IMPORTANT POINT
Higher consumption of electricity but the production going down is a good ground for rejection of the books of account as in such a case 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.

Headnote:U.P. Trade Tax Act—Section 4-A—Eligibility certificate—Monetary limit—Assessee’s intention to suppress the production and the turn over—Appellant was doing business of manufacture of metallised plastic films—Appellant’s unit was holding an eligibility certificate u/s 4-A of the Act for the period from 20-2-1995 to 19-2-2003 upto monetary limit of Rs. 66,56,239/—Assessing authority rejected appellant’s books of account and enhanced the turn over—While the electricity consumption for the three assessment years has clearly been going up, the production has gone down—Non production of the production register, the labour attendance register—Tribunal sustained rejection of assessee’s books of account and estimate of turn over on basis of higher consumption of electricity—High Court has not interfered with the findings of the Tribunal about non maintenance of proper accounts and suppression of production and turn over—Whether rejection of assessee’s books of account and estimate of turn over on basis of higher consumption of electricity was justified—(Yes).
       Held : 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.(Para 13)
       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.(Para 14)

JUDGMENT

Markandey Katju, J.—Leave granted.

2. 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.

3. 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.

4. 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.

5. 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 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.

6. 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.

7. 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:

AssessmentProductionElectri

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