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1986 (12) TMI 49
The Appellate Tribunal ITAT Ahmedabad-B dismissed the appeal regarding the addition made on account of under valuation of stock. The IT authorities found an undervaluation of stock but the AAC of IT deleted the addition. The Tribunal upheld the decision, stating that undervaluation of stock could only be considered on the last day of the previous year. The appeal was dismissed.
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1986 (12) TMI 48
Issues:
1. Whether expenditure incurred on renovation by a firm can be added to a partner's wealth for valuation purposes.
Analysis:
The judgment revolves around the dispute of whether renovation expenditure treated as capital by the firm can be added to a partner's wealth for valuation purposes. The WTO observed substantial renovation expenditure by firms Laxmi Talkies and L.N. Talkies, treated as capital expenditure by the ITOs. The AAC rejected arguments that the firms did not belong to certain HUFs, citing enduring benefits, close relationships, and potential tax evasion. The AAC confirmed the WTO's action of adding the renovation expenses to the partners' wealth. The counsel argued that the expenditure should be treated as revenue based on accounting principles, not as an asset under WT Rules, 1957.
The ld. D.R. supported the AAC and WTO, stating that revenue expenditure on renovation enhances asset value, distinguishing between revenue and capital expenditure for tax purposes. The counsel contended that Rule 2-C does not apply, emphasizing accounting principles in determining expenditure nature. The Tribunal clarified that the dispute was not about revenue expenditure's impact on partnership value but about adding partners' share of renovation expenses treated as capital by the firms. The WTO valued partnership interests globally, following Section 7(2)(a) of the WT Act, allowing adjustments per Rule 2A of WT Rules, 1957.
The Tribunal highlighted that the firms' substantial renovation expenditure increased asset value, rejecting claims that the premises did not belong to the firms. The judgment emphasized determining the real taxable wealth, considering the capital nature of the expenditure. The Tribunal agreed with the AAC that capital expenditure forms part of partners' interest, suggesting depreciated value calculations per IT Rules. The Tribunal directed the WTO to decide whether the expenditure is revenue or capital in nature, withholding a decision on adding revenue expenditure to partner's interest.
The judgment concluded by allowing the appeals partly, withholding decisions on rectification proceedings' grounds. The Tribunal restored the issue of expenditure nature to the WTO for further examination, considering pending appeals and the unsettled nature of the renovation expenditure classification. The judgment did not pronounce on whether revenue expenditure on renovation could be added to partner's interest in a firm, leaving the matter for future determination.
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1986 (12) TMI 47
Issues Involved:
1. Jurisdiction of the Appellate Tribunal.
2. Validity of Import Licenses.
3. Quantum of Redemption Fine.
4. Time-barred Appeals.
Issue-wise Detailed Analysis:
1. Jurisdiction of the Appellate Tribunal:
The appeals were initially filed with the North Regional Bench of the Customs, Excise, and Gold (Control) Appellate Tribunal, New Delhi. However, the learned SDR protested regarding the jurisdiction, leading to the transfer of the appeals to the West Regional Bench of the Tribunal.
2. Validity of Import Licenses:
The core issue was whether refined industrial coconut oil was permitted to be imported under the additional licenses submitted by the appellants or whether the goods were banned as per Appendix 9 of the Import Policy. The Collector of Customs and Central Excise, Ahmedabad, confiscated the consignments, arguing that the import licenses were invalid and that the goods were canalized items meant to be imported only by the State Trading Corporation (STC).
The appellants contended that they acted on the clarification from the STC and previous orders from the Central Board of Excise and Customs and the Government of India, which indicated that industrial coconut oil was not a canalized item. However, the Delhi High Court upheld the Collector's decision, affirming that both edible and non-edible coconut oils were canalized items under the Import Policy for the relevant years.
3. Quantum of Redemption Fine:
The Collector imposed fines of Rs. 2 crores and Rs. 3 crores on the two consignments, respectively. The appellants argued that these fines were excessive and not justified, especially given the past practice of allowing similar imports without such heavy fines. They cited previous decisions where fines were either not imposed or significantly lower.
The learned SDR for the respondent argued that the fines were appropriate given the deliberate violation of the Import Control Regulations and the substantial profits the appellants stood to gain from the illegal imports. The Delhi High Court remitted the matter to the Tribunal to determine the appropriate quantum of fine, considering all relevant facts and circumstances.
4. Time-barred Appeals:
The appeals were filed on 22-2-1985, well beyond the statutory period after the Collector's orders dated 17-12-1982 and 18-12-1982. The issue of whether the appeals were time-barred was not initially raised by the respondent but was considered by the Tribunal.
Member (Technical) held that the appeals were time-barred under Section 129A(3) of the Customs Act and should be dismissed. Member (Judicial), however, opined that since the High Court had remitted the matter to the Tribunal, the question of limitation should not bar the appeals.
Final Judgment:
The matter was referred to a larger bench due to the difference of opinion between the two members of the West Regional Bench. The larger bench concluded that the appeals could not be rejected as time-barred since the High Court had remitted the matter to the Tribunal. However, on the substantive issue of the quantum of redemption fine, the larger bench agreed with Member (Technical) that the fines imposed by the Collector should not be reduced.
Conclusion:
The appeals for reduction in redemption fines were rejected, and the fines imposed by the Collector of Customs and Central Excise, Ahmedabad, were upheld.
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1986 (12) TMI 46
Issues Involved:
1. Legality of removal of tobacco consignments without payment of excise duty.
2. Alleged criminal conspiracy to cheat the revenue.
3. Fabrication of documents and evidence.
4. Failure of prosecution to produce primary evidence.
5. Validity of acquittal of co-accused.
6. Propriety of the trial court's judgment.
Issue-wise Detailed Analysis:
1. Legality of Removal of Tobacco Consignments Without Payment of Excise Duty:
The judgment discusses the provisions under Section 3 of the Central Excises and Salt Act, 1944, which is the charging section for levying and collecting duties of excise on all excisable goods. The consignments of tobacco were allegedly removed from Lalgidi to Solapur without payment of excise duty. The prosecution's case was that except for the first consignment, none of the other 13 consignments reached Solapur, and documents were fabricated to show their arrival.
2. Alleged Criminal Conspiracy to Cheat the Revenue:
The accused, including K.S. Deshmukh, were charged under Section 120B read with Sections 420 and 471 of the Indian Penal Code, and Sections 5(1)(d) and 5(2) of the Prevention of Corruption Act. The prosecution alleged that the accused conspired to evade excise duty by falsely documenting the movement and re-warehousing of tobacco consignments. However, the court found that the evidence did not sufficiently establish a conspiracy between the accused and the consignor.
3. Fabrication of Documents and Evidence:
The prosecution argued that documents were fabricated to show the arrival and storage of tobacco consignments in Solapur. The trial court found discrepancies in the documents, such as over-writing of dates and the landlord's denial of consent for storage. However, the appellate court noted that the alleged over-writing did not constitute fabrication, as it did not serve any purpose, and the presence of tobacco smell and leaves in the Neelanagar godown indicated recent use for storage.
4. Failure of Prosecution to Produce Primary Evidence:
The court criticized the prosecution for failing to produce primary evidence, such as the complete records of the octroi Nakas. The negative evidence presented by the prosecution was deemed insufficient to prove that the consignments did not arrive in Solapur. The court emphasized the importance of producing primary evidence, especially when proving a negative fact.
5. Validity of Acquittal of Co-accused:
The trial court had acquitted Accused No. 2 S.L. Deshpande and Accused No. 3 R.A. Manoki. The appellate court noted that the State's appeal against their acquittal was not admitted, and therefore, their acquittal stood valid. The court also mentioned that the evidence related to these accused could not be re-agitated in the present appeal.
6. Propriety of the Trial Court's Judgment:
The appellate court found that the trial court had approached the case with a bias regarding the guilt of the accused. The trial court's findings were based on assumptions and did not consider the possibility of the accused disposing of the tobacco clandestinely. The appellate court dismantled the prosecution's theory and found that the evidence did not support the conviction of K.S. Deshmukh.
Conclusion:
The appeal succeeded, and the order of conviction and sentence passed by the lower court was set aside. The appellate court ordered that the Appellant K.S. Deshmukh be set at liberty forthwith, and the bail bond was canceled. The notices issued to the acquitted co-accused were discharged.
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1986 (12) TMI 45
Issues Involved:
1. Conspiracy to import contraband goods.
2. Loading and transportation of contraband goods.
3. Acquittal of certain accused by the trial court.
4. Reliability and corroboration of an accomplice's evidence.
5. Application of Section 138B of the Customs Act.
6. Examination of circumstantial evidence.
Detailed Analysis:
1. Conspiracy to Import Contraband Goods:
The prosecution alleged that A13 Haji Mohamed Moosa, his sons A14 Abdul Razak and A7 Abdul Hamid, along with others, conspired to import contraband goods of foreign origin into India. The conspiracy involved purchasing an ambassador car as a benami transaction and using it to transport the goods. The first successful attempt involved loading the goods in a truck camouflaged with gunny bags containing Dal, which was then transported to Bombay without detection. Emboldened by this success, a second attempt was made on 24-9-1969, which led to the seizure of the goods by the police near Nasik.
2. Loading and Transportation of Contraband Goods:
The accused loaded the contraband goods on a truck near the sea shore of Dhumas. A convoy, including the recently purchased ambassador car and a station wagon, was used to transport the goods to Bombay. The convoy took a circuitous route to avoid detection but was intercepted by the police near Nasik, leading to the seizure of goods worth Rs. 4,10,923/-.
3. Acquittal of Certain Accused by the Trial Court:
The trial court convicted several accused under Section 120B of the Indian Penal Code and Sections 135(a) and (b) read with Section 135(1) of the Customs Act, as well as under Section 5 of the Imports and Exports (Control) Act, 1947. However, the court acquitted A12 of charges related to the first consignment and acquitted A7, A13, and A14 of all charges related to the second seizure. The State filed an appeal against these acquittals.
4. Reliability and Corroboration of an Accomplice's Evidence:
The court discussed the approach to weighing the evidence of an accomplice, referencing Major E.G. Barsay v. State of Bombay and other cases. The evidence of an accomplice must satisfy a double test: it must be reliable and sufficiently corroborated. The court noted that the evidence of the main witnesses, who turned hostile, could not be considered reliable, and hence the corroboration pieces of evidence need not be examined.
5. Application of Section 138B of the Customs Act:
The appellant argued that the statements made by A1 before the Customs officers should be admitted as substantive evidence under Section 138B of the Customs Act. The respondent countered that this section, introduced in 1973, should not be applied retrospectively to events that occurred in 1969. The court noted that procedural laws can have retrospective operation and considered the statements as substantive evidence.
6. Examination of Circumstantial Evidence:
The court examined various circumstantial evidence presented by the prosecution, including a current account opening form, a letter referring to "Safed Machhi," hundis, passport details, and telephone numbers. The court found that these pieces of evidence did not conclusively connect the accused to the conspiracy. The court also considered the explanation given by P.W. 3 for resiling from his earlier statement, which indicated that he had falsely implicated others to save himself.
Conclusion:
The court concluded that the prosecution's evidence, including the retracted statements and circumstantial evidence, did not meet the standard of proof required in criminal jurisprudence to convict A7 as the mastermind behind the operation. The court upheld the trial court's judgment exonerating the accused concerning the first consignment that went undetected. Consequently, the appeal was dismissed, and the bail bonds of the accused were canceled.
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1986 (12) TMI 44
Issues Involved:
1. Legality of the extension of time for issuing a show cause notice u/s 124 of the Customs Act.
2. Validity of the seizure and detention of goods u/s 110 of the Customs Act.
3. Authority and procedure for reopening the assessment of goods post-clearance.
Summary:
1. Legality of the Extension of Time for Issuing a Show Cause Notice u/s 124:
The petitioner challenged the proceedings initiated u/s 110(2) and 124 of the Customs Act and the detention of goods. The extension of three months granted by the Collector of Customs was deemed invalid as it was made ex-parte without giving the petitioner an opportunity to be heard. The court emphasized that the act of extension is a quasi-judicial act requiring a judicial approach, as per the Supreme Court's ruling in *The Assistant Collector of Customs and Superintendent, Preventive Service Customs, Calcutta and others v. Charan Das Malhotra*. The Collector must record reasons for granting an extension and act judicially, which was not done in this case.
2. Validity of the Seizure and Detention of Goods u/s 110:
The goods were seized on 27th September 1985, and a notice u/s 110 of the Customs Act was issued. The petitioner argued that the goods were cleared upon payment of customs duty and production of necessary documents. The court found that no valid extension of the period for issuing a show cause notice was made before the expiry of the initial six months. Consequently, the petitioner acquired a vested right to the return of the goods, which could not be taken away by an ex-parte order. The court ordered the release of the goods from seizure and detention.
3. Authority and Procedure for Reopening the Assessment of Goods Post-Clearance:
The court noted that the goods had been assessed and released after proper examination. The Deputy Collector's order for assessment and release was not set aside or reviewed according to the provisions of the Act. Therefore, the customs authorities could not reopen the assessment without following the due process. The court held that the goods, once released after proper assessment, could not be seized again for alleged under-invoicing without fresh material evidence.
Conclusion:
The court concluded that the extension of the period for issuing a show cause notice was invalid, and the goods must be released from seizure. The respondents were permitted to issue a fresh show cause notice under Section 124 of the Customs Act and proceed in accordance with the law, ensuring the petitioner is given a reasonable opportunity to be heard. The petitioner was allowed to deal with or dispose of the goods after retaining one coil for inspection by the customs authorities if required.
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1986 (12) TMI 43
Issues Involved:
1. Rejection of the price list and basis of assessment for Excise duty.
2. Validity of deductions claimed by the petitioner.
3. Interpretation and application of relevant case law.
4. Re-assessment of duty payable.
5. Claim for interest on total assessment.
Detailed Analysis:
1. Rejection of the Price List and Basis of Assessment for Excise Duty:
The petition challenges the order dated 8-12-1981 rejecting the price list and basis of assessment for Excise duty. During the pendency of this petition, another assessment order dated 19-8-1986 was passed, which is also challenged.
2. Validity of Deductions Claimed by the Petitioner:
The petitioner claimed deductions on the grounds of normal discount, dealer's commission, additional discount, and special packing. The Assistant Collector, in the second impugned order dated 19-8-1986, rejected all claims of deductions except for the normal discount. The Court found that the rejection of deductions for dealer's commission and additional discount was based on an incorrect interpretation of case law. The Court noted that the dealer's commission, although not reflected in invoices, was accounted for in the books and should be considered valid. Similarly, additional discounts were given through credit notes and reflected in the account books, thus meriting consideration.
3. Interpretation and Application of Relevant Case Law:
The judgment discusses the evolution of the law regarding the assessable value of goods for Excise duty. Initially, the assessable value was based on manufacturing cost and profit, excluding post-manufacturing expenses. The Supreme Court's judgment in Union of India vs. Bombay Tyres International (1983 E.L.T. 869) shifted the basis to the "normal price" of goods, allowing specific deductions. The Court also referenced subsequent judgments, including Union of India v. Godfrey Philips (1985) and Moped India v. Assistant Collector (1986), to clarify permissible deductions. The Court found that the Assistant Collector had overlooked these precedents, leading to an erroneous rejection of deductions for dealer's commission and special packing.
4. Re-assessment of Duty Payable:
The Court held that the second impugned order suffered from irregularities and non-application of relevant case law. It directed the Assessing Authority to re-assess the duty payable after verifying the account books of the petitioner and relevant dealers. The Court emphasized that deductions for dealer's commission, additional discounts, and secondary packing should be reconsidered in light of the Supreme Court's judgments.
5. Claim for Interest on Total Assessment:
The respondent's claim for interest on the total assessment was rejected. The Court noted the absence of a statutory provision for such interest and highlighted that no directions regarding interest were given in interim orders. The Court observed that the petitioners had paid the full assessment of Excise Duty and furnished Bank Guarantees worth several crores. Given the bona fide dispute and changing legal interpretations, the Court found no basis for awarding interest.
Conclusion:
The second impugned order dated 19-8-1986 was struck down due to various irregularities and non-application of relevant case law. The Court directed a fresh assessment of duty payable, considering permissible deductions for dealer's commission, additional discounts, and secondary packing. The claim for interest by the respondent was dismissed. The operative order dated 19-12-1986 made the rule partly absolute with no order as to costs.
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1986 (12) TMI 42
Issues:
Jurisdiction of the Magistrate to order the return of seized truck before filing a formal complaint under the Customs Act.
Authority of the High Court to direct the return of the truck under Section 482 of the Criminal Procedure Code or Article 227 of the Constitution.
Jurisdiction Issue:
The judgment involves two criminal revisions arising from orders passed by the Chief Metropolitan Magistrate related to the return of a seized truck by the customs department. The customs department objected to the return, arguing that the Magistrate lacked jurisdiction as no complaint had been filed by customs or cognizance taken. The Magistrate initially ordered the return on bond, but later stayed the order for the customs department to seek superior court orders. The High Court analyzed previous decisions and concluded that the Magistrate did not have jurisdiction to order the return before the launch of criminal proceedings under the Customs Act. The Court highlighted that Customs Officers do not function as police officers and must report seizures to the Collector of Customs, not the Magistrate. Therefore, the Magistrate's assumption of jurisdiction was deemed unjustified.
High Court's Authority Issue:
The High Court addressed the argument that even if the Magistrate lacked power to order the return, the Court could direct the return under Section 482 of the Criminal Procedure Code or Article 227 of the Constitution. The petitioner, as the registered owner of the truck, claimed it was her only source of livelihood and sought its return. The Court acknowledged the customs department's right to start confiscation proceedings but noted the owner's right to claim a fine instead of confiscation under the Customs Act. Considering the truck's importance for the owner's livelihood, the High Court directed the release of the seized truck upon the owner furnishing a bond and a bank guarantee to the satisfaction of the Chief Metropolitan Magistrate. The revision petitions were disposed of accordingly, with the order to be sent to the Magistrate promptly.
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1986 (12) TMI 41
Issues Involved:
1. Classification of waste/scrap under Tariff Item 68 of C.E.T.
2. Liability of excise duty on waste/scrap.
3. Definition and scope of "manufacture" and "goods" under the Central Excises and Salt Act, 1944.
4. Applicability of Rule 49 and Rule 50 of the Central Excise Rules, 1944.
Summary:
1. Classification of waste/scrap under Tariff Item 68 of C.E.T.:
The primary issue is whether waste/scrap obtained during the manufacture of tyres, tubes, flaps, and other products by the petitioner company are "goods" classifiable under Tariff Item 68 of C.E.T. and liable to excise duty. The Central Board of Excise and Customs had classified such waste under Tariff Item 68, leading to the issuance of trade notices and directives to the petitioner company.
2. Liability of excise duty on waste/scrap:
The petitioner company argued that excise duty is a duty on the event of manufacture as defined in the Central Excises and Salt Act, 1944, and since there is no event of manufacture of waste, no duty is leviable. The court examined whether the waste/scrap generated during the manufacturing process could be considered as goods resulting from manufacture.
3. Definition and scope of "manufacture" and "goods" under the Central Excises and Salt Act, 1944:
The court referred to the Supreme Court's interpretation in "Union of India v. Delhi Cloth Mills" and "S.B. Sugar Mills Ltd. v. Union of India," which stated that manufacture implies a change resulting in a new and different article with a distinctive name, character, or use. The court concluded that waste/scrap is not the result of any treatment, labour, or manipulation by the petitioner company whereby a new and different article emerges. The waste/scrap is obtained in the course of manufacture and not as a result of the manufacture of the end product.
4. Applicability of Rule 49 and Rule 50 of the Central Excise Rules, 1944:
Rule 49 provides for duty chargeable only on removal of goods from the factory premises, and the proper officer may not demand duty on goods unfit for consumption or marketing. Rule 50 deals with non-excisable products and their removal from the factory premises. The court noted that waste matter is treated as non-excisable under Rule 50, and no amendment has been made to classify waste/scrap as excisable goods under Tariff Item 68.
Conclusion:
The court held that the waste/scrap obtained in the course of manufacture by the petitioner company are not goods and there is no event of manufacture of waste/scrap. Consequently, no duty of excise can be levied on such waste/scrap. The writ petition was allowed, and the impugned directives were quashed.
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1986 (12) TMI 40
The High Court of Bombay ruled that goods cannot be confiscated without an order under Section 129D of the Customs Act. The appellants were directed to comply with the interim order by a specified date unless proceedings were initiated under Section 129D before that time. The appeal was disposed of with no further orders.
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1986 (12) TMI 39
Issues Involved:
1. Constitutionality of Section 27 of the Customs Act, 1962.
2. Legality of the Assistant Collector's order rejecting the refund claim as barred by limitation under Section 27(1) of the Customs Act.
3. Determination of whether the imported item falls under Tariff Item 68(a) and is thus exempt from additional duty.
4. Availability of alternate efficacious remedy for the petitioner.
5. Entitlement to refund of duty paid under mistake of law.
6. Entitlement to interest on the refund amount.
Issue-wise Detailed Analysis:
1. Constitutionality of Section 27 of the Customs Act, 1962:
The petitioner initially sought a declaration that Section 27 of the Customs Act, 1962, is unconstitutional. However, the petitioner's counsel did not advance any submissions regarding this issue. Therefore, this issue was not addressed in the judgment.
2. Legality of the Assistant Collector's Order:
The Assistant Collector of Customs rejected the refund claim on the ground that it was barred by limitation under Section 27(1) of the Customs Act. The petitioner argued that the duty was paid under a mistake of law, and thus, the period of limitation under Section 27(1) would not apply. The court held that if the duty is paid under a mistake of law, the claim for refund is not governed by the limitation period set out under Section 27(1) of the Customs Act. The court referenced the Supreme Court decision in D. Cawasji & Co. & Ors. v. State of Mysore and another and other relevant cases to support this view.
3. Determination of Tariff Item 68(a):
The petitioner contended that the imported item, being alcohol, falls under Tariff Item 68(a) and is thus exempt from additional duty. The court examined the plain language of Tariff Item 68(a), which excludes "alcohol, all sorts" from duty. The court rejected the Department's argument that Tariff Item 68(a) is restricted only to ethyl alcohol. The court emphasized that the term "alcohol, all sorts" is clear and unambiguous, covering every kind of alcohol. The court also noted that the Central Board of Excise and Customs had accepted the Tribunal's decision that all types of alcohol are excluded from Tariff Item 68(a).
4. Availability of Alternate Efficacious Remedy:
The Department argued that the petitioner had an alternate efficacious remedy of filing an appeal against the Assistant Collector's order. The court rejected this preliminary objection, stating that no worthwhile purpose would be served by driving the petitioner to file an appeal, as the refund application was rejected solely on the ground of limitation.
5. Entitlement to Refund of Duty Paid Under Mistake of Law:
The court held that duty paid under a mistake of law is recovered without authority of law, and the claim for refund is not barred by the limitation period under Section 27(1) of the Customs Act. The court noted that the petitioner filed the refund application within three years from the date of knowledge of the mistake. The court rejected the Department's argument that the petitioner was guilty of laches for not filing the refund application earlier.
6. Entitlement to Interest on the Refund Amount:
The petitioner sought interest on the refund amount at the rate of 18% per annum. The court directed the Department to refund the amount within one month. If the amount was not paid within this period, the Department was ordered to pay interest at the rate of 15% per annum on the refund amount until the date of repayment. The court did not grant the petitioner's claim for interest at the rate of 18%.
Conclusion:
The court set aside the Assistant Collector's order dated September 26, 1986, and directed the respondents to refund the amount of Rs. 15,688.94 to the petitioner within one month. If the refund was not made within this period, the Department was ordered to pay interest at the rate of 15% per annum on the refund amount until the date of repayment. The respondents were also ordered to pay the costs of the petitioner.
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1986 (12) TMI 38
Issues:
1. Whether the detained goods should be released and the seized records returned due to the expiration of the statutory period for issuing a show cause notice under Section 110 of the Customs Act, 1962.
2. Whether the documents seized along with the goods are also liable to be returned.
3. Whether the delay in returning the goods and documents was unreasonable and if the authorities have the right to retain the documents for investigation purposes.
Analysis:
Issue 1:
The petitioner, a partnership firm, sought a writ of mandamus for the release of detained goods and the return of seized records, arguing that the Collector of Central Excise did not extend the statutory period for issuing a show cause notice under Section 110 of the Customs Act, 1962. The respondents contended that the goods seized were liable for excise duty and that the statutory period had expired. The court noted that the statutory period had indeed expired, and as no notice was issued within the stipulated time, the goods were to be returned to the petitioner. The court directed the respondents to return the detained goods.
Issue 2:
The petitioner also argued for the return of documents seized along with the goods, claiming that their retention was unwarranted. The court held that while Section 110 of the Act dealt with the seizure and return of goods, it did not explicitly mandate the return of seized documents. The court emphasized that the power to seize documents was for broader investigative purposes under the Act. The court found the retention of documents for investigation valid and denied the petitioner's request for their return.
Issue 3:
Regarding the delay in returning the goods and documents, the court acknowledged the lack of a specific timeline for returning documents under the Act. However, it expected authorities to retain documents only as long as necessary for investigation purposes. The court directed the authorities to expedite the investigation and conclude it promptly. While the court allowed the return of detained goods, it did not grant relief for the return of documents. The court emphasized that the delay in investigation due to the writ petition should not have occurred and instructed the authorities to conclude the investigation promptly.
In conclusion, the court partially allowed the writ petition, directing the respondents to return the detained goods but denying relief for the return of documents. The court emphasized the need for expeditious investigation and concluded by imposing costs on the parties involved.
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1986 (12) TMI 37
Whether any additional incentive can be given to the industrial concern?
Held that:- It is not disputed that the first Order namely, the one dated 11-4-1979 gave more of tax exemption than the second one. The second notification withdrew the exemption relating to purchase tax and confined the exemption from sales tax to the limit specified in the proviso of the Notification. All parties before us who in response to the Order of April 11, 1979 set up their industries prior to 21-10-1980 within the State of Kerala would thus be entitled to the exemption extended and/or promised under that Order. Such exemption would continue for the full period of five years from the date they started production. New industries set up after 21-10-1980 obviously would not be entitled to that benefit as they had noticed of the curtailment in the exemption before they came to set up their industries. Appeal allowed.
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1986 (12) TMI 36
Whether the processes of bleaching, dying, printing, mercerising etc. carried on by a processor on job work basis in respect of grey cotton fabrics and man-made fabrics belonging to the customer and entrusted by him for processing amount to 'manufacture' within the meaning of the Central Excises and Salt Act as it stood prior to its amendment by the Central Excise and Salt and Additional Duty of Excise (Amendment) Act, 1980?
Held that:- Correct mode of determination of the assessable value of the processed fabric in the hands of the processor who does job work in respect of grey cloth supplied by the manufacturer or trader.
Refer these writ petitions and appeals to a larger Bench of five Judges. Of course, when these writ petitions and appeals are referred to the larger Bench it will be open to the larger Bench to consider not only the question of determination of the assessable value but also the other question, namely, whether processing of grey fabric by a processor on job work basis constitutes manufacture, because the judgment in Empire Industries case (1985 (5) TMI 215 - SUPREME COURT OF INDIA) which has decided this question in favour of the Revenue and against the processor is a Judgment of a Bench of only three Judges and now the present writ petitions and appeals will be heard by a Bench of five Judges.
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1986 (12) TMI 35
Whether the price to the Defence Department Ex-factory gate (ex-factory) is to be considered as the wholesale cash price under old Section 4 as this was disallowed .by the Assistant Collector/
Held that:- Different prices can be declared with reference to different classes of buyers and each price is deemed to be a normal price of such goods. In this view of the matter, merely because the product is sold at a lower price to the Government and its Departments does not enable the MRF to contend that the difference in price with reference to an ordinary dealer and the Government is a discount to the Government. The difference in price is not a discount but constitutes a normal price for the Government as a class of buyer and no deduction on this head is liable to MRF Ltd. [1983 (11) TMI 70 - SUPREME COURT OF INDIA]
The assessable value is arrived at only after the permissible deductions are made. Excise duty is a ratio of the assessable value. Ad valorem excise duty is computed only on assessable value after arriving at such assessable value by making proper permissible deductions. Excise duty cannot be computed without proper determination of the assessable value, namely assessable value exclusive of permissible deductions. Even in the cum-duty sale price, the same principle must be followed to arrive at the assessable value. To compute an excise duty as a pre-determined amount without making the permissible deductions for reducing the cum-duty selling price is a fallacy both legally and mathematically as demonstrated above. The ad valorem excise duty can only be computed after reducing the assessable value by permissible deductions and then applying the tariff rate to the assessable value. To reverse this sequence is to mis-interpret the scheme and mode of levy of excise duty on the assessable value. In the light of our aforesaid discussions and keeping in line with our previous format orders, we direct the assessing authorities to quantify and re-determine the permissible deductions
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1986 (12) TMI 34
Issues:
1. Delay in refunding excess duty by the Department.
2. Department's failure to comply with the directions of the Appellate Collector.
3. Petition seeking a writ of mandamus for refund and enforcement of the Collector's order.
4. Tribunal's refusal to grant stay on the Collector's order.
5. Petitioner's request for refund based on calculations.
Analysis:
1. The petitioners had applied for registration of a contract to avail the benefit of a specific notification regarding duty payment on imported goods. The Assistant Collector initially rejected the application, but the Collector of Customs (Appeals) later allowed the appeal directing re-assessment of customs duty. The Department failed to act on this decision, leading to the petition filed by the importers on the grounds of inaction by the respondents.
2. The petitioners sought a writ of mandamus to compel the Department to assess the imported consignments as per the Collector's order and refund the excess duty paid. Despite the Division Bench's order to await the Tribunal's final decision, the Department filed an appeal after the limitation period, which was condoned by the Tribunal. The Tribunal also refused to grant a stay on the Collector's order, emphasizing the Department's obligation to comply with the appellate authority's directions.
3. The Court found it necessary to issue a writ directing the Department to enforce the Collector's order and refund the excess amount to the petitioners within two weeks. The Department was instructed to base the refund on the calculations provided by the petitioners. If the Department's appeal to the Tribunal succeeded, the petitioners agreed to refund the amount paid by the Department, subject to their right to challenge the Tribunal's decision in the appropriate forum.
4. Consequently, the Court made the rule absolute, ordering the Department to comply with the Collector's order within the specified timeframe. Failure to refund within two weeks would result in the Department paying interest on the refund amount at a rate of 15% per annum until the actual refund date. Additionally, the respondents were directed to bear the costs of the petition, emphasizing the Department's obligation to promptly execute the refund as directed by the appellate authority.
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1986 (12) TMI 33
Issues Involved: Challenge to demand notice u/s 72(1) of the Customs Act, 1962; Relinquishment of title to imported goods u/s 23(2) of the Act; Legal validity of demand notice; Failure to shift and sell goods as per court order.
Challenge to Demand Notice u/s 72(1) of the Customs Act, 1962: The petitioners, a registered Company, challenged the legality of a demand notice dated June 14, 1983, issued by the Assistant Collector of Customs, calling for duty payment u/s 72(1) of the Act and interest. The petitioners imported Polyster Filament Yarn, partially drawn as "POY", for manufacturing textile goods. Despite relinquishing title to damaged goods, the Assistant Collector demanded duty payment after the warehousing period expired, leading to the petition challenging the notice.
Relinquishment of Title to Imported Goods u/s 23(2) of the Act: The petitioners, after a survey indicating considerable damage to the imported goods, relinquished their title to the remaining POY under Section 23(2) of the Act before an order for clearance for home consumption was made. The Assistant Collector's demand notice ignored this provision, leading to a dispute over duty payment.
Legal Validity of Demand Notice: The Assistant Collector's demand notice, issued after the warehousing period expired, sought duty payment despite the petitioners' relinquishment of title to the goods. The petitioners argued that the demand was illegal as they had exercised their right u/s 23(2) and were not liable to pay duty. The Court found the demand unsustainable and lacking legal authority, quashing the notice.
Failure to Shift and Sell Goods as per Court Order: Despite court orders to shift and sell the goods after relinquishment of title, the respondents failed to comply, leading to multiple motions and delays. The Court, noting the rapid deterioration of the goods, directed the respondents to shift the goods to another location and sell them as per the earlier order, emphasizing the need for timely compliance.
Conclusion: The Court ruled in favor of the petitioners, quashing the demand notice u/s 72(1) of the Customs Act. The bond executed by the petitioners was canceled, and costs were awarded to the petitioners. The judgment highlighted the importance of legal provisions governing duty payment and the rights of importers under the Customs Act, emphasizing the need for compliance with court orders in a timely manner.
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1986 (12) TMI 30
Issues:
Whether the status of an individual assessee governed by Hindu law would change to that of a Hindu undivided family under the Income-tax Act merely on his marriage (as yet without issue).
Analysis:
The case involved a respondent-assessee who was originally a member of a larger Hindu undivided family and had a partial partition in 1956. After his marriage in 1966, he filed returns both as an individual and as a Hindu undivided family. The Income-tax Officer maintained his status as an individual, leading to appeals and subsequent Tribunal decision in favor of the assessee, considering him as a Hindu undivided family post-marriage. The Commissioner of Income-tax sought reference from the Tribunal, which was declined, leading to the matter being brought before the High Court.
The High Court analyzed the concept of Hindu undivided family under the Income-tax Act and the basic rule of Hindu law regarding the revolution of shares acquired on partition. The court highlighted that the respondent held his share as separate property post-partition and marriage did not automatically convert his status to that of a Hindu undivided family. The court referred to precedents like C. Krishna Prasad v. CIT and Surjit Lal Chhabda v. CIT to support the argument that marriage without any issue does not change the individual status for income tax purposes.
The court emphasized that even in cases where an unmarried daughter was involved, the status of the assessee as an individual would not change post-marriage. Referring to the Madhya Pradesh High Court case of CIT v. Vishnukumar Bhaiya, the court reiterated that marriage without issue does not alter the individual status for income tax assessment. The court also addressed the argument of variance between different judgments, clarifying that the cases of C. Krishna Prasad and Surjit Lal Chhabda were complementary and supported the Revenue's position.
Ultimately, the court held that the status of an individual assessee governed by Hindu law does not automatically change to that of a Hindu undivided family under the Income-tax Act upon marriage. The Tribunal's decision in considering the assessee as a Hindu undivided family post-marriage was deemed incorrect in law, and the answer to the referred question was given in favor of the Revenue.
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1986 (12) TMI 29
Issues Involved: Assessment of undisclosed income, imposition of penalty u/s 271(1)(c) of the Income-tax Act, 1961, voluntary disclosure by the assessee, justification for cancelling the penalty.
Assessment of Undisclosed Income: The assessee, a partnership firm, disclosed loans from different parties as income in a voluntary disclosure made after filing the return for the assessment year 1963-64. The Income-tax Officer added the peak credit amount and interest paid on the loans to the total income of the assessee during assessment.
Imposition of Penalty u/s 271(1)(c): The Inspecting Assistant Commissioner imposed a penalty of Rs. 1,27,810 on the assessee for concealing income and furnishing inaccurate particulars by not disclosing the income under the disclosure scheme and claiming deduction of interest on fictitious loans.
Voluntary Disclosure and Tribunal's Decision: The assessee contended before the Tribunal that the voluntary disclosure made before any enquiry by the Revenue should negate the application of section 271(1)(c) for penalty imposition. The Tribunal found that the assessee had made a full disclosure before any steps were taken by the Income-tax Officer, and since the assessment did not exceed the disclosed amount, the penalty was unjustified.
Justification for Cancelling Penalty: The Tribunal, considering the nature of the breach as venial and pardonable, cited the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, emphasizing that penalty imposition should be discretionary and based on relevant circumstances. The Tribunal canceled the penalty, noting that the breach was not deliberate and the subsequent conduct of the assessee absolved it of intentional concealment.
Court's Decision: The High Court upheld the Tribunal's decision, stating that though a technical default may have occurred, the subsequent conduct of the assessee indicated no deliberate intention to conceal income. The Court emphasized that penalty imposition is not mandatory in every case and should be based on established conditions. The question of cancelling the penalty was answered in favor of the assessee, with no costs imposed.
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1986 (12) TMI 28
Issues Involved:
1. Initiation of proceedings under section 147(a) of the Income-tax Act, 1961.
2. Deletion of the addition of Rs. 3,06,093 on the ground that the concealment of income was not established by the Revenue.
Detailed Analysis:
1. Initiation of proceedings under section 147(a) of the Income-tax Act, 1961
Background:
The assessee, a partner in a firm that was dissolved, took over the business as a sole proprietor. During the assessment year 1964-65, the Income-tax Officer initially accepted loans totaling Rs. 3 lakhs as genuine. However, subsequent information from other Income-tax Officers indicated that these loans were fictitious, leading to the initiation of reassessment proceedings under section 147 of the Income-tax Act, 1961.
Tribunal's Findings:
The Tribunal held that the reasons recorded by the Income-tax Officer for reopening the assessment were insufficient and lacked clarity. The Tribunal noted that the Income-tax Officer did not have direct evidence but relied on third-hand information from other officers. The Tribunal concluded that there was no nexus or link between the information received and the belief that the income had escaped assessment.
High Court's Analysis:
The High Court affirmed the Tribunal's findings, emphasizing that the Income-tax Officer did not independently verify the primary materials or the confessions of the creditors. The Court noted that the reasons recorded by the Income-tax Officer were vague and did not explicitly mention the sources of information. The Court held that the Income-tax Officer acted on mere suspicion rather than a bona fide belief, which is not sufficient to justify the initiation of reassessment proceedings.
Conclusion:
The High Court concluded that the initiation of proceedings under section 147(a) was unjustified as the Income-tax Officer did not have sufficient or valid reasons to believe that the income had escaped assessment due to the assessee's failure to disclose material facts fully and truly.
2. Deletion of the addition of Rs. 3,06,093 on the ground that the concealment of income was not established by the Revenue
Background:
During the reassessment proceedings, the Income-tax Officer proposed to add the amounts of the loans and interest to the assessee's income under the head "Income from other sources." The assessee was unable to produce the creditors for examination, and the Revenue did not provide an opportunity for cross-examination of the creditors who had allegedly confessed to the bogus nature of the loans.
Tribunal's Findings:
The Tribunal found that the Revenue failed to establish that the loans were the assessee's income from undisclosed sources. The Tribunal noted that the Income-tax Officer did not make any effort to produce the creditors for examination and did not disclose the materials or confessions to the assessee. The Tribunal held that the reassessment was based on suspicion and not on concrete evidence.
High Court's Analysis:
The High Court agreed with the Tribunal, stating that the Revenue did not provide the assessee with an opportunity to contest the evidence collected behind his back. The Court emphasized that the principles of natural justice were not followed as the assessee was not allowed to cross-examine the creditors or review the confessions. The Court reiterated that the burden of proof was on the Revenue to establish the concealment of income, which it failed to do.
Conclusion:
The High Court upheld the Tribunal's decision to delete the addition of Rs. 3,06,093, concluding that the concealment of income was not established by the Revenue. The Court stressed that the reassessment proceedings were invalid due to the lack of evidence and the failure to provide the assessee with an opportunity to defend himself.
Final Judgment:
The High Court answered both questions in the affirmative and in favor of the assessee, holding that the initiation of proceedings under section 147(a) was unjustified and the addition of Rs. 3,06,093 was rightly deleted. There was no order as to costs.
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