ACIT, Kota V. PREM JAIN ISPAT UDHYOG PVT. LTD., Kota

ITA 839/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1974 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 26-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L CHANDEL
• Keywords: Rejection of books of accounts; Business expenditure; Search and seizure; Corroborative evidences; Revenue expenditure; Capital expenditure
• Section: 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 839/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2013-14 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-02 KOTA CUKE VS. M/S PREM JAIN ISPAT UDHYOG PVT. LTD., BAJAJ PALACE, NEAR PALIWAL COMPOUND, CHHAWANI, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAECP6241P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 887/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2013-14 M/S PREM JAIN ISPAT UDHYOG PVT. LTD., BAJAJ PALACE, NEAR PALIWAL COMPOUND, CHHAWANI, KOTA CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-02 KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAECP6241P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI S.L.CHANDEL (ADDL. CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 26/07/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: /07/2017 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 2 THESE ARE TWO CROSS APPEALS FILED BY THE REVENUE A ND THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A), KOTA DAT ED 12.07.2016 FOR A.Y. 2013-14 WHEREIN THE RESPECTIVE GROUNDS OF THE APPEAL ARE AS UNDER:- ITA NO. 839/JP/16 (GROUND OF REVENUES APPEAL):- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2, 23,33,467/- OUT OF THE TOTAL ADDITION OF RS. 2,42,83,459/-. ITA NO. 887/JP/16 (GROUND OF ASSESSEES APPEAL):- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE FINDINGS OF AO THAT THE AMOUNT SHOWN IN PAPER/D OCUMENTS FOUND IN SEARCH CONDUCTED BY THE EXCISE AUTHORITIES REPRESENTS THE UNRECORDED SALES OF THE ASSESSEE. 1.1 THE LD. CIT(A) HAS FURTHER ERRED ON FACTS AND I N LAW IN CONFIRMING THE ADDITION OF RS. 19,49,962/- BY APPLY ING THE G.P RATE OF 8.03% ON THE ALLEGED UNRECORDED SALES OF RS . 2,42,83,459/- (CORRECT AMOUNT AS PER THE PAPERS/DOC UMENTS IS RS. 2,34,75,870/-). HE HAS FURTHER ERRED IN APPLYIN G THE G.P RATE OF 8.03% AS AGAINST G.P. RATE OF 6.03% AS PER THE B OOKS OF ACCOUNTS. 2. FIRSTLY, REGARDING GROUND NO. 1 OF THE REVENUE A ND THE GROUND NO. 1 AND 1.1 TAKEN BY THE ASSESSEE, BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF IRON AND STEEL TORS/SARIA AND INGOTS. THE EXCISE DEPARTMENT CONDUC TED A SEARCH AND SEIZURE OPERATION ON 06.07.2012 AT THE FACTORY PREM ISES OF THE ASSESSEE. IN SEARCH, 32 SLIPS INDICATING THE DISPAT CH OF GOODS (473 MT) WERE FOUND FROM THE OFFICE PREMISES AND ONE SLIP NO . 33 (665 MT) INDICATING THE QUANTITY OF STOCK ON 04.03.2012 WAS FOUND FROM THE ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 3 POSSESSION OF GENERAL MANAGER OF THE COMPANY SHRI J .D. PANT. ACCORDING TO THESE PAPERS, THE QUANTITY INVOLVED IS 1138.304 MT. FURTHER, THE TOTAL QUANTITY OF STOCK WAS INVENTORIS ED AT 379.00 MT AGAINST THE BOOK STOCK OF 467.209 MT AND THUS STOCK WAS DETERMINED SHORT BY 88.209 MT. ACCORDINGLY, THE COMMISSIONER E XCISE ISSUED SHOW CAUSE NOTICE ALLEGING THAT ASSESSEE HAS SOLD GOODS OF RS. 4,92,99,999/- (RS. 4,57,61,333/- + RS. 34,88,666/-) WITHOUT PAYME NT OF EXCISE DUTY AND THUS EVADED THE PAYMENT OF EXCISE DUTY OF RS. 6 0,87,300/-. 2.1 ON THE REPRESENTATION MADE BY THE ASSESSEE BEFORE T HE COMMISSIONER EXCISE, HE ACCEPTED THAT OUT OF 32 SLI PS, THE DISPATCH OF GOODS WITH REFERENCE TO 25 SLIPS INVOLVING A QUANTI TY OF 390MT IS RECORDED IN THE BOOKS OF ACCOUNTS. HOWEVER, HE DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT IN RESPECT OF 7 SLIPS IN VOLVING 83 MT, THE ORDERS WERE CANCELLED AND THEREFORE THE GOODS WERE NOT DISPATCHED. IN RESPECT OF SLIP NO. 33 FOUND FROM THE POSSESSION OF THE GM, HE ACCEPTED THAT THE QUANTITY AS PER THIS SLIP IS 412 MT AND NO T 665 MT BUT HE DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT IT IS ONL Y A DUMB PAPER ON THE GROUND THAT ASSESSEE HAS NOT FURNISHED THE AVAILABI LITY OF STOCK WITH IT AS ON 04.03.2012. HE ALSO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT THERE IS NO SHORTAGE OF STOCK OF 88.209 MT. ACCORDI NGLY, HE DETERMINED THE EVASION OF DUTY OF RS. 30,01,451/- OF WHICH THE CORRESPONDING VALUE OF GOODS IS WORKED OUT AT RS.2,42,83,584/-. 2.2 ON THE BASIS OF THE ABOVE INFORMATION RECEIVED FROM THE EXCISE AUTHORITIES, THE AO ISSUED A SHOW CAUSE NOTICE DATE D 02.02.2016 WHICH IS REPRODUCED AT PAGES 1-16 OF THE ASSESSMENT ORDER . THEREAFTER, FROM PAGES 17 TO 22 OF THE ORDER, HE EXTRACTED CERTAIN F INDINGS FROM THE ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 4 ORDER OF THE EXCISE COMMISSIONER AND ISSUED SHOW CA USE NOTICE AS TO WHY BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED U/S 14 5(3). THE ASSESSEE FILED ITS EXPLANATION STATING THE REASONS FOR DECLI NE IN G.P. RATE AS ALSO EXPLANATION IN RESPECT OF THE PAPERS WHICH HAS BEEN CONSIDERED BY THE EXCISE AUTHORITIES AS REMOVAL OF GOODS WITHOUT PAYM ENT OF EXCISE DUTY. HOWEVER, THE AO REJECTED THE SAME AND HELD THAT AS PER THE PAPERS FOUND IN SEARCH BY THE EXCISE AUTHORITIES, ASSESSEE HAS SOLD GOODS OUT OF BOOKS OF RS.2,42,83,459/-. HE FURTHER HELD THAT COST AND EXPENSES AGAINST SUCH SALES IS ALREADY DEBITED IN THE REGULA R BOOKS OF ACCOUNTS AND THEREFORE THE ALLEGED SALE OF RS. 2,42,83,459/- WAS ADDED TO THE INCOME. THIS ADDITION WAS FURTHER JUSTIFIED BY HOLD ING THAT AFTER INCLUDING THIS AMOUNT IN THE SALE AND THE PROFIT, T HE G.P. RATE WORKS OUT AT 8.01% AS COMPARED TO 8.03% DECLARED IN THE LAST YEAR. 2.3 THE LD. CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) BY HOLDING THAT THE BOOKS OF ACCOUNTS ARE IN COMPLETE, FALSE AND UNRELIABLE. THEREAFTER, HE APPLIED GP RATE OF 8.03% ON THE ALLEGED SUPPRESSED TURNOVER OF RS. 2,42,82,459/-, THEREBY C ONFIRMING TRADING ADDITION OF RS.19,49,962/- AS AGAINST ADDITION OF R S. 2,42,82,459/- MADE BY THE AO. THE RELEVANT FINDINGS OF THE LD CIT (A) WHICH ARE UNDER CHALLENGE BY BOTH THE PARTIES ARE AS UNDER: AS REGARDS GROUND NO. 2, IN THE PRESENT CASE, IT I S SEEN THAT AS PER THE ORIGINAL CUSTOMS AND EXCISE DEPARTMENT (CED) REPORT , THE TOTAL VALUE OF GOODS CLEARED FROM THE ASSESSEES FACTORY WITHOUT P AYMENT OF EXCISE DUTY WAS 1138.64 MT VALUED AT 4,57,61,333 & EXCISE DUTY EVADED @ 12.6% WAS 56,56,101/- DIFFERENTIAL STOCK OF FURNISH ED GOODS VALUED AT 88,209 MT INVOKING VALUE OF RS. 34,88,666/- & ED EV ASION OF 4,31,999/- ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 5 WAS ACCEPTED BY THE ASSESSEE IN CED SEARCH OPERATIO N AND TAX PAYMENT OF RS. 40 LAKHS WAS MADE & RS. 20.87 LAKHS DEBITED THROUGH RG-23 A PART II. OUT OF THE ABOVE, THE CCE-I JAIPUR ASSESSED GOODS S OLD & SUPPRESSED SALE AT RS. 37,75,173+1,66,10,450/- & STOCK AT RS. 34,88,606/-, THUS TOTALING THE UNCLEARED SLIPS FOUND FOR CLANDESTINE SALES WITHOUT PAYING EXCISE DUTY TO RS. 2,38,74,289/- INSTEAD OF RS. 4,5 7,61,333/-. IT WAS A NEVER A CASE OF EXCISE DEPARTMENT THAT THE RE WAS NO COST TO THOSE GOODS. IT IS THE DUTY EVASION ON THE SALE VAL UE THAT THEY WERE CONSIDERING. NATURALLY, IF THE SALE VALUE WOULD BE Y AMOUNT, T HE MANUFACTURING COST WOULD BE SOME X AMOUNT ALSO. THIS HAS NOT SEEN WO RKED OUT ANYWHERE. UNDER THE CIRCUMSTANCES, THE A.O., DURING THE COURSE OF INCOME TAX PROCEEDINGS SHOULD HAVE TRIED TO WORK OU T A COSTING BASED ON THE NORMAL PROCESS TO SEE WHAT 1 MT OF THE PRODU CT COSTS & SHOULD THEN HAVE MULTIPLIED IT WITH THE UNRECORDED SALE QU ANTITY TO GET ITS COST & COMPARATIVE PROFIT, EVEN IF HE DID NOT ALLOW ANY OTHER OVERHEAD OR ADMINISTRATIVE COSTS, IT WOULD HAVE BEEN ACCEPTABLE . HOWEVER, WHAT HE HAS DONE IS THAT HE HAS TAKEN THE ENTIRE SALE VALUE AS PROFIT. IN THE SCENARIO HERE THAT THE PRODUCT MADE BY THE ASSESSEE IS A HIGH VALUE ONE AND THE TURNOVER IS MORE THAN 110 CR ORES, THE UNRECORDED SALES EVEN IF TAXED FULLY WOULD NOT GIVE AN EXORBITANT PROFIT RATE (WHICH IN THIS CASE HE HAS WORKED OUT @ 8% G.P .) BUT THE ASSESSEE HAS BEEN SHOWING A MARGIN OF 1 TO 1.17% AS NET PROFIT ON THE SALES CONSISTENTLY. FOR A PROFIT OF 2 .38 CRORES TO BE INCLUDED ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 6 IN THE SALES TURNOVER, THE SALES WOULD HAVE TO INCR EASE BY APPROXIMATELY ANOTHER 25-30 CRORES, WHICH EVIDENCE HAS NOT BEEN B ROUGHT ON RECORD ANYWHERE, SO THE ENTIRE THEORY OF THE ASSESSING OFF ICER APPEARS TO BE NOT LOGICALLY SUPPORTED BY EVIDENCES. HE HAS ONLY CAUGHT THE FIGURE FROM THE CENTRAL EXCISE DEPARTMENT ORDER AND ADDED IT AT BOTH THE PLACES NAMELY TURNOVER AS WELL AS PROFITS. HE INITIALLY GAVE A SHOW CAUSE FOR REJECTION OF BOO KS AND ESTIMATION OF G.P. @ 7.19% AND SUBSEQUENTLY HE MENTIONED THAT IN VIEW OF THE SUPPRESSED TURNOVER DETECTED, THE UNRECORDED SALES AND STOCK FIGURES SHOULD BE SUBSTITUTED AND DID NOT REJECT THE BOOKS BUT ADDED THE ABOVE AMOUNT IN THE PROFITS. THUS THE A.O RESORTED TO BEST JUDGMENT WITHOUT REJE CTING THE BOOKS AND ADDING THE DETECTED AMOUNTS FINALIZED IN THE CED ASSESSMENT ORDER, WITHOUT ANY INDEPENDENT APPLICATI ON OF MIND OR PROCEDURE PRESCRIBED U/S 145 (3). HE HAS NO T BROUGHT ON RECORD IF HE HAS CARRIED OUT ANY INDEPENDENT ENQ UIRIES BASED ON WHICH HE HAS REACHED THE CONCLUSION THAT T HE SALES WERE UNRECORDED. HIS ONLY RELIANCE APPEARS TO BE ON THE EXCISE DEPARTMENT FINDINGS AND GENERAL DISCUSSION ON G.P. IT WAS NOTICED THAT IN THE CASE OF MITTAL PIGMENTS PVT. LTD., KOTA (PAN AABCM1418N) FOR A.Y 2011-12, THE CENTRAL EXCISE DEP ARTMENT HAD CARRIED OUT A SIMILAR ACTION OF SEARCH AND THE ACIT CIRCLE 1, KOTA, HAD BASED ON THAT ADJUDICATION ORDER OF COMMISSIONER CE NTRAL EXCISE, JAIPUR-1, PASSED AN ASSESSMENT ORDER TAKING ASSESSE E COMPANYS OWN G.P. RATE ON THE UNDISCLOSED SALES ESTIMATED TO HAV E BEEN PRODUCED FROM RAW MATERIAL FOUND SHORT IN THAT CASE. ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 7 THUS, I AM NOT IN AGREEMENT WITH THE ADDITION MADE BY THE A.O OF THE ENTIRE UNRECORDED SALE AND STOCK RELATED WORKING OF RS. 2,42,83,459/- ASSESSED AS THE PROFIT AS WELL AS ADDED TO THE TURN OVER (THOUGH IN THE EXCISE WORKING THE SAME WAS RS. 2,38,74,289/-). WHILE THE SAID AMOUNT OF RS. 2,42,83,459/- NEEDED T O BE ADDED TO THE TURNOVER, BUT LIKE IN THE CASE OF THE REST OF THE S ALES, THE A.O NEEDED (WITHOUT GIVING ANY RELIEF ON ACCOUNT OTHER ADMINIS TRATIVE EXPENSES ON THIS AMOUNT), TO MAKE THE ADDITION TO THE TOTAL INC OME OF THE ASSESSEE BY ADOPTING PROFIT AT THE RATE HE CHOSE FIT ON THES E UNDECLARED SALES ETC. IN ADDITION TO THE REGULAR PROFIT WITH DUE FINDING ON THE BASIS FOR THE SAME. IN A TOTALITY OF CIRCUMSTANCES, SINCE THESE ARE SUP PRESSED SALES ALREADY CONCLUDED AND NO PROFIT WORKING IS AVAILABLE FOR TH EM, I FEEL IT REASONABLE TO RESTRICT THE ADDITION ON THIS SUPPRES SED TURNOVER DETECTED @8.03% WHICH WAS THE ACCEPTED G.P RATE IN THE IMMED IATELY PRECEDING YEAR IN THE ASSESSEES ONW CASE. THE G.P SUSTAINED WILL BE 19,49,962/- IN ADDITION TO THE RETURNED PROFIT ON WHICH ALL EXP ENSES, COSTS ETC, WOULD BE DEEMED TO HAVE BEEN ALLOWED. THIS BALANCE ADDITION OF RS. 2,23,33,497/- IS DIREC TED TO BE DELETED. 3. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ENTIRE ADDITION MADE BY THE AO IS WITH REFERENCE TO THE FO LLOWING PAPERS/DOCUMENTS FOUND IN SEARCH CONDUCTED BY THE E XCISE AUTHORITIES:- (A) 7 SLIPS RELATED TO DISPATCH OF GOODS RS. 33,75,860 /- (B) SLIP FOUND FROM SHRI J.D. PANT RS. 1,66,11,35 0/- ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 8 (C) SHORT STOCK FOUND RS. 34,88,660/- TOTAL RS. 2,34,75,870/- ON THE BASIS OF ABOVE PAPERS AND OTHER PAPERS, THE EXCISE AUTHORITIES MADE OUT A CASE OF DUTY EVASION OF RS.60,87,300/- W HICH IS REDUCED TO RS.30,01,541/- BY THE COMMISSIONER OF CENTRAL EXCIS E. AGAINST THIS ORDER, BOTH THE PARTIES FILED APPEAL TO THE CESTAT. THE HONBLE CESTAT VIDE ORDER DT. 30.06.2017 DELETED THE ENTIRE DUTY L EVIED BY THE EXCISE AUTHORITIES. THUS, WHEN THE CESTAT HAS ACCEPTED THA T THERE IS NO CASE OF CLANDESTINE REMOVAL OF THE GOODS OR ANY STOCK FO UND SHORT, THE TRADING ADDITION MADE BY THE AO AND PARTLY CONFIRME D BY THE LD. CIT(A) DO NOT SURVIVE AND THEREFORE, THE ENTIRE TRADING AD DITION MADE BY THE AO BE DIRECTED TO BE DELETED. 3.1 ON MERIT, THE LD AR IN RESPECT OF EACH OF THE ABOVE ISSUES, SUBMITTED AS UNDER:- (A) 7 SLIPS RELATED TO DISPATCH OF GOODS (84.44 MT)- RS . 33,75,860/- (I) IN SEARCH, ANTI EVASION WING OF THE EXCISE DEPARTME NT FOUND 32 SLIPS RELATING TO DISPATCH OF GOODS. THE TOTAL Q UANTITY INVOLVED IN THESE SLIPS IS 473.304 MT. COPY OF THES E SLIPS ARE AT PB 34-39. A PERUSAL OF THESE SLIPS WOULD SHOW TH AT IT INDICATE THE NAME OF THE PARTY, THE VEHICLE NO., TH E SIZE OF GOODS, NO. OF BUNDLES AND WEIGHT. IN PROCEEDINGS BE FORE THE EXCISE AUTHORITIES, THE ASSESSEE GOT VERIFIED 25 SL IPS INVOLVING QUANTITY OF 388.864 MT FROM ITS BOOKS OF ACCOUNTS W HICH IS ACCEPTED BY THEM. IN RESPECT OF THE REMAINING 7 SLI PS NUMBERING 3, 11, 17, 22, 24, 27 & 31 INVOLVING QUAN TITY OF 84.44 MT, IT IS EXPLAINED THAT THE SAME WERE CANCEL LED. THE ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 9 DETAILS OF THESE SLIPS ALONG WITH THE EXPLANATION G IVEN IN RESPECT OF CANCELLATION OF THESE SLIPS IS AS UNDER PB 41-59:- S. NO. SLIP NO. QUANTITY (IN MT) NAME OF PARTY NAME OF DISTRIBUTOR AMOUNT (IN RS.) REMARKS 1 3 16.01 RAMU IRON PREM JI 6,44,656/- THE DISTRIBUTOR PLACED ORDER FOR SUPPLY OF MATERIAL ON 23.06.2012. HOWEVER, THE VEHICLE COULD NOT BE ARRANGED AND WHEN IT WAS ARRANGED ON THE NEXT DATE & GOODS LOADED IN THE TRUCK, ON COMMUNICATION WITH THE DISTRIBUTOR, HE INFORMED THAT DUE TO DELAY IN SUPPLY OF GOODS THE PARTY HAS CANCELLED THE ORDER. THE CONFIRMATION OF THE GANPATI STEEL CORPORATION WHOSE PROPRIETOR IS PREM AGARWAL IS FILED. 2 11 10.92 JAIN IRON SHYAM JI 4,46,486/- THE DISTRIBUTOR SOLD THE ABOVE GOODS ON ADVANCE PAYMENT CONDITION. BUT DUE TO NON PAYMENT OF ADVANCE AGAINST GOODS, THE DISTRIBUTOR CANCELLED THE ORDER. THE CONFIRMATION OF DISTRIBUTOR SHRI SHYAM ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 10 JI STEELS IS AT PB 45. 3 17 19.88 S. N. STEEL GHANSHYAM JI 8,03,543/- THE DISTRIBUTOR PLACED THE ORDER FOR SUPPLY OF MATERIAL TO S. N. STEEL ON 11.05.2012 BUT AS THE VEHICLE WAS NOT AVAILABLE ON THAT DAY, THE GOODS WERE LOADED IN THE TRUCK ON NEXT DAY. THEREAFTER, WHEN THE DISTRIBUTOR WAS CONTACTED, HE CANCELLED THE ORDER FOR NOT MAINTAINING THE DELIVERY SCHEDULE. THE CONFIRMATION OF THE DISTRIBUTOR, SHRI VINAYAK ENTERPRISES IS AT PB 48. 4 22 11.05 BUNDI 4,56,483/- DUE TO DELAY IN SUPPLY OF GOODS, THE DISTRIBUTOR M/S BAGHERWAL TRADERS CANCELLED THE ORDER AS PER THE CONFIRMATION PLACED AT PB 51. 5 24 9.91 BHAWANI MANDI 4,00,942/- DUE TO TECHNICAL PROBLEM IN VEHICLE AND NON SUPPLY OF MATERIAL ON TIME, THE DISTRIBUTOR M/S BAGHERWAL TRADERS CANCELLED THE ORDER AS PER THE CONFIRMATION PLACED AT PB 54. 6 27 0.6 LOCAL BUYER LOCAL BUYER 27,491/- DUE TO NON PAYMENT BY THE LOCAL BUYER, THE ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 11 CONSIGNMENT WHICH WAS LOADED TO THE TRUCK WAS NOT DISPATCHED AND THE ORDER WAS CANCELLED BY THE ASSESSEE. 7 31 15.97 JAGDAMB A IRON 5,99,259/- THE DEALER REFUSED TO TAKE THE DELIVERY OF GOODS AND CANCELLED THE ORDER DUE TO OVER CHARGED FREIGHT. TOTAL 84.44 33,75,860 (II) THIS WAS EXPLAINED TO THE AO BUT THE AO WITHOUT ASS IGNING ANY REASON HAS NOT ACCEPTED THE SAME. IT MAY ALSO BE NO TED THAT THIS EXPLANATION WAS ALSO FURNISHED BEFORE THE COMMISSIO NER EXCISE BUT HE HAS ALSO NOT ACCEPTED THE EXPLANATION ON THE GROUND THAT AT THE TIME OF SEARCH SHRI PREM CHAND JAIN, DIRECTO R AND SHRI J.D. PANT, GM HAVE ADMITTED THAT THESE GOODS WERE SOLD O UT OF BOOKS. THE COMMISSIONER EXCISE ALSO OBSERVED THAT CANCELLA TION LETTERS HAVE NOT BEEN SUBMITTED BY THE CONSIGNEES, IN SOME CANCELLATION LETTERS NO DATE IS MENTIONED, IN ONE CANCELLATION L ETTER DATE MENTIONED IS 11.12.2013 AND THAT WHEN THE ORDERS HA VE BEEN PROCURED ON VERBAL COMMUNICATION THE CANCELLATION L ETTER RECEIVED IN WRITING CREATES THE DOUBT. IN HOLDING SO, HE IGN ORED THAT IN THE STATEMENT SHRI PREM CHAND JAIN AND SHRI J.D. PANT A DMITTED THAT QUANTITY STATED IN ALL THE 32 SLIPS PERTAINS TO CLE ARANCE OF FINISHED GOODS WITHOUT PAYMENT OF DUTY AND WITHOUT COVER OF INVOICES WHEREAS THE FACT REMAINS IS THAT OUT OF THESE 32 SL IPS, THE COMMISSIONER EXCISE HIMSELF ACCEPTED THAT IN RESPEC T OF 25 SLIPS ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 12 THE SALE OF GOODS ARE DULY RECORDED IN THE BOOKS AN D EXCISE DUTY HAS BEEN PAID. THEREFORE, SUCH STATEMENT WHICH IS G IVEN UNDER STRESS CANNOT BE A BASIS TO HOLD THAT IN RESPECT OF 7 SLIPS WHERE THE ORDERS WERE CANCELLED AND GOODS WERE NOT DISPAT CHED AND FOR WHICH CONFIRMATIONS HAVE BEEN FILED IS SALE OUT OF BOOKS. SO FAR AS THE CANCELLATION LETTERS ARE CONCERNED, THE SAME WE RE OBTAINED BY THE ASSESSEE IN COURSE OF THE PROCEEDINGS BEFORE TH E EXCISE COMMISSIONER EXCEPT ONE CANCELLATION LETTER FROM SH RI SHYAM JI STEEL WHICH WAS ALREADY WITH THE ASSESSEE AND THERE FORE IN THESE CANCELLATION LETTER EITHER THE DATE IS NOT MENTIONE D OR IN ONE SUCH LETTER THE DATE MENTIONED IS 11.12.2013. IN ANY CAS E, THE ALLEGED DISCREPANCIES ARE IMMATERIAL PARTICULARLY WHEN THE CONFIRMATION OF THE ORDER CANCELLATION GIVING THE COMPLETE NAME AND ADDRESS HAS BEEN FURNISHED AND THE AO HAS NOT FOUND THESE CONFI RMATIONS AS NON GENUINE. (III) THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE HAS BEE N ACCEPTED BY THE HONBLE CESTAT. IN VIEW OF ABOVE DISCUSSIONS, NO SALES ON THE BASIS OF THESE 7 SLIPS CAN BE CONSIDERED AS UNRECORDED SALES OF THE ASSESSEE. (B) SLIP FOUND FROM SHRI J.D. PANT (412 MT) - RS.1,66,1 1,350/- (I) COPY OF THE SLIP IS AT PB 60. FROM THE SLIP IT CAN BE NOTED THAT IT IS DATED 04.03.2012 WHICH FALLS IN AY 2012- 13 AND NOT IN THE YEAR UNDER CONSIDERATION. ON THIS SLIP THE W ORD STOCK IS MENTIONED GIVING THE SIZE OF THE ITEM AND THE WEIGH T OF THESE ITEMS. THE SLIP DOES NOT CONTAIN NAME OF ANY PARTY OR ANY ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 13 VEHICLE NUMBER. THEREFORE, ON THE BASIS OF THIS SLI P NO UNRECORDED SALES CAN BE ASSUMED. (II) THE COMMISSIONER EXCISE HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE FOR THE REASON THAT ASSESSEE HAS NOT PRODU CED THE COPY OF DAILY STOCK ACCOUNT REGISTER, I.E. RG1 REGI STER TO ASCERTAIN WHETHER THE SAID QUANTITY OF STOCK WAS AV AILABLE IN THE BOOKS OR NOT AND THAT SHRI J.D. PANT IN HIS STA TEMENT HAS ACCEPTED THAT IT ALSO PERTAIN TO CLEARANCE OF GOODS WITHOUT PAYMENT OF DUTY AND WITHOUT COVERS OF INVOICES. IT IS SUBMITTED THAT AS ON 04.03.2012 THE ASSESSEE HAS 12 32 MT AS OPENING STOCK AND 1295 MT AS CLOSING STOCK WHICH IS MUCH MORE THAN THE QUANTITY MENTIONED ON THE SLIP PB 62- 63. THE SIZE WISE DETAILS OF SUCH STOCK MAINTAINED IN ISI R EGISTER IS PLACED AT PB 64 FROM WHICH IT IS VERIFIABLE THAT AS SESSEE HAS STOCK OF MUCH MORE QUANTITY THAT THAT MENTIONED ON THE SLIP. SO FAR AS STATEMENT OF SHRI. J.D. PANT IS CONCERNED , THIS STATEMENT WAS GIVEN ALONG WITH THE PAPERS AT S. NO. 1 TO 32 AND AS EXPLAINED ABOVE, SUCH STATEMENT GIVEN UNDER STRESS CANNOT BE A BASIS FOR MAKING THE ADDITION MORE PART ICULARLY WHEN SIMILAR STATEMENT GIVEN IN RESPECT OF 25 SLIPS HAS BEEN ACCEPTED HAS HAVING BEEN RECORDED IN THE BOOKS OF A CCOUNTS. (III) IT IS ALSO SUBMITTED THAT IN COURSE OF ASSESSMENT P ROCEEDINGS, ASSESSEE HAS FILED AFFIDAVIT (PB 61) OF THE DIRECTOR SHRI PREM CHAND JAIN WHERE HE HAS STATED THAT THIS SLIP WAS P REPARED FOR THE ANTICIPATED SALE OF FINISHED STOCK TO TWO P ARTIES. THE AO HAS NOT CONTROVERTED THIS AFFIDAVIT AND THEREFOR E ALSO ON ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 14 THE BASIS OF THIS SLIP IT CANNOT BE PRESUMED THAT A SSESSEE HAS SOLD GOODS OUT OF BOOKS MORE PARTICULARLY WHEN SLIP DO NOT RELATE TO THE YEAR UNDER CONSIDERATION. (IV) THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE HAS BEE N ACCEPTED BY THE HONBLE CESTAT AND THEREFORE, ON TH E BASIS OF SUCH PAPER, NO ADVERSE INFERENCE CAN BE DRAWN AG AINST THE ASSESSEE. (C) SHORT STOCK FOUND (88.209 MT) - RS. 34,88,660/- (I) COPY OF THE PHYSICAL VERIFICATION REPORT ON THE BAS IS OF WHICH SHORT STOCK OF 88.209MT IS DETERMINED IS PLACED AT PB 65. FROM THE SAME IT CAN BE NOTED THAT THE PHYSICAL STO CK IS STATED AT 379 MT AS AGAINST THE BOOKS STOCK OF 467. 209 MT. FROM THE LOOK OF THIS SHEET IT IS EVIDENT THAT THER E IS NO BREAK UP OF HOW 379 MT IS MEASURED. THE STOCK IS PLACED I N BUNDLES RANGING FROM 90 TO 110 KGS PER BUNDLE OF DIFFERENT- DIFFERENT SIZES SPREAD OVER THE ENTIRE FACTORY YARD. THEREFOR E, IN THE ABSENCE OF ANY BREAK-UP OF THE BUNDLES AND SIZE WHI CH TOTALLED TO 379 MT, IT IS EVIDENT THAT THE PHYSICAL STOCK HAS BEEN MENTIONED ONLY ON ESTIMATE BASIS. (II) THIS FACT WAS ALSO EXPLAINED BEFORE THE COMMISSIONE R EXCISE BUT HE HAS NOT ACCEPTED THE CONTENTION OF ASSESSEE ONLY FOR THE REASON THAT THE INVENTORY WAS TAKEN BEFORE TWO INDEPENDENT WITNESSES AND SHRI PREM CHAND JAIN AND SHRI J.D. PANT IN THE STATEMENT DT. 06.07.2012/29.10.201 2 ( PB 66-74 ) AGREED THAT THERE IS A SHORT STOCK OF 88.209MT.AS ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 15 EXPLAINED ABOVE THESE STATEMENTS WERE UNDER STRESS AND COERCION AND THEREFORE CANNOT BE A BASIS FOR ASSUMI NG THAT STOCK IS FOUND SHORT AND THE SAME IS SHOWN OUT OF B OOKS. (III) THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE HAS BEE N ACCEPTED BY THE HONBLE CESTAT AND THEREFORE, ON TH E BASIS OF SUCH PAPER, NO ADVERSE INFERENCE CAN BE DRAWN AG AINST THE ASSESSEE. IN VIEW OF ABOVE DISCUSSION AND MATERIAL AVAILABLE ON RECORD IT CAN BE NOTED THAT ASSESSEE HAS NOT SOLD ANY GOODS OUTSIDE THE BOOKS OF ACCOUNTS. 3.2 THE ABOVE POSITION WAS EXPLAINED BEFORE THE LD. CIT (A). THE LD. CIT(A) HAS NOT FOUND ANY DEFECT / DISCREPANCY IN TH E EXPLANATION SO FURNISHED BUT STILL WITHOUT ANY EVIDENCE HE HELD TH AT THE ASSESSEE HAS SOLD GOODS OUT OF BOOKS OF RS. 2,42,83,459/- ON WHI CH AFTER APPLYING G.P RATE OF 8.03% HE CONFIRMED ADDITION OF RS. 19,4 9,962/-. HOWEVER, THE HONBLE CESTAT HAS HELD THAT THERE IS NO CLANDE STINE CLEARANCE OF GOODS. THUS, THE ORDER OF THE EXCISE AUTHORITIES WH ICH IS THE BASIS FOR ALLEGING THAT ASSESSEE HAS SOLD OUT OF BOOKS DO NOT SURVIVE, THE ADDITION CONFIRMED BY THE LD. CIT(A) IS UNWARRANTED AND UNJU STIFIED. 3.3 IT IS ALSO SUBMITTED THAT ON THE BASIS OF THE ABOVE ACTION OF THE EXCISE AUTHORITIES, THE COMMERCIAL TAXES DEPARTMENT ALSO RAISED DEMAND OF VAT ON THE ASSESSEE. HOWEVER, IN APPEALS, THE SA ME WAS DELETED BY THE LD. CIT(A) BY HOLDING THAT THE ENTIRE DEMAND IS RAISED ON THE BASIS OF THE ACTION TAKEN BY THE EXCISE AUTHORITIES WITHO UT BRINGING ANY ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 16 EVIDENCE OF SALE OF GOODS OUT OF BOOKS. THE COPY OF THE ORDER IS AT PB 76-79. THUS, WHEN THE COMMISSIONER OF COMMERCIAL TA XES DEPARTMENT HAS DELETED THE DEMAND RAISED ON ACCOUNT OF ALLEGED SALE OF GOODS OUT OF BOOKS, THERE IS NO REASON TO MAKE ANY ADDITION O N ACCOUNT OF ALLEGED SUPPRESSED SALE OF GOODS. 5. THE LD. D/R SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. WE NOW REFER TO THE ORDER OF THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL DATED 30.06.2017 IN THE CASE OF M/S PREM JAIN ISPAT UDYOG PVT. LTD. VS. CC (PREV.) JAIPUR (EXCISE APPEAL NOS. 54511, 54512 & 54835 OF 2014 AND 54784 OF 2014) WHEREIN THE RELEVANT FINDINGS ARE AS UNDER: (5) WITH THE ABOVE BACKGROUND, WE HAVE HEARD BOTH THE SIDES. THE ASSESSEE WERE REPRESENTED BY SH. ARUNABH DEY, LD. C ONSULTANT AND SH. R.K. MISHRA, LD. AR FOR THE REVENUE. (6) REVENUE HAS CHALLENGED THE DROPPING OF DEMAND T O THE EXTENT OF RS. 30.85 LAKHS. THE DEMAND OF ABOUT RS. 60 LAKHS W AS PROPOSED IN THE SHOW CAUSE NOTICE ON THE BASIS OF THE QUANTIFICATIO N RELYING ON 32 KACHHA PARCHIS RECOVERED DURING SEARCH PROCEEDINGS. THE ASSESSEE CONTENDED DURING THE COURSE OF ADJUDICATION THAT OU T OF 32 SLIPS, 25 SLIPS OF VARIOUS DATES WERE OF DIFFERENT DISPATCHES , WHICH CORRELATE AND RECONCILE WITH THE EXCISE INVOICES ISSUED TO THE RE SPECTIVE PARTIES. THEY HAVE FURTHER CLAIMED THAT ALL THE CLEARANCES WERE D UTY PAID AND THERE WAS NO CLANDESTINE CLEARANCE. THE ADJUDICATING AUTH ORITY HAS CAREFULLY GONE THROUGH THE SAID 25 SLIPS ALONG WITH THE CONNE CTED INVOICES AND OTHER DOCUMENTS SUBMITTED BY THE ASSESSEE AND HAS G IVEN DETAILED ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 17 DISCUSSIONS IN PARA 36 OF THE IMPUGNED ORDER. WITH REFERENCE TO EACH KACHHA PARCHI AND THE RELEVANT INVOICE, HE HAS RECO RDED THAT THE QUANTITY, SIZE, TRUCK NO. NAME OF CONSIGNEE MENTION ED IN THE INVOICE ARE COMPLETELY MATCHING WITH THE DETAILS SO GIVEN I N THE RECOVERED KACHHA PARCHI. FURTHER, HE HAS RECORDED THAT THE SU BJECT INVOICES HAVE BEEN DULY ENTERED IN RG-1 REGISTER AS WELL AS THE L EDGER ACCOUNT. IN THE LIGHT OF THE ABOVE, HE HAS CONCLUDED THAT THE SUBJE CT CONSIGNEE WERE CLEARED ON PAYMENT OF CENTRAL EXCISE DUTY. WE HAVE GONE THROUGH THE RECORDS OF THE CASE AS WE LL AS THE FINDINGS OF THE ADJUDICATING AUTHORITY IN THIS REGA RD. WE ARE OF THE VIEW THAT SINCE THE ADJUDICATING AUTHORITY HAS GIVEN DET AILED FINDINGS THAT ALL THE GOODS COVERED BY 25 KACHHA PARCHIS HAVE BEEN CL EARED ON PAYMENT OF DUTY, WE FIND NO REASON TO TAKE A DIFFERENT VIEW . CONSEQUENTLY, WE UPHOLD THE DROPPING OF DEMAND OF RS. 30,85,849/- AN D REJECT THE REVENUES APPEAL. (7) THE ADJUDICATING AUTHORITY HAS CONFIRMED THE DE MAND AMOUNTING TO ABOUT RS. 30 LAKHS ON THE BASIS OF SEVEN KACHHA PARCHIS IN RESPECT OF WHICH THE ASSESSEE WAS NOT IN A POSITION TO SUBMIT PROOF FOR CLEARANCE OF GOODS UNDER INVOICES WITHOUT PAYMENT OF DUTY. HE HAS FURTHER RECORDED THAT BOTH SH. J.D. PANT, GENERAL MANAGER A S WELL AS SH. P.C. JAIN, DIRECTOR HAVE GIVEN INCULPATORY STATEMENTS UN DER SECTION 14 OF THE CENTRAL EXCISE ACT TO THE EFFECT THAT GOODS COVERED BY KACHHA PARCHIS WERE CLANDESTINELY CLEARED WITHOUT PAYMENT OF DUTY. FURTHER, THE ASSESSEE HAS ALSO PAID THE DUTY FOR THE GOODS COVER ED BY 32 SLIPS. THESE FINDINGS OF THE ADJUDICATING AUTHORITY HAVE BEEN CHALLENGED BY THE ASSESSEE IN THE PRESENT APPEALS. IT IS THEIR SUBMISSION THAT THE ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 18 GOODS COVERED BY THESE SEVEN SLIPS WERE NEVER DISPA TCHED FROM THE FACTORY FOR VARIOUS REASONS. IT IS THEIR SUBMISSION THAT THE KACHHA PARCHIS WERE INITIALLY MADE FOR INTERNAL USE INDICA TING THE QUANTITY OF MATERIAL, NAME OF THE PARTY, PLACE TO WHICH GOODS T O BE DISPATCHED AND OTHER DETAILS. LATER ON, THE RELEVANT QUANTUM OF GO ODS ARE IDENTIFIED FROM THE STOCKYARD AND LOADED INTO THE DISPATCH TRU CK WHOSE NUMBER IS ALSO INCLUDED IN THE KACHHA PARCHI. IN RESPECT OF T HESE SEVEN KACHHA PARCHIS, THE ORDERS PLACED BY THE CUSTOMERS HAVE GO T CANCELLED AND HENCE NO GOODS WERE DISPATCH TO THE PARTIES INDICAT ED IN THE KACHHA PARCHI. (8) ON GOING THROUGH THE IMPUGNED ORDER, WE NOTE TH AT THE ADJUDICATING AUTHORITY HAS NOT GIVEN DUE CONSIDERAT ION TO THE SUBMISSIONS MADE BY THE APPELLANT. THE ALLEGATION O F CLANDESTINE REMOVAL HAS BEEN UPHELD IN RESPECT OF GOODS MENTION ED IN THE SEVEN PARCHIS ONLY ON THE BASIS OF INCULPATORY STATEMENTS GIVEN BY SH. J.D. PATN, GENERAL MANAGER AND SH. P.C. JAIN, DIRECTOR. WE FIND FROM THE RECORD THAT REVENUE HAS NOT UNDERTAKEN ANY VERIFICA TION EITHER WITH THE BUYERS OR EVEN WITH THE TRANSPORTERS. NO INVESTIGAT ION APPEARED TO HAVE BEEN CARRIED OUT TO PROVE THAT SUCH GOODS WERE MANU FACTURED IN THE FACTORY BUT NOT ACCOUNTED FOR. (9) CLANDESTINE CLEARANCE IS A SERIOUS ALLEGATION A ND NEEDS TO BE ESTABLISHED ON THE BASIS OF TANGIBLE EVIDENCE. IT I S WELL ESTABLISHED FACT THAT ONLY ON THE BASIS OF THE INCULPATORY STATEMENT , THE CHARGES OF CLANDESTINE CLEARANCE CANNOT BE UPHELD. THE INCULPA TORY STATEMENTS GIVEN BY THE GENERAL MANAGER AND DIRECTOR ALSO DO N OT SPECIFICALLY COVER THE SEVEN PARCHIS. IN THE ABSENCE OF ANY CORROBORAT IVE EVIDENCE TO INDICATE THAT THE GOODS COVERED BY SEVEN PARCHIS WE RE CLEARED BY THE ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 19 APPELLANT, WE ARE OF THE VIEW THAT THE CHARGE OF CL ANDESTINE CLEARANCE AND DEMAND OF DUTY CANNOT BE SUSTAINED. THE ASSESSE E HAS CITED A LARGE NUMBER OF DECISIONS TO SUPPORT THE CONTENTION THAT CLANDESTINE CLEARANCE CANNOT BE UPHELD WITHOUT TANGIBLE EVIDENC E. (10) IN VIEW OF THE ABOVE DISCUSSIONS, THE APPEALS FIELD BY THE APPELLANT-ASSESSEE AND THEIR GENERAL MANAGER AND DI RECTOR ARE ALLOWED. THE APPEAL FILED BY THE REVENUE IS REJECTED. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE WHOLE CASE OF THE REVENUE RESTS ON SEARCH AND SEIZURE OPERATIONS CARRIED OUT BY THE EXCISE AU THORITIES ON 6.7.2012 AND THERE IS NO INDEPENDENT VERIFICATION AND EXAMIN ATION CARRIED OUT BY THE TAX AUTHORITIES TO DETERMINE OUT OF BOOKS SALES AND SHORTAGE OF STOCK. A FACT ALSO CONFIRMED BY THE LD CIT(A) AND W HICH LD DR FAIRLY CONCEDED DURING THE COURSE OF HEARING. SUBSEQUENTL Y, AGAINST THE ORDER OF THE COMMISSIONER, CENTRAL EXCISE, ON APPEA L BY BOTH THE PARTIES, CESTAT HAS PASSED ON ORDER DATED 30.06.201 7 ALLOWING THE APPEAL OF THE ASSESSEE COMPANY AND DISMISSING THE R EVENUES APPEAL. APPARENTLY, THE CESTAT ORDER DATED 30.06.2017 HAS B EEN PRONOUNCED POST PASSING OF ORDER BY THE LD CIT(A) ON 12.07.201 6 AND THE LATTER WAS NOT HAVING THE BENEFIT OF TAKING THE SAME INTO CONS IDERATION. 8. ON PERUSAL OF THE ABOVE ORDER AND FINDINGS OF TH E CESTAT VIDE ITS ORDER DATED 30.06.2017, IT IS OBSERVED THAT IT HAS UPHELD THE DROPPING OF DEMAND IN RESPECT OF 25 KACHA PARCHIS AND REJECT ED THE REVENUES APPEAL. THEREAFTER, IN RESPECT OF 7 KACHA PARCHIS, IT FURTHER HELD THAT IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE TO IN DICATE THAT THE ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 20 GOODS COVERED BY SEVEN PARCHIS WERE CLEARED BY THE APPELLANT, WE ARE OF THE VIEW THAT THE CHARGE OF CLANDESTINE CLEARANC E AND DEMAND OF DUTY CANNOT BE SUSTAINED. THE ASSESSEE HAS CITED A LARGE NUMBER OF DECISIONS TO SUPPORT THE CONTENTION THAT CLANDESTIN E CLEARANCE CANNOT BE UPHELD WITHOUT TANGIBLE EVIDENCE. NOW, IN RESPECT OF SLIP NO. 33 FOUND FROM SHRI J.D. PANT (412 MT) VALUING THE GOOD S REMOVED AT RS.1,66,11,350/- AND SHORTAGE OF STOCK (88.209MT) V ALUING AT RS 34,88,660, THE MATTER WAS SPECIFICALLY ENQUIRED DUR ING THE COURSE OF HEARING. IN RESPONSE, THE LD AR SUBMITTED THAT THE ASSESSEE HAD FILED AN APPEAL AGAINST THE WHOLE OF THE ADDITIONS SUSTAI NED BY COMMISSIONER OF CENTRAL EXCISE INCLUDING THESE TWO MATTERS AS WE LL AND CESTAT HAS ACCEPTED THE ASSESSEES EXPLANATION IN RESPECT OF T HESE TWO MATTERS AS WELL AND VIDE ITS ORDER DT. 30.06.2017 HAS DIRECTED TO DELETE THE ENTIRE DUTY LEVIED BY THE EXCISE AUTHORITIES. IN THIS REGA RD, THE LD AR DRAWN OUR REFERENCE TO PARA 3 AND 4 OF CESTAT ORDER WHICH DETAILS THE OUTSTANDING DEMAND OF RS 30,01,451 WHICH INCLUDES DEMAND IN RESPECT OF SLIP NO. 33 AND SHORTAGE OF STOCK, AND THE FACT THAT THE APPEAL HAS BEEN FILED AGAINST THE WHOLE OF THE ADDITION INCLUD ING THESE TWO MATTERS. FURTHER, OUR REFERENCE WAS DRAWN TO PARA 9 OF THE CESTAT ORDER WHERE THE CESTAT HAS RULED AGAINST THE ALLEGA TION OF CLANDESTINE REMOVAL OF GOODS IN ABSENCE OF TANGIBLE EVIDENCE. THE LD AR SUBMITTED THAT WHEN THE CESTAT HAS ACCEPTED THAT THERE IS NO CASE OF CLANDESTINE REMOVAL OF THE GOODS OR ANY STOCK FOUND SHORT, THE TRADING ADDITION MADE BY THE AO AND PARTLY CONFIRMED BY THE LD. CIT( A) DO NOT SURVIVE. WE FIND THAT CESTAT HAS FINALLY ALLOWED THE APPEAL OF THE ASSESSEE AND THUS PRIMA FACIE FIND FORCE IN THE CONTENTIONS OF T HE LD AR THAT THE WHOLE OF THE DEMAND AMOUNTING TO RS 30,01,451 UNDER EXCISE LAW HAS BEEN DIRECTED TO BE DELETED. WE ARE ACCORDINGLY SET TING ASIDE THE ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 21 MATTER TO THE FILE OF THE AO FOR THE LIMITED PURPOS E OF VERIFYING WITH THE EXCISE AUTHORITIES THE IMPACT OF CESTAT ORDER ON TH E DEMAND SO RAISED ON THE ASSESSEE COMPANY AND WHERE THE WHOLE OF THE DEMAND IS FOUND TO BE DELETED BY THE EXCISE AUTHORITIES FOLLOWING T HE ORDER OF CESTAT, THE AO IS DIRECTED TO GIVE A CONSEQUENTIAL EFFECT I N THE PRESENT PROCEEDINGS. THE GROUNDS OF APPEAL RAISED BY THE A SSESSEE AND THE REVENUE ARE DISPOSED OFF ACCORDINGLY. 7. AS REGARDS GROUND NO. 2 OF THE ASSESSEES APPEA L, THE BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED THAT THE ASSESSE E HAS DEBITED THE FOLLOWING EXPENSES IN THE PROFIT & LOSS ACCOUNT:- SR. NO. PARTICULARS AMOUNT 1. MEDICAL EXPENSES RS. 1,56,180/- 2. OTHER EXPENSES RS. 45,436/- 3. PETROL AND DIESEL RS. 2,60,021/- 4. TELEPHONE RS. 1,46,772/- 5. STAFF WELFARE RS. 25,552/- 6. CARRIAGE OUTWARD RS. 1,56,180/- TOTAL RS. 7,90,141/- HE OBSERVED THAT THE VOUCHERS OF EXPENSES ARE DEFEC TIVE AND THEREFORE, EXPENSES CLAIMED ARE TREATED AS EXCESSIVE. HE FURTH ER ASSUMED PERSONAL EXPENSES OF DIRECTORS IN TELEPHONE EXPENSE S AND VEHICLE PETROL EXPENSES. ACCORDINGLY, 20% OF THE ABOVE EXPE NSES WERE DISALLOWED. ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 22 8. THE LD. CIT(A) CONFIRMED DISALLOWANCE MADE BY TH E AO BY OBSERVING AS UNDER :- LOOKING TO THE NATURE OF THE ABOVE EXPENSES AND THE FACT THAT SEVERAL DEFECTS HAVE BEEN POINTED OUT IN THE MAINTE NANCE OF SUPPORTING EVIDENCES IN THESE AS WELL AS THE FINDIN G THAT THERE IS ALL PROBABILITY IN THE ABSENCE OF PROPERLY MAINTAIN ED RECORDS IN SUPPORT THAT THESE EXPENSES WERE NOT INCURRED WHOLL Y AND EXCLUSIVELY ONLY FOR BUSINESS PURPOSES, I FIND THE ACTION OF THE A.O IN PARTIALLY DISALLOWING EXPENSES ON ACCOUNT OF MED ICAL, OFFICE, PETROL, TELEPHONE, WELFARE & CARRIAGE OUTWARD AS PR OPER . 9. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE DISALLOWANCE IS MADE ON ADHOC BASIS WITHOUT SPECIFY ING ANY SPECIFIC DEFECT IN THE VOUCHER AND WITHOUT BRINGING ANY MATE RIAL ON RECORD TO ASSUME THAT THE EXPENSES CLAIMED ARE EXCESSIVE. FUR THER, IT IS A CASE OF A LIMITED COMPANY WHERE NO DISALLOWANCE ON ACCOUNT OF PERSONAL USER OF TELEPHONE / PETROL EXPENSES BY THE DIRECTORS CAN BE MADE. HENCE THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD . CIT(A) IS UNJUSTIFIED. RELIANCE IN THIS CONNECTION IS PLACED ON FOLLOWING CASES:- - FRIGOGLASS INDIA PVT. LTD. VS. DCIT (2016) 140 DTR 35 (DELHI) (TRIB) - SEASONS CATERING SERVICES (P) LTD. VS. DCIT (2010) 43 DTR 397 (DEL) (TRIB). - ACIT VS. GANPATI ENTERPRISES LTD. (2013) 142 ITD 11 8 (DELHI)(TRIB.) - SURYA CREDITS LTD. VS DCIT 22 TAX WORLD 90 (JAIPUR) (TRIB) - METALLIZING EQUIPMENT CO. (P.) LTD. VS. DCIT 70 TT J 358 (JODH.) - CIT VS. DINESH MILLS LTD. 148 TAXMAN 76 (GUJ.) (HC) - BANCO PRODUCTS (INDIA) LTD. VS DCIT 63 ITD 370 (AHD .) (TRIB.) ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 23 10. ON THE CONTRARY THE LD. D/R SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO HAS STATED THAT THE VO UCHERS FOR CLAIM OF EXPENSES ARE DEFECTIVE AND THE ASSESSEE HAS NOT OFF ERED PROPER EXPLANATION AND THEREAFTER, HAS GONE AHEAD AND DISA LLOWED 20% OF THE WHOLE OF THE SUBJECT EXPENSES. IF THE AO WAS NOT S ATISFIED WITH THE EXPLANATION AND BASIS OF CLAIM OF THE EXPENSE, THE QUESTION IS WHY HE HAS DISALLOWED ONLY 20% OF THE EXPENSES EFFECTIVELY STATING THAT THE BALANCE 80% OF THE EXPENSE ORIGINATING FROM THE SAM E VOUCHERS ARE ALLOWED. IN OUR VIEW, THERE IS INHERENT CONTRADICT ION IN THE STAND OF THE REVENUE AND IT IS CLEARLY A CASE OF ADHOC DISALLOWA NCE WHICH CANNOT BE SUSTAINED IN THE EYE OF LAW. IN THE RESULT, ADHOC DISALLOWANCE OF EXPENSES ARE HEREBY DELETED. IN THE RESULT, GROUND NO. 2 OF THE ASSESSEES APPEAL IS ALLOWED. 12. AS REGARDS GROUND NO. 3 OF THE ASSESSEES APPEA L, THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR, THE ASSESSEE PAI D FEES TO THE REGISTRAR OF COMPANIES OF RS. 3 LAKHS FOR INCREASIN G ITS AUTHORISED CAPITAL FROM RS. 15 CRORES TO RS 18 CRORES. THE SAM E WAS CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AS REVE NUE EXPENDITURE. THE AO, HOWEVER, ALLOWED 1/5 TH OF SUCH EXPENSES U/S 35D(2)(C)(IV) I.E., RS. 60,000/- AND DISALLOWED THE BALANCE AMOUNT OF RS.2, 40,000/-. 13. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE BY RE LYING ON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF BROOKE BOND INDIA LTD. VS. CIT 91 TAXMANN 26. THE OBSERVATIONS OF THE LD. CIT (A) ARE AS UNDER :- ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 24 AS REGARDS THE ROC RELATED EXPENSES, OF RS. 3,00,00 0/- FOR INCREASING THE SHARE CAPITAL, SUPREME COURT OF INDI A IN BROOKE BOND INDIA LTD. V. COMMISSIONER OF INCOME-TA X 91 TAXMAN 26 (SC) HELD- ON THE FACTS THAT DURING THE ASSESSMENT YEAR 1969-7 0, THE ASSESSEE-COMPANY ISSUED SHARE TO INCREASE ITS SHARE CAPITAL AND CLAIMED DEDUCTION OF EXPENDITURE INCURRED IN CONNEC TION THEREWITH AS REVENUE EXPENDITURE BUT THE SAME WAS D ISALLOWED AS CAPITAL EXPENDITURE BY ALL THE LOWER AUTHORITIES. HELD-THOUGH THE INCREASE IN THE CAPITAL RESULTS IN EXPANSION OF THE CAPITAL BASE OF THE COMPANY AND INCIDENTALLY TH AT WOULD HELP IN THE BUSINESS OF THE COMPANY AND MAY ALSO HELD IN THE PROFIT MAKING, THE EXPENSES INCURRED IN THAT CONNECTION ST ILL RETAINS THE CHARACTER OF A CAPITAL EXPENDITURE SINCE THE EXPEND ITURE IS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY. HENCE, EXPENDITURE INCURRED BY THE ASSESSEE WAS CAP ITAL EXPENDITURE. IN VIEW OF THE ABOVE, THE STAND TAKEN BY THE A.O OF ALLOWING THESE EXPENSES BEING CAPITAL IN NATURE, @ 1/5 EACH FOR 5 YEARS IS CORRECT AND NOT REQUIRED TO BE INTERFERED WITH. THE DISALLOWANCE OF RS. 2,40,000/- IS CONFIRMED. 14. THE LD DR IS HEARD WHO HAS RELIED UPON THE ORDE R OF THE LOWER AUTHORITIES. 15. THE LD AR SUBMITTED THAT ANY FUND GENERATED FRO M SHARE CAPITAL WHICH UTILIZED IN RUNNING OF BUSINESS OR TO PROMOTI ON OF BUSINESS IS ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 25 SIMILAR TO BANK LOAN AND ITS EXPENSES IS SIMILAR TO INTEREST EXPENSES AND INTEREST EXPENSES IS A REVENUE EXPENDITURE AND ALL OWABLE IN PROFIT & LOSS ACCOUNT AS BUSINESS EXPENSES. RELIANCE IN THIS CONNECTION IS PLACED ON THE FOLLOWING CASES:- NAVI MUMBAI SEZ (P.) LTD VS. ACIT (2015) 152 ITD 82 8 (MUMBAI) (TRIB) LAKSHMI AUTO COMPANIES LTD. VS. DCIT (2006) 101 ITD 209 (TM) (CHENNAI) (TRIB) 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUE D THE MATERIAL AVAILABLE ON RECORD. IN LIGHT OF SUPREME COURT DEC ISION IN CASE OF BROOKE BOND INDIA (SUPRA), WE SEE NO REASON TO INTE RFERE WITH THE ORDER OF THE LD CIT(A). HENCE, GROUND NO. 3 OF ASSESSEE S APPEAL IS DISMISSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE AND REVEN UE ARE DISPOSED OFF WITH ABOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON /07/2017 DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- /07/2017. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- A.C.I.T, KOTA ITA NO. 839 & 887/JP/2016 ACIT, KOTA VS. M/S PREM JAIN INSPAT UDHYOG PVT. LTD .,KOTA 26 2. IZR;FKHZ@ THE RESPONDENT- M/S PREM JAIN ISPAT UDHYOG PVT. LTD ., BAJAJ PALANCE, NEAR PALIWAL COMPOUND, CHHAWANI, KOT A 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 839 & 887/JP/2016} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR