India Vs. The
Commissioner Trade Tax, U.P  Insc 74 (31 January 2007)
B. Sinha & Markandey Katju (Arising out of Special Leave Petition (Civil)
Nos. 2234-2237/2005) MARKANDEY KATJU, J.
appeal has been directed against the judgment and order dated 10.12.2004 by the
High Court of Judicature at Allahabad in
Trade Tax Revision Nos. 2407-2410/2004.
learned counsel for the parties and perused the record.
appellant was doing the business of manufacture of metallised plastic films.
The appellant's unit was holding an eligibility certificate under Section 4-A
of the U.P. Trade Tax Act for the period from 20.02.1995 to 19.02.2003 upto
monetary limit of Rs. 66,56,239/-.
Assessing authority rejected the appellant's books of account and enhanced the
turn over. The first and second appeals filed by the appellant were rejected.
appellant then filed Revisions before the High Court which were also dismissed
and hence this appeal.
Tribunal has rejected the books of account of the assessee appellant on the
ground that during the assessment year 2000-01 as against the electricity
consumption of 513596 units, production was shown at 402 MT, while in the
assessment year 2001-02 as against the electricity consumption of 638164 units,
production was shown at 268 MT, and for the assessment year 2002-03 as against
the electricity consumption of 668736 units, production was shown at 314 MT.
Thus the Tribunal, as also the High Court, were of the view that since
electricity consumption by the assessee had increased it can be reasonably
inferred that the assessee's production must also have increased. Since the
production had in fact gone down, it could be reasonably inferred that the assessee
had suppressed its production.
appellant explained that during the period in question it had switched over
from production of 23 micron goods to production of 12 micron goods. According
to it, electricity consumption in the manufacturing of 23 micron goods was less
than that in manufacturing 12 micron goods. It was explained that the appellant
was now manufacturing goods of 12 micron, which requires more electricity
consumption as compared to the goods of 23 micron as the length of 12 micron is
more than the length of 23 micron. The weight of 23 micron is 33 gm. per sq.
meter, whereas the weight of 12 micron is almost half i.e. 17 gram per sq.
meter, and therefore to manufacture 1 kg. goods of 12 micron the consumption of
electricity is almost double than the consumption of electricity for
manufacture of 1 kg. of 23 micron. It was further explained that the chilling
tower was in operation even during the closure of the manufacturing which
resulted continuous consumption of power, through manufacturing did not take
place and electricity was also consumed in residential area. These explanations
have not been accepted by the Tribunal on the ground that it can not be
believed that during the closure of the production the chilling plant kept in
operation. The Tribunal further held that though less production was shown but
the claim of labour expenses etc. have not been shown less and the position was
same as it was in the earlier years. The Tribunal observed that no prudent
businessman would keep in operation the chilling plant without production. The
Tribunal further held that separate account for the job work had not been
produced and it had not been shown as to which production relates to the job
work. The Tribunal accordingly sustained the rejection of the assessee's books
of account and estimate of turn over on the basis of the higher consumption of
Dwivedi, learned senior counsel for the appellant submitted that the higher
consumption of electricity is not a good ground for rejection of the books of
accounts. On the other hand, learned counsel for the respondent submitted that
the appellant had not maintained proper books of accounts.
this connection we may refer to the electricity consumption and production in
the appellant's factory for the three assessment years in question, which are
Year Production Electricity consumed 2001-01 402 MT 5,13,596 2001-02 268 MT
6,38,164 2002-03 314 MT 6,68,736 A perusal of the above figures shows that
while the electricity consumption has clearly been going up, the production has
gone down from 402 MT to 314 MT. Ordinarily, when electricity consumption goes
up, a reasonable inference can be drawn that the production will also have gone
up. If the electricity consumption is going up but the production is seen to be
going down, a reasonable inference can, prima facie, be drawn that there was
suppression of production and consequently suppression of sales in order to
avoid sales tax.
Deputy Commissioner (Appeals) observed that in spite of the several opportunities
being given for verification of production from the production register, the labour
attendance register and the payment made to the labour the same was not done by
the assesse, and the closure of the manufacturing also could not be got
verified from the labour attendance register and labour payment register. The
appellant also had not maintained separate accounts for its own manufacturing
and the job work, and it could not inform which raw materials have been used in
the manufacturing of job work and which goods have been used on the assessee's
view of the above, we agree with the High Court that excessive power
consumption, prima facie, establishes the assessee's intention to suppress the
production and the turn over.
Dwivedi, learned senior counsel for the appellant, however, submitted that
earlier the appellant was manufacturing goods of 23 micron which required less
electricity consumption, whereas subsequently it had started manufacturing
goods of 12 micron which required more electricity consumption as stated above.
opinion this submission cannot be accepted. It may be noted from the orders of
the Deputy Commissioner (Appeals), the Tribunal and the High Court that the assessee's
books of accounts have been rejected on several grounds. For example, the assessee
had not produced the relevant books showing the payment of wages to the
workers. This book was very important because had it shown that the total wage
bill of the unit was going up, it would be a reasonable inference to draw that
production was also going up. Non production of such a book despite several
opportunities being given by the authorities indicates that the assessee was
trying to suppress its production. Similarly, non production of the production
register also leads to the same inference.
have carefully perused the order of the Tribunal which is the last fact finding
authority and we note that there were relevant considerations and relevant
material on the basis of which the books of the assessee were rejected. The
Tribunal has given various reasons for upholding the rejection of the assessee
books. For example, there was no verification of the raw materials used and the
work done on job work basis has not been verified. The Tribunal also considered
the assessee's submission regarding the difference in the production of 23
microns and 12 microns. The Tribunal has also observed that the appellant has
nowhere mentioned that the chilling plant has ever remained closed and similar
is the position with regard to the supply of electricity for labourers. Various
other reasons have given for rejecting the books of accounts including the
imbalance in the production on the basis of electricity consumption, non
verification of job work etc.
Court has considered these reasons and has not interfered with the findings of
the Tribunal about non maintenance of proper accounts and suppression of
production and turn over. These are findings of fact and hence the High Court,
which could only interfere if there an error of law, rightly rejected the
revision. Thus there is no force in this appeal and hence it is dismissed.