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TMI Blog2018 (3) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... ge iron, the allegation of suppression of production of sponge iron cannot stand. 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, composition 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 plant 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. Nothing has been brought on record by the AO directly/indirectly to show that there was clandestine removal of excessively produced sponge iron from its plant. We note that the AO has not found any defect in respect to the quantitative details furnished by the assessee which 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. 145(3) of the Act, the AO ought not to have estimated the excess production of sponge iron. - Decided against revenue - I.T(SS).A. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Sales Tax Order determining 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 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 ₹ 10,73,51,268/- on the basis of additional evidence and documents, without giving opportunity to the AO in violation of 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 pertained to the single issue of deletion by the Ld. CIT(A) of addition made by AO on account of alleged suppression of production of sponge iron and sales. We note that in the assessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee submitted that The assessment order of Deputy Commissioner of Commercial Taxes, Jajpur Range, Jajpur has been challenged and the company has filed an appeal with the appellate authority. Also the aforesaid order pertains to our Sponge Iron Plant at Karakolha, Odisha which consumes raw material from Odisha itself and where as the reference made by your goodself relates 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 contention we request you to refer our seized documents MKJ-85 MKJ-88 which are Gate(receipt) registers 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 Mines 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 contention we are producing the copies of Form E Form J which shows the source of raw materials procured for Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 909728123.00 75878 11989.00 2008-09 1196268123.00 81419 14693.00 2009-10 1013684199.00 84408 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 1,12,297.485 67,907.470 74,864.990 6957.520 8826.00 61407072 2007-08 1,16,492.230 68,707.340 77,661.487 8954.147 11989.00 107351268 2008-09 1,36,429.250 81,430.550 90,952.833 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginary production that too without there being any positive material on record to support his allegations. The AO has certainly erred in law as well 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 factors such as the quality and composition of raw materials 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertain to the sponge iron factory at Chaliama and therefore has no relevance in so far as the composition of iron ore utilised in the sponge iron factory at Karakolha (Orissa) was concerned. I have perused the seized documents MKJ -85 88 which were gate receipt registers of the factory at Karakolha containing all relevant details such as date of entry exit, vehicle number, weight specification of raw material and also the source of raw material. The gate receipt registers clearly show that the iron ore utilised in the sponge 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 factory at Karakolha (Orissa) utilised iron ore from the mines situated in Orissa. In such factual 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 sponge iron factory at Karakolha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esting commensurate investment in undisclosed assets or unaccounted expenses which could corroborate the assumption of undisclosed profits to the tune of ₹ 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 production 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 the Commercial Tax Officer, Circle-II, Panposh, Rourkela whereby the Dean of NIT, Rourkela conveyed his technical opinion regarding consumption of raw material for production of sponge iron. I find it appropriate to first reproduce the relevant portions of such technical opinion : In fact no direct data is available in any reference 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 conditions. However based on our knowledge and general discussion with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 opined 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 consideration at over 63%. The AO in fact relied on the investigation report of the State Commercial Tax Wing of Orissa wherein it was claimed that the Fe content of the iron ore utilised in the sponge iron factory at Karakolha was well beyond 63%. I however note that neither the investigation report of the State Commercial Tax Wing of Orissa nor the AO has ever claimed that the Fe content of iron ore utilised in assessee's sponge iron factory was 65% or more. I further note that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 such 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 requirements and also ignoring the various factors as suggested in the technical opinion. 6. Thereafter, the Ld. CIT(A) concluded by observing as under: In view of the ratio laid down by the various courts, I am of the considered opinion that the AO has erred in law in assuming imaginary production of sponge iron by mechanically applying the yield ratio of 1.5 and also in assuming 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 paragraphs, I am of the opinion that the addition made by the AO on account of suppressed sales is neither sustainable in law nor on facts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 ₹ 465,73,19,882/- 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 the 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 order 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 based on material whereas the Ld. CIT(A) has given relief on the basis that any estimation by the AO of the production of sponge iron by applying the yield ratio was not valid when there is no rejection of books. The Ld. DR also submitted that the Ld. CIT(A) has admitted additional evidence without giving any opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression of sales of sponge iron ore on estimate basis based on some standard input output norms (SION). Even otherwise the Ld. AR contended that the additions made by the Sales Tax Authorities on account of sales of sized iron ore and iron ore fines 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 tax authority have no relevance in sofar as the impugned addition is concerned. According to the Ld. AR, the orders passed by the Sales Tax Authority i.e. the AO of the Sales Tax was available before the AO and after perusal of the relevant material and proper examination of facts he chose not to make any separate addition in respect of other issues emanating from the sales tax assessment order. The AO in the instant case proceeded with the addition only on account of alleged suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portation of minerals/ores as per the Orissa Minerals (Prevention of theft, smuggling and illegal mining and regulation of possession, storage, trading and transportation) Rules 2007 in support of its contention. The Ld. AR contended that the sponge iron factory at Karakolha utilized iron ore having Fe content around 63%. The Ld. AR pointed out that the AO relied on the assessment order of the Deputy Commissioner of Sales Tax and the investigation report of the State Commercial Tax Wing 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 sponge iron factory at Karakolha as submitted the Sales Tax Authorities placed the Fe content 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 Commissioner, Sales Tax did not dispute the laboratory reports and held that the sponge iron factory at Karakolha utilized iron ore have Fe content of 63%. According to Ld. AR there is no material on record to suggest that assessee s sponge iron factory at Karakolha utilized iron ore havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 universal and uniformal accepted standard for the yield ratio which was depending on various factors and consequently the same was variable from one plant to another and also from year to year. According to Ld. AR, the assessee has shown yield ratio which was not only consistent 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 General 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 various Govt. institutions are not unanimous in their opinion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was a search at the factory premises of sponge iron division at Karakolha, Barbil, Orissa on 18.08.2009 by the Sales Tax Authorities from where they had made seizure 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 ₹ 55,92,360/- which has been later deleted by the First Appellate Authority, Additional Commissioner of Sales Tax, Central Zone. The Sales Tax Authorities have seized two monthly performance reports for the month of July, 2008 and after comparing with the mining returns submitted by the assessee made an addition or suppression in sales to the tune of ₹ 465,73,19,882/- which has been reduced by the First Appellate Authority to the tune of ₹ 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 ₹ 15,47,71,775/- which has been sustained by the First Appellate Authority and which is the subject matter of assessment in which the AO (Income Tax) in the impugned proceedings have made an addition of ₹ 6,14,07,072/- (computation of it has been given by AO at page 8 of assessment order) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO that the AO s reliance on page nos. 1 to 159 of MKJ 113 was misplaced because it contains the sample 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 assessee s 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 Chaliama Steel Plant and iron ore excavated from Ghatkuri mines cannot be relied on when production of sponge iron at the factory of the assessee situated at Orissa is being carried out. For supporting their contention the assessee relied on the seized papers which were marked 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 mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO concluded that the entire suppressed sale of ₹ 6,14,07,072/- for the year needs to be added back to the total income of the assessee and he made an addition of the said amount, which was challenged 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 mistake 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 account of the assessee before venturing into the estimation of the suppressed production and sales 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 mandatory/statutorily required books of account maintained by the assessee in the regular course of its business before estimating the income; as afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67, CSP 32 etc. which according to AO, goes on to show that the sponge iron plant at Karakolha, Barbil (Orissa) were consuming high grade of iron ore and the average of Fe content of the iron ore is more than 63%. These aforesaid adverse facts were communicated to the assessee, to elicit the assessee s version in respect to the contents of the seized documents pursuant to which the AO formed the opinion 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 attention to the fact that the Chaliama Steel Plant was situated in the State of Jharkhand and the Gatkuri mines is also situated in the State of Jharkhand. So, therefore, according to assessee, the contents of page nos. 1 to 159 of MKJ 113 relied on by the AO containing sample analysis of incoming iron ore from Gatkuri mines to Chaliama Steel Plant are events taking 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 we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orily mandated Form E J of mining Rules and seized gate passes/register MKJ 85 88. We note that the AO has heavily relied on the Investigation report of the Enforcement Officials of the State Commercial Tax Wing of Orissa and assessment order of the Deputy Commissioner of Sales Tax to form an opinion that the Fe content of iron ore used at the steel plant at Karakolha is of higher grade i.e. more than 63% Fe content. We have gone though the order of assessment passed by the Deputy Commissioner of Sales Tax, Jaipur Range which is placed at pages 39 to 52 (PB)and the First Appellate order passed by the Additional Commissioner of Sales Tax, Central Zone which is placed at pages 53 and 64 (PB). We note that the Sales Tax AO on the issue in hand has discussed about the suppression of production and the sale of 12897.640 MT of sponge iron costing of ₹ 15,47,71,776/- at pages 42 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. According to him, 1.590 MT iron ore is to be consumed for manufacture of 1 MT of sponge iron, when the Fe content is well beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 important question before him (i.e. AO) was whether the assessee s sponge iron plant at Karkolha consumed iron ore which had Fe content more than 65%? The non-consideration of this important piece of evidence which has been recorded by AO, Sales Tax in his order, ought not to have been ignored, when adjudicating the issue of Fe content which also makes 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 Authority s order to fasten the liability on the assessee, in all fairness should have considered all materials adverse as well as in favour of the assessee and should have arrived at a fair, reasonable and just conclusion after weighing the materials on both the sides, which he failed to do and the Ld. CIT(A) has correctly taken note of relevant materials to give relief to the assessee, which action of ld. CIT(A) in the facts and circumstances we concur. 20. Moreover, we note tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dges 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 fact that had to be brought on record by the AO was to be find out as a matter of fact the Fe 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 to renowned institute in the country for finding out the Fe content of ore used for production of sponge iron which admittedly they have not done. The AO has blindly taken the technical view/opinion of the Dean NIT, Rourkella which is a general letter/opinion which comes with a caveat that if the Fe content is 65% or more, then a ton of sponge iron will be produced from 1.5 MT of iron ore. So, it goes without saying that when Fe content of iron ore is less than 65% more then more iron ore is required to produce a ton of sponge iron, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is found that all the entries in the seized register showing transportation of iron ore fines to the Railway siding have been duly reflected 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 transit 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 Karakohla Sponge Iron Plant to Railway siding on the strength of transit pass issued by the mining authorities from 22.5.09 to 1.6.09. As the dealer appellant produced true satisfactory records in support of transportation of the exact quantum of iron ore fines from Karakohla Sponge Iron 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 officials, Enforcement Range, Cuttack in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in 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 ratio that also depends on various factors such as composition and quality of raw materials and operating conditions. The Ld AR has submitted in course of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee) 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 appellate jurisdiction over the decision of a quasi judicial authority i.e. AO and who enjoys plenary 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 results of consumption of iron ore by similar companies engaged in same business in State of Orissa, the ld CIT(A) came to the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee suppressed its production 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 impugned order of first appeal along with the order of the assessment vis-a-vis the grounds 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 re-determined the final production of sponge iron by rejecting the respondent's ratio of 1 : 1.65. On going through order of assessment we do not find any other 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, any excess found in the finished product stock because of more receipts and less reflection 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 have been etched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty raw materials were utilized by him, the same should have been controverted on due analysis of the purchase 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 assessment 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 whereas 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 content of iron ore is 67% or more. The expert view of the scientist working with NIT, Rourkela expressed in his letter dt.29- 09-2004 that no direct data is available to input and 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 condition. The ratio of raw materials and finished products would be at 1.500 : 1.000 MT if the 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sales tax official who raided on 18.08.2009 failed to do so) and sent it for examination at a laboratory to find out the Fe content of the iron ore utilized at its Karakolha plant at Orissa, thus making the estimation of excess production based on imaginary figures without any scientific base. The AO in this case has blindly based his estimation on the opinion of the Dean of NIT. As stated earlier, the Fe content of iron ore is a scientific fact which can be determined by a Lab Report which has not been conducted by the AO before imagining the Fe content of the iron ore utilized in the Karakolha plant as more than 65%. Further, the AO failed to conduct any experiment at the sponge iron factory of assessee to test as to the capacity of the plant at Karakolha, the consumption of iron ore for producing the 1 MT of sponge iron which could have thrown light into the veracity of the claim of the assessee as well as that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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