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CASE NO.: Appeal (civil)  373 of 2007

PETITIONER: Melton India

RESPONDENT: The Commissioner Trade Tax, U.P

DATE OF JUDGMENT: 31/01/2007

BENCH: S. B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T (Arising out of Special Leave Petition (Civil) Nos. 2234-2237/2005)

MARKANDEY KATJU, J.

       Leave granted.

       This 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.

       Heard learned counsel for the parties and perused the record.

       The 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/-.   The 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.   

       The appellant then filed Revisions before the High Court which  were also dismissed and hence this appeal.

       The 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.            The 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

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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 electricity.      

       Shri Dinesh 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.

       In 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 as follows:    Assessment 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.

       The 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 own manufacturing.   In 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.

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Shri Dinesh 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.   

In our 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.

We 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.

The High 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.