Kesarwani Zarda Bhandar,, Allahabad vs Assessee on 15 July, 2014
To
support the arguments, the appellant has relied on the decision of the
Hon'ble Supreme Court in the matter of C.I.T. Vs. Flexi Pack in SLP
(C) No.18112 of 2009 reported in 319 ITR Page 3. The Hon'ble
Court held that there was no question of going into estimation without
rejection of books of account, properly maintained in the regular
course. Another argument put forward by the appellant is that the
search and seizure action did not result in the discovery of any
suppressed production lying in the premises, so no adverse finding
could be given on the production of the finished products. The
department could not find any hidden place to store the suppressed
production. There is no allegation about exit of suppressed production
by the Central Excise, the duty is leviable at the point of exit. The
process of manufacturing was explained to the A.O. but the A.O. did
not visit the manufacturing process. Relying on the decision of
Allahabad High Court in the case of Mascot (India) Tools & Forges,
the appellant has argued that no addition on account of suppression
of sale can be made without any valid basis when the goods were
excisable and correctness of the declared sales is supported by
regular books of account, duly audited by the auditors. No G.P. rate
addition can be made unless some specific mistakes in the accounts
are pointed out. The A.O. has not considered the evaporation /
81 ITA Nos.358 & 374 to 378/Alld./2014
ITA Nos. 06 to 11/Alld./2014
wastage of percentage in arriving at her working of suppressed
production. The appellant has also referred to one survey conducted
by the excise department in the year 1991 for verification of stock in
which they alleged that there was excess stock of tobacco found as a
result of pilot experiment. They reached the conclusion that the
increase in the weight on account of addition of chemicals, perfumes,
menthol etc. was purely temporary and the weight of the coloured
leaves come almost to the same level after evaporation. Loss of weight
on the use of other materials for example perfumes, chemicals, silver
and silver vark, kimam and masala etc. is on account of evaporation
and processing. The surrender of Rs.50 lakh was only with the
intention to purchase peace of mind and to avoid litigation. But the
surrender did not represent the acceptance of suppression of
production. The yield during the various stages, manufacturing
process cannot be uniform as the raw materials are largely
agricultural produce or vegetable products, some of which are
hygroscopic in nature and some are volatile. There is no fixed rate of
ratio or parameter for the consumption of various raw materials in
the manufacturing process of the tobacco. The yield always varies on
account of quality of raw materials used. The consumption and
product cannot be matched at 1 to 1 ratio but the A.O. failed to
understand this simple fact. The appellant has given the example of
preparation of a cup of tea wherein various ingredients such as water,
milk, sugar, tea leaf are mixed and heated, after getting the essence
and colour of the tea, leaf and other ingredients used are thrown out.