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Judgment
Rajesh H. Shukla, J.—The present tax appeal has been filed by the Appellant u/s 260A of the Income Tax Act, proposing to raise the following substantial questions of law:
(i) Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the addition of Rs. 18,00,000 by rejecting the fat content in standard and toned milk produced by the Appellant even though the same compared favourably with comparative cases of Amul and Uttam Dairies respectively and the department had not brought any comparative case showing less fat content than that of the Appellant ?
(ii) Whether there was any evidence before the Tribunal to hold that actual fat content in standard and toned milk was less than what Appellants books showed ?
(iii) Whether the Tribunal was right in law in holding that the comparative cases of Amul and Uttam were new evidence before the Tribunal and the same was not pleaded for admission in accordance with law when in fact,-this evidence was there before the lower authorities, and therefore, no prayer for admission thereof was necessary ?
Notice for final disposal was issued on 30-11-2009 which was duly served.
Heard the learned Counsel Mr. J.P. Shah for learned Counsel Mr. Manish J. Shah for the Appellant and learned senior standing counsel Mr. M.R. Bhatt appearing with Mrs. Mauna M. Bhatt for the Respondent.
Learned Counsel Mr. J.P. Shah referred to the assessment order at Annex.-A and also the order passed by the Commissioner (Appeals)-VIII, Ahmedabad as well as Tribunal and submitted that the additions which have been made in the order passed by the assessing officer are based on misconception and in disregard to the facts and material on record. Learned Counsel Mr. J.P. Shah submitted that the Appellant is running a business of purchase and sale of milk and milk products and the type of milk prescribed under the standard of fat as required under Prevention of Food Adulteration Act. He further submitted that the assessing officer has made the presumptions and on the basis of the standard with regard to fat he has misconstrued and on the hypothetical basis he has come to the conclusion. It was submitted that the Ghee was sold @ Rs. 130 and also the inflated fat of 31,980 kgs. which is said to have been converted into Ghee of 21,782 kgs. for which he added income of Rs. 3,84,020. Learned Counsel Mr. J.P. Shah referred to the chart at pp. 14, 16 and 48. He further referred to the three different types of milk and submitted that the fat for the whole milk was 6.16 per cent which was accepted. However, for standard milk, the fat was 4.79 per cent as compared to the standard fat required of 4 per cent and on that basis he has made the additions. However, learned Counsel Mr. Shah submitted that the Appellant had pointed out that Prevention of Food Adulteration Act prescribes the minimum fat contents . which the different types of milk must contain and the Appellant like others in the trade had practice of keeping a higher fat content than the standard prescribed by Prevention of Food Adulteration Act. He further submitted that the Appellant had also submitted the certificate of Dr. C.V. Patel, dated 26-3-2002, who is a dairy technologist and consultant and was former General Manager (Technical) of Amul Dairy. Learned Counsel Mr. Shah also referred to the instances of Amul Dairy and Uttam Dairy, which are having the similar product. He has also referred to the additional written submissions submitted before the Commissioner (Appeals) raising the similar contentions which he has summarized briefly. Learned advocate Mr. Shah therefore submitted that the order passed by the Tribunal dismissing the appeal is erroneous and the present appeal may be admitted.
In view of the submissions made, the undisputed facts of the record are required to be appreciated. As it is evident from the facts, the present Appellant is a dairy dealing in the dairy products of the milk, the type of the milk like toned milk, standard milk and the whole milk. The Prevention of Food Adulteration Act prescribes the standards which are required to be maintained with regard to the fat etc. and the other two dairies namely, Amul and Uttam Dairy also have been in the same way adhered to the prescribed standards. Therefore the submissions made by learned Counsel Mr. Shah based on the comparative chart produced at p. 14 as well as on p. 48 are required to be appreciated. The comparative chart is reproduced hereinbelow:
Type of the Milk As per the Assessee company Found on the pouches Difference
Toned 3.5 3 0.5
Standard 5.0 4.5 0.5
Whole 6.5 6 0.5
Extract of comparative actual kilograms fat of the Assessee with Amul Dairy and Uttam Dairy A/c Year: 31st March, 1999 Asst. yr.: 1999-2000 (A) With Amul
Type of milk Llrs. Fat actual as per Gayatri Fat actual as per Amul Diffin fat Diffin kg. fat
(i) Whole milk 32,35,668.50 6.16 6.30 0.14 4,529.94
(ii) Standard milk 60,06,322.50 4.79 4.80 0.01 +600.63
(iii) Toned milk 32,12,831.90 3.30 3.20 -0.10 -3,212.83
Total kg. fat 1,917.74
(B) With Uttam:
Type of milk Ltrs. Fat actual as per Gayatri Fat actual as per Amul Diffin fat Diffin kg. fat
(i) Whole milk 32,35,668.50 6.16 6.20 0.14 + 1294.27
(ii) Standard milk 60,06,322.50 4.79 4.70 -0.09 +5405.69
(iii) Toned milk 32,12,831.90 3.30 3.30 0.00 0.00
Total kg. fat -4111.42
It clearly transpires that by and large the Appellant has tried to adhere to the Prevention of Food Adulteration Act and in order to see that they are not dragged into any kind of complications or the prosecution. They have taken precaution or the care and if a percentage of fat is little more or it has some variation as compared to the other two dairies, it cannot be a ground for making such additions as sought to be canvassed. The two other dairies have also with regard to the same product like milk, almost on the same standards and for them there is no addition, for which there is no justification. The percentage which is sought to be calculated for making addition is on hypothetical basis as the Commissioner (Appeals) has stated and observed that the fat content for standard milk claimed by the Appellant company is 4.79 per cent as" against the printed content of 4 per cent as mentioned in the assessment order. Thus, the excess content of 0.79 per cent is about 20 per cent of the printed content. Similarly, the fat content claimed by the Appellant company for whole milk is 6.16 per cent as against the standard printed content of 6 per cent The difference of 0.16 per cent is very nominal being hardly 3 per cent of the printed content. Thus, referring to this aspect, the additions are made. The submissions made by the Assessee were recorded by the Commissioner (Appeals) and as quoted in the memo, the Commissioner (Appeals) has dealt with and observed as under:
As stated above, a reasonable amount of margin is to be allowed to the Appellant company over and above the printed content mentioned on the pouch so that they can keep themselves safe from action of the PFA. At the same time the margin should not be very much. I find that the excess fat content claimed by the Appellant company for whole milk is 6.16 per cent as against the standard printed content of 6 per cent. The difference of 0.16 per cent is very nominal being hardly 3 per cent of the printed content. Keeping in view the above facts and circumstances, I hold that no adverse inference can be drawn from the fact that the Appellant company was claiming fat content of 6.16 per cent as against 6 per cent printed on the pouch. Consequently, excess fat of 4,854 kgs. is not required to be considered for making any addition on this ground. However, the fat content for standard milk claimed by the Appellant company is 4.79 per cent as against the printed content of 4 per cent as mentioned in the assessment order. The excess content of 0.79 per cent is about 20 per cent of the printed content. In my opinion, in this type of milk the Appellant company is claiming unreasonably high margin of the fat content which should not be permitted.
Thus, it is on this hypothetical basis, additions are sought to be made. The tabular form clearly suggests that the other two dairies, i.e. Amul has also 4.80 and Uttam Dairy has 4.70 of fat for the same standard of milk for which the Appellant is having 4.79. Therefore, there is not much variation even in comparable units in the same business for which there is no discussion or even a whisper as to whether the other two dairy units in the same business having the similar margins are accepted, what was the need or reason for making out an exception for the Appellant herein particularly when he has given the reasons for justification which have not been particularly dealt with and merely on the basis of the hypothecation, the additions are sought to be made. It is required to be appreciated that the standard as required under Prevention of Food Adulteration Act has to be maintained or adhered to, failing which the complaint or a criminal prosecution may be initiated. Therefore, on one hand, one is required to adhere to the standard and in the process by abundant caution if the percentage of fat is little higher to avoid any such hassles, would it be justified to make addition on the ground that it was for income.
Moreover, the standard applied to the present Appellant with regard to the quality or the standard of fat has to be applied uniformly to other units and on comparable basis if the other two units are not questioned, there is no justification for such additions as it would amount to be arbitrary and without any justification. Further, both the authorities have not discussed on this aspect as to the comparable basis and the standard in other two comparable cases. Therefore, the present appeal deserves to be allowed.
In this view of the matter, we quash and set aside the order passed by the Tribunal and remand the same to the Tribunal for deciding the appeal afresh and we direct that the Tribunal shall pass speaking order dealing with the findings arrived at by the Commissioner (Appeals) particularly keeping in mind the aspect of the two comparable dairy units and the standards applied in their case with regard to the different products and also keeping in mind the aspect of standard, which is required to be adhered to under the Prevention of Food Adulteration Act to avoid any prosecution or criminal liability. The Tribunal shall specifically record the contentions raised by the Appellant and the written submissions which have been given before the Commissioner (Appeals), which are also referred to by learned Counsel Mr. J.P. Shah For the Appellant.
Accordingly, the present appeal stands allowed to the above extent.