TMI Blog2015 (1) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. when there is a difference of the opinion between the Ld. Members of the CESTAT then the matter is referred to Ld. Third Member and after the issue or point/s of difference referred to Ld. Third Member has been decided then the majority order is passed on the basis of majority opinion which is a legal order and minority order is not a legal order in the eye of law. In the case of the assessee company entire matter of alleged suppression of production was referred to the Ld. Third Member of the CESTAT and not only any specific point and this position is clear from the questions or points referred to Ld. Third Member. We, therefore, reject the argument of the Ld. Spl. AR for the Revenue that we have to also consider the minority order of the Ld. Technical Member of the CESTAT Investigation by DGCEI and proceeding before the Settlement Commission has also been considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings initiated by the Assessing Officer u/s. 147 of the Income-tax Act by taking the Ground Nos. 1 and 2. The assessee has also challenged the validity of assessment order by taking plea that there was no compliance of sec. 143(2) and hence, assessment order is bad in law. At the beginning of the hearing Ld. AR for the assessee submitted that as per the instructions of the assessee Ground Nos. 1 and 2 as well as Ground No. 11 are not pressed. As the Ground Nos. 1, 2 and 11 are not pressed, the same are dismissed as not pressed. 3. The common issue in both the appeals are the addition made by the Assessing Officer for alleged suppression of production/sales of ₹ 39,20,36,546/- and ₹ 40,75,72,486/- in the A.Ys. 2007-08 and 2008-09 respectively. So far as the A.Y. 2007-08 is concerned the above issue arises from Ground Nos. 3 to 6, 8 and in A.Y. 2008-09 the said issue arises from Ground Nos. 2, 3, 4 and 6. 4. The facts pertain to the above issue are as under. The assessee company is engaged in the manufacturing of MS Ingots/Billets. So far as A.Y. 2007-08 is concerned, the regular assessment of the assessee was completed u/s. 143(3) of the Act vide assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer has also discussed the modus operandi adopted by Shri Faruk Shaikh in Para No. 2.5 of the assessment order but that is also based on the investigation carried out by the DGCEI. The Assessing Officer also referred to the investigation made by DGCEI and observed that the manufacturers of the TMT bars were confronted and the manufacturers admitted that they had supplied TMT bars to the brokers without paying excise duty and they confirmed the modus operandi as narrated by Shri Faruk Shaikh and Shri Pawan Garg. The Assessing Officer has noted that consequent to admission by the suppliers of unaccounted TMT bars, they also admitted that they had manufactured these TMT bars from raw material viz., Ingots and Billets from unaccounted receipt of raw material. As observed by the Assessing Officer the suppliers identified the Ingots/Billets from alleged unaccounted receipts of raw material. The Assessing Officer has given the names of the parties in Para No. 2.7 of the assessment order against whom the investigation was carried out by the Central Excise Authorities and the name of the assessee appears at Sl. No. 10 who had allegedly supplied Ingots/Billets to its sister conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee before the DGCEI, Mumbai as well as CCESC, Aurangabad. 6. In the Para No. 4 of the assessment order, the Assessing Officer has discussed the process of manufacturing of the TMT bars as well Ingots and Billets. Finally the Assessing Officer proceeded to examine the electricity consumption declared by the assessee in the manufacturing of Ingots and Billets and we would like to reproduce of the same in the words of the Assessing Officer:- 4.2 Electricity is a major cost input in process of manufacture of ingots/billets and accounts for major share of expenses. Manufacturers are sanctioned load capacity on the basis of unit capacity. Unit capacity includes usage for furnace load and auxiliary load. Major load factor is on account of furnace. The Central Excise Department, Aurangabad has made a detailed study on electricity units consumed per metric tonne of production and made it the basis of their conclusion that the assessee has indulged in suppression of production. All mini steel plants have express feeders of 33KVA line which provides uninterrupted non-fluctuating power to the plants. Further consistency in power supply is maintained by use of power control panels. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the SCN issued by the Central Excise Department to the assessee. This aspect is important because all manufacturers in Jalna show wide fluctuation in consumption of electricity for every metric tonne of mild steel produced. 4.3 During the course of assessment proceedings,, the assessee was specifically asked as to why the consumption of electricity for per metric ton should not be adopted for the purpose of calculation of suppressed production as per the Commissioner of Central Excise and Customs, Aurangabad's SCN for the reason that, it is based on the technical analysis with expert opinion, detailed reasoning and data collected. In response to the same by and large the assessee has reiterated the stand taken before the Commissioner of Central Excise, Aurangabad which is not on the sound footings and the same had been rejected with elaborate reasoning and lucid justification. In view of the above as also the detailed comparative analysis of data prepared from the assessee's books of accounts, peer analysis and details furnished, it is apparent that, the rate of units of electricity per metric ton adopted by the honourable Commissioner of Central Excise and Customs, Aur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additions made by the Assessing Officer which were based on the statistic of electricity consumption. The operative part of the finding of the Ld. CIT(A) for confirming the additions in both the assessment years are 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 clandestinely removed MS ingots/billets and has evaded Excise Duty and has not accounted for the said sale of MS ingots/billets as is evident from the investigation and enquiries made by Director General of Central Excise Intelligence (DGCEI). (2) The appellant has also admitted the said clandestine removal of goods in the statement recorded in investigation by DGCEI and also before the Settlement Commission of Customs and Excise Department and has paid Excise Duty and the Settlement Commission has 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent and ratio laid down by the said decisions in the case of ACIT vs. SRJ Peety Steels Pvt. Ltd./Shree Om Rolling Mills Pvt. Ltd. (2011) 137 TTJ 627 (Pune) in respect of gross profit addition can only be applied with some alteration considering the fact of the case of the appellant. (9) The various manufacturers of MS ingots/billets have filed petition for stay of recovery of Excise on alleged undisclosed production 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 ttroborative evidence was found by the Bench. The Hon'ble Appellate Tribunal has further observed that the crucial evidentiary findings have been noted in the cases of the applicants including the appellant. The said findings in the case of-the appellant are as under:- (a) Cost of electricity and raw material shown to be 125% of selling price of ingots. (b) Sanctioned auxiliary load was only 7. 8% of the total sanction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppressed 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 Assessing Officer to adopt gross profit @ 4% on the value of alleged suppressed production/sales and accordingly, partly sustained the additions. Now, we first decide the core issue in this case:- (i) On the facts and circumstances of this case whether the Assessing Officer was justified in making the addition of ₹ 39,20,36,546/- in the A.Y. 2007-08 and ₹ 40,75,72,486/- in the A.Y. 2008-09 on alleged suppression of production/sales and; (ii) Whether the Assessing Officer was justified in holding that the books of account of the assessee does not give the correct picture of the state of affairs and hence, those books of account needs to be rejected. 10. The Ld. AR for the assessee opened his argument by submitting that both the assessments are based on the investigation made by the Central Excise Authorities as well as the adjudication order passed by the CCE, Aurangabad. He submits that there was a search and seizer action against the assessee u/s. 132(1) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt framed in consequence of the search and seizure action under sec. 132(1) is reported as 137 TTJ Pune 627 and the copy of the same is placed at Page No. 1 of P/B-III. He submits that the decision of the Tribunal has reached the finality as the Hon'ble jurisdictional High Court confirmed the order of this Tribunal and dismissed the appeas filed by the Revenue. 10.1 He submits that the assessee's case is identical on facts with the case of A.K. Alloys 17 ITR 424 (Chnd)(Trib.) and addition cannot be made mere by based on the technical opinion on the electricity consumption for production of Ingots/Billets per MT. Ld. AR placed his reliance on the following decisions:- i) ACIT vs. A.K. Alloys Pvt. Ltd. 17 ITR 424 (Chnd)(Trib.) ii) ACIT vs. Arora Alloys Ltd. 27 taxmann.com 140 iii) Vishal Paper Industries vs. JCIT 32 taxmann.com 247 iv) ACIT vs. Khambhatta Family Trust 62 TTJ 685 10.2 Referring to the petition filed by the assessee before the Settlement Commission (The Custom and Central Excise), he submits that some third party investigation was carried out by the Central Excise Department and as per the alleged admissions and statements of the brokers/sub-b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee even during the course of intensive search carried out by the DI (Inv.) of the Revenue then how subsequently merely on the basis of some technical opinion report by one DR. N.K. Batra, books of accounts can be rejected. He placed his reliance on the following decisions:- i. Raj Kumar Chawla vs. ITO 94 ITD 1 ii. Kuber Tobacco Products Pvt. Ltd. vs. DCIT 117 ITD 273 iii. Ashok B. Bafna vs. DCIT 27 taxmann.com 126 iv. ITO vs. Aligarh Auto Centre 58 SOT 90 v. Sanjeev R. Arora vs. ACIT 29 taxmann.com 287 vi. M/s. Bedrock Ltd. vs. DCIT dated 25-07-2012 vii. Amiti Software Technologies Pvt. Ltd. vs. ITO dated 07-02-2014 viii. ADIT (E) vs. Vodithala Education Society 39 taxmann.com 100 10.5 He pleaded for allowing the grounds taken by the assessee and deleting the entire addition made by the Assessing Officer and on principles confirmed by the Ld. CIT(A). 11. The Ld. Spl. AR for the Revenue opened his argument by submitting that there is an evidence in possession of the Assessing Officer in respect of the suppression of the production and clandestine removal of goods by the assessee and there is no merits in the contention of the assessee company that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the assessee on the principle of estoppel as per Section 115 of the Indian Evidence Act, 1872 is also binding on the assessee company. 11.1 Ld. Spl. AR for the Revenue submits that the assessee company approached the Customs and Central Excise Settlement Commission, Mumbai for waiver of penalty and immunity from prosecution for evading the excise duty on clandestine removal and sale of goods. Ld. Spl. AR referred to Page No. 218 of Paper Book No. 1 filed by the assessee company where the copy of the order passed by Settlement Commission is placed and he submits that there is a categorical observation by the Settlement Commission that the assessee was indulged along with the other companies, individually and collectively for evasion of duties. He placed his heavy reliance on the said observation of the Settlement Commission and submits that the assessee has not challenged the order of the Settlement Commission before any superior forum when the adverse finding has been given against the assessee. He submits that assessee has repeatedly harped that solely with a view to buy peace of mind and avoid litigation, they have approached the Customs and Central Excise Settlement C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company has not disputed the adverse observation of the Ld. Technical Member of the CESTAT even before the Hon'ble Bench in the course of hearing of the present appeals. He submits that the electricity constitutes is a major cost of production i.e. 29.67 % and the Assessing Officer has rightly calculated the suppressed production on the basis of electricity consumption. Ld. Spl. AR argues that there is presumption on the issue that if consumption of Electricity increases, there is also increase in the production. He relied on the decision of the Hon'ble Supreme Court in the case of Melton India vs. The Commissioner Trade Tax U.P.. He also placed his reliance of the decision of the Hon'ble' Supreme Court in the case of Triveni Rubber and Plastics vs. Collector of Central Excise, Cochin in support of his argument that if there is an admission of suppression of turnover then consumption of electricity can form the basis of estimation of suppression. He submits that it is a well settled law that in case of concealment of income direct evidence is seldom available and the case has to be decided on theory of preponderance of probability. In support of this arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted and even though the said decision is a minority decision, but it has an evidential value and the same cannot be rejected. He placed his reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works Pvt. Ltd. 198 ITR 297 (SC) in support of his contention that the entire judgment is to be considered and we cannot confine to a particular observation. He submits that the SLP filed by the Revenue before the Hon'ble Supreme Court in the case of R.A. Castings (supra) challenging the decision of the Hon'ble Allahabad High Court was summarily dismissed but summary dismissal of the SLP does not lay down any law nor it is a binding precedent. He referred to the decision of the Ld. Third Member of the CESTAT, Mumbai in the appeal of the assessee company being No.1319/09/Mum and submits that the Ld. Third Member has held that estimation of alleged suppressed turnover on the basis of mere consumption of electricity was impermissible and the order of the CCE, Aurangabad was cancelled. He submits that the decision of the Third Member is not binding on the Hon'ble Bench while deciding the present appeals for the reason that the decision of CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the Central Excise and Custom, Mumbai Bench, nowhere there is any observation or finding that the said declaration was based on electricity consumption. Ld.AR submits that there was investigation against some brokers and sub-brokers who were indulged in trading of TMT Bars and on the basis of the said investigation show cause notices were issued to the assessee and many other Companies in Jalna. He submits that the assessee preferred to approach the Settlement Commission to buy the peace, save the time and avoid the litigation as the provisions of Central Excise Act are very harsh. Ld. AR referred to the order of the Settlement Commission and submits that it is a common summary order including the assessee and other companies and production of 288.50 MTs admitted before the Settlement Commission was also offered for tax in the Income-tax proceedings. Ld. AR submits that Ld. Spl. AR for the Revenue placed his heavy reliance on the dissenting order of Ld. Technical Member of the CESTAT when it is principle of law that only the order passed by majority opinion is a order of the Court or Tribunal and is binding and in the present case by the majority decision of the CESTAT, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 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 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral 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 ₹ 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 and 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 Bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 accordingly, worked the suppressed production of the A.Y. 2007-08 as under:- A.Y. Suppressed Production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred 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 assessee's records. The Ld. CCE accordingly, observed that the assessee has willfully suppressed the figures of production of Billets/MS Ingots in their records with an intent to evade payment of Central Excise Duty and, have involved themselves in the clandestine remov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v). 1000 to 1800 units per Ton or even higher, as per Letters dated 18.3.2008 and 25.4.2008 of same Mr. R.P. Varshney [All India Induction Furnaces Association] informing that his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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' documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v). Amount received from the consignees, statement of the consignees, receipts of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landestine 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 Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. The Revenue sought to rely on an order passed by Tribunal in GuIabchand Silk Mills Pvt. Ltd., V/s. CCE, Hyderabad-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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-in-progress 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 any theoretical repot was relied for arriving at deemed production. 24. Further, in Sarvana Alloys Steels Pvt Ltd, 2011- (274) ELT 248 (Tri-Bang.) similar order based on power consumption was held unsustainable and the appeal was allowed after considering inter alia the judgments in D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is also legal order. Sec. 35D of the Central Excise Act, 1944 provides that the provisions of sub-sections (1), (2), (5) and (6) of section 129C of the Customs Act, 1962 (52 of 1962), shall apply to the Appellate Tribunal in the discharge of its functions under said Act as they apply to it in the discharge of its functions under the Customs Act, 1962. Hence, the procedure of the Appellate Tribunal i.e. CESTAT is regulated as provided in Sec. 129C of the Custom Act, 1962. The relevant provision of the Custom Act, 1962 reads as under:- Sec. 129C. Procedure of Appellate Tribunal:- (1) The powers and functions of the Appellate Tribunal may be exercised and discharged by Benches constituted by the President from amongst the members thereof. (2) Subject to the provisions contained in sub-section (4), a Bench shall consist of one judicial member and one technical member. (3) Omitted (4) The President or any other member of the Appellate Tribunal authorized in this behalf by the President may, sitting singly, dispose of any case which has been allotted to the Bench of which he is a member where:- (a) the value of the goods confiscated without option having been given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 subbrokers 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:- 19. There are other instances of central excise violations detected by other agencies where the assessee was found to be involved. In one instance that assessee had approached the Settlement Commission, admitted the evasion offence of an identical nature and had obtained immunity from criminal proceedings. The assessee has however argued that each case has to be treated as a separate case based on its own merit and dealt with accordingly. The argument of the assessee is accepted. No reliance has been placed on evidence relied upon in central excise proceedings. The findings in this case are based only on material and evidence that have been brought on record in the instant case. 21. Though the Ld. Spl. AR has referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing 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 his formula and on the basis of the formula he worked out the alleged concealed income. There are certain important observations and findings of the Tribunal which are as under:- 31. In the present case, the search was initiated on 17th March, 2006 in the residential and business premises of SRJ Peet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly 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:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oose 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. 25. In the case of ACIT vs. A.K. Alloys (P) Ltd. (supra) in which the additions were made by the A.O. for alleged suppression of production and investment in purchase of raw material relying on information received from Central Excise (Ludhiana) and when matter reached before the Tribunal and it is held as under:- 10. The assessee had filed an appeal against the order of CIT Customs and Excise, before the Customs, Excise and Service Tax Appellate Tribunal with principal Bench at New Delhi (supra). The copy of the order of the Customs, Excise and Service Tax Appellate Tribunal is placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and 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 assessee. We are also in agreement with the observations of CIT (Appeals) in deleting the aforesaid addition as no independent evidence has been brought on record to establish that the assessee had, a) suppressed its production and; b) it made sale of its unaccounted production, outside the books of account. Upholding the order of the CIT (Appeals) we dismiss the ground Nos.1 and 2 raised by the Revenue. 26. In the case of ACIT vs. Arora Alloys Ltd. (supra) the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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, worked out ₹ 37,69,582/-. In fact, the said addition is made by the Ld. CIT(A) as he has confirmed the alleged suppression of production/sales as held by the Assessing Officer. As the assessee has succeeded in getting the relief by deleting the entire additions towards alleged suppression of production and sales, hence, this addition does not survive and said addition is also deleted. We, accordingly, allow the Ground No. 10 taken by the assessee. 30. Now, we take up the Revenue's appeal for the A.Ys. 2007-08 and 2008-09. The Revenue has taken the following grounds which are common in both the appeals:- 1. Whether on the facts and in the circumstances of the case the CIT(A) was justified in quantifying the suppressed p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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