT YEAR 2004-05. THE TRIBUNAL DECIDED SIMILAR ISSUE, OBSERVING AS UNDER:- 15. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY C ONSIDERED THEIR SUBMISSIONS (INCLUDING THE WRITTEN SUBMISSIONS), MA TERIALS PLACED BY THEM ON RECORD AND THE AUTHORITIES REFERRED TO BY T HEM. WE HAVE ALREADY REPRODUCED THE STATEMENT OF SHRI HARMESH AR ORA, DIRECTOR IN THE ASSESSEE-COMPANY AS RECORDED BY THE CENTRAL EXCISE AUTHORITIES. IN THE AFORESAID STATEMENT, IT IS ADMITTED THAT THE (I) CA PACITY OF THE FURNACE WAS RAISED FROM 4 MT TO 5 MT IN DECEMBER 2003; (II) RAW MATERIALS USED TO BE PROCURED IN CASH THROUGH BROKERS FOR GEN ERATING UNACCOUNTED PRODUCTION; AND (III) GOODS PRODUCED OU TSIDE THE BOOKS USED TO BE SOLD IN CASH WITHOUT ISSUING INVOICE OR RECORDING THEM AND WITHOUT PAYING EXCISE DUTY THEREON. BASED SOLELY ON THE AFORESAID STATEMENT, THE CENTRAL EXCISE AUTHORITIES CONCLUDED THAT THE ASSESSEE HAD PRODUCED 624 MT OF NON-ALLOY STEEL INGOTS WITHO UT ACCOUNTING THEM IN THE RECORD AND WITHOUT PAYMENT OF CENTRAL EXCISE DUTY THEREON. THE 6 ORDER PASSED AND SUBSEQUENTLY CONFIRMED BY THE ADJU DICATING AUTHORITY, CUSTOMS AND CENTRAL EXCISE IN THIS BEHALF WAS, ON A PPEAL, REVERSED BY THE COMMISSIONER (APPEALS), CUSTOMS AND CENTRAL EXC ISE. AT PP. 10-12 OF HIS APPELLATE ORDER, THE COMMISSIONER (APPEALS), CUSTOMS AND CENTRAL EXCISE HAS OBSERVED AS UNDER: THE APPELLANTS FURTHER SUBMITTED THAT THE ADJUDICA TING AUTHORITY IS NOT JUSTIFIED IN CONFIRMING THE DEMAND FOR DUTY ON THE ALLEGATION THAT THE CENTRAL EXCISE OFFICERS ON THEI R VISIT TO THE FACTORY PREMISES ON 25.3.2004, HAD VERIFIED THE LAS T HEAT TAPPED AT 0820 HOURS ON 25.3.2004 AND FOUND 45 INGOTS LYIN G THERE INSTEAD OF 37 INGOTS ENTERED IN THE LOG SHEET AND T HEREBY ASSUMING THAT THE APPELLANTS HAD BEEN USING THE FUR NACE WITH CAPACITY OF 5 MTS AS PER HEAT DURING THE PERIOD FRO M DECEMBER 2003 TO 24.3.2004. THEY SUBMITTED THAT THEY HAD ACT UALLY BEEN USING INDUCTION FURNACE WITH PRODUCTION CAPACITY OF 4 MTS PER HEAT ONLY AND HAD ACTUALLY PRODUCED 37 INGOTS IN LA ST HEAT TAPPED AT 0820 HOURS ON 25.3.2004 AND ENTERED THE PRODUCTI ON OF 37 INGOTS ONLY IN THEIR LOG SHEET AS THEY HAD BEEN MAK ING ENTRIES OF PRODUCTION IN THEIR STATUTORY RECORDS AS PER THE AC TUAL PRODUCTION OF STEEL INGOTS. THEY EXPLAINED THAT THE BALANCE 8 INGOTS PERTAINED TO THE PREVIOUS DAYS HEATS AND WERE REJE CTED/DEFECTIVE INGOTS LYING THERE FOR RE-MELTING. THIS EXPLANATION APPEARED TO HAVE BEEN ACCEPTED BY THE CENTRAL EXCISE OFFICERS A S OTHERWISE THEY WOULD HAVE SEIZED THESE 8 INGOTS ALLEGEDLY NOT ENTERED IN THE LOG SHEET. SINCE NO ACTION HAD BEEN TAKEN IN RE SPECT OF THESE 8 INGOTS BY THE CENTRAL EXCISE OFFICERS, IT CAN BE CONCLUDED THAT THE APPELLANTS HAD BEEN OPERATING INDUCTION FURNACE WITH PRODUCTION CAPACITY OF 4 MTS PER HEAT ONLY. I FULLY AGREE WITH THIS CONTENTION OF THE APPELLANTS AND FIND FORCE IN THE APPELLANTS CONTENTION. IF THE CENTRAL EXCISE OFFICERS WERE SO SURE THAT THE APPELLANTS HAD BEEN OPERATING INDUCTION FURNACE WIT H PRODUCTION CAPACITY OF 5 MTS PER HEAT INSTEAD OF 4 MTS PER HEA T AND THAT THE APPELLANTS HAD ACTUALLY PRODUCED 45 STEEL INGOT S INSTEAD OF 37 INGOTS IN LAST HEAT TAPPED AT 0820 HRS ON 25.3.2004 , THEN THE CENTRAL EXCISE OFFICERS WOULD HAVE SEIZED 8 STEEL I NGOTS ALLEGED LYING THERE HAVING NOT BEEN ENTERED IN THE LOG SHEE T OF THE APPELLANTS. SINCE NO SEIZURE OF 8 STEEL INGOTS HAD BEEN MADE, THE BENEFIT SHOULD GO TO THE APPELLANTS AND ACCORDINGLY , I HOLD THAT THE APPELLANTS HAD BEEN OPERATING INDUCTION FURNACE WITH PRODUCTION CAPACITY OF 4 MTS PER HEAT ONLY DURING T HE MATERIAL PERIOD AND THERE COULD BE NO QUESTION OF CLANDESTIN E MANUFACTURE AND REMOVAL OF STEEL INGOTS. I ALSO AGR EE WITH THE APPELLANTS THAT AT THE MATERIAL TIME, THE EXCISE DU TY WAS NOT LEVIABLE ON THE CAPACITY OF PRODUCTION BUT WAS LEVI ABLE ON THE ACTUAL PRODUCTION AND CLEARANCE OF STEEL INGOTS. TH IS FACT ALSO STRENGTHENS MY EARLIER FINDING THAT THE STATEMENT O F SHRI HARMESH ARORA CANNOT BE TERMED TO BE AN INDEPENDENT AND 7 VOLUNTARILY ONE AND CANNOT BE MADE THE BASIS FOR CO NFIRMING THE DEMAND FOR DUTY. THE APPELLANTS FURTHER SUBMITTED THAT NEITHER ANY VERIFICATION NOT ANY INVESTIGATION HAD BEEN MADE FR OM THEM AS TO FROM WHERE THEY HAD ACQUIRED/PURCHASED THE RAW MATE RIALS FOR THE MANUFACTURE OF INGOTS ALLEGEDLY CLEARED WITHOUT PAYMENT OF DUTY; TO WHOM THEY HAD SOLD THE SAID INGOTS AND TO VERIFY/INVESTIGATION FROM THE CONSIGNORS-SUPPLIERS AS TO WHETHER THEY HAD SUPPLIED THE RAW MATERIALS TO M/S ARORA AL LOYS LTD.; LUDHIANA OR FROM THE USERS OF SUCH INGOTS AS TO WHE THER THEY HAD RECEIVED ANY INGOTS FROM M/S ARORA ALLOYS LTD.; LUD HIANA; AS TO HOW THE PAYMENTS FOR THE SCRAP PURCHASED HAD BEEN M ADE AND ALSO AS TO HOW THE PAYMENTS FOR THE INGOTS SOLD HAD BEEN RECEIVED AND ALSO AS TO WHETHER ANY ENQUIRY HAD BEE N MADE FROM THE TRUCK DRIVES AS TO WHETHER THEY HAD TRANSP ORTED THE GOODS, IN QUESTION. THE APPELLANTS SUBMITTED THAT T HERE IS NOTHING ON RECORD TO SHOW THAT ANY SUCH VERIFICATIO N/INVESTIGATION HAD BEEN MADE BY THE DEPARTMENT AND AS SUCH THE DEP ARTMENT HAS TOTALLY FAILED TO DISCHARGE THE BURDEN OF PROOF REGARDING THE CLANDESTINE MANUFACTURE AND REMOVAL OF STEEL INGOTS AND IN THE ABSENCE OF ANY SUCH INVESTIGATIONS AND DISCHARGE OF BURDEN OF PROOF, THE CHARGES AGAINST THE APPELLANTS TOTALLY F AIL AND THE ALLEGATIONS OF REMOVAL OF GOODS WITHOUT PAYMENT OF DUTY DO NOT SUSTAIN AND THE IMPUGNED ORDER MERITS TO BE QUASHED OUT RIGHTLY. IN SUPPORT OF THIS SUBMISSION, THE APPELLANTS PLACE D RELIANCE UPON THE FOLLOWING JUDGMENTS OF THE APPELLATE TRIBUNAL:- A) RAWALWASIA ISPAT UDYOG LTD. V. CCE, DELHI REPORT ED AS 2005 (186) ELT 465 (TRIBUNAL-DELHI) B) CCE, JALANDHAR V. HARCHARAN BROTHERS REPORTED AS 2004 (168) ELT 454 (TRIBUNAL-DELHI) C) ESS VEE POLYMERS (P) LTD & OTHERS V. CCE, JAIPUR REPORTED AS 2004 (165) ELT 291 (T) D) RAJASTHAN FOILS PVT LTD. & OTHERS V. CCE, JAIPUR REPORTED AS 2005 (69) RLT 131 (CESTAT-DELHI) E) RAMA SHYAMA PAPERS LTD. V. CCE REPORTED AS 2004 (168) ELT 494 (TRIBUNAL-DELHI) WHEREIN IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY INDEPENDENT UNIMPEACHABLE EVIDENCE, SUCH AS, ANY MATERIAL/EVIDENCE SHOWING PURCHASE OF RAW MATERIALS /EXCESS CONSUMPTION OF ELECTRICITY/TRANSPORT AND DELIVERY O F GOODS TO CONSIGNEES/PAYMENT FOR THE GOODS ETC., THE CHARGES OF CLANDESTINE MANUFACTURE AND REMOVAL ARE NOT PROVED AND DEMAND FOR DUTY IS NOT SUSTAINABLE. IN THE PRESENT CASE ALSO I FIND THAT THE ALLEGED ALLEGATIONS OF CLANDESTINE MA NUFACTURE AND REMOVAL OF STEEL INGOTS HAVE REMAINED UNCORROBORATE D BY ANY 8 INDEPENDENT UNIMPEACHABLE EVIDENCE SUCH AS PURCHASE OF RAW MATERIALS/CONSUMPTION OF ELECTRICITY/PURCHASE OF ST EEL INGOTS BY BUYERS/ENQUIRY FROM THE TRANSPORT REGARDING THE TRA NSPORTATION OF RAW MATERIALS/STEEL INGOTS/FLOW BACK OF MONEY ETC. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE DEPARTMENT HAS C OMPLETELY FAILED IN PROVING THE ALLEGATION OF CLANDESTINE MAN UFACTURE AND CLEARANCE OF STEEL INGOTS BY THE APPELLANTS. TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES OF TH E MATTER, ALSO THE FACT THAT NEITHER ANY STATEMENT FROM ANY PURCHA SER OF THE ALLEGED CLANDESTINELY REMOVAL STEEL INGOTS WAS RECO RDED NOR THE STATEMENT OF ANY SELLER OF THE RAW MATERIALS WAS BR OUGHT ON RECORD NOR THE STATEMENT OF ANY TRANSPORTER WAS BRO UGHT ON RECORD NOR ANY RECOVERY OF SALE PROCEEDS OF CLANDES TINELY REMOVED STEEL INGOTS WAS MADE, COUPLED WITH THE FAC T THAT NEITHER THE STOCK OF FINISHED GOODS WAS FOUND IN EX CESS AT THE TIME OF SURPRISE VISIT BY THE CENTRAL EXCISE OFFICE RS, THE DEPARTMENT HAS NOT SUBSTANTIATED ITS CASE AND IT CA NNOT BE REASONABLY BE SAID THAT THE APPELLANTS HAVE CLANDES TINELY MANUFACTURED AND CLEARED STEEL INGOTS WITHOUT PAYME NT OF DUTY. AS SUCH, APPLYING THE RATIO OF THE PRINCIPLE LAID D OWN BY THE APPELLATE TRIBUNAL IN THE CASES, SUPRA, THE CONFIRM ATION OF DEMAND FOR DUTY AND IMPOSITION OF PENALTIES ON THE COMPANY APPELLANT NO. 1 AND ITS DIRECTOR (APPELLANT NO. 2) AS DETAILED IN THE IMPUGNED ORDER, CANNOT BE SUSTAINED AND ARE, TH EREFORE, SET ASIDE. 16. AT THE TIME OF HEARING BEFORE US, IT WAS SUBMIT TED BY BOTH THE PARTIES THAT THE ORDER DATED 21.4.2006 PASSED BY TH E COMMISSIONER (APPEALS), CUSTOMS AND CENTRAL EXCISE HAS NOT BEEN ACCEPTED BY THE DEPARTMENT OF THE CUSTOMS AND CENTRAL EXCISE AND TH AT APPEAL HAS BEEN FILED BEFORE THE CENTRAL EXCISE AND SERVICE TA X APPELLATE TRIBUNAL WHICH IS STILL PENDING FOR DISPOSAL. 17. PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE A O SHOWS THAT THE AO WORKED OUT UNACCOUNTED SALES ON THE BASIS OF UNACCOUNTED PRODUCTION CALCULATED BY THE CENTRAL EXCISE AUTHORI TIES SOLELY ON THE BASIS OF STATEMENT OF SHRI HARMESH ARORA AS RECORDE D BY THEM ON 25.3.2004. AS REGARDS THE EVIDENTIARY VALUE OF A ST ATEMENT CONTAINING ADMISSION, IT HAS BEEN HELD IN THIRU JOHN V. RETURN ING OFFICER, AIR 1977 SC 1724, 1726-7 THAT AN ADMISSION, IF CLEARLY AND E QUIVOCALLY MADE, IS THE BEST EVIDENCE AGAINST THE PARTY MAKING IT AND, THOUGH NOT CONCLUSIVE, SHIFTS THE ONUS ON TO THE MAKER ON THE PRINCIPLE THAT WHAT A PARTY HIMSELF ADMITS TO BE TRUE MAY REASONABLY BE P RESUMED TO BE SO AND UNTIL THE PRESUMPTION WAS REBUTTED THE FACT ADM ITTED MUST BE TAKEN TO BE ESTABLISHED. IT HAS BEEN HELD IN NARAYANA BH AGWANTRAO GOSAVI BALAJIWALE V. GOPAL VINAYAK GOSAVI, AIR 1960 S.C 10 0,105 THAT AN ADMISSION IS THE BEST EVIDENCE THAT AN OPPOSING PAR TY CAN RELY UPON AND THOUGH NOT CONCLUSIVE, IS DECISIVE OF THE MATTER UN LESS SUCCESSFULLY WITHDRAWN OR PROVED ERRONEOUS. THE LEGAL POSITION T HAT EMERGES FROM 9 CATENA OF AUTHORITIES ON THE SUBJECT IS THAT THE PR OPOSITION THAT AN ADMISSION IS DECISIVE OF THE MATTER IS SUBJECT TO F OUR QUALIFICATIONS, NAMELY, (1) THE ADMISSION MUST HAVE BEEN VOLUNTARIL Y MADE; AN ADMISSION CANNOT BE ACTED UPON UNLESS THE FACTS AVA ILABLE ON RECORD SHOW THAT IT WAS VOLUNTARILY MADE; (2) THE ADMISSIO N MUST BE CLEAR AND UNEQUIVOCAL; (3) AN ADMISSION CANNOT BE ACTED UPON IF IT IS PROVED BY THE PERSON MAKING IT THAT IT IS INCORRECT OR ERRONE OUS; AND (4) AN ADMISSION CANNOT BE ACTED UPON IF IT IS INCONSISTEN T WITH THE MATERIALS AVAILABLE ON RECORD. UNLESS AN ADMISSION FALLS UNDE R ANY OF THE AFORESAID FOUR SITUATIONS, AN ADMISSION IS DECISIVE OF THE MA TTER. THE QUESTION AS TO WHETHER AN ADMISSION, WHICH IS NOT CORROBORATED BY INDEPENDENT MATERIALS, CAN FORM THE SOLE BASIS FOR DECISION CAN BETTER BE ANSWERED WITH REFERENCE TO THE FACTS OF THE CASE. THERE IS N O UNIVERSAL RULE THAT AN ADMISSION OR CONFESSION IS NEVER DECISIVE UNLESS IT IS CORROBORATED. SIMILARLY THERE IS NO UNIVERSAL RULE THAT AN ADMISS ION/CONFESSION IS ALWAYS DECISIVE IN ALL CASES. THE ANSWER TO THE QUE STION AS TO WHETHER A STATEMENT CONTAINING ADMISSION/CONFESSION IS DECISI VE IN A GIVEN CASE DEPENDS UPON THE NATURE OF ADMISSION, CONTENTS OF A DMISSION, AND SEVERAL OTHER RELEVANT FACTORS. 18. APPLYING THE AFORESAID PRINCIPLES, WE SHALL NOW EXAMINE AS TO WHETHER THE STATEMENT MADE BY SHRI HARMESH ARORA BE FORE THE CENTRAL EXCISE AUTHORITIES IN THE CONTEXT OF LEVY OF EXCISE DUTY ON UNACCOUNTED PRODUCTION CAN FORM THE SOLE BASIS FOR MAKING THE I MPUGNED ADDITIONS BY THE AO. FIRST AND MOST IMPORTANT ASPECT IS THAT THE SAID STATEMENT WAS NOT RECORDED BY THE INCOME-TAX AUTHORITIES BUT BY THE CENTRAL EXCISE AUTHORITIES. AS HELD BY THE HONBLE HIGH COU RT (REPRODUCED SUPRA), PROCEEDINGS UNDER THE CENTRAL EXCISE ACT HA VE RELEVANCE ONLY FOR FORMATION OF OPINION OF ESCAPEMENT OF INCOME AN D THEREAFTER THE INCOME-TAX AUTHORITIES HAVE TO INDEPENDENTLY FINALI SE THE RE-ASSESSMENT IRRESPECTIVE OF THE FINAL VIEW IN EXCISE PROCEEDING S. WE FIND THAT THE AO HAS REASSESSED THE INCOME AND MADE THE IMPUGNED ADD ITIONS SOLELY ON THE BASIS OF THE INFORMATION RECEIVED BY HIM FROM T HE CENTRAL EXCISE DEPARTMENT WITHOUT BRINGING ANY MATERIAL ON RECORD TO JUSTIFY OR SUPPORT THE ADDITIONS. THE IMPUGNED ADDITIONS ARE L IABLE TO BE CANCELLED ON THIS GROUND ALONE AND ARE ACCORDINGLY CANCELLED. 19. WITHOUT PREJUDICE TO THE AFORESAID, MATERIALS A VAILABLE ON RECORD DO NOT ESTABLISH THAT THE MELTING CAPACITY OF THE F URNACE WAS 5 MT OR INCREASED TO 5 MT FROM 4 MT. AFTER CAREFUL CONSIDER ATION OF THE MATERIALS AVAILABLE ON RECORD, THE LD. CIT(A) HAS H ELD AS UNDER: ..FURTHER, AS BROUGHT OUT ABOVE ON A SUBSEQUEN T SURPRISE INSPECTION BY THE EXCISE AUTHORITIES, THE CAPACITY OF THE APPELLANTS UNIT HAS BEEN STEED TO BE OF 4 MTS ONLY . THEREFORE, THE SAME DEPARTMENT IS CERTIFYING THAT THE INSTALLE D CAPACITY OF THE FURNACE IS OF 4 MTS ONLY. FURTHER AS ALREADY M ENTIONED THIS IS NOT POSSIBLE THAT THE APPELLANT HAD INSTALLED A 5 M T FURNACE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R UNDER CONSIDERATION AND THAT, HOWEVER, FURNACE OF 4 MT HA D BEEN 10 INSTALLED BEFORE AND AFTER THAT PERIOD. ALSO THERE IS NOTHING ON RECORD THAT THE APPELLANT INCURRED ANY EXPENSES FOR REMOVAL AND INSTALLATION OF THE FURNACE AS ABOVE AND THAT THE S ANCTIONED LOAD DURING THE RELEVANT PERIOD WAS MORE THAN 2250 KW WH ICH IS A MUST FOR USING 5 MT FURNACE.. 20. IN OUR VIEW, THE VIEW TAKEN BY THE LD. CIT(A) I S REASONABLE ON THE FACTS OF THE CASE. ENTIRE ADDITION HAS BEEN MAD E ON THE BASIS OF THE STATEMENT OF SHRI HARMESH ARORA AS RECORDED BY THE CENTRAL EXCISE AUTHORITIES IN WHICH HE STATED THAT THE CAPACITY OF FURNACE WAS INCREASED FROM 4 MT TO 5 MT IN DECEMBER 2003. CAPACITY OF FUR NACE IS NOT A MATTER WITHIN THE DOMAIN OF PERSONAL KNOWLEDGE OF T HE ASSESSEE; RATHER IT IS AN OBJECTIVE FACT WHICH IS CAPABLE OF VERIFIC ATION AND PROOF BY DIRECT EVIDENCE. FOLLOWING FACTS AVAILABLE ON RECORD ESTAB LISH THAT THE CAPACITY OF FURNACE WAS NOT 5 MT BUT 4 MT. (I) PERUSAL OF THE MATERIALS PLACED ON RECORD (PP.1 87-189 OF THE PAPER-BOOK I FOR AY 2005-06) SHOWS THAT THE ASS ESSEE HAD ADDRESSED LETTERS DATED 14.8.2002, 16.8.2002, AND 2 1.8.2002 TO THE SUPERINTENDENT, CENTRAL EXCISE, RANGE I, DIVISI ONII, LUDHIANA CONVEYING REPLACEMENT OF THE THEN EXISTING FURNACE OF 3 TON WITH NEW FURNACE OF 4 TON. IN ITS LAST LETTER D ATED 21.8.2002 ADDRESSED TO THE SUPERINTENDENT, CENTRAL EXCISE, TH E ASSESSEE- COMPANY INFORMED THAT IT HAD COMMENCED PRODUCTION O N NEW FURNACE ON 21.8.2002 AT 08:00 HOURS. IT IS QUITE UN LIKELY THAT AN ASSESSEE WOULD CHANGE THE FURNACE ALMOST IN A YEAR (I.E., IN DECEMBER 2003) FROM 4 TON TO 5 TON. BESIDES, THERE IS NO EVIDENCE BEFORE US TO SHOW THAT THE FURNACE OF 4 TO N, WHICH WAS PROCURED IN 2002, WAS ACTUALLY REPLACED BY A FURNAC E OF 5 TON IN DECEMBER 2003. (II) EACH FURNACE HAS TECHNICAL SPECIFICATIONS WHI CH ARE AVAILABLE WITHIN THE UNIT AS ALSO IN THE INVOICE. THESE SPECI FICATIONS CONTAIN VARIOUS DETAILS, E.G., THE IDENTITY NUMBER OF THE F URNACE AND ITS MAKER/MANUFACTURER, ITS CAPACITY, WATTAGE, ETC. NO DETAIL HAS BEEN PLACED BEFORE US TO SHOW THAT THE TECHNICAL SP ECIFICATIONS OF THE FURNACE FOUND AT THE TIME OF VISIT BY THE CENTR AL EXCISE AUTHORITIES ON 25.3.2004 WERE DIFFERENT FROM THE ON E PROCURED BY THE ASSESSEE IN 2002. NEITHER THE AO MADE THE INQUI RY IN THIS BEHALF AT THE ASSESSMENT STAGE NOR PREFERRED TO DO SO WHEN HE WAS GIVEN THE OPPORTUNITY BY THE CIT(A) TO DO SO. (III) REPORT DATED 2.5.2007 GIVEN BY ER. J S OBEROI , CHARTERED ENGINEER/VALUER SHOWS THAT HE VISITED THE FACTORY O F THE ASSESSEE AND FOUND THAT THE FURNACE OF 4 TON, WHICH WAS PROC URED IN 2002, WAS BEING USED BY THE ASSESSEE. AFTER NOTING THE TE CHNICAL SPECIFICATIONS OF THE FURNACE, THE WEIGHT OF THE IN GOTS PRODUCED, THE ELECTRICITY LOAD SANCTIONED, HE OPINED THAT THE AVERAGE MELTING CAPACITY OF FURNACE WAS 4 MT. NO MATERIAL H AS BEEN PLACED BEFORE US TO REBUT THE FACTS REPORTED OR THE OPINION EXPRESSED BY THE CHARTERED ENGINEER. 11 (IV) SUPPRESSED OR UNACCOUNTED PRODUCTION WAS WORKE D OUT BY THE CENTRAL EXCISE AUTHORITIES FOR THE PERIOD DECEM BER 2003 TO 25.3.2004 ON THE BASIS THAT THE MELTING CAPACITY OF FURNACE WAS 5 MT DURING THAT PERIOD. THE CAPACITY OF FURNACE BEIN G 4 MT AFTER 25.3.2004 WAS NOT EVEN DOUBTED AS THE SUPPRESSED PR ODUCTION WAS WORKED OUT TILL 25.3.2004 WHICH MEANS THAT IT W AS ACCEPTED THEREAFTER, I.E., AFTER 25.3.2004, THAT THE MELTING CAPACITY OF THE FURNACE WAS 4 MT. THIS SOUNDS QUITE ILLOGICAL. (V) FIELD INSPECTION WAS CARRIED OUT BY THE CENTRAL EXCISE AUTHORITIES ON 25.11.2005 AND A REPORT TO THAT EFFE CT HAS BEEN RECORDED IN THE DAILY STOCK ACCOUNT. IT IS STATED I N THE SAID REPORT THAT THE THE UNIT HAS INSTALLED 4 MT FURNACE. NO MATERIAL HAS BEEN PLACED BEFORE US TO REBUT THE AFORESAID REPORT . (VI) THOUGH THE INSPECTION WAS CARRIED OUT BY THE C ENTRAL EXCISE AUTHORITIES ON 25.3.2004 ALSO AT THE PREMISE S OF THE ASSESSEE, THERE IS NOTHING IN THE ASSESSMENT ORDER TO SHOW THAT THE INSPECTION REPORT PREPARED, IF ANY, BY THE CENT RAL EXCISE AUTHORITIES WAS AT ALL CONSIDERED BY THE AO. IT HAS ALSO NOT BEEN PLACED BEFORE US EITHER. THERE IS ABSOLUTELY NO MAT ERIAL BEFORE US TO SHOW THAT THE CENTRAL EXCISE AUTHORITIES HAD AT ALL MADE ANY ATTEMPT TO VERIFY THE MELTING CAPACITY OF THE FURNA CE DURING THE COURSE OF THEIR INSPECTION ON 25.3.2004. (VII) THE AO HAS PLACED NO MATERIAL ON RECORD TO SH OW THAT THE ASSESSEE HAD MADE ANY INVESTMENT TOWARDS ACQUISITIO N OF FURNACE OF 5 MT OR THAT THE AO HAS ALLOWED DEPRECIA TION THEREON, I.E., FURNACE OF 5 MT. THERE IS NO MATERIAL ON RECO RD TO HOLD THAT THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE ON T HE FURNACE OF 4 MT WAS REJECTED BY THE AO. 21. BESDIES, THE STATEMENT OF SHRI HARMESH ARORA HA S SEVERAL GAPS ON MATERIAL ISSUES. FOR EXAMPLE, THE STATEMENT OF S HRI HARMESH ARORA IS COMPLETELY SILENT AS TO (I) WHEN WAS FURNACE OF 5 M T WAS PROCURED AND FROM WHOM IT WAS PROCURED; (II) ANY OF THE PARTIES FROM WHOM RAW MATERIALS WAS PURCHASED FOR GENERATING UNACCOUNTED PRODUCTION; (III) ANY OF THE PARTIES TO WHOM UNACCOUNTED PRODUCTION W AS SOLD. 22. IN VIEW OF THE FOREGOING, THE STATEMENT OF SHRI HARMESH ARORA CANNOT BY ITSELF FORM THE BASIS FOR MAKING THE IMPU GNED ADDITIONS. THE AO HAS GIVEN NO OTHER BASIS TO SUPPORT THE ADDITION S MADE BY HIM. IN 12 THIS VIEW OF THE MATTER, THE ORDER PASSED BY THE CI T(A) IN THIS BEHALF IS CONFIRMED. GROUND NO. 2 IS DISMISSED. 10. THE FACTS AND CIRCUMSTANCES OF THE PRESENT YEAR ARE SIMILAR TO THAT OF ASSESSMENT ORDER 2004-05. RESPECTFULLY FOLLOWING T HE ORDER OF THE TRIBUNAL (SUPRA) PASSED IN ASSESSEES CASE FOR ASSESSMENT YE AR 2004-05, WE DISMISS THE GROUND NO.1 OF THE APPEAL. IT IS RELEVANT TO OBSER VE HERE THAT IN ASSESSMENT YEAR 2004-05, THE REVENUE AGITATED SIMILAR ISSUE VI DE GROUND NO.2 OF THE APPEAL. 11. THE ISSUE RAISED BY THE REVENUE VIDE GROUND NO. 2 OF THE APPEAL IS ALSO COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY THE DECISION OF THE ITAT A BENCH, CHANDIGARH, ORDER DATED 24.6.20 11 IN ASSESSEES CASE IN ITA NO.319/CHD/2008 RELATING TO ASSESSMENT YEAR 200 4-05. RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 23. APROPOS GROUND NO.1, THE AO ESTIMATED UNEXPLAI NED EXPENDITURE AMOUNTING TO RS.69,59,370/- TOWARDS PUR CHASE OF RAW MATERIALS ON THE GROUND THAT IT MUST HAVE BE EN UTILIZED IN PRODUCING 624 MTS OF UNACCOUNTED GOODS. THE AO H AS MADE THE IMPUGNED ADDITIONS U/S 69C. WE HAVE ALREAD Y DELETED THE ADDITION MADE BY THE AO WITH REFERENCE TO UNACCOUNTED PRODUCTION AND SALE OF 624 MTS OF STEEL INGOTS. IN THIS VIEW OF THE MATTER, THE IMPUGNED ADDITIONS CANNOT BE SUSTAINED. THE ORDER OF THE CIT(A) DELETING THE IMP UGNED ADDITION IS THEREFORE CONFIRMED. GROUND NO.1 IS DIS MISSED. 12. THE FACTS AND CIRCUMSTANCES OF THE PRESENT YEAR ARE SIMILAR TO THAT OF ASSESSMENT ORDER 2004-05. RESPECTFULLY FOLLOWING T HE ORDER OF THE TRIBUNAL (SUPRA), WE DISMISS THE GROUND NO.2 OF THE APPEAL. IT IS RELEVANT TO OBSERVE 13 HERE THAT IN ASSESSMENT YEAR 2004-05, THE REVENUE A GITATED SIMILAR ISSUE VIDE GROUND NO.1 OF THE APPEAL. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS IST DAY OF MARCH, 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : IST MARCH, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR