Appeal Details
Counselvise Citation
[2018] 122 COUNSELVISE.COM (IT) 3675 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
09-03-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
27-04-2017
Assessment Year
2007-2008
Appeal Filed On
19-02-2015
Judgement Text
1 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) BEFORE . . , /AND . . , ) [BEFORE SHRI P. M. JAGTAP, AM & SHRI A. T. VARKEY, JM] I.T(SS).A. NOS. 30 TO 33/KOL/2015 ASSESSMENT YEARS: 2007-08 TO 2010-11 DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(3), KOLKATA. VS. M/S. RUNGTA MINES LTD., (PAN: AABCR6463N) APPELLANT RESPONDENT DATE OF HEARING 03.01.2018 DATE OF PRONOUNCEMENT 09.03.2018 FOR THE APPELLANT SHRI G. MALLIKARJUNA, CIT, DR FOR THE RESPONDENT SHRI SUBASH AGARWAL, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM ALL THESE APPEALS FILED BY THE REVENUE CHALLENGING THE DECISIONS OF LD. CIT(A)-20, KOLKATA ALL DATED 12.12.2014 FOR AYS 2007-08 TO 201 0-11. SINCE FACTS ARE COMMON AND GROUNDS ARE IDENTICAL, WE DISPOSE OF ALL THESE APPE ALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MINING AND ALSO INVOLVED IN MANUFACTURING OF SPONGE IRON. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED U/S. 132 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 06.02.2012 IN THE RESIDENTIAL AND BUSINESS PREMISES OF RUNGTA GROUP. THEREAFTER, THE AO INVOKED SECTION 153A OF THE ACT AND INITIATED ASSES SMENT PROCEEDINGS AGAINST THE ASSESSEE. LATER, THE ASSESSMENT PROCEEDINGS U/S. 153A READ WI TH SEC. 143(3) OF THE ACT WERE CONCLUDED BY THE AO. APPEALS BEFORE THE TRIBUNAL H AVE BEEN FILED BY THE REVENUE FOR THE AYS 2007-08 TO 2010-11. BASIC ISSUE RAISED BY THE REVENUE RELATES TO THE ADDITION MADE BY THE AO ON ACCOUNT OF ALLEGED SUPPRESSION OF PRODUCT ION OF SPONGE IRON AND SALES WHICH HAS BEEN DELETED BY THE LD. CIT(A). IN THE MEMORANDUM OF APPEAL FOR THE AY 2007-08 THE FOLLOWING GROUNDS WERE RAISED BY THE DEPARTMENT. 2 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 I) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS ERRED IN DELETING THE ADDITION OF RS.6,14,07,072/- ON THE BASIS OF ADDITIONAL EVIDENC E & DOCUMENTS ETC. WITHOUT GIVING OPPORTUNITY TO THE AO TO EXAMINE THE SAME. II) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS ERRED IN ACCEPTING FRESH EVIDENCE AND DOCUMENTS VIOLATING THE PROVISION UNDER RULE 46A OF THE I. T. RULES, 1962. FOR THE REST OF THE THREE YEARS, THE REVENUE HAS S UBMITTED REVISED GROUNDS OF APPEAL. 3. DURING HEARING BOTH THE PARTIES HAD AGREED T HAT THE ISSUES RAISED BY THE REVENUE IN ALL THE FOUR YEARS ARE SAME. THE REVISED GROUNDS OF AP PEAL FOR THE REST OF THE THREE YEARS ARE EXACTLY THE SAME EXCEPT VARIANCE IN FIGURE UNDER CH ALLENGE. REVISED GROUNDS FOR AY 2008- 09 ARE REPRODUCED AS UNDER: I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER LAW, THE LD. CIT(A)-20 ERRED IN DRAWING INFERENCE AND ASSUMPTION THAT THE SALES TAX ORDER DETERMINING EXCESS PRODUCTION IS NOT SUSTAINABLE IN LAW AS SUCH ORDERS HAVE BEEN QUA SHED BY THE SALES TAX TRIBUNAL IN OTHER CASES WITHOUT GIVING SUCH DETAILS IN HIS ORDER AND IGNORING THE FACT THAT THE SALES TAX ORDER IN THIS CASE IS PENDING BEFORE THE SALES TAX TRIBUNAL AND WHERE THE FIRST APPELLATE AUTHORITY HAD UPHELD THE SALES TAX ORDER. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER LAW, THE LD. CIT(A)-20 ERRED IN DELETING THE ADDITION OF RS.10,73,51,268/- ON THE B ASIS OF ADDITIONAL EVIDENCE AND DOCUMENTS, WITHOUT GIVING OPPORTUNITY TO THE AO IN VIOLATION O F THE PROVISIONS OF RULE 46A OF THE INCOME- TAX RULES. III) THAT DEPARTMENT CRAVES LEAVE TO ADD, ALTER OR MODIFY ANY GROUNDS OF APPEAL IN THE COURSE OF APPELLATE PROCEEDINGS. 4. BOTH THE GROUNDS FOR ALL THE FOUR YEARS PERTAINE D TO THE SINGLE ISSUE OF DELETION BY THE LD. CIT(A) OF ADDITION MADE BY AO ON ACCOUNT OF ALL EGED SUPPRESSION OF PRODUCTION OF SPONGE IRON AND SALES. WE NOTE THAT IN THE ASSESSM ENT ORDER FOR AY 2007-08 ORDERS PASSED FOR ALL THE FOUR YEARS ARE SIMILARLY WORDED EXCEPT FOR THE RELEVANT FIGURES. THE AO HAS MADE THE ADDITION ON THE ALLEGED SUPPRESSION OF SALES BY OBSERVING AS UNDER: 8. PAGE NO. 11 TO 24 OF THE SEIZED DOCUMENTS WITH IDENTIFICATION MARK RH-22 CONTAINS A SALES TAX ORDER OF ASSESSMENT PASSED BY DEPUTY COMMISSION ER OF SALES TAX, JAJPUR RANGE, JAJPUR ROAD. ON A PERUSAL OF THE SAME IT IS SEEN THAT THE OFFICIALS OF ENFORCEMENT RANGE, CUTTACK, OF STATE COMMERCIAL TAX WING MADE A SURPRISE VISIT TO THE SPONGE IRON FACTORY OF THE ASSESSEE AT KARAKOLHA, BARBIL ON 18.08.2009. IN COURSE OF THEIR INVESTIGATION, THE ENFORCEMENT OFFICIALS SEIZED CERTAIN DOCUMENTS FROM THE FACTORY PREMISES. AFTER FURTHER INVESTIGATION, ENFORCEMENT OFFICIALS SENT A INVESTIGATION REPORT TO THE JOINT COMMISSIONER OF COMMERCIAL TAXES, JAJPUR. IN COURSE OF INVESTIGATION, ENFORCEMENT OFFICIALS F OUND THAT THE SPONGE IRON PLANT HAS UTILIZED HIGH QUALITY OF IRON ORE, THE FE CONTENT OF WHICH I S WELL BEYOND 63% WHICH WOULD CERTAINLY YIELD 1.000 MT OF SPONGE IRON OUT OF 1.590 MT OF IR ON ORE. 8.1 THE FINDINGS OF THE OFFICIALS OF ENFORCEMENT R ANGE REGARDING USE OF HIGH QUALITY IRON ORE IN ASSESSEE'S SPONGE IRON PLANTS GETS SUPPORT F ROM PAGE NO. 1 TO 159 OF MKJ-113 CONTAINING THE SAMPLE ANALYSIS OF INCOMING IRON ORE TO CHALIAMA STEEL PLANT AND OF IRON ORE OF 3 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 GHATKURI MINES WHICH SHOWS THAT THE FE CONTENT OF T HESE IRON ORE WERE MORE THAN 63% IN MOST OF THE SAMPLES. PAGE NO. 1 OF MKJ-113 EVEN SHO WS THE FE CONTENT UPTO 66.8%. SIMILAR ANALYSIS OF RAW MATERIALS HAVE BEEN MADE AND KEPT I N CSP-61, CSP-56, CSP-67, CSP-32 ETC WHICH SHOW THAT THE SPONGE IRON PLANTS WERE CONSUMI NG HIGH GRADE OF IRON ORE THE AVERAGE OF WHICH IS MORE THAN 63%. 8.2 TO ARRIVE AT A CONCLUSION REGARDING PRODUCTION OF SPONGE IRON FROM THESE HIGH GRADE IRON ORE, THE DEPUTY COMMISSIONER OF SALES TAX CONS ULTED THE DEAN (SPONSORED RESEARCH, INDUSTRIAL CONSULTANCY AND CONTINUING EDUCATION) OF NIT, ROURKELA WHO COMMUNICATED THAT 1.5 MT OF IRON ORE IS REQUIRED FOR PRODUCTION OF 1. 000 MT OF SPONGE IRON. ON THE BASIS OF THIS REPORT, THE DEPUTY COMMISSIONER OF SALES TAX IN HIS ORDER OF ASSESSMENT CONCLUDED THE SUPPRESSION OF PRODUCTION OF SPONGE IRON ORE TO THE EXTENT OF 12,897.640 MT FOR RS. 15,47,71,776 FOR THE ENTIRE PERIOD OF 01.04.2006 TO 31.07.2009 AFTER TAKING THE RATIO THAT 1.59 MT OF IRON ORE IS REQUIRED TO PRODUCE 1.000 MT OF S PONGE IRON. 8.3 THE ENTIRE FACT WAS COMMUNICATED TO THE ASSESSE E AND THE COMMENT OF THE ASSESSEE ON THE MATTER WAS SOUGHT FOR. THE ASSESSEE SUBMITTED THAT 'THE ASSESSMENT ORDER OF DEPUTY COMMISSIONER OF COMMERCIAL TAXES, JAJPUR RANGE, JAJ PUR HAS BEEN CHALLENGED AND THE COMPANY HAS FILED AN APPEAL WITH THE APPELLATE AUTH ORITY. ALSO THE AFORESAID ORDER PERTAINS TO OUR SPONGE IRON PLANT AT KARAKOLHA, ODISHA WHICH CO NSUMES RAW MATERIAL FROM ODISHA ITSELF AND WHERE AS THE REFERENCE MADE BY YOUR GOODSELF RE LATES TO IRON ORE OF GHATKURI MINES LOCATED AT JHARKHAND. AT NO POINT OF TIME, THE ORE OF GHATKURI MINES HAS BEEN USED BY THE KARAKOLHA PLANT IN ODISHA. IN SUPPORT OF OUR CONTEN TION WE REQUEST YOU TO REFER OUR SEIZED DOCUMENTS MKJ-85 & MKJ-88 WHICH ARE GATE(RECEIPT) R EGISTERS OF IRON ORE OF KARAKOLHA PLANT WHEREIN THE WEIGHT, SPECIFICATION OF THE RAW MATERIAL, VEHICLE NO., DATE OF ENTRY & EXIT AND MOST IMPORTANTLY THE SOURCE OF THE RAW MATERIAL IS CLEARLY MENTIONED. FROM THE SAME IT CAN BE EASILY SEEN THAT NO IRON ORE OF GHATKURI MIN ES HAS ENTERED THE PLANT DURING THE RELEVANT PERIOD. SUCH REGISTERS ARE MAINTAINED FOR THE ALL THE YEARS WHICH ARE PRODUCED FOR YOUR VERIFICATION. ALSO IN SUPPORT OF OUR CONTENTIO N WE ARE PRODUCING THE COPIES OF FORM E & FORM J WHICH SHOWS THE SOURCE OF RAW MATERIALS PROC URED FOR KARKOLHA PLANT. FROM THE SAME ALSO IT CAN BE EASILY SEEN THAT NO IRON ORE OF GHAT KURI MINES HAS ENTERED THE PLANT DURING THE RELEVANT PERIOD. FURTHER IT IS ALSO A TRUE FACT THA T THE ORE VARIES FROM MINE TO MINE, STATE TO STATE AS WELL AS THERE ARE ALSO DIFFERENT TYPES OF ORE IN A PARTICULAR MINE.' 8.4 ON A CAREFUL EXAMINATION OF THE SUBMISSION OF T HE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS SUBMITTED AND TRIED TO PROVE THAT NO RAW MATERIALS FROM IT'S GHATKURI MINES, WHICH PRODUCES HIGH GRADE OF IRON ORE, HAS BEEN USED IN IT'S SPONG E IRON PLANT AT KARAKOLHA. BUT THE ASSESSEE HAS DONE PRECISELY LITTLE TO PROVE THAT THE SPONGE IRON PLANT AT KARAKOLHA HAS CONSUMED IRON ORE OF INFERIOR QUALITY. AS SUCH NOTHING HAS BEEN D ONE TO REFUTE THE FINDINGS OF THE VIGILANCE CELL THAT THE SPONGE IRON PLANT AT KARAKOLHA USES H IGH QUALITY OF IRON ORE. ON THE CONTRARY, IT IS SEEN THAT THE FINDINGS OF THE UNDER PRODUCTION O F SPONGE IRON IN THE ORDER OF THE DEPUTY COMMISSIONER OF SALES TAX HAS BEEN UPHELD IN THE FO RUM OF FIRST APPELLATE AUTHORITY I.E. ADDL. COMMISSIONER OF SALES TAX (CENTRAL ZONE). IT IS FAC T THAT THE ASSESSEE HAS FURTHER AGITATED THE MATTER AT A HIGHER FORUM BUT THE MATTER IS PENDING THERE. AS SUCH, SIMPLY BECAUSE OF THE FACT THAT THE ASSESSEE HAS AGITATED THE MATTER AT A HIGH ER FORUM ASSESSEE'S CAUSE CANNOT BE HELPED. 8.5 IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE FI RM OPINION THAT THE PRODUCTION OF THE SPONGE IRON IN THE SPONGE IRON FACTORY OF THE ASSESSEE AT KARAKOLHA, BARBIL HAS BEEN UNDERSTATED. HOWEVER THE LOGIC OF THE SALES TAX AUTHORITY BEHIND ADOPTING THAT 1.59 MT OF IRON ORE IS REQUIRED TO PRODUCE 1.000 MT OF SPONGE IRON IS NOT VERY CLEAR WHEN A TECHNICAL EXPERT HAS ALREADY QUANTIFIED THAT 1.5 MT OF IRON ORE IS REQUI RED FOR PRODUCTION OF 1.000 MT OF SPONGE IRON. THE RATIO QUANTIFIED BY THE TECHNICAL EXPERT IS THEREFORE ADOPTED IN THE CASE AS PER CALCULATION BELOW: THE AVERAGE SALE PRICE OF SPONGE IRON FOR EACH OF T HE FINANCIAL YEARS IS TABULATED AS PER FIGURES OF AUDITED BALANCE SHEET OF RUNGTA MINES LT D. KARAKOLHA PLANT: 4 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 FINANCIAL YEAR SALES AMOUNT QUANTITY SOLD AVERAGE S ALE PRICE (RS. PER MT) 2006-07 2007-08 2008-09 2009-10 586762275.00 909728123.00 1196268123.00 1013684199.00 66481 75878 81419 84408 8826.00 11989.00 14693.00 12009.00 SUPPRESSED SALE IS COMPUTED AS UNDER: F.Y CONSUMPTI9ON OF ORES (MT) PRODUCTION OF SPONGE IRON SHOWN (MT) PRODUCTION AT THE RATIO OF 1.5 (MT) SUPPRESSION OF PRODUCTION (MT) AVERAGE RATE AS PER ABOVE (PER MT) AMOUNT OF SUPPRESSION (RS.) 2006-07 2007-08 2008-09 2009-10 1,12,297.485 1,16,492.230 1,36,429.250 55,091.650 67,907.470 68,707.340 81,430.550 33,403.290 74,864.990 77,661.487 90,952.833 36,727.767 6957.520 8954.147 9522.283 3324.477 8826.00 11989.00 14693.00 12009.00 61407072 107351268 139910904 39923644 FURTHER, SINCE NO EXCESS CLOSING STOCK HAS BEEN DET ECTED, IT IS HELD THAT THE ASSESSEE HAS SOLD THE SUPPRESSED PRODUCTION AND CONSEQUENTLY UNDERSTA TED THE SALES. MOREOVER AS THE PROCESSING OF THE SAME AMOUNT OF IRON ORE AS RECORD ED IN THE BOOKS OF ACCOUNTS HAS RESULTED IN THE SUPPRESSED PRODUCTION AND THE CONSEQUENT SUP PRESSED SALE, NO ADDITIONAL EXPENSES HAS BEEN INCURRED BY THE ASSESSEE OVER AND ABOVE THE EX PENSES DEBITED IN THE P&L A/C. THEREFORE THE ENTIRE SUPPRESSED SALE OF RS. 6,14,07,072 FOR T HE YEAR IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 9. ON SCRUTINY OF RECORDS, IT IS REVEALED FROM TAR THAT AN AMOUNT OF RS. 1,33,38,388/- WAS NOT ALLOWABLE FOR DEDUCTION U/S. 43B. IT IS SEEN THAT I N THE COMPUTATION OF INCOME THE ASSESSEE DISALLOWED AND ADDED BACK RS. 91,61,860/-. ON VERIF ICATION IT WAS SEEN THAT THE DISALLOWANCE OF RS. 91,61,860 IS ACTUALLY NOT A DISALLOWANCE U/S 43B BUT A DISALLOWANCE U/S 40 (A)(IA). THE ASSESSEE WAS ASKED TO CLARIFY THE NON-PAYMENT OF RS . 1,33,38,388. THE ASSESSEE FILED A STATEMENT ALONG WITH SUPPORTING EVIDENCES WHEREIN I T IS SEEN THAT ACTUALLY AN AMOUNT OF RS. 1,26,87,690.75 HAS BEEN CLEARED BY THE ASSESSEE BY WAY OF PAYMENT I ADJUSTMENT BEFORE THE DUE DATE OF FILING OF RETURN. HOWEVER AN AMOUNT OF RS.6,50,697.56 WAS NOT PAID BY THE DUE DATE OF FILING OF RETURN. AS SUCH AN AMOUNT OF RS. 6,50,698 IS DISALLOWED U/S. 43B. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DELETE THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: I HAVE PERUSED THE IMPUGNED ORDER. I HAVE ALSO CO NSIDERED THE ARGUMENTS OF THE LD AR AND THE MATERIAL PLACED BY HIM ON RECORD. I FIND FROM T HE IMPUGNED ORDER THAT THE AO HAS POINTED OUT NO DEFECT OR MISTAKE IN THE BOOKS OF ACCOUNT OR OTHER RELEVANT DOCUMENTS THAT WERE PRODUCED BEFORE HIM IN COURSE OF THE ASSESSMENT PRO CEEDINGS. THE AO HAS NOT EVEN REJECTED THE BOOKS OF THE ASSESSEE. I THEREFORE FIND MERIT I N THE CONTENTION THAT THE AO UNDER THE CIRCUMSTANCES WAS NOT AUTHORISED TO DISTURB THE BOO K RESULTS AND ASSUME IMAGINARY PRODUCTION THAT TOO WITHOUT THERE BEING ANY POSITIV E MATERIAL ON RECORD TO SUPPORT HIS ALLEGATIONS. THE AO HAS CERTAINLY ERRED IN LAW AS W ELL AS ON FACTS IN RESORTING TO ESTIMATION BY APPLYING YIELD RATIO WHEN HE HAD FOUND NO DEFECT IN THE BOOKS OF ACCOUNT AND WHEN THERE WAS NO MATERIAL OR EVIDENCE TO SUPPORT HIS ALLEGATIONS. I ALSO FIND SUBSTANCE IN THE ARGUMENT THAT NO UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD FOR CONSUMPTION OF IRON ORE CAN BE PRESCRIBED WITHOUT APPRECIATING THE VARIOUS OTHER F ACTORS SUCH AS THE QUALITY AND COMPOSITION OF RAW MATERIALS AND OPERATING CONDITIONS WHICH ALS O CONTRIBUTE TO THE YIELD RATIO. THE 5 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 MATERIAL PLACED ON RECORD ALSO SUGGESTS THAT THE YI ELD RATIO CAN VARY FROM PLANT TO PLANT AND EVEN FROM YEAR TO YEAR FOR THE SAME PLANT. I HAVE P ERUSED THE RELEVANT PAGES OF THE ANNUAL REPORTS OF TATA SPONGE IRON LTD, ORISSA SPONGE IRON & STEEL LTD AND MSP STEEL & POWER LTD WHICH ARE ALSO ENGAGED IN PRODUCTION OF SPONGE IRON IN THE STATE OF ORISSA. I FIND THAT THE YIELD RATIO HAS NOT ONLY DIFFERED FOR THE 3 COMPANIES BUT IT HAS ALSO VARIED IN DIFFERENT YEARS FOR THE SAME COMPANY. THE DIRECTORATE GENERAL OF FOREIGN TR ADE HAS IN ITS STANDARD INPUT OUTPUT NORMS FOR SPONGE IRON SUGGESTED YIELD RATIO OF 1.5 WHEN THE FE CONTENT IN THE IRON ORE IS 67% OR MORE. THE ANDHRA PRADESH POLLUTION CONTROL BOARD HAS IN ITS INFORMATION BULLETIN SUGGESTED THE YIELD RATION OF 1.60 TO 1.75. THUS, I T APPEARS THAT EVEN THE VARIOUS GOVERNMENT INSTITUTIONS ARE NOT UNANIMOUS IN THEIR OPINION ON THE ISSUE OF YIELD RATIO IN SPONGE IRON FACTORIES. I THEREFORE FIND MERIT IN THE ARGUMENT T HAT THERE CAN BE NO UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD FOR THE YIELD RATIO THAT ALSO D EPENDS ON VARIOUS FACTORS SUCH AS COMPOSITION AND QUALITY OF RAW MATERIALS AND OPERAT ING CONDITIONS. THE LD AR HAS SUBMITTED IN COURSE OF THE APPELLATE PROCEEDINGS THAT THE FE CONTENT IN IRON ORE DIFFERS FROM MINE TO MINE AND ALSO FROM STATE TO STATE. I FIND FROM THE IMPUG NED ORDER THAT THE AO HAD NO INDEPENDENT DATA REGARDING THE FE CONTENT IN IRON ORE UTILISED IN THE SPONGE IRON FACTORY AT KARAKOLHA (ORISSA). THE AO THEREFORE RELIED ON THE INVESTIGAT ION REPORT OF THE ENFORCEMENT OFFICIALS OF THE STATE COMMERCIAL TAX WING OF ORISSA AND THE ASS ESSMENT ORDER OF THE DEPUTY COMMISSIONER OF SALES TAX TO CONCLUDE THAT THE SPON GE IRON FACTORY AT KARAKOLHA HAD UTILISED IRON ORE HAVING FE CONTENT OVER 63%. THE AO ALSO DR EW STRENGTH FROM THE SAMPLE ANALYSIS OF IRON ORE RECEIVED IN THE SPONGE IRON FACTORY AT CHA LIAMA (JHARKHAND) AND THOSE EXTRACTED FROM THE GHATKURI MINES (JHARKHAND) AS CONTAINED IN THE SEIZED DOCUMENTS MKJ -113 AND CSP-32, 56, 61 & 67. THE ASSESSEE HAD CONTENDED AT THE ASSESSMENT STAGE THAT IRON ORE FROM GHATKURI MINES (JHARKHAND) WAS NEVER UTILISED IN TH E SPONGE IRON FACTORY AT KARAKOLHA (ORISSA) AND THEREFORE ITS FE CONTENT WAS NOT RELEV ANT IN SO FAR AS THE COMPOSITION OF IRON ORE UTILISED IN THE SPONGE IRON FACTORY AT KARAKOLHA (O RISSA) WAS CONCERNED. I FIND THAT THIS CONTENTION WAS NOT DISPUTED BY THE AO IN HIS ASSESS MENT ORDER. I FIND THAT THE SEIZED DOCUMENTS MKJ-113 CONTAINED RECORDS OF IRON ORE REC EIVED IN THE SPONGE IRON FACTORY AT CHALIAMA (JHARKHAND) AND SAMPLE ANALYSIS OF IRON OR E EXTRACTED FROM THE GHATKURI MINES (JHARKHAND). BUT THEN, IRON ORE RECEIVED IN THE SPO NGE IRON FACTORY AT CHALIAMA (JHARKHAND) HAS NO RELEVANCE TO THE COMPOSITION OF IRON ORE UTI LISED IN THE SPONGE IRON FACTO AT KARAKOLHA (ORISSA). SIMILARLY, THE DOCUMENTS MARKED CSP-32, 5 6, 61 & 7 WERE SEIZED FROM THE OFFICE OF CHALIAMA STEEL PLANT AT CHAIBASA (JHARKHAND) WHICH PERTAIN TO THE SPONGE IRON FACTORY AT CHALIAMA AND THEREFORE HAS NO RELEVANCE IN SO FAR A S THE COMPOSITION OF IRON ORE UTILISED IN THE SPONGE IRON FACTORY AT KARAKOLHA (ORISSA) WAS C ONCERNED. I HAVE PERUSED THE SEIZED DOCUMENTS MKJ -85 & 88 WHICH WERE GATE RECEIPT REGI STERS OF THE FACTORY AT KARAKOLHA CONTAINING ALL RELEVANT DETAILS SUCH AS DATE OF ENT RY & EXIT, VEHICLE NUMBER, WEIGHT & SPECIFICATION OF RAW MATERIAL AND ALSO THE SOURCE O F RAW MATERIAL. THE GATE RECEIPT REGISTERS CLEARLY SHOW THAT THE IRON ORE UTILISED IN THE SPON GE IRON FACTORY AT KARAKOLHA (ORISSA) CAME FROM THE MINES IN ORISSA. I ALSO FIND FROM THE COPY OF FORM E & J CONTAINING ACCOUNT OF PROCUREMENT AND TRANSPORTATION OF MINERALS/ ORES AS PER THE ORISSA MINERALS (PREVENTION OF THEFT, SMUGGLING & ILLEGAL MINING AND REGULATION OF POSSESSION, STORAGE, TRADING AND TRANSPORTATION) RULES, 2007 THAT THE SPONGE IRON FA CTORY AT KARAKOLHA (ORISSA) UTILISED IRON ORE FROM THE MINES SITUATED IN ORISSA. IN SUCH FACT UAL BACKGROUND, THE AO HAS ERRED IN RELYING ON THE SEIZED DOCUMENTS MKJ-113 AND CSP-32, 56, 61 & 67 WHICH WERE NOT RELEVANT IN SO FAR AS THE COMPOSITION OF IRON ORE UTILISED IN THE SPON GE IRON FACTORY AT KARAKOLHA (ORISSA) WAS CONCERNED. THE SECOND PILLAR ON WHICH THE AO HAS PL ACED RELIANCE WAS THE INVESTIGATION REPORT OF THE ENFORCEMENT OFFICIALS OF THE STATE CO MMERCIAL TAX WING OF ORISSA AND THE ASSESSMENT ORDER OF THE DEPUTY COMMISSIONER OF SALE S TAX BUT THEN BOTH HAVE PLACED THE FE CONTENT OF IRON ORE AT OVER 63%/1 HAVE PERUSED THE ASSESSMENT ORDER OF THE DEPUTY COMMISSIONER OF SALES TAX WHO HAS AT PAGE 6 OF HIS ORDER ACKNOWLEDGED THAT THE ASSESSEE PRODUCED BEFORE HIM THE LABORATORY REPORTS REGARDIN G SAMPLE ANALYSIS OF IRON ORE UTILISED IN ITS SPONGE IRON FACTORY AT KARAKOLHA (ORISSA) WHICH PLACED THE FE CONTENT AT 62.79% IN THE FINANCIAL YEAR 2006-07, 62.80% IN THE FINANCIAL YEA R 2007-08, 62.79% IN THE FINANCIAL YEAR 2008-09 AND 63.23% IN THE FINANCIAL YEAR 2009-10 (U PTO JULY). THE DEPUTY COMMISSIONER OF SALES TAX HOWEVER HAS NOT DISPUTED THE LABORATORY R EPORTS PRODUCED BY THE ASSESSEE BEFORE 6 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 HIM AND HELD THAT THE SPONGE IRON FACTORY AT KARAKO LHA UTILISED IRON ORE HAVING FE CONTENT OF 63%, HE HAS HOWEVER, CONSIDERED THE SAME AS IRON OR E OF HIGH GRADE. I THEREFORE NOTE THAT THERE IS NO POSITIVE MATERIAL ON RECORD TO SUGGEST THAT ASSESSEE'S SPONGE IRON FACTORY AT KARAKOLHA UTILISED IRON ORE HAVING FE CONTENT OF 65 %. THE AO THEREFORE ERRED IN APPLYING THE YIELD RATIO OF 1.5 AS SUGGESTED BY THE DEAN OF NIT, ROURKELA WITHOUT VERIFYING THE BASIC REQUIREMENT THAT THE FE CONTENT IN IRON ORE SHOULD BE 65%. I AGREE WITH THE LD AR THAT NO UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD FOR CON SUMPTION OF IRON ORE COULD POSSIBLY BE PRESCRIBED WITHOUT APPRECIATING THE VARIOUS OTHER F ACTORS WHICH ALSO CONTRIBUTE TO THE YIELD RATIO. BUT EVEN OTHERWISE, THE AO ERRED ON FACTS AS WELL FOR HE HAS NOT CONSIDERED THE EXPERT VIEW IN ITS ENTIRETY IN AS MUCH AS THE DEAN HAD CLE ARLY STATED THAT THE CONSUMPTION OF IRON ORE PER TON OF SPONGE IRON WILL BE MORE THAN 1.5 TON IF THE FE CONTENT IN THE IRON ORE WAS LESS THAN 65%. I FIND MERIT AND SUBSTANCE IN THE CONTENTION O F THE LD AR THAT THE ASSUMED IMAGINARY PRODUCTION OF SPONGE IRON AND ITS CLANDESTINE REMOV AL AND SUBSEQUENT SALE IS NOT BACKED BY ANY POSITIVE MATERIAL EVIDENCE FOUND IN THE SEARCH. FOR, THE AO HAS DISCUSSED NO SEIZED MATERIAL IN THE IMPUGNED ORDER THAT EVEN REMOTELY S UPPORTED HIS ALLEGATIONS OF EXCESS PRODUCTION OR ITS SUBSEQUENT SALE. I ALSO FIND MERI T IN THE ARGUMENT THAT THERE WAS NO RECOVERY OF EVIDENCE OR DOCUMENT SUGGESTING COMMENSURATE INV ESTMENT IN UNDISCLOSED ASSETS OR UNACCOUNTED EXPENSES WHICH COULD CORROBORATE THE AS SUMPTION OF UNDISCLOSED PROFITS TO THE TUNE OF RS.34.86 CRORES AS ALLEGED BY THE AO IN HIS ASSESSMENT ORDERS FOR THE FINANCIAL YEARS 2006-07 TO 2009-10. 21. I FIND FROM THE IMPUGNED ORDER THAT THE AO HAS RELIGIOUSLY RELIED ON THE TECHNICAL OPINION OF THE DEAN OF NIT, ROURKELA TO ESTIMATE THE PRODUC TION OF SPONGE IRON IN THE FINANCIAL YEARS 2006-07 TO 2009-10. THE LD AR HAS IN COURSE OF THE APPELLATE PROCEEDINGS PLACED ON RECORD COPY OF THE LETTER DATED 01-09-2004 ADDRESSED TO TH E COMMERCIAL TAX OFFICER, CIRCLE-II, PANPOSH, ROURKELA WHEREBY THE DEAN OF NIT, ROURKELA CONVEYED HIS TECHNICAL OPINION REGARDING CONSUMPTION OF RAW MATERIAL FOR PRODUCTIO N OF SPONGE IRON. I FIND IT APPROPRIATE TO FIRST REPRODUCE THE RELEVANT PORTIONS OF SUCH TECHN ICAL OPINION : 'IN FACT NO DIRECT DATA IS AVAILABLE IN ANY REFEREN CE BOOK DEALING WITH DRI (DIRECT REDUCED OF IRON) ON RAW MATERIAL CONSUMPTION PATTER N. THIS WILL VARY FROM PLANT TO PLANT DEPENDING ON COMPOSITION AND QUALITY OF RAW M ATERIAL AND THE OPERATING CONDITIONS. HOWEVER BASED ON OUR KNOWLEDGE AND GENE RAL DISCUSSION WITH SOME PRODUCERS, I MENTION BELOW THE AVERAGE REQUIREMENT OF RAW MATERIAL PER TON OF SPONGE IRON PRODUCED UNDER AVERAGE INDIAN CONDITION S. CONSUMPTION PER TON OF SPONGE IRON: IRON ORE - 1.5 TON (WITH FE CONTENT IN THE ORE 65%), IF IT IS LESS, THERE WILL BE MORE CONSUMPTION'. I HAVE CAREFULLY ANALYSED THE TECHNICAL OPINION OF THE DEAN OF NIT, ROURKELA. I FIND THAT THE AO WHILE RELYING ON SUCH TECHNICAL OPINION IN THE I MPUGNED ORDER HAS MISSED SOME VERY VITAL ASPECTS. THE DEAN HAS CLEARLY PLACED ON RECORD THE FACTUAL POSITION (I) THAT NO DIRECT DATA REGARDING CONSUMPTION PATTERN OF RAW MATERIAL WAS A VAILABLE IN ANY REFERENCE BOOK; (II) THAT HIS OPINION WAS BASED ON HIS PERSONAL KNOWLEDGE AND GENERAL DISCUSSION WITH SOME PRODUCERS; (III) THAT THE YIELD RATIO WILL VARY FRO M PLANT TO PLANT DEPENDING ON THE COMPOSITION AND QUALITY OF RAW MATERIAL AND THE OPERATING CONDI TIONS; (IV) THAT THE CONSUMPTION OF IRON ORE PER TON OF SPONGE IRON WOULD BE 1.5 TON PROVIDED TH E FE CONTENT IN THE IRON ORE WAS 65%; AND, (V) THAT THE CONSUMPTION OF IRON ORE PER TON OF SPO NGE IRON WILL BE MORE THAN 1.5 TON IF THE FE CONTENT IN THE IRON ORE WAS LESS THAN 65%. THE DEAN BEFORE PENNING HIS TECHNICAL OPINION HAS CLARIFIED AT THE OUTSET THAT NO DIRECT DATA REGARDI NG CONSUMPTION PATTERN OF RAW MATERIAL WAS AVAILABLE IN ANY REFERENCE BOOK AND THAT SUCH OPINI ON WAS BASED ON HIS PERSONAL KNOWLEDGE AND GENERAL DISCUSSION WITH SOME PRODUCERS THEREBY STATING IN NO UNEQUIVOCAL, TERMS THAT NO UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD YIELD R ATIO COULD POSSIBLY BE SUGGESTED FOR CONSUMPTION OF RAW MATERIAL. THE AO HOWEVER BLINDLY APPLIED THE YIELD RATIO OF 1.5 AND IGNORED THIS VITAL ASPECT THAT THERE COULD BE NO ST ANDARD PATTERN FOR CONSUMPTION OF RAW MATERIAL. THE AO MISSED THE CAUTION THAT WAS CLEARL Y SOUNDED BY THE DEAN THAT NO STANDARD FORMULA COULD POSSIBLY BE LAID DOWN FOR THE INPUT-O UTPUT RATIO. I ALSO NOTE THAT THE YIELD RATIO 7 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 OF 1.5 AS SUGGESTED BY THE DEAN WAS BASED ON HIS PE RSONAL KNOWLEDGE 'AND HIS DISCUSSIONS WITH SOME PRODUCERS AND SO SUCH YIELD RATIO COULD N OT BE UNIVERSALLY APPLIED TO ALL SPONGE IRON FACTORIES. THE AO WAS THEREFORE NOT JUSTIFIED IN MECHANICALLY APPLYING THE YIELD RATIO OF 1.5 TO THE SPONGE IRON FACTORY OF THE ASSESSEE. THE DEAN HAD ALSO CLARIFIED THAT THE YIELD RATIO WILL VARY FROM PLANT TO PLANT DEPENDING ON THE COMP OSITION AND QUALITY OF RAW MATERIAL AND THE OPERATING CONDITIONS. THE AO HOWEVER FAILED TO CONSIDER SUCH FACTORS AS THE COMPOSITION AND QUALITY OF RAW MATERIAL AND ALSO THE OPERATING CONDITIONS BEFORE APPLYING THE YIELD RATIO OF 1.5 IN THE CASE OF THE ASSESSEE. THE DEAN HAD OP INED THAT THE CONSUMPTION OF IRON ORE PER TON OF SPONGE IRON WOULD BE 1.5 TON PROVIDED THE FE CONTENT IN THE IRON ORE WAS 65%. HE HAD ALSO CLARIFIED THAT THE CONSUMPTION OF IRON ORE PER TON OF SPONGE IRON WILL BE MORE THAN 1.5 TON IF THE FE CONTENT IN THE IRON ORE WAS LESS THAN 65% . I FIND THAT THE AO HAS BLUNDERED ON THIS FRONT AS WELL. THE AO HAS IN PARA 8 OF THE IMPUGNED ORDER PLACED THE FE CONTENT OF IRON ORE UTILISED IN ASSESSEE'S SPONGE IRON FACTORY UNDER CO NSIDERATION AT OVER 63%. THE AO IN FACT RELIED ON THE INVESTIGATION REPORT OF THE STATE COM MERCIAL TAX WING OF ORISSA WHEREIN IT WAS CLAIMED THAT THE FE CONTENT OF THE IRON ORE UTILISE D IN THE SPONGE IRON FACTORY AT KARAKOLHA WAS WELL BEYOND 63%. I HOWEVER NOTE THAT NEITHER TH E INVESTIGATION REPORT OF THE STATE COMMERCIAL TAX WING OF ORISSA NOR THE AO HAS EVER C LAIMED THAT THE FE CONTENT OF IRON ORE UTILISED IN ASSESSEE'S SPONGE IRON FACTORY WAS 65% OR MORE. I FURTHER NOTE THAT THE AO HAS IN THE IMPUGNED ORDER PLACED TOO MUCH RELIANCE ON THE ASSESSMENT ORDER OF THE DEPUTY COMMISSIONER OF SALES TAX. I HAVE THEREFORE PERUSED THE ASSESSMENT ORDER OF THE DEPUTY COMMISSIONER OF SALES TAX THAT WAS PLACED ON RECORD IN COURSE OF THE APPELLATE PROCEEDINGS. I FIND THAT THE DEPUTY COMMISSIONER OF SALES TAX HAS AT PAGE 6 OF HIS ASSESSMENT ORDER CONCEDED THAT THE ASSESSEE PRODUCED BEFORE HIM THE LABORATORY REPORTS REGARDING SAMPLE ANALYSIS OF IRON ORE UTILISED IN ITS SPONGE IRON FA CTORY AT KARAKOLHA (ORISSA) WHICH PLACED THE FE CONTENT AT 62.79% IN THE FINANCIAL YEAR 2006-07, 62.80% IN THE FINANCIAL YEAR 2007-08, 62.79% IN THE FINANCIAL YEAR 2008-09 AND 63.23% IN THE FINANCIAL YEAR 2009-10 (UPTO JULY). THE DEPUTY COMMISSIONER OF SALES TAX DID NOT DISPUT E THE LABORATORY REPORTS PRODUCED BY THE ASSESSEE BEFORE HIM AND HELD THAT THE SPONGE IRON F ACTORY AT KARAKOLHA UTILISED IRON ORE HAVING FE CONTENT OF 63%, HE HAS HOWEVER CONSIDERED THE SAME AS IRON ORE OF HIGH GRADE. THE AO HAS NO INDEPENDENT MATERIAL WITH HIM TO, SUBSTAN TIATE HIS CONCLUSION THAT ASSESSEE'S SPONGE IRON FACTORY AT KARAKOLHA UTILISED IRON ORE OF SUPERIOR QUALITY. THE AO FOR DRAWING HIS CONCLUSIONS HAS SOLELY RELIED ON THE ASSESSMENT ORD ER OF THE DEPUTY COMMISSIONER OF SALES TAX AND THE INVESTIGATION REPORT OF THE STATE COMME RCIAL TAX WING OF ORISSA BUT THEN BOTH HAVE PLACED THE FE CONTENT IN THE IRON ORE AT OVER 63%. I THEREFORE NOTE THAT THERE IS NO POSITIVE MATERIAL ON RECORD TO SUGGEST THAT ASSESSE E'S SPONGE IRON FACTORY AT KARAKOLHA UTILISED IRON ORE HAVING FE CONTENT OF 65%. IN SUCH FACTUAL BACKGROUND, THE PRE-CONDITION FOR APPLYING THE YIELD RATIO OF 1.5 THAT THE FE CONTENT SHOULD BE 65% IS NOT SATISFIED IN THE CASE OF THE ASSESSEE. THE DEAN HAS CLEARLY MADE HIS POINT T HAT THE CONSUMPTION OF IRON ORE PER TON OF SPONGE IRON WILL BE MORE THAN 1.5 TON IF THE FE CON TENT IN THE IRON ORE WAS LESS THAN 65%. THE AO THUS HAS ERRED ON FACTS IN APPLYING THE YIELD RA TIO OF 1.5 WITHOUT EVEN VERIFYING THE BASIC REQUIREMENT THAT THE IRON ORE UTILISED IN THE SPONG E IRON FACTORY SHOULD HAVE FE CONTENT OF 65%. THE DEAN IN HIS TECHNICAL OPINION HAS ALSO STA TED THAT THE YIELD RATIO WILL DEPEND ON THE OPERATING CONDITIONS BUT NO SUCH ANALYSIS SEEMS TO HAVE BEEN UNDERTAKEN BY THE AO. I FIND THAT THE AO HAS NOT EVEN CONSIDERED IN THE IMPUGNED ORDER THE OPERATING CONDITIONS OF THE SPONGE IRON FACTORY AS A FACTOR BEFORE APPLYING THE YIELD RATIO OF 1.5. UNDER THE CIRCUMSTANCES, I AM OF THE CONSIDERED VIEW THAT NO STANDARD FORMULA CAN BE PRESCRIBED FOR THE YIELD RATIO AS IT WAS DEPENDED ON VARIOUS FACTORS S UCH AS THE COMPOSITION AND QUALITY OF RAW MATERIAL AND THE OPERATING CONDITIONS AND THEREFORE THE AO WAS NOT JUSTIFIED IN MECHANICALLY APPLYING THE YIELD RATIO OF 1.5 IN THE CASE OF THE ASSESSEE. BUT EVEN OTHERWISE, THE AO HAS ALSO ERRED ON FACTS IN NOT VERIFYING THE BASIC REQUIREME NTS AND ALSO IGNORING THE VARIOUS FACTORS AS SUGGESTED IN THE TECHNICAL OPINION. 6. THEREAFTER, THE LD. CIT(A) CONCLUDED BY OBSERVIN G AS UNDER: 8 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 IN VIEW OF THE RATIO LAID DOWN BY THE VARIOUS COU RTS, I AM OF THE CONSIDERED OPINION THAT THE AO HAS ERRED IN LAW IN ASSUMING IMAGINARY PRODUCTIO N OF SPONGE IRON BY MECHANICALLY APPLYING THE YIELD RATIO OF 1.5 AND ALSO IN ASSUMIN G THAT SUCH PRODUCTION WAS CLANDESTINELY REMOVED FROM THE FACTORY AND SUBSEQUENTLY SOLD AWAY IN THE MARKET. IN VIEW OF THE FACTUAL AND LEGAL POSITION AS DISCUSSED IN THE FOREGOING PA RAGRAPHS, I AM OF THE OPINION THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF SUPPRESSED SA LES IS NEITHER SUSTAINABLE IN LAW NOR ON FACTS. THE ADDITION OF RS.6,14,07,072/- IS THEREFO RE DIRECTED TO BE DELETED. GROUND NO. 6 IS ALLOWED. 7. AGGRIEVED BY THE AFORESAID ORDER OF THE LD. CIT( A) THE REVENUE IS BEFORE US. 8. BEFORE US, THE LD. DR ASSAILING THE ORDER OF LD CIT(A) CONTENDED THAT THE SALES TAX AUTHORITIES HAS PASSED ORDERS AGAINST THE ASSESSEE AND AS PER THE SAID ORDER IT IS EVIDENT THAT THE ENFORCEMENT OFFICIALS MADE A SURPRISE VISIT TO THE FACTORY PREMISES OF THE SPONGE IRON DIVISION AT KARAKOLHA, BARBIL ON 18.08.2009 AND REC OVERED AND SEIZED CERTAIN DOCUMENTS. THEY ALSO VISITED THE OFFICE PREMISES OF THE ASSESS EE ON THE SAME DAY AT BARBIL AND ELICITED THE ASSESSEES EXPLANATION AGAINST ALL THE SEIZED D OCUMENTS AND CONCLUDED THAT THERE WAS SUPPRESSION OF SALES FOR 279.618 MT OF IRON ORE FIN ES VALUED AT RS.55,92,360/- AS PER ONE EXPRESS DUPLICATE BOOK FROM KARAKHOLHA BRANCH. THE LD. DR STATED THAT THE SALES TAX ASSESSMENT AT PAGE 9 WHICH IS PLACED AT PAGE 39 OF THE PAPER BOOK REVEALS THAT THERE WAS SUPPRESSION OF SALES TO THE EXTENT OF 2897.640 MT O F SPONGE IRON FOR RS.15,47,71,776/- WHICH IS ON THE BASIS OF SUPPRESSION OF PRODUCTION. ACCORDING TO SALES TAX ASSESSING OFFICER, THE ASSESSEE HAD UTILIZED HIGH QUALITY IRO N ORE WHERE THE FE CONTENT WAS MORE THAN 63% WHICH WOULD CERTAINLY YIELD 1.000MT OF SPONGE I RON OUT OF 1.590 MT OF IRON ORE, BUT THE ASSESSEE COMPANY ON THE CONTRARY HAS CONSUMED 1 12297.485 MT, 116492.230 MT, 136429.250 MT AND 55091.650 MT OF IRON ORE FOR THE PERIOD 2006-07 TO 2009-10 (UP TO 31.07.09) TO PRODUCE 67907.470 MT, 68707.340 MT, 81 430.550 MT AND 33403.290 MT OF SPONGE IRON DURING THAT RESPECTIVE PERIODS WHICH C ALCULATES THE RATIO ONLY AT 1.67 MT OF IRON ORE TO 1.00 MT OF SPONGE IRON, THUS UNDERSTATI NG THE PRODUCTION. IT WAS FINALLY CONCLUDED IN THE SAID ORDER THAT THE ENTIRE IRON OR E BEING HIGH GRADE AT 63% IN THE OWN ADMISSION OF THE MANAGER, COMMERCIAL ON APPLICATION OF SION, THE PRODUCTION WAS UNDERSTATED BY 12897.640 MT SINCE THE SAME SHOULD H AVE BEEN AT 264346.298 MT OUT OF IRON ORE OF 420310.615 MT INSTEAD OF DISCLOSED AT 2 51448.650 MT, THEREBY SALES SUPPRESSION OF RS.15,47,71,776/-. 9. IT WAS ALSO CONTENDED BY THE LD. DR THAT FROM A PERUSAL OF PAGE 7 OF THE SALES TAX ASSESSMENT ORDER THAT AS PER THE REPORT OF VIGILANC E WING OF BALASORE DIVISION BY THE STO 9 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 IN COURSE OF INSPECTION AT THE JAGANG MINES AND OFF ICE BARBIL, THEY SEIZED CERTAIN WRITTEN SLIPS, DOCUMENTS, REGISTERS, CHALLANS, TAX INVOICES ETC. CONCERNING THEIR BUSINESS TRANSACTIONS FOR THE PERIOD 2008-09 TO 2009-10. ACCORDING TO AO (SALES TAX) ALL THE SEIZED DOCUMENTS WERE SUBSEQUENTLY CROSS VERIFIED WITH THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE WHICH RESULTED IN THE REPORTED SUPPRESSION OF RS.465,73,1 9,882/- WHICH EMANATED OUT OF CROSS VERIFICATION OF THE TWO SEIZED MONTHLY PERFORMANCE REPORTS FOR THE MONTHS JULY, 2008 AND JULY, 2009 WITH THE MINING RETURNS, SUBMITTED BY TH E ASSESSEE COMPANY TO THE OFFICE OF THE DEPUTY DIRECTOR OF MINES, JODA FOR THE PERIOD APRIL , 2008 TO JULY, 2008 AND APRIL, 2009 TO JULY, 2009. 10. THE LD. DR SUBMITTED THAT ON PERUSAL OF THE ORD ER OF THE DEPUTY COMMISSIONER, SALES TAX REVEALS THAT THERE IS A CLEAR CUT FINDING BY THE STATE AUTHORITY ABOUT THE SUPPRESSION OF THE SALES BY THE ASSESSEE COMPANY BA SED ON MATERIAL WHEREAS THE LD. CIT(A) HAS GIVEN RELIEF ON THE BASIS THAT ANY ESTIMATION B Y THE AO OF THE PRODUCTION OF SPONGE IRON BY APPLYING THE YIELD RATIO WAS NOT VALID WHEN THER E IS NO REJECTION OF BOOKS. THE LD. DR ALSO SUBMITTED THAT THE LD. CIT(A) HAS ADMITTED ADD ITIONAL EVIDENCE WITHOUT GIVING ANY OPPORTUNITY OF REBUTTAL TO THE AO. ACCORDING TO TH E LD. DR, DGFT GUIDELINES, A.P POLLUTION CONTROL BOARD BULLETIN AND THE ANNUAL REP ORTS OF CERTAIN LISTED ORISSA BASED COMPANIES LIKE TATA SPONGE IRON LTD., ORISSA SPONGE IRON & STEEL LTD. AND MSP STEEL & POWER LTD. WERE ADMITTED WITHOUT GIVING AN OPPORTUN ITY TO THE AO TO REBUTT, THEREFORE, THE ORDER IMPUGNED IS ERRONEOUS AND TO BE SET ASIDE AND THE ORDER OF THE AO IS TO BE RESTORED. 11. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT LD . DR HAS MISCONSTRUED THE ASSESSMENT ORDER PASSED BY THE SALES TAX AUTHORITY AND POINTED OUT THAT THE ADDITIONS MADE BY THE SALES TAX AUTHORITY WERE ON THREE DIFFERENT COUNTS AND WHICH ARE UNDISPUTEDLY MUTUALLY EXCLUSIVE. IT WAS BROUGHT TO OUR NOTICE T HAT THE SALES TAX AUTHORITY MADE ADDITION ON ACCOUNT OF ALLEGED SUPPRESSION OF SALES OF 2796. 18 MT IRON ORE FINES OF RS.55,92,360/- WAS ON THE BASIS OF ONE EXPRESS BOOK FOUND FROM THE KARAKHOLHA PLANT WHICH DEPICTED DISPATCHES OF IRON ORE FROM 22.05.2009 TO 01.06.200 9 WHICH ALLEGEDLY WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT. THE FIRST APPELLATE AUTHORIT Y OF THE SALES TAX DEPTT., IN ITS ORDER DATED 21.01.2012, PLACED AT PAGE 53 OF THE PAPER BO OK, VIDE PAGE NO. 6 HAS GIVEN A FACTUAL FINDING THAT THE ASSESSEE EXPLAINED BEFORE THE AUTH ORITIES AT THE ASSESSMENT STAGE ITSELF THAT 2796.18 MT OR IRON ORE FINES WERE NOT OUT OF BOOKS TRANSACTIONS INASMUCH AS THEY WERE NOT 10 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 SOLD BUT TRANSFERRED FROM THEIR KARKOLHA SPONGE IRO N PLANT TO RAILWAY SIDING UNDER THE COVER OF TRANSIT PERMITS ISSUED BY THE MINING AUTHO RITIES. THE FIRST APPELLATE AUTHORITY CONCLUDED THAT THE ALLEGATION OF SALE SUPPRESSION O F 2796.18 MT OF IRON ORE FINES HAS NO MERIT AND, THEREFORE, DELETED THE ADDITION. 12. ANOTHER ADDITION MADE BY THE SALES TAX AUTHORIT Y WAS IN REGARD TO ALLEGED SUPPRESSION OF SALES OF SIZED IRON ORE AND IRON ORE FINES ON THE BASIS OF DOCUMENT LIKE MONTHLY PROGRESS REPORT SEIZED BY THE SALES TAX AUT HORITIES ON THEIR SURPRISE VISIT TO MINES AND RELATED OFFICE PREMISES. IT WAS POINTED OUT BY THE LD. AR THAT THIS ADDITION HAS NOTHING TO DO WITH THE IMPUGNED ADDITION MADE BY THE AO WHI CH IS RELATING TO THE ALLEGED SUPPRESSION OF SALES OF SPONGE IRON EMANATING FROM ALLEGED UNDERSTATEMENT OF PRODUCTION IN THE SPONGE IRON PLANT. IT WAS BROUGHT TO OUR NOTIC E THAT THE ADDITION MADE BY THE AO (INCOME-TAX) RELATES TO THE ADDITION ON ACCOUNT OF ALLEGED SUPPRESSION OF SALES OF SPONGE IRON ORE ON ESTIMATE BASIS BASED ON SOME STANDARD I NPUT OUTPUT NORMS (SION). EVEN OTHERWISE THE LD. AR CONTENDED THAT THE ADDITIONS M ADE BY THE SALES TAX AUTHORITIES ON ACCOUNT OF SALES OF SIZED IRON ORE AND IRON ORE FIN ES HAS BEEN SUBSTANTIALLY REDUCED BY THEIR FIRST APPELLATE AUTHORITY AS IS APPARENT FROM PAGES 11 AND 12 OF THE APPELLATE ORDER PASSED BY THE ADDITIONAL COMMISSIONER OF SALES TAX. THE LD . AR SUBMITTED THAT THE SUBMISSION OF THE LD. DR THAT SALES TAX AUTHORITY HAS ARRIVED AT THE ALLEGED SUPPRESSION OF SALES OF SPONGE IRON ON THE BASIS OF COGENT MATERIAL IS WITHOUT ANY BASIS. IT WAS POINTED OUT BY THE LD. AR THAT THE TWO TYPES OF ADDITIONS MADE BY THE SALES T AX AUTHORITY HAVE NO RELEVANCE IN SOFAR AS THE IMPUGNED ADDITION IS CONCERNED. ACCORDING TO TH E LD. AR, THE ORDERS PASSED BY THE SALES TAX AUTHORITY I.E. THE AO OF THE SALES TAX WA S AVAILABLE BEFORE THE AO AND AFTER PERUSAL OF THE RELEVANT MATERIAL AND PROPER EXAMINA TION OF FACTS HE CHOSE NOT TO MAKE ANY SEPARATE ADDITION IN RESPECT OF OTHER ISSUES EMANAT ING FROM THE SALES TAX ASSESSMENT ORDER. THE AO IN THE INSTANT CASE PROCEEDED WITH THE ADDIT ION ONLY ON ACCOUNT OF ALLEGED SUPPRESSION OF SALES OF SPONGE IRON ON ESTIMATED YI ELD TAKING CUE FROM THE ORDER OF THE SALES TAX AUTHORITY WHICH WAS CONFIRMED BY THE FIRST APPE LLATE AUTHORITY UNDER THE SALES TAX LAW THOUGH THE AO UNDER THE INCOME TAX ACT ADOPTED THE MORE STRINGENT NORM OF INPUT OUTPUT OF 1:1.50 THAN THAT ADOPTED BY THE SALES TAX AUTHOR ITIES I.E. 1:1.59. THE LD. AR REITERATED THAT THE ISSUE BEFORE THE TRIBUNAL IS ONLY IN RESPE CT TO THE ESTIMATED ADDITION MADE ON 11 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 ESTIMATED YIELD IN THE SAID REPORT INDEPENDENTLY EX AMINED AS IT HAS NO NEXUS WITH ANY INCRIMINATING MATERIAL. 13. FURTHER, THE LD. AR SUBMITTED THAT THE BOOKS OF ACCOUNT ALONG WITH ALL THE RELEVANT DOCUMENTS WERE PRODUCED BEFORE THE AO IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. ACCORDING TO THE LD. AR, THE AO DID NOT POINT OUT A NY SPECIFIC DEFECT IN THE BOOKS MAINTAINED BY THE ASSESSEE AND DID NOT EVEN REJECT THE SAME. IN SUCH A SCENARIO, ACCORDING TO THE LD. AR, THE AO OUGHT NOT TO HAVE DISTURBED T HE BOOK RESULTS AND ASSUMED IMAGINARY PRODUCTION. ACCORDING TO LD. AR, THERE CAN BE NO U NIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD FOR CONSUMPTION OF IRON ORE WHICH DEPENDS ON VARIOUS FACTORS LIKE THE QUALITY AND COMPOSITION OF RAW MATERIALS AND OPERATING CONDITIO NS, WHICH VARY FROM PLACED TO PLACE. ACCORDING TO LD. AR, THE FE CONTENTS IN IRON ORE DI FFERS FROM MINE TO MINE AND ALSO FROM STATE TO STATE. IT WAS POINTED OUT THAT IRON ORE O F GHATKURI MINES (JHARKHAND) WAS ADMITTEDLY UTILIZED IN THE SPONGE IRON FACTORY AT C HALIAMA (JHARKHAND) BUT THE SAME WAS NEVER UTILIZED IN THE SPONGE IRON FACTORY AT KARAKO LHA (ORISSA) AND, THEREFORE, THE SEIZED DOCUMENTS CSP 32, 56, 61 AND 67 WHICH WERE SEIZED F ROM THE OFFICE OF CHALIAMA STEEL PLANT AT CHALIAMA (JHARKHAND) HAVE NO RELEVANT WHAT SOEVER TO THE IRON ORE UTILIZED IN THE SPONGE IRON FACTORY AT KARAKOLHA (ORISSA). THE LD. AR TOOK PAINS TO POINT OUT THAT THE SPONGE IRON FACTORY AT KARAKOLHA (ORISSA) UTILIZED IRON ORE FROM THE MINES SITUATED IN ORISSA WHICH WAS EVIDENT FROM THE VERY SAME SEIZED DOCUMEN TS MKJ 85 AND MKJ 88 WHICH WERE GATE RECEIPT REGISTERS OF THE FACTORY AT KARAKOLHA CONTAINING ALL THE RELEVANT DETAILS SUCH AS DATE OF ENTRY AND EXIT, VEHICLE NUMBER, WEIGHT AND SPECIFICATION OF RAW MATERIALS AND ALSO THE SOURCE OF RAW MATERIALS. THE LD. AR ALSO BROUG HT TO OUR NOTICE THAT THE ASSESSEE HAD PRODUCED BEFORE THE AO COPY OF FORM E & J CONTAININ G ACCOUNT OF PROCUREMENT AND TRANSPORTATION OF MINERALS/ORES AS PER THE ORISSA M INERALS (PREVENTION OF THEFT, SMUGGLING AND ILLEGAL MINING AND REGULATION OF POSSESSION, ST ORAGE, TRADING AND TRANSPORTATION) RULES 2007 IN SUPPORT OF ITS CONTENTION. THE LD. AR CONT ENDED THAT THE SPONGE IRON FACTORY AT KARAKOLHA UTILIZED IRON ORE HAVING FE CONTENT AROUN D 63%. THE LD. AR POINTED OUT THAT THE AO RELIED ON THE ASSESSMENT ORDER OF THE DEPUTY COM MISSIONER OF SALES TAX AND THE INVESTIGATION REPORT OF THE STATE COMMERCIAL TAX WI NG OF ORISSA BUT BOTH ACCEPTED THE FE CONTENT AT AROUND 63%. IT WAS POINTED OUT BY THE LD. AR THAT THE LABORATORY REPORTS REGARDING SAMPLE ANALYSIS OF IRON ORE UTILIZED IN S PONGE IRON FACTORY AT KARAKOLHA AS 12 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 SUBMITTED THE SALES TAX AUTHORITIES PLACED THE FE C ONTENT AT 62.79% IN THE FY 2006-07, 62.80% IN THE FY 2007-08, 62.79% IN THE FY 2008-09 AND 63.23% IN THE FY 2009-10 (UP TO JULY). ACCORDING TO LD. AR, THE DEPUTY COMMISSI ONER, SALES TAX DID NOT DISPUTE THE LABORATORY REPORTS AND HELD THAT THE SPONGE IRON FA CTORY AT KARAKOLHA UTILIZED IRON ORE HAVE FE CONTENT OF 63%. ACCORDING TO LD. AR THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT ASSESSEES SPONGE IRON FACTORY AT KARAKOLHA UTILIZE D IRON ORE HAVING FE CONTENT OF MORE THAN 65%. THEREFORE, THE AO ERRED IN CONCLUDING THAT TH E SPONGE IRON FACTORY AT KARAKOLHA UTILIZED SUPERIOR QUALITY IRON ORE AND CONSEQUENTLY THE YIELD RATION OF 1.5 AS SUGGESTED IN THE EXPERT VIEW COULD NOT BE APPLIED IN THE ASSESSEES CASE. ACCORDING TO LD. AR, THE AO ERRED IN ESTIMATING PRODUCTION OF SPONGE IRON BY BLINDLY RELYING ON THE TECHNICAL OPINION OF THE DEAN OF NIT, ROURKELA. THE LD. AR DREW OUR ATTENTI ON TO THE REPORT OF THE DEAN WHICH IS PLACED AT PAGE 65 OF THE PAPER BOOK FROM WHERE IT W AS BROUGHT TO OUR NOTICE THAT THE DEAN OF NIT HAS ACKNOWLEDGED THAT NO DIRECT DATA REGARDING CONSUMPTION PATTERN OF RAW MATERIAL WAS AVAILABLE IN ANY REFERENCE BOOK AND HIS OPINION WAS BASED ON HIS PERSONAL KNOWLEDGE AND GENERAL DISCUSSION WITH SOME PRODUCERS. THE DE AN OF NIT CLARIFIED THAT THE YIELD RATIO WILL VARY FROM PLANT TO PLANT DEPENDING ON THE COMP OSITION AND QUALITY OF RAW MATERIAL AND THE OPERATING CONDITIONS. THE DEAN HAD ALSO OPINED THAT THE CONSUMPTION OF IRON ORE PER TON OF SPONGE IRON WILL BE MORE THAN 1.5 TON IF THE FE CONTENT IN THE IRON ORE WAS LESS THAN 65%. THUS, ACCORDING TO THE LD. AR, THE AO HAD NO INDEPE NDENT MATERIAL WITH HIM TO SUBSTANTIATE HIS CONCLUSION THAT THE SPONGE IRON FACTORY AT KARA KOLHA UTILIZED IRON ORE OF SUPERIOR QUALITY. ACCORDING TO THE LD. AR, THE AO THUS ERRED IN APPLY ING THE YIELD RATION AT 1.5 CONVENIENTLY IGNORING THE BASIC REQUIREMENT OF THE NIT REPORT TH AT THE IRON ORE UTILIZED IN THE SPONGE IRON FACTORY SHOULD HAVE FE CONTENT OF 65%. THE LD. AR DREW OUR ATTENTION TO THE ANNUAL ACCOUNTS OF SOME REPUTED ORISSA BASED PLANT OWNED C OMPANIES LIKE TATA SPONGE IRON LTD., ORISSA SPONGE IRON & STEEL LTD. AND MSP STEEL & POW ER LTD. WHICH ARE ALSO ENGAGED IN PRODUCTION OF SPONGE IRON. THESE REPORTS ARE AVAIL ABLE IN PUBLIC DOMAIN AND ARE PLACED IN THE PAPER BOOK FROM PAGES 88 TO 98. THE YIELD SHOW N BY SUCH COMPANIES ALONG WITH THOSE OF THE ASSESSEE IN THE FYS 2006-07 TO 2009-10 MAY B E SUMMARIZED AS UNDER: FINANCIAL YEAR TATA SPONGE IRON LTD. ORISSA SPONGE IRON & STEEL LTD. MSP STEEL & POWER LTD. RUNGTA MINES LTD. (ASSESSEE) 2006-07 1.59 1.51 2.09 1.65 2007-08 1.68 1.55 2.04 1.69 2008-09 1.63 1.61 2.45 1.67 13 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 2009-10 1.59 1.79 1.93 1.65 14. DRAWING OUR ATTENTION TO THE YIELD RATIO SHOWN BY THE AFORESAID COMPANY IT WAS SUBMITTED BY THE LD. AR THAT THERE CAN BE NO UNIVER SAL AND UNIFORMAL ACCEPTED STANDARD FOR THE YIELD RATIO WHICH WAS DEPENDING ON VARIOUS FACT ORS AND CONSEQUENTLY THE SAME WAS VARIABLE FROM ONE PLANT TO ANOTHER AND ALSO FROM YE AR TO YEAR. ACCORDING TO LD. AR, THE ASSESSEE HAS SHOWN YIELD RATIO WHICH WAS NOT ONLY C ONSISTENT BUT ALSO COMPETITIVE WITH THE CITED COMPARABLE CASES. IT WAS SUBMITTED BEFORE US THAT AS PER STANDARD INPUT OUTPUT NORMS FOR SPONGE IRON AS PRESCRIBED BY THE DIRECTORATE GE NERAL OF FOREIGN TRADE HAS YIELD RATIO OF 1.60 TO 1.75, THAT ALSO WHEN THE FE CONTENT IS HIGH AS 67%. THE LD. AR CONTENDED THAT THE DGFT GUIDELINES WHICH WAS SUBMITTED BEFORE THE LD. CIT(A) WERE PLACED AT PAGE 78. IT WAS ALSO SUBMITTED BY THE LD. AR THAT EVEN THE VARI OUS GOVT. INSTITUTIONS ARE NOT UNANIMOUS IN THEIR OPINION ON THE ISSUE OF YIELD RATIO IN SPO NGE IRON FACTORIES. IT IS SUBMITTED BY THE LD. AR THAT NON RECOVERY OF ANY INCRIMINATING MATERIAL IN THE SEARCH PROVED BEYOND DOUBT THAT THE ASSUMPTION OF IMAGINARY PRODUCTION AND ITS SUBS EQUENT SALE BY THE AO WAS FALSE AND WITHOUT ANY BASIS AND HE RELIED ON THE FOLLOWING JU DICIAL DECISIONS ALSO: I) COMMISSIONER OF CENTRAL EXCISE, MEERUT VS. M/S. R.A . CASTINGS (P) LTD. 2008- TIOL-2732-CESTAT-DEL II) ITO VS. ARORA ALLOYS LTD. ITA NO. 78/CHD/2012 III) M/S. JEEVAKA INDUSTRIES VS. ACIT, ITA NOS. 684 & 98 3/HYD/2011 IV) CIT VS. R. K. RICE MILLS 319 ITR 173 (P&H) V) STATE OF ORISSA VS. M/S. PAWANJAY SPONGE IRON LTD. SA NO. 1624 OF 2005-06 VI) M/S. UTKAL METALLICS LTD. VS. STATE OF ORISSA S A N O. 517 OF 2007-08. 15. IT WAS POINTED OUT BY THE LD. AR THAT THE LD. C IT(A) HAS NOT GIVEN ANY RELIEF ON THE BASIS OF ANY ADDITION EVIDENCE. IT WAS POINTED OUT BY THE LD. AR THAT THE RELIEF WAS GIVEN BY THE LD. CIT(A) PRIMARILY ON THE BASIS OF EXAMINA TION OF MATERIAL ALREADY AVAILABLE ON RECORD OF THE AO I.E. THE ASSESSMENT ORDER PASSED B Y THE SALES TAX AUTHORITIES, APPELLATE ORDER PASSED BY THE SALES TAX AUTHORITY, REPORT OF NIT, FORM NOS. J & E ETC. IT WAS POINTED OUT BY THE LD. AR THAT OTHER DOCUMENTS REFERRED TO BY THE LD. CIT(A) ARE DOCUMENTS OF 14 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 GOVERNMENT ORGANIZATIONS/LISTED COMPANIES WHICH ARE AVAILABLE IN THE PUBLIC DOMAIN. THE SAME ARE AT THE MOST CLARIFICATORY IN NATURE IN THE SENSE THAT THERE WILL BE NO CHANGE IN THE DECISION EVEN IF THEY ARE NOT TAKEN COGNIZANCE OF. IN THE LIGHT OF THE AFORESAID FACTS AND CIRCUMSTANCES, THE LD. AR PLEADED THAT THE LD. CIT( A)S ORDER IS LEGALLY VALID AND CALLS FOR NO INTERFERENCE FROM OUR SIDE. 16. WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE AS SESSMENT ORDER, ORDER OF LD. CIT(A), SALES TAX ASSESSMENT ORDER PASSED BY DY. COMMISSION ER OF SALES TAX, JAIPUR RANGE AND FIRST APPELLATE AUTHORITY, ADDITIONAL COMMISSIONER OF SALES TAX, CENTRAL ZONE ORDER AND OTHER CASE LAWS AND DOCUMENTS AVAILABLE IN THE PAPE R BOOK. THE MAIN ISSUE THAT REQUIRES ADJUDICATION IN THE PRESENT APPEAL IS WHETHER THE A SSESSEE DURING THE FINANCIAL YEAR HAS ACTUALLY PRODUCED SPONGE IRON IN EXCESS OF WHAT HAS BEEN RECORDED IN ITS STATUTORILY MAINTAINABLE RECORDS; AND THEREAFTER THEN REMOVED S UCH EXCESS PRODUCTION CLANDESTINELY FROM ITS FACTORY, FOR ITS SUBSEQUENT SALE IN THE MA RKET. WE NOTE THAT THERE WAS A SEARCH AT THE FACTORY PREMISES OF SPONGE IRON DIVISION AT KARAKOL HA, BARBIL, ORISSA ON 18.08.2009 BY THE SALES TAX AUTHORITIES FROM WHERE THEY HAD MADE SEIZ URE OF ONE EXPRESS DUPLICATE BOOK WHICH LED THEM TO MAKE AN ASSESSMENT OF SUPPRESSION OF SALES OF 2796.18 MT IRON ORE FINES THEREBY MADE AN ADDITION OF RS.55,92,360/- WHICH HA S BEEN LATER DELETED BY THE FIRST APPELLATE AUTHORITY, ADDITIONAL COMMISSIONER OF SAL ES TAX, CENTRAL ZONE. THE SALES TAX AUTHORITIES HAVE SEIZED TWO MONTHLY PERFORMANCE REP ORTS FOR THE MONTH OF JULY, 2008 AND AFTER COMPARING WITH THE MINING RETURNS SUBMITTED B Y THE ASSESSEE MADE AN ADDITION OR SUPPRESSION IN SALES TO THE TUNE OF RS.465,73,19,88 2/- WHICH HAS BEEN REDUCED BY THE FIRST APPELLATE AUTHORITY TO THE TUNE OF RS.45,09,67,300/ -. WE NOTE THAT FOR SUPPRESSION OF PRODUCTION OF 12897.640 MT OF SPONGE IRON AND SALE OF IT WAS PEGGED TO RS.15,47,71,775/- WHICH HAS BEEN SUSTAINED BY THE FIRST APPELLATE AUT HORITY AND WHICH IS THE SUBJECT MATTER OF ASSESSMENT IN WHICH THE AO (INCOME TAX) IN THE IMPU GNED PROCEEDINGS HAVE MADE AN ADDITION OF RS.6,14,07,072/- (COMPUTATION OF IT HAS BEEN GIVEN BY AO AT PAGE 8 OF ASSESSMENT ORDER) WHICH HAS BEEN DELETED BY THE LD. CIT(A) AGAINST WHICH THE REVENUE HAS PREFERRED THESE APPEALS. 17. WE NOTE IN THE INSTANT CASE THAT THE AO (INCOME TAX) HAS MADE THE ADDITION ON THE ALLEGED SUPPRESSION OF PRODUCTION OF SPONGE IRON FI RSTLY, BY HEAVILY RELYING ON THE ASSESSMENT ORDER PASSED BY THE DEPUTY COMMISSIONER OF SALES TAX, JAIPUR RANGE PURSUANT 15 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 TO THE SEARCH CONDUCTED ON 18.08.2009 AT THE KARAKO LHA, BARBIL (ORISSA). IT WAS NOTED BY THE AO THAT THE ENFORCEMENT OFFICIALS (SALES TAX) F OUND THAT THE SPONGE IRON PLANT AT KARAKOLHA, BARBIL (ORISSA) HAS UTILIZED HIGH QUALIT Y OF IRON ORE, THE FE CONTENT OF WHICH IS WELL BEYOND 63% WHICH WOULD CERTAINLY YIELD 1.000 M T OF SPONGE IRON OUT OF 1.590 MT OF IRON ORE. THE AO (INCOME-TAX) CONFRONTED THE ASSESS EE WITH A NOTICE WHEREIN THE INVESTIGATION REPORT BY THE OFFICIALS OF THE ENFORC EMENT RANGE OF THE SALES TAX IS REFERRED , AND THE AO REFERS THE ATTENTION OF ASSESSEE TO PAGE NOS. 1 TO 159 OF MKJ-113(SEIZED DOCUMENTS) CONTAINING SAMPLE ANALYSIS OF INCOMING I RON ORE TO CHALIAMA STEEL PLANT WHICH WAS USING IRON ORE FROM GHATKURI MINES WHICH GOES ON TO SHOW THAT THE FE CONTENT OF THESE IRON ORE USED THEREIN WERE MORE THAN 63% IN MOST OF THE SAMPLES. THE AO EVEN REFERRED TO PAGE NO. 1 OF MKJ 113 WHERE THE FE CONTENT WAS SHOW N UPTO 66.8%. THEREAFTER, THE AO REFERRED TO CERTAIN ANALYSIS OF RAW MATERIAL WHICH ARE FOUND PLACED AND KEPT IN CSP 61, 56, 67, 32 ETC WHICH SHOWS THAT THE SPONGE IRON PLANTS WERE CONSUMING HIGH GRADE IRON ORE, THE AVERAGE OF WHICH IS MORE THAN 63%. THE AO ALSO NOT ED IN THE NOTICE THAT DY. COMMISSIONER OF SALES TAX HAD CONSULTED THE DEAN (S PONSORED RESEARCH, INDUSTRIAL CONSULTANCY AND CONTINUING EDUCATION) OF NIT, ROURK ELA, WHO COMMUNICATED TO HIM THAT 1.5 MT OF IRON ORE IS REQUIRED FOR PRODUCTION OF 1. 000MT OF SPONGE IRON. FURTHER THE AO NOTED IN THE NOTICE THAT ON THE BASIS OF THIS REPOR T (DEAN REPORT FROM NIT), THE DY. COMMISSIONER OF SALES TAX IN HIS ORDER OF ASSESSMEN T CONCLUDED THE SUPPRESSION OF PRODUCTION OF SPONGE IRON ORE TO THE EXTENT OF 12,8 97.640 MT WHICH WAS VALUED FOR RS.15,47,71,776/- FOR THE ENTIRE PERIOD OF 1 ST APRIL, 2006 TO 31 ST JULY, 2009 AFTER TAKING THE RATIO THAT 1.59 MT OF IRON ORE REQUIRED TO PRODUCE 1.000 MT OF SPONGE IRON. WHEN THE ASSESSEE WAS CONFRONTED BY THE NOTICE WITH THE AFOR ESAID FACTS, THE AO ACKNOWLEDGES THAT THE ASSESSEE HAS BROUGHT TO THE NOTICE OF THE AO TH AT THE AOS RELIANCE ON PAGE NOS. 1 TO 159 OF MKJ 113 WAS MISPLACED BECAUSE IT CONTAINS THE SA MPLE ANALYSIS OF INCOMING IRON ORE TO CHALIAMA STEEL PLANT AND IRON ORE OF GHATKURI MINES WHICH SHOWS THE FE CONTENT OF THE IRON ORE MORE THAN 63% AND EVEN UP TO 66.8% ARE OF IRON ORE OF GHATKURI MINES WHICH ARE SITUATED IN THE STATE OF JHARKHAND ; AND THE ASSESSEES PLANT IN QUESTION ARE IN STATE OF ORISSA AND THAT THE IRON ORE FROM THOSE MINES SITUATED AT JHARKHAND HAS NEVER BEEN TRANSPORTED TO ITS SPONGE IRON FACTORY AT KARAKOLHA, BARBIL WHICH IS SITUATED IN THE STATE OF ORISSA; AND, THEREFORE, THE RESULTS OF INCOMING IRON ORE FOR CH ALIAMA STEEL PLANT AND IRON ORE EXCAVATED FROM GHATKURI MINES CANNOT BE RELIED ON WHEN PRODUC TION OF SPONGE IRON AT THE FACTORY OF 16 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 THE ASSESSEE SITUATED AT ORISSA IS BEING CARRIED OU T. FOR SUPPORTING THEIR CONTENTION THE ASSESSEE RELIED ON THE SEIZED PAPERS WHICH WERE MAR KED AS MKJ 85 AND 88 WHICH ARE GATE RECEIPT REGISTERS OF IRON ORE OF KARAKOLHA PLANT OF THE ASSESSEE SITUATED AT ORISSA WHEREIN THE WEIGHT, SPECIFICATION OF THE RAW MATERIAL, VEHICLE NO., DATE OF ENTRY AND EXIT AND MOST IMPORTANTLY THE SOURCE OF THE RAW MATERIAL HAS BEEN CLEARLY MENTIONED. THUS, THE ASSESSEE CONTENDED BEFORE THE AO THAT THE IRON ORE OF GHATKU RI MINES TO CHALIAMA STEEL PLANT SITUATED AT JHARKHAND WAS NEVER TRANSPORTED TO ITS FACTORY SITUATED AT ORISSA. MOREOVER, THE ASSESSEE PRODUCED BEFORE THE AO THE COPIES OF FORM E & J WHICH SHOWS THE SOURCE OF RAW MATERIAL PROCURED FOR KARAKOLHA PLANT WAS FROM THE MINES SITUATED AT ORISSA AND NOT FROM JHARKHAND. HOWEVER, THE AO DID NOT ACCEPT THE AFOR ESAID SUBMISSIONS AND EVIDENCE OF THE ASSESSEE AND NOTED THAT THOUGH THE ASSESSEE HAD TRI ED TO PROVE THAT NO RAW MATERIAL FROM ITS GHATKURI MINES (JHARKHAND) WHICH PRODUCED HIGH GRAD E OF IRON ORE HAS BEEN USED IN ITS SPONGE IRON PLANT AT KARAKOLHA, ORISSA, THE ASSESSE E DID PRECISELY LITTLE TO PROVE THAT THE SPONGE IRON PLANT AT KARAKOLHA, ORISSA IS A CONSUME R OF IRON ORE OF INFERIOR QUALITY. THE AO NOTED THAT THE ASSESSEE HAS DONE NOTHING TO REFUTE THE FINDINGS OF THE VIGILANCE CELL (SALES TAX) THAT THE SPONGE IRON PLANT AT KARAKOLHA, ORISS A USES HIGH QUALITY OF IRON ORE. AFTER REFERRING TO THE FIRST APPELLATE AUTHORITYS ORDER OF SALES TAX AUTHORITIES WHEREIN THE FIRST APPELLATE AUTHORITY CONFIRMED THE ORDER OF THE AO O F SALES TAX ON THIS ISSUE HE REPELLED THE CONTENTION OF THE ASSESSEE. THEREAFTER, THE AO CON CLUDED THAT THE PRODUCTION OF THE SPONGE IRON IN THE SPONGE IRON FACTORY OF THE ASSESSEE AT KARAKOLHA, BARBIL HAS BEEN UNDERSTATED. FINALLY, IN THE ASSESSMENT ORDER, THE AO WONDERED A ND QUESTIONED THE LOGIC OF THE SALES TAX AUTHORITIES BEHIND ADOPTING THE FIGURE OF 1.59 MT I RON ORE TO PRODUCE 1.000 MT OF SPONGE IRON, WHEN A TECHNICAL EXPERT HAS ALREADY QUANTIFIE D THAT 1.5 MT OF IRON ORE IS ONLY REQUIRED FOR PRODUCTION OF 1.000 MT OF SPONGE IRON. ACCORDI NGLY, THE RATIO QUANTIFIED BY THE TECHNICAL EXPERT WAS ADOPTED BY THE AO AND THEN HE MADE THE COMPUTATION WHICH IS GIVEN IN PAGE 8 OF THE ORDER OF AO. THEREAFTER, HE TOOK NOTE OF THE FACT THAT SINCE NO EXCESS CLOSING STOCK HAS BEEN DETECTED IN THE BOOKS OF THE ASSESSEE, THE AO INFERRED THAT THE ASSESSEE HAS SOLD THE SUPPRESSED PRODUCTION AND CON SEQUENTLY UNDERSTATED THE SALES. THE AO ALSO NOTED THAT AS THE PROCESSING OF THE SAME AM OUNT OF IRON ORE AS RECORDED IN THE BOOKS OF ACCOUNT HAS RESULTED IN THE SUPPRESSED PRO DUCTION AND THE CONSEQUENT SUPPRESSED SALE, NO ADDITIONAL EXPENSES HAS BEEN INCURRED BY T HE ASSESSEE OVER AND ABOVE THE EXPENSES DEBITED IN THE P&L ACCOUNT. THEREFORE, THE AO CONC LUDED THAT THE ENTIRE SUPPRESSED SALE OF 17 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 RS.6,14,07,072/- FOR THE YEAR NEEDS TO BE ADDED BAC K TO THE TOTAL INCOME OF THE ASSESSEE AND HE MADE AN ADDITION OF THE SAID AMOUNT, WHICH WAS C HALLENGED BY THE ASSESSEE BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DELETE THE ADDITION. THE REVENUE IS CHALLENGING THE ACTION OF THE LD. CIT(A) BY PREFERRING THIS APPEAL. 18. WE NOTE THAT DURING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) TOOK NOTE OF THE FACT THAT THE AO HAS NOT POINTED OUT ANY DEFECT OR MISTA KE IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS OR OTHER RELEVANT DOCUMENTS THAT WERE PRODUCED BEFORE HIM IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. CIT(A) TOOK NOTE OF THE FACT THAT THE AO HAS NOT EVEN REJECTED THE BOOKS OF ACCO UNT OF THE ASSESSEE BEFORE VENTURING INTO THE ESTIMATION OF THE SUPPRESSED PRODUCTION AND SAL ES THEREAFTER OF THE SUPPRESSED SPONGE IRON. WE CONCUR WITH THE FINDING OF THE LD. CIT(A) ON THIS FINDING WHICH IS CORRECT AND IS AS PER LAW, SINCE THE AO HAS NOT REJECTED THE MANDA TORY/STATUTORILY REQUIRED BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THE REGULAR COURSE OF ITS BUSINESS BEFORE ESTIMATING THE INCOME; AS AFORESTATED THE AO WITHOUT REJECTING THE BOOKS OF ACCOUNT AS ENVISAGED BY LAW, THE AO OUGHT NOT TO HAVE DISTURBED THE BOOK RE SULTS AND VENTURED TO MAKE ESTIMATION WHICH ACTION OF AO ITSELF VITIATES THE ESTIMATED AD DITION MADE BY THE AO PER SE. IT SHOULD BE KEPT IN MIND THAT, WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS NOT BEEN REJECTED AND ASSESSMENT HAVING NOT BEEN FRAMED U/S. 144 OF THE A CT, THE AO CANNOT RESORT TO AN ESTIMATION OF INCOME AND SUCH EXERCISE BY AO IS NOT SUSTAINABLE. SECTION 145(3) OF THE ACT LAYS DOWN THAT THE AO CAN PROCEED TO MAKE ASSESSMEN T TO THE BEST OF HIS JUDGMENT UNDER SECTION 144 OF THE ACT ONLY IN THE EVENT OF NOT BEI NG SATISFIED WITH THE CORRECTNESS OF THE ACCOUNTS PRODUCED BY THE ASSESSEE. IN THE INSTANT CASE, THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THE REGULAR C OURSE OF ITS BUSINESS. THE AO HAS NOT MADE OUT A CASE THAT CONDITIONS LAID DOWN IN SECTIO N 145(3) OF THE ACT ARE SATISFIED FOR REJECTION OF BOOKS OF ACCOUNT. THUS WHEN THE BOOKS OF ACCOUNT ARE MAINTAINED BY THE ASSESSEE IN ACCORDANCE WITH THE SYSTEM OF ACCOUNTIN G, IN THE REGULAR COURSE OF HIS BUSINESS, THE SAME WOULD FORM THE BASIS OF COMPUTATION OF INC OME. SINCE THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED, NO ADDITIONS CAN BE MADE ON ESTI MATE BASIS AND FOR THIS PROPOSITION WE RELY ON THE DECISION OF HONBLE KARNATAKA HIGH COUR T IN THE CASE OF CIT VS. ANIL KUMAR & CO. 67 TAXMANN.COM 278 (KAR). 18 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 19. THOUGH ESTIMATION BY THE AO IS UNSUSTAINABLE AS AFORESTATED, HOWEVER, FOR COMPLETENESS WE WOULD LIKE TO EXAMINE THE ADDITION ON MERITS TOO. THE MAIN PLANK ON WHICH THE AO CONFRONTED THE ASSESSEE IN RESPECT TO THE ALLEGED SUPPRESSION OF PRODUCTION OF IRON ORE WAS FROM THE FINDING OF THE OFFICIALS OF E NFORCEMENT RANGE (SALES TAX) REGARDING USE OF HIGH QUALITY IRON ORE IN ASSESSEES SPONGE I RON PLANT AT KARAKOLHA, BARBIL (ORISSA). THE AO TOOK SUPPORT FROM DOCUMENTS PLACED AT PAGE 1 TO 159 OF MKJ 113 CONTAINING THE SAMPLE ANALYSIS OF FE CONTENT IN THE INCOMING IRON ORE TO CHALIAMA STEEL PLANT AND IRON ORE EXTRACTED FROM GATKURI MINES, WHICH SHOWS THAT THE FE CONTENT OF THIS IRON ORE WAS MORE THAN 63% IN MOST OF THE SAMPLES COLLECTED. ACCORDI NG TO THE AO, PAGE NO. 1 OF MKJ 112 EVEN SHOWS THAT THE FE CONTENT WAS UP TO 66.8%. SI MILAR ANALYSIS OF RAW MATERIALS HAVE BEEN MADE AND KEPT IN COMPUTER DISCS SEIZED WHICH A RE MARKED AS CSP 61, CSP 56, CSP 67, CSP 32 ETC. WHICH ACCORDING TO AO, GOES ON TO S HOW THAT THE SPONGE IRON PLANT AT KARAKOLHA, BARBIL (ORISSA) WERE CONSUMING HIGH GRAD E OF IRON ORE AND THE AVERAGE OF FE CONTENT OF THE IRON ORE IS MORE THAN 63%. THESE AF ORESAID ADVERSE FACTS WERE COMMUNICATED TO THE ASSESSEE, TO ELICIT THE ASSESSEES VERSION I N RESPECT TO THE CONTENTS OF THE SEIZED DOCUMENTS PURSUANT TO WHICH THE AO FORMED THE OPINI ON THAT THE FE CONTENT OF IRON ORE CONSUMED BY THE ASSESSEE AT ITS KARAKOLHA PLANT WAS MORE THAN 63%. THE ASSESSEE PURSUANT TO THE NOTICE, REPLIED TO THE AO AND DREW HIS ATTE NTION TO THE FACT THAT THE CHALIAMA STEEL PLANT WAS SITUATED IN THE STATE OF JHARKHAND AND TH E GATKURI MINES IS ALSO SITUATED IN THE STATE OF JHARKHAND. SO, THEREFORE, ACCORDING TO AS SESSEE, THE CONTENTS OF PAGE NOS. 1 TO 159 OF MKJ 113 RELIED ON BY THE AO CONTAINING SAMPLE AN ALYSIS OF INCOMING IRON ORE FROM GATKURI MINES TO CHALIAMA STEEL PLANT ARE EVENTS TA KING PLACE IN STATE OF JHARKHAND AND NOTHING TO DO WITH ACTIVITIES IN STATE OF ORISSA. THE ASSESSEE ALSO DREW THE ATTENTION OF AO TO THE SEIZED DOCUMENTS MKJ 85 AND 82 WHICH ARE THE GATE PASS/REGISTER OF IRON ORE OF KAROKOLHA STEEL PLANT, ORISSA WHEREIN THE WEIGHT, S PECIFICATION OF THE RAW MATERIAL, VEHICLE NO., DATE OF ENTRY AND EXIT AND THE SOURCE OF RAW M ATERIAL WAS CLEARLY MENTIONED. WE NOTE THAT THE LD. CIT(A) HAS TAKEN SPECIFIC NOTE OF THE DOCUMENTS MARKED AS MKJ 85 AND 88 AND MADE A FINDING OF FACT THAT THESE WERE IN FACT GATE RECEIPT/REGISTERS OF THE FACTORY AT KAROKOLHA, ORISSA CONTAINING ALL THE RELEVANT DETAI LS SUCH AS DATE OF ENTRY AND EXIT, VEHICLE NO., WEIGHT AND SPECIFICATION OF RAW MATERIAL AND A LSO THE SOURCE OF RAW MATERIAL. THE LD. CIT(A) HAS CLEARLY GIVEN A FINDING OF FACT THAT THE SAID GATE RECEIPT/REGISTER CLEARLY GOES ON TO SHOW THAT THE IRON ORE UTILIZED IN THE SPONGE IR ON FACTORY AT KARAKOLHA, ORISSA CAME FROM 19 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 THE MINES SITUATED IN THE STATE OF ORISSA. THE LD. CIT(A) HAS ALSO GONE THROUGH THE COPY OF FORM E & J CONTAINING ACCOUNT OF PROCUREMENT AND TR ANSPORTATION OF MINERALS/ORES AS PER THE ORISSA MINERALS (PREVENTION & THEFT, SMUGGLING AND ILLEGAL MINING AND REGULATION OF POSSESSION, SEARCH, TRADING & TRANSPORTATION) RULES , 2007 THAT THE SPONGE IRON FACTORY AT KARAKOLHA UTILIZED IRON ORE FROM THE MINES SITUATED AT ORISSA ONLY. WE HAVE GONE THROUGH THE FORM E & J WHICH IS KEPT FROM PAGE 66 TO 77 OF THE PAPER BOOK AND WE CONCUR WITH THE FINDING OF FACT OF THE LD. CIT(A) ON THIS ISSUE AS RENDERED BY HIM. WE ALSO NOTE THAT FROM THE ASSESSMENT ORDER THAT THE CSP 1 TO CSP 95 (CSP 4 ONE EXTERNAL HARD DISK, CSP 93 HARD DISK, CSP 1 PEN DRIVE, CSP 95 ONE PEN DRIV E WHICH HAS STATED IN PAGE 4 OF THE AOS ORDER IS SHOWN TO HAVE BEEN SEIZED FROM THE OF FICE SITUATE AT CHAIBASA, WHICH IS SITUATED IN THE STATE OF JHARKHAND. THE AO BY RELY ING ON THE ANALYSIS OF RAW MATERIAL KEPT IN CSP 61, CSP 56, CSP 67, CSP 32 ETC. WERE ANALYSI S MADE IN THE MINES SITUATE IN THE STATE OF JHARKHAND AND DOCUMENTS MARKED AS 1 TO 159 OF MKJ 113 WHICH ARE THE SAMPLE ANALYSIS OF INCOMING IRON ORE TO CHALIAMA STEEL PLA NT AND IRON ORE OF GATKURI MINES ARE IN RESPECT OF IRON ORE IN THE STATE OF JHARKHAND AND H AS NOTHING TO DO WITH STEEL PLANT AND MINES SITUATED IN THE STATE OF ORISSA. THEREFORE, THE RELIANCE MADE BY THE AO TO ALLEGE THAT THE IRON ORE AT KARAKOLHA MINES, ORISSA IS OF HIGHE R GRADE I.E. MORE THAN 63% FE CONTENT IS ERRONEOUS AND BASED ON IRRELEVANT MATERIAL WHICH HA S NOTHING TO DO WITH THE STEEL PLANT SITUATED AT ORISSA WHERE IRON ORE FROM THE MINES SI TUATED IN ORISSA ONLY HAS BEEN USED AS EVIDENT FROM STATUTORILY MANDATED FORM E & J OF MINING RULES AND SEIZED GATE PASSES/REGISTER MKJ 85 & 88. WE NOTE THAT THE AO HA S HEAVILY RELIED ON THE INVESTIGATION REPORT OF THE ENFORCEMENT OFFICIALS OF THE STATE CO MMERCIAL TAX WING OF ORISSA AND ASSESSMENT ORDER OF THE DEPUTY COMMISSIONER OF SALE S TAX TO FORM AN OPINION THAT THE FE CONTENT OF IRON ORE USED AT THE STEEL PLANT AT KARA KOLHA IS OF HIGHER GRADE I.E. MORE THAN 63% FE CONTENT. WE HAVE GONE THOUGH THE ORDER OF ASSES SMENT PASSED BY THE DEPUTY COMMISSIONER OF SALES TAX, JAIPUR RANGE WHICH IS PL ACED AT PAGES 39 TO 52 (PB)AND THE FIRST APPELLATE ORDER PASSED BY THE ADDITIONAL COM MISSIONER OF SALES TAX, CENTRAL ZONE WHICH IS PLACED AT PAGES 53 AND 64 (PB). WE NOTE T HAT THE SALES TAX AO ON THE ISSUE IN HAND HAS DISCUSSED ABOUT THE SUPPRESSION OF PRODUCT ION AND THE SALE OF 12897.640 MT OF SPONGE IRON COSTING OF RS.15,47,71,776/- AT PAGES 4 2 TO 45 AND 51(P.B.). WE NOTE FROM THE SAME THAT THE SALES TAX AO HAD MADE THE ALLEGATION OF SUPPRESSION IN PRODUCTION OF SPONGE IRON ON THE BASIS OF INPUT AND OUTPUT RATIO. ACCOR DING TO HIM, 1.590 MT IRON ORE IS TO BE 20 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 CONSUMED FOR MANUFACTURE OF 1 MT OF SPONGE IRON, WH EN THE FE CONTENT IS WELL BEYOND 63%. THE AO, SALES TAX ACKNOWLEDGES THAT THE ASSES SEE HAD IN FACT SUBMITTED BEFORE HIM THE LABORATORY REPORT OF THE IRON ORE USED IN THEIR FACTORY FOR THE PERIOD 2006-07 TO 2009-10 (UP TO JULY). THE LABORATORY REPORTS DEPICTED THAT AVERAGE FE CONTENT WAS 62.79% FOR THE PERIOD 2006-07, 62.80% FOR THE PERIOD 2007-08, 62.7 9% FOR THE PERIOD 2008-09, 63.23% FOR THE PERIOD 2009-10 (UP TO JULY). THE AO, SALES TAX HAS RECORDED THE CONTENTION OF THE ASSESSEE BEFORE HIM THAT IN THIS CASE THE AVERAGE R ATIO OF PRODUCTION OF ASSESSEE AT THIS PLANT AT KARAKOLHA HAS BEEN 1.67 MT OF IRON ORE TO 1.000M T OF SPONGE IRON. IT WAS CONTENDED BY THE ASSESSEE BEFORE THE AO, SALES TAX THAT SION (ST ANDARD INPUT OUTPUT NORMS) CANNOT BE APPLIED UNIVERSALLY. WE NOTE THAT THE SALES TAX AO HAS NOT MADE ANY ADVERSE VIEW ABOUT THE LABORATORY REPORT SUBMITTED BY THE ASSESSEE BEF ORE HIM AS TO THE FE CONTENT WHICH SHOWED FE CONTENT RANGING BETWEEN 62.79 % TO 63.83% . THE AO, SALES TAX HAS NOT DISPUTED THE CLAIM/LABORATORY REPORT PRODUCED BY TH E ASSESSEE BEFORE HIM WHICH GOES ON TO SHOW THAT THE FE CONTENT OF THE IRON ORE USED IN THE KARAKOLHA PLANT WAS BETWEEN 62.79% TO 63.83% FOR 2006-07 TO 2009-10 (UP TO JULY). THIS LABORATORY REPORT PRODUCED BY THE ASSESSEE WAS VERY IMPORTANT AND CRUCIAL TO DECIDE T HE QUESTION OF FACT AS TO FE CONTENT OF IRON ORE USED BY ASSESSEE AT ITS SPONGE IRON PLANT AT KARAKOLHA. HOWEVER, WE NOTE THAT THE AO SALES TAX RECORDED THE LAB RESULTS PRODUCED BY T HE ASSESSEE, HOWEVER, KEPT A STUDIED SILENCE ON THIS REPORT AND HAS NOT DOUBTED THE VERA CITY OF THE LAB REPORT. THUS THE AO SALES TAX HAS NOT DISPUTED THE LAB RESULTS PRODUCED BY TH E ASSESSEE WHICH IN TURN SUPPORTS THE BOOKS OF ACCOUNT OF THE ASSESSEE AND SHOULD NOT HAV E BEEN DISTURBED. WE ALSO TAKE NOTE OF THE FACT THAT THOUGH THE AO (INCOME TAX) HAS HEAVIL Y RELIED ON THE ORDERS OF THE SALES TAX AUTHORITIES HAS NOT TAKEN INTO CONSIDERATION THIS R ELEVANT PIECE OF EVIDENCE WHICH WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO SALES TAX TO SHOW THAT THE IRON ORE USED AT THE KARAKOLHA PLANT, ORISSA HAD FE CONTENT RANGING FROM 62.79% TO 63.23% AND THAT IT WAS NOT GIVING CONSISTENT RESULTS. THE AO WHO IS A QUASI J UDICIAL AUTHORITY WHEN EXERCISING SUCH A POWER, SHOULD ACT FAIRLY AND OUGHT TO HAVE TAKEN IN TO CONSIDERATION THIS RELEVANT PIECE OF EVIDENCE PRODUCED BY THE ASSESSEE ALBEIT BEFORE SAL ES TAX AUTHORITIES, WHEN THE MAIN ISSUE BEFORE HIM WAS THE QUESTION OF FACT AS TO WHAT WAS THE FE CONTENT OF IRON ORE USED IN THE KARAKOLHA SPONGE IRON FACTORY? SO, THE MOST IMPORTA NT QUESTION BEFORE HIM (I.E. AO) WAS WHETHER THE ASSESSEES SPONGE IRON PLANT AT KARKOLH A CONSUMED IRON ORE WHICH HAD FE CONTENT MORE THAN 65%? THE NON-CONSIDERATION OF THI S IMPORTANT PIECE OF EVIDENCE WHICH 21 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 HAS BEEN RECORDED BY AO, SALES TAX IN HIS ORDER, OU GHT NOT TO HAVE BEEN IGNORED, WHEN ADJUDICATING THE ISSUE OF FE CONTENT WHICH ALSO MAK ES THE ORDER OF AO A QUASI JUDICIAL AUTHORITY FRAGILE IN THE EYES OF LAW. IT SHOULD BE REMEMBERED THAT JUSTICE SHOULD NOT ONLY BE DONE, BUT SHOULD BE SEEMED TO BE DONE. WHEN THE AO HAVING HEAVILY RELIED ON THE SALES TAX AUTHORITYS ORDER TO FASTEN THE LIABILITY ON TH E ASSESSEE, IN ALL FAIRNESS SHOULD HAVE CONSIDERED ALL MATERIALS ADVERSE AS WELL AS IN FAVO UR OF THE ASSESSEE AND SHOULD HAVE ARRIVED AT A FAIR, REASONABLE AND JUST CONCLUSION AFTER WEI GHING THE MATERIALS ON BOTH THE SIDES, WHICH HE FAILED TO DO AND THE LD. CIT(A) HAS CORREC TLY TAKEN NOTE OF RELEVANT MATERIALS TO GIVE RELIEF TO THE ASSESSEE, WHICH ACTION OF LD. CI T(A) IN THE FACTS AND CIRCUMSTANCES WE CONCUR. 20. MOREOVER, WE NOTE THAT THE AO IN ORDER TO FASTE N THE ADDITION BASED ON SUPPRESSION OF PRODUCTION BY STATING THE FE CONTENT OF THE IRON ORE USED IN KARAKOLHA IS HIGH GRADE OF 65% AND ABOVE, HAS ROPED IN THE TECHNICAL OPINION O F THE DEAN OF NIT, ROURKELA WHICH IS A LETTER DATED 01.09.2004 ADDRESSED TO THE COMMERCIAL TAX OFFICER, CIRCLE-2. THE CONTENT OF THE LETTER IS REPRODUCED AS UNDER: 'IN FACT NO DIRECT DATA IS AVAILABLE IN ANY REFEREN CE BOOK DEALING WITH DRI (DIRECT REDUCED OF IRON) ON RAW MATERIAL CONSUMPTION PATTERN. THIS WILL VARY FROM PLANT TO PLANT DEPENDING ON COMPOSITION AND QUALITY OF RAW MATERIAL AND THE OPERATING CONDI TIONS. HOWEVER BASED ON OUR KNOWLEDGE AND GENERAL DISCUSSION WITH SOME PRODUCERS, I MENTION B ELOW THE AVERAGE REQUIREMENT OF RAW MATERIAL PER TON OF SPONGE IRON PRODUCED UNDER AVERAGE INDIA N CONDITIONS. CONSUMPTION PER TON OF SPONGE IRON: IRON ORE - 1.5 TON (WITH FE CONTENT IN THE OR E 65%), IF IT IS LESS, THERE WILL BE MORE CONSUMPTION'. 21. FROM A PERUSAL OF THE AFORESAID OPINION GIVEN B Y THE DEAN OF NIT, WE NOTE THAT IT IS A GENERAL OPINION AND NOT AN OPINION RENDERED AFTER ANALYSING THE SA MPLE IRON ORE USED IN KARAKOLHA SPONGE IRON PLANT. FROM A PERUSAL OF THE OPINION IT IS UNDERSTOOD THAT THE DEAN OF NIT ACKNOWLEDGES THE FACT THAT NO DIRECT DATA IS AV AILABLE IN ANY REFERENCE BOOK DEALING WITH DRI (DIRECT REDUCE OF IRON) ON RAW MATERIAL CO NSUMPTION PATTERN. SECONDLY HE ACKNOWLEDGES THE FACT THAT THE YIELD RATIO VARY FRO M PLANT TO PLANT DEPENDING ON COMPOSITION OF QUALITY OF RAW MATERIAL AND THE OPERATING CONDIT IONS. THE DEAN OF NIT HAS ADMITTED THAT HIS TECHNICAL OPINION IS BASED ON HIS KNOWLEDGE AND GENERAL DISCUSSION WITH SOME PRODUCERS. WITH THE AFORESAID BACKGROUND THE DEAN OF NIT HAS OPINED THAT THE AVERAGE REQUIREMENT OF RAW MATERIAL I.E. IRON ORE 1.5 TON S WHEN FE CONTENT IN THE ORE IS 65% TO PRODUCE A TON OF SPONGE IRON, UNDER AVERAGE INDIAN CONDITIONS. FROM THE OPINION IT IS 22 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 DISCERNED THAT THE PRODUCTION OF SPONGE IRON MAY VA RY IF THE CONDITIONS ARE DIFFERENT AND THEREAFTER, DEAN STATES THAT CONSUMPTION PER TON OF SPONGE IRON : IRON ORE - 1.5 TON (WITH FE CONTENT IN THE ORE 65%). THEREAFTER, HE ADDS THAT IF IT IS LESS THERE WILL BE MORE CONSUMPTION. THE DEAN OF NIT BASED HIS OPINION OWN KNOWLEDGE AND GENERAL DISCUSSION WITH SOME PRODUCERS AND HE ADMITS THE FACT THAT NO DIRECT DATA IS AVAILABLE IN ANY REFERENCE BOOK. HE ALSO ACKNOWLEDGES THE FACT THAT THE YIELD RATIO VARY FROM PLANT TO PLANT DEPENDING ON (I) COMPOSITION , (II) QUALITY OF RAW MATERIAL AND (III) THE OPERATING CONDITIONS . AN ANALYSIS OF THE AFORESAID LETTER/TECHNICAL OPINION OF THE DEAN OF NIT GOES ON TO SUPPORT THE CONTENTION OF THE ASSESSEE. THE MAIN QUESTION OF F ACT THAT HAD TO BE BROUGHT ON RECORD BY THE AO WAS TO BE FIND OUT AS A MATTER OF FACT THE F E CONTENT OF THE IRON ORE USED IN THE SPONGE IRON FACTORY AT KARAKOLHA, BARBIL, WHICH HE HAS NOT DONE. NO ATTEMPTS OR ENDEAVOUR WAS MADE BY THE SALES TAX AUTHORITIES OR THE INCOME TAX AO TO COLLECT THE SAMPLES OF THE IRON ORE FROM IRON ORE USED AT KARAKOLHA AND SENT T O RENOWNED INSTITUTE IN THE COUNTRY FOR FINDING OUT THE FE CONTENT OF ORE USED FOR PRODUCTI ON OF SPONGE IRON WHICH ADMITTEDLY THEY HAVE NOT DONE. THE AO HAS BLINDLY TAKEN THE TECHNI CAL VIEW/OPINION OF THE DEAN NIT, ROURKELLA WHICH IS A GENERAL LETTER/OPINION WHICH C OMES WITH A CAVEAT THAT IF THE FE CONTENT IS 65% OR MORE, THEN A TON OF SPONGE IRON WILL BE P RODUCED FROM 1.5 MT OF IRON ORE. SO, IT GOES WITHOUT SAYING THAT WHEN FE CONTENT OF IRON OR E IS LESS THAN 65% MORE THEN MORE IRON ORE IS REQUIRED TO PRODUCE A TON OF SPONGE IRON, WH ICH THE DEAN HAS ALSO STATED IN HIS OPINION. IT HAS BEEN CATEGORICALLY STATED BY THE D EAN OF NIT THAT THE CONSUMPTION OF IRON ORE PER TON OF SPONGE IRON WILL BE MORE THAN 1.5 MT IF THE FE CONTENT IN THE IRON ORE WAS LESS THAN 65%. THIS PARTICULAR TECHNICAL INFORMATI ON OF THE DEAN, NIT CLEARLY COMES IN AID OF THE ASSESSEE COMPANY WHICH HAS BEEN ABLE TO PLAC E ON RECORD THE LABORATORY REPORT OF THE IRON ORE WHICH WAS USED IN ITS KARAKOLHA SPONGE FACTORY. THE LAB RESULTS SHOW THE FE CONTENT OF IRON ORE USED IN ITS KARAKOLHA PLANT WER E BETWEEN 62.79% AND 63.23% FROM 2006 TO 2009 (UP TO JULY). THEREFORE, WE NOTE THAT THE LD. CIT(A) HAS CLEARLY ANALYSED THE LETTER OF DEAN, NIT AND HAS COME TO A FINDING THAT RELIANC E BY THE AO BLINDLY OF THE DEAN, NITS REPORT IS ERRONEOUS, WHICH WE CONCUR. 22. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE NOTE THAT OTHER THAN THE AFORESAID DOCUMENTS THE AO HAD NO OTHER EVIDENCE/MATERIAL TO SUGGEST THAT THE ASSESSEES KARAKOLHA IN ORISSA STEEL PLANT WAS USING IRON ORE WHICH HAD FE CONTENT MORE THAN 65%, WITHOUT DOING 23 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 SO, THE ALLEGATION OF SUPPRESSION OF PRODUCTION OF SPONGE IRON IS MERELY ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURES WHICH CANNOT ST AND SCRUTINY IN THE EYES OF LAW, WHEN THE ASSESSEE WAS ABLE TO PLACE ON RECORD THE LABORA TORY REPORT WHICH CERTIFIED THAT THE ASSESSEES PLANT AT KARAKOLHA, ORISSA USED IRON OR E WHICH HAD FE CONTENT BETWEEN 62.79% TO 63.23%. THE VERACITY OF THE LABORATORY REPORT H AVE NOT BEEN CHALLENGED OR FOUND TO BE INVALID BY THE DEPARTMENT. IN SUCH A SCENARIO, WIT HOUT FINDING DEFECT IN THE BOOKS OF ACCOUNT OR WITHOUT FINDING FAULT WITH THE LABORATOR Y REPORT THAT CERTIFIED THE FE CONTENT OF THE IRON ORE USED BY THE ASSESSEE AT KARAKOLHA, ORI SSA FOR PRODUCTION OF THE SPONGE IRON, THE ALLEGATION OF SUPPRESSION OF PRODUCTION OF SPONGE I RON CANNOT STAND. WITH REFERENCE TO THE LD. DRS CONTENTION THAT ONE EXPRESS DUPLICATE BOOK WAS FOUND IT SUGGESTED SUPPRESSION OF SALES, WE NOTE THAT ON APPEAL THE FIRST APPELLATE A UTHORITY AT PAGE 59 HAS DELETED THE ADDITION AND HAS CLEARLY GIVEN A FINDING THAT THERE WAS NO SUPPRESSION OF SALES AND THE FIRST APPELLATE AUTHORITY HAS HELD AT PAGE 59 OF PAPER BO OK AS UNDER: ON CROSS VERIFICATION OF THE ENTRIES MADE IN PAGE 1 AND PAGE 2 OF THE SEIZED REGISTER FROM 22.5.09 TO 1.6.09 WITH THE RETURN OF FORM E FOR THE MONTH OF MAY 2009 & JUNE 2009 AT THIS FORUM, IT IS FOUND THAT ALL THE ENTRIES IN THE SEIZ ED REGISTER SHOWING TRANSPORTATION OF IRON ORE FINES TO THE RAILWAY SIDING HAVE BEEN DULY REFLECTE D IN THE RETURN IN FORM E SUBMITTED TO DDM, JODA CIRCLE, ODISHA. FURTHER, ON VERIFICATION OF THE COPIES OF TRANSIT PASS ISSUED BY THE MINING AUTHORITIES IT IS FOUND THAT IRON ORE FINES HAVE BEEN TRANSPORTED FROM KARAKOHLA SPONGE IRON PLANT TO RAILWAY SIDING BETWEEN 22.5.09 TO 1.6.09 AND THE SEAL & SIGNATURE OF THE MINING AUTHORITIES HAVE BEEN PUT ON THE BACK OF TRA NSIT PASS. THE QUANTUM OF IRON ORE FINES TRANSPORTED DATE WISE AS WRITTEN IN PAGE 1 & PAGE 2 OF THE SEIZED REGISTER TALLIED WITH THE QUANTUM OF IRON ORE FINES TRANSPORTED FROM KARAKOHL A SPONGE IRON PLANT TO RAILWAY SIDING ON THE STRENGTH OF TRANSIT PASS ISSUED BY THE MINING A UTHORITIES FROM 22.5.09 TO 1.6.09. AS THE DEALER APPELLANT PRODUCED TRUE & SATISFACTORY RECOR DS IN SUPPORT OF TRANSPORTATION OF THE EXACT QUANTUM OF IRON ORE FINES FROM KARAKOHLA SPONGE IRO N PLANT TO RAILWAY SIDING FROM 22.5.09 TO 1.6.09 AS WAS REFLECTED IN THE SEIZED REGISTER, THE ALLEGATION OF SALE SUPPRESSION OF 2796.18 MT OF IRON ORE FINES MADE BY THE INVESTIGATING OFFI CIALS, ENFORCEMENT RANGE, CUTTACK IN THE REPORT NO. 11, DT. 22.3.10 HAS NOT MERIT. (EMPHASI S GIVEN BY US) 23. WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE LD. DR THAT THERE WERE IN FACT INCRIMINATING MATERIAL IN THE FORM OF ONE EXPRESS D UPLICATE BOOK AND TWO MONTHLY PERFORMANCE REPORT FOR THE MONTHS OF JULY, 2008 AND JULY, 2009 WHICH SHOWED SUPPRESSION OF SALES OF IRON ORE AND SUPPRESSION IN SALE OF FIN ES RESPECTIVELY. WE NOTE THAT THOUGH THE AO HAD RELIED ON THE ORDER OF THE AO, SALES TAX FRO M WHICH THE ADDITION HAS BEEN MADE THE AO HAS NOT MADE ANY WHISPER IN HIS ORDER ABOUT THE EXPRESS DUPLICATE BOOK OR THE MONTHLY PERFORMANCE REPORT AS CONTENDED BY THE LD. DR. WE NOTE THAT THE FIRST APPELLATE AUTHORITY(SALES TAX) HAD ALREADY DELETED THE ADDITI ON BASED ON THE EXPRESS DUPLICATE BOOK AND THE FIRST APPELLATE AUTHORITY HAS REDUCED SUBS TANTIALLY THE ADDITION MADE BY THE AO 24 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 (SALES TAX) ON THE BASIS OF MONTHLY PERFORMANCE REP ORT. WE ARE OF THE CONSIDERED OPINION THAT THE LD. DR CANNOT MAKE A DIFFERENT CASE FROM T HAT SET BY THE AO. WE HAVE REPRODUCED THE AOS ORDER (SUPRA) AND FROM A PERUSAL OF THE SA ME, IT CAN BE SEEN THAT THERE IS NOT EVEN A WHISPER ABOUT THE EXPRESS DUPLICATE BOOK OR THE MON THLY PERFORMANCE REPORT TO FASTEN THE IMPUGNED ESTIMATED LIABILITY ON THE ASSESSEE. THER EFORE, WE DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE LD. DR IN THIS REGARD. 24. WE NOTE THAT THE LD. CIT(A) HAS TAKEN INTO CONS IDERATION THE YIELD RATIO OF PRODUCTION OF SPONGE IRON IN THE STATE OF ORISSA BY THREE DIFFERENT COMPANIES I.E. (I) TATA SPONGE IRON LTD., (II) ORISSA SPONGE IRON & STEEL L TD. & (III) MSP STEEL & POWER LTD. THE LD. CIT(A) HAS GONE THROUGH THE ANNUAL REPORTS OF T HE AFORESAID COMPANIES TO TAKE NOTE OF THE FACT THAT YIELD RATIO HAS NOT ONLY DIFFERED FOR THE THREE COMPANIES, BUT IT HAS ALSO VARIED IN DIFFERENT YEAR FOR THE SAME COMPANY. THE LD. CIT(A ) HAS REFERRED TO THE SION AS GIVEN BY THE DIRECTOR GENERAL OF FOREIGN TRADE AND THE ANDHR A PRADESH POLLUTION CONTROL BOARD WHEREIN DIFFERENT SION ARE STATED. THE LD. CIT(A) S OBSERVATION IN THIS REGARD IS REPRODUCED BELOW: I ALSO FIND SUBSTANCE IN THE ARGUMENT THAT NO UNIVE RSAL AND UNIFORMLY ACCEPTABLE STANDARD FOR CONSUMPTION OF IRON ORE CAN BE PRESCRIBED WITHOUT APPRECIATING THE VARIOUS OTHER FACTORS SUCH AS THE QUALITY AND COMPOSITION OF RAW MATERIAL S AND OPERATING CONDITIONS WHICH ALSO CONTRIBUTE TO THE YIELD RATIO. THE MATERIAL PLACED ON RECORD ALSO SUGGESTS THAT THE YIELD RATIO CAN VARY FROM PLANT TO PLANT AND EVEN FROM YEAR TO YEAR FOR THE SAME PLANT. I HAVE PERUSED THE RELEVANT PAGES OF THE ANNUAL REPORTS OF TATA SPONGE IRON LTD, ORISSA SPONGE IRON & STEEL LTD AND MSP STEEL & POWER LTD WHICH ARE ALSO ENGAGED IN PRODUCTION OF SPONGE IRON IN THE STATE OF ORISSA. I FIND THAT THE YIELD RATIO HAS NOT ONLY DIFFERED FOR THE 3 COMPANIES BUT IT HAS ALSO VARIED IN DIFFERENT YEARS FOR THE SAME COMPANY. THE DIRECTORATE GENERAL OF FOREIGN TRADE HAS IN ITS STANDARD INPUT OUTPUT NORMS FOR SPONGE IRON SUGGESTED YIELD RATIO OF 1.5 WHEN THE FE CONTENT IN THE IRON ORE IS 67% OR MORE. THE ANDHRA PRADESH POLLUTION CONTROL BOARD HAS IN ITS INFORMATION BULLETIN SUGGESTED THE YIELD RATION OF 1.60 TO 1.75. THUS, IT APPEARS THAT EVEN THE VARIOUS GOVERNMENT INSTITUTIONS ARE NOT UNANIMOUS I N THEIR OPINION ON THE ISSUE OF YIELD RATIO IN SPONGE IRON FACTORIES. I THEREFORE FIND MERIT IN THE ARGUMENT THAT THERE CAN BE NO UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD FOR THE YIELD RAT IO THAT ALSO DEPENDS ON VARIOUS FACTORS SUCH AS COMPOSITION AND QUALITY OF RAW MATERIALS AN D OPERATING CONDITIONS. THE LD AR HAS SUBMITTED IN COURSE OF THE APPELLATE PROCEEDINGS TH AT THE FE CONTENT IN IRON ORE DIFFERS FROM MINE TO MINE AND ALSO FROM STATE TO STATE. I FIND F ROM THE IMPUGNED ORDER THAT THE AO HAD NO INDEPENDENT DATA REGARDING THE FE CONTENT IN IRON O RE UTILISED IN THE SPONGE IRON FACTORY AT KARAKOLHA (ORISSA). THE AO THEREFORE RELIED ON THE INVESTIGATION REPORT OF THE ENFORCEMENT OFFICIALS OF THE STATE COMMERCIAL TAX WING OF ORISS A AND THE ASSESSMENT ORDER OF THE DEPUTY COMMISSIONER OF SALES TAX TO CONCLUDE THAT THE SPON GE IRON FACTORY AT KARAKOLHA HAD UTILISED IRON ORE HAVING FE CONTENT OVER 63%. THE AO ALSO DR EW STRENGTH FROM THE SAMPLE ANALYSIS OF IRON ORE RECEIVED IN THE SPONGE IRON FACTORY AT CHA LIAMA (JHARKHAND) AND THOSE EXTRACTED FROM THE GHATKURI MINES (JHARKHAND) AS CONTAINED IN THE SEIZED DOCUMENTS MKJ -113 AND CSP-32, 56, 61 & 67. 25 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 25. IN THE REVISED GROUNDS OF APPEAL, THE DEPARTMEN T HAS CHALLENGED THE AFORESAID ACTION OF THE LD. CIT(A) AS VIOLATION OF RULE 46A, WHEREIN THE LD. CIT(A) HAS NOT CONFRONTED THESE MATERIALS WITH AO AND ELICITED A REMAND REPO RT BEFORE TAKING INTO CONSIDERATION THESE NEW MATERIALS, WHICH THE AO WAS NOT PRIVY TO DURING ASSESSMENT PROCEEDINGS. WE NOTE THAT AS PER THE SCHEME OF THE ACT, THE LD. CIT (A) ENJOYS PLENARY & CO-TERMINUS POWERS AS THAT OF AO WHILE DECIDING THE APPEAL BEFORE HIM. THE APPELLATE PROCEEDING BEFORE THE LD. CIT(A) IS AKIN TO CONTINUATION OF ASSESSMENT PR OCEEDINGS. THE LD. CIT(A) AFTER GIVING NOTICE TO ASSESSEE HAS POWER TO EVEN ENHANCE THE AS SESSMENT MADE BY AO. AS PER RULE 46A OF INCOME-TAX RULES, THE LD. CIT(A) HAS TO GIVE OPP ORTUNITY TO AO BEFORE ADMITTING ADDITIONAL EVIDENCES. WE NOTE THAT THE LD. CIT(A) HAS BASED HIS DECISION ON THE MATERIALS PRODUCED BEFORE THE AO. HOWEVER, IN ADDITION TO IT HAS GONE THROUGH THE FINANCIAL RESULT OF SIMILAR COMPANIES LOCATED AT ORISSA, AND WHICH ARE ENGAGED IN THE SAME ACTIVITY AS THAT OF THE ASSESSEE COMPANY. THE ANNUAL REPORTS OF THREE COMPANIES I) M/S. TATA SPONGE IRON LTD., (II) M/S. ORISSA SPONGE IRON & STEEL LTD. AND (III) M/S. MSP STEEL & POWER LTD. HAVE BEEN LOOKED INTO BY THE LD CIT(A) AND COMPARED THE CONSU MPTION OF IRON ORE WITH THAT OF ASSESSEE COMPANY WHICH IS AS UNDER: FINANCIAL YEAR TATA SPONGE IRON LTD. ORISSA SPONGE IRON & STEEL LTD. MSP STEEL & POWER LTD. RUNGTA MINES LTD. (ASSESSEE) 2006-07 1.59 1.51 2.09 1.65 2007-08 1.68 1.55 2.04 1.69 2008-09 1.63 1.61 2.45 1.67 2009-10 1.59 1.79 1.93 1.65 26. THE AFORESAID CHART WAS DRAWN BY THE LD. CIT(A) AFTER PERUSAL OF THE ANNUAL REPORT OF THE AFORESAID COMPANIES WHICH ARE IN PUBLIC DOMAIN AND CANNOT BE TERMED AS ADDITIONAL EVIDENCE. THE LD. CIT(A) WHO IS DISCHARGING THE AP PELLATE JURISDICTION OVER THE DECISION OF A QUASI JUDICIAL AUTHORITY I.E. AO AND WHO ENJOYS P LENARY & CO-TERMINUS POWERS ARE ENTITLED TO TAKE JUDICIAL NOTICE OF EVENTS RELEVANT TO ISSUE FOR ADJUDICATION AND IN THIS CASE HAS TAKEN NOTE OF THE ANNUAL REPORT OF THESE THREE COMPANIES TO FORM AN OPINION ON THE ISSUE IN QUESTION CANNOT BE FAULTED. AFTER COMPARING THE RES ULTS OF CONSUMPTION OF IRON ORE BY SIMILAR COMPANIES ENGAGED IN SAME BUSINESS IN STATE OF ORISSA, THE LD CIT(A) CAME TO THE CONCLUSION THAT IT IS NOT POSSIBLE THAT FE CONTENT OF IRON ORE CAN BE UNIVERSALLY HELD AS MORE THAN 65%, WHICH IS EVIDENT FROM A GLANCE OVER THE R ESULTS GIVEN IN THE CHART SUPRA. FURTHER 26 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 THE LD. CIT(A) REFERRED TO INFORMATION BULLETIN IS SUED BY ANDHRA PRADESH POLLUTION CONTROL BOARD WHICH SUGGESTED YIELD RATIO OF 1.60% TO 1.75% . THESE WE NOTE ARE PUBLIC DOCUMENTS WHICH ARE READILY AVAILABLE IN PUBLIC DOMAIN, WHICH CANNOT BE TERMED AS ADDITIONAL EVIDENCE. WE NOTE THAT IT IS NOT THE CASE OF THE D EPARTMENT THAT THESE REPORTS WHICH ARE TAKEN NOTE BY THE LD CIT(A) ARE FALSE AND CONCOCTED, AND THEREBY THE LD CIT(A) WAS MISLED TO PASS THE IMPUGNED ORDER. MOREOVER WE NOTE, EVEN IF THESE DOCUMENTS ARE EXCLUDED, THEN ALSO THE IMPUGNED ORDER OF LD CIT(A) SURVIVES. THEREFORE, TH ERE IS NO MERIT IN THE CONTENTION OF THE DEPARTMENT RAISED IN THIS REVISED GROUND. 27. ANOTHER ISSUE RAISED BY THE DEPARTMENT IN THE R EVISED GROUND OF APPEAL FOR AY 2008- 10 TO AY 2010-11 IS THAT LD. CIT(A) HAS WRONGLY ASS UMED THAT THE APPELLATE AUTHORITY OF SALES TAX HAS GIVEN RELIEF TO THE ASSESSEE. WE NOT E THAT THE LD. CIT(A) HAS NOT MADE ANY SUCH OBSERVATION. HOWEVER, LD. CIT(A) HAS TAKEN NO TE OF SIMILAR CASES WHEREIN SALES TAX OFFICER RELYING ON THE OPINION OF DEAN, NIT HAS MA DE IMAGINARY ESTIMATION, WHICH HAS BEEN DELETED BY THE SALES TAX TRIBUNAL. THE LD. CI T(A) HAS TAKEN NOTE OF THIS FACT AS UNDER: 18. THE LD AR HAS SUBMITTED THAT THE AO MADE THE IMPUGNED ADDITION BY RELYING ON THE ASSESSMENT ORDER PASSED BY THE DEPUTY COMMISSIONER OF SALES TAX. BUT, SIMILAR ORDERS PASSED BY THE SALES TAX OFFICERS IN OTHER CASES HAVE BEEN REVERSED BY THEIR OWN APPELLATE TRIBUNALS. FOR, THE LD. AR HAS PLACED RELIANCE ON THE DECISION S OF THE HON'BLE SALES TAX TRIBUNAL IN THE CASE OF STATE OF ORISSA VS M/S PAWANJAY SPONGE IRON LTD SA NO.1624 OF 2005-06 AND M/S UTKAL METALLICS LTD VS STATE OF ORISSA SA NO.517 OF 2007-08. THE BRIEF FACTS IN THE CASE OF M/S PAWANJAY SPONGE IRON LTD ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPONGE IRON. THE STO FOUND IN COURSE OF THE ASSE SSMENT PROCEEDINGS THAT THE ASSESSEE HAD SHOWN THE YIELD RATIO OF 1.65 MEANING THEREBY THAT 1.65 MT OF IRON ORE WAS REQUIRED FOR PRODUCING 1 MT OF SPONGE IRON. THE STO HOWEVER RELI ED ON THE EXPERT VIEW OF THE PROFESSOR OF NIT, ROURKELA THAT L.6 MT OF IRON ORE SHOULD PRODUC E 1 MT OF SPONGE IRON. THE STO CONCLUDED THAT THE ASSESSEE SUPPRESSED ITS PRODUCTI ON OF SPONGE IRON AND THEN ESTIMATED THE EXCESS PRODUCTION BY APPLYING THE YIELD RATIO OF L. 6. THE HON'BLE TRIBUNAL REVERSED THE ORDER OF THE STO BY HOLDING AS UNDER: WE HAVE HEARD THE COUNSELS, GONE THROUGH THE IMPUGN ED ORDER OF FIRST APPEAL ALONG WITH THE ORDER OF THE ASSESSMENT VIS-A-VIS THE GROU NDS OF APPEAL. AS IT APPEARS THE APPELLANT STATE HAS HARPED UPON THE RATIO OF SPONGE IRON AND IRON ORE AS FINISHED PRODUCT AND RAW MATERIAL RESPECTIVELY TO BE 1: 1.6 AS OBSERVED BY THE PROFESSOR OF THE NIT, ROURKELA AND BASING ON WHICH THE LEARNED STO R E-DETERMINED THE FINAL PRODUCTION OF SPONGE IRON BY REJECTING THE RESPONDE NT'S RATIO OF 1 : 1.65. ON GOING THROUGH ORDER OF ASSESSMENT WE DO NOT FIND ANY OTHE R GROUNDS FOR REJECTION OF THE RESPONDENT'S BOOKS OF ACCOUNT. NOTHING HAS COME OUT FROM THE ORDER REGARDING QUALITY OF IRON ORE USED, THE FE CONTENT OF THE IRON ORE, A NY EXCESS FOUND IN THE FINISHED PRODUCT STOCK BECAUSE OF MORE RECEIPTS AND LESS REF LECTION IN ACCOUNTS. THE RATIO OF 1 : 1.6 CAN WORK WELL WITH STANDARD RAW MATERIAL HAVING FE CONTENT OF 65% OR MORE. HENCE, THE RATIO PRESCRIBED CANNOT BE TAKEN AS TO H AVE BEEN ETCHED IN STONE WITH NO FLEXIBILITY. A SPECIALIST'S VIEW IS OF IMMENSE HELP ONLY WHEN PROPER GROUND WORK IS 27 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 DONE TO FORM A PYRAMID AND THE SPECIALIST'S VIEW IS PUT AT THE TOP AS A TOP-UP. THIS HAS NOT BEEN DONE. IN THE CONSIDERED OPINION OF THE TRI BUNAL, THE LEARNED ACST RIGHTLY DELETED THE DEMAND ON THIS POINT. 19. THE BRIEF FACTS IN THE CASE OF M/S UTKAL METAL LICS LTD. ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPONGE IRON. THE STO FOUND IN COURSE OF THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD SHOWN THE YIELD RATIO OF L.7 MEANING THEREBY THAT L.7 MT OF IRON ORE WAS REQUIRED FOR PRODUCING 1 MT OF SPONGE IRON. THE STO HOWEVER RELIED ON THE EXPERT VIEW OF THE SCIENTIST OF NIT, ROURKEL A THAT 1.65 MT OF IRON ORE SHOULD PRODUCE 1 MT OF SPONGE IRON. THE STO CONCLUDED THAT THE ASSES SEE SUPPRESSED ITS PRODUCTION OF SPONGE IRON AND THEN ESTIMATED THE EXCESS PRODUCTION BY AP PLYING THE YIELD RATIO OF 1.65. THE HON'BLE TRIBUNAL REVERSED THE ORDER OF THE STO BY HOLDING A S UNDER : THE APPELLANT, A SPONGE IRON MANUFACTURER MAINTAINE D HIS BOOKS OF ACCOUNT SUCH AS PURCHASE ACCOUNT, MANUFACTURING ACCOUNT AND SALE OF FINISHED PRODUCT ACCOUNT. DURING THE IMPUGNED YEAR HE HAD UTILIZED 20075.130 MT OF IRON ORE TO GET 11808.900 MT OF SPONGE IRON. THE RATIO IS CALCULATED AS 1.700 : 1.000 MT. THE LEARNED STO CONSIDERED THE SAME TO BE AT HIGHER SIDE AND RE-DET ERMINED AS 1.650 : 1.000 MT WHICH WAS CONFIRMED BY THE LEARNED ACST. ON GOING T HROUGH THE ORDERS OF LEARNED STO AND ACST, THIS TRIBUNAL FAILS TO FIND ANY COGEN T REASON FOR SUCH REFIXATION. WHILE THE STO OBSERVED THAT IT WAS A FACT THAT RECEIPT OF SPONGE IRON DEPENDS UPON THE QUALITY OF IRON ORE AND COAL BUT IT COULD NOT BE AS HIGH AS CLAIMED BY THE APPELLANT. THE LEARNED ACST OBSERVED THAT THE LEARNED STO ADOP TED THE RATIO AFTER TAKING INTO ACCOUNT THE PREVALENT RATIO ADOPTED BY THE SPONGE I RON UNIT IN GENERAL. SUCH FINDINGS APPEARED TO BE NOT BASED ON A STRONG FOOTING AS EST ABLISHED LAW IS THAT TO DISBELIEVE AND ASSESSEE'S VERSION THE REVENUE HAS TO BRING IN POSITIVE EVIDENCES TO COUNTER WITH. THE APPELLATE AUTHORITY HAS NOT THROWN ANY LIGHT ON THE ASPECT OF EXISTENCE OF ANY FIXED FORMULA FOR CONSUMPTION OF RAW MATERIALS AND RECEIPT OF FINISHED PRODUCTS AND AS PER THAT FORMULA WHAT SHOULD BE THE QUALITY OF T HE RAW MATERIALS, WHEN THE CLAIM OF THE APPELLANT THAT INFERIOR QUALITY RAW MATERIALS W ERE UTILIZED BY HIM, THE SAME SHOULD HAVE BEEN CONTROVERTED ON DUE ANALYSIS OF THE PURCH ASE INVOICES OF RAW MATERIALS. IT HAS ALSO NOT BEEN REASONED OUT AS TO HOW THE 1.700 MT IS HIGH AND 1.650 MT IS JUST AND PROPER. WHILE THE ORDERS OF APPEAL AND ASSESSME NT REMAINED SILENT ON THIS POINT, THE APPELLANT HAS COME UP WITH A WRITTEN SUBMISSION THAT HE PURCHASED IRON ORE FROM OPEN MARKET HAVING A FE CONTENTS OF 62% OR LESS WHE REAS THE CENTRAL EXCISE DEPARTMENT'S CIRCULAR TO BE THE RATIO OF 1.500 : 1. 000 MT WITH CATEGORICAL MENTION THAT AFORESAID RATIO IS ACHIEVABLE IF THE FE CONTEN T OF IRON ORE IS 67% OR MORE. THE EXPERT VIEW OF THE SCIENTIST WORKING WITH NIT, ROUR KELA EXPRESSED IN HIS LETTER DT.29- 09-2004 THAT NO DIRECT DATA IS AVAILABLE TO INPUT A ND OUTPUT RATIO IN SPONGE IRON INDUSTRY IN ANY BOOK AND IT DIFFERS PLANT TO PLANT DEPENDING ON CONSUMPTION AND QUALITY OF RAW MATERIALS AND THE OPERATIONAL CONDIT ION. THE RATIO OF RAW MATERIALS AND FINISHED PRODUCTS WOULD BE AT 1.500 : 1.000 MT IF T HE FE CONTENT IN IRON ORE IS 65% OR MORE AND IF THE FE CONTENT IS LESS THE CONSUMPTION WILL BE MORE. AS IT APPEARS THE LEARNED STO HAS NEITHER ACCEPTED THE VERSION OF THE APPELLANT NOR THE VERSION OF THE EXCISE DEPARTMENT AND THE EXPERTS FOUND OUT A MID W AY OF 1.650 : 1.00 MT. SUCH AN ACTION IS NOT TENABLE IN THE LAW BEING NOT SUPPORTE D WITH DUE ANALYSIS AND PROPER REASONINGS. THIS HAS TO BE SET-ASIDE AND THEREFORE SET-ASIDE. THE APPEAL SUCCEEDS ON THIS POINT. 28. THE REVISED GROUNDS OF APPEAL FOR AY 2008-09 TO 2010-11 ARE THAT THE LD. CIT(A) ERRED IN DRAWING INFERENCE AND ASSUMPTION THAT THE SALES TAX ORDER DETERMINED THE EXCESS PRODUCTION IS NOT SUSTAINABLE IN LAW AS SUCH ORDERS HAVE BEEN QUASHED BY THE SALES TAX TRIBUNAL IN OTHER CASES WITHOUT GIVING SUCH DETAILS IN HIS ORDER AND IGNORING THE FACT THAT THE 28 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 SALES TAX ORDER IN THIS CASE IS PENDING BEFORE THE SALES TAX TRIBUNAL AND WHERE THE FIRST APPELLATE AUTHORITY HAS UPHELD THE SALES TAX ORDER IS, THEREFORE, INCORRECT. WE NOTE THAT THE FIRST APPELLATE AUTHORITY OF SALES TAX HAS UPHELD T HE ORDER OF THE SALES TAX, AO ON THIS ISSUE. THE LD. CIT(A) HAS NOT MADE ANY INCORRECT S TATEMENT CONTRADICTING THIS FACT. IN THE IMPUGNED ORDER THE LD. CIT(A) WHILE RECORDING THE S UBMISSION OF THE LD. AR HAS INCORPORATED ALONG WITH THE SUBMISSION OF THE LD. A R, THE SALES TAX TRIBUNALS ORDER IN SIMILAR/IDENTICAL CASES WHEREIN THE SALES TAX TRIBU NAL WAS PLEASED TO DELETE THE ESTIMATED ADDITION BASED ON THE OPINION OF THE DEAN, NIT AS H AS BEEN DONE IN THIS CASE. THE LD. CIT(A) HAS GIVEN THE FACTS AS WELL AS THE DECISION OF SALES TAX TRIBUNAL ALONG WITH THE APPEAL NUMBER AND TITLE OF THE CASE, THEREFORE, THIS GROUND OF APPEAL RAISED BY THE REV ENUE IN THE REVISED GROUNDS OF APPEAL HAS NO MERITS AND, TH EREFORE, HAS TO BE DISMISSED. 29. TO SUM UP FINALLY, WE NOTE THAT THERE CAN BE NO UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD FOR CONSUMPTION OF IRON ORE FOR PRODUCTION OF SPONGE IRON. IT HAS TO BE APPRECIATED THAT THE VARIOUS OTHER FACTORS LIKE QUALITY, COMPOS ITION OF RAW MATERIALS, OPERATING CONDITIONS ETC WHICH CONTRIBUTE TO THE YIELD RATIO. FROM THE DISCUSSIONS STATED ABOVE, WE NOTE THAT THE YIELD RATIO CAN VARY FROM PLANT TO PL ANT AND EVEN DIFFER FROM YEAR TO YEAR BASED ON THE CAPACITY OF THE PLANT, THE EFFICIENCY OF THE STAFF, MAINTENANCE OF THE PLANT, ELECTRICITY CONSUMPTION ETC. THE FE CONTENT OF THE IRON ORE AL SO VARIES FROM GEOGRAPHICAL LOCATION OF MINE TO MINE, SEASON TO SEASON ETC. SO, THERE CANN OT BE ANY UNIVERSAL AND UNIFORMLY ACCEPTABLE STANDARD FOR CONSUMPTION OF IRON ORE. T HE FE CONTENT IN AN IRON ORE IS A SCIENTIFIC FACT AND WHICH CAN BE DETERMINED BY SCIENTIFIC TEST CONDUCTED AT LABORATORY EQUIPPED FOR FINDING THAT. HOWEVER, IN THE INSTANT CASE, THE AO FAILED TO COLLECT SAMPLES OF THE IRON ORE DURING SEARCH CONDUCTED ON 06.02.2012 (EVEN THE SAL ES TAX OFFICIAL WHO RAIDED ON 18.08.2009 FAILED TO DO SO) AND SENT IT FOR EXAMINA TION AT A LABORATORY TO FIND OUT THE FE CONTENT OF THE IRON ORE UTILIZED AT ITS KARAKOLHA P LANT AT ORISSA, THUS MAKING THE ESTIMATION OF EXCESS PRODUCTION BASED ON IMAGINARY FIGURES WIT HOUT ANY SCIENTIFIC BASE. THE AO IN THIS CASE HAS BLINDLY BASED HIS ESTIMATION ON THE OPINIO N OF THE DEAN OF NIT. AS STATED EARLIER, THE FE CONTENT OF IRON ORE IS A SCIENTIFIC FACT WHI CH CAN BE DETERMINED BY A LAB REPORT WHICH HAS NOT BEEN CONDUCTED BY THE AO BEFORE IMAGI NING THE FE CONTENT OF THE IRON ORE UTILIZED IN THE KARAKOLHA PLANT AS MORE THAN 65%. F URTHER, THE AO FAILED TO CONDUCT ANY EXPERIMENT AT THE SPONGE IRON FACTORY OF ASSESSEE TO TEST AS TO THE CAPACITY OF THE PLANT AT 29 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 KARAKOLHA, THE CONSUMPTION OF IRON ORE FOR PRODUCIN G THE 1 MT OF SPONGE IRON WHICH COULD HAVE THROWN LIGHT INTO THE VERACITY OF THE CLAIM OF THE ASSESSEE AS WELL AS THAT OF THE ALLEGATION MADE BY THE SALES TAX AUTHORITY. WE NOTE THAT NO INDEPENDENT STUDY HAS BEEN MADE BY THE AO AT ITS KARAKOLHA PLANT IN ORISSA TO FIND OUT THE ACTUAL CONSUMPTION OF IRON ORE TO PRODUCE SPONGE IRON WHEN THE AO HAD DOUBTS A BOUT THE CONSUMPTION OF IRON ORE AS CLAIMED BY THE ASSESSEE. THE AO HAS NOT REJECTED T HE BOOKS OF ACCOUNT BEFORE VENTURING INTO ESTIMATION WHICH IS AGAINST THE RULE OF LAW AN D VITIATES THE ESTIMATION MADE BY HIM. ANOTHER IMPORTANT FACT WHICH WE HAVE NOTED IS THAT WHEN THE SEARCH WAS CONDUCTED BY THE INCOME TAX DEPARTMENT ON 06.02.2012 IN THE RESIDENT IAL AND BUSINESS PREMISES OF RUNGTA GROUP, NO EXCESS CLOSING STOCK OF SPONGE IRON WAS F OUND AT THE TIME OF SEARCH . IN THE SAID PREMISES, THE AO WRONGLY ASSUMED THAT THE EXCESS PR ODUCTION OF SPONGE IRON WAS MADE IN THE ASSESSMENT YEARS UNDER APPEALS AND HELD THAT IT WAS CLANDESTINELY REMOVED FROM THE FACTORY AND SOLD AWAY IN THE MARKET, WHICH IS BASED ON NO MATERIAL AT ALL AND IS BASED ON SUSPICIOUS, SURMISES AND CONJECTURES, WHICH CANNOT STAND THE SCRUTINY OF LAW AND THEREFORE, HAS TO FAIL. THE LD. CIT(A) HAS RIGHTLY OBSERVED T HAT IN CASE THERE WAS CLANDESTINE MANUFACTURE AND REMOVAL OF EXCESS SPONGE IRON IT HA S TO BE PROVED BY SOME MATERIAL DIRECT OR INDIRECT OR CIRCUMSTANTIAL WHICH RELATE TO (A) M ANUFACTURE OF SPONGE IRON WITH REFERENCE TO INSTALLED CAPACITY, CONSUMPTION OF ELECTRICITY, LAB OUR EMPLOYED AND PAYMENT MADE TO THEM, PACKING MATERIAL USED, RECORDS OF SECURITY OFFICERS , DISCREPANCY IN THE STOCK OF SPONGE IRON, CLANDESTINE REMOVAL OF SPONGE IRON WITH REFERENCE T O ENTRY OF TRUCKS INTO FACTORY PREMISES, LOADING OF SPONGE IRON THEREIN, SECURITY GATE RECOR DS, TRANSPORTERS DOCUMENTS SUCH AS LRS, ENTRIES AT DIFFERENT CHECK POSTS, FORMS OF COMMERCI AL TAX AND RECEIPTS BY THE CONSIGNEES AND (B) AMOUNTS RECEIVED FROM THE CONSIGNEES, STATE MENT OF THE CONSIGNEES, RECEIPTS OF SALE PROCEEDS BY THE CONSIGNOR AND ITS DISPOSAL. NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO DIRECTLY/INDIRECTLY TO SHOW THAT THERE WAS CLANDEST INE REMOVAL OF EXCESSIVELY PRODUCED SPONGE IRON FROM ITS PLANT. WE NOTE THAT THE AO HA S NOT FOUND ANY DEFECT IN RESPECT TO THE QUANTITATIVE DETAILS FURNISHED BY THE ASSESSEE WHIC H TALLIED WITH THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN ITS REGULAR COURSE OF ITS BUSINESS AND WITHOUT REJECTING THE BOOKS OF ACCOUNT AND THAT TOO AS STIPULATED U/S. 14 5(3) OF THE ACT, THE AO OUGHT NOT TO HAVE ESTIMATED THE EXCESS PRODUCTION OF SPONGE IRON. THE LD. CIT(A) HAS RIGHTLY APPRECIATED THE FACTS AS WELL AS THE LAW GOVERNING THE ISSUES THAT HAS BEEN RAISED BY THE ASSESSEE DURING THE 30 IT(SS)A NOS.30 TO 33/KOL/2015 RUNGTA MINES LTD., AYS- 2007-08 TO 2010-11 APPELLATE PROCEEDINGS AND HAS PASSED A REASONED ORD ER WHICH DOES NOT CALL FOR ANY INTERFERENCE FROM OUR PART. THEREFORE, WE UPHOLD THE ORDER OF LD. CIT(A). 30. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE REASONED ORDER PASSED BY THE LD. CIT(A) AND, TH EREFORE, IT IS CONFIRMED, THEREFORE, DISMISS ALL THE APPEALS OF THE REVENUE. 31. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 09.03.201 8 SD/- SD/- (P. M. JAGTAP) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9 TH MARCH, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, C.C-1(3), KOLKATA. 2 RESPONDENT M/S. RUNGTA MINES LTD., 8A, EXPRESS TOWER, 42A, SHAKESPEARE SARANI, KOLKATA-700 017. 3. THE CIT(A) KOLKATA. 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. / TRUE COPY, BY ORDER, SR. PVT. SECRETARY
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