TaxTMI 
TaxTMI 
2015 (10) TMI 2302
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....5. 3. In ITA No. 1258/PN/2012, the assessee has raised the following grounds of appeal:- 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the alleged suppression of sales of Rs. 3,89,11,352/-. 2. The learned Commissioner of Income Tax (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 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). 3. The learned Commissioner of Income Tax (Appeals) further erred in confirming the suppression of sales of Rs. 3,89,11,352/- 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 Commissioner of Income Tax (Appeals) further erred in confirming the alleged suppressi....
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.... at lower rate than adopted by the Assessing Officer at the time of assessment. 2. On the facts and in the circumstances of the case, the learned CIT(A) has erred in adopting GP @ 4% arbitrarily without any basis ignoring the factual position on record, thus rendering his decision perverse. 3. On the facts and in the circumstances of the case, the learned CIT(A) failed to appreciate that the actual GP is 35% as admitted by the director in his statement recorded u/s.131 of the Act on 17-08-2009, thus rendering his decision perverse on facts. 4. On the facts and in the circumstances of the case, the learned CIT(A) has erred in lowering the GP addition ignoring the fact that, imaginary unaccounted manufacturing expenses cannot be allowed as deduction as per the provisions of section 69C of the Act. 5. Any other ground that may be urged at the time of hearing. 5. Briefly, in the facts of the present case, the assessee was engaged in the business of manufacturing of MS Ingots. Search and seizure action under section 132(1) of the Act was conducted in the case of Kalika group of Jalna including the assessee company on 16.06.2009. During the course of search, statement of director M....
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.... destination i.e. utilized in the construction activity, the Assessing Officer was of the view that the assessee was generating huge unaccounted profits, which in turn was introduced in the business in the guise of commission, commodity property, etc. In order to verify the genuineness of the income declared, certain verification exercise was carried out by the Assessing Officer in respect of commission income declared by the assessee. 6. The Assessing Officer further referred to the action of the Director General of Central Excise Intelligence (DGCEI), who had conducted actions on many steel and TMT bar manufacturers of Jalna including the assessee at different times. The DGCEI had been able to substantiate the clandestine removal of goods manufactured by the assessee. The Assessing Officer made reference to various orders passed by the DGCEI, under which duty, penalty and even personal penalties on directors of the assessee company, were levied. The Assessing Officer made reference to the orders passed by the DGCEI against the assessee during the financial years 2004-05 to 2010-11, under para 28 and show caused the assessee as to why the book results should not be rejected. Afte....
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....d not be accepted without making further addition on account of profit on suppressed sales. The CIT(A) upheld the order of Assessing Officer in arriving at the suppressed production / sales of MS ingots / billets on the basis of electricity unit consumption. The second aspect considered by the CIT(A) was whether Gross Profit was to be taxed in respect of said alleged undisclosed sales and at what percentage of GP or the total amount of consideration towards alleged suppressed production sold after reducing cost of raw material, was to be taxed. The CIT(A) noted that the Assessing Officer had estimated the electricity consumption for one MT production of MS ingots on 1026 electricity units as estimated by the Excise Department and as considered by the Income-tax Department in preceding years. Reference was made to the decision of Pune Bench of Tribunal in SRJ Peety Steels Pvt. Ltd. and Shri Om Rolling Pvt. Ltd. and the appeals pending before the Hon'ble Bombay High Court, Aurangabad Bench. The CIT(A) held that GP in respect of undisclosed production sold could only be taxed in the hands of the assessee. Since the book results were rejected in view of admitted clandestine removal of ....
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.... The CIT(A) also upheld the rejection of books of account under section 145(3) of the Act. The CIT(A) also considered the objections raised by the assessee that the assessment framed under section 143(3) r.w.s. 153A of the Act was bad in law, as no incriminating material or evidence was found during the course of search. The CIT(A) observed that during the course of search and statement recorded under section 132(4) of the Act, Kalika group had declared additional income of more than Rs. 14 crores in various group cases and profit of Rs. 2.80 crores, which has been earned on account of profit on suppressed production sold by the flagship companies of Kalika group including assessee company, had been declared in the statement recorded under section 132(4) of the Act and also in the returns of income filed in the hands of directors / persons, who were beneficiaries of the said income. Therefore, it could not be said that no incriminating material was found in course of search. Further, the fact of action by DGCEI and the clandestine removal of goods noted during the course of search / post search enquiries, the CIT(A) upheld the order of Assessing Officer in assessing the income unde....
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....rector had declared Rs. 14 crores in the hands of directors of four groups of shareholders and their family members. Further, in the statement recorded under section 131 of the Act, the director had given complete bifurcation of the declaration of Rs. 14 crores and also details bifurcation of income declared in the hands of individuals in respective years. The major portion of income was declared in assessment year 2010-11 amounting to Rs. 12.08 crores and the balance of Rs. 2.80 crores was declared in assessment years 2006-07 to 2008-09. However, in the hands of the group company i.e. the assessee and also sister concern Kalika Steel Jalna Pvt. Ltd., no declaration of income was made. 13. The learned Authorized Representative for the assessee further pointed out that during the course of search, the details of show cause notices issued by the Excise Department were found and the Assessing Officer had show caused the assessee to explain the same. The Assessing Officer had made the addition on account of suppressed production and sale on the basis of orders of Excise Commissioner, which was similar to the order passed in other furnace cases. The learned Authorized Representative fo....
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.... Ltd., was against the order passed under section 153A of the Act, which has been confirmed by the Hon'ble Bombay High Court, Aurangabad Bench, relating to assessment years 2000-01 to 2006-07. 15. The learned Departmental Representative for the Revenue in reply, in turn, relied on the order of CIT(A) and also pointed out that the assessee in its statement recorded under section 131 of the Act had admitted to the clandestine removal of goods and had also admitted to the additional income being offered in the hands of its directors. The learned Departmental Representative for the Revenue stressed that the said addition is to be made in the hands of assessee. 16. Coming to the appeals filed by the Revenue, the learned Departmental Representative for the Revenue pointed out that vide grounds of appeal No.1 and 2, the issue was against the addition restricted by the CIT(A) by applying GP rate of 4% on the suppressed sales. The learned Departmental Representative for the Revenue pointed out that vide ground of appeal No.3, the Department has challenged that GP rate of 35% as admitted by the director in the statement recorded under section 131 of the Act on 17.08.2009 should be applied.....
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....se notices to the assessee for the respective assessment years and on the basis of the allegation of Excise authorities, vide said show cause notices, the Assessing Officer made additions in the hands of assessee on account of clandestine removal of goods without payment of Excise duty. The basis for the issue of show cause notices was the variation in electricity consumption and also and / or on account of the evidence of clandestine removal of goods having been found against the assessee by way of search at the premises of group cases of assessee by the Excise authorities. The present cross appeals filed by the assessee and the Revenue are pursuant to search and seizure operations carried out against the assessee on 08.07.2009. During the course of search by the Income-tax Department on the assessee, statement of director of assessee company was recorded under section 132(4) of the Act on 08.07.2009, in which he declared undisclosed income of Rs. 14 cores in the hands of directors of four groups of shareholders and their family members. Further, statement under section 131 of the Act was recorde d on 17.08.2009, in which bifurcation of declaration of Rs. 14 crores was given. Admi....
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.... year 2009-10, which was also considered by the Tribunal in another set of appeals relating to assessment year 2009-10 and after considering the cancellation order passed by the CESTAT (Division Bench) and also the verification exercise carried out at the premises of the assessee, wherein the consumption of electricity was found to be far in excess of the allegation of the Excise Department on the basis of the report of Dr. Batra, no addition on account of excessive production was made in the hands of assessee. Before us, there is fourth show cause notices issued by the Excise Department, which have been cancelled on 25.05.2009 by Commissioner (Appeals) of Excise and the said order is placed on record at pages 50 to 56 of the Paper Book. The Revenue has not filed any appeal against the order of Commissioner (Appeals) of Excise, Aurangabad before CESTAT. The learned Departmental Representative for the Revenue has failed to bring on record any evidence that the said order has been challenged before CESTAT. In view thereof, where the issue is identical to the issue raised in earlier bunch of appeals wherein addition was made on account of erratic consumption of electricity and various....
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.... the Bench, but he referred to his adjournment letter. 19. The Counsel for the assessee started his argument. However, the Special AR for the Revenue walked off from the Court Room. The Counsel for the assessee also furnished written rejoinder in reply to the submissions filed by the Special AR for the Revenue, parawise which were gone into at length. Though, in the course of hearing, the Special AR for the Revenue left the Court 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 t o 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 ....
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....steel group of cases were heard from day-to-day on various dates and the arguments of both the learned Authorized Representative for the assessee and the Ld. special AR were heard along with written submissions, Notes filed by them and the compilation of case laws relied upon by the respective Authorized Representatives. It may be put on record that the issues raised by the different assessees before us are relatable to the addition made on account of alleged suppression of production and evasion of duty on account of erratic consumption of electricity. 25. Now, we are coming to the merits of the issue raised before us. We have heard this bunch of appeals where different issues are raised i.e. in some cases where the assessment is completed under section 143(3) r.w.s. 148 of the Act, the assessee has raised the issue against re-opening of assessment, non-supply of reasons for re-opening under section 147 and also non-service of notice under section 143(2) after recording of reasons under section 147 of the Act. However, in some cases, the assessment has been completed under section 143(3) of the Act and there are no issues against re-opening of the assessment. The Ld. Authorized ....
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....a cluster on the ground of variance in consumption of electricity versus production. The Assessing Officer also referred to the data collected in the cases of furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd. and others and relying on the addition made in the hands of M/s. SRJ Peety Steels Pvt. Ltd. (supra), in turn, on the basis of the order of CCE, Aurangabad, made additions in the hands of present set of assesses before us. 28. The Tribunal had elaborately considered all the aspects of addition in the hands of the furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd., on the basis of erratic consumption of electricity, which in turn, was the basis for making the additions in the hands of the assessee therein by CCE, Aurangabad and vide order dated 16.01.2015 held that since the order of the CCE, Aurangabad has been overruled by the Third Member of CESTAT, there was no basis for addition in the hands of the assessee. The other aspects of the issue that the assessee therein had made the petition before Settlement Commission in respect of clandestine removal of material without payment of Excise duty, was also considered by the Tribunal and in the absence of any inquiry / investig....
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....f Ingots/Billets. So far as A.Y. 2007 -08 is concerned the original assessment of the assessee was completed u/s. 143(3) of the Act on 31-12-2009. While completing the assessment u/s. 143(3) of the Act, in the opinion of the Assessing Officer the electricity consumption shown by the assessee was at higher side as compared to the quantum of production declared by the assessee. The Assessing Officer, therefore, made the addition on the basis of the alleged suppression of the production/sales by the assessee as in his opinion the assessee should have declared or shown more production of the Ingot/Billets. Subsequently, on the basis of the information received from 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 Aur....
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.... Central Excise & Custom, Mumbai. The investigation was carried out by Central Excise Authorities i.e. DGCEI, against few brokers/sub-brokers and those brokers gave the names of many companies who are in the manufacturing of Ingot/Billets and TMT Bars. As per the statement given before the Central Excise Authorities by those brokers as well as sub-brokers namely Shri Umesh Modi, Mumbai, Shri Anil D Lingade, Shri Mukesh Gupta it was admitted that they were involved in clearing the consignments from the factory on weighment slips only and no excise duty was paid and they were involved in providing fake trading bills and challans which accompanied the vehicles carrying those consignments. As per the modus operandi adopted by the brokers they used to recover the said fake trading bills and challans after the goods reached their destination. As noted by the Assessing Officer those brokers/sub-brokers also admitted that the entire evidence was destroyed by them and they used to get the commission of Rs. 100/- per MT. The Assessing Officer has discussed the information gathered by the DGCEI, Zonal Unit, Mumbai in Para Nos. 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 & 2.7 of the assessment order. So far....
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....nace is between 650 to 820 units per MT depending upon the input charge used. The Assessing Officer also referred to the Technical report of the IIT, which states that electricity requirement for manufacturing 1 MT of M.S. Ingots where melting scrap is used as an input, varies from 555 to 754 units and where "Sponge Iron" is used as an input, the electricity requirement varies from 815 to 1046 units. The Assessing Officer, therefore, came to the 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 ....
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....sioner of Central Excise and Custom, Aurangabad on the basis of power consumption. The copy of the adjudication order passed by the Commissioner of Central Excise and Custom and Service Tax, Aurangabad dated 28 -08-2009 (in short referred to as the "CCE") in the case of the assessee is placed at Page Nos. 122 to 174 of the P/B-I. The CCE, Aurangabad has observed that during the scrutiny of electricity bills, it was noticed that the substantial amount of expenditure has incurred by the assessee towards the cost of power consumption (Primary input). He has further observed that from the scrutiny of the various records, the cost of production is much more than cost of sale value, leaving no room for other major expenses like stores, wages, salaries, cost of maintenance etc. The Ld. Commissioner has referred to the study conducted by the Indian Institute of Technology (IIT), Kanpur and has observed that as per the said "Technical Opinion Report" the consumption of electricity for manufacture of one metric ton of steel ingots varies between 555 to 1026 electricity units depending upon the thermal efficiency, electricity efficiency and nature of mix of raw material. As observed by the Ld....
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.... following differences: a. Whether in view of the discussion in Para 1 to 31 and in view of the decision of the Tribunal in the case of R.A. Castings Pvt. Ltd. (supra) the impugned orders are to be set aside and the appeal allowed. b. Whether in view of the discussion in Para 32 to 68 above 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 fi nding 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....
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....norm of 1026 units allegedly as per report of Dr. Batra, for arriving at deemed production. Moreover, the trial run conducted by the department had proved that at that time power consumption was actually higher than that reported in Dr. Batra's report. 20.4 It is also seen that the allegations levelled in R,A, Casting (supra) were mainly- (i). Inordinately high electricity consumption without any explanation, (ii). Sale of Ingots at a huge loss over last 4-5 years, which was economically and commercially not possible, (iii). generation of fictitious profits in the balance sheets by depositing huge amount of cash with the stock brokers and receiving cheques of profits against the cash so deposited, (iv). Claim of High Auxiliary load of about 35%, However the Tribunal in categorical terms held that no demand can be upheld based on electricity consumption as such because the clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to- (i). Receipt of raw material inside the factory premises, and non-accounting thereof in the statutory records; (ii). Utilization of such raw material ....
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....nts in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained." 20.8 In the present appeals, none of the so called other evidences referred in the impugned Orders prove clandestine clearance. The primary evidence of department is admittedly excess electricity consumption based on benchmark adopted allegedly-'from....
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..... Varshney suggesting that electric consumption in induction furnace can be upto 1800 units per MT is also on record. Since, varying reports are on record, the ratio of R.A. Casting (sura) is squarely applicable. 23. Revenue, also relied On the judgment of the Hon'ble Supreme Court in the case of Melton India V/s. The Commissioner Trade Tax, U.P, - 2007-TIOL-14-SC-CT, the judgment of the Hon'ble Gujarat High Court in the case of Rajmoti Industries V/s. Joint Commissioner of Income Tax, 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, no....
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....o bearing in the said order but on the perusal of the said order, it is seen that entire order is copy of order passed for the A.Y. 2007-08. As vary basis of the assessment order i.e. the order of the Commissioner of Central Excise (CCE), Aurangabad has been set aside and cancelled by the CESTAT, in our opinion the assessment orders passed by the Assessing Officer and confirmed by the Ld. CIT(A) approving the estimated alleged suppression of the production/sales have no legal legs to stand." 31. The Tribunal thereafter, dealt with the arguments of Ld. Special AR that even the minority decision of Ld. Technical Member of CESTAT was a legal order. This plea of the Ld. Special AR was rejected by the Tribunal in view of the decision of Third Member of the CESTAT. 32. Another objection raised by the Ld. Special AR was with reference to the order of Settlement Commission passed in the case of set of companies. The Tribunal noted that the CCE, Aurangabad in its order had taken into consideration the said material while determining the value of alleged suppressed production and had made observations vide para 19. The relevant observations of the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd....
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....nd the Tribunal overruled the arguments of the Ld. Special AR and upheld the arguments of learned Authorized Representative for the assessee that the order of CESTAT had to be applied. The relevant para of the Tribunal order reads as under:- "21. Though the Ld. Spl. AR has referred to and 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 ent....
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....rtment before the Hon'ble Bombay High Court and the Revenue's appeal was dismissed by common order dated 10.02.2014 in the case of assessee and other companies by the Hon'ble Bombay High Court and there were observations on the estimation of production based on the consumption of electricity. The Tribunal while deciding the appeal of M/s. SRJ Peety Steels Pvt. Ltd. in this regard observed as under:- "22. We have already mentioned here-in-above that in the case of the assesse, the search and seizure operation was carried out u/s. 132(1) of the Income-tax Act on 17-03-2006 and accordingly the assessment orders for the A.Ys. 2000-01 to 2006-07 were framed u/s. 153A r.w.s. 143(3) of the Act. The Assessing Officer rejected the books of account of the assessee for the A.Ys. 2000-01 to 2006-07 and one of the reasons was that alleged suppressed production which was computed on the basis of consumption of the electricity. The Assessing Officer devised a formula on the basis of electricity consumption and the same was applied uniformly in order to work out certain alleged suppressed production and resultant concealed income in the case of the assessee. The Assessing Officer took 1,600 Unit....
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....ring the regular assessments and not in the assessment proceedings under s. 153A of the Act. When nothing incriminating was found in the course of search relating to any of these assessment years, the assessments for such years could not be disturbed on this ground. 33. In view of above factual and legal position we find that the additions in question in asst. yrs. 2000-01 to 2005-06 are not corresponding to the seized material found during the course of search. The relevant IT returns for said years were filed prior to the search in normal course disclosing the particulars of subject-matters were already on record. The returns have already been accepted and no assessment as such could be said to be pending on the date of initiation of search and abated in light of the provisions of s. 153A. 34. Without prejudice to above, with regard to invoking the provisions of s. 145 of the Act, according to which in case the AO is not satisfied about the correctness or completeness of accounts of the assessee or where no method of accounting provided in sub-s. (1) or accounting standards as notified under sub-s. (2), have not been regularly followed by the assessee, the AO may make an asse....
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....f books for these years purely on the ground that there has been divergence in the consumption of electricity and application of s. 144 is not at all justified. Accordingly additions have rightly been deleted in asst. yrs. 2000-01 to 2005-06 in both the cases. 23. It is clear from the order of the Tribunal in assessee's own case in the search and seizure matter as it is held that the consumption of electricity for the manufacturing of mild steel ingots/billets depends on various factors and there was no justification to charge the assessee that the assessee has suppressed the production and indulged into unaccounted production. The order of the Tribunal was challenged by the Department before the Hon'ble High Court of Bombay Bench at Aurangabad by filing the appeal u/s. 260A of the Income-tax Act, being Tax Appeal No. 30 of 2011. The Revenue's appeal was dismissed vide common Judgment dated 10-02-2014, in the case of the assessee and other companies by the Hon'ble High Court and there are categorical observations of their Lordships on the estimation of the production based on the consumption of the electricity which are as under: "4. In that regard, the Tribunal as also the Com....
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....in consequence of the search and seizure operation but the important fact remains that nothing was found during the course of search except few loose sheets found in the residence of the Director to make out a case against the assessee for alleged suppression of production or sales. It is also to be taken note of the fact that in A.Ys. 2007-08 and 2008-09, no investigation has been done by the Revenue which are immediate next assessment years after the search and seizure operation against the assessee company and hence, in our opinion above findings and observation of the Tribunal as well as the Hon'ble High Court are also important to decide the present appeals more particularly on the additions based on consumption of electricity." 37. The Tribunal vide para 24 took note of the fact that in assessment years 2007-08 and 2008-09, no investigation was done by the Revenue after the search and seizure operations in the immediately preceding year, wherein during the course of search, certain loose sheets were found in the residence of the Director to make out case against the assessee for alleged suppression of production / sales. The Tribunal while deciding the appeal in M/s. SRJ Pee....
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...., Excise & Service Tax Appellate Tribunal categorically held that the electricity consumption could not be criteria to determine the output laid down in R.A. Castings, where the appeal of the Revenue was dismissed by the Hon'ble Apex Court as reported in 2011 (269) ELT A -108 (SC). The basis for the addition in the present case was the investigation report of the Central Excise Department and the suppression in production calculated by the said Investigating Team. The Assessing Officer had completely based its addition on the aforesaid report of the Investigating Team and had also show caused the assessee to establish its point in view of the said report of the Investigating Team. The Customs, Excise & Service Tax Appellate Tribunal (supra) in the appeal filed by the assessee and its Director has categorically held that no cogent evidence has been brought on record to prove that the output had been cleared clandestinely. Further it has been held that there was no cogent evidence to show either suppression of purchase of input or removal of goods. In view of the aforesaid findings of the Customs, Excise & Service Tax Appellate Tribunal in assessee's own case there is no merit in a....
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....for rejection of the books of account was the alleged suppression of production/sales and which was determined on the basis of the adjudication order passed by the CCE, Aurangabad as well as the consumption of the electricity used in the manufacturing of the Ingots/Billets relying on the technical opinion of Dr. Batra, IIT, Kanpur. No other reasons are given by the Assessing Officer. We have already held that the Assessing Officer was not justified in making the additions towards alleged suppression of production/sales. We, therefore, hold that the rejection of the books of account on above reason cannot be upheld. We, accordingly, allow Ground No. 7 in the A.Y. 2007 -08 and Ground No. 5 in the A.Y. 2008 -09. 28. The next issue is the percentage of the gross profit estimated by the Ld. CIT(A) on the alleged suppressed sales and said issue arises from Ground No. 9 in the A.Y. 2007 -08 and Ground No. 7 in the A.Y. 2008 -09 are on. As the assessee has succeeded on the main grounds as entire additions made by the Assessing Officer are deleted, the Ground No. 9 in the A.Y. 2007 -08 and Ground No. 7 in the A.Y. 2008 -09 become infructuous. 29. In Ground No. 10, the assessee has raise....
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....se of huge fluctuation in electricity consumption and production of ingots / billets, addition was made in the hands of the assessee. However, in Omsairam Steel & Alloys Pvt. Ltd., it was fairly admitted by the learned Authorized Representative for the assessee that there was investigation by the DGCEI and in assessment years 2006-07 and 2007-08, the assessee had filed the petition before the Settlement Commission, which was accepted. However, in assessment years 2005-06 and 2008-09, there was no such petition filed before the Settlement Commission. 41. We find that the Assessing Officer in the present case before us had made the addition on account of erratic consumption of electricity based on the report of Dr. Batra. The addition in the hands of sister concern M/s. SRJ Peety Steels Pvt. Ltd. was made on the basis of the report of one Dr. Batra with regard to electric consumption and the Third Member of CESTAT had deleted the aforesaid addition made under the Excise law. Similarly, in the case of assessee before us, there is order of CCE, Aurangabad and of CESTAT and the Assessing Officer worked out the addition on the basis of erratic consumption of electricity as determined by....
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....xcise duty before the Settlement Commission for part of the period, then in view of the order of the Settlement Commission and also since the assessee had admitted to additional income on such account before the Assessing Officer, the sales for the entire year should be extrapolated. The basis for declaration of clandestine removal of material without payment of Excise duty was on account of search and seizure proceedings conducted by DGCEI on certain brokers and sub-brokers. Consequent thereto, Shri SRJ Peety, Managing Director of M/s. SRJ Peety Steels Pvt. Ltd. admitted to the said clandestine removal of material without payment of Excise duty and approached the Settlement Commission for payment of Excise duty on the said amount. The Settlement Commission accepted the petition of the assessee, but also levied penalty. The assessee before the Assessing Officer admitted that the additional income in respect of the said clandestine removal of material without payment of Excise duty, is to be added in the hands of the assessee. All this information was available before the Assessing Officer during the course of assessment proceedings, but no other investigation or inquiry was made by....
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....o re-visit the offer made by the claimant and where any adverse material is available against the person making the offer, then the figures of settlement can be increased. However, in the case of the assessee, offer of the assessee has been accepted for the financial year and the same cannot be said to be restricted to the number of days for which it was offered. The basis of any settlement is the offer made by the claimant and/or the evidence found against the person offering the settlement and where the evidence has been found for part of the year, such settlement being accepted is relatable to the year under consideration. In cases where the petition is accepted in the hands of the assessee by the Settlement Commission, then no further addition can be made in the hands of the assessee on account of alleged clandestine removal of material without payment of Excise duty or suppressed sales for the balance period, in the absence of any evidence found against the assessee for the balance period. 45. Another aspect of the issue is that though the factum of the assessee filing the petition before the Settlement Commission, was before the Assessing Officer, even additional income on s....
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....nds of the assessee and made the aforesaid addition, which we in the paras hereinabove had already deleted. The Ld. Special AR pointed out that the said action of the Assessing Officer was one of the methodologies for working out the additional income of the assessee. We find no merit in the stand of the Ld. Special AR since no investigation or inquiry was carried out by the Assessing Officer and merely on the basis of petition filed before the Settlement Commission, which in turn has been accepted, no further addition can be made in the hands of the assessee in the absence of any incriminating material found for the balance period. 47. Reliance in this regard is placed upon the ratio laid down in Ravi Foods Pvt. Ltd. Vs. CCE, Hyderabad (supra). In the facts of the said case, certain documents were found by the Income-tax Department pursuant to search and seizure action, which indicated clearance in sales, on the basis of which the additional income was added in the hands of the assessee. The said information was forwarded to the Central Excise Department pursuant to which, order levying additional Excise duty was passed by the Excise Commissioner. However, the Trib unal cancelled....
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....e 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-à-vis the addition on account of extrapolation of sales for the period of 300 days. 52. The Ld. Special AR further relied on series of decisions under the Excise authorities for the proposition that the confessional statement before the Excise Department was an important piece of evidence. We are in agreement with the said proposition laid down by the Hon'ble Supreme Court in Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala and another (supra), but the statement made before any of the authorities is limited to the amounts surrendered vide the said settlement and no inference could be drawn against the assessee for extrapolating the same for full year and for the balance year and in other years, other than the year in which the said settlement was offered. In this regard, we find support from the ratio laid down 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 t....
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....the decision of coordinate Bench on similar issue as before us, we find no merit in the reliance placed upon by the Ld. Special AR. 56. The Ld. Special AR during the course of arguments before the Tribunal in Miscellaneous Application filed in M/s. SRJ Peety Steels Pvt. Ltd. vide MA No.17/PN/2015 had raised the issue of extrapolation of sales for 300 days in view of the assessee having admitted to clandestine removal of material without payment of Excise duty and thereafter, filing a petition before the Settlement Commission. 57. The plea of the Revenue raised in the Miscellaneous Application was rejected as no such plea was taken by the Department during the appellate proceedings before the Tribunal and was raised for the first time in the Miscellaneous Application. However, in the interest of justice, the said issue of extrapolation of suppressed sales was adjudicated by the Tribunal by observing as under:- "41. Before closing the issue, in the interest of justice, we would like to adjudicate 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, e....
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....different from the facts of the present case. 42. Even on merits, the Revenue has no case against the assessee. The reliance placed upon by the Ld. Special AR on the ratio laid down in assessee's own case relating to assessment year 2006-07 is misplaced as the addition in the hands of the assessee in that year was made on account of search and seizure operations carried out by the Income-tax Department, wherein sales outside books were found for few days. However, no independent investigation / inquiry by the Income-tax Department has been made before completing assessment proceedings against the assessee. Another aspect of the issue is that the petition before the Settlement Commission has been made by the assessee in assessment year 2007-08 only and no such petition for clandestine removal of material without payment of Excise duty has been made for assessment year 2008-09. The assessee had offered the additional income on account of such clandestine removal of goods before 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....
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....e that the said figures of additional production should be utilized for extrapolating the sales in the hands of the assessee for the entire year. Admittedly, the assessee had offered additional income on the said clandestine removal of material without payment of Excise duty, which is to be added as income in the hands of the assessee. The learned Authorized Representative for the assessee fairly admitted that in case the said additional income has not been added while computing the income in the hands of the assessee for the respective years, the same may be directed to be added in the hands of the respective assessee in respective years. Accordingly, we direct the Assessing Officer to verify from the records for the respective years and include the additional income on account of such admitted clandestine removal of material without payment of Excise duty, by the assessee either before the Settlement Commission or before the Excise authorities, in the hands 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 investig....
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....s justified or not, arose before the Tribunal in bunch of appeals with lead order in Bhagyalaxmi Steel Alloys Pvt. Ltd. in ITA No.1292/PN/2012 & 1478/PN/2012, relating to assessment year 2009-10 along with other related appeals, to which both of us are parties, decided the issue vide order dated 15.07.2015. The relevant findings of the Tribunal were as under:- "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 account of suppressed production/sales on the basis of erratic electricity consumption. In the facts relevant to assessment year 2009-10, the assessee was held to have clandestinely manufactured and cleared its material without payment 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 st....
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....al 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/86249/2014 Gajlaxmi Steel Pvt. Ltd. February 2008 to March 2009 Rs.2,76,52,805/- & equal penalty Specific verification of electricity consumption on 20.2.2009 showed electricity consumption of 1433.78 units per MT using mix input of scrap and sponge Iron. 7. E/86242/2014 Kalika Steel & Commodities Pvt. Ltd. April 2008 to March 2009 Rs.3,19,92,292/- & equal penalty Specific verification of electricity consumption on 25.1.2009 showed electricity consumption of 1371.5 units per MT using mix input of scrap and sponge Iron. 8. E/86330/2014 Meta Rolls & Commodities Pvt. Ltd. April 2008 to March 2009 Rs.3,26,84,318/- & equal penalty Specific verification of electricity consumption on 20.3.2009 showed electricity consumption of 1251 units per MT using mix input of scrap and sponge Iron. 9. E/86220/2014 Nilesh Steel & Alloys Pvt. Ltd. April 2008 to March 2009 Rs.2,06,54,292/- & equal penalty Specific verification of electricity consumption on 22.2.2009 showed electricity consumption ....
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....etition, but the then Attorney General of India, the Shri Goutam Vahanvati opined not to file review petition vide letter No.276/417/2010 CX 8A dated 26.05.2011. Therefore, the reliance on the study analysis conducted by Dr. N.K. Batra, Professor IIT Kanpur, is not an evidence to ascertain the electricity consumption for manufacture of 1MT of MS Ingots. 7. In appellants own case for the earlier period on the basis of the evidence relied upon by the adjudicating authority, Tribunal came to the conclusion that the 1026 units of electricity for manufacture of 1MT of MS Ingots is not correct and set aside the adjudication orders. In the cases in hand there is additional evidence of specific verification/trial conducted by the revenue to ascertain the actual electricity consumption which works out to more than 1026 units of electricity consumption per 1MT of MS Ingots. Therefore, relying on the decision of the earlier period in appellant's own cases and the additional evidences, collected by way specific verification, we hold that impugned orders are not legal and proper whereas during the impugned period, the physical verification was conducted and the electricity consumption for man....
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....f excise duty, and in the absence of the assessee declaring any additional income in its hand, no such addition is warranted in the hands of the assessee. However, in case any of the assessee have admitted to clandestine removal of goods without payment of excise duty, then additional income relatable to such turnover is to be added in the hands of the said assessee. We have already dealt with this issue in detail by order of even date in the bunch of appeals as referred earlier. 14. Following the same parity of reasoning as per our order of even date in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. & Others relating to assessment years 2006-07 to 2008-09 and in view of the physical verification carried out by the authorities as referred to by us in the paras hereinabove and the consequent order of Division Bench of CESTAT in the case of present assessee's before us relating to assessment year 2009-10, we find no merit in the orders of authorities below and we reverse the order of CIT(A). We find no merit in the addition made in the hands of the assessee on account of suppressed production consequent to erratic consumption of electricity. 15. The appeals of the Revenue against....
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....order of Hon'ble Bombay High Court in the case of CIT Vs. SRJ Peety Steel Pvt. Ltd. and CIT Vs. Shri Om Rolling Pvt. Ltd. vide Tax Appeal No.30 of 2011 & Ors., wherein the findings of the Tribunal have been upheld vide judgment dated 10.02.2014. 22. Hence, the addition made in the hands of assessee by the Assessing Officer on the plea that the Departmental appeal is pending before the Hon'ble Bombay High Court does not survive. 23. Another aspect to be noted in the present bunch of appeals is that the directors of the assessee company and their family members had offered additional income of Rs. 14 crores, which has been declared in the respective returns of income and has been assessed in the hands of respective individuals. The major portion of income was declared in assessment year 2010-11 amounting of Rs. 12 crores and the balance of Rs. 2.80 crores was declared in assessment years 2006-07 to 2008-09. No benefit of telescoping has been allowed by the CIT(A) in respect of said declaration in the hands of assessee and no ground of appeal has been raised against the said denial by the CIT(A). In the totality of the above said facts and circumstances, we find no merit in the grou....