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TMI Blog2015 (12) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... /2014. 3. In ITA No.855/PN/2014, the assessee has raised the following grounds of appeal:- 1. The learned CIT(Appeals) erred in confirming the action of the Assessing Officer in holding that the appellant company had suppressed its production and sales of Rs. 5,91,31,377/-. 2. The learned CIT (Appeals) further erred in confirming the alleged suppression of sales merely on the basis of the order passed by the Commissioner of Central Excise and Customs, Aurangabad for earlier years and on the basis of evasion of excise duty by steel manufacturers in Jalna cluster found by the Directorate General of Central Excise and Customs (DGCEI) for earlier years. 3. The learned CIT (Appeals) further erred in confirming alleged suppression of production and sale of Rs. 5,91,31,377/- 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 evidence of purchase of raw material or sales of finished products out of books. 4. The learned CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arely covered by the order of Tribunal in assessee's own case relating to assessment years 2006-07 to 2008-09 and by separate order of Tribunal relating to assessment year 2009-10. 7. The learned Authorized Representative for the assessee briefly summarized facts of the present case by way of written Note, which read as under:- "1. The issue in these appeals are the additio n m ad e on acco unt of alleged supp ression of production and sales on the basis of m onthly variation in con su m ption of electricity. 2. The sim ilar addition m ade in A .Y. 200 6 -07 to 2008 -09 w as deleted by the H on. Tribunal vide orde r d ated 05.08.2015 . C op y of the O rd er is enclose d herew ith. 3. The addition on the sim ilar groun d for A .Y. 2009 -10 is also deleted by the H on. Tribunal vide orde r d ated 05.08.2015 . C op y of the O rd er is enclose d herew ith. 4. For A .Y. 2006 -07 to 2008-0 9, the C o m m issioner of E xcise has passe d the order on the basis of consu m ption of the electricity and the same has been deleted by the 3rd member of the C E S TAT. 5. For A .Y. 20 09 -1 0, the C o m m issione r of E xcise has passed the O rder on the basis of consu m ption of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en carried out by the Excise authorities, wherein it was found that there was in fact higher consumption of electricity than the report of Dr. Batra. In the instant assessment year i.e. 2010-11, there is no order of Commissioner of Central Excise and Customs and there is no evidence of any clandestine removal of goods without payment of Excise duty, found against the assessee. In the entirety of the above said facts and circumstances, there is no merit in any addition in the hands of assessee, in view of the finding of Tribunal in assessee's own case, in turn following the order of Tribunal in earlier years with lead order in Bhagyalaxmi Steel Alloys Pvt. Ltd. Vs. Addl.CIT & Ors. in ITA Nos.284, 285 and 286/PN/2012 and others, relating to assessment years 2004-05 to 2008-09, vide order dated 15.07.2015, the Tribunal held as under:- "17. We have heard the rival contentions and perused the record. The Ld. AR for the assessee filed argument synopsis and Ld. Spl. 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 wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter, 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. Special AR in yesterday's hearing and his non-appearance in today's hearing, conduct of the Ld. Special AR is to be taken note of. The CIT-DR was informed in the Bench as to why costs should not be imposed on the Department for his continued defiance and for interrupting proceedings of the Bench. The hearing is to continue in the listed matters as annexed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. 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 re-opening 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-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 invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 year 2008-09, there was no admission of any clandestine removal of material without payment of Excise duty before the Settlement Commission and in the absence of any other inquiry or investigation being carried out by the Assessing Officer or any other evidence being brought on record, the Tribunal held that no addition is warranted in the hands of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have declared or shown more production of the Ingot/Billets. Subsequently, on the basis of the information received from the office of the CCE, Aurangabad vide their letter dated 29-03-2010 as well as adjudication order of CCE quantifying the value of alleged suppressed production and alleged evasion of excise duty, the Assessing Officer initiated the re-assessment proceedings for A.Y. 2007 -08 against the assessee company u/s. 147 of the Act. In reasons recorded by the Assessing Officer while issuing the notice to the assessee company u/s. 147 for A.Y. 2007 -08 the Assessing Officer gave reference of the communication and order of the CCE Aurangabad received from the Central Excise office at Aurangabad. 14. The Assessing Officer has also referred to one matter in respect of the action conducted by DGCE (Intelligence) against the few brokers and sub-brokers who were involved in the 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, interest and for getting immunity from a prosecution. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 sub-brokers are concerned the Central Excise Authority issued show cause to the assessee as well as the other manufacturers who were involved in clearing the excisable goods without payment of duty. All the manufacturers of the Ingots/Billets and TMT Bars were based in Jalna and the assessee is one of them. As per the investigation done by the Central Excise Authorities, the assessee who is manufacturing of Ingots/Billets supplied 288.500 MT. to Shri Om Rolling Mills Pvt. Ltd. which is engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 accordingly, worked the suppressed production of the A.Y. 2007-08 as under: A.Y. Suppressed Production M.T. Rate per M.T. Rs. Assessable Value of Suppressed Production Rs. 2007-08 20,751 18,892 39,20,37,546 2008-09 29,276 21,444 40,75,72,486 18. In the A.Y. 2007 -08, the Assessing Officer gave the set off of Rs. 8,44,01,504/- which was in respect of the addition made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary 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 from 1454 to 1856 units. 19.1 He relying on the Technical report of IIT, Kanpur the Ld. Commissioner observed that on calculating the production of M.S. Ingot/Billets on the basis of consumption of 1026 units (Maximum Limit) of electricity for per MT of MS Ingots produced, it is noticed that there is a huge difference in the actual/normal production and the recorded figures in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 the following reports and clarifications for his consideration- (i). 555 to 1046 units PMT as per Dr. Batra's report; (ii). 1800 units PMT as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India; (iii). 1427 units per MT as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv). 650 to 820 units/MT as per Article of the Executive Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mically 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 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' docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (supra). Thus, in my opinion the primary evidence relied in the impugned Order is itself inadmissible, and no other evidence in the instant case proves clandestine production and clearance to sustain, the demand, It is contended by Revenuethat furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moti Industries V/s. Joint Commissioner of Income Tax, 2014-TIOL-203-HC-AHM-IT, and an unreported order dtd. 28/9/2010 of Andhra Pradesh Sales Tax Tribunal (Visakhapatnam Bench) in the case of Venkata Raimana Stone Crushers Company V/s. State of Andhra Pradesh. In the case of Melton India (supra), for the norm, of power consumption, actual electricity consumption of the assessment year 2000-01 was taken as 'norm' and the same was applied in subsequent assessment years 2001-02 and 2002-03.This was followed by the Sales Tax Tribunal in the order cited by Revenue. In the case of Rajmoti Industries, facts of the case are that for the assessment year 2005-06, the Assessing Officer rejected the books of accounts of the assessee and made various additions, not only for the reason of unexplained wide fluctuations in the productivity as compared to that in A.Y. 2004 -05, but also because the assessee therein had not recorded the work-inprogress in the books of accounts. I am therefore of the opinion that these cases, apart from being under Statutes other than Central Excise Act, do not any manner help in sustaining the findings recorded in the impugned Order. In none of these cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 .........the Ld. Technical Member of the CESTAT. The Ld. Spl. AR for the Revenue also referred to the order of the Settlement Commission, Mumbai passed in the case of the assessee and other companies. It is true that the assessee approached the Settlement Commission when on the basis of investigation made by the DGCEI against some of the brokers and sub-brokers dealing in the Ingot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion' of any person-Sec. 17, Sec. 106 and Sec. 115 of the Indian Evidence Act etc. but the fact remain s 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 merged with the order of the higher appellate forum which in the present case is CESTAT. Moreover, investigation by DGCEI and proceeding before the Settlement Commission has also been considered by the CCE, Aurangabad in his adjudication order. The said order was subject matter before the CESTAT and said order has be en set aside. Hence, we do not consider it necessary to deal with decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "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 Officer took 1,600 Units as consumption per MT which was a lowest as shown by the assessee. The Assessing Officer, accordingly, worked out the alleged suppressed production and made the addition in all the years while completing the assessments. In sum and substance the Assessing Officer had simply taken the lowest electricity consumption for a month in a whole year and accordingly worked out the total production as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-06 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 by the assessee, the AO may make an assessment in the manner provided in s. 144. Sec. 145 gives the power to AO to reject the books in certain circumstances after considering the following aspects: (a) Whether the assessee has regularly employed a method of accounting? (b) Whether the annual profits can be properly deduced from the method employed? (c) Whether the accounts maintained are correct and complete? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld 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: "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 proceedings. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation 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 production / sales. The Tribunal while deciding the appeal in M/s. SRJ Peety Steels Pvt. Ltd, in turn, relying on the ratio laid down by coordinate Bench of the Tribunal, deleted the addition made on account of alleged suppression of production / sales in entirety. The relevant observations of the Tribunal are as under:- "25. In the case of ACIT Vs. A.K. Alloys (P) Ltd. (supra) in which the additions were made by the A.O. for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 & 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 alleged investment in purchase of raw material. In view thereof, we hold that no addition on account of profit on the sale of unaccounted production or on account of unexplained investment merits to be made in the hands of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in the A.Y. 2008 -09 become infructuous. 29. In Ground No. 10, the assessee has raised the objection for making the addition of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and the Assessing Officer worked out the addition on the basis of erratic consumption of electricity as determined by CCE, Aurangabad. Following the same line of reasoning as in the order of M/s. SRJ Peety Steels Pvt. Ltd. (supra), we find no merit in the addition made in the hands of the assessee on surmises. Both the learned Authorized Representative for the assessee and Ld. Special AR has raised identical arguments as in M/s. SRJ Peety Steels P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val 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 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 Officer placed reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 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 factum of the assessee filing the petition before the Settlement Commission, was before the Assessing Officer, even additional income on such offer of settlement was offered by the assessee before the Assessing Officer, however, no further inquiry, investigation or action was taken by Assessing Officer in this regard. In the absence of the same, the issue raised in the present appeal is whether any extrapolation of sales for the balance year on the basis of ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 Excise Department pursuant to which, order levying additional Excise duty was passed by the Excise Commissioner. However, the Tribunal cancelled the Excise demand on the ground that there was no corroborative evidence of clandestine removal of material without payment of Excise duty was found from the possession of the assessee by the Excise authorities. 48. Following the same analogy of reasoning, where the evidence of clandestine removal of material without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 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 by the Bangalore Bench of Tribunal in Anjaneya Brick Works vs. CIT (supra), wherein it has been held that mere existence of evidence of concealment in the next assessment year could 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised 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 the issue of extrapolation of suppressed sales on account of settlement petition made by the assessee. Admittedly, during the course of search and seizure operation on certain brokers, evidences of clandestine removal of material without payment of Excise duty, was found against the assessee. However, no search and seizure operation was carried out against the assessee, but the assessee claims that in order to buy peace of mind, it had declared the said amount by way of petition befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Assessing Officer for assessment year 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 inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the assessee. We have heard bunch of appeals and in some years, there is no admission of clandestine removal of material without payment of Excise duty and in those years in the absence of any evidence and / or any investigation or inquiry made by the Assessing Officer and where the Assessing Officer has failed to collect additional evidence, no addition can be made in the hands of the assessee, by way of extrapolation of sales for 300 days on account of any evidence found in any preceding or succeeding years. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Excise duty, in turn relying on the investigation conducted against the furnace companies in the earlier years. The CCE, Aurangabad had made the addition in the hands of the assessee on the basis of the study conducted by Dr.N.K. Batra, Professor, IIT, Kanpur and as per his study report for manufacturing one MT of MS ingot, electricity should be consumed from 555 units to 1046 units. However, the assessee's were showing more consumption of electricity for production per MT. The CCE, Aurangabad raised the demands by confirming the order of adjudicating authority. However, in the cas e of different assessee's trials / experiments were conducted in the factory of most of the appellants and on such experiments / trials, the consumption of electricity was found to be more than 1026 units per MT. In view thereof, the facts of the present case are at variance to the facts before the Tribunal in assessment 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 prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,06,54,292/- & equal penalty Specific verification of electricity consumption on 22.2.2009 showed electricity consumption of 1253 units per MT using mix input of scrap and sponge Iron. 10. E/86349/2014 Om Sairam Steel & Alloys Pvt. Ltd. April 2008 to March 2009 Rs.3,90,21,947/- & equal penalty Specific verification of electricity consumption was done on 25.3.2009; however copy thereof was not give to appellant. 11. E/86331/2014 Saptashrungi Alloys (P) Ltd. April 2008 to March 2009 Rs.1,61,53,031/- & equal penalty No verification of electricity consumption was done during the relevant period. 10. The Division Bench of CESTAT had set -aside the order of the CCE, Aurangabad on account of additions made in the hands of the assessee because of erratic consumption of electricity. The relevant finding of the order of CESTAT reads as under : - "In the impugned order the adjudicating authority has not considered the specific verification conducted by the departmental officers, who ascertained the actual consumption of electricity to manufacture of 1MT of MS Ingots is more than 1026 units for per MT as alleged in the SCN's, when the appellants have specifically tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roper whereas during the impugned period, the physical verification was conducted and the electricity consumption for manufacture of 1MT of MS Ingots was found to be more than 1026 units of electricity. 8. In these circumstances, we set aside the impugned orders and allow the appeals with consequential relief and stay applications are also disposed of in the above terms." 11. The addition on account of suppressed production made in the hands of the assessee was deleted by the Division Bench of CESTAT vide order dated 22.10.2014, wherein on specific inspection / experiments by the authorities, conducted to ascertain the electricity consumption to manufacture one MT found that the consumption of electricity was more than 1026 units per MT. The case of the Excise Department was that 1026 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 ca me to a finding that in view of the additional evidences of specific verification / trial conducted by the Revenue to ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee on account of suppressed production consequent to erratic consumption of electricity. 15. The appeals of the Revenue against the adoption of GP rate of 4% and the deletion of working capital required for investment in suppressed production is also deleted by us by following order in the case of assessee and others in earlier years and following the same parity of reasoning, we dismiss the grounds of appeal raised by the Revenue." 12. In the totality of the above said facts and circumstances and in view of the issue being identical to the issue before the Tribunal in set of furnace cases, we delete the addition made in the hands of assessee on account of suppressed production. The grounds of appeal raised by the Revenue also do not survive, in view of the earlier order of Tribunal. 13. The facts and issues in ITA Nos. 660/PN/2014 & 970/PN/2014, ITA Nos.790/PN/2014 & 969/PN/2014 and ITA Nos. 796/PN/2014 & 966/PN/2014 are identical to the facts and issues in ITA No s.855/PN/2014 & 967/PN/2014 and our decision in ITA No s.855/PN/2014 & 967/PN/2014 shall apply mutatis mutandis to ITA Nos. 660/PN/2014 & 970/PN/2014, ITA Nos.790/PN/2014 & 969/PN/2014 and ITA Nos.796/PN/2014 & 966 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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