Melton India vs The Commissioner Trade Tax, U.P

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 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.

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.