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Bhagyalaxmi Steel Alloys Pvt. Ltd. Versus The Addl. Commissioner of Income Tax, Range – 1, Aurangabad and Vica-Versa

2015 (11) TMI 14 - ITAT PUNE

Addition made on account of alleged suppression of sales - addition based on consumption of electricity as per US standards and evasion of Excise duty by the manufacturers of TMT bars in Jalna cluster found by Director General of Central Excise and Customs - working out the addition by applying GP rate of 4% on the alleged suppression of sales, after rejecting the books of account under section 145 - Held that:- No extrapolation of sales for 300 days can be made in the hands of the assessee on t .....

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e 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 fairly admitted that in case the said additional income has not been added while computing t .....

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ssee. 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 extrapolation of sales for 300 days on account of any evidence found in any preceding or succeeding .....

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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. Accordingly, we hold that no addition can be made in the hands of the assessee on account of .....

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nce of expenses are also dismissed. - Decided in favour of assessee. - ITA Nos.284, 285 & 286/PN/2012, ITA Nos.437, 438 & 439/PN/2012, ITA Nos.179 to 182/PN/2012, ITA Nos.656 to 659/PN/2012, ITA No.1084/PN/2012, ITA No.1468/PN/2012, ITA No.1466/PN/2012, ITA No.1523/PN/2012, ITA Nos.142 to 146/PN/2012, - Dated:- 15-7-2015 - ITA Nos.631 to 635/PN/2012, ITA Nos.214 & 215/PN/2012, ITA Nos.412 & 413/PN/2012 MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM For The Assessee : Shri J.P. Bairagra Fo .....

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sstt. Year 1. ITA Nos.284 to 286/PN/2012 Bhagyalaxmi Steel Alloys Pvt. Ltd. 30/12/2011 2006-07 to 2008-09 ITA Nos.437 to 439/PN/2012 2. ITA Nos.179 to 182/PN/2012 Omsairam Steel & Alloys Pvt. Ltd. 06/01/2012 2005-06 to 2008-09 ITA Nos.656 to 659/PN/2012 3. ITA No.1084/PN/2012 Omsairam Steel & Alloys Pvt. Ltd. 30/04/2012 2004-05 ITA No.1468/PN/2012 4 ITA No.1466/PN/2012 M/s Rishi Steel & Alloys Pvt. Ltd. 30/04/2012 2004-05 ITA No.1523/PN/2012 5 ITA Nos.142 to 146/PN/2012 Matsyodari St .....

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o adjudicate the issues. 3. In ITA No.284/PN/2012, the assessee has raised the following grounds of appeal:- 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the re-opening of the assessment u/s. 147 of the Income Tax Act. 2. The learned Commissioner of Income Tax (Appeals) further erred in not taking cognizance of the fact that reasons for re-opening of the assessment were not supplied to the appellant company, neither on re-opening of the assessment nor at the stage of a .....

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the Directorate General of Central Excise and Customs (DGCEI). 5. The learned Commissioner of Income Tax (Appeals) further erred in confirming the suppression of sales of ₹ 28,59,32,329/- on the basis 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 eviden .....

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ncome Tax Act without any evidence or finding as to how the provisions of Section 145(3) are satisfied. 8. 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 any show cause notice to the appellant company to explain the facts against the proposed huge addition on this account which is against the rules of natural justice. 9. The learned Commissioner of Inc .....

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valid in law as the same has been passed without issue of notice u/s.143(2) of the I.T. Act. 12. 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. 13. The appellant company craves to add to, alter or amend the foregoing grounds, which are without prejudice .....

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ring and administrative expenses on the unaccounted production worked out in the appellate order had already been borne by the production shown in the books of accounts? 3. The order of the AO be restored and that of the CIT(A) be vacated. 4. The appellant craves leave to add, amend or alter any grounds of appeal. 5. Briefly, in the facts of the present case, the assessee had filed the return of income on 11.12.2006 declaring loss of ₹ 1,22,42,039/-. The return was processed under section .....

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e Assessing Officer recorded reasons for reopening the assessment under section 147 of the Act and notice under section 148 of the Act was issued on 30.03.2010. The assessee in response stated that the original return of income may be treated as filed in response to notice under section 148 of the Act. In response to statutory notices received, there was representation by the assessee and the Assessing Officer notes that the books of account were produced which were verified on test check basis. .....

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urchase of raw materials. The Assessing Officer during the course of assessment proceedings asked the assessee as to why the consumption of electricity per metric tonne should not be adopted for the purposes of calculation of suppression in production as per the order of the CCE, Aurangabad s show-cause notice. In response, the stand of the assessee was the same as before the CCE, Aurangabad. The Assessing Officer was of the view that the books of account of the assessee do not reflect the true .....

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consumption was not justified. Even though addition on account of clandestine removal of MS ingots/billets in the year under appeal was agreed to purchase peace of mind and to avoid litigation. The CIT(A) in the bunch of appeals held as under :- 7.2 I have carefully considered the facts of the case and the rival contentions raised by the appellant in para-7.1 above and raised by the A.O. mentioned in para-5 above. On perusal of the same, it has been observed as under - (1) The appellant has clan .....

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levied token penalty in respect of the said clandestine sale out of the books. (3) The Commissioner of Excise in his order and the A.O. have reasonably estimated, after considering various reports and studies in respect of electricity consumption required for producing MS ingots/billets, at 1026 electricity units per Metric Ton. (4) The A.O. has also pointed out that there is substantial variation in various months and in respect of various manufacturers of MS ingots/billets in electricity consu .....

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ods by the appellant and the admission of the appellant about the said fact of unaccounted transactions was not before the Hon'ble ITAT. Further, the detailed order of the Commissioner of Excise and the other facts brought on record by the A.O. in the assessment order was not before the Hon'ble ITAT, Pune while deciding the above referred cases. Further in the said cases action u/s 132 was conducted and the appellant was assessed u/s 153A of the Act and hence addition in respect of compl .....

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on the basis of electricity units consumed were not present in the said cases. (6) The contention of the appellant that the books of accounts are regularly maintained and audited cannot be accepted in view of the clandestine removal of goods and the unaccounted purchases and sales admitted by the appellant and also in view of various reasons mentioned by the A.O. in the assessment order. (7) The appellant has not maintained information in form No.G-7, which is compulsory, showing daily consumpti .....

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roduction sold before Hon'ble CESTAT. The Hon'ble Appellate Tribunal, West Zonal Bench has passed order dated 01/03/2011 on the said stay petition. In this order, the Hon'ble Appellate Tribunal has observed that the facts of the case including R.A. Castings relied on by the applicants cannot be followed as precedent as in the said case no corroborative evidence was found by the Bench. The Hon'ble Appellate Tribunal has further observed that the crucial evidentiary findings have b .....

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ssment years 2001 -02 to 2006-07. (d) Clandestine clearance for specific case admitted before Settlement Commission. Similar observations have been made by the Hon'ble Appellate Tribunal in the case of other manufacturers. The Hon'ble CESTAT has also taken support of decision of Hon'ble Madras High Court in the case of Alagappa Cement Pvt. Ltd. Vs. CEGAT & CCE, Trichy (2010-TIOL-770-HC-MAD-CX) and held that the Revenue cannot be faulted for demanding duty on the steel ingots whic .....

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7.3 In view of the facts of the case and above mentioned reasons mentioned by the A.O. and respectfully considering observations in the decision of Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench order 01/03/2011 in the case of the appellant and others, I hold that there is suppression of sale and profit in the years under appeal and hence the profit declared by the appellant cannot be accepted without making further addition on account of profit on suppressed sale. 7.4 I .....

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n the case of SRJ Peety Steels Pvt. Ltd.. 8. The Ld. Authorized Representative for the assessee at the outset pointed out that the issue raised in the present appeal is squarely covered by the ratio laid down by the Tribunal in SRJ Peety Steels Pvt. Ltd. vs. Addl.CIT in ITA Nos.123 & 124/PN/2012 relating to assessment years 2007-08 & 2008-09 and in cross-appeal filed by the Revenue in ITA Nos.435 & 436/PN/2012 relating to assessment years 2007-08 & 2008-09 vide order dated 16.01. .....

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essee further stressed that in all the years under appeal i.e. assessment years 2006-07 to 2008-09 there was no inspection by the Excise Department and there was no case of clandestine removal of material without payment of excise duty against the assessee. 9. The Ld. Special AR for the Revenue in fairness pointed out that there was no evidence however with the Excise Department or with the Income Tax Department regarding the clandestine removal of material without payment of excise duty in the .....

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OL-14-SC-CT. Further, the Ld. Special AR pointed out that the assessee had failed to furnish any evidence with regard to the huge fluctuation in electricity consumption and also no wages register was produced by the assessee. The Ld. Special AR pointed out that no doubt the Department has to show the prima-facie evidence against the assessee, but where the prima-facie evidence has been shown, the onus was on the assessee to explain the same. The Ld. Special AR in this regard placed reliance on t .....

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evidence was found against the assessee. It was pleaded by the Ld. Special AR that the Central Excise Commissioner had considered the case and came to a finding that there was a clandestine removal of goods. Reliance was placed upon the ratio laid down by the Hon ble Supreme Court in Sumati Dayal vs. CIT reported in 214 ITR 801 (SC) for the proposition of preponderance of probabilities. The Ld. Special AR submitted that though the Assessing Officer at page 2 observed that the books of account we .....

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Court as only the SLP has been dismissed. 10. In rejoinder, the Ld. Authorized Representative for the assessee pointed out that the assessment in the hands of the assessee had been re-opened on the basis of the order of the CCE, Aurangabad. Our attention was drawn to para 1 of the assessment order and also to the last page of the assessment order to point out that the addition was made on that basis. The Ld. Authorized Representative for the assessee further referred to the order of the Third M .....

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o laid down by the Hon ble Supreme Court in Melton India (supra) and at page 11 to Collector of Customs, Madras And Others (supra) and all the other judgements under the Excise Act have been considered by the Third Member of CESTAT and thereafter the additions have been deleted. The claim of the Ld. Authorized Representative for the assessee before us was that once the additions made by the CCE, Aurangabad have been deleted by the Third Member of CESTAT, no addition under the Income Tax Act is t .....

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Representative for the assessee further took us through the order of the Tribunal from para to para and page to page and pointed out that all the submissions made by the assessee have been considered by the Tribunal in SRJ Peety Steels Pvt. Ltd. (supra) and in view thereof the issue in the present case merits to be allowed. 11. In respect of grounds of appeal No.1, 2 and 11 in assessment year 2006-07, the Ld. Authorized Representative for the assessee submitted that it is agitating the reopenin .....

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rongly objected to non-issue of notice under section 143(2) after initiation of proceedings under section 148 of the Act. The Ld. Authorized Representative for the assessee placed reliance on the following decisions :- (i) Manish Prakash Gupta vs. CIT, 249 CTR 57 (Allahabad); (ii) Parikalpana Estate Development (P) Ltd. vs. CIT, 220 taxmann.com 39; (iii) Cebon India Ltd. vs. CIT, 347 ITR 583; and, (iv) Salman Khan in ITA No.508/2010 dated 06.06.2011. 12. The Ld. Special AR on the other hand poin .....

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ut that as in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. there is no order of the Settlement Commission, in the case of M/s Rishi Steel & Alloys Pvt. Ltd. and Jalna Siddhivinayak Alloys Pvt. Ltd. and in absence of any finding of the clandestine removal of goods without payment of excise duty, there is no merit in the submissions of the assessee for extrapolation of production in the hands of the assessee for any of the years. In the case of Matsyodari Steel & Alloys Pvt. Ltd. the ord .....

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essee - in the case of Omsairam Steel & Alloys Pvt. Ltd.) : ITA No.1468/PN/2012, A.Y. 2004-05 (By Revenue - in the case of Omsairam Steel & Alloys Pvt. Ltd.) : 14. The assessee is in appeal against the order of CIT(A), Aurangabad relating to assessment years 2004-05 to 2008-09. The Revenue has also filed crossappeal against the aforesaid order of the CIT(A), Aurangabad for all the above-said years. 15. The ground of appeal raised on reopening of the assessment was not pressed by the Ld. .....

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nt years 2006-07 to 2008-09. 16. The Ld. CIT-DR for the Revenue referred to the show-cause notice issued by the Excise Authority in which the documents and statements of the various persons were referred. It was pointed out by the Ld. CIT-DR that there was evidence on both the captive consumption of electricity in the case of the assessee and also clandestine removal of material without payment of excise duty. It was further pointed out by her that the Third Member of CESTAT had given relief onl .....

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ce had to be added in the hands of the assessee. It was pointed out by the Ld. DR that the Revenue was in appeal against the order of the CIT(A) in challenging the GP rate of 4% and further in allowing the manufacturing and administrative expenses on unaccounted production worked out in the hands of the assessee. The issue in ground of appeal No.3 was against the deletion of the working capital required for investments in unaccounted production. It was pointed out by the Ld. DR that in all the a .....

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. AR for the Revenue also has filed notes of his argument which are placed on record. We have also considered all the precedents and decisions relied on by both the Parties. 18. Before addressing the issue on merits, we would like to make a mention of the proceedings before the Bench of the present cases listed before us, which were made vide order 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 .....

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ongwith compilation of case laws and the matter was adjourned to 07.05.2015 for further hearing. On 07.05.2015, the case was taken up in the pre-lunch hour and was argued at length by the Special AR for the Revenue. The Counsel for the assessee strongly opposed the same on the ground that the Special AR for the Revenue had concluded his arguments 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 .....

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R for the Revenue was asked to continue his arguments by the Bench, but he referred to his adjournment letter. 19. The Counsel for the assessee started his argument. However, the Special AR for the Revenue walked off from the Court Room. The Counsel for the assessee also furnished written rejoinder in reply to the submissions filed by the Special 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 proceeding .....

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and ITA No.1638/PN/2012 were heard. All the other appeals are adjourned to 08.05.2015 as part heard. 20. On 08.05.2015, on calling of the matters, we find that the Ld. Special AR is not present in the Court room and there is no intimation about his absence in the bunch of matters, which are listed for hearing. The CIT-DR was present and was asked 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 .....

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r were present for the Department. The matter was finally heard on 14.05.2015 when Shri J.P. Bairagra present for the assessee and Shri Sunil Ganoo, Ld. Special AR, Smt. M.S. Verma, CIT-DR & Shri Rajesh Damor were present for the Department. 22. Though the assessee has raised several grounds of appeal, but the issues raised by the assesse 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 .....

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g the books of account under section 145 of the Act. d) Addition made on account of investment in purchases relating to suppression of sale. 23. 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 dut .....

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ssues raised by the different assessees before us are relatable to the addition made on account of alleged suppression of production and evasion of duty on account of erratic consumption of electricity. 25. 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 assess .....

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Nos.1, 2 and 10 in relation to re-opening of the assessment under section 147 and non-supply of reasons for re-opening under section 147 of the Act, are not pressed. Hence the same are dismissed as not pressed. 26. 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 .....

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n the present appeal was identical to the issue before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra). However, the Ld. Special AR stressed that the issue was at variance and made elaborate submissions. It may be put on record that M/s. SRJ Peety Steels Pvt. Ltd. (supra) is a case of furnace, which is engaged in the manufacture of 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 suppres .....

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tion before the Settlement Commission and offered additional production, which was accepted by the Settlement Commission in entirety. The Assessing Officer observed that there was suppression of production by the furnace companies in Jalna cluster on the ground of variance in consumption of electricity versus production. The Assessing Officer 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 .....

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6.01.2015 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 in respect of clandestine removal of material without payment of Excise duty, was also considered by the Tribunal and in the absence of any inquiry / investigation or material collected by the Assessing Officer, the Tribu .....

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sue 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 value of alleged suppressed production/sales of Ingots and Billets 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 Asse .....

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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. 29. After considering the submissions of the assessee in paras 10 to 10.5 at pages 12 to 16 and also summarizing the submissions of the Ld. Special AR in paras 11 to 11.6 at pages 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 .....

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ssment 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 the alleged suppression of the production/sales by the assessee as 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 th .....

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n 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 trading into the Ingot/Billets and TMT Bars. The Assessing Officer also referred to the petition filed by the assessee before the Central Excise and Custom Settlement Commission, Mumbai Bench, Mumbai for waiver of penalty, interes .....

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zure 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 assessee has suppressed the production as compared to the consumption 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 .....

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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 has placed his reliance only on the information received from the Central Excise Authorities and the proceeding before the Settlement Commission of Central Excise & Custom, Mumbai. The investigation was carried ou .....

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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. As noted by the Assessing Officer those brokers/sub-brokers also 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 .....

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estigation 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. Peety, Managing Director of the assessee recorded on 12-01- 2007, 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 p .....

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r 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 are not concerned with the said discussion which is in Para No. 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 electri .....

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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 melting scrap is used as an input, varies from 555 to 754 units and where Sponge Iron is used as an input, the electricity requirement varies from 815 to 1046 units. The Assessing Officer, therefore, came to the conclu .....

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. 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, Aurangabad as per his adjudication order and held that the assessee 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. .....

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t 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 the Commissioner of Central Excise and Custom, Aurangabad 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 .....

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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 laid down in R.A. Casting (supra). The relevant finding of the 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 .....

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f 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 of sale value, leaving no room for other major expenses 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 .....

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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 the actual/normal production and the recorded figures in 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 .....

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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 observed that the said Dr. N.K. Batra was no more and hence, his 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 inves .....

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ise 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 to 31 and in view of the decision of the Tribunal in the case 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 a .....

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stainable 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 the electricity consumption was 2072 to 2443 units per MT, which is higher than the average electricity consumption in the instant appeals. 20.1 The Commissioner in the orders impugned in the instant appeals w .....

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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 Letter dated 22,6.2008 from Electrotherm, (vii). Letter dated 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 a .....

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nistry 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. CCE, Chandigarh reported in 2000 (125) E.LT. 1147, 20.3 After perusal of these reports, Tribunal opined that wide variations in the consumption electricity have been reported for the manufactur .....

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ually 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 commercially not possible, (iii). generation of fictitious profits in the balance sheets by depositing huge amount of cash with the stock brokers and receiving cheques of profits against the cash s .....

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tine 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). Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters' documents, such as L.Rs, statements .....

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nnot be permitted to justify the demands .raised. Similar is the fact situation in the instant appeals, 20.5 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). Discrepancies in financial accounts in some cases and/or any proceedings under Income Tax, d). Claim of higher Auxiliary load, e). Past case settled before Settlement Commission, 20.7 So far a .....

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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 the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereaf .....

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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 In the present appeals, none of the so called other evidences referred in the impugned Orders prove clandestine clearance. The primary evidence of department is admitted .....

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ion 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 considered in R.A. Casting (supra). It has been contention of the department that the Department is not required to prove its case to its mathematical precision, by .....

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umptions 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 reason for lower consumption of electricity during the subsequent period. I also agree with the finding of the Hon'ble Vice President that in. any .....

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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-14-SC-CT, the judgment of the Hon'ble Gujarat High Court in the case of Rajmoti Industries V/s. Joint Commissioner of Income Tax, 201 .....

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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 recorded the work-in-progress in the books of accounts. I am therefore of the opinion that these cases, apart from being under Sta .....

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(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 (supra) would be squarely applicable in the facts of the instant case in all the appeals. 19.4 The common order was pass .....

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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 consumption of electricity i.e. 1026 Units for manufacturing of 1 MT of Ingots and Billets. Moreover, even if in the A.Y. 2008-09, .....

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IT(A) approving the estimated alleged suppression of the production/sales have no legal legs to stand. 31. 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 CESTAT. 32. Another objection raised by the Ld. Special AR was with reference to the order of Settlement Commission passed in the ca .....

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d 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 taken in to consideration said matter while determining the value of the alleged suppressed production and has observed as under: .....

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s 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. 33. 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 information received from the Central Excise Department as well as the adjudication order passed by the CCE, Aurangabad, which in turn, .....

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e context of admission of the Director in the course of investigation made by the DGCEI. 34. 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 CESTAT had to be applied. The relevant para of the Tribunal order reads as under:- 21. Though the Ld. Spl. AR has referred to and reli .....

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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 higher appellate authority then the entire order gets merged with the order of the higher appellate forum which in the present ca .....

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ian 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 correct. The CESTAT is a higher appellate forum under the Custom Act 1962 and Central Excise Act 1944 and we cannot sit as revision .....

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sment 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 2000-01 to 2006-07 under section 153A r.w.s 143(3) of the Act and held that in the said case of search and seizure, it was also he .....

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nd 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 17-03-2006 and accordingly the assessment orders for the A.Ys. 2000-01 to 2006-07 were framed u/s. 153A r.w.s. 143(3) of the Act .....

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nits 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 out the total production as per his formula and on the basis of the formula he worked out the alleged concealed income. There ar .....

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d. 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 same has not been disputed by the Revenue. The tax audit report also contained the unit production of each year which were accepte .....

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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 assessments and not in the assessment proceedings under s. 153A of the Act. When nothing incriminating was found in the course .....

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eady 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 where no method of accounting provided in sub-s. (1) or accounting standards as notified under sub-s. (2), have not been regular .....

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ccounts 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 electricity consumption for a month in the whole year and treated the production in that month as the correct production and then .....

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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 that there is an excess consumption of electricity resulting in suppressed production and alleging that the assessee company has .....

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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 manufacturing of mild steel ingots/billets depends on various factors and there was no justification to charge the assessee that the asses .....

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he 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 assessment year 2000-01 to 2005-06 had already been filed u/s. 139(1) of the Act, accompanies by all requisite documents and proc .....

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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 course of regular assessment and not u/s. 153A of the Act. The finding is that nothing incriminating was found in the cour .....

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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 consequence of search and seizure operation. We are not inclined to accept the argument of the Ld. Spl AR for the reason .....

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rch 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. 37. The Tribunal vide para 24 took note of the fact that in assessment years 2007-08 and 2008-09, no investigation was done by the Revenue after the search and seizure operations in the immediately preceding year, .....

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e 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 & Excise, before the Customs, Excise & Service Tax Appellate Tribunal with principal Bench at New Delhi (supra). The .....

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rved 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 made by Revenue in excessive exercise of its jurisdiction to the detriment of justice. The Customs, Excise & Ser .....

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hich, 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 Hon'ble Apex Court as reported in 2011 (269) ELT A-108 (SC). The basis for the addition in the prese .....

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lly 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 being made in the hands of the assessee on account of the alleged suppression in production and also .....

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uction, 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. The Ld. CIT(A) allowed the assessee s appeal. The Revenue challenged the order of Ld. CIT(A) be .....

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ons 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 Nos. 2,3,4 & 6 in the A.Y. 2008- 09. 38. 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 a finding that since the additions made in the hands of the assessee have been deleted, there was no m .....

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electricity used in the manufacturing of the Ingots/Billets relying on the technical opinion of Dr. Batra, IIT, Kanpur. 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 cannot be upheld. We, accordingly, allow Ground No. 7 in the A.Y. 2007-08 and Ground No. 5 in the A.Y. 2008- .....

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ing 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 appeal are of ₹ 39,20,36,546/- and the said investment required for production out of books, therefore, worke .....

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he 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 Revenue do not survive as the entire additions are deleted in both the assessment years by allowing the grounds ta .....

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However, the CCE, Aurangabad had passed an order against the assessee, but there was no case of clandestine removal of materials without payment of Excise duty against the assessee. The Ld. Special AR admitted that there was no evidence with the Excise Department or the Income-tax Department regarding clandestine removal of materials without payment of Excise duty. However, because of huge fluctuation in electricity consumption and production of ingots / billets, addition was made in the hands o .....

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before us had made the addition on account of erratic consumption of electricity based on the report of Dr. Batra. The addition in the hands of sister concern M/s. SRJ Peety Steels 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. Similarly, in the case of assessee before us, there is order of CCE, Aurangabad and of CESTAT and the Assessing Officer worked .....

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Peety Steels Pvt. Ltd. (supra), the ratio of the said decision is applicable to the facts of the present case. However, additional production relating to the declaration made before the Settlement Commission is to be added in the hands of the assessee, as admitted by the learned Authorized Representative for the assessee. 42. 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 o .....

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rized Representatives. We have by an order of even date held that there is no merit in the said Miscellaneous Application filed by the Revenue and no remedy is available to the Revenue under section 254(2) of the Act. In view thereof, the next objection of the Ld. Special AR for not relying on the order of M/s. SRJ Peety Steels Pvt. Ltd. (supra) also stands dismissed. 43. Another aspect of the issue in relation to the addition on account of suppressed production, raised before us is that where t .....

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e the Settlement Commission for part of the period, then in view of the order of the Settlement Commission and also since the assessee had admitted to additional income on such account before the Assessing Officer, the sales for the entire year should be extrapolated. 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, .....

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he hands of the assessee. All this information was available before the Assessing Officer during the course of assessment proceedings, but no other investigation or inquiry was made by the Assessing Officer while completing the assessment 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 ingots / billets. The basis for such assumption was the electricity consumption, for which the Assessing Offic .....

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ne removal of material without payment of Excise duty and also because of the admission of the assessee before the Assessing Officer, the sales for the period of 300 days should be extrapolated 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 Ass .....

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s, however, no search and seizure operation was carried out against the assessee. In order to buy peace of mind, the assessee declared the said amount vide petition before the Settlement Commission, 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 .....

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e claimant and/or the evidence found against the person offering the settlement and where the evidence has been found for part of the year, such settlement being accepted is relatable to the 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 balan .....

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e raised in the present appeal is whether any extrapolation of sales for the balance year on the basis of evidence found for the part of the year is justified or not. The answer, in our opinion, has to be in negative. 46. 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 assessmen .....

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arch and seizure operation carried out by the Income-tax Department against the assessee and also no investigation or inquiry was made by the Assessing Officer, as stated earlier. In the absence 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 t .....

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ed by the DGCEI and also the other basis i.e. erratic consumption of electricity, were before the Assessing Officer. However, the Assessing Officer adopted the second issue in the hands of the 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 .....

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the Income-tax Department pursuant to search and seizure action, which indicated clearance in sales, on the basis of which the additional income was added in the hands of the assessee. The said 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 pay .....

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come-tax proceedings. The Assessing Officer does not have any evidence for suppressed production and even after the order of Settlement Commission, the Assessing Officer had not investigated or brought any material on record establishing suppressed production and / or its sale outside the books of account. 49. 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 adm .....

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cial AR in this regard. The addition at best is to be restricted to the additional income offered by the assessee. 50. In our considered opinion, the issue in hand is to be decided on the basis of findings of the Assessing Officer and CIT(A) and the Tribunal 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 ca .....

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the addition on account of extrapolation of sales for the period of 300 days. 52. The Ld. Special AR further relied on series of decisions under the Excise authorities for the proposition that 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 authoritie .....

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ould not be the basis for estimating income in any other assessment years. 53. Further, before the Hon ble Delhi High Court in CIT Vs. Anand Kumar Deepak Kumar (supra), the issue was in relation 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 Off .....

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ys and the Assessing Officer estimated the sales for the remaining period. The addition was deleted in the hands of the assessee and was restricted to the income declared by the assessee on 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 hypothe .....

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uring the course of search operation carried out by the Central Excise authorities. Such addition based on hypothetical calculation of turnover and estimation of GP on presumption and surmises 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 A .....

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was taken by the Department during the appellate proceedings before the Tribunal and was raised for the first time in the Miscellaneous Application. However, in the interest of justice, the 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, durin .....

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have the power to re-visit the offer made by the assessee, in case, any adverse material is available against the person making the offer. It may also be noted that the Settlement accepted in 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 .....

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.M.K.E. Memon (supra) while arguing the issue No.2 i.e. estimation of suppressed production is mis-placed. The Hon ble Bombay High Court in the said decision considered the scope of assessment 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 regu .....

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e present case. 42. Even on merits, the Revenue has no case against the assessee. The reliance placed upon by the Ld. Special AR on the ratio laid down in assessee s own case relating to assessment 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 Depa .....

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ar 2007-08 and the same was the reason for reopening the assessment under section 148 of the Act. Once a particular fact was available with the Assessing Officer, which was taken note of and 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 D .....

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] is mis-placed and there is no merit in the arguments of the Ld. Special AR in this regard. 58. Another plea raised by the Ld. Special AR was that income could be estimated/ taxed on the theory 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 t .....

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ays can be made in the hands of the assessee on the basis of the evidence found for clandestine removal of material without payment of Excise duty for few days, which in turn, has been admitted 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 .....

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ional income has not been added while computing the income in the hands of the assessee for the respective years, the same may be directed to be added in the hands of the respective assessee 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 .....

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any evidence found in any preceding or succeeding years. Further, no addition can be made in the hands of the assessee, where no petition has been filed by the assessee before the Settlement Commission in any of the respective years or before the Excise authorities. In the case of Bhagyalaxmi Steel Alloys Pvt. Ltd., there is no investigation by DGCEI and hence, no addition on account of extrapolation can be made, in the absence of any evidence found against the assessee. 60. Since we have delete .....

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