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2015 (10) TMI 2303 - ITAT PUNE

2015 (10) TMI 2303 - 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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notices 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 sup .....

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has 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, .....

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ssment 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.1265 to 1269/PN/2012, ITA No s.1655 to 1659/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 S.K. Rastog .....

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r and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issues in ITA No.1265/PN/2012 and ITA No. 1655/PN/2012 to adjudicate the issues. 3. In ITA No. 1265/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 ₹ 4,54,13,116/-. 2. The learned Commissioner of Income Tax (Appeals) further erred in .....

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ax (Appeals) further erred in confirming the action of the Assessing Officer in holding that the books of accounts of the appellant company are correctly rejected u/s. 145 of the Income Tax Act without any evidence or finding as to how the provisions of Section 145(3) are satisfied. 5. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in making an addition on account of alleged suppression of sales without giving sufficient opportuni .....

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account of undisclosed investment under Section 69C of the Income Tax Act . 8. The learned Commissioner of Income Tax (Appeals) further erred in not following the order of the Hon. Income Tax Appellate Tribunal in the case of M/s. SRJ Peety Steels Pvt. Ltd. for assessment years 2000-01 to 2006-07 reported in 137 TTJ (Pune) 627, wherein the similar addition was deleted. 9. The learned Commissioner of Income Tax (Appeals) further erred in confirming the order passed u/s. 143(3) read with Sec. 153A .....

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the time of hearing. 4. In ITA No. 1655/PN/2012, the Revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case the learned CIT(A) has erred in deleting the addition of ₹ 6,86,91,303/- by estimating GP at lower rate than adopted by the Assessing Officer at the time of assessment. 2. On the facts and in the circumstances of the case, the learned CIT(A) has erred in adopting GP @ 4% arbitrarily without any basis ignoring the factual position on .....

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as deduction as per the provisions of section 69C of the Act. 5. Any other ground that may be urged at the time of hearing. 5. Briefly, in the facts of the present case, the assessee was engaged in the business of manufacturing of TMT Bars from MS Ingots / billets. Search and seizure action under section 132(1) of the Act was conducted in the case of Kalika group of Jalna including the assessee company on 16.06.2009. During the course of search, statement of director Mr.Ghanshyam Goyal was recor .....

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s, noted that the assessee was engaged in the business of TMT Bars from MS Ingots / billets. All ingots and billet manufacturers in Jalna produce mild steel from which TMT bars were produced. The Assessing Officer elaborately noted the manufacturing activity of the assessee and the modus operandi of the business of assessee. The Assessing Officer further noted that electricity was major cost input in the process of manufacture of TMT Bars from MS Ingots / billets and accounted for major share of .....

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Assessing Officer was of the view that the assessee was generating huge unaccounted profits, which in turn was introduced in the business in the guise of commission, commodity property, etc. 6. The Assessing Officer further referred to the action of the Director General of Central 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 good .....

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essing 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 furnish any documentary evidence to justify the variance in electricity consumption. Reference was made to the report of Dr. Batra and others and also to the o .....

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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 @ 188 units per MT and income was estimated in the hands of the assessee from year to year. 7. The CIT(A) in the consolidated order passed in the case of assessee after considering orders .....

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uty. The CIT(A) thus, held that 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 TMT Bars on the basis of electricity unit consumption at 188 electricity units per MT. 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 percent .....

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e 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%, which was almost double of G .....

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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 additional income in the state .....

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o 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 of account. The CIT(A) he .....

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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 filed in the hands of di .....

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he basis of consumption of electricity as per US standards and evasion of Excise duty for TMT Bars manufacturers in Jalna cluster found by the DGCEI. The assessee is also aggrieved by the order of CIT(A) in confirming the addition of alleged suppressed production on the grounds of monthly variation in consumption pattern of electricity vis-à-vis production. The assessee by way of ground of appeal No.4 has raised the issue against rejection of books of account under section 145(3) of the A .....

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hallenged the passing of order under section 143(3) r.w.s. 153A of the Act , even though no incriminating material or evidence was found during the course of search. This ground of appeal raised by the assessee is not pressed. Vide ground of appeal No.9, the issue is against 5/6 show cause notices issued by the DGCEI discussed by the Assessing Officer in the assessment order, wherein two show cause notices were settled before the Settlement Commission and two show cause notices were decided befo .....

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second objection is against the application of GP rate of 4%. The third being the addition made under section 69C of the Act on account of the investment required for conducting the said suppressed production. The assessee is also challenged the order of CIT(A) in rejecting the books of account and also in respect of findings of Assessing Officer vis-à-vis 5/6 show cause notices issued by the Excise authorities. The assessee has not pressed ground of appeal for nongrant of sufficient opp .....

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horized Representative for the assessee pointed out that search under section 132 of the Act was carried out at the premises of assessee on 08.07.2009. The statement 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 ha .....

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7 to 2008-09. However, in the hands of the group company i.e. the assessee and also sister concern Kalika Steel Jalna Pvt. Ltd., no declaration of income was made. 12. 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 suppressed production a .....

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5 - 860 of Paper Book Volume 5. The GP @ 4% on the quantity involving total sale value of ₹ 1,32,25331/- comes to ₹ 5,29,013/- which is to be now included in the income of the assessee for assessment year 2007-08. 2. The SCN at S.No.2 is settled before the settlement commission together with other parties and the order of the settlement petition is given at Page No.855 - 860 of Paper Book Volume 5. 3. The SCN at S.No.3 is pending before the CESTAT of Ex cise and the appeal filed befo .....

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5. The SCN at S.No.5 is pending before the CESTAT, the copy of which is filed along with the order passed by the Commissioner of Excise and the appeal filed before the CESTAT in the Paper Book now filed at Page No.125 - 260. 6. The SCN at S.No.6 is at Page No.778 of Paper Book Volume 5 and the order passed by the Commissioner (Appeals) is at Page No.261 to 269 of the Paper Book filed now. The appellant has accepted this SCN on the basis of order passed by Commissioner (Appeals) of Excise. The GP .....

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-07 to 2008-09, vide order dated 15.07.2015. The learned Authorized Representative for the assessee further pointed out that the earlier decision of Tribunal in the case of SRJ Peety Steels Pvt. Ltd., was against the order passed under section 153A of the Act, which has been confirmed by the Hon ble Bombay High Court, Aurangabad Bench, relating to assessment years 2000-01 to 2006-07. 14. The learned Departmental Representative for the Revenue in reply, in turn, relied on the order of CIT(A) and .....

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al No.1 and 2, the issue was against the addition restricted by the CIT(A) by applying GP rate of 4% on the suppressed sales. The learned Departmental Representative for the Revenue pointed out that vide ground of appeal No.3, the Department has challenged that GP rate of 15% as admitted by 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 applie .....

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resentative for the assessee pointed out that director of assessee company though had stated that it would be reasonable to compute the GP rate @ 35% in case of furnace cases and 15% in case of Rolling Mills, but in the said statement itself, it was mentioned that the declaration was made 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 .....

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stine removal of goods without payment of Excise duty, the first show cause notice was relating to assessment year 2007-08, in which, it had admitted to clandestine removal of goods worth ₹ 1,32,25,331/- and against the second show cause notice, it had admitted to have removed goods worth ₹ 29,42,221/- relating to assessment year 2006-07. In respect of third show cause notice, the Assessing Officer pointed out that the matter was pending before CESTAT and in case, no relief is allowe .....

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ause notice, the learned Authorized Representative for the assessee pointed out that income can be estimated @ 4%. Vis-à-vis sixth show cause notice, the learned Authorized Representative for the assessee pointed out that it had accepted the order passed by the CCE, Aurangabad and consequently, profits on the alleged sales made by the assessee outside books of account can be added in the hands of assessee in assessment year 2010-11. Similarly, in respect of assessment years 2006-07 and 20 .....

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herwise, is to be added in the hands of assessee as directed by the Tribunal in appeals in group of furnace cases. 17. 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 at 188 units per MT as per the report of Dr. Batra. The Excise authorities had issued various show cause notices to th .....

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he 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 of four groups .....

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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. 18. 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 cause notices i .....

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ee, 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 and second show cause notices 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 clandestine remov .....

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he CESTAT decide s the issue against the assessee, then the profits on such alleged excessive production can be added in the hands of assessee by applying GP rate of 4%. The fourth show cause notice issued to the assessee was relating to the sales made to M/s. Balaji Steel Traders in assessment year 2008-09 and the learned Authorized Representative for the assessee as pointed out that the alleged sales have been accepted to be not accounted for in the books of account and consequently, addition .....

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referred to five show cause notices, whereas the assessee before us has filed explanation in respect of six show cause notices and the said show cause notices relate to the years under appeal before us and hence, the directions. In view thereof, where the issue is identical to the issue raised in the earlier bunch of appeals, wherein addition was made on account of consumption of electricity and various show cause notices issued by DGCEI, we hold that the earlier ratio laid down by the Tribunal .....

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d on record. We have also considered all the precedents and decisions relied on by both the Parties. 46….. 47….. 48….. 49….. 50. Though the assessee has raised several grounds of appeal, but the issues raised by the assessee 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 .....

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nt in purchases relating to suppression of sale. 51. The Revenue on the other hand, is in appeal against the order of CIT(A) on the following grounds:- a) In quantifying the suppressed production @ 4% as against the addition made by the Assessing Officer 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 unaccounted produ .....

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unt of alleged suppression of production and evasion of duty on account of erratic consumption of electricity. 53. Now, we are coming to the merits of the issue raised before us. We have heard this bunch of appeals where different issues are raised i.e. 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 .....

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or re-opening under section 147 supply of the Act, are not pressed. Hence the same are dismissed as not pressed. 54. The next issue is the working of the suppressed production and the application of GP rate of 4% on such suppressed production and 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 Pee .....

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of Note and also relied on series of case laws. He continued his arguments in the prelunch hour on 07.05.2015. On the perusal of the written Note filed by the Ld. Special AR and on comparison of the said written Note with the written Note dated 05.11.2014 filed by him before the Tribunal in the case of M/s. SRJ Peety Steels Pvt. Ltd., (supra) which is a sister concern of Shree Om Rolling Mills Pvt. Ltd., we find that the same are identical. We called for appeal folder of M/s. SRJ Peety Steels P .....

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M/s. SRJ Peety Steels Pvt. Ltd. (supra) is a case of furnace, which is engaged in the manufacture of ingots / billets, whereas manufacturing of TMT bars is carried out by Shree Om Rolling Mills Pvt. Ltd. by using ingots / 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, .....

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In some cases, such offer of additional income was before the Excise authorities, who in turn, accepted the same. The Assessing Officer in the case of Rolling Mills i.e. in the hands of the assessee before us was of the view that because of erratic consumption of electricity, in turn, relying on the data of consumption of electricity as per US standards, came to the conclusion that there was suppression of production by the TMT Bars manufacturers in Jalna cluster on the ground of variance in con .....

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e. M/s. SRJ Peety Steels Pvt. Ltd., on the basis of erratic consumption of electricity, which in turn, was the basis for making the additions in the hands of the assessee therein by CCE, Aurangabad and vide order dated 16.01.2015 held that since the order of the CCE, Aurangabad has been overruled by the Third Member of CESTAT, there was no basis for addition in the hands of the assessee. The other aspects of the issue that the assessee therein had made the petition before Settlement Commission i .....

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absence of any other inquiry or investigation being carried out by the Assessing Officer or any other evidence being brought on record, the Tribunal held that no addition is warranted in the hands of the assessee. The issue before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. Was summarized under para 9, which reads as under:- 9. At this stage we are not considering the appeals filed by the Revenue for the reason that those appeals are against the finding of the Ld. CIT(A) that the entire val .....

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ified in making the addition of ₹ 39,20,36,546/- in the A.Y. 2007-08 and ₹ 40,75,72,486/- in the A.Y. 2008 -09 on alleged suppression of production/sales and; (ii) Whether the Assessing Officer was justified in holding that the books of account of the assessee does not give the correct picture of the state of affairs and hence, those books of account needs to be rejected. 57. After considering the submissions of the assessee in paras 10 to 10.5 at pages 12 to 16 and also summarizing .....

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by both the Parties. The assessee is manufacturer of Ingots/Billets. So far as A.Y. 2007 -08 is concerned the original assessment of the assessee was completed u/s. 143(3) of the Act on 31-12-2009. While completing the assessment u/s. 143(3) of the Act, in the opinion of the Assessing Officer the electricity consumption shown by the assessee was at higher side as compared to the quantum of production declared by the assessee. The Assessing Officer, therefore, made the addition on the basis of th .....

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ainst the assessee company u/s. 147 of the Act. In reasons recorded by the Assessing Officer while issuing the notice to the assessee company u/s. 147 for A.Y. 2007 -08 the Assessing Officer gave reference of the communication and order of the CCE Aurangabad received from the Central Excise office at Aurangabad. 14. The Assessing Officer has also referred to one matter in respect of the action conducted by DGCE (Intelligence) against the few brokers and sub-brokers who were involved in the tradi .....

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urangabad. It is pertinent to note here that in this case that there was a search and seizure action against the assessee and its group companies by the Income-tax Dept. on 17-03-2006 and in consequence of the search and seizure action u/s. 132(1) the assessments of the assessee have been framed u/s. 153A r.w.s. 143(3) for the A.Ys. 2000-01 to 2006-07. It is also pertinent to note that during the course of search and seizure operation no incriminating evidence was found suggesting that the asses .....

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framed by the Assessing Officer. It is also to be taken note that the A.Ys. 2007-08 and 2008-09 before us are immediately next assessment years after the assessments in consequence of search and seizure action u/s. 132(1) of the Act were completed. 15. It is also to be taken note of the fact that even for the A.Ys. 2007-08 and 2008-09, no independent investigation or any enquiry is made by the Assessing Officer or any other Income Tax Authorities. In the assessment order the Assessing Officer h .....

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brokers namely Shri Umesh Modi, Mumbai, Shri Anil D Lingade, Shri Mukesh Gupta it was admitted that they were involved in clearing the consignments from the factory on weighment slips only and no excise duty was paid and they were involved in providing fake trading bills and challans which accompanied the vehicles carrying those consignments. As per the modus operandi adopted by the brokers they used to recover the said fake trading bills and challans after the goods reached their destination. A .....

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er manufacturers who were involved in clearing the excisable goods without payment of duty. All the manufacturers of the Ingots/Billets and TMT Bars were based in Jalna and the assessee is one of them. As per the investigation done by the Central Excise Authorities, the assessee who is manufacturing of Ingots/Billets supplied 288.500 MT. to Shri Om Rolling Mills Pvt. Ltd. which is engaged in the manufacturing of TMT Bars. The Assessing Officer also referred to a statement of Shri Surendra S. Pee .....

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lement Commission and paid the excise duty to the extent of ₹ 7,79,313/- for clearing the goods without payment of excise duty. The declaration filed by the assessee was accepted without any further addition or objection filed by the Central Excise Authorities. The Settlement Commission levied the penalty of ₹ 8,000/-. 16. The Assessing Officer also has in detail discussed the process involved in the manufacturing of Ingots as well as Billets in the assessment order. At this stage we .....

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irector, All India Induction Furnaces Association, New Delhi on Electric Steel Making technology in the 21st Century which is available on the internet which is on the Electric Induction Furnace and as per the said article the power consumption in Induction Furnace is between 650 to 820 units per MT depending upon the input charge used. The Assessing Officer also referred to the Technical report of the IIT, which states that electricity requirement for manufacturing 1 MT of M.S. Ingots where mel .....

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d by the CCE, Aurangabad are very much reasonable, fair and justified and he adopted the same for the purpose of calculation of alleged unaccounted production of finished goods (Para No. 4.3 of the assessment order). 17. The Assessing Officer also rejected the books of account of the assessee u/s. 145(3) of the Income-tax Act by giving the reason that the assessee has not given the true and correct picture. The Assessing Officer adopted the suppression of production determined by the CCE, Aurang .....

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completing the assessment u/s. 143(3) of the Act in the order dated 31-12-2008 and made the net addition of ₹ 30,76,35,042/-. So far as A.Y. 2008 -09 is concerned no adjustment was made in the A.Y. 2008-09 as it was the regular assessment u/s. 143(3) of the Act. Even though in the A.Y. 2008 -09, the Assessing Officer has observed that the information received from the Central Excise Authority is not relevant, but finally the assessment order is framed on the basis of the order passed by t .....

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ibunal noted that in both the years before it, the Assessing Officer had determined the alleged suppression of production / sales as determined by the CCE, Aurangabad on the basis of erratic consumption of electricity. The basis of the order of CCE, Aurangabad was the report of Dr. N.K. Batra, Professor of IIT, Kanpur. The Third Member of CESTAT in group of cases of furnace owners held that the order of CCE, Aurangabad was not sustainable and had to be cancelled in turn, relying on the ratio lai .....

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stom and Service Tax, Auran gabad dated 28-08-2009 (in short referred to as the CCE ) in the case of the assessee is placed at Page Nos. 122 to 174 of the P/B-I. The CCE, Aurangabad has observed that during the scrutiny of electricity bills, it was noticed that the substantial amount of expenditure has incurred by the assessee towards the cost of power consumption (Primary input). He has further observed that from the scrutiny of the various records, the cost of production is much more than cost .....

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erial. As observed by the Ld. CCE in the case of the assessee as per their electricity bills, the average consumption of electricity for manufacture of 1 MT of MS Ingots varies from 1454 to 1856 units. 19.1 He relying on the Technical report of IIT, Kanpur the Ld. Commissioner observed that on calculating the production of M.S. Ingot/Billets on the basis of consumption of 1026 units (Maximum Limit) of electricity for per MT of MS Ingots produced, it is noticed that there is a huge difference in .....

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ttlement Commission. The Ld. Commissioner also referred to nonmaintenance of the proper electricity consumption record more particularly in Form G-7. The Ld. Commissioner also gave the data of production from April, 2003 to March, 2008 in his order. He has also recorded the objections of the assessee company. It appears that the assesse demanded the cross examination of Dr. N.K. Batra, Professor of IIT, Kanpur which opinion was heavily relied on by the CCE, Aurangabad. The Ld. Commissioner obser .....

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the show cause notice and also levied the penalty to the extent of ₹ 33,07,22,069/-. 19.2 The said order of the Ld. Commissioner was challenged before the CESTAT by filing the appeal u/s. 35B(a) of the Central Excise Act, 1944. There was a difference of the opinion between the Ld. Members of the CESTAT, i.e. Ld. Vice -President and Ld. Technical Member and the matter was referred to the Ld. Third Member to resolve the following differences: a. Whether in view of the discussion in Para 1 t .....

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the appeals dismissed. 19.3 The Ld. Third Member of the CESTAT concurred with the finding of the Hon ble Vice-President that the order passed by Ld. Commissioner of Central Excise and Custom, Aurangabad was not sustainable and has to be cancelled. The operative part of the order of the Third Member is as under: 20. It is also seen that the Hon ble Vice President correctly opined that the judgment in R.A. Casting (supra) is squarely applicable in the facts of the instant appeals. In R.A, Casting .....

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rt of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv). 650 to 820 units/MT as per Article of the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v). 1000 to 1800 units per Ton or even higher, as per Letters dated 18.3.2008 and 25.4.2008 of same Mr. R.P. Varshney [All India Induction Furnaces Association] informing that his Article prepared in 1989-90 was for Concast Steel making [thus not for Induction Furnace], (vi). 620 to 690 units/MT as per Let .....

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f 1 MT of MS Ingots, reported in following different reports- (i). 555 to 1046 (KWH/T) as per Dr. Batra s report; (ii). 1800 KWH/T as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India; (iii). 1427 KWH/T as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv). 650 units to 820 units/MT as per the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v). 851 units/MT in the case of Nagpal Steel v .....

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1026 units allegedly as per report of Dr. Batra, for arriving at deemed production. Moreover, the trial run conducted by the department had proved that at that time power consumption was actually higher than that reported in Dr. Batra s report. 20.4 It is also seen that the allegations levelled in R,A, Casting (supra) were mainly- (i). Inordinately high electricity consumption without any explanation, (ii). Sale of Ingots at a huge loss over last 4-5 years, which was economically and commercial .....

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le evidences relating to- (i). Receipt of raw material inside the factory premises, and non-accounting thereof in the statutory records; (ii). Utilization of such raw material for clandestine manufacture of finished goods; (iii). Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, .discrepancy in the stock of raw materials and final products; (iv). Clandestin .....

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d, the Appeal of R.A. Casting was allowed for want of evidence relating to the above points, with further finding that the Revenue, not having conducted any experiment whatsoever, cannot be permitted to justify the demands .raised. Similar is the fact situation in the instant appeals, 20.6 The evidence as per Revenue in the instant appeals are a). High electricity consumption without any explanation, b). Sale of Ingots at loss, which was economically and commercially not possible, c). Discrepanc .....

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it would 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. It was further held that- 23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside* and .....

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s to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained. 20.8 .....

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tine production and clearance to sustain, the demand, It is contended by Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. The Revenue sought to rely on an order passed by Tribunal in GuIabchand Silk Mills Pvt. Ltd., V/s. CCE, Hyderabad-II, 2005 (184) ELT 263, however the same was also co .....

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e of clandestine removal is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions, Regarding the claim of the Revenue that subsequent to passing of impugned Orders the power consumption for manufacturing one MT of Ingots has reduced in factories of all the appellants, I am of the view that it cannot be-.a basis to sustain the findings in the impugned Orders by assuming that there could not be any rea .....

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nduction furnace. In any event, in the Impugned Orders, there is no such reason to discard the report and in any event the letter of Mr. R.P. Varshney suggesting that electric consumption in induction furnace can be upto 1800 units per MT is also on record. Since, varying reports are on record, the ratio of R.A. Casting (sura) is squarely applicable. 23. Revenue, also relied On the judgment of the Hon ble Supreme Court in the case of Melton India V/s. The Commissioner Trade Tax, U.P, - 2007-TIOL .....

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ame was applied in subsequent assessment years 2001-02 and 2002-03.This was followed by the Sales Tax Tribunal in the order cited by Revenue. In the case of Rajmoti Industries, facts of the case are that for the assessment year 2005-06, the Assessing Officer rejected the books of accounts of the assessee and made various additions, not only for the reason of unexplained wide fluctuations in the productivity as compared to that in A.Y. 2004 -05, but also because the assessee therein had not recor .....

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wed after considering inter alia the judgments in D. Bhoormull (supar), Gulabchand Silk Mills (supra), as also Hans Casting (supra). In A.K. Alloys, 2012 (275) E.L.T. 232 (Tri. - Del.) the Tribunal followed the decision of R.A. Casting (supra) and allowed the appeal, as the demand was based mainly on the evidence of power consumption without any evidence of clandestine removal. 25. I therefore concur with the findings of the Hon ble Vice President and in my opinion, the judgment in R.A. Casting .....

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otices (SCN) were issued to the assessee and other companies and the assessee and other companies came forward before the Settlement Commission and paid the excise duty. Hence, the investigation of the DGCEI made against the brokers and sub-brokers referred by the Assessing Officer was also before the Ld. Commissioner, Aurangabad. On perusal of the assessment orders it is clear that both the assessments are merely based on the alleged suppression of the production by estimating certain consumpti .....

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de and cancelled by the CESTAT, in our opinion the assessment orders passed by the Assessing Officer and confirmed by the Ld. CIT(A) approving the estimated alleged suppression of the production/sales have no legal legs to stand. 59. The Tribunal thereafter, dealt with the arguments of Ld. Special AR that even the minority decision of Ld. Technical Member of CESTAT was a legal order. This plea of the Ld. Special AR was rejected by the Tribunal in view of the decision of Third Member of the CESTA .....

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cal Member of the CESTAT. The Ld. Spl. AR for the Revenue also referred to the order of the Settlement Commission, Mumbai passed in the case of the assessee and other companies. It is true that the assessee approached the Settlement Commission when on the basis of investigation made by the DGCEI against some of the brokers and sub-brokers dealing in the Ingots/Billets and TMT Bars show cause notice was issued to the assessee company and matter was settled. Ld. CCE, Aurangabad in his order has ta .....

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as a separate case based on its own merit and dealt with accordingly. The argument of the assessee is accepted. No reliance has been placed on evidence relied upon in central excise proceedings. The findings in this case are based only on material and evidence that have been brought on record in the instant case. 61. The Tribunal thereafter, noted another aspect of the issue that no independent investigation was made by the Revenue, but the entire assessment was framed on the basis of informati .....

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der has been set - aside, hence, it was not necessary to deal with the decisions relied upon by the Ld. Special AR, which are in the context of admission of the Director in the course of investigation made by the DGCEI. 62. The second issue of maintaining of Form No.G-7 in respect of electricity consumption, was also before the CESTAT and the Tribunal overruled the arguments of the Ld. Special AR and upheld the arguments of learned Authorized Representative for the assessee that the order of CES .....

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rmation received from the Central Excise Department as well as the adjudication order passed by the Ld. Commissioner of Central Excise, Aurangabad. Moreover, as observed above the adjudication Order passed by the CCE, Aurangabad has been cancelled by the CESTAT, Mumbai by majority opinion and hence, foundation of assessments for A. Yrs. 2007-08 & 2008-09 do not exist. The law is also well settled that when the assessee files an appeal challenging an order of the lower authority before the hi .....

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ntext of admission of the Director of the assessee in the course of investigation made by DGCEI more particularly under the Indian Evidence Act as those decisions are not relevant now though good for academic discussion. So far as maintaining of Form G-7 in respect of the electricity consumption, the said issue was also before the CESTAT while deciding the fate of order of the Ld. CCE, Aurangabad. Ld. AR vehemently argued to point out how the order of the CESTAT, Mumbai Bench, Mumbai is not corr .....

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eizure operations carried out under section 132(1) of the Act on 17.03.2006 against M/s. SRJ Peety Steels Pvt. Ltd. and the assessment framed under section 153A r.w.s. 143(3) of the Act. The assessee therein i.e. M/s. SRJ Peety Steels Pvt. Ltd. had filed an appeal before the Tribunal and the order of the Tribunal is reported in 137 TTJ (Pune) 627. The Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) referred to the observations of Tribunal in earlier proceedings relating to assessment years 2 .....

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eal was dismissed by common order dated 10.02.2014 in the case of assessee and other companies by the Hon ble Bombay High Court and there were observations on the estimation of production based on the consumption of electricity. The Tribunal while deciding the appeal of M/s. SRJ Peety Steels Pvt. Ltd. in this regard observed as under:- 22. We have already mentioned here-in-above that in the case of the assesse, the search and seizure operation was carried out u/s. 132(1) of the Income-tax Act on .....

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tain alleged suppressed production and resultant concealed income in the case of the assessee. The Assessing Officer took 1,600 Units as consumption per MT which was a lowest as shown by the assessee. The Assessing Officer, accordingly, worked out the alleged suppressed production and made the addition in all the years while completing the assessments. In sum and substance the Assessing Officer had simply taken the lowest electricity consumption for a month in a whole year and accordingly worked .....

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filed under s. 139(1) of the Act accompanied by all requisite documents and proceeding under s. 143(1) of the Act stood completed. During the course of search no incriminating materials were found relating to aforesaid years which could have been added back in the proceedings under s. 153A. The details regarding the consumption of electricity for the production for each of the year under consideration was very well placed before the authorities below in the director s report of each year. The s .....

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239 1313 2001-02 25528565 17,010.558 1501 2002-03 31404354 19,709.654 1593 2003-04 31623843 20,396.313 1550 2004-05 43123824 23,240.189 1856 2005-06 62650888 29,582.434 2118 2006-07 70440580 36,017.983 1956 32. The matter of fluctuating consumption of electricity can by no means be said to be a finding of search since all details regarding electricity vis-a-vis production were before the Department. If the Department had any doubts regarding the same, it could have been raised during the regular .....

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prior to the search in normal course disclosing the particulars of subject-matters were already on record. The returns have already been accepted and no assessment as such could be said to be pending on the date of initiation of search and abated in light of the provisions of s. 153A. 34. Without prejudice to above, with regard to invoking the provisions of s. 145 of the Act, according to which in case the AO is not satisfied about the correctness or completeness of accounts of the assessee or .....

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er the accounts maintained are correct and complete? 35. Without prejudice to above, we find that having rejected the books of accounts of the assessee company for all the years under consideration, the AO devised a statistical formula on the basis of electricity consumption that was applied uniformly in order to work out certain production and resultant concealed income for each year under consideration. The AO could not substitute the same by cogent reasoning. He has simply taken the lowest el .....

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cture of mild steel ingots/billets depends on various factors like quality of raw material which is the major input, voltage of the supply, power interruptions, mechanical and electrical breakdowns and the chemical composition of the liquid metal which has to be finally cast into ingots/billets. The AO failed to appreciate these facts and did not attempt to establish a direct nexus between the production and electricity consumed for the manufacture of round/TMT bars and arrived at a conclusion t .....

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mpany from the asst. yrs. 2000-01 to 2005-06. Therefore, rejection of books for these years purely on the ground that there has been divergence in the consumption of electricity and application of s. 144 is not at all justified. Accordingly additions have rightly been deleted in asst. yrs. 2000-01 to 2005-06 in both the cases. 23. It is clear from the order of the Tribunal in assessee s own case in the search and seizure matter as it is held that the consumption of electricity for the manufactur .....

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he assessee and other companies by the Hon ble High Court and there are categorical observations of their Lordships on the estimation of the production based on the consumption of the electricity which are as under: 4. In that regard, the Tribunal as also the Commissioner of Income Tax (Appeals) have concurrently found that the search was initiated on 17/03/2006 in the residential and business premises of SRJ Peety Steels Pvt. Ltd. Prior to the search, the returns of the income for the assessmen .....

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he same has not been disputed by the Revenue. The Tax Audit Report also contains the unit production of each year, which was accepted year after year along with returns and no query was raised by the Revenue. The finding of fact dated 31/03/2008 in the order passed by the Income Tax Appellate Tribunal refers to a detailed chart. The matter of fluctuating electricity, therefore, was held to be one, and since details were made available to the Department, which could have been raised during the co .....

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have in their orders, held that there are several factors which have to be taken into consideration and while arriving at a conclusion with regard to the alleged production calculated on the basis of electricity consumption. Rejection of books for these years only on the ground that there has been divergence in the consumption of electricity, therefore, was held not justified. 24. Ld. Spl. AR for the Revenue argues that the said observations are made in the context of the assessment framed in c .....

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07-08 and 2008-09, no investigation has been done by the Revenue which are immediate next assessment years after the search and seizure operation against the assessee company and hence, in our opinion above findings and observation of the Tribunal as well as the Hon ble High Court are also important to decide the present appeals more particularly on the additions based on consumption of electricity. 65. The Tribunal vide para 24 took note of the fact that in assessment years 2007-08 and 2008-09, .....

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ed suppression of production / sales in entirety. The relevant observations of the Tribunal are as under:- 25. In the case of ACIT Vs. A.K. Alloys (P) Ltd. (supra) in which the additions were made by the A.O. for alleged suppression of production and investment in purchase of raw material relying on information received from Central Excise (Ludhiana) and when matter reached before the Tribunal and it is held as under: 10. The assessee had filed an appeal against the order of CIT Customs & Ex .....

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rted by evidence was made on a particular date and that resulted in higher amount of production. It was further observed by the Customs, Excise & Service Tax Appellate Tribunal vide para 4.2 that So far as the production quantum is concerned, there is also no evidence on record to show that the authorities intervened lawfully recording the output in the presence of witness. The Customs, Excise & Service Tax Appellate Tribunal held that therefore, a hypothetical case appears to have been .....

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ither suppression of purchase of input or clandestine removal of goods in fool proof manner known to law for which, it can be painfully said that the adjudication has no legs to stand. Both the appeals are therefore, allowed with consequential relief, if any. 11. The Customs, Excise & Service Tax Appellate Tribunal categorically held that the electricity consumption could not be criteria to determine the output laid down in R.A. Castings, where the appeal of the Revenue was dismissed by the .....

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ce Tax Appellate Tribunal (supra) in the appeal filed by the assessee and its Director has categorically held that no cogent evidence has been brought on record to prove that the output had been cleared clandestinely. Further it has been held that there was no cogent evidence to show either suppression of purchase of input or removal of goods. In view of the aforesaid findings of the Customs, Excise & Service Tax Appellate Tribunal in assessee s own case there is no merit in any addition bei .....

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that the assessee had, a) suppressed its production and; b) it made sale of its unaccounted production, outside the books of account. Upholding the order of the CIT (Appeals) we dismiss the ground Nos.1 and 2 raised by the Revenue. 26. In the case of ACIT Vs. Arora Alloys Ltd. (supra) the addition was made on the basis of electricity consumption to produce 1 MT of Ingots. The confessional statement was also given by the Managing Director of the said company before the Central Excise Authorities .....

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y used in manufacturing of Ingots/Billets are not sustainable. We, accordingly, delete the additions made towards the alleged suppression of production and sales at entirety and allow the Ground Nos. 3, 4, 5, 6 & 8 in the A.Y. 2007 -08 and Ground 2007-Nos. 2,3,4 & 6 in the A.Y. 2008 -09. 66. The Tribunal thereafter, held that there was no merit in the rejection of books of account and application of gross profit to determine the income in the hands of the assessee. The Tribunal also gave .....

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d on the basis of the adjudication order passed by the CCE, Aurangabad as well as the consumption of the electricity used in the manufacturing of the Ingots/Billets relying on the technical opinion of Dr. Batra, IIT, Kanp ur. No other reasons are given by the Assessing Officer. We have already held that the Assessing Officer was not justified in making the additions towards alleged suppression of production/sales. We, therefore, hold that the rejection of the books of account on above reason can .....

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7 in the A.Y. 2008 -09 become infructuous. 29. In Ground No. 10, the assessee has raised the objection for making the addition of ₹ 37,69,582/-. The said addition is made by the Ld. CIT(A). He has observed that there is an element of the undisclosed investment in respect of the undisclosed turnover which is estimated as an average undisclosed turnover of the half period of the earlier year under appeal. The Ld. CIT(A) has observed that the undisclosed sale for the earliest year under appe .....

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We, accordingly, allow the Ground No. 10 taken by the assessee. 67. The Tribunal also dismissed the appeal of the Revenue against the estimation of gross profit by the CIT(A) observing as under:- 31. We have heard the parties. The main grievance of the Revenue is against the estimation of GP by Ld. CIT(A). We have already allowed the grounds taken by the assessee on the alleged suppression of the production/sales. As the assessee has succeeded on the basic additions, the grounds taken by the Rev .....

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fferent ground i.e. consumption of electricity as per US standard. However, the Ld. Special AR stressed that the issue raised in the present appeal was at variance. Vide his written submissions, he has raised identical grounds of appeal and had elaborately took us through various submissions and has relied on different case laws. The contention of the Ld. Special AR is sheer waste of process of law, wherein the submissions made before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) have .....

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s Pvt. Ltd. was made on the basis of the report of one Dr. Batra with regard to electric consumption and the Third Member of CESTAT had deleted the aforesaid addition made under the Excise law. However, in the case of assessee before us, there is no order of CCE, Aurangabad or of CESTAT and the Assessi ng Officer worked out the addition on the basis of erratic consumption of electricity vis-à-vis the consumption as per US standards after giving benefit of 25%. Following the same line of r .....

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sent case. 70. Another objection raised by the Ld. Special AR before us during the course of hearing of the bunch of appeals was that it had moved 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 .....

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RJ Peety Steels Pvt. Ltd. (supra) also stands dismissed. 71. Further, the Tribunal in the case of another Rolling Mills i.e. Mahaveer Steel Re-Rolling Mills Vs. ACIT in ITA Nos.1072 to 1076/PN/2012 and ACIT Vs. Mahaveer Steel Re-Rolling Mills in ITA Nos.1446 to 1450/PN/2012, relating to assessment years 2004-05 to 2008-09 vide order dated 05.03.2015 had applied the ratio laid down by the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and held that the addition made towards alleged suppresse .....

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fficer is on pure estimates, conjuncture and surmises and the same cannot be accepted. We hereby delete the same. 72. Another aspect of the issue in relation to the addition on account of suppressed production, 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 rel .....

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rapolated. The basis for declaration of clandestine removal of material without payment of Excise duty was on account of search and seizure proceedings conducted by DGCEI on certain brokers and sub-brokers. Consequent thereto, Shri SRJ Peety, person in-charge of Shree Om Rolling Mills 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 accept .....

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in the hands of the assessee. The Assessing Officer on the other hand, was of the view that the assessee had not correctly disclosed the production of TMT Bars. The basis for such assumption was the electricity consumption, for which the Assessing Officer placed reliance on the results of electricity consumption under US standards against which, handicap of 25% was given. The Assessing Officer applying the formula worked out the suppressed production and sales in the hands of the assessee. We in .....

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ted in the hands of the assessee. He stressed that even where the evidence of clandestine removal of material without payment of Excise duty and suppression of income was found for the part of the year, then the Assessing Officer can estimate the additional income for 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 th .....

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mission, which has been accepted by the Settlement Commission in toto. The Ld. Special AR objected to the plea of assessee that declaration was to buy peace of mind, but we find no merit in the same, since the object of moving petition before the Settlement Commission 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 ma .....

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year under consideration. In cases where the petition is accepted in the hands of the assessee by the Settlement Commission, then no further addition can be made in the hands of the assessee on account of alleged clandestine removal of material without payment of Excise duty or suppressed sales for the balance period, in the absence of any evidence found against the assessee for the balance period. 74. Another aspect of the issue is that though the factum of the assessee filing the petition bef .....

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ion, has to be in negative. 75. The Ld. Special AR vehemently relied on the ratio laid down by the Tribunal in assessee s own case reported in 137 TTJ (Pune) 627, which in turn has been approved by the Hon ble Bombay High Court. It may be pointed out that the facts of 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 d .....

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nce of any evidence collected against the assessee, merely because the addition was made in the hands of the assessee in a preceding year, we find no merit in the submissions of the assessee that following the same ratio, extrapolation of sales for the assessment year 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 adopte .....

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e assessee and made the aforesaid addition, which we in the paras hereinabove had already deleted. The Ld. Special AR pointed out that the said action of the Assessing Officer was one of the methodologies for working out the additional income of the assessee. We find 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 f .....

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aid information was forwarded to the Central Excise Department pursuant to which, order levying additional Excise duty was passed by the Excise Commissioner. However, the Tribunal cancelled the Excise demand on the ground that there was no corroborative evidence of clandestine removal of material without payment of Excise duty was found from the possession of the assessee by the Excise authorities. 77. Following the same analogy of reasoning, where the evidence of clandestine removal of material .....

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or brought any material on record establishing suppressed production and / or its sale outside the books of account. 78. The Ld. Special AR time and again stressed that the assessee had made admission before the Assessing Officer and this was the evidence available with 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 .....

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is of findings of the Assessing Officer and CIT(A) and the Trib unal cannot traverse beyond the orders of Assessing Officer and CIT(A). Admittedly, the parties can raise an additional plea before the Tribunal justifying the addition. However, the said plea has to be decided 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 e .....

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at the confessional statement before the Excise Department was an important piece of evidence. We are in agreement with the said proposition laid down by the Hon ble Supreme Court in Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala and another (supra), but the statement 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 .....

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tion to the evidence found of unaccounted sales for part of the period during the course of search. The Assessing Officer on the said basis assumed unaccounted sales during the entire year, which was deleted by the CIT(A) and the Tribunal. The Hon ble Delhi High Court 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. 83. Similar proposition has been laid down .....

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the basis of papers seized, for which the assessee had filed a petition before the Settlement Commission and income on that account was declared by the assessee. The Tribunal held that no further addition could be made in the hands of the assessee for the balance period. 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 .....

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es were not sustainable. The Tribunal distinguished the ratio laid down in CST Vs. H.M. Esufali H.M. Abdulali (supra). The Ld. Special AR relied on the said decision and in view of the decision of coordinate Bench on similar issue as before us, we find no merit in the reliance placed upon by the Ld. Special AR. 85. 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 .....

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said issue of extrapolation of suppressed sales was adjudicated by the Tribunal by observing as under:- 41. Before closing the issue, in the interest of justice, we would like to adjudicate the issue of extrapolation of suppressed sales on account of settlement petition 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 sear .....

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n the hands of the assessee is for the financial year and is not restricted to the number of days for which it has offered. In other words, once a person makes a settlement petition for a particular year on account of the evidence found for part of the period and once 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 .....

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nt under Chapter XIV-B and held that what is to be assessed under the said Chapter is undisclosed income of the block period and not the total income or loss of the previous year required to be assessed under regular assessment under section 143(3) of the Act. The Hon 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 undisclos .....

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essment year 2006-07 is misplaced as the addition in the hands of the assessee in that year was made on account of search and seizure operations carried out by the Income-tax Department, wherein sales outside books were found for few days. However, no independent investigation / 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 ass .....

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considered by him during the assessment proceedings, but the addition having been made on only on the issue of erratic consumption of electricity, which is the basis of order passed by CCE, Aurangabad, who was also in knowledge of the clandestine removal of material 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 a .....

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eory of preponderance, in turn relying on the ratio laid down by the apex court in Sumati Dayal Vs. CIT (supra) and Collector of Customs Madras and others Vs. D. Bhoormull (supra), which was also relied upon by the Ld. Special AR in M/s. SRJ Peety Steels Pvt. Ltd. (supra) 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 th .....

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ted by the assessee by way of filing petition before the Settlement Commission, which in turn, has also been accepted by the Settlement Commission. Merely because the Settlement Commission accepted the claim of the assessee of additional Excise duty payable on the said 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 f .....

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in respective years. Accordingly, we direct the Assessing Officer to verify from the records for the respective years and include the additional income on account of such admitted clandestine removal of material without payment of Excise duty, by the assessee either 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 du .....

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Commission in any of the respective years or before the Excise authorities. 89. 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 hav .....

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the addition in the hands of the assessee the grounds of appeal raised by the Revenue i.e. against application of GP rate and allowance of expenses are also dismissed. 19. In the totality of the above said facts and circumstances and in view of 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 as in the earlier order of Trib .....

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The assessee has furnished the details of show cause notices 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 Comm issioner (Appeals) of Excise. The said tabulated details are appended as Annexure to this order. We direct the Assessing Officer to verify the claim of ass .....

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l in the case of SRJ Peety Steel Pvt. Ltd. and Shri Om Rolling Pvt. Ltd. (supra) on the ground that the appeal filed by the Department is pending before the Hon ble Bombay High Court. The learned Authorized Representative for the assessee 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 judgme .....

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