TMI Blog2015 (7) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... T 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 made in the hands of the assessee on account of suppressed production consequent to erratic consumption of electricity. 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. - ITA No.1292, 1478, 1085, 1469, 1452, 1477, 1557, 1628, 1373, 1525, ITA Nos.1432 & 1433, ITA No s.1632 & 1633, 1467, 1524, 1516, 1634, 1638, 1476, 1431, 1475, 1558, 1629/ PN/2012 - - - Dated:- 15-7-2015 - MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM Assessee by : Shri J. P. Bairagra Department by : Smt. M. S. Verma, CIT Shri Rajesh Damor ORDER PER SUSHMA CHOWLA, JM : The present bunch of cross appeals filed by the different assessees and the Revenue are against the separate orders of CIT(A), Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.1632/PN/2012 ITA No.1433/PN/2012 Mauli Steel Pvt. Ltd. 22/05/2012 2009-10 ITA No.1633/PN/2012 9. ITA No.1467/PN/2012 M/s Rishi Steel Alloys Pvt. Ltd. 30/04/2012 2009-10 ITA No.1524/PN/2012 10. ITA No.1431/PN/2012 Shree Om Rolling Mills Pvt. Ltd. 30/04/2012 2009-10 ITA No.1475/PN/2012 11. ITA No.1558/PN/2012 Shri Anand Omprakash 06/06/2012 2009-10 ITA No.1629/PN/20 12 Pahade 2. This bunch of appeals relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar addition was deleted. 8. The appellant company craves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing. 4. In ITA No. 1478/PN/2012, the Revenue has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case the CIT(A) was justified in quantifying the suppressed production @ 4% even after accepting the fact that the assessee indulged in clandestine removal of goods without payment of taxes. 2. On the facts and in the circumstances of the case whether the CIT(A) was justified in not appreciating the fact that manufacturing and administrative expenses on the unaccounted production worked out in the appellate order had already been borne by the production shown in the books of accounts? 3. On the facts and in the circumstances of the case whether the CIT(A) was justified in not appreciating the fact that the working capital is required for purchase of raw material and day to day activities for production of goods every year. 4. The order of the AO be restored and that of the CIT(A) be vacated. 5. The appellant craves leave to add, amend or alter any g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... variations from month to month. The Assessing Officer accordingly, computed the addition in the hands of the assessee on account of suppressed production and added the same to the total income of the assessee. Further, addition was made on account of working capital required for the unrecorded production. 6. The CIT(A) noted that the issue raised in the present appeal was common to the issue raised in the hands of other manufacturers of MS ingots / billets. The CIT(A) held as under:- 7.2 I have carefully considered the facts of the case and the rival contentions raised by the appellant in para-7.1 above and raised by the A.O. mentioned in para-5 above. On perusal of the same, it has been observed as under (1) The appellant has 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons mentioned by the A.O. in the assessment order. (7) The appellant has not maintained information in form No.G-7, which is compulsory, showing daily consumption of power in units. (8) The facts of the decisions relied on by the appellant are different 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 corroborative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the order of CIT(A). 8. Both the Authorized Representatives pointed out that the issue raised in the present appeal is similar to the issue before the Tribunal in M/s. SRJ Peety Steel Pvt. Ltd. and also in assessee s own case. The only distinction drawn by the learned Authorized Representative for the assessee was that in the earlier years i.e. from assessment years 2004-05 to 2008-09, there was an order of CCE, Aurangabad, which was set-aside by the Third Member of CESTAT. However, in assessment year 2009-10 after the order passed by the CCE, Aurangabad, the matter was decided by the Division Bench of CESTAT, West Zonal Bench, Mumbai vide order dated 22.10.2014 in series of appeals with lead order in Bhagyalaxmi Steel Alloys Pvt. Ltd. and the order of CCE, Aurangabad was set-aside. 9. We have heard the rival contentions and perused the record. The issue raised in the present set of appeals relating to assessment year 2009-10 is identical to the issue raised in the earlier appeals relating to assessment years 2006-07 to 2008-09 in the case of different assessees. We have by order of even date already adjudicated the issue of addition in the hands of the assessee on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 503.5 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 electricity consumption on 22.3.2009 showed electricity consumption of 1209 units per MT using mix input of scrap and sponge Iron. 4. E/86152/2014 Regent Steel Pvt. Ltd. February 2008 to March 2009 Rs.96,27,516/- equal penalty Specific verification of electricity consumption on 19.3.2009 showed electricity consumption of 1199 units per MT using mix input of scrap and sponge Iron. 5. E/86348/2014 Jailaxmi Casting Alloys Pvt. Ltd. 2008-09, 2009-10 (up to July 2009) Rs.1,92,94,575/- equal penalty Specific verification of electricity consumption on 18.3.2009 showed electricity consumption of 1147.74 units per MT using mix input of scrap and sponge Iron. 6. E/86249/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental 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. N.K. Batra, the electricity consumption can t be the basis for demands. The order of this Tribunal was challenged by the Revenue before the Hon ble High Court and the Hon ble High Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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. 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 suppress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 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 Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Officer also referred to the petition filed by the assessee before the Central Excise and Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 M.T. Rate per M.T. Rs. Assessable Value of Suppressed Production Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 from 1454 to 1856 uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 the following reports and clarifications for his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reference to installed ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... 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-HC-AHM-IT, and an unreported order dtd. 28/9/2010 of Andhra Pradesh Sales Tax T ribunal (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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id 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 opinio n 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 the Ld. Techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 merged with the order of the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 Officer took 1,600 Units as consumption per MT which was a lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 824 23,240.189 1856 2005-06 62650888 29,582.434 2118 2006-07 70440580 36,017.983 1956 32. The matter of fluctuating consumption of electricity can by no means be said to be a finding of search since all details regarding electricity vis-a-vis production were before the Department. If the Department had any doubts regarding the same, it could have been raised during the regular 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 alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an excess consumption of electricity resulting in suppressed production and alleging that the assessee company has indulged in unaccounted production. 37. None of the evidence collected as a result of search or detected during the course of assessment pertains to the asst. yrs. 2000-01 to 2005-06. It is an accepted fact that each year of the assessment is independent and evidences found relating to asst. yr. 2006-07 cannot have an adverse impact on the assessments of the assessee company from the asst. yrs. 2000-01 to 2005-06. Therefore, rejection of books for these years purely on the ground that there has been divergence in the consumption of electricity and application of s. 144 is not at all justified. Accordingly additions have rightly been deleted in asst. yrs. 2000-01 to 2005-06 in both the cases. 23. It is clear from the order of the Tribunal in assessee s own case in the search and seizure matter as it is held that the consumption of electricity for the 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration and while arriving at a conclusion with regard to the alleged production calculated on the basis of electricity consumption. Rejection of books for these years only on the ground that there has been divergence in the consumption of electricity, therefore, was held not justified. 24. Ld. Spl. AR for the Revenue argues that the said observations are made in the context of the assessment framed in consequence of search and seizure operation. We are not inclined to accept the argument of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of the assessee company and vide para 6 held as under: 6. We would have certainly come to the rescue of Revenue had the statement been recorded in a manner known to law and cogent evidence had been brought to record to prove output cleared clandestinely. No cogent evidence is on record to show either suppression of purchase of input or clandestine removal of goods in fool proof manner known to law for which, it can be painfully said that the adjudication has no legs to stand. Both the appeals are therefore, allowed with consequential relief, if any. 11. The Customs, Excise Service Tax Appellate Tribunal categorically held that the electricity consumption could not be criteria to determine the output laid down in R.A. Castings, where the appeal of the Revenue was dismissed by the 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Tribunal thereafter, held that th ere was no merit in the rejection of books of account and application of gross profit to determine the income in the hands of the assessee. The Tribunal also gave a finding that since the additions made in the hands of the assessee have been deleted, there was no merit in any addition on account of undisclosed investment in respect of the undisclosed turnover. The Tribunal vide paras 27 to 29 held as under:- 27. The next issue is the rejection of books of account 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down in M/s. SRJ Peety Steels Pvt. Ltd. (supra). It was further pointed out by him that in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd., there was no investigation by the DGCEI and further there was no order of Settlement Commission. However, the CCE, Aurangabad had passed an order against the assessee, but there was no case of clandestine removal of materials without payment of Excise duty against the assessee. The Ld. Special AR admitted that there was no evidence with the Excise Department or the Income-tax Department regarding clandestine removal of materials without payment of Excise duty. However, because of huge fluctuation in electricity consumption and production of ingots / billets, addition was made in the hands 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 As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. 43. Another aspect of the issue in relation to the addition on account of suppressed production, raised before us is that where the Assessing Officer had evidence of clandestine removal of material without payment of Excise duty, the addition could be upheld in the hands of the assessee by extrapolating the sales for period of 300 days. The Ld. Special AR for the said proposition relied on the decision of the Tribunal in assessee s own case relating to assessment year 2006-07. The 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. admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch and seizure operation on certain brokers, however, no search and seizure operation was carried out against the assessee. In order to buy peace of mind, the assessee declared the said amount vide petition before the Settlement Commission, which has been accepted by the Settlement Commission in toto. The Ld. Special AR objected to the plea of assessee that declaration was to buy peace of mind, but we find no merit in the same, since the object of moving petition before the Settlement Commission is to settle the dispute. In cases where 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee before the Settlement Commission. The perusal of the assessment order and the order of CIT(A) reflects no such basis was adopted for making the addition in the hands of the assessee. The sole basis on which the addition in the hands of the assessee made was on account of erratic consumption of electricity. Undoubtedly, both the aspects i.e. the petition made by the assessee before the Settlement Commission pursuant to search conducted by the DGCEI and also the other basis i.e. erratic consumption of electricity, were before the Assessing Officer. However, the Assessing Officer adopted the second issue in the hands of the assessee and made the aforesaid addition, which we in the paras hereinabove had already deleted. The Ld. Special AR pointed out that the said action of the Assessing Officer was one of the methodologies for working out the additional income of the assessee. We find no merit in the stand of the Ld. Special 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion, the issue in hand is to be decided on the basis of findings of the Assessing Officer and CIT(A) and the Tribunal cannot traverse beyond the orders of Assessing Officer and CIT(A). Admittedly, the parties can raise an additional plea before the Tribunal justifying the addition. However, the said plea has to be decided keeping in mind the facts of the case. Though both the Assessing Officer and CIT(A) had not made the addition in the hands of the assessee on the basis of petition filed before the Settlement Commission, but had adopted the 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 vis- -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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sales for 9 months, it could have been detected by the Central Excise authority during their search operations. Therefore, the addition made by the Assessing Officer is purely based on guess work, presumption and surmises and not on the basis of any material found during the course of search operation carried out by the Central Excise authorities. Such addition based on hypothetical calculation of turnover and estimation of GP on presumption and surmises were not sustainable. The Tribunal distinguished the ratio laid down in CST Vs. H.M. Esufali H.M. Abdulali (supra). The Ld. Special AR relied on the said decision and in view of the decision of coordinate Bench on similar issue as before us, we find no merit in the reliance placed upon by the Ld. Special 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 Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income or loss of the previous year required to be assessed under regular assessment under section 143(3) of the Act. The Hon ble Bombay High Court held that such regular assessment stands on a different footing in contrast to the exercise undertaken by the Assessing Officer under Chapter XIV-B, where the Assessing Officer had to assess only the undisclosed income. However, the Hon ble Bombay High Court further held that under Chapter XIV-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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above said facts and circumstances, we hold that no extrapolation of sales for 300 days can be made in the hands of the assessee on the basis of the evidence found for clandestine removal of material without payment of Excise duty for few days, which in turn, has been admitted by the assessee by way of filing petition before the Settlement Commission, which in turn, has also been accepted by the Settlement Commission. Merely because the Settlement Commission accepted the claim of the assessee of additional Excise duty payable on the said clandestine removal of material without 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of GP rate and allowance of expenses are also dismissed. 13. The Ld. Special AR for the Revenue before us pointed out that another aspect of the addition is extrapolation of sales to be made in the hands of the assessee for the entire year on the basis information received for part of the year. It may be put on record that in assessment year 2009-10 in the hands of various furnace companies no such investigation 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 assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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