Gujarat High Court
The Pr. Commissioner Of Income Tax, ... vs Vrundavan Ceramics P. Ltd on 10 September, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/TAXAP/1109/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1109 of 2018
With
R/TAX APPEAL NO. 1110 of 2018
With
R/TAX APPEAL NO. 1111 of 2018
With
R/TAX APPEAL NO. 1112 of 2018
With
R/TAX APPEAL NO. 1113 of 2018
With
R/TAX APPEAL NO. 1114 of 2018
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THE PR. COMMISSIONER OF INCOME TAX, RAJKOT 3
Versus
VRUNDAVAN CERAMICS P. LTD
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Appearance:
MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1
for the RESPONDENT(s) No. 1
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 10/09/2018
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. These appeals filed by the Revenue arise in common background. We may therefore, record facts from Tax Appeal No. 1109 of 2018. Revenue has challenged judgement of Income Tax Appellate Tribunal dated 16.01.2018 in case of the respondent-Assessing Officer in connection with the Page 1 of 6 C/TAXAP/1109/2018 ORDER assessment year 2004-05. Following questions are framed for our consideration:
"1. Whether on facts and circumstances of the case Appellate Tribunal is justified in law and on fact in not appreciating the provisions of section 145 of the IT Act which provides for rejection of the book result of the assessee when the assessing officer is not satisfied about the correctness or completeness of the accounts of the assessee?
2. Whether on facts and circumstances of the case Appellate Tribunal is justified in law and on facts in deleting the addition made on account of suppressed sale by using the material collected by the Excise Department including the statements of relevant witnesses recorded during the search?"
2. Respondent-assessee is in the business of manufacturing ceramic items. Assessee was subjected to investigation at the hands of Central Excise [Investigation Wing] which led to show-cause notice being issued for adjudication and levy of unpaid excise duty with interest and penalty. On the basis of such exercise and the materials collected by the Intelligence Wing of the Excise department, the Revenue also reopened the assessments and instituted further inquiries, upon completion of which, the Assessing Officer made additions which eventually came to be deleted by the Tribunal by the impugned judgement.
3. We notice that under identical situation, a bunch of Tax Appeals No. 82 of 2016 and connected appeals came to be Page 2 of 6 C/TAXAP/1109/2018 ORDER dismissed by this Court by a common order dated 25.04.2018 with following observations:
"6. Having heard learned advocates for the parties at considerable length at the outset, we may straightaway agree with the suggestion of the counsel for the Revenue that the present group of cases do not fall in the same category as the judgement of this Court in case of Futura Ceramics (petitioner) Ltd v. State of Gujarat reported in [2013] 40 taxmann.com 404 (Gujarat). It was the case in which, the petitioner before the High Court was a registered dealer under the Gujarat Value Added Tax Act and was liable to pay tax on the basis of its turnover. The petitioner's return for the financial year 2006-07 was scrutinized by the Assistant Commissioner of Commercial Tax. The assessee was served with the show-cause notice by the said authority indicating that he has reason to believe that taxable turnover was suppressed. This was on the basis of a show-cause notice issued by the Excise department pursuant to the raid indicating that the petitioner had suppressed sales to the tune of Rs. 5.25 crores and thereby evaded tax duty to the extent of 73.55 lacs. The Assistant Commissioner of Commercial Tax therefore, prima facie held a belief that the assessee's sale of Rs. 5.97 crores (i.e. the suppressed sale of 5.25 crores coupled with excise duty element of 73.55 lacs) had escaped assessment. He accordingly, framed the assessment after rejecting the petitioner's objections. Such assessment order was challenged by the petitioner before the High Court on the ground that the Assistant Commissioner of Commercial Tax had proceeded merely on the show-cause notice issued by the Excise Department without any further verification. The Court noticed that the entire order of reassessment proceeded on the show-cause notice issued by the Excise department without any further material being brought on record. The Court held that merely because the Excise department issued such a notice, it cannot be a ground to presume that there was evasion of excise duty further implying evasion of value added tax. It was noticed that the show-cause notice issued by the Excise department had not yet culminated into final order against the petitioner and a piquant Page 3 of 6 C/TAXAP/1109/2018 ORDER situation would arise if ultimately, such show-cause notice were to be dropped in favour of the petitioner. On this ground, the Court quashed the order of reassessment.
7. In the present case, the Assessing Officer has not proceeded on the basis of show-cause notice taking the proposals contained in such show-cause notice as having achieved finality. He has put the assessees to notice with respect to the contents of such show-cause notice issued by the Excise department and also elicited assessee's response to the same. Whether this was sufficient to enable him to frame assessment is a question, which we will answer a while later.
8. Before proceeding further, we may discard the contention of the counsel for the assessees that since the excise proceedings had not yet been finalized, the Assessing Officer could not have passed the final order of assessment. This contention would have multiple objections from us. Firstly, as is wellknown, the adjudication proceedings under the Central Excise Act do not come with time barring provisions unlike as in the Income Tax Act. In fact, the Adjudicating authorities, under the Central Excise Act, enjoy much wider time period even for issuance of show-cause notice in case of the alleged nonpayment or short payment of duty is for any reason of fraud or collusion or willful misstatement or suppression of facts or contravention of the provisions of the Act with intent to evade payment of duty.
9. Under the circumstances, the Assessing Officer cannot be expected to defer completion of assessment awaiting final order of adjudication in excise proceedings at the risk of his assessment getting time barred. Even otherwise, in a given case, the material that may be brought on record in excise proceedings may be different from that which may form part of the assessment proceedings though the both may, to some extent, be common.Page 4 of 6
C/TAXAP/1109/2018 ORDER
10. Having thus cleared the peripheral issues, we may examine the central question viz. did the Assessing Officer have sufficient material at his command to believe evasion of tax? We have noticed the broad modus operandi stated to have been adopted by the assessees as per the excise show-cause notices. Admittedly, these show-cause notices are only at such stage without in any of these cases the final orders of adjudication have been passed by the Excise authorities. These show-cause notices thus merely present the material collected by the Excise department suggesting the view of the department that this is a case of large scale excise evasion. Before final order levying excise duty with interest and penalty can be passed, these facts have to be established through by parte proceedings. Till then, it only remains in the realm of the stand of the department which is yet to be tested.
11.In addition to confronting the assessee with the contents of the show-cause notice issued by the Excise department, the Assessing Officer has done little else. He of course called upon the assessee to respond to the allegations contained in the show-cause notice, to the statements and materials accompanying such show-cause notice. As noted, the assessee gave a brief reply denying the allegations and pointing out that the charges are yet to be proved. If the Assessing Officer thereafter wanted to make additions on the basis of such materials, the same had to be brought on record. By merely producing the copies of the statements of the witnesses accompanying the show-cause notices, such statements and the veracity thereof does not get automatically established. The Assessing Officer merely cosmetically gave an opportunity to the assessee to meet with such allegations, virtually, shifting the burden of proving the evasion of duty that had taken place on the assessee. We have perused the entire order of assessment. There is no independent material brought on record by the Assessing Officer other than those which were already collected by the Excise department and which, as noted earlier, are yet to be verified.Page 5 of 6
C/TAXAP/1109/2018 ORDER
12. Counsel for the assessees drew our attention to a judgement of Customs, Excise and Service Tax Appellate Tribunal in which, the order of adjudication passed in case of one of the ceramic units (not an assessee before us) by the Adjudicating authority came to be set aside. However, for the following reasons we do not wish to place any reliance on this judgement :
• Firstly, the excise show-cause notices in case of the present assessees are yet to be adjudicated. What would be the material on record during such proceedings is not possible for us to foresee.
• Secondly, the Tribunal has mainly proceeded on the basis of absence of section 4A of the Central Excise Act at the relevant time which, in the opinion of the Tribunal, alone could have permitted the department to substitute the sale price by the transaction value of the goods. Such is not the case in the present group of cases. We would, therefore, be well advised to clear such controversy.
13. When we find that the Assessing Officer did not have the basis for making additions, the question of percentage of the sales at which stage additions should be made would become redundant.
14. In the result, question is decided against the Revenue. All Tax Appeals are dismissed."
4. In the result, without recording separate reasons, these appeals are also dismissed.
(AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI Page 6 of 6