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2015 (10) TMI 2302 - ITAT PUNE

2015 (10) TMI 2302 - ITAT PUNE - TMI - GP rate @15% on the suppressed sales - additional income in the hands of assessee in the respective assessment years on account of admission of clandestine removal of goods without payment of Excise duty - Held that:- The issue being identical to the issue before the Tribunal in set of Rolling Mill cases, we delete the additions made in the hands of assessee on account of suppressed production. However, following the parity of reasoning we direct the Assess .....

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tices issued by the Central Excise Authorities and the quantity involved of clandestine removal of goods and suppression of production in the respective years and also the final result / status of the petitions moved by the assessee either before the Settlement Commission / CESTAT or Commissioner (Appeals) of Excise. The said tabulated details are appended as Annexure to this order. We direct the Assessing Officer to verify the claim of assessee in this regard and include the profit on the suppr .....

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as been assessed in the hands of respective individuals. The major portion of income was declared in assessment year 2010-11 amounting of ₹ 12 crores and the balance of ₹ 2.80 crores was declared in assessment years 2006-07 to 2008-09. No benefit of telescoping has been allowed by the CIT(A) in respect of said declaration in the hands of assessee and no ground of appeal has been raised against the said denial by the CIT(A). In the totality of the above said facts and circumstances, w .....

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ment years on account of admission of clandestine removal of goods without payment of Excise duty by the assessee before the Settlement Commission, Commissioner (Appeals) of Excise and CESTAT. No other addition is warranted in the hands of assessee. - Decided in favour of assessee. - ITA Nos.1258 to 1264/PN/2012, ITA No s.1660 to 1666/PN/2012 - Dated:- 24-9-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Assessee : Shri J.P. Bairagra For The Department : S/Shri Rastogi & .....

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re being disposed of by this consolidated order for the sake of convenience. In order to adjudicate the issue, reference is being made to the cross appeals filed by the assessee and Revenue in ITA No. 1258/PN/2012 and ITA No.1660/PN/2012 relating to assessment year 2004-05. 3. In ITA No. 1258/PN/2012, the assessee has raised the following grounds of appeal:- 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the alleged suppression of sales of ₹ 3,89,11,352/-. 2. The l .....

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asis of the order of the Commissioner of Central Excise and Customs, Aurangabad wherein they have relied on the consumption of electricity vis-a-vis production on the basis of an article written by Dr. N. K. Batra, Professor of IIT, Kanpur i.e. on presumption and assumption and without any evidence of purchase of raw material or sales of finished products out of books. 4. The learned Commissioner of Income Tax (Appeals) further erred in confirming the alleged suppression of production on the gro .....

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ssessing Officer in making an addition on account of alleged suppression of sales without giving sufficient opportunity to the appellant company to explain the facts in response to the show cause notice issued on 23-12-2011 when the assessment order was passed on 30-12-2011, which is against the rules of natural justice. 7. The learned Commissioner of Income Tax (Appeals) further erred in confirming the addition on account of Gross Profit @ 4% on the alleged suppression of sale of ₹ 15,56, .....

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rned Commissioner of Income Tax (Appeals) further erred in confirming the order passed u/s. 143(3) read with Sec. 153A of the Income Tax Act even though there was no incriminating material or evidence found during the course of the search leading to an assessment being framed u/s. 153A. 11. The appellant company further erred in confirming the addition made by the AO on the basis of 4 orders passed by the Directorate General of Central Excise and Customs (DGCEI) on the appellant company. 12. The .....

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case, the learned CIT(A) has erred in adopting GP @ 4% arbitrarily without any basis ignoring the factual position on record, thus rendering his decision perverse. 3. On the facts and in the circumstances of the case, the learned CIT(A) failed to appreciate that the actual GP is 35% as admitted by the director in his statement recorded u/s.131 of the Act on 17-08-2009, thus rendering his decision perverse on facts. 4. On the facts and in the circumstances of the case, the learned CIT(A) has erre .....

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n 16.06.2009. During the course of search, statement of director Mr.Ghanshyam Goyal was recorded under section 132(4) of the Act and an offer of additional income of ₹ 14,30,95,471/- was made in the hands of director of assessee company. The Assessing Officer thereafter, issued notice under section 153A of the Act for assessment years 2004-05 to 2009-10. The assessee in compliance thereto, filed returns of income and also filed the return of income under section 139(1) of the Act relating .....

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tricity was major cost input in the process of manufacture of ingots / billets and accounted for major share of expenses. The Assessing Officer observed that the manufacturers in Jalna district were sanctioned load capacity on the basis of unit capacity, which in turn included usage for furnace load and auxiliary load and the major load factor on account of furnace. The Assessing Officer further pointed out that the Central Excise Department, Aurangabad had made detailed study on electricity uni .....

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essee was in receipt of income from various sources like commission, commodity profits, etc. On the other hand, the assessee continued to suffer losses from the core activity of manufacturing of MS billets. The Assessing Officer under para 13 has tabulated year-wise other income earned by the assessee and the losses / profits from core activity and the overall profits / losses declared by the assessee. After considering the process of mining of iron ore to its final destination i.e. utilized in .....

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Excise Intelligence (DGCEI), who had conducted actions on many steel and TMT bar manufacturers of Jalna including the assessee at different times. The DGCEI had been able to substantiate the clandestine removal of goods manufactured by the assessee. The Assessing Officer made reference to various orders passed by the DGCEI, under which duty, penalty and even personal penalties on directors of the assessee company, were levied. The Assessing Officer made reference to the orders passed by the DGC .....

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filed before the Hon ble Bombay High Court, Aurangabad Bench on 02.05.2011, the decisions of the Tribunal were not binding. It was further observed by the Assessing Officer that the assessee had merely denied the facts without any corroboratory evidence and in the absence of the same, onus has not been discharged. The Assessing Officer referred to the variance in electricity consumption by different manufacturers and held that the same was not justified and also that the assessee had failed to .....

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ied as claimed by the assessee. The Assessing Officer in view thereof, estimated the suppressed production in the hands of assessee on the basis of data relied upon by the Central Excise Commissioner (CEC), Aurangabad and rejected the books of account of the assessee under section 145(1) of the Act. The Assessing Officer thereafter, computed the production in the hands of the assessee on the basis of production shown as per Excise records and electricity consumption and income was estimated in t .....

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assessee and others and hence, the profit declared by the assessee could not be accepted without making further addition on account of profit on suppressed sales. The CIT(A) upheld the order of Assessing Officer in arriving at the suppressed production / sales of MS ingots / billets on the basis of electricity unit consumption. The second aspect considered by the CIT(A) was whether Gross Profit was to be taxed in respect of said alleged undisclosed sales and at what percentage of GP or the tota .....

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the appeals pending before the Hon ble Bombay High Court, Aurangabad Bench. The CIT(A) held that GP in respect of undisclosed production sold could only be taxed in the hands of the assessee. Since the book results were rejected in view of admitted clandestine removal of goods and unaccounted purchase of raw materials and sale of finished goods admitted by the assessee, the GP on undisclosed sales was to be reasonably estimated. The CIT(A) estimated the GP on suppressed production sold @ 4%, whi .....

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reduced by income offered to tax in the hands of directors / persons who were the beneficiaries of the said income. The CIT(A) noted that in the hands of four persons, the total declaration of ₹ 2.80 crores was made by the said persons in assessment years 2006-07 to 2008-09. The details of the profit of the companies of group on suppressed production sold also worked out to ₹ 2.80 crores. The claim of the assessee before the CIT(A) was that since it had offered to tax the above addit .....

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T(A) further noted that no income was offered to tax in the hands of the assessee company. Therefore, the CIT(A) held that no telescoping was to be allowed in the hands of the assessee. Hence, contention of the assessee about telescoping of the income offered to tax in individual capacity against the income taxed in the hands of the assessee company, was rejected. 8. The second aspect considered by the CIT(A) was the funds / capital required for producing and selling the goods outside the books .....

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arch. The CIT(A) observed that during the course of search and statement recorded under section 132(4) of the Act, Kalika group had declared additional income of more than ₹ 14 crores in various group cases and profit of ₹ 2.80 crores, which has been earned on account of profit on suppressed production sold by the flagship companies of Kalika group including assessee company, had been declared in the statement recorded under section 132(4) of the Act and also in the returns of income .....

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pressed sales on the basis of order passed by the CCE, Aurangabad and on the basis of evasion of Excise duty found by the DGCEI. The assessee is also aggrieved by the order of CIT(A) in confirming the addition on the basis of order of CCE, Aurangabad, wherein, they had relied on the consumption of electricity vis-à-vis production on the basis of an article written by Dr.N.K. Batra. The assessee is further aggrieved by the rejection of books of account upheld by the CIT(A). The next grieva .....

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e) and against one, the assessee had gone to the Settlement Commission. The assessee had also raised ground of appeal No.6 against the non-allowance of sufficient opportunity to the assessee by the Assessing Officer before completing assessment, which is not pressed, hence the same is dismissed as not pressed. Further, vide ground of appeal No.9, the assessee has raised objection against the passing of order under section 143(3) r.w.s. 153A of the Act and the said ground of appeal is not pressed .....

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of director Shri Ghanshyam Goyal was recorded under section 132(4) of the Act on 08.07.2009 and further, statement under section 131 of the Act was recorded on 17.08.2009, copies of which are placed in the Paper Book. As per the statement recorded under section 132(4) of the Act, the director had declared ₹ 14 crores in the hands of directors of four groups of shareholders and their family members. Further, in the statement recorded under section 131 of the Act, the director had given comp .....

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. The learned Authorized Representative for the assessee further pointed out that during the course of search, the details of show cause notices issued by the Excise Department were found and the Assessing Officer had show caused the assessee to explain the same. The Assessing Officer had made the addition on account of suppressed production and sale on the basis of orders of Excise Commissioner, which was similar to the order passed in other furnace cases. The learned Authorized Representative .....

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now filed a complete statement showing the final result of the SCNs at Page No.1 from which your honour will find as under:- a. The SCN at S.No.1 is settled before the Settlement Commission together with other parties and the order of Settlement petition is given at Page No.290 - 295 of Paper Book Volume 2. The GP @ 4% on the quantity of 688.50 MT involving total sale value of ₹ 1,11,85,530/-comes to ₹ 4,47,421/- which is to be now included in the income of the assessee for assessme .....

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er (Appeals) of Central Excise and the order of the Commissioner (Appeals) of Central Excise is at Page No.52 - 56. 14. The contention of the assessee before us is that the issue in the present appeals is similar to the issue raised in the appeals decided by Pune Bench of Tribunal in the case of M/s. SRJ Peety Steels Pvt. Ltd. Vs. Addl. CIT in ITA Nos.123 & 124/PN/2012 and appeals filed by the Revenue in ACIT Vs. M/s. SRJ Peety Steels Pvt. Ltd., relating to assessment years 2007-08 and 2008- .....

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e Hon ble Bombay High Court, Aurangabad Bench, relating to assessment years 2000-01 to 2006-07. 15. The learned Departmental Representative for the Revenue in reply, in turn, relied on the order of CIT(A) and also pointed out that the assessee in its statement recorded under section 131 of the Act had admitted to the clandestine removal of goods and had also admitted to the additional income being offered in the hands of its directors. The learned Departmental Representative for the Revenue stre .....

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the director in the statement recorded under section 131 of the Act on 17.08.2009 should be applied. The learned Departmental Representative for the Revenue thus, stressed that in case GP rate is to be applied, then the same should be applied @ 35% since the assessee by clandestine removal of goods has evaded the payment of Excise duty and hence, the margins of profits were higher in the hands of assessee. 17. The learned Authorized Representative for the assessee in reply, pointed out that the .....

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to buy peace of mind and in principle, he was not accepting such results of unaccounted sales. The learned Authorized Representative for the assessee further referred to the order of CIT(A) in para 8.6, wherein, the CIT(A) had not allowed telescoping in the hands of the assessee on account of addition made in the hands of directors / individuals of Kalika group. The declaration made by the director in the hands of individuals was claimed to be under pressure and there was no merit in the afores .....

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way of Settlement Commission or otherwise, is to be added in the hands of assessee as directed by the Tribunal in appeals in group of furnace cases. 18. We have heard the rival contentions and perused the record. The issues arising in the present cross appeals filed by the assessee and the Revenue are against the addition made on account of suppressed production worked out on the basis of electricity consumption as per the report of Dr. Batra. The Excise authorities had issued various show caus .....

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of search at the premises of group cases of assessee by the Excise authorities. The present cross appeals filed by the assessee and the Revenue are pursuant to search and seizure operations carried out against the assessee on 08.07.2009. During the course of search by the Income-tax Department on the assessee, statement of director of assessee company was recorded under section 132(4) of the Act on 08.07.2009, in which he declared undisclosed income of ₹ 14 cores in the hands of directors .....

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d under section 271(1)© of the Act. No declaration of any additional income was made by the assessee company during the course of search. The Assessing Officer based the addition in the hands of assessee on the basis of variation in electricity consumption, which was the issue raised in various show cause notices issued by the Excise Department. 19. The issue arising in the present bunch of appeals is whether any addition could be made in the hands of assessee on the basis of aforesaid show .....

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the case of assessee, no incriminating material was found by the Income-tax Department and the total addition from year to year was based on the show cause notices issued by the Excise Department. Against the first show cause notice issued by the Excise Department, the assessee had filed petition before the Settlement Commission, in which it had admitted to clandestine removal of certain goods without payment of Excise duty. The assessee admittedly, had not offered the profit on such clandestin .....

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addition in the hands of assessee. The third show cause notice issued to the assessee was relating to assessment year 2009-10, which was also considered by the Tribunal in another set of appeals relating to assessment year 2009-10 and after considering the cancellation order passed by the CESTAT (Division Bench) and also the verification exercise carried out at the premises of the assessee, wherein the consumption of electricity was found to be far in excess of the allegation of the Excise Depa .....

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tal Representative for the Revenue has failed to bring on record any evidence that the said order has been challenged before CESTAT. In view thereof, where the issue is identical to the issue raised in earlier bunch of appeals wherein addition was made on account of erratic consumption of electricity and various show cause notices issued by DGCEI, we hold that earlier ratio laid down by the Tribunal is squarely applicable. The relevant findings of the Tribunal in Bhagyalaxmi Steel Alloys Pvt. Lt .....

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rder sheet entry dated 07.05.2015. The present appeals were fixed for hearing initially on 10.03.2015 and were adjourned at the request of the Special AR for the Revenue as he was not ready to argue the appeals. The reasons stated in the letter dated 10.03.2015 for seeking adjournment i.e. contemplation of filing MA against the earlier orders of the Tribunal, was rejected. The appeals were adjourned to 13.03.2015 and then 05.05.2015 at the request of the Special AR. On 05.05.2015, the Counsel fo .....

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ts on earlier date and today the matter was fixed for his rejoinder. The hearing could not be concluded in the pre-lunch hour session and it was directed that the hearing would continue at 03:00 PM i.e. after the lunch hour to which both the parties consented. On reassembling of the Bench, the Special AR for the Revenue furnished letter under his signature stating that the Pr.CIT, Aurangabad was contemplating to file certain petitions before the Hon ble President/Vice President, ITAT, Mumbai and .....

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al AR for the Revenue, parawise which were gone into at length. Though, in the course of hearing, the Special AR for the Revenue left the Court proceedings, on the other hand, Smt. M.S. Verma, Ld. CIT-DR and Shri Rajesh Damor, Ld. Addl.CIT-DR were present in the Court. Thereafter, other cases which were to be argued by the Ld. CIT-DR and Ld. Addl.CIT-DR were taken up for hearing and the matters in ITA Nos.125, 127, 430 & 431/PN/2012 along with ITA No.1525/PN/2012, ITA No.1476/PN/2012, ITA No .....

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ked to explain his absence. In reply she stated that she had no intimation. In view of continued defiance of the Ld. Special AR in yesterday s hearing and his non-appearance in today s hearing, conduct of the Ld. Special AR is to be taken note of. The CIT-DR was informed in the Bench as to why costs should not be imposed on the Department for his continued defiance and for interrupting proceedings of the Bench. The hearing is to continue in the listed matters as annexed on 13.05.2015 as part-hea .....

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are four-fold on the following accounts:- a) Reopening of assessment under section 147 and non-supply of reasons for reopening the assessment under section 147 of the Act; b) Non-issue of notice under section 143(2) of the Act after reopening the assessment under section 147 of the Act; and c) Addition made on account of alleged suppression of sales on the basis of consumption of electricity as per US standards and evasion of Excise duty by the manufacturers of TMT bars in Jalna cluster found by .....

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r on account of the total suppressed production, where the assessee was found to be indulging in clandestine removal of goods without payment of Excise duty; and b) Allowability of manufacturing and administrative expenses on the un-accounted production worked out by the Assessing Officer. 24. The steel group of cases were heard from day-to-day on various dates and the arguments of both the learned Authorized Representative for the assessee and the Ld. special AR were heard along with written su .....

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. in some cases where the assessment is completed under section 143(3) r.w.s. 148 of the Act, the assessee has raised the issue against re-opening of assessment, non-supply of reasons for re-opening under section 147 and also non-service of notice under section 143(2) after recording of reasons under section 147 of the Act. However, in some cases, the assessment has been completed under section 143(3) of the Act and there are no issues against re-opening of the assessment. The Ld. Authorized Rep .....

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third is the working capital required for investment in such suppressed production. We find that similar issue of addition on account suppressed production on account of erratic consumption of electricity arose before the Tribunal in the case of SRJ Peety Steel Pvt. Ltd. (supra). Though both the parties have raised their arguments in favour of/against the order of the Tribunal in SRJ Peety Steel Pvt. Ltd. (supra), we first refer to the decision of the Tribunal and then meet with the respective .....

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gots / billets. In the case of M/s. SRJ Peety Steels Pvt. Ltd. (supra), there was an order of Central Excise Commissioner, Aurangabad in relation to suppression of production on account of erratic consumption of electricity. The assessee filed an appeal against the said order of CCE, Aurangabad before the CESTAT and the Third Member of CESTAT deleted the addition made in the hands of respective furnace cases. Also, in the case of the assessee before us, there is order of CCE, Aurangabad and ther .....

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also referred to the data collected in the cases of furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd. and others and relying on the addition made in the hands of M/s. SRJ Peety Steels Pvt. Ltd. (supra), in turn, on the basis of the order of CCE, Aurangabad, made additions in the hands of present set of assesses before us. 28. The Tribunal had elaborately considered all the aspects of addition in the hands of the furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd., on the basis of erratic cons .....

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Excise duty, was also considered by the Tribunal and in the absence of any inquiry / investigation or material collected by the Assessing Officer, the Tribunal held t hat there was no merit in any addition in the hands of the assessee in assessment year 2007-08. Further, in assessment year 2008-09, there was no admission of any clandestine removal of material without payment of Excise duty before the Settlement Commission and in the absence of any other inquiry or investigation being carried out .....

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cannot be treated as income of the assessee and some reasonable percentage of the gross profit is to be estimated. Ld. CIT(A), accordingly, directed the Assessing Officer to adopt gross p rofit @ 4% on the value of alleged suppressed production/sales and accordingly, partly sustained the additions. Now, we first decide the core issue in this case - (i) On the facts and circumstances of this case whether the Assessing Officer was justified in making the addition of ₹ 39,20,36,546/-in the A. .....

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ges 16 to 22 and the rejoinder of the assessee in paras 12 to 12.1 at pages 22 to 24 of the order, the Tribunal observed as under:- 13. We have heard the rival submissions of the parties and perused the record. Ld. AR for the assessee filed argument synopsis and Ld. Spl. AR for the Revenue also has filed notes of his argument on 05-11-2014 which are placed on record. We have also considered all the precedents and decisions relied on by both the Parties. The assessee is manufacturer of Ingots/Bil .....

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s in his opinion the assessee should have declared or shown more production of the Ingot/Billets. Subsequently, on the basis of the information received from the office of the CCE, Aurangabad vide their letter dated 29-03-2010 as well as adjudication order of CCE quantifying the value of alleged suppressed production and alleged evasion of excise duty, the Assessing Officer initiated the re-assessment proceedings for A.Y. 2007 -08 against the assessee company u/s. 147 of the Act. In reasons reco .....

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lso referred to the petition filed by the assessee before the Central Excise and Custom Settlement Commission, Mumbai Bench, Mumbai for waiver of penalty, interest and for getting immunity from a prosecution. The Assessing Officer proceeded to decide the alleged suppression of production by the assessee admittedly which was based on the information received from Central Excise Authority as well as the adjudication Order of the CCE, Aurangabad. It is pertinent to note here that in this case that .....

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n of the electricity. No excess stock of finished goods was also found. We also put on record that the assessment framed by the Assessing Officer in consequence of search and seizure action against the assessee u/s. 153A r.w.s. 143(3) have reached the Hon ble jurisdiction al High Court. We will later refer to the decision of the Tribunal as well as Hon ble High Court and certain important observations made in respect of the assessment framed by the Assessing Officer. It is also to be taken note .....

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he Central Excise Authorities and the proceeding before the Settlement Commission of Central Excise & Custom, Mumbai. The investigation was carried out by Central Excise Authorities i.e. DGCEI, against few brokers/sub-brokers and those brokers gave the names of many companies who are in the manufacturing of Ingot/Billets and TMT Bars. As per the statement given before the Central Excise Authorities by those brokers as well as sub-brokers namely Shri Umesh Modi, Mumbai, Shri Anil D Lingade, S .....

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o admitted that the entire evidence was destroyed by them and they used to get the commission of ₹ 100/- per MT. The Assessing Officer has discussed the information gathered by the DGCEI, Zonal Unit, Mumbai in Para Nos. 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 & 2.7 of the assessment order. So far as action against the brokers and sub-brokers are concerned the Central Excise Authority issued show cause to the assessee as well as the other manufacturers who were involved in clearing the excisable g .....

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by the DGCEI who allegedly admitted that the goods supplied to Shri Om Rolling Mills Pvt. Ltd. i.e. Ingots/ Billets, were removed clandestinely without payment of excise duty and the said material was to extent of 275 MTs. The sale price was received in cash from Shri Om Rolling Mills Pvt. Ltd. and hence, there was no accounting. The assessee admitted the said charge of the Central Excise Authorities i.e. DGCEI and approached the Settlement Commission and paid the excise duty to the extent of &# .....

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o. 4.1 of the assessment order. The Assessing Officer in his discussion for arriving at the conclusion that as compared to the consumption of the electricity shown by the assessee the production was much more lower, has given the examples or reference of some other manufacturers against whom action taken by the Central Excise authorities. As observed by the Assessing Officer as per an article written by Shri R.P. Varshney, Executive Director, All India Induction Furnaces Association, New Delhi o .....

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nd where Sponge Iron is used as an input, the electricity requirement varies from 815 to 1046 units. The Assessing Officer, therefore, came to the conclusion that the assessment framed by the Commissioner of Central Excise and Custom, Aurangabad in respect of the alleged suppression of production after considering the electricity consumption declared by the assessee and the production rate of units of electricity per metric ton adopted by the CCE, Aurangabad are very much reasonable, fair and ju .....

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has suppressed the production and accordingly, worked the suppressed production of the A.Y. 2007-08 as under: A.Y. Suppressed Production M.T. Rate per M.T. Rs. Assessable Value of Suppressed Production Rs. 2007-08 20,751 18,892 39,20,37,546 2008-09 29,276 21,444 40,75,72,486 18. In the A.Y. 2007 -08, the Assessing Officer 2007-gave the set off of ₹ 8,44,01,504/- which was in respect of the addition made by the Assessing Officer while completing the assessment u/s. 143(3) of the Act in the .....

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as per the value determined in the adjudication order for the purpose of levy of excise duty adopting statistic of power consumption. In the computation for the A.Y. 2008-09 the Assessing Officer made the mistakes by mentioning Rs. (-) 1,91,62,000/- as per the order u/s. 143(3) when in fact the said figure is as per the return of income filed by the assessee for the A.Y. 2008 -09. 30. After analyzing the submissions of the assessee, the Tribunal noted that in both the years before it, the Assess .....

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he Tribunal in turn, incorporating the order of Third Member of CESTAT in paras 19 to 19.4, which read as under: - 19. In sum and substance in both the assessment years the Assessing Officer has determined alleged suppression of the production/sales as determined the Commissioner of Central Excise and Custom, Aurangabad on the basis of power consumption. The copy of the adjudication order passed by the Commissioner of Central Excise and Custom and Service Tax, Aurangabad dated 28 -08-2009 (in sh .....

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like stores, wages, salaries, cost of maintenance etc. The Ld. Commissioner has referred to the study conducted by the Indian Institute of Technology (IIT), Kanpur and has observed that as per the said Technical Opinion Report the consumption of electricity for manufacture of one metric ton of steel ingots varies between 555 to 1026 electricity units depending upon the thermal efficiency, electricity efficiency and nature of mix of raw material. As observed by the Ld. CCE in the case of the asse .....

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the assessee s records. The Ld. CCE accordingly, observed that the assessee has willfully suppressed the figures of production of Billets/MS Ingots in their records with an intent to evade payment of Central Excise Duty and, have involved themselves in the clandestine removal of final products. He also referred to the show cause notice issued by the DGCEI to the assessee which matter was ultimately settled by the assessee company in the Settlement Commission. The Ld. Commissioner also referred t .....

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is cross examination was not possible. He has also discussed and referred to the different decisions of the Tribunal. The Ld. Commissioner also relied on the investigation made by the DGCEI and show cause notice issued to the assessee and how the assessee approached the Settlement Commission and admitted the evasion and paid the excise duty and obtained immunity from criminal proceedings. The Ld. Commissioner confirmed the demand raised in the show cause notice and also levied the penalty to the .....

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ase of R.A. Castings Pvt. Ltd. (supra) the impugned orders are to be set aside and the appeal allowed. b. Whether in view of the discussion in Para 32 to 68 above and in view of the Hon ble Supreme Court s judgment in the case of Triveni Rubber & Plastics (supra) and this Tribunal s decision in the case of Rattan Steels Works (supra), Nagpal Steel (supra) and Hans Castings Pvt. Ltd. (supra), the impugned order are to be upheld and all the appeals dismissed. 19.3 The Ld. Third Member of the C .....

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T, which is higher than the average electricity consumption in the instant appeals. 20.1 The Commissioner in the orders impugned in the instant appeals was having the following reports and clarifications for his consideration- (i). 555 to 1046 units PMT as per Dr. Batra s report; (ii). 1800 units PMT as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India; (iii). 1427 units per MT as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; .....

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ed 9.8.2008 of Electrotherm to a client suggesting reasons which lead to high power- consumption, and another Letter dated 5.4.2008 of Electrotherm agreeing-., with .the views of Induction Furnace Association and informing that it is very difficult to define any range of power consumption. 20.2 As against this, in para 20 of the Order, the Tribunal in R.A. Casting (supra) considered different electricity consumption figures for production of 1 MT of MS Ingots, reported in following different rep .....

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3 After perusal of these reports, Tribunal opined that wide variations in the consumption electricity have been reported for the manufacture of one MT of steel ingot&, and that this renders the norm of 1046 units adopted by the Revenue as arbitrary. After this finding, which is upheld by the Hon ble Allahabad High Court and even SLP has been dismissed, there was no reason for the Commissioner in the instant cases to consider the norm of 1026 units allegedly as per report of Dr. Batra, for ar .....

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in the balance sheets by depositing huge amount of cash with the stock brokers and receiving cheques of profits against the cash so deposited, (iv). Claim of High Auxiliary load of about 35%, However the Tribunal in categorical terms held that no demand can be upheld based on electricity consumption as such because the clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to- (i). Receipt of raw material i .....

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uck in the factory premises, loading of goods therein, security gate records, transporters documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v). Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal, 20.5 However, since no such evidences were brought on record, the Appeal of R.A. Casting was allowed for want of ev .....

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edings under Income Tax, d). Claim of higher Auxiliary load, e). Past case settled before Settlement Commission, 20.7 So far as the proceedings already settled are concerned, the Commissioner is hot relying on the same and the findings of the Commissioner, as recorded earlier, have not been challenged by the Revenue. All these other allegations were also levelled in R.A. Casting (supra). It was further observed in R.A, Casting (supra) that it would be appropriate on the part of the Revenue to co .....

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different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. T .....

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ences referred in the impugned Orders prove clandestine clearance. The primary evidence of department is admittedly excess electricity consumption based on benchmark adopted allegedly- from report of Dr. Batra, which was already held to be arbitrary by Hon ble Tribunal in RA casting (supra). Thus, in my opinion the primary evidence relied in the impugned Order is itself inadmissible, and no other evidence in the instant case proves clandestine production and clearance to sustain, the demand, It .....

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f the department that the Department is not required to prove its case to its mathematical precision, by relying on judgment of the Hon ble Supreme Court in the case of D. Bhoormull - 1983 (13) ELT 1546 (SC), relied upon by the Commissioner as well as the Hon ble Member (Technical). It is seen that even this judgment was considered in R.A. Casting (supra), 21. There can be no dispute on the fact that in adjudication proceedings, the charge of clandestine removal is definitely to be established o .....

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uent period. I also agree with the finding of the Hon ble Vice President that in. any event, this additional material is also only of power consumption. 22. In written submissions of Revenue, it has also been contended that Report of JPC suggesting electricity consumption upto 1800 its PMT was for electric arc furnace and not induction- furnace. However, the appellant has contended that productivity in. electric arc furnace is higher than induction furnace. In any event, in the Impugned Orders, .....

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t in the case of Rajmoti Industries V/s. Joint Commissioner of Income Tax, 2014-TIOL-203-HC-AHM-IT, and an unreported order dtd. 28/9/2010 of Andhra Pradesh Sales Tax Tribunal (Visakhapatnam Bench) in the case of Venkata Raimana Stone Crushers Company V/s. State of Andhra Pradesh. In the case of Melton India (supra), for the norm, of power consumption, actual electricity consumption of the assessment year 2000-01 was taken as norm and the same was applied in subsequent assessment years 2001-02 a .....

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herefore of the opinion that these cases, apart from being under Statutes other than Central Excise Act, do not any manner help in sustaining the findings recorded in the impugned Order. In none of these cases any theoretical repot was relied for arriving at deemed production. 24. Further, in Sarvana Alloys Steels Pvt Ltd, 2011 - (274) ELT 248 (Tri -Bang.) similar order based on power consumption was held unsustainable and the appeal was allowed after considering inter alia the judgments in D. B .....

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he instant case in all the appeals. 19.4 The common order was passed by the CESTAT on 30 -07-2006 as per the majority opinion allowing the appeals filed by the assessee and other appellant companies. The copy of the majority order is placed at Page Nos. 5 and 6 of the P/B - VI. It is pertinent to note here that the Ld. Commissioner has also considered the investigation made by the DGCEI against some brokers and in consequence the show cause notices (SCN) were issued to the assessee and other com .....

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1 MT of Ingots and Billets. Moreover, even if in the A.Y. 2008 -09, the Assessing Officer has observed that the information received from the Central Excise Authorities has no bearing in the said order but on the perusal of the said order, it is seen that entire order is copy of order passed for the A.Y. 2007-08. As vary basis of the assessment order i.e. the order of the Commissioner of Central Excise (CCE), Aurangabad has been set aside and cancelled by the CESTAT, in our opinion the assessmen .....

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th reference to the order of Settlement Commission passed in the case of set of companies. The Tribunal noted that the CCE, Aurangabad in its order had taken into consideration the said material while determining the value of alleged suppressed production and had made observations vide para 19. The relevant observations of the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) were as under:- 20.1 ………the Ld. Technical Member of the CESTAT. The Ld. Spl. AR for the Revenue al .....

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lue of the alleged suppressed production and has observed as under: 19. There are other instances of central excise violations detected by other agencies where the assessee was found to be involved. In one instance that assessee had approached the Settlement Commission, admitted the evasion offence of an identical nature and had obtained immunity from criminal proceedings. The assessee has however argued that each case has to be treated as a separate case based on its own merit and dealt with ac .....

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e adjudication order passed by the CCE, Aurangabad, which in turn, had been cancelled by the Third Member of CESTAT. The Tribunal thus, held that the foundation for assessment does not exist. It was also noted by the Tribunal in para 21 that the investigation by the DGCEI and proceedings before the Settlement Commission were considered by the CCE in its adjudication order, which in turn, was the subject matter of CESTAT and the said order has been set - aside, hence, it was not necessary to deal .....

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r reads as under:- 21. Though the Ld. Spl. AR has referred to and relied on the different judgments of the Hon ble Supreme Court more particularly on the binding nature of the admission of any person-Sec. 17, Sec. 106 and Sec. 115 of the Indian Evidence Act etc. but the fact remains that in the case of the present assessee no independent investigation is made by the Revenue but the entire assessments are framed on the basis of the information received from the Central Excise Department as well a .....

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th the order of the higher appellate forum which in the present case is CESTAT. Moreover, investigation by DGCEI and proceeding before the Settlement Commission has also been considered by the CCE, Aurangabad in his adjudication order. The said order was subject matter before the CESTAT and said order has been set aside. Hence, we do not consider it necessary to deal with decisions relied on by Ld. Spl AR of the Revenue which are in context of admission of the Director of the assessee in the cou .....

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Act 1962 and Central Excise Act 1944 and we cannot sit as revisionary authority or make any observation whether that order is right or wrong. 35. The Tribunal held that CESTAT was an appellate forum under the Customs Act, 1962 and Central Excise Act, 1954 and the Tribunal (Income - tax) could not act as revisionary authority or make any observation whether that order was right or wrong. 36. The Tribunal further referred to search and seizure operations carried out under section 132(1) of the Act .....

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and held that in the said case of search and seizure, it was also held that the consumption of electricity for the manufacture of mild steel, ingots / billets depending on various factors and there was no justification to charge the assessee that it had suppressed the production and indulged into unaccounted production. The order of the Tribunal was challenged by the Department before the Hon ble Bombay High Court and the Revenue s appeal was dismissed by common order dated 10.02.2014 in the cas .....

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s. 2000-01 to 2006-07 were framed u/s. 153A r.w.s. 143(3) of the Act. The Assessing Officer rejected the books of account of the assessee for the A.Ys. 2000-01 to 2006-07 and one of the reasons was that alleged suppressed production which was computed on the basis of consumption of the electricity. The Assessing Officer devised a formula on the basis of electricity consumption and the same was applied uniformly in order to work out certain alleged suppressed production and resultant concealed in .....

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of the formula he worked out the alleged concealed income. There are certain important observations and findings of the Tribunal which are as under: 31. In the present case, the search was initiated on 17th March, 2006 in the residential and business premises of SRJ Peety Group, Jalna covering the premises of the assessee company as well. Prior to the search, the returns of income for the asst. yrs. 2000-01 to 2005-06 had already been filed under s. 139(1) of the Act accompanied by all requisit .....

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t also contained the unit production of each year which were accepted year after year along with the returns and no query was ever raised by the Department. The following chart shows the year-wise production vis-a-vis electricity consumption which has been placed before the authorities below along with the returns for each year: Asst. yr. Electricity consumption Production (MT) Yearly average consumption (units) 2000-01 24331059 18,524.239 1313 2001-02 25528565 17,010.558 1501 2002-03 31404354 1 .....

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53A of the Act. When nothing incriminating was found in the course of search relating to any of these assessment years, the assessments for such years could not be disturbed on this ground. 33. In view of above factual and legal position we find that the additions in question in asst. yrs. 2000-01 to 2005-06 are not corresponding to the seized material found during the course of search. The relevant IT returns for said years were filed prior to the search in normal course disclosing the particul .....

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nting standards as notified under sub-s. (2), have not been regularly followed by the assessee, the AO may make an assessment in the manner provided in s. 144. Sec. 145 gives the power to AO to reject the books in certain circumstances after considering the following aspects: (a) Whether the assessee has regularly employed a method of accounting? (b) Whether the annual profits can be properly deduced from the method employed? (c) Whether the accounts maintained are correct and complete? 35. With .....

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ed the production in that month as the correct production and then proceeded to arrive at his production figure by multiplying the production in the books by the ratio of production to the electricity consumption for the month in which electricity consumption was minimum. The method of computing the so-called suppressed production is not justified in absence of sound basis for same. 36. The consumption of the electricity for the manufacture of mild steel ingots/billets depends on various factors .....

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n suppressed production and alleging that the assessee company has indulged in unaccounted production. 37. None of the evidence collected as a result of search or detected during the course of assessment pertains to the asst. yrs. 2000-01 to 2005-06. It is an accepted fact that each year of the assessment is independent and evidences found relating to asst. yr. 2006-07 cannot have an adverse impact on the assessments of the assessee company from the asst. yrs. 2000-01 to 2005-06. Therefore, reje .....

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nd there was no justification to charge the assessee that the assessee has suppressed the production and indulged into unaccounted production. The order of the Tribunal was challenged by the Department before the Hon ble High Court of Bombay Bench at Aurangabad by filing the appeal u/s. 260A of the Income-tax Act, being Tax Appeal No. 30 of 2011. The Revenue s appeal was dismissed vide common Judgment dated 10-02-2014, in the case of the assessee and other companies by the Hon ble High Court and .....

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of the Act, accompanies by all requisite documents and proceedings. The scrutiny was thus completed. During the course of search, no incriminating material was found relating to the said years, which could have been added in the proceedings u/s. 153A. The details regarding the consumption of electricity for the production for each of the year under consideration was placed before the Authorities in the Director s Report of each year. The same has not been disputed by the Revenue. The Tax Audit R .....

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finding is that nothing incriminating was found in the course of search relating to these assessment years. The additions, therefore, were not corresponding to the seized material during the course of search. The relevant income tax returns, in normal course, are disclosing the particulars. They were already on record. The returns have been accepted. In such circumstances, the Tribunal, as also, the Commissioner of Income Tax (Appeals) have in their orders, held that there are several factors wh .....

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ed to accept the argument of the Ld. Spl AR for the reason that even if the assessments are framed in consequence of the search and seizure operation but the important fact remains that nothing was found during the course of search except few loose sheets found in the residence of the Director to make out a case against the assessee for alleged suppression of production or sales. It is also to be taken note of the fact that in A.Ys. 2007-08 and 2008-09, no investigation has been done by the Reve .....

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d seizure operations in the immediately preceding year, wherein during the course of search, certain loose sheets were found in the residence of the Director to make out case against the assessee for alleged suppression of production / sales. The Tribunal while deciding the appeal in M/s. SRJ Peety Steels Pvt. Ltd, in turn, relying on the ratio laid down by coordinate Bench of the Tribunal, deleted the addition made on account of alleged suppression of production / sales in entirety. The relevan .....

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Tribunal with principal Bench at New Delhi (supra). The copy of the order of the Customs, Excise & Service Tax Appellate Tribunal is placed on record by the learned A.R. for the assessee. The Customs, Excise & Service Tax Appellate Tribunal after considering the factual aspects of the case, the quantum of production, the consumption of electricity observed that there is nothing on record to show that high power connection supported by evidence was made on a particular date and that resul .....

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the detriment of justice. The Customs, Excise & Service Tax Appellate Tribunal further considered the retraction statement of the Director of the assessee company and vide para 6 held as under: 6. We would have certainly come to the rescue of Revenue had the statement been recorded in a manner known to law and cogent evidence had been brought to record to prove output cleared clandestinely. No cogent evidence is on record to show either suppression of purchase of input or clandestine removal .....

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The basis for the addition in the present case was the investigation report of the Central Excise Department and the suppression in production calculated by the said Investigating Team. The Assessing Officer had completely based its addition on the aforesaid report of the Investigating Team and had also show caused the assessee to establish its point in view of the said report of the Investigating Team. The Customs, Excise & Service Tax Appellate Tribunal (supra) in the appeal filed by the .....

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d suppression in production and also alleged investment in purchase of raw material. In view thereof, we hold that no addition on account of profit on the sale of unaccounted production or on account of unexplained investment merits to be made in the hands of the assessee. We are also in agreement with the observations of CIT (Appeals) in deleting the aforesaid addition as no independent evidence has been brought on record to establish that the assessee had, a) suppressed its production and; b) .....

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hallenged the order of Ld. CIT(A) before the Tribunal. It was held that there was no justification to support the said addition and the Revenue s appeal was dismissed. In the light of our above discussion, we are of the opinion that the additions made by the Assessing Officer and confirmed by Ld. CIT(A) in both the assessment years based on the order passed by the CCE, Aurangabad as well as on the basis of consumption of the electricity used in manufacturing of Ingots/Billets are not sustainable .....

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see have been deleted, there was no merit in any addition on account of undisclosed investment in respect of the undisclosed turnover. The Tribunal vide paras 27 to 29 held as under:- 27. The next issue is the rejection of books of account by the Assessing Officer in both the assessment years. We find that the only reason for rejection of the books of account was the alleged suppression of production/sales and which was determined on the basis of the adjudication order passed by the CCE, Auranga .....

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-08 and Ground No. 5 in the A.Y. 2008 -09. 28. The next issue is the percentage of the gross profit estimated by the Ld. CIT(A) on the alleged suppressed sales and said issue arises from Ground No. 9 in the A.Y. 2007 -08 and Ground No. 7 in the A.Y. 2008 -09 are on. As the assessee has succeeded on the main grounds as entire additions made by the Assessing Officer are deleted, the Ground No. 9 in the A.Y. 2007 -08 and Ground No. 7 in the A.Y. 2008 -09 become infructuous. 29. In Ground No. 10, th .....

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r production out of books, therefore, worked out ₹ 37,69,582/-. In fact, the said addition is made by the Ld. CIT(A) as he has confirmed the alleged suppression of production/sales as held by the Assessing Officer. As the assessee has succeeded in getting the relief by deleting the entire additions towards alleged suppression of production and sales, hence, this addition does not survive and said addition is also deleted. We, accordingly, allow the Ground No. 10 taken by the assessee. 39. .....

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assessment years by allowing the grounds taken by the assessee. Accordingly, all the grounds of the Revenue in both appeals are dismissed. 40. The plea of the learned Authorized Representative for the assessee before us was that the issue raised in the present appeals is squarely covered by the ratio laid down in M/s. SRJ Peety Steels Pvt. Ltd. (supra). It was further pointed out by him that in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd., there was no investigation by the DGCEI and further th .....

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/ billets, addition was made in the hands of the assessee. However, in Omsairam Steel & Alloys Pvt. Ltd., it was fairly admitted by the learned Authorized Representative for the assessee that there was investigation by the DGCEI and in assessment years 2006-07 and 2007-08, the assessee had filed the petition before the Settlement Commission, which was accepted. However, in assessment years 2005-06 and 2008-09, there was no such petition filed before the Settlement Commission. 41. We find tha .....

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of CESTAT and the Assessing Officer worked out the addition on the basis of erratic consumption of electricity as determined by CCE, Aurangabad. Following the same line of reasoning as in the order of M/s. SRJ Peety Steels Pvt. Ltd. (supra), we find no merit in the addition made in the hands of the assessee on surmises. Both the learned Authorized Representative for the assessee and Ld. Special AR has raised identical arguments as in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and since the Tribuna .....

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ved Miscellaneous Application against the order of Tribunal dated 16.01.2015 and the hearing of the present appeals be kept in abeyance. After hearing the appeals in the present bunch of appeals, the Miscellaneous Application filed by the Revenue in M/s. SRJ Peety Steels Pvt. Ltd. (supra) was also fixed for hearing and the same was heard on 19.06.2015. We have by an order of even date dismissed the Miscellaneous Application filed by the Revenue in M/s. SRJ Peety Steels Pvt. Ltd. (supra) after co .....

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roduction, raised before us is that where the Assessing Officer had evidence of clandestine removal of material without payment of Excise duty, the addition could be upheld in the hands of the assessee by extrapolating the sales for period of 300 days. The Ld. Special AR for the said proposition relied on the decision of the Tribunal in assessee s own case relating to assessment year 2006-07. The case of the Revenue before us was that where the assessee had admitted to clandestine removal of mat .....

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okers. Consequent thereto, Shri SRJ Peety, Managing Director of M/s. SRJ Peety Steels Pvt. Ltd. admitted to the said clandestine removal of material without payment of Excise duty and approached the Settlement Commission for payment of Excise duty on the said amount. The Settlement Commission accepted the petition of the assessee, but also levied penalty. The assessee before the Assessing Officer admitted that the additional income in respect of the said clandestine removal of material without p .....

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consumption, for which the Assessing Officer placed reliance on the report of Dr. Batra and order of CCE, Aurangabad. The Assessing Officer applying the formula worked out the suppressed production and sales in the hands of the assessee. We in the paras hereinabove have already adjudicated the issue that no addition on account of suppressed production / sales on such account could be made in the hands of the assessee. The Ld. Special AR on the other hand, stressed that where the Assessing Office .....

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whole of the year. Merely because the Assessing Officer had adopted another methodology of suppression, the addition in the hands of the assessee could be sustained on the basis of extrapolation of sales for 300 days, in view of the admission of the assessee of clandestine removal of material without payment of Excise duty and suppression of income. 44. The evidence of clandestine removal of material without payment of Excise duty was detected by the Excise authorities during the course of sear .....

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is to settle the dispute. In cases where any settlement petition is moved by the claimants, the authorities have the power to re-visit the offer made by the claimant and where any adverse material is available against the person making the offer, then the figures of settlement can be increased. However, in the case of the assessee, offer of the assessee has been accepted for the financial year and the same cannot be said to be restricted to the number of days for which it was offered. The basis .....

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ise duty or suppressed sales for the balance period, in the absence of any evidence found against the assessee for the balance period. 45. Another aspect of the issue is that though the factum of the assessee filing the petition before the Settlement Commission, was before the Assessing Officer, even additional income on such offer of settlement was offered by the assessee before the Assessing Officer, however, no further inquiry, investigation or action was taken by Assessing Officer in this re .....

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the case before the Tribunal in assessment year 2006-07 are at variance. The addition in the hands of the assessee was made on the basis of search and seizure action carried out by the Incometax Department and the documents found during the course of search, which were admitted by the assessee to reflect suppression of sales. On the basis of aforesaid documents, the income for the year was extrapolated, which order of the Tribunal was approved by the Hon ble Bombay High Court. However, for the .....

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2007-08 should be made in the hands of the assessee, in view of the settlement petition by the assessee before the Settlement Commission. The perusal of the assessment order and the order of CIT(A) reflects no such basis was adopted for making the addition in the hands of the assessee. The sole basis on which the addition in the hands of the assessee made was on account of erratic consumption of electricity. Undoubtedly, both the aspects i.e. the petition made by the assessee before the Settlem .....

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no merit in the stand of the Ld. Special AR since no investigation or inquiry was carried out by the Assessing Officer and merely on the basis of petition filed before the Settlement Commission, which in turn has been accepted, no further addition can be made in the hands of the assessee in the absence of any incriminating material found for the balance period. 47. Reliance in this regard is placed upon the ratio laid down in Ravi Foods Pvt. Ltd. Vs. CCE, Hyderabad (supra). In the facts of the s .....

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landestine removal of material without payment of Excise duty was found from the possession of the assessee by the Excise authorities. 48. Following the same analogy of reasoning, where the evidence of clandestine removal of material without payment of Excise duty has been found by the Excise Department, in respect of sale of goods for a particular quantity and for a particular period, the same could not be relied upon as evidence, while extrapolating the sales and the additional income thereon .....

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ith the Assessing Officer. The alleged admission before the Assessing Officer was only by way of the additional income offered by the assessee, which was relatable to the clandestine removal of material without payment of Excise duty admitted before the DGCEI and offered by way of petition before the Settlement Commission. No statement of Directors of the assessee company was recorded either by Assessing Officer or CIT(A) during the course of assessment proceeding. Accordingly, we find no merit .....

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ecided keeping in mind the facts of the case. Though both the Assessing Officer and CIT(A) had not made the addition in the hands of the assessee on the basis of petition filed before the Settlement Commission, but had adopted the erratic consumption of electricity as basis to make the addition, we have adjudicated the alternate plea raised by the Ld. Special AR in this regard and dismissed the same. 51. Now, we come to the reliance placed upon by both the Authorized Representatives in support o .....

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tatement made before any of the authorities is limited to the amounts surrendered vide the said settlement and no inference could be drawn against the assessee for extrapolating the same for full year and for the balance year and in other years, other than the year in which the said settlement was offered. In this regard, we find support from the ratio laid down by the Bangalore Bench of Tribunal in Anjaneya Brick Works vs. CIT (supra), wherein it has been held that mere existence of evidence of .....

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t observed that assumption of Assessing Officer may have perhaps been valid if the search had been conducted after the accounting year and the books of account had brought some discrepancy. 54. Similar proposition has been laid down by the Hon ble Bombay High Court in CIT Vs. C.J. Shah and Co. (supra). 55. Further, the Bilaspur Bench of the Tribunal in Chattisgarh Steel Casting Pvt. Ltd. V. ACIT (supra) decided similar issue of the information available with the Central Excise Department, wherei .....

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iod. The Tribunal further held that hypothetical calculation of turnover and estimation of gross profit merely on guess work and presumption was not sustainable in law. No details were available to the Assessing Officer to arrive at such figure or had there been any concealed sales for 9 months, it could have been detected by the Central Excise authority during their search operations. Therefore, the addition made by the Assessing Officer is purely based on guess work, presumption and surmises a .....

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e reliance placed upon by the Ld. Special AR. 56. The Ld. Special AR during the course of arguments before the Tribunal in Miscellaneous Application filed in M/s. SRJ Peety Steels Pvt. Ltd. vide MA No.17/PN/2015 had raised the issue of extrapolation of sales for 300 days in view of the assessee having admitted to clandestine removal of material without payment of Excise duty and thereafter, filing a petition before the Settlement Commission. 57. The plea of the Revenue raised in the Miscellaneou .....

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ion made by the assessee. Admittedly, during the course of search and seizure operation on certain brokers, evidences of clandestine removal of material without payment of Excise duty, was found against the assessee. However, no search and seizure operation was carried out against the assessee, but the assessee claims that in order to buy peace of mind, it had declared the said amount by way of petition before the Settlement Commission. The said offer made by the assessee was accepted in toto. I .....

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e the petition is accepted in the hands of the assessee, no further addition can be made on account of alleged clandestine removal of goods or suppressed sales, in the absence of evidence for the balance period. The above said ratios have been laid down in Chattisgarh Steel Casting Pvt. Ltd. V. ACIT (supra), Hon ble Bombay High Court in CIT Vs. C.J. Shah & Co. (supra), Hon ble Delhi High Court in CIT Vs. Anand Kumar Deepak Kumar (supra). The Ld. Special AR had placed reliance on the decision .....

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n ble Bombay High Court held that such regular assessment stands on a different footing in contrast to the exercise undertaken by the Assessing Officer under Chapter XIV-B, where the Assessing Officer had to assess only the undisclosed income. However, the Hon ble Bombay High Court further held that under Chapter XIV-B, the Assessing Officer cannot estimate the undisclosed income on an arbitrary basis. We find no merit in the plea raised by the Ld. Special AR in this regard as the facts of the s .....

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estigation / inquiry by the Income-tax Department has been made before completing assessment proceedings against the assessee. Another aspect of the issue is that the petition before the Settlement Commission has been made by the assessee in assessment year 2007-08 only and no such petition for clandestine removal of material without payment of Excise duty has been made for assessment year 2008-09. The assessee had offered the additional income on account of such clandestine removal of goods bef .....

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and the investigation carried out by the DGCEI and the petition before the Settlement Commission, even the Third Member of CESTAT was aware of all these proceedings, but since the settlement petition filed by the assessee had been accepted in toto by the Settlement Commission, no further addition could be made in the hands of the assessee on this ground, in the absence of any inquiry or investigation by the Assessing Officer. Accordingly, the reliance placed upon by the Ld. Special AR in assess .....

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upra) and the same had been considered by the Tribunal. During the course of hearing, the Ld. Special AR relied on series of other decisions, but the ratios laid down by the said judgments are distinguishable and not applicable to the facts of the present case. It may be put on record that all these decisions were relied upon by the Ld. Special AR in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and same have already been considered. 59. In the entirety of the above said facts and circumstances, we ho .....

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id clandestine removal of material without payment of Excise duty does not establish the case of the Revenue that the said figures of additional production should be utilized for extrapolating the sales in the hands of the assessee for the entire year. Admittedly, the assessee had offered additional income on the said clandestine removal of material without payment of Excise duty, which is to be added as income in the hands of the assessee. The learned Authorized Representative for the assessee .....

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before the Settlement Commission or before the Excise authorities, in the hands of the assessee. We have heard bunch of appeals and in some years, there is no admission of clandestine removal of material without payment of Excise duty and in those years in the absence of any evidence and / or any investigation or inquiry made by the Assessing Officer and where the Assessing Officer has failed to collect additional evidence, no addition can be made in the hands of the assessee, by way of extrapo .....

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inst the assessee. 60. Since we have deleted the addition in the hands of assessee on both accounts i.e. addition made on account of erratic consumption of electricity and addition proposed on the basis of evidence found for the part of the year of clandestine removal of material without payment of Excise duty, next addition made in the hands of the assessee i.e. alleged investment in the purchases for effecting such sales which goods have been clandestinely removed, is not sustainable. Accordin .....

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appeal raised by the Revenue i.e. against application of GP rate and allowance of expenses are also dismissed. 19. In respect of assessment year 2009-10, the Tribunal has passed separate order, in which they had considered the verification exercise carried out by the Excise Authorities and deleted the addition by holding as under:- 9. We have heard the rival contentions and perused the record. The issue arising in the cross appeals filed by the assessee and the Revenue are against the addition m .....

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15.07.2015. The relevant findings of the Tribunal were as under:- 9. We have heard the rival contentions and perused the record. The issue raised in the present set of appeals relating to assessment year 2009-10 is identical to the issue raised in the earlier appeals relating to assessment years 2006-07 to 2008-09 in the case of different assessees. We have by order of even date already adjudicated the issue of addition in the hands of the assessee on account of suppressed production/sales on t .....

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g one MT of MS ingot, electricity should be consumed from 555 units to 1046 units. However, the assessee s were showing more consumption of electricity for production per MT. The CCE, Aurangabad raised the demands by confirming the order of adjudicating authority. However, in the case of different assessee s trials / experiments were conducted in the factory of most of the appellants and on such experiments / trials, the consumption of electricity was found to be more than 1026 units per MT. In .....

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:- Sr. No. Appeal No. Manufacturer Appellant Period of dispute Duty amount and penalty Details of experiment 1. E/86268/201 SRJ Peety Steel Pvt. Ltd. January 2008 to March 2009 Rs.12,41,64,392 & equal penalty Specific verification of electricity consumption on 4.3.2009 showed electricity consumption of 1496 units per MT using mix input of scrap and sponge Iron. 2. E/86151/2014 Bhagyalaxmi Steel Alloys Pvt. Ltd. April 2008 to March 2009 Rs.5,91,23,193 & equal penalty Specific verification .....

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y Specific verification of electricity consumption on 19.3.2009 showed electricity consumption of 1199 units per MT using mix input of scrap and sponge Iron. 5. E/86348/2014 Jailaxmi Casting & Alloys Pvt. Ltd. 2008-09, 2009-10 (up to July 2009) Rs.1,92,94,575/- & equal penalty Specific verification of electricity consumption on 18.3.2009 showed electricity consumption of 1147.74 units per MT using mix input of scrap and sponge Iron. 6. E/86249/2014 Gajlaxmi Steel Pvt. Ltd. February 2008 .....

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14 Meta Rolls & Commodities Pvt. Ltd. April 2008 to March 2009 Rs.3,26,84,318/- & equal penalty Specific verification of electricity consumption on 20.3.2009 showed electricity consumption of 1251 units per MT using mix input of scrap and sponge Iron. 9. E/86220/2014 Nilesh Steel & Alloys Pvt. Ltd. April 2008 to March 2009 Rs.2,06,54,292/- & equal penalty Specific verification of electricity consumption on 22.2.2009 showed electricity consumption of 1253 units per MT using mix in .....

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ide the order of the CCE, Aurangabad on account of additions made in the hands of the assessee because of erratic consumption of electricity. The relevant finding of the order of CESTAT reads as under : - In the impugned order the adjudicating authority has not considered the specific verification conducted by the departmental officers, who ascertained the actual consumption of electricity to manufacture of 1MT of MS Ingots is more than 1026 units for per MT as alleged in the SCN s, when the app .....

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evidences relied upon by the Ld. Adjudicating authority are theoretical and have been considered by this Tribunal in appellant s own cases for the earlier period; wherein this Tribunal relied on the decision of R.A. Casting Pvt. Ltd. vs. CCE, Meerut reported in 2009 (273) ELT 674 and held that on the basis of study report of Dr. N.K. Batra, the electricity consumption can t be the basis for demands. The order of this Tribunal was challenged by the Revenue before the Hon ble High Court and the H .....

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6.05.2011. Therefore, the reliance on the study analysis conducted by Dr. N.K. Batra, Professor IIT Kanpur, is not an evidence to ascertain the electricity consumption for manufacture of 1MT of MS Ingots. 7. In appellants own case for the earlier period on the basis of the evidence relied upon by the adjudicating authority, Tribunal came to the conclusion that the 1026 units of electricity for manufacture of 1MT of MS Ingots is not correct and set aside the adjudication orders. In the cases in h .....

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nducted and the electricity consumption for manufacture of 1MT of MS Ingots was found to be more than 1026 units of electricity. 8. In these circumstances, we set aside the impugned orders and allow the appeals with consequential relief and stay applications are also disposed of in the above terms. 11. The addition on account of suppressed production made in the hands of the assessee was deleted by the Division Bench of CESTAT vide or der dated 22.10.2014, wherein on specific inspection / experi .....

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finding that in view of the additional evidences of specific verification / trial conducted by the Revenue to ascertain the actual electricity consumption, which worked out to more than 1026 units per MT, there was no basis for making any addition in the hands of the assessee. The Tribunal also referred to its earlier order in the case of different assessee s, where similar addition was deleted. 12. The Tribunal in bunch of appeals with lead order in ITA Nos.284 to 286/PN/2012 relating to assess .....

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ted out that another aspect of the addition is extrapolation of sales to be made in the hands of the assessee for the entire year on the basis information received for part of the year. It may be put on record that in assessment year 2009-10 in the hands of various furnace companies no such investigation was made by DGCEI. In the absence of any information gathered by the Excise Authority of clandestine removal of goods without payment of excise duty, and in the absence of the assessee declaring .....

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n the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. & Others relating to assessment years 2006-07 to 2008-09 and in view of the physical verification carried out by the authorities as referred to by us in the paras hereinabove and the consequent order of Division Bench of CESTAT in the case of present assessee s before us relating to assessment year 2009-10, we find no merit in the orders of authorities below and we reverse the order of CIT(A). We find no merit in the addition made in the hands .....

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rcumstances and in view of the issue being identical to the issue before the Tribunal in set of furnace cases, we delete the additions made in the hands of assessee on account of suppressed production. However, following the parity of reasoning as in the earlier order of Tribunal as directed by us in paras hereinabove, we direct the Assessing Officer to compute the addition on account of profits relating to the clandestine removal of goods without payment of Excise duty as admitted by the assess .....

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result / status of the petitions moved by the assessee either before the Settlement Commission / CESTAT or Commissioner (Appeals) of Excise. The said tabulated details are appended as Annexure to this order. We direct the Assessing Officer to verify the claim of assessee in this regard and include the profit on the suppressed production @ 4% or actual GP rate declared by the assessee, whichever is higher. The assessee is directed to file the requisite details of proceedings before the Excise au .....

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essee furnished on record the copy of order of Hon ble Bombay High Court in the case of CIT Vs. SRJ Peety Steel Pvt. Ltd. and CIT Vs. Shri Om Rolling Pvt. Ltd. vide Tax Appeal No.30 of 2011 & Ors., wherein the findings of the Tribunal have been upheld vide judgment dated 10.02.2014. 22. Hence, the addition made in the hands of assessee by the Assessing Officer on the plea that the Departmental appeal is pending before the Hon ble Bombay High Court does not survive. 23. Another aspect to be n .....

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