Case Law Details
Brief of the Case
ITAT Pune held In the case of ACIT vs. M/s. Nilesh Steel & Alloys Pvt. Ltd. that the consumption of the electricity for the manufacture of mild steel ingots/billets depends on various factors like quality of raw material which is the major input, voltage of the supply, power interruptions, mechanical and electrical breakdowns and the chemical composition of the liquid metal which has to be finally cast into ingots/billets. The AO failed to appreciate these facts and did not attempt to establish a direct nexus between the production and electricity consumed for the manufacture of round/TMT bars and arrived at a conclusion that there is an excess consumption of electricity resulting in suppressed production and alleging that the assessee company has indulged in unaccounted production.
Facts of the Case
The assessee is a Private Limited Company and is engaged in the manufacture of MS ingots / billets. The assessee had furnished return of income declaring total income of Rs.32,14,410/- on 24.09.2009. The case was selected for scrutiny and notice under section 143(2) was issued to the assessee. Further, the case was referred seeking directions under section 144A and in response to which, the JCIT issued specific written directions. The Assessing Officer received information from the office of the Commissioner of Central Excise and Customs, that the assessee had indulged in suppression of production and clandestine removal of finished products without payment of Excise duty. The adjudication order of CCE quantifying the value of suppressed production was also available with the Assessing Officer. In view thereof, the assessee was show caused as to why the amount of income escaping assessment should not be added in the hands of the assessee.
The Assessing Officer considered the manufacturing process of the assessee in detail and noted that the electricity was one of the major cost input in the manufacture of ingots / billets and also accounts for major share of expenses. As per the Assessing Officer, there was deviation in electricity unit consumption per MT i.e. 287 units which was unreasonable and unacceptable. Because of the huge deviation in the electricity consumption, the presumption of the Assessing Officer was that the production disclosed in the books was substantially suppressed. The Assessing Officer accordingly, computed the addition in the hands of the assessee on account of suppressed production at Rs.4,64,65,600/- and added the same to the total income of the assessee. Further, addition of Rs.58,12,720/- was made on account of working capital required for the unrecorded production.
Contention of the Assessee
The ld. counsel for the assessee submitted that the issue stands squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. and Vice-versa vide ITA Nos.1292/PN/2012 & 1478/PN/2012 for A.Y. 2009-10 and other connected appeals vide consolidated order dated 15-07-2015. Further, the Coordinate Bench of the Tribunal in the case of Mahavir Steel Re-rolling Mills Vs. ACIT and Vice-versa vide ITA Nos. 1072 to 1076/PN/2012 and ITA Nos. 1446 to 1450/PN/2012 order dated 05-03-2015 has also decided the issue in favour of the assessee. Since the addition sustained by the CIT (A) has been deleted in all these cases, therefore, the appeal filed by the Revenue has to be dismissed and the grounds raised by the assessee in so far as sustenance of the addition is concerned has to be allowed.
Contention of the Revenue
The ld counsel of the revenue contended that the issue stands decided in favour of the revenue and against the Assessee by the various decisions of the Coordinate Benches of the Tribunal.
Held by CIT (A)
The CIT (A) held that 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). The appellant has also admitted the said clandestine removal of goods in the statement recorded in investigation by DGCEI and also before the Settlement Commission of Customs and Excise Department and has paid Excise Duty and the Settlement Commission has levied token penalty in respect of the said clandestine sale out of the books. The Commissioner of Excise in his order and the A.O. have reasonably estimated, after considering various reports and studies in respect of electricity consumption required for producing MS ingots/billets.
Further it was held that the contention of the appellant that the books of accounts are regularly maintained and audited cannot be accepted in view of the clandestine removal of goods and the unaccounted purchases and sales admitted by the appellant and also in view of various reasons mentioned by the A.O. in the assessment order. The appellant has not maintained information in form No.G-7, which is compulsory, showing daily consumption of power in units. The decisions relied on by the appellant in support of the contention that no addition can be made on the basis of electricity consumption are distinguishable on facts of the case of the appellant and the facts in the said decisions.
Held by ITAT
We find the issue stands decided in favour of the assessee and against the Revenue by the decision of the Tribunal. We find the Tribunal in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. ITA Nos.1292/PN/2012 and other connected appeals has discussed the issue and decide the same in favour of the assessee. In this case , it was decided that on perusal of the assessment orders it is clear that both the assessments are merely based on the alleged suppression of the production by estimating certain consumption of electricity i.e. 1026 Units for manufacturing of 1 MT of Ingots and Billets. Moreover, even if in the A.Y. 2008-09, the Assessing Officer has observed that the information received from the Central Excise Authorities has no 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 CIT(A) approving the estimated alleged suppression of the production/sales have no legal legs to stand.”
It was further held that no independent investigation was made by the Revenue, but the entire assessment was framed on the basis of information received from the Central Excise Department as well as the adjudication order passed by the CCE, Aurangabad, which in turn, had been cancelled by the Third Member of CESTAT. The Tribunal thus, held that the foundation for assessment does not exist. It was also noted by the Tribunal in para 21 that the investigation by the DGCEI and proceedings before the Settlement Commission were considered by the CCE in its adjudication order, which in turn, was the subject matter of CESTAT and the said order has been set aside, hence, it was not necessary to deal with the decisions relied upon by the Ld. Special AR, which are in the context of admission of the Director in the course of investigation made by the DGCEI. On the issue of Form no. G-7 in respect of electricity consumption, which was also before the CESTAT and 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. It was held that CESTAT was an appellate forum under the Customs Act, 1962 and Central Excise Act, 1954 and the Tribunal (Income-tax) could not act as revisionary authority or make any observation whether that order was right or wrong.
On the matter of fluctuating consumption of electricity, it was held that 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.
Since the facts of the present case are identical to the facts of the case decided by the Tribunal, therefore, following the decision of the Coordinate Bench of the Tribunal in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. ITA Nos.1292/PN/2012 and in absence of any contrary material brought to our notice the grounds raised by the Revenue are dismissed and the addition sustained by the CIT (A) is deleted.
Accordingly appeal of the revenue dismissed.
