Income Tax Appellate Tribunal - Delhi
Inspecting Assistant Commissioner vs Indian Aluminium Cables Ltd. on 3 December, 1990
Equivalent citations: [1991]38ITD53(DELHI)
ORDER
J.P. Bengra, Judicial Member
1. This is an appeal by the revenue against an order of the Commissioner of Income-tax (Appeals)-V, New Delhi, pertaining to the assessment year 1982-83.
2. The first grievance in this appeal relates to the deletion of addition of Rs. 17,06,311 (Rs. 12,63,694 + Rs. 4,42,617) made on account of scrap.
3. M/s. Indian Aluminium Cables Ltd. is an assessee in this case. It has got two factories situated at Faridabad and Sahibabad (Ghaziabad). On 14th July, 1981 during the course of 'Nakabandi' arranged by the Central Excise Staff, Faridabad at Faridabad Badarpur Sales-tax barrier, the Central Excise Officers intercepted one truck No. DLI 8007 loaded with consignment of two drums of ACSR conductors falling under tariff item No. 33B(ii). The truck driver produced one challan No.523 dated 14-7-1981 issued by M/s. Indian Aluminium Cables Ltd., Faridabad showing the description of the goods as ACSR conductor code 'Panther' size rejected quantity two drums with total value of Rs. 31,499.99 and also produced one goods receipt No. 13718 dated 14-7-1981 issued by M/s. Pindi Goods Transport Co., Faridabad, one Form No. 38 (pertaining to Sales-tax) and one proforma Invoice No. 523 dated 14-7-1981 issued by M/s. Indian Aluminium Cables Ltd., Faridabad showing the description of the subject goods as two drums weighing 4.197 MT rejected Panther Conductor (greasy and weather damaged) issued in the name of M/s. Sapna Enterprises, 4935, Phatak Namak, Hauz Qauzi, Delhi. The truck driver could not produce any Central Excise document in respect of the said consignment. The truck driver Shri Raj Kumar S/o Shri Bani Singh in his statement stated that the goods were loaded on 14-7-1981 from the factory premises of M/s. Indian Aluminium Cables Ltd., Faridabad but no Central Excise documents were given to him by the party. On enquiry from the assessee, the assessee failed to produce any Central Excise records showing the clearance of payment of duty on the said goods. The assessee's Manager and authorised signatory Shri R.C. Aggarwal in his statement stated that these goods were cleared by them out of their stock of goods received back by them as rejected goods from various State Electricity Boards as such no Central Excise document had been issued for removal of this consignment being duty paid. He did not produce any D-I intimation and Form V register or any other documents required for the rejected goods. The goods were seized under Section 10 of the Customs Act, 1962 as made applicable to like matter vide Notification No. 65/68-CE dated 4-5-1963 issued under Section 12 of the Central Excises & Salt Act, 1944. The assessee had contended that they have cleared similar type of goods even in the past and in the same manner without payment of Central Excise duty due thereon and without issue of Central Excise documents. On this information and on scrutiny of records of M/s. Aggarwal Metal Co., Delhi, M/s. Satakashi Metal Industries, Jagadhri and M/s. Sapna Enterprises, Delhi, it was revealed that they were selling the non-duty paid ACSR Conductor (Panther) received from M/s. Indian Aluminium Cables Ltd., Faridabad not as rejected/scrap goods but as good conductors. The prices of these goods were charged in their invoices by the assessee at a very low price i.e., Rs. 7,200 to Rs. 10,000 against wholesale price of Rs. 17,000 per MT. M/s. Indian Aluminium Cables Ltd., Faridabad manufactured and cleared ACSR Conductor (Panther) under Challan No. 516 dated 13-6-1981 and 520 dated 7-7-1981 which were found lying in the premises of the following parties :-
1. M/s. Chopra Bros., New Delhi and M/s. Omco Metal Delhi. The goods were jointly owned by these parties and were lying in the godown of M/s. Chopra Bros., New Delhi.
2. M/s. Shree Gopal Electric Stores, Delhi. Later on Shri R.C. Aggarwal, Manager changed his earlier statement dated 14-7-1981 under their letter dated 30-7-1981 and stated that the goods under seizure were cleared from the premises of Promain Ltd., Faridabad and the said goods were received from their Ghaziabad factory on payments of duty and stored in the godown of M/s. Promain Ltd., Faridabad. The assessee also submitted that the details showing serial number of drums, gross/net weight and the company etc. could be tallied with the details given under letter dated 30-7-1981. According to the Excise Department two drums cleared under challan No. 523 dated 14-7-1981 weighing 4.197 MT did not tally with any of the weights shown in the details given by the party with their letter dated 30-7-1981. Therefore, they were of the view that the assessee's plea was not tenable. It was commented that even the godown of M/s. Promain Ltd. was situated within the four walls of the premises of M/s. Indian Aluminium Cables Ltd. having a common exit under the exclusive control of the assessee and No. D-3 was given to the department and no statutory records were maintained. Therefore, they came to the conclusion that M/s. Indian Aluminium Cables Ltd. had unauthorisedly manufactured and deliberately cleared with the intent to evade payment of duty on ACSR Conductors (Panther) weighing 52.772 MT valuing Rs. 8,97,124 involving Central Excise duty of Rs. 89,712.40 as Basic Excise duty and Rs. 4,485.62 as State Excise Duty in the guise of scrap without making entries in the statutory records and without payment of duty leviable thereon. In this was included a quantity of 14.842 MT seized on 14-7-1981 and 20-7-1982. Consequent upon the seizure made on 14-7-1981 the Central Excise authorities visited on 4-11-1981 the factory premises of M/s. Indian Aluminium Cables Ltd. and found that the assessee company had manufactured and stored 55.265 MT of ACSR Panther Conductor rolled on 26 drums falling under Tariff Item 33-B which they had not accounted for in their Central Excise statutory account namely RG-1 register and the same was accordingly seized. The assessee tried to explain that these goods were received by them from their Ghaziabad factory but the Collector of Customs did not agree with this contention. He was of the view that after conducting detailed investigations, the Central Excise authorities came to the conclusion that the assessee company has been manufacturing and selling ACSR Panther Conductors in the garb of aluminium scrap. The quantity of such goods manufactured and sold under the garb of scrap was found to be as under:
Year Quantity Value
(MT) (Rs.)
1977-78 20.465 2,03,702.25
1978-79 56.479 5,64,790.00
1979-80 120.533 12,05,330.00
1980-81 102.245 10,07,693.76
The Collector of Customs did not accept the explanation of the assessee for the following reasons:-
(i) No permission under Rule 51A to bring duty-paid goods was ever accorded to them.
(ii) No account under Form V was maintained by the party as required under Rules 173-Hand 173-L of the Central Excise Rules, 1944.
(iii) No D-3 intimation of these 26 drums was submitted to the department.
(iv) In the face of their own admission in their letter dated 8-11-1977 purported to have been addressed to the Range Officer the said 26 drums of ACSR (Panther) conductor were completely deteriorated and not fit for despatch and for which they had sought permission for rewinding. They could not produce any conclusive evidence to that effect.
(v) The markings given on the drums were of new origin and to give them old look foreign material like grease and dust was thrown on the painted marks.
(vi) Serial numbers given on the drums and weight mentioned thereon did not tally with the particulars given on the original gate passes produced by the party in support of the plea that these had already been paid duty.
(vii) The said quantity of 26 drums was never shown in the annual stocktaking report as signed by the party and duly verified by the departmental officers in the balance-sheets of the party and there was nothing forthcoming to believe as to why the said goods were lying in the store for the last 7 to 8 years and as such it appeared that the goods were removed clandestinely.
It was observed that a large quantity of exciseable goods had been sold by the party under the description of aluminium scrap and it was found that the goods were exciseable falling under tariff item 33B of the Central Excise Tariff and not aluminium scrap as declared by the assessee. The assessee had also failed to produce any evidence to the effect that the permission/supervision of the Central Excise Officers was ever taken for the conversion of ACSR Conductors into pieces of less than 12" and converting them into jumbled form so as to make them as scrap and unfit for sale/use as ACSR Conductors. Accordingly a show-cause notice was given to the assessee wherein the assessee was called upon to explain the facts as found during the course of investigation by the Central Excise and Customs authorities. The assessee in its reply has contended that the present management took over another company M/s. Promain Ltd., situated adjacent to the factory premises of M/s. Indian Aluminium Cables Ltd. at Faridabad having common address. Prior to the take-over, M/s. Indian Aluminium Cables Ltd. had a central warehouse at the premises of M/s. Davis and White (India) Pvt. Ltd. at 15/3, Mathura Road, for storage of duty-paid conductors. When the new management took over the management of the company, 58 drums of ACSR conductors (Panther) which were manufactured at Ghaziabad in the year 1972-73 were lying in its duty-paid godown at M/s. Davis and White and M/s. Promain Ltd. These had been manufactured for the supply to various State Electricity Boards but had not been supplied by the previous management and were lying in the duty-paid godowns. They had to shift these duty-paid drums to the premises of M/s. Promain Ltd., as the management of M/s. Davis and White desired their clients to vacate their premises and in this connection the assessee had relied on the correspondence which the assessee had with the Central Excise authorities and in particular a letter dated 8th November, 1977 whereunder they had sought permission of the excise authorities to bring those goods to their factory for reconditioning in accordance with the provisions of Rule 173-H. No action was taken by the Excise authorities. With the passage of time the said conductors deteriorated and it was no longer commercially feasible to recondition them and the goods had to be removed, and as such there was no need to file D-3 intimation as the goods were not brought back to the factory premises. In respect of the low price being charged by them for the goods, the assessee had stated that since the goods were sold as rejected scrap due to their deteriorated condition, the goods could not have been sold at the normal price. In a subsequent letter dated 17-7-1982 in response to the show-cause notice dated 11-5-1982, the assessee stated the circumstances of the sale of the rejected goods and the assessee had duly apprised the excise authorities regarding the storage of 26 drums being balance out of 58 drums which were still stored by them at the premises of M/s. Promain Ltd. and this information which was voluntarily given was ignored and the seizure was effected on 12-11-1981. The assessee had refuted the charge labeled against them. However, the Collector of Customs observed that the goods in question on visual examination clearly meet with the requirement of standard ACSR Conductors otherwise for such goods how M/s. Bharat Aluminium Corporation (one of the parties who had purchased the impugned material from the assessee company and from whose custody the goods were recovered) could fetch apriceofRs. 17,000 per MT, when they effected its sale vide Invoice No. 1339 dated 7-7-1981 issued in favour of M/s. Shrigopal Electric Stores. On the basis of this the Assessing Officer requested the assessee to file details of scrap and produce parties. According to him, the assessee could not produce any such party. On this information the Assessing Officer found that there is overwhelming evidence brought on record in support of the fact that the assessee company had cleared ACSR Conductors under the garb of scrap and had also suppressed production which was found unaccounted in the books of the assessee company. Therefore invoking the provisions of Section 145(2) he had estimated the income on the basis that during the accounting year under considerat'on the assessee has shown sale of scrap of aluminium weighing 191.098 for Rs. 19,98,742 on an uniform price of Rs. 10,000 per MT as against the market price of Rs. 17,000 per M.T. Therefore, adopting the market rate of these conductors @ Rs. 17,000 per M.T. at which rate the sale price of 191.908 MT, he worked out the sale of Rs. 32,62,436 and after deducting the sale price disclosed by the assessee company at Rs. 19,98,748, the difference of Rs. 12,63,694 was added. Taking support from the order of the Collector, Central Excise, he further mentioned that the entire sales effected in the past years were not genuine. As regards 26 drums of ACSR Conductors weighing 55.265 MT valued at Rs. 9,39,505, he mentioned that the assessee had valued them at Rs. 8,991 per M.T. and they form part of the closing stock. Since these were also standard ACSR conductors they were valued @ Rs. 17,000 per M.T. and the difference of Rs. 4,42,617 was added by him to the income of the assessee. Aggrieved by that order, the assessee went up in appeal before the CIT (Appeals).
4. The CIT (Appeals) after considering the written and oral submissions of the assessee, asked the IAC (Asst.) to submit his report. The IAC (Asst.) has submitted his report as under :-
As desired in para 5, I have seen two certificates issued by Central Excise Authority dated 24-7-1985 and the other dated 31-7-1985 confirming the clearance of scrap 92.475 MT + 62.275 MT of scrap and also the certificate dated 11-3-1985 issued by Cable Conductor and Manufacturers Association. In addition, the assessee company has also filed seven certificates from the parties who purchased scrap to the extent of 164.450 MT from the assessee company during the financial year 1981-82.I have nothing to doubt these documents.
After considering the report of the IAC (Asst.), he deleted the addition made by the Assessing Officer for the following reasons:-
3.5 On careful consideration of the facts of the case and the evidence rendered in support of the same, I find considerable force in them the photostat copy of the letter dated 8th November, 1977 along with the packing list clearly show that 58 drums were lying in the Promain godown at Faridabad. Out of these drums, 7 drums were seized - two from the truck vide challan number 523, and 5 from the premises of the dealers to whom the goods were sold by the appellant. The 2 drums seized vide challan number 523 are still lying in the premises of the appellant and have not yet been sold. As regards 5 drums, it is found that they were sold by the appellant to M/s. Sapna Enterprises who in turn again resold these goods to other parties from whose premises the goods were seized by the Excise Authorities. I further find that IAC(A) had called the parties under Section 131 who confirmed having received the goods from the appellant at the rate at which the scrap is sold. In this respect, it is further found that while the appellant sold the aluminium @ Rs. 10,000 per MT, steel was sold at Rs. 3,000 per MT to M/s. Sapna Enterprises. M/s. Sapna Enterprises, in turn, sold the goods at Rs. 8 per kg. In respect of 5 drums they made a profit of about Rs. 14,000. In case the version of the IAC(A) is to be believed that the goods were not scrap but good ACSR Conductors then M/s. Sapna Enterprises would have made a profit of about Rs. 90,000 as against Rs. 14,000. This is reflected in their bills and confirmed before the IAC(A). There is no evidence to the effect that the sale bills raised by M/s. Sapna Enterprises were not genuine. As regards the objection that the drums did not contain the mark number as indicated in the despatch list, I find that the same is not correct. The appellant has furnished complete information showing that the drums sold were the ones which were available in the despatch list furnished to the Excise Authorities somewhere in 1977.Exceptforadifference of 0.002 MT in respect of challan number 516, no other difference is found. Here I also agree with the ARthat there was no evidence on record to show that the drums seized in the premises of the three parties were in good condition and were not scrap. In fact, the parties confirmed otherwise before the IAC(A) in the statements recorded under Section 131. Apart from this, information available on record shows that 26 drums were sold in 1985 with the prior permission of Excise Authorities as scrap. This clearly proves the appellant's case that they were not good ACSR Conductors. The Excise Authorities gave permission to the appellant to sell the goods as scrap. The goods of 26 drums were sold for a sum of Rs. 6,90,000. I further find that the explanation furnished by the appellant on 14-7-1981 was modified in a subsequent letter dated 30-7-1981. Therefore, the observations of the Collector, Customs & Central Excise that they were in running length of kilometre was no more relevant. Again, it is found that the Excise Authorities gave permission to the appellant to clear the scrap during the year under appeal. This shows that the process of scrap as a result of manufacture of conductors is admitted by the authorities. Incideniaiy it may be mentioned that the appellant rendered evidence to show that the stock dismantled was raised in the process of manufacture of cable during the assessment year 1982-83 (available on page 341 of Paper Book). Further, I agree with the AR that in view of preponderance of evidence in support of appellant's version available on record and no evidence brought on record to show that the sales effected were of good ACSR Conductors, the addition is not sustainable. Thus, the appellant gets a relief of Rs. 12,63,694.
4. As regards addition made at Rs. 4,42,617, the IAC(A) submitted as under :-
On going through the details of the opening stock as well as of the closing stock, I find that the conductors weighing 62.097 K.M. (59.460 MT) stored in 28 drums were valued at Rs. 5,58,224 @ 8991 per K.M. on 31-3-1982. This stock was valued @ Rs. 8,631 per K.M. on 31-3-1981. As per the information furnished scrap sale rate on 31-3-82 was around Rs. 10,000 per MT. As such, there was nothing wrong with assessee's valuation, made on 31-3-82.
In addition to this,as pointed out above.it was proved by the appellant that 26 drums were sold for a total consideration of Rs. 6,90,000 as scrap in 1985 with prior permission of Excise Authorities.
This was as under :-
Bill Name of the party Qty. Amount
No.
94 M/s. Navjeevan Jain Metal 4.110 MT A Wire
Udyog, Faridabad. Scrap 75418.50
95 -do- 3.630 MT -do- 66610.50
107 -do- 5.545 MT -do- 101750.75
108 M/s. Rishi Metal Agency Gurgaon 5.050 MT -do- 93425.00
109 -do- 4.360 MT -do- 80660.00
110 -do- 3.540 MT -do- 65490.00
123 -do- 6.040 MT a wire
scrap 111740.00
124 -do- 0.550 MT -do- 10175.00
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32.825 MT 605269.75
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119 M/s. Vijsons Works, Delhi 7.045 MT S.Wire 27841.84
scrap
122 -do- 7.295 MT -do- 28829.84
125 -do- 7.255 MT -do- 28671.76
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21.595 MT 85343.44
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Grand Total 54.420 MT 690613.19
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Weight of 26 drums 55.265 MT
Shortage* .845 MT
*Shortage due to destruction and passage of time.
In view of this, the addition made at Rs. 4,42,617 is not sustainable and is deleted.
The department is aggrieved.
5. The learned Departmental Representative Shri Tandon submitted that the matter before us was considered by the CEGAT, the highest fact finding body of the Central Excise and Customs. The Tribunal after perusing the correspondence of the assessee with the State Electricity Board had given the finding of fact that the goods received by the assessee were in short-length whereas the goods seized from the assessee's premises were in running length. The weight available on record of the drums received back do not tally with each other and co-relation with both of them cannot be established. Another finding for 26 drums is that the marking given on drums appeared to be of new origin and to give them an old look, a foreign material like grease and dust had been thrown on the painted markings. Serial Numbers given on them and the weight do not tally with the serial numbers and weight given in the original gate passes. These are the findings of fact which were not available to the CIT (Appeals) because the CEGAThas decided the matter on 22-11-1988 whereas the CIT (Appeals) has passed his order on 31-3-81. That is why the CIT (Appeals) had no benefit of this order so the finding of the CIT (Appeals) has gone wrong and it has the variance with the finding given by the CEGAT. When investigations were conducted by the Collector of Customs and the findings were confirmed by the CEGAT, this Court cannot sit over the order of the CEGAT, and give a contradictory finding. It is not open to this Tribunal to disturb the finding given by the highest fact finding body. The assessee's books of account are not in order. Therefore, some treatment has to be given to the sale of scrap of 191 MT made during the year. Once books of accounts had been rejected, they are not reliable. Therefore, estimate can be made on the basis of sale @ Rs. 17,000 per MT of the whole clearance made during the year i.e., 191 MT. As against this, the learned counsel for the assessee Shri Vaish submitted that the assessee company had 58 drums of rejected ACSR Conductors of 125.280 Kms since the years 1973-74. In 1977, the assessee company wrote to Excise authorities vide their letter dated 8-11-1977, requesting to open and recondition the said drums. The said drums were carried at the selling price of Rs. 12,162.40 per KM giving a total value of Rs. 15,23,705 in closing stock. As per the auditor's certificate the assessee changed its method of accounting in the closing stock for the year ending and started valuing its cost on net realisable value. As per the learned counsel for the assessee the opening stock production and disposal of scrap during the assessment year under appeal was as follows :-
(i) Opening stock in hand 015.827 MT
(ii) Scrap produced during the year 143.498 MT
(iii) Scrap produced on destruction of
defective Panther Conductors 37.158 MT
---------
196.483 MT
Less :
Sale of scrap 191.908 MT
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Closing st. 004.575 MT
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It is pointed out that Cable & Conductor Manufacturers' Association of India has given a certificate to the effect that normal loss/wastage of scrap generated by cable & conductor industries varies between 5 to 7%. The production of scrap in the case of the assessee is about 4.81% which was less than the usual rate of production of scrap. The revenue authorities pointed out that the entire quantity of scrap amounting to 191.908 MT has been treated by them as good conductors which is incorrect on the face of it because it would mean that in the manufacture of Panther conductor, no scrap at all is generated. He has pointed out that such an extreme view is contrary to the established manufacturing process. Whenever the assessee company is required to make sale of scrap, prior permission is obtained from the Central Excise Department and the sale itself takes place in the presence of a representative of the Central Excise Department. It is pointed out that the present management took over another company, namely M/s. Promain Ltd., situated adjacent to the factory premises of their clients at Faridabad, having common address. Prior to their take over, their clients had a central warehouse at the premises of M/s. Davis and White (India) Pvt.Ltd., at 15/3, Mathura Road for storage of duty paid conductors. When the new Management took over the management of the company, 58 drums of ACSR conductors (Panther) which were manufactured at Ghaziabad in the year 1972-73, were lying in its duty paid godown at M/s. Davis and White and M/s. Promain Ltd. These had been manufactured for supply to various State Electricity Boards but had not been supplied by the previous Management and were lying in the duty paid godowns. They had to shift these duty paid drums to the premises to M/s. Promain Ltd. as the management of M/s. Davis and White desired their clients to vacate their premises. Accordingly, the permission was sought from the Excise Department but it was not granted. The condition of these conductors had deteriorated to such an extent that it was no longer commercially feasible to recondition the goods and they reduced to mere scrap. Since it was already duty paid, there was no need to pay excise duty so D-3 intimation was not necessary.
6. These 58 drums of ACSR conductors (Panthers) which were manufactured at Ghaziabad in the years 1972 to 1974.They were good, saleable conductors and they were valued as per the accounting practice followed in these years at selling price. These 58 Panther conductor drums were entered in closing stock as finished goods right from 1973 to 1979 at selling price. The drums of these conductors were deteriorated and were so discovered by the company in the year 1977 and permission for reconditioning was asked for on 8-11 -1977 which was not granted. With the result the conditions of these drums deteriorated. As per its changed policy of valuation the entire stock was valued in the manner that the steel content at raw material cost, and the aluminium content at prevailing scrap rate on the basis of the aluminium scrap being sold by the company generated by it in its normal manufacturing process. The total weight of these 58 drums of ACSR Conductor sold was as follows:-
No. of drums Aluminium Steel Total
scrap scrap
25 30.745 20.652 51.397
26 32.825 21.595 54.420
5 6.413 4.232 10.645
2 2.529 1.668 4.197
Out of these 58 drums, 25 drums were dismantled and only aluminium contents thereof was sold to various scrap dealers in the year under review. The assessee's Paper Book contains details of 58 drums at pp. 44 to 46. About 26 drums it is submitted that they were sold in the accounting year 1985-86 as per Collector of Central Excise (Appeals) order and as per destruction carried out by the Asstt. Collector of Central Excise and sold under as permitted by them from time to time. The details regarding 26 drums are as under :-
-------------------------------------------------------------------
Drum as per destruction S. No. of S. No. of packing
order of Asstt. Collector warehousing list dt. 8-11-77
register
-------------------------------------------------------------------1 2 3
-------------------------------------------------------------------i. M-2576 22 27 2. M-2574 12 12 3. M-2574 11 13 4. M-2575 9 11 5. M-2570 7 7 6. M-2654 1 1 7. M-2051 55 52 8. M-1690 20 26 9. M-2566 8 8 10. M-1693 28 21 11. M-2528 6 6 12. M-2524 4 4 13. M-2655 2 2 14. M-2620 3 3 15. M-2577 25 28 16. M-2572 26 22
-------------------------------------------------------------------
Drums as per destruction S.No.of s. No. of packing order of Asstt. warehousing list dt. 8-11-1977 Collector dated 18-7-85 register
------------------------------------------------------------------1. M-2568 24 19 2. M-1688 10 14 3. M-2565 5 5 4. M-2578 15 16 5. M-1684 17 23 6. M-1683 17 15 7. M-2016 32 31 8. M-1694 23 29
------------------------------------------------------------------
Drums as per destruction S.No. of S.No. of packing order of Asstt. warehousing list dt. 8-11-77 Collector dated 25-7-85 register
------------------------------------------------------------------1. M-1696 21 9 2. M-1689 27 30
------------------------------------------------------------------
5 drums were sold to M/s. Sapna Enterprises as per challan. Two drums were in the possession of the assessee which were seized at 'Nakabandi' and they were sold in the year 1989 with the permission of the Excise Department.
7. Therefore, from the above it is clear that normal scrap generated during the process has nothing to do with the ACSR (Panther) Conductor. The finding given by the CEGAT that the conductors seized were of short length is not correct. The CEGAT has not gone into the factual position of the case that in subsequent years out of 58 drums, 26 drums were sold as a scrap with the permission of Excise Department. Then how can the length of these conductors would differ. Similarly the other finding that these 26 drums were different in identity is also not correct because the same were already duty-paid. These were sold under the permission of Excise Department and the department has not objected to the sale. It is pointed out that this Court is a separate juristic personality. It could view the case after appreciating the facts and evidence brought on record. Since this factor had been pointed out, there is no bar to take a different view in the matter. It is pointed out that the Excise Department has looked the matter with a different angle of levying Excise Duty whereas this Court is not concerned with that matter. So this court can take a different view. The order of the CEGAT is not binding on this Court though it has a persuasive value. So in view of the facts pointed out the Court can take a different view. It is pointed out that after considering the I AC (Asst.)'s report and the submission made before the CIT (Appeals), the CIT (A) came to the conclusion that whatever sold by the assessee was not good conductor but scrap and the Excise authorities gave the permission to sell the scrap. The CIT(Appeals) has also compared the position of scrap of about 26 drums and the report of the IAC (Asst.) and has deleted the addition. Therefore, there is no reason" why the order of the CIT (Appeals) should not be confirmed. It is also pointed out that out of 191 MT, 154.750 MT were sold with the permission of the Excise Department which is also mentioned in the order of the CIT (Appeals). If these were sold with the permission of the Excise Department, how can an addition be made on these 154.750 MT. The view of the department making an addition of 191.908 MT is wrong. Regarding 37.158 MT, the assessee had given an explanation. Therefore, there is no reason to sustain that addition. It is also pointed out that the CEGAT upholding the finding of the Collector, has mentioned that the assessee has cleared the Conductors worth Rs. 29,81,516 during the period 1977-78 to 1980-81 in the garb of Aluminium scrap. This factual position is incorrect because the quantity sold and the value for which they have been sold, has been duly accepted -by the Central Excise and Customs department which is clear from the following statement:-
Account Year Quantity in MT Value in Rs.
1977-78 20.465 2,03,702
1978-79 56.479 5,64,790
1979-80 120.533 12,05,330
1980-81 102.245 10,07,694
-------- ---------
299.722 29.81,516
-------- ----------
It is also to be noted that the Excise & Customs Department has nowhere alleged that these goods have been sold for any higher value than the one disclosed. There is no substance that the sale which has been disclosed in the books from Rs. 7,200 to Rs. 10,000 per MT as against Rs. 17,000 per MT is without any basis. It is also pointed out that for clearance of these conductors, permission was sought and it was physically verified. They were included in the stock also. Therefore, the finding given by the CEGAT is not correct. In fact, the CEGAT has confirmed the finding of the Collector without verifying the facts. The learned counsel for the assessee also pointed out that Dy. Commissioner initiated proceedings under Section 147A for assessment years 1978-79 to 1981 -82 but the same were dropped. It would mean that the department has no case. In reply to this the learned Departmental Representative submitted that the CEGAT has categorically mentioned that the scrap was sold @ Rs. 10,000 per MT. The Collector of Customs had also shown that these were disposed of @ Rs. 10,000 per MT. This might have weight in the mind of the Assessing Officer at the time of dropping proceedings. Therefore, no benefit can be taken on this score.
8. We have considered the rival submissions. The department has raised basically one objection that the finding given by the CEGAT which is the highest fact finding body of Customs, Excise & Gold (Control), has a binding force on this Tribunal. The CEG AT has given the finding that the goods seized at the time of raid at the Sales-tax barrier do not tally in details available on record and the drums received back by the assessee from State Electricity Board. The goods seized from the assessee were in running length whereas the goods received back from the U.P. State Electricity Board by the assessee are in short length. Regarding 26 drums the finding is that the marking given on the drums appeared to be of new origin and to give them old look foreign material like grease and dust was thrown on the painted marks. Serial numbers given on the drums and weight mentioned thereon did not tally with the particulars given on the original gate passes produced by the assessee. These are the findings of fact. Therefore, this Court cannot sit over the decision of the highest fact finding body of Customs, Excise & Gold (Control). In this connection, we would like to mention relevant sections of Evidence Act which speak about the relevancy and binding nature of judgments of Courts of Justice. Sections 41 to 43 are reproduced hereunder:-
41. A final judgment, order or decree of a competent Court, in the exercise of probate, matrimonial, admiralty or insolvency jurisdiction, which confers upon or takes away from any person any legal character, or which declares any person to be entitled to any such character, or to be entitled to any specific thing, not as against any specified person but absolutely, is relevant when the existence of any such legal character, or the title of any such person to any such thing, is relevant.
Such judgment, order or decree is conclusive proof-
that any legal character which it confers accrued at the time when such judgment, order or decree came into operation ;
that any legal character, to which it declares any such person to be entitled, accrued to that person at the time when such judgment, order or decree declares it to have accrued to that person ;
that any legal character which it takes away from any such person ceased at the time from which such judgment, order or decree declared that it had ceased or should cease;
and that anything to which it declares any person to be so entitled was the property of that peson at the time from which such judgment, order or decree declares that it had been or should be his property."
"42. Judgments, orders or decrees other than those mentioned in Section 41 are relevant if they relate to matters of a public nature relevant to the enquiry; but such judgments, orders or decrees are not conclusive proof of that which they state."
"43. Judgments, orders or decrees, other than those mentioned in Sections 40,41 and 42, are irrelevant, unless the existence of such judgments, order or decree is a fact in issue or is relevant under some other provision of this Act.
9. After going through these provisions, it is clear that only those judgments, orders or decrees of a competent Court which are generally called judgments in rem are binding which declare existence of any legal character or the title of such person or a thing or status of a person. The other judgments which are judgments in a personan are binding between the parties to the suit. Besides this, the judgments or orders relate to matter of public nature are not conclusive proof but have a persuasive value. In view of the above provisions, it is clear that the order of the CEGAT is not binding but have a persuasive value. It is not the conclusive proof of the existence of certain facts. Therefore, this Court being a separate entity created by law is not bound to follow that order. However, it is a matter of unwritten convention that Court should be very slow to take a different view unless it is pointed out that certain facts were not considered by the earlier Tribunal.
10. Now we come to the facts of the present case. As per the details given above, it is clear that the dispute relates to 58 drums of ACSR conductors (Panther). Out of these 58 drums, 2 drums were seized at the time of 'Nakabandi' on 14-7-1981, 5 drums were seized from various parties mentioned above, 25 drums were dismantled out of which 30.745 aluminium scrap was sold whereas 20.652 steel scrap was used in reprocessing. Regarding 26 drums the case of the department is that these drums were also sold as a good conductors whereas they have been claimed as completely deteriorated and not fit for despatch and have been shown to have been sold as scrap. The Collector of Customs as well as CEGAT has given above-mentioned finding regarding selling of scrap of 191.195 MT as of good conductor on the basis that goods seized and recovered from the parties shown to have been sold as a scrap, were in fact good conductors because as per the case of the assessee these were returned from U.P. State Electricity Board as rejected Panthers. The goods returned by the U.P. State Electricity Board did not tally with the particulars of the drums, gross net weight, company of manufacture etc. shown by Shri R.C. Aggarwal, Authorised signatory of the company in his first statement. Later on Sri R.C. Aggarwal retracted from his earlier statement and has mentioned that these goods tallying with various gate passes of ACSR conductors (Panthers) which were mentioned in letters dated 8-11-1977 and 30-7-1981. On that basis it is alleged that the assessee company has not sold the scrap but the real good conductors. Therefore, additions have been made on entire sale shown as scrap during the Assessment Year under consideration 191.195 MT and on the value of 26 drums. Now we have to sec whether the inference drawn by the Customs and Excise authorities in the given facts and circumstances, have considered all the facts relevant to it or have ignored certain vital evidence. In this case it will be pertinent to point out that total scrap generated during the year was shown 191.908 MT and additions were made on the entire scrap generated during this year, overlooking the fact that Cable & Conductor Manufacturers' Association of India has issued a letter No. CACMAI/38(1) 85/311 dated 11-3-1985 certifying that the normal loss/wastage of scrap generated by Cable & Conductor Industries varies between 5% to 7%. In the asscssce's case the production of scrap comes to 4.84% which was in generation of cable and conductors wastage of scrap is bound to be there. The percentage may differ. Since the assessee had shown generation of scrap at 4.84% which is below minimum 5% to 7% mentioned in the letter of Cable & Conductor Manufacturers' Association, it cannot be believed that no amount of scrap had generated during this year. If we take the find ing of the CEGAT and make addition on the basis of that to the whole amount of scrap generated during the year, it will amount that no scrap was generated in the assessee's factory which would be an unrealistic, illusory proposition. The second point in this connection is; that the assessce vide letters dated 24-7-1985 and 31-7-1985 sought permission from the Superintendent, Central Excise, Range-VII, Faridabad and Range-IV, Sahibabad to seek clearance of aluminium scrap from the department and it has been certified by the Superintendent that these clearances had been issued under the physical supervision of the Central Excise Department. From these two certificates it is clear that the assessee sold scrap of 154.750 MT from its two factories at Faridabad and Sahibabad (Ghaziabad) under certificate issued by the Central Excise authorities even after the issue of the order of the Collector of Central Excise on 6-10-1973. It will be clear that at least these two lots were cleared after seeking permission from the Excise Department. It appears that above-mentioned two certificates were not considered by the Collector of Customs and the highest fact finding body CEGAT. Taking into consideration the certificate of Cable & Conductor Manufacturers' Association regarding percentage of scrap it generated usually and the certificate issued by the Central Excise authorities, it is amply clear that no addition at least to this scrap amounting to 154.750 MT cannot be made out of 191.908 MT in any circumstance.
11. Now we arc left with unexplained scrap of 37.158 MT contained in 32 drums. This is the subject matter of seizure at the time of 'Nakabandi' of two drums and 5 drums seized from parties on the information given by the driver and the authorised signatory. There arc yet other 25 drums which according to the assessee were dismantled with permission of Customs and Excise Department and the steel contents were used and the aluminium scrap were sold to the parties. The observation of the Collector of Customs and the CEGAT regarding two drums seized at the time of 'Nakabandi' at the Barrier and 5 other drums seized from the parties was that the goods seized from the assessee were in running length whereas the case of the assessee was that the goods received back by the assessee from various State Electricity Boards, were in short length. The CEGAT after going through the various correspondences with State Electricity Boards, Agra, Nainital and Haldwani and comparing with the Statement of goods received from U.P. State Electricity Board given before them at p. 144 of the Paper Book, came to the conclusion that the Statement on p. 144 is based on notional basis whereas in the present matter, actual weight is very well available on record and the drums received back do not tally with each other and co-relation with both of them cannot be established. This observation to our mind can hold good to the seized drums from Sales-tax Barrier on 14-7-1981 and 5 other drums seized from the premises of M/s. Chopra Brothers, New Delhi and M/s. Srigopal Electric Stores but this observation cannot hold good for 25 drums which were dismantled by the assessce and the asscssee's case is that they have sold the aluminium contents of these 25 drums i.e., 30.745 MT and rest of the steel content of 20.652 MT was utilised in reprocessing. These drums were dismantled and used in the month of July, at the same time when the seizure had been made. It seems that due to seizure of 7 drums of full length size good conductors as against the case of assessee that it was rejected panther conductor received from various U.P.S.E.B., the inference has been drawn with regard to 25 drums also without being any direct or circumstantial evidence to this effect. Therefore, inference is not supported by any evidence so it cannot be presumed that the assessee had also sold 25 drums of good conductors in the garb of scrap of aluminium.
12. Regarding the seized material, the explanation of the assessee was that two drums cleared under challan No. 523 dated 14-7-1981 weighing 4.197 MT, tallies with the details under letter dated 30-7-1981. The details of these drums is given as under:-
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S. Drum No. Gross Tare Net Length Excise gate pass
No. weight weight weight in No. date
in Kgs. in Kgs. in Kgs. meter.
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17 M-2564 2358 280 2078 2129 474 27-2-74 18 M-4535 2454 335 2119 2171 253 24-9-73
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Similarly for 5 other drums seized under Challan No. 516 dated 13-6-1981 and ChallanNo.520dated7-7-1981, the total quantity involved is 10.645 MT which was recovered from the premises of M/s. Chopra Brothers, New Delhi, M/s. Omco Metals, Delhi and M/s. Srigopal Electric Stores, Delhi. The explanation was that the details given in these drums tally with the details under Challan Nos. 523 and 516 with the Excise gate passes. The details are given as under :-
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S. Drum No. Gross Tare Net Length Excise gate pass
No. weight weight weight in No. date
in Kgs. in Kgs. in Kgs. meter.
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46 M-2029 2487 347 2140 2193 523 27-10-72 53 M-2052 2505 347 2158 2211 523 27-10-72 54 M-2053 2519 367 2152 2205 525 27-10-72
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As against this, the finding of the CEGAT is that the details of these drums do not tally with the details given in page 144 of the Paper Book filed before the Customs authorities showing statement of goods received from U.P. State Electricity Board. The finding of the CEGAT is squarely applicable to these 7 drums. The finding given relates to the identity of the drums and it is a finding of fact. No material was brought by the assessee to take a different view with regard to these 7 drums. Therefore, the explanation given by the assessee that the identity of these 7 drums tallise with the identity of the drums given in letter dated 8-11-1977 does not help, specially in the circumstances when the assessee had taken a plea in the beginning that the drums were returned from the State Electricity Board as rejected drums. In view of this finding of the CEGAT which is applicable only with regard to 7 drums, we arc of the opinion that these 7 drums were not sold as a rejected conductor as a scrap but rather a good conductor which was found at the time of seizure by the department. So far as Other 25 drums dismantled by the assessee are concerned, there is no direct evidence to prove that these were good conductors. Therefore, it is clear that the addition on account of these 25 drums at the value of good conductor cannot be taken.
13 to 20. [These paras are not reproducd here as they involve minor issues.]