9911796707
TMI Blog2015 (12) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(2) of the Act was issued to the assessee. Further, the case was referred seeking directions under section 144A of the Act and in response to which, the JCIT issued specific written directions vide letter dated 14.12.2011. The Assessing Officer received information from the office of the Commissioner of Central Excise and Customs, Aurangabad vide letter dated 29.03.2010 that the assessee had indulged in suppression of production and clandestine removal of finished products without payment of Excise duty. The adjudication order of CCE, Aurangabad quantifying the value of suppressed production was also available with the Assessing Officer. In view thereof, the assessee was show caused as to why the amount of income escaping assessment should not be added in the hands of the assessee. The Assessing Officer considered the manufacturing process of the assessee in detail and noted that the electricity was one of the major cost input in the manufacture of ingots / billets and also accounts for major share of expenses. After going through the information furnished by the assessee i.e. the figures of input and output ratio and month-wise electricity consumption / productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consumption required for the quantum of goods produced, which is abnormal. The A.O. has also noted substantial variation in yield and shortages during various months in the years under appeal. (5) The decision in the case of ACIT Vs. SRJ Peety Steels Pvt. Ltd./Shree Om Rolling Mills Pvt. Ltd. (2011) 137 TTJ 627 (Pune) has been relied on by the appellant. The facts before the Hon'ble ITAT while deciding the said cases were "Afferent to some extent. In the said cases, clandestine removal of goods 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned auxiliary load was only 7. 8% of the total sanctioned load but claimed to be 25% by appellant in statement; (c) Commissioner of Income Tax (Appeals)' confirmed net addition of Income of Rs. 23.5 lakhs on account of suppressed production of ingots for assessment years 2001 -02 to 2006-07. (d) Clandestine clearance for specific case admitted before Settlement Commission. 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 which could have been manufactured by consuming excess quantity of electricity. The Hon'ble Appellate Tribunal has held in concluding para-22 that "none of the appellants except M/s Shree Steel Castings has made out the prima-facie case on merits. They cannot raise a valid plea of limitation either. Suppression of relevant facts is inbuilt in clandestine production of Excisable goods and its removal without payment of duty, and the same, prima-facie, stands established in these cases. The decisions relied on by the appellant in support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above grounds, the learned CIT(A) erred in confirming addition of Rs. 58,12,720/- under the head Gross Profit on suppressed sales and the same addition may please be deleted. 7. Assessee denies its liability of Interest u/s. 234 ABC of Income Tax Act and the same may please be deleted. 8. Your Appellant craves leave to add, alter, amend, modify and/or withdraw any of the ground/s during the course of hearing as occasion may demand. 9. Appellant prays for just and equitable relief." 5. The Ld. Counsel for the assessee at the outset submitted that the issue stands squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. and Vice-versa vide ITA Nos.1292/PN/2012 & 1478/PN/2012 for A.Y. 2009-10 and other connected appeals vide consolidated order dated 15-07-2015. Further, the Coordinate Bench of the Tribunal in the case of Mahavir Steel Re-rolling Mills Vs. ACIT and Vice-versa vide ITA Nos. 1072 to 1076/PN/2012 and ITA Nos. 1446 to 1450/PN/2012 order dated 05-03-2015 has also decided the issue in favour of the assessee. Since the addition sustained by the CIT(A) has been deleted in all these cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment years 2006- 07 and 2007-08 wherein the case of the Excise Authority was that the consumption of electricity was not in accordance with the report of Dr. Batra. However, the said factual aspect has been overturned by the investigation carried out by the Excise Authority at the premises of the assessee on different dates as mentioned hereinabove and the findings of the Authority were as under :- Sr. Sr. No. Appeal No. Manufacturer Appellant Period of dispute Duty amount and penalty Details of experiment 1. E/86268/2014 SRJ Peety Steel Pvt. Ltd. January 2008 to March 2009 Rs.12,41,64,392 & equal penalty Specific verification of electricity consumption on 4.3.2009 showed electricity consumption of 1496 units per MT using mix input of scrap and sponge Iron. 2. E/86151/2014 Bhagyalaxmi Steel Alloys Pvt. Ltd. April 2008 to March 2009 Rs.5,91,23,193 & equal penalty Specific verification of electricity consumption on 25.2.2009 showed electricity consumption of 1503.5 units per MT using mix input of scrap and sponge Iron. 3. E/86275/2014 Mahaveer Steel Re- Rolling Mills April 2008 - March 2009 Rs.79,74,603/- & equal penalty Specific verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The relevant finding of the order of CESTAT reads as under :- "In the impugned order the adjudicating authority has not considered the specific verification conducted by the departmental officers, who ascertained the actual consumption of electricity to manufacture of 1MT of MS Ingots is more than 1026 units for per MT as alleged in the SCN's, when the appellants have specifically taken this defense. In fact, the specific inspection/experiment which has been conducted to ascertain the electricity consumption to manufacture 1MT of MS Ingots is vital evidence, which has not been considered by the adjudicating authority. If the physical verification report conducted by the Revenue would have been taken into consideration by the adjudicating authority, then the adjudicating authority was not required to consider the other evidences. Moreover, all the evidences relied upon by the Ld. Adjudicating authority are theoretical and have been considered by this Tribunal in appellant's own cases for the earlier period; wherein this Tribunal relied on the decision of R.A. Casting Pvt. Ltd. vs. CCE, Meerut reported in 2009 (273) ELT 674 and held that on the basis of study report of Dr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26 units per MT were required to manufacture one MT of MS ingots / billets and the assessee was issued show cause notice in this regard. However, since the physical verification conducted by the Excise Department reflected higher consumption of electricity, the Tribunal came to a finding that in view of the additional evidences of specific verification / trial conducted by the Revenue to ascertain the actual electricity consumption, which worked out to more than 1026 units per MT, there was no basis for making any addition in the hands of the assessee. The Tribunal also referred to its earlier order in the case of different assessee's, where similar addition was deleted. 12. The Tribunal in bunch of appeals with lead order in ITA Nos.284 to 286/PN/2012 relating to assessment years 2006-07 to 2008-09 in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. vs. Addl.CIT and cross appeal filed by the Revenue in ITA Nos.437 to 439/PN/2012 relating to assessment years 2006-07 to 2008-09 along with other connected appeals while deciding the issue of addition on account of suppressed production because of erratic consumption of electricity, held as under :- "17. We have heard the rival c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 proceedings, on the other hand, Smt. M.S. Verma, Ld. CIT-DR and Shri Rajesh Damor, Ld. Addl.CIT-DR were present in the Court. Thereafter, other cases which were to be argued by the Ld. CIT-DR and Ld. Addl.CIT-DR were taken up for hearing and the matters in ITA Nos.125, 127, 430 & 431/PN/2012 along with ITA No.1525/PN/2012, ITA No.1476/PN/2012, ITA 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.1558/PN/2012, ITA No.1629/PN/2012, ITA No.1516/PN/2012 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. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n submissions, Notes filed by them and the compilation of case laws relied upon by the respective Authorized Representatives. It may be put on record that the issues 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 assessment, non-supply of reasons for re-opening under section 147 and also non-service of notice under section 143(2) after recording of reasons under section 147 of the Act. However, in some cases, the assessment has been completed under section 143(3) of the Act and there are no issues against reopening of the assessment. The Ld. Authorized Representative for the assessee in the present bunch of appeals relating to Bhagyalaxmi Steel Alloys Pvt. Ltd. at the outset stated that the grounds of appeal Nos.1, 2 and 10 in relation to re-openi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Steels Pvt. Ltd. and others and relying on the addition made in the hands of M/s. SRJ Peety Steels Pvt. Ltd. (supra), in turn, on the basis of the order of CCE, Aurangabad, made additions in the hands of present set of assesses before us. 28. The Tribunal had elaborately considered all the aspects of addition in the hands of the furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd., on the basis of erratic 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 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 Tribunal held that there was no merit in any addition in the hands of the assessee in assessment year 2007-08. Further, in assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the office of the CCE, Aurangabad vide their letter dated 29-03-2010 as well as adjudication order of CCE quantifying the value of alleged suppressed production and alleged evasion of excise duty, the Assessing Officer initiated the reassessment proceedings for A.Y. 2007-08 against 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) again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the names of many companies who are in the manufacturing of Ingot/Billets and TMT Bars. As per the statement given before the Central Excise Authorities by those brokers as well as sub-brokers namely Shri Umesh Modi, Mumbai, Shri Anil D Lingade, 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. 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 Rs. 100/- per MT. The Assessing Officer has discussed the information gathered by the DGCEI, Zonal Unit, Mumbai in Para Nos. 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 & 2.7 of the assessment order. So far as action against the brokers and subbrokers are concerned the Central Excise Authority issued show cause to the assessee as well as the other manufacturers who w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, 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 conclusion that the assessment framed by the Commissioner of Central Excise and Custom, Aurangabad in respect of the alleged suppression of production after considering the electricity consumption declared by the assessee and the production rate of units of electricity per metric ton adopted by the CCE, Aurangabad are very much reasonable, fair and 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, Aurangabad as per his adjudication order and held that the assessee has suppressed the production and accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Excise and Custom and Service Tax, Aurangabad 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 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 and has observed that as per the said "Technical Opinion Report" the consumption of electricity for manufacture of one metric ton of steel ingots varies between 555 to 1026 electricity units depending upon the thermal efficiency, electricity efficiency and nature of mix of raw material. As observed by the Ld. CCE in the case of the assessee as per their electricity bills, the average consumption of electricity for manufacture of 1 MT of MS Ingots varies fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal 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 and in view of the Hon'ble Supreme Court's judgment in the case of Triveni Rubber & Plastics (supra) and this Tribunal's decision in the case of Rattan Steels Works (supra), Nagpal Steel (supra) and Hans Castings Pvt. Ltd. (supra), the impugned order are to be upheld and all the appeals dismissed. 19.3 The Ld. Third Member of the 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 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 was having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, 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 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 so deposited, (iv). Claim of High Auxiliary load of about 35%, However the Tribunal in categorical terms held that no demand can be upheld based on electricity consumption as such because the clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to- (i). Receipt of raw material 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 referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. 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 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 admittedly excess electricity consumption based on benchmark adopted allegedly-'from report of Dr. Batra, which was already held to be arbitrary by Hon'ble Tribunal in RA casting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 2014-TIOL-203-HCAHM-IT, and an unreported order dtd. 28/9/2010 of Andhra Pradesh Sales Tax Tribunal (Visakhapatnam Bench) in the case of Venkata Raimana Stone Crushers Company V/s. State of Andhra Pradesh. In the case of Melton India (supra), for the norm, of power consumption, actual electricity consumption of the assessment year 2000-01 was taken as 'norm' and the same was applied in subsequent assessment years 2001-02 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said order, it is seen that entire order is copy of order passed for the A.Y. 2007-08. As vary basis of the assessment order i.e. the order of the Commissioner of Central Excise (CCE), Aurangabad has been set aside and cancelled by the CESTAT, in our opinion the 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." 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 case of set of companies. The Tribunal noted that the CCE, Aurangabad in its order had taken into consideration the said material while determining the value of alleged suppressed production and had made observations vide para 19. The relevant observations of the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) were as under:- "20.1 .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 relied on the different judgments of the Hon'ble Supreme Court more particularly on the binding nature of the 'admission' of any person-Sec. 17, Sec. 106 and Sec. 115 of the Indian Evidence Act etc. but the fact remains that in the case of the present assessee no independent investigation is made by the Revenue but the entire assessments are framed on the basis of the information received from the Central Excise Department as well 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 higher appellate authority then the entire order gets mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment before the Hon'ble Bombay High Court and the Revenue's appeal 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 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. The Assessing Officer rejected the books of account of the assessee for the A.Ys. 2000-01 to 2006-07 and one of the reasons was that alleged suppressed production which was computed on the basis of consumption of the electricity. The Assessing Officer devised a formula on the basis of electricity consumption and the same was applied uniformly in order to work out certain alleged suppressed production and resultant concealed income in the case of the assessee. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of search relating to any of these assessment years, the assessments for such years could not be disturbed on this ground. 33. In view of above factual and legal position we find that the additions in question in asst. yrs. 2000-01 to 2005-06 are not corresponding to the seized material found during the course of search. The relevant IT returns for said years were filed prior to the search in normal course disclosing the 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 where no method of accounting provided in sub-s. (1) or accounting standards as notified under sub-s. (2), have not been regularly followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 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 manufacturing of mild steel ingots/billets depends on various factors and there was no justification to charge the assessee that the assessee has suppressed the production and indulged into unaccounted production. The order of the Tribunal was challenged by the Department before the Hon'ble High Court of Bombay Bench at Aurangabad by filing the appeal u/s. 260A of the Income-tax Act, being Tax Appeal No. 30 of 2011. The Revenue's appeal was dismissed vide common Judgment dated 10-02-2014, in the case of the assessee and other companies by the Hon'ble High Court and there are categorical observations of their Lordships on the estimation of the production based on the consumption of the electricity which are as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. Spl AR for the reason that even if the assessments are framed in consequence of the search and seizure operation but the important fact remains that nothing was found during the course of search except few loose sheets found in the residence of the Director to make out a case against the assessee for alleged suppression of production or sales. It is also to be taken note of the fact that in A.Ys. 2007-08 and 2008-09, no investigation has been done by the 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." 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, wherein during the course of search, certain loose sheets were found in the residence of the Director to make out case against the assessee for alleged suppression of prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, 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 present case was the investigation report of the Central Excise Department and the suppression in production calculated by the said Investigating Team. The Assessing Officer had completely based its addition on the aforesaid report of the Investigating Team and had also show caused the assessee to establish its point in view of the said report of the Investigating Team. The Customs, Excise & Service Tax Appellate Tribunal (supra) in the appeal filed by the 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 & S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the Assessing Officer in both the assessment years. We find that the only reason for rejection of the books of account was the alleged suppression of production/sales and which was determined on the basis of the adjudication order passed by the CCE, 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, 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. 2008-09. 28. The next issue is the percentage of the gross profit estimated by the Ld. CIT(A) on the alleged suppressed sales and said issue arises from Ground No. 9 in the A.Y. 2007-08 and Ground No. 7 in the A.Y. 2008-09 are on. As the assessee has succeeded on the main grounds as entire additions made by the Assessing Officer are deleted, the Ground No. 9 in the A.Y. 2007-08 and Ground No. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment 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 of the assessee. However, in Omsairam Steel & Alloys Pvt. Ltd., it was fairly admitted by the learned Authorized Representative for the assessee that there was investigation by the DGCEI and in assessment years 2006-07 and 2007-08, the assessee had filed the petition before the Settlement Commission, which was accepted. However, in assessment years 2005-06 and 2008-09, there was no such petition filed before the Settlement Commission. 41. We find that the Assessing Officer in the present case 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the Revenue before us was that where the assessee had admitted to clandestine removal of material without payment of Excise duty before 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, Managing Director of M/s. SRJ Peety Steels Pvt. Ltd. admitted to the said clandestine removal of material without payment of Excise duty and approached the Settlement Commission for payment of Excise duty on the said amount. The Settlement Commission accepted the petition of the assessee, but also levied penalty. The assessee before the Assessing Officer admitted that the additional income in respect of the said clandestine removal of material without payment of Excise duty, is to be added in the hands of the assessee. All this information was avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 making the offer, then the figures of settlement can be increased. However, in the case of the assessee, offer of the assessee has been accepted for the financial year and the same cannot be said to be restricted to the number of days for which it was offered. The basis of any settlement is the offer made by the 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 balance period, in the absence of any evidence found against the assessee for the balance period. 45. Another aspect of the issue is that though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 AR since no investigation or inquiry was carried out by the Assessing Officer and merely on the basis of petition filed before the Settlement Commission, which in turn has been accepted, no further addition can be made in the hands of the assessee in the absence of any incriminating material found for the balance period. 47. Reliance in this regard is placed upon the ratio laid down in Ravi Foods Pvt. Ltd. Vs. CCE, Hyderabad (supra). In the facts of the said case, certain documents were found by 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 Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before the Settlement Commission, but had adopted the erratic consumption of electricity as basis to make the addition, we have adjudicated the alternate plea raised by the Ld. Special AR in this regard and dismissed the same. 51. Now, we come to the reliance placed upon by both the Authorized Representatives in support of individual proposition visà-vis 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 authorities is limited to the amounts surrendered vide the said settlement and no inference could be drawn against the assessee for extrapolating the same for full year and for the balance year and in other years, other than the year in which the said settlement was offered. In this regard, we find support from the ratio laid down b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable. 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. 56. The Ld. Special AR during the course of arguments before the Tribunal in Miscellaneous Application filed in M/s. SRJ Peety Steels Pvt. Ltd. vide MA No.17/PN/2015 had raised the issue of extrapolation of sales for 300 days in view of the assessee having admitted to clandestine removal of material without payment of Excise duty and thereafter, filing a petition before the Settlement Commission. 57. The plea of the Revenue raised in the Miscellaneous Application was rejected as no such plea 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -B, the Assessing Officer cannot estimate the undisclosed income on an arbitrary basis. We find no merit in the plea raised by the Ld. Special AR in this regard as the facts of the said case are different from the facts of the 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 Department has been made before completing assessment proceedings against the assessee. Another aspect of the issue is that the petition before the Settlement Commission has been made by the assessee in assessment year 2007-08 only and no such petition for clandestine removal of material without payment of Excise duty has been made for assessment year 2008-09. The assessee had offered the additional income on account of such clandestine removal of goods before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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 the Excise authorities, in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation was made by DGCEI. In the absence of any information gathered by the Excise Authority of clandestine removal of goods without payment of excise duty, and in the absence of the assessee declaring any additional income in its hand, no such addition is warranted in the hands of the assessee. However, in case any of the assessee have admitted to clandestine removal of goods without payment of excise duty, then additional income relatable to such turnover is to be added in the hands of the said assessee. We have already dealt with this issue in detail by order of even date in the bunch of appeals as referred earlier. 14. Following the same parity of reasoning as per our order of even date in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. & Others relating to assessment years 2006-07 to 2008-09 and in view of the physical verification carried out by the authorities as referred to by us in the paras hereinabove and the consequent order of Division Bench of CESTAT in the case of present assessee's before us relating to assessment year 2009-10, we find no merit in the orders of authorities below and we reverse the order of CIT(A). We find no merit in the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se be held that notice u/s 148 and consequently assessment order passed u/s. 143(3) RWS 147 is bad in law and the same may please be quashed. 3. Without prejudice to above grounds, directions issued u/s. 144A by Joint Commissioner of Income Tax Range 1 are bad in law as no opportunity of being heard was given to assessee before issuing directions and entire assessment order based on such directions may please be quashed. 4. Without prejudice to above grounds, the lower authorities were not justified in rejecting books of accounts and it is prayed that profit arrived from audited books of accounts may please be accepted. 5. Without prejudice to above grounds, the lower authorities were not justified in holding that there is suppressed production and they have erred in estimating suppressed production based on electricity units consumption basis. 6. The learned CIT (A) has erred in confirming Assessing Officer's estimate or alleged suppressed production without Assessing Officer granting the copies material relied by Assessing Officer and opportunity to examine the parties. 7. Without prejudice to above grounds, the learned CIT(A) erred in confirming addition of Rs. 72, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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