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2025 (1) TMI 1477
Rectification u/s 154 - Addition for provisions for expenses - basic accounting principles - CIT(A) deleted addition - HELD THAT:- As submitted to the AO that the issue has already been heard by the Jaipur Bench of ITAT and decided in favour of the assessee, and further, it was also explained that the assessee has not separately claimed Provision of Expenses in the income tax return, AO without considering the order of the Coordinate Bench of ITAT on the same issue, passed an order u/s 154 making an addition which shows the high handedness of the AO to interfere in the already concluded proceedings.
At this point we note the observation of the apex court in the case of Parashuram Pottery Works Co. Ltd. [1976 (11) TMI 1 - SUPREME COURT] wherein noted that “At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity”.
Bench also that the Association filed an appeal before the Ld CIT(Appeals) against the order passed by the AO, where ld. CIT(A) allowed the appeal in the favor of the Association by holding at last the order that “It appears that the A.O. has not perused the above documentary evidences filed by the appellant at various stages and the computation of income and the financials of the appellant which would be available in the assessment record and after giving the appeal effect of order of CIT(A) which has also been confirmed by the Hon’ble ITAT, has made the order u/s. 154 withdrawing the appeal effect/making addition of Rs. 2,30,26,342/- without an iota of verification or application of mind about the issue and the facts involved”. Thus, we feels that there is no ambiguity in the order of the ld. CIT(A) and we do not incline to interfere in the order of the ld CIT(A). Hence, the appeal of the Revenue is dismissed.
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2025 (1) TMI 1476
Addition of 20% of the expenses u/s. 37 - reasons given by the ld. AO show that considering the PSU status and turnover of assessee, the claimed expenses are very high and raises suspicion on the payment - HELD THAT:- Before the ld. CIT(A), assessee submitted additional evidences which were admitted for the reason that during the short span of time it was not possible to collect the invoices and other details from all the branches and units.
CIT(A) forwarded all these details to the jurisdictional AO for submission of remand report, even after considerable time, the ld. AO did not submit remand report.
CIT(A) admitted additional evidences, verified the same on test check basis and deleted the disallowance. It is not the case of the ld. DR even now that details submitted by the assessee before the ld. CIT (A), which were sent to ld. AO for submission of remand report were not complete and proper. Therefore, we do not find any infirmity in the order of the ld. CIT–A in deleting the above disallowance. Accordingly ground number 1 of the appeal is dismissed.
Addition of 5% of sundry creditors payable towards purchase suppliers and work and for expenses as a cessation of liability under section 41 (1) read with section 28 (iv) - HELD THAT:-Natural corollary would be that the amount of addition u/s 41(1) cannot be made on ad hoc basis. The learned assessing officer has applied five percentage of the total liability outstanding in the books of the assessee and held that it has ceased to exist and therefore chargeable to tax under section 41 (1). On reading of the provisions under section 41 (1) of the Act any ad hoc addition is not warranted. It must be the actual liability which has ceased to exist, is chargeable to tax in the hands of the assessee.
Therefore, no infirmity in the order of CIT–A in dealing with the additional evidences filed by the assessee, which were sent for remand report to the assessing officer but for substantial time no such remand report was submitted, and therefore on examination by the learned CIT–A, he has reached at a conclusion that the liability is stated by the assessee as on 31/3/2017 is in existence and has not ceased and therefore not chargeable to tax under section 41 (1) of the act. Accordingly, we dismiss ground number 2 of the appeal of the learned AO.
Disallowance of provision - CIT(A) has disallowed only because in absence of specific identity of the debtors, it is not possible to close the account of such debtors and therefore the disallowance was made and confirmed - HELD THAT:- Had the details of individual accounts available with the assessee, there would not have been a separate account opened for such consolidated debtors. From that consolidated account of the debtors, part of the sum comprising of ₹ 83.59 crores could not be reconciled, which was written off. Therefore, disallowance, of the sum considered as bad debt by the assessee, by the learned lower authorities is not correct, as it satisfies all the conditions of section 36 (1) (vii) read with section 36 (2) of the act.
This claim of the assessee is allowed based on the principles of the allowability of bad debts, which are otherwise allowable irrespective of the additional evidence submitted by the assessee. Accordingly, the learned assessing officer is directed to delete the disallowance of ₹ 83.59 Crores being amount written off in relation to the number of sundry debtors (the customers).
Disallowance as bad and doubtful debts from ex-employees -HELD THAT:- Apparently from the books of accounts of the assessee its shows that this is provided as bad and doubtful debts. Therefore now the question of claiming the same as a business loss does not arise because assessee has failed to show that the loss has arisen during the year. Merely because it is the claim of the assessee that same should be allowed as a business loss, it cannot be allowed unless it satisfies the provisions of section 28-29 of the income tax act. In fact when the books of accounts shows that this is merely a provision for bad and doubtful debts, naturally there is no provision in the income tax act applicable to the assessee, which shows that it is allowed while computing taxable profits of the assessee.
Various judicial precedents relied upon by AR also does not support the case. Accordingly we do not find any infirmity in the order of the learned CIT – A in confirming the disallowance being amount provided as bad and doubtful debts from ex-employees to whom materials issued are not returned as well as excess material is drawn by them.
Excess balance of in the said bank - HELD THAT:- These are the minor differences arising on account of reconciliation. It was pointed out by the audit party. The assessee on its failure to reconcile the same decided to write it off to the profit and loss account but wrongly clubbed into another account head. Therefore, if the assessee has come to know about the error in its books of account during the year, of non-existence of an asset, though disclosed as an existing asset in books of accounts of the assessee, writing off the same would be allowable to the assessee as deduction. Therefore, as the amount is small and it has arisen out of the bank reconciliation, same is allowable to the assessee u/s 28 of the act for computation of profits and gains. Accordingly, we direct the learned lower authorities to delete an amount on account of excess balance of in the said bank.
Disallowance being amount written off consisting of advances given to various parties - HELD THAT:- Except the standard operating procedure, the nature of accounting entries being passed, no substantial evidence could be placed with respect to the claim. Before us also, merely judicial precedents are cited without showing the facts. Therefore, we do not have any option, but to confirm the order of the learned lower authorities in confirming the disallowance with respect to the suppliers.
Second item of the advances to the staff, similar conditions apply as far as the claim of the loss raised by the assessee. For this also assessee has failed to give any reason that why such losses are treated as incurred during the year. No further details were provided, except showing us the standard operating procedure, which does not help the case of the assessee. Accordingly, the disallowance by CIT – A is also confirmed.
Computation of book profit u/s 115JB - HELD THAT:- As accepted fact that the learned assessing officer has computed the book profit under section 115JB of the act without any form number 29B filed by the assessee. In absence of any details of any brought forward losses or unabsorbed depreciation as per the books of accounts, the learned assessing officer did not grant deduction of least of these two items. When the matter reached before the learned CIT – A, he directed the learned assessing officer to compute the book profit under section 115JB of the act by giving an opportunity of hearing to the assessee and then compute the same in accordance with the provisions of the law.
As the issue has been restored back to the file of the learned assessing officer to compute the book profit correctly, it is the duty of the assessee to show that there is any book loss or unabsorbed depreciation available to the assessee to be granted as deduction from the book profit. It is for the assessee to compute and show before the learned assessing officer the brought forward losses and unabsorbed depreciation as per the books of account.
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2025 (1) TMI 1475
TP Adjustment - selection of MAM - Assessee had adopted the aggregate transactions approach and applied Transactional Net Margin Method (“TNMM”) for bench marking of the international transactions - TPO and Ld. DRP adopted the Comparable Uncontrolled Price (“CUP”) and Other Method (“OM”) and rejected the TNMM adopted by the assessee -
Whether close inter-linking between all the transactions exist or not, so as to justify the aggregation approach? - HELD THAT:- There is a substantial change in the nature of services received by the assessee and the service provider in A.Y. 2018-19 as compared to A.Y. 2009-10. It is also a fact that, the co-ordinate bench of ITAT in assessee's own case for A.Ys. 2011-12 to 2014-15, 2016-17 and 2017-18 has given their findings in favour of the assessee relying on the findings of A.Y. 2009-10. As there is substantial changes in the nature of services received by the assessee and the service provider in A.Y. 2018-19 as compared to A.Y. 2009-10, the facts on the basis of which the Tribunal has decided the issue in A.Y. 2009-10, has got substantially changed.
Therefore, close inter-linking between all the transactions are required to be established with documentary evidence, before deciding, whether aggregate transactions approach can be adopted or not. Therefore, we set aside the issue to the file of Ld. TPO to verify with the documentary evidence and confirm whether there is any close inter- linking between all the transactions or not and decide as per law. Accordingly, the grounds of the assessee are dismissed.
Adjustment for payment of interest on Masala Bond - assessee has paid interest on Masala Bond @ 8.70% per annum and the Ld. TPO bench marked the same at 7.53% per annum - HELD THAT:- Considering the factual matrix of the case, we are of the opinion that, the bench marking of the interest on Masala Bond can be taken at 8.70% per annum. Therefore, we direct the Ld. TPO to consider the rate of interest on Masala Bond at 8.70% per annum and delete the addition. Accordingly, these grounds of assessee are allowed.
Refund of excess Dividend Distribution Tax (“DDT”) - HELD THAT:- We are of the considered opinion that, if any tax has been paid erroneously in excess over the applicable rate, then, it should be refunded to the assessee. Therefore, we direct to the AO to verify the same from the record and issue the refund towards the excess payment, if any, made by the assessee. Accordingly, these ground of the assessee are allowed for statistical purposes.
AO allowed less credit on account of MAT and TCS - HELD THAT:- We are of the considered opinion that, the eligible credit on account of MAT and TCS should be provided to the assessee. Accordingly, we make a direction to the Ld. AO to allow necessary credit on account of MAT and TCS after verification of the record, as per law. Accordingly, these grounds of the assessee are allowed for statistical purposes
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2025 (1) TMI 1474
Revision u/s 263 - Validity of reassessment proceedings - case of the assessee was assessed as protective assessment - non-examination of sundry creditors - HELD THAT:- It is observed that the case of the assessee was assessed as protective assessment for the preceding year also. It confirms the stand of the Revenue that, in the matter of the assessee, the revenue is firm about the status of the matter, i.e. to be assessed under the protective scheme of assessment. It is further observed that the order of the Ld. CIT (A) in the case of Sh. Mahendra Mehra for A.Y.s 2012-13 and 2013-14 was passed on 12.10.2023 and confirmed the order as substantive assessment, whereas the notice u/s. 263 of the Act was issued first time on 04-08-2022 and final order was passed on 14.03.2024. This chronology of event has its own importance, i.e. when the status of Sh. Mahendra Mehra has been taken as substantive and further confirmed by the Ld. CIT (A), there is no protective assessment stands on its own feet now against the assessee under consideration.
The notices issued u/s. 263 of the Act are no more valid as the order against which the same were issued, is no more in existence, as the department has taken a firm stand against Sh. Mahendra Mehra. Now let's consider the position of law with regard to protective assessments. The concept of protective assessment has not been defined in the Income-tax Act and there are no specific provisions governing the same. However, it is well settled by judicial precedents and it is an established departmental practice which has gained judicial recognition by the Courts over the years that in the interest of revenue, protective assessment can be framed in a situation where the revenue during the proceedings finds that a particular amount of income can be taxed in the hands of different persons/assessee but the Assessing Officer is not sure enough about such person in whose hands the income is chargeable to tax.
A protective assessment is regarded as being protective because it is an assessment which is made 'ex abundanti cautela' where the department has a “doubt as to the person who is or will be deemed to be in receipt of the income".
Thus, we are of the firm view that, the revenue has taken a firm view against Sh. Mahendra Mehra; hence there can’t be any simultaneous proceedings of the same matter and amount against the assessee under consideration.
Non-consideration of the assessee’s submissions - On this issue we have gone through the factual paper book submitted by the assessee, wherein it is submitted before us in the form of screen shots of reply uploaded (Copies of replies also submitted before us). It is observed that the contentions raised by the assessee are correct and the order passed by the Ld. PCIT (Central), Jaipur was being passed without due consideration of the assessee’s submission and certainly a serious violation of the Principle of the Natural Justice. In the result, Ground No. 3 raised by the assessee is also allowed.
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2025 (1) TMI 1473
Rejection of application for registration u/s 12AA based on a typographical error in the application form - as submitted due to a typographical/inadvertent error the application was filed u/s 12A(1)(ac)(vi)(B) whereas the assessee was required to file application u/s 12A(1)(ac)(iii) since it was an old trust already registered u/s 12 of the IT Act and was required to get registration under the new provisions of the IT Act
HELD THAT:- As relying on Raj Krishan Jain Charitable Trust [2024 (6) TMI 1400 - ITAT DELHI] we find force in the arguments of Ld. Counsel of the assessee that Ld. CIT, Exemption, Pune erred in dismissing the application for registration merely on a technical ground and accordingly we deem it proper to set-aside the order passed by Ld. CIT, Exemption, Pune and direct him to treat the application already filed by the assessee as under clause (iii) of section 12A(1)(ac) of the IT Act instead of under clause (vi) of section 12A(1)(ac) of the IT Act and decide the same as per fact and law after providing reasonable opportunity of hearing to the assessee. Appeal filed by the assessee is allowed for statistical purposes.
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2025 (1) TMI 1472
Revision u/s 263 - AO failed to initiate penalty u/s. 270A for under-reporting of income vitiates the assessment order passed by the AO u/s. 153A of the Act thereby making assessment order, erroneous as well as prejudiced to the interest of the Revenue - HELD THAT:- As undisputed that there has been no ‘Intimation’ issued by the revenue u/s. 143(1)(a) of the Act. Therefore, it can be safely presumed that the assessee cannot be considered to have under-reported his income within the meaning of sub-section(2) of section 270A of the Act.
In that event, unless assessee’s case falls in the ken of sub-section 2, the invocation of sub-section (9) of section 270A does not arise.
Moreover, machinery provisions to levy penalty u/s. 270A of the Act also fails because, the penalty is computed @50% of the amount of tax payable on the under-reported income in consequence to mis-reporting of income or @200%of the amount of tax payable on the under-reported income in consequence to mis- reporting of income.
So, without computing “under-reporting income” as per sub-section (2) of section 270A of the Act, machinery provisions also fails. It is a trite law that the penalty provisions must be construed strictly. Therefore, the direction given by the Ld.PCIT modifying the assessment order with a direction to AO to invoke the applicable penalty provisions u/s. 270A(9)(e) on the entire sum is legally untenable - Appeal of the assessee is allowed.
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2025 (1) TMI 1471
Disallowance u/s 14A r/w Section 8D - HELD THAT:- As the appellant company had not earned any exempt income from the investment and the investment did not fall under the category of exempt income in the year under consideration. Hon’ble High Court had rendered decision in the appellant’s own case for the A.Y. 2012-13 [2021 (12) TMI 441 - ITAT DELHI] Therefore, deletion on account of disallowance deserves to be upheld.
Addition on account of Rental Income - CIT(A) by referring the details of Rental income observed that appellant had submitted details of documents before the AO for verification - CIT(A) directed the learned AO to consider the submissions made by the appellant/assessee and give relief subject to verification of evidence. In the given facts, the order of learned CIT(A) deserves approval.
Disallowance of Misc. Foreign Expenses - Genunity of expenses not doubted and expenses being incurred wholly and exclusively for purposes of business are not disputed by the revenue. So assessee deserves relief.
Disallowance of Advertisement and sales promotion exp on being 1% of total expenditure on the head - The books of accounts were not rejected. In the case of assessee’s own case, learned CIT(A) for A.Ys. 2011-12 & 2012-13 had decided the issue in favour of the assessee. So the contention of learned AO was not justifiable and the reasons of treating 1% of total expenditure as bogus or unexplained was unwarranted.
Disallowance of 50% of software expenses - Since learned AO had not given any specific reason and exact amount of the expenditure to treat such expenditure as capital in nature. Relying on judgments of learned CIT(A) and ITAT in appellant’s own case, the view taken by learned CIT(A) is meritorious.
Disallowance of expenses of Consumption debtors - CIT(A) appreciated party wise details of consumption debtors showing that the discount was very much ascertained. The consumption debtors were filed before the learned AO during the course of assessment proceedings. ITAT has also allowed this claim of the A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15 and the Hon’ble High Court of Delhi [2022 (8) TMI 361 - DELHI HIGH COURT] also allowed the case in favour of the assessee. The learned CIT(A) rightly relying on the judgments deleted additions
Disallowance u/s 43B of the Act towards claim of Leave Encashment - As per ratio of judgment in the case of Exide Industries Ltd. [2007 (6) TMI 175 - CALCUTTA HIGH COURT] the directions for verification of the claim of assessee are deserves to be upheld.
Revenue appeal dismissed.
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2025 (1) TMI 1470
Disallowance being provisions for bad and doubtful reserve - whether appellant was entitled to the relief u/s 36(1)(viia)? - HED THAT:- As in case of Bharuch Dist. Central Co-op. Bank Ltd. [2013 (8) TMI 405 - ITAT AHMEDABAD] as held that amount credited by bank to reserve for bad and doubtful debts towards standard assets is not deductible u/s 36(1)(viia), as it is not akin to provision for bad and doubtful debts. The terms “reserve” and “proviso” are not one and same.
Provision for bad and doubtful debts is a liability whereas reserve is assessee’s own fund. Hence, both cannot be equated and assessee is not entitled for any deduction in absence of any provision for bad and doubtful debts.
The facts of present case are similar to the above decision. It is clear from the details given by the appellant during the proceedings before ITAT that the appellant has not created any provisions for bad and doubtful debts. The reserve account cannot be considered as provision for the purpose of allowing deduction u/s 36(1)(viia) of the Act.
The decisions relied upon by Ld. AR are not applicable because facts in those decisions are different. The issue in these cases pertained to “Provision for bad and doubtful debts” and not “reserve”. Therefore, claim of deduction u/s 36(1)(viia) of the Act is not allowable. Therefore, the decision of the CIT(A) is confirmed, and the ground of the assessee is dismissed.
Write up u/s 36(1)(vi) of investment in Madhavpura Mercantile Co-Op. Bank (MMCB) - appellant has also taken alternate ground that the same is allowable even without provisions of section 36(1)(vii)/36(1)(viia) - whether investment of FDs written off by a Co-operative Bank is capital or revenue in nature? - HELD THAT:- It is seen that as per section 6 of the Banking Regulation Act, 1949 which deals with the form and business in which the banking companies may engage, dealing in funds is a part of banking business. Apart from accepting deposits and lending money, investing in deposits is also a part of banking business. Accepting deposits and giving of loans and advances, making investments, deposits etc. form part of core activity of banking business. Thus, the deposits placed with MMCB was wholly in the course of and for the purpose of business. Therefore, the deposits held by the assessee-bank cannot be treated as capital asset and they formed part of stock-in-trade. This is also fortified by the fact that the interests earned on such deposits are offered to tax and have been taxed by the Department as business income.
Whether write off the said deposit is a loss arising in the course of carrying on banking business? - Once it is held that holding of deposits forms part of banking business, write off such loss will be a loss arising in the course of carrying on banking business. From the facts of record, it is seen that the same MMCB incurred huge losses and the RBI cancelled its license to carry on banking business. The RBI also directed the banks which had deposits with MMCB to write off those losses. Accordingly, we are of the view that loss incurred by the appellant is a business loss incurred during the course of carrying on its banking business.
Whether loss can be claimed without debiting the P&L account? - On the issue of violation of RBI norms, it is for RBI to take appropriate action against the bank, if at all there was any violation in 2011-12. It is further seen that in the subsequent period, the appellant had recovered part of the deposit amount which was also offered to tax. This also strengthens the claim of the appellant as a business loss was incurred in the course of carrying on of banking business.
In his brief summary, the Ld. AR submitted that assessee has offered subsequent recovery from MMCB as income and the assessee may recover further amount in future. The assessee has also conceded deduction of Rs. 35,00,000/- out of Rs. 7.81 crore, which pertained to AY.2013-14. Claim of the appellant that write off of FDs with MMCB as a business loss is partly allowed and AO is directed to delete addition. Accordingly, the ground of appeal is partly allowed.
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2025 (1) TMI 1469
Accrual of income in India - FTS under Article 12 of the India-Netherlands DTAA - cost recoveries received by the assessee from its affiliates - technical knowledge, experience, and skill - scope of “make available” clause - HELD THAT:- We concur with the view of the assessee that there is no specific reference as to how the “make available” under the India-Netherlands Tax Treaty has been satisfied while rendering the above services, so as to fall within the ambit of FTS under the India-Netherlands Tax Treaty. Accordingly, in view of our observations in the preceding paragraphs while dealing with the issue for A.Y. 2009-10 to 2018-19 vide order dated 20.03.2024, we are of the considered view that the “make available” clause has not been satisfied in the instant facts and therefore, the services mentioned above do not qualify as FTS under India-Netherlands Tax Treaty.
In the result, we hold that the above services did not qualify as FTS under the India-Netherlands Tax Treaty, since the “make available” clause has not been satisfied in the instant facts.
Ground Nos. 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of the assessee’s appeal are allowed, since the services do not qualify as “FTS” under the India-Netherlands Tax Treaty.
Whether services are merely cost allocation / reimbursement are taxable? - We have decided this issue against the assessee for previous assessment years and therefore held assessee has not been able to demonstrate that only the precise cost incurred for rendering services has been recovered, and therefore, there is no income element at the India level, during the course of rendering of the services. Accordingly, we are not inclined to agree with the aforesaid argument of the assessee.
levy of surcharge, education cess and secondary and higher education cess on the tax levied - Rate of tax on total income @ 12% instead of 10% - We observe that this issue has been decided in favour of the assessee in the aforesaid order [2024 (3) TMI 1066 - ITAT AHMEDABAD], as held Article 12 read with Article 2 of the Tax Treaty makes it clear that the rate of tax at 10% would encompass surcharge and education cess as it is also in the nature of tax. Therefore, we hold that levy of surcharge and cess over and above the taxable rate of 10% on royalty and FTS is not permissible as per the Treaty provisions.
Short Credit of TDS, Arithmetical inaccuracy in calculating tax liability and Incorrect Adjustment of Refund - The issue is restored to the file of the Ld. AO to verify the facts, after giving due opportunity of hearing to the assessee to present the complete set of facts and thereafter pass an order, in accordance with law.
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2025 (1) TMI 1468
Disallowances u/s 36(1)(iv) - Contribution made to approved superannuation fund to bridge the gap between actual contribution and actuarial valuations - HELD THAT:- As decided in Exide Industries [2022 (9) TMI 1259 - CALCUTTA HIGH COURT] amount which was remitted by the respondent assessee is neither towards an initial contribution nor towards an ordinary annual contribution and, therefore, the ceiling fixed under the rules will not apply to such a contribution. That apart, this contribution had to be made considering the peculiar circumstances and it was a one-time payment, therefore we are of the view that the learned Tribunal rightly allowed the appeal filed by the assessee. Decided against the Revenue.
Excess contribution to approved gratuity fund to part fund the gap in actuarial valuation and actual contribution - As decided in Eastern Equipment and Sales [1990 (11) TMI 27 - CALCUTTA HIGH COURT] as relying on Gestetner Duplicators (P) Ltd. [1978 (12) TMI 1 - SUPREME COURT] where the Supreme Court while considering the approved provident fund held that if the provident fund contravenes any of the conditions to be satisfied for its recognition, the taxing authority may refer the question of withdrawal of recognition to the Commissioner, but until the Commissioner acting under the powers reserved to him withdraws such recognition, the taxing authority must proceed on the basis that the provident fund has satisfied all the conditions for its recognition in that year, any other course is bound to result in chaos and uncertainty which has to be avoided. Decided against the Revenue.
Addition u/s 143(1) being sustained at the level of Ld. AO - As the concerned Kolkata Port Trust (Non-contributory Provident Fund) Regulations 1988 notified under the Major Port Trust Act does not specify any 'due date for this purpose, no disallowance u/s 36(1)(va) is warranted on account of the delay in deposit of the contribution. It is not disputed by the A.O. that the deposit was actually made within a couple of days from the artificial 'due date'.
Perusal of the column 20(b) of Form 3CD reflects that for most of the months the contribution as deposited well before the artificial 'due date' itself. Therefore, in my considered opinion, in the absence of any specified due date, deduction u/s 36(1)(va) cannot be denied when the contribution has actually been credited in the concerned fund within the following month of contribution. Consequently, the disallowance made by the A.O. u/s 36(1)(va) is hereby deleted.
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2025 (1) TMI 1467
Seeking issuance of an appropriate writ for directing the Respondents to release and return the seized gold ornaments belonging to the Petitioner - Smuggling of Gold - prohibited goods or not - HELD THAT:- The Supreme Court in Pushpa Lekhumal Tolani [2017 (8) TMI 684 - SUPREME COURT] has considered whether jewellery being carried by a tourist as part of her baggage would qualify as smuggling under the Act read with the Baggage Rules, 1998, that was in force during the relevant period. The Supreme Court clearly holds that it is not permissible to completely exclude jewellery from the ambit of ‘personal effects’. Accordingly, the Court declared that the seized jewellery items therein were the bona fide jewellery of the tourist for her personal use and was intended to be taken out of India.
In Saba Simran v. Union of India & Ors. [2024 (12) TMI 19 - DELHI HIGH COURT] this Court was seized with the issue of deciding the validity of the seizure of gold jewellery by the Customs Department from an Indian tourist. The Court considered the ambit of ‘personal effects’ vis-à-vis jewellery under the Baggage Rules, in effect from time to time.
A conspectus of the above decisions and provisions would lead to the conclusion that jewellery that is bona fide in personal use by the tourist would not be excluded from the ambit of personal effects as defined under the Baggage Rules. Further, the Department is required to make a distinction between ‘jewellery’ and ‘personal jewellery’ while considering seizure of items for being in violation of the Baggage Rules.
The Baggage Rules have to be interpreted in a manner that does not lead to unnecessary burden upon the tourist, being either of Indian or foreign origin. Accordingly, the term “personal effects” cannot exclude personal jewellery or ornaments, as is clear from a harmonious reading of the Baggage Rules.
Conclusion - i) The jewellery of the Petitioner which has been seized deserves to be released. Let the same be released within a period of two weeks from today to the Petitioner.
Petition allowed.
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2025 (1) TMI 1466
Seeking grant of regular bail - smuggling of Heroin - seizure and sampling done by the prosecution suffers from substantial irregularities and non-adherence to Standing Order or not - substantial delay of two months in filing the application under Section 52A of the NDPS Act for the drawing of samples before the Magistrate - right to speedy trial - HELD THAT:- While Section 37 of the NDPS Act is undoubtedly applicable, the Applicant’s fundamental right to a speedy and expeditious trial must also be given due consideration. This right serves as a safeguard against undue and oppressive incarceration, ensuring that the judicial process does not inflict punishment prior to a finding of guilt. In the present case, the Applicant has been in judicial custody for over 3 years and 8 months, while the trial before the Special Judge (NDPS) remains at the stage of prosecution evidence. Acknowledging these delays, the Court called for an updated Nominal Roll of the Applicant and a Status Report from the Trial Court detailing the reasons for the protracted trial proceedings. The updated Nominal Roll, dated 07th January, 2025, confirms that the Applicant has been in custody for 3 years, 8 months, and 18 days. This prolonged detention raises significant concerns about the balance between the rigours of Section 37 and the constitutional guarantee of a fair and timely trial.
The report of the Trial Court indicates that the delay in the trial proceedings cannot be attributed to any fault of the Applicant. Instead, the matter has been adjourned on multiple occasions due to the non-appearance of prosecution witnesses. The Special Judge has observed in the report that the Special Public Prosecutor for Customs, appointed in this case, is available only on Wednesdays, Fridays, and Saturdays, and hearing dates are being scheduled to accommodate this limitation. Thus, it cannot be said that the delay in Trial in the present case can, in any way, be attributed to the Applicant who has been in incarceration for a period of almost 4 years. The next date of hearing is scheduled for 19th February, 2025, making it evident that the trial’s conclusion is not foreseeable in the near future.
The Court must strike a balance between the fundamental right to a speedy trial, an integral aspect of the right to life and liberty under Article 21 of the Constitution of India, and the stringent requirements of Section 37 of the NDPS Act. While the rigours of Section 37 must be meticulously applied, they cannot override the constitutional mandate for timely justice. The right to life and personal liberty cannot be undermined by unwarranted delays in the judicial process, particularly when such delays are neither attributable to the accused nor adequately justified by the prosecution with compelling reasons. In a recent decision of KULWINDER VERSUS STATE OF PUNJAB [2025 (1) TMI 1314 - PUNJAB AND HARYANA HIGH COURT], the High Court of Punjab and Haryana held that the rigours of Section 37 of the NDPS Act must be meticulously scrutinised against the backdrop of the accused’s fundamental right to a speedy trial.
In the present case, even though the prosecution has argued that if the Applicant is released on bail, she may avoid the course of justice, however, this Court is empowered to put the conditions of bail in such a manner, so as to ensure her presence during Trial.
Conclusion - The Court granted bail to the applicant, considering the prolonged detention and the constitutional guarantee of a fair and timely trial.
The Applicant is directed to be released on bail subject to fulfilment of conditions imposed - bail application allowed.
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2025 (1) TMI 1465
Smuggling of Gold - Absolute Confiscation - whether the absolute confiscation without objection for redemption of the golds carried in person are in violation of Baggage Rules, 1998? - HELD THAT:- The import of gold is not prohibited. Rather, it is restricted and regulated. Therefore, any person carrying gold ornament ought to have paid appropriate customs duty if whether such gold jewellery/ornament was worn in person or kept in the “baggage” - Absolute confiscation of the imported quantity of gold in the hands of each of these petitioners cannot be ordered to be absolutely confiscated under Section 125 of the Customs Act, 1962.
The option ought to have been given to the owner of such gold to redeem in lieu of confiscation under Section 125 of the Customs Act, 1962. Therefore, the Order rejecting the request for redemption or reexport cannot be sustained - Considering the fact that the goods are not absolutely confiscable, the Court is of the view that the Impugned Order dated 25.10.2021 passed by the 4th respondent, holding the goods are not redeemable and is not liable to be confiscated is to be interfered with.
Conclusion - The goods not declared under customs regulations are liable for confiscation, but absolute confiscation is not mandatory if the goods are not inherently prohibited. The impugned order affirming the absolute confiscation of the gold set aside. The case remitted to the Joint Commissioner of Customs to impose a redemption fine under Section 125 of the Customs Act.
Petition allowed.
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2025 (1) TMI 1464
Absolute confiscation of the gold recovered from Shri Firoze Sekh - imposition of penalty on the appellants - smuggling of foreign origin gold bars - Admissible evidences - HELD THAT:- In this case, two gold bars totally weighing 1999.000 grams were recovered from the possession of one Shri Firoze Sekh on 26.06.2018 when he was travelling by a Sealdah bound Train No. 12378. In his statement, Shri Firoze Sekh has stated that the gold had been handed over to him by Shri Durlav Paul (appellant no. 1 herein) for delivering the same to M/s.H.K. Jewellers, Kolkata (appellant no. 2) - when the appellants came to know about the seizure of the gold, they came forward and produced all the documents regarding ownership of the said gold.
The invoices are G.S.T. paid invoices. The appellants have also produced the certificate showing the payment of appropriate Tax / G.S.T. on the said invoices. Further, Form GSTR-2A is also placed on record. Further, Form GSTR 1 submitted by the appellants also shows that the said transactions had been recorded by the appellants and reported to the G.S.T. Department. As the claim made by the appellants with regard to ownership of the gold in question is supported by documentary evidence, in these circumstances, oral evidences will not prevail over the documentary evidence available on record. Therefore, the statements recorded during the course of investigation are not admissible evidence.
Moreover, it is observed that the purity of the gold was found to be only 99.6% by weight of gold (as recorded at paragraph 37.1, page 38 of the Order-in-Original dated 08.07.2020). It is also not a case of seizure of gold from Port, Airport or International Border and the gold does not bear any marking of foreign origin.
The gold in question cannot be confiscated. Consequently, the confiscation of the gold in question is set aside - no penalty is imposable on the appellants.
Conclusion - i) As the claim made by the appellants with regard to ownership of the gold in question is supported by documentary evidence, in these circumstances, oral evidences will not prevail over the documentary evidence available on record. Therefore, the statements recorded during the course of investigation are not admissible evidence. ii) It is also not a case of seizure of gold from Port, Airport or International Border and the gold does not bear any marking of foreign origin. iii) The gold in question cannot be confiscated. iv) No penalty is imposable on the appellants.
Appeal allowed.
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2025 (1) TMI 1463
Classification of imported goods - Data Processing Server with all standard parts and accessories (second hand) - exemption under N/N. 24/2005-Customs, dated 01.03.2005, under entry No. 8 - misdeclaration of goods - confiscation of goods - import of restricted goods in violation of DGFT Notification No.05/2015-2020 dated 07.05.2019 read with Electronics And Information Technology Goods (Requirement for Compulsory Registration) order 2012 - penalty u/s 112(a) (i) of the Customs Act, 1962 for violation of Section 111(d), 111(l) and 111(m) of the Act - penalty u/s 114AA of the Customs Act, 1962 for violation of Section 111(d), 111(l) and 111(m) of the Act.
Classification of imported servers - HELD THAT:- 'Servers’ are entirely different from “Automatic Data Processing Machines”. The function of a server is to receive and share data to other computer on its network. A server is an apparatus for the transmission or reception of information, image or data. The server may work in conjunction with the automatic data processing machine but a server itself never processes any data automatically like desktop, personal computer or laptop. The servers imported by the appellant are meant for specific application in a network, are entirely different from the “Automatic Data Processing Machine” including personal computers and laptop computers, which are actually stand-alone equipment. It is observed that 'servers' imported by the appellant don’t have the keyboard and monitors. Thus, the restrictions in the Exim Policy as per Para 2.31 of the Foreign Trade Policy (FTP) as notified by the DGFT Notification No.05/2015-20, dated 07.05.2019 are applicable only to computers including personal computer and laptop computer and not to 'servers' imported by the appellant.
'Servers' are classifiable under the CTH 8417. This view is supported by the decision in the case of COMMR. OF CUS., BANGALORE VERSUS MICROSOFT CORPN. INDIA PVT. LTD. [2007 (11) TMI 203 - CESTAT, BANGALORE], wherein at paragraph 3, it has been held that 'normally the servers will be the larger machines having very high memory. The processing speed also will be very high and there are various types of servers for various applications. There is no reason to exclude them from the scope of ‘Capital Goods’. So, they are not stand-alone computer. In any case, the Commissioner (Appeals) has upheld the confiscation on some other ground and he has also imposed redemption fine and penalty which is the final penalty imposed or only reduced.'
The appellant has rightly classified the goods imported by them under the Customs Tariff Item No.84714190 and rightly claimed exemption under Notification No.24/2005-Customs, dated 01.03.2005, under entry No.8.
Mis-declaration of goods - HELD THAT:- The goods not declared are items such as Output Power Supply, Switching Power Supply, AC-DC converter & Delta Energy system and Switches. These items are parts and accessories of the 'servers' imported by the appellant without which the 'servers' cannot function. The value of the same has already been included in the value of the 'servers' and no separate value has been paid for the parts and accessories. Thus, the findings of the lower authorities not agreed upon that the appellant has mis-declared these items. Thus, the allegation of mis declaration in the impugned order is not sustained. Accordingly, the confiscation of the goods on account of mis-declaration is not warranted.
Undervaluation of goods - HELD THAT:- The value addition is mainly on account of inclusion of value of undeclared goods such as Output Power Supply, Switching Power Supply, AC-DC converter & Delta Energy system. However, these undeclared items are parts and accessories of 'Server' and their value has already been included in the value of 'servers' and hence no additional value need to be added for the undeclared items. Accordingly, the assessable value declared by the appellant is correct as there is no under valuation established. Hence, the value enhancement by the lower authorities rejected.
Penalty imposed under Section 114AA of the Customs Act, 1962 - HELD THAT:- The appellant has filed the Bill of Entry with correct information and the allegation of mis declaration is not sustained. The classification of the goods as 'servers' under the CTH 8471 4190 is found to be in order - classification dispute cannot be considered as violation Section 114AA of the Act and accordingly, penalty imposed under section 114AA of the Act on the appellant is not sustainable.
Penalty imposed under Section 112(a) of the Customs Act - HELD THAT:- Penalty under Section 112(a) relates to violations in regard to situation where goods are liable for confiscation under Section 111. In the instant case, the imported goods are not ‘restricted goods’. These goods are duty free goods and can be imported freely. In the instant case, confiscation of the goods is made on erroneous premises of law, by mis-interpreting the DGFT Notification No.05/2015-20, dated 07.05.2019, as the authority below has mixed up the ‘server’ with Desktops Computer and Personal Computers / Laptop and considered the same as “Automatic Data Processing Machine” and erroneously confiscated the server. Thus, the confiscation in the impugned order is not sustainable. For the same reason, the penalty imposed on the appellant under Section 112(a) of the Act is not sustainable.
Conclusion - i) The confiscation of the imported ‘server’ falling under CTH 84714190 is not warranted, as the goods imported by the appellant are not ‘restricted goods’ and there is no violation of DGFT Notification No.05/2015-2020 dated 07.05.2019 read with the Electronics And Information Technology Goods (Requirement for Compulsory Registration) Order, 2012. ii) Imposition of penalty of Rs.20,00,000/- under Section 112(a)(i) of the Customs Act, 1962 is set aside. iii) Imposition of penalty of Rs.30,00,000/- under Section 114AA of the Customs Act, 1962 is set aside.
The impugned order set aside - appeal allowed.
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2025 (1) TMI 1462
Revocation of their customs broker licence - forfeiture of entire amount of security deposit - Levy of penalty - importation of ‘black pepper’ and ‘cigarettes’ - breach of regulation 10(d) and 10(n) of Customs Brokers Licensing Regulations, 2018.
Breach of regulation 10(d) of Customs Brokers Licensing Regulations, 2018 - HELD THAT:- Regulation 10(d) of Customs Brokers Licensing Regulations, 2018 prescribes that a customs broker is required to advice his client to comply with the provisions of statute and, in the event of non-compliance, to bring the matter to the notice of the designated official. This charge has been established on the finding that the appellant had never met the proprietor of the importing entity and had not contacted the holder of the Importer-Exporter Code (IEC) thus precluding rendering of advice - The licensing regulations are also bereft of any definition of ‘client’ and, it would appear that there is no bar on the importer/exporter approaching the customs broker through an employee/agent. The essence of this obligation is restricted to the advice given specifically in relation to a particular consignment and is not broad enough to place the onus of educating the importer/exporter on the letter and spirit of customs statute on the customs broker. The factual circumstances in which this charge came to be laid at the door of the ‘customs broker’ is not evident in the records. Imputations are inadequate, the findings based on facts which have nothing to do with the framework of the obligations and externalities have been grafted to conclude that the regulation has been breached.
Breach of regulation 10(n) of Customs Brokers Licensing Regulations, 2018 - HELD THAT:- It is necessary for customs broker, to be particularly careful about credibility of clients before undertaking to handle customs procedures. The mandate of the obligation is for ascertaining the existence of the client, the operation of the premises at which the client is reported to be functioning and the documents that are required for imports and exports. It is apparent that the customs broker had not carried out the mandate of the obligation inasmuch as the importer was reported as not existing at the stated address and the customs broker has been unable to produce evidence not only of such existence but also of having verified the antecedent before securing the authorization for handling the consignment. In these circumstances, breach of regulation 10(n) of Customs Brokers Licensing Regulations, 2018 cannot but to be held as proved. As it is only this breach which may be held as proved, the imposition of all the detriments offered by Customs Brokers Licensing Regulations, 2018 appears to be disproportionate.
Penalty - HELD THAT:- Considering the specific breach and the gravity of the consequence of such breach, ends of justice would be met by setting aside the revocation under regulation 14 of Customs Brokers Licensing Regulations, 2018 and imposition of penalty under regulation 18 of Customs Brokers Licensing Regulations, 2018.
Conclusion - i) The breach of Regulation 10(n) was proven due to the customs broker's failure to verify client details adequately. ii) The penalties of license revocation and monetary penalty were disproportionate to the breach established. iii) The forfeiture of the security deposit was upheld, with provisions for license restoration contingent on a new security deposit.
Appeal disposed off.
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2025 (1) TMI 1461
Waiver of penalty imposed upon the appellant u/s 114A and 114AA of the Customs Act, 1962 - appropriation of deposit made by the appellant towards the duty demand that has been confirmed - HELD THAT:- The Commissioner has expressed concerns in the impugned order as to why Raj Kumar Pal had appeared before the authorities after he had substantially defrauded the appellant and as to why the appellant lodged a police complaint instead of a First Information Report and as to why the appellant had not instituted a civil suit against Raj Kumar Pal for recovery of the amount. The Commissioner, for these reasons, concluded that the appellant had deliberately and in a very systematic and planned manner arranged to submit doctored and forged documents to evade payment of customs duties and Raj Kumar Pal was a dummy planted by the appellant. It is for this reason that the Commissioner imposed penalties upon the appellant under sections 114A and 114AA of the Customs Act.
Such a finding has been recorded by the Commissioner on the basis of conjectures and surmises. There is nothing on record to indicate that the appellant and Raj Kumar Pal had colluded. The fact that the appellant had paid the correct amount of duty to Raj Kumar Pal through banking channels does not support the finding recorded by the Commissioner. Raj Kumar Pal clearly stated in his statement before the customs authorities that he had received the correct amount from the appellant but for his own gains he paid a reduced amount. The appellant has deposited the differential amount of duty with interest.
Section 114A of the Customs Act provides that where the duty has been short paid for reason of collusion or any willful statement or suppression of facts, the person who is liable to pay duty shall be liable to pay the penalty equal to the duty - In the absence of any collusion or any willful mis-statement or suppression of facts by the appellant, penalty under section 114A could not have been imposed upon the appellant.
Penalty under section 114AA of the Customs Act is imposed if a person knowingly makes, signs or uses or causes to be made, signed or used, any declaration is false or incorrect in any material particular, in the transaction of any business for the purposes of the Customs Act, shall be liable to a penalty not exceeding five times the value of goods - The appellant had not submitted any Bills of Entry. They were submitted by Raj Kumar Pal. The appellant also had no knowledge that any incorrect statement was made by Raj Kumar Pal. Penalty could not have been imposed upon the appellant under section 114AA of the Customs Act.
It is not in dispute that the appellant had deposited the entire amount of duty with interest. This fact has also been noted by the Commissioner, but this amount has not been appropriated. This amount is, therefore, required to be appropriated against the demand of duty that has been confirmed.
Conclusion - i) Penalties under Sections 114A and 114AA require evidence of collusion or willful mis-statement, which was absent in this case. The penalties imposed under Sections 114A and 114AA were set aside. ii) An appellant's liability for duty does not automatically imply liability for penalties without evidence of intent or knowledge of fraudulent activities. The amount deposited by the appellant should be appropriated towards the duty demand.
Appeal allowed.
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2025 (1) TMI 1460
Penalties u/s 114(i) of the Customs Act, 1962 - alleged involvement in the mis-declaration and attempted export of prohibited goods (beef) as "Frozen Boneless Buffalo Meat" - HELD THAT:- The appellant no. 1 was mainly engaged for the purpose of loading and unloading of export cargo of M/s. Global Foods International and he got a remuneration of Rs.22,000/- per month. We find that although the business under the name of M/s. A.M. Enterprise was registered in the name of appellant no. 1, the entire activities of the said Firm has been controlled and managed by Mr. Ankit Kapoor of M/s. Global Foods International. From the documents available on record, it is observed that Mr. Ankit Kapoor used to make contact and finalize the dealings with all the persons concerned who used to supply cattle meat to the said firm; those meat products purchased for export from NS Dock, Kolkata, were exported in the name of M/s. A.M. Enterprise and not in the name of M/s. Global Foods International. The goods were being shown as sold by M/s. A.M. Enterprise in favour of M/s. Global Foods International and accordingly, online fund transactions were made by M/s. Global Foods International in favour of M/s. A.M. Enterprise and the money was being paid to all such suppliers in the name of M/s. A.M. Enterprise. The money transactions done through M/s. A.M. Enterprises has been mainly used by Mr. Ankit Kapoor for the purpose of renovation of the cold storage.
Penalty under Section 114 - HELD THAT:- Penalty under Section 114 is imposable only when the person abets an offence which leads to confiscation of the goods. It must be established that he has abetted the offence knowingly. In this case, the appellant no. 1 had to carry out the packing, loading and unloading of the goods, as directed by his employer. Thus, the appellant no. 1 has not contravened any of the provisions under the Customs Act, 1962 warranting imposition of penalty under Section 114(i) of the Customs Act, 1962. Thus, the penalty under Section 114(i) is not imposable on the appellant no. 1 in this case. Accordingly, the penalty imposed on appellant no.1 in the impugned order is set aside.
Penalty imposed on appellant no. 2 - HELD THAT:- The rent agreement specifically mentioned that the cold storage is meant only for the purpose of storage of the goods, i.e., meat as agreed upon in the agreement. Thus, appellant no. 2 is in no way concerned with the alleged export of beef and hence the penalty imposed on him for abetting the offence under Section 114(i) of the Customs Act, 1962 is not sustainable and accordingly, the penalty imposed on him set aside.
Appeal allowed.
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2025 (1) TMI 1459
Classification of imported goods - Epoxidised Soya Bean Oil (ESBO) - to be classified under CTH 3812 3990 or under CTH 1518 0039? - benefit of availment of BCD @7.5%vide Sl. No. 262 of N/N. 50/2017 dated 30.6.2017 - SCN issued beyond two years of date of clearance of BoE for home consumption - Abrupt change in classification - mis-declaration of goods - Confiscation and penalties.
Classification of imported ‘Epoxidised Soya Bean Oil” - HELD THAT:- ESBO is a chemically modified vegetable oil. As per the product declaration given by the supplier, the composition of the product is 99.8% epoxidized Soyabean oil and 0.2% water. It is not disputed that the production process undertaken to convert the raw material soyabean oil to epoxidised Soya Bean oil include epoxidation, vacuum distillation, centrifugation and filtration and that it is a secondary plasticiser. As stated in the OIO the product is a bio-based product from the epoxidation of soya bean oil with hydrogen peroxide and either acetic or formic acid obtained by converting the double bonds into epoxy group which is non-toxic and of higher chemically reactivity. As per the Explanatory Notes heading 1518 covers epoxidized oils obtained by treating, for example soya bean oil with per acetic acid pre-formed or formed in situ by reaction between hydrogen peroxide and acetic acid in the presence of a catalyst. They are used as plasticisers or stabilisers for e.g. vinyl resins - note 6(c) fits the impugned goods squarely and the impugned goods hence are covered under CTH 1518. While plasticisers, are also covered by heading 3812 it pertains to the category of compound plasticisers. The HSN notes makes it clear that ESBO fall under CTH 1518 which is the more specific heading hence as per Rule 3 (a) of RIT the goods have been classified correctly. The classification of goods as per the impugned order is hence upheld.
Proper date for calculating time bar of SCN / demand - HELD THAT:- As regards the date of supplying all RUDs, the appellant has stated that although the SCN mentioned that the relied upon documents were enclosed as Annexure A along with a detailed worksheet as Annexure B, these documents were not enclosed as stated. Repeated requests were made for service of the complete show cause notice vide their letters dated 09.08.2022, 07.09.2022, 03.11.2022 and 24.11.2022. It was only on 04.01.2023 that the missing annexures were mailed to the them by the department. The said documents were quintessential to submit a reply showing cause to the claims made in the notice - the principles of natural justice and procedural fairness require that the time limit for the purpose of calculating time bar, be reckoned from the date when the documents and worksheet was made available to the appellant, enabling him to commence making a proper defence of his case, which was on 04.01.2023.
Abrupt change in classification as held in the impugned order without any change in facts or law is improper - HELD THAT:- A healthy balance needs to be maintained between the need for uniformity in assessment of similar goods belonging to different assessee, correcting any deviation when necessary and the need to maintain certainty and predictability of taxes over a long period of time against frivolous allegations as per the doctrine of consistency or the precedential value of the earlier pronouncement. No blanket principle is possible and the judgements cited by the appellant are peculiar to the facts of the individual cases - In this case the department had investigated the matter by a specialized investigative agency (DRI). Such an enquiry is generally able to unearth facts and obtain statements of those involved which gives a more complete picture of the goods involved and the declaratory practices adopted, which is not possible to be obtained by the normal assessing officer.
In WARNER HINDUSTAN LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, HYDERABAD [1999 (8) TMI 75 - SUPREME COURT], the Hon’ble Supreme Court opinioned that the correct course for making a change of an approved classification was to issue a fresh show cause notice to the appellant on the basis of the fresh details gathered. This would have given the appellant the opportunity to place on record such material as was available to it to establish the contrary. This requirement has been met in the present case. Hence there are no infirmity and their plea is rejected.
Classification based on appellants belief, cannot be said to be a misdeclaration - HELD THAT:- The non-adoption of the classification as stated in the COO certificate was evident to the departmental officers in the two cases examined by them. The appellant had provided the product literature, letter describing the captive use of the product and the material safety data sheet when called for by the department officer. This was followed by the department accepting the classification in one case. Further the impugned goods which are plasticisers, are also covered by heading 3812, although it may not have been the more specific heading and had to yield to heading 1518. The importer cannot be held responsible for taking an alternate view when he has submitted all the necessary documents that have helped the department to now come to a different view. The plea of the appellant hence succeeds on this issue. The department has failed to make out a case of suppression or misdeclaration etc.
Confiscation and penalties are liable to be set aside since there is no suppression of facts etc. - HELD THAT:- No case of suppression, mis-decleration etc., has been made out. This being so the demand has to be limited to the normal period and the question of confiscation and penalties does not arise. However it is seen that interest is necessarily linked to the duty payable, such liability arises automatically by operation of law and is payable on any demand due. As per the Hon’ble Supreme Court's judgment in COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS M/S SKF INDIA LTD. [2009 (7) TMI 6 - SUPREME COURT] interest is leviable on delayed or deferred payment of duty for whatever reasons.
Conclusion - i) The classification of ESBO under CTH 1518 upheld. ii) SCN was not time-barred, considering the date of providing all RUDs as the starting point for the time limit. iii) Confiscation and penalties were set aside, but interest on the duty was upheld.
Appeal allowed in part.
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2025 (1) TMI 1458
Grant of interest - relevant date for calculation of interest - whether the appellant should be granted interest from 14.04.2003, which date is one month after the issuance of the “let export order” on 13.03.2003, or from one month after 31.05.2012 on which date the proceedings initiated against the appellant by issuance of show cause notice were dropped for the second time? - HELD THAT:- Section 75 of the Customs Act deals with drawback on imported materials used in the manufacture of goods which are exported. Sub-section (1) provides that drawback should be allowed of the duties of customs chargeable under the Customs Act on any imported material of a class or description used in the manufacture or processing of such goods or carrying out any operation of such goods. It also provides that the Central Government may make rules for the purpose of carrying out the provisions of sub-section (1).
In the present case, the appellant had filed seven shipping bills on 24.02.2003 and the “let export order” was given on 13.03.2003. Under rule 13 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 that have been framed under section 75(2) of the Customs Act, the submission of the shipping bills is deemed to be a claim for drawback filed on the date on which the proper officer of customs makes an order permitting clearance and loading of goods - The amount of drawback should have been sanctioned within a period of one month from the date the “let export order” was issued on 13.03.2003 but it was actually sanctioned on 24.04.2022. Interest has been paid to the appellant by the Commissioner (Appeals) from a date after a period of one month from 31.05.2012 when the show cause notice was dropped by the adjudicating authority for the second time pursuant to the order passed by the Supreme Court and not from 13.03.2003 when the “let export order” was issued.
It is on the instance of the department that proceedings were initiated and ultimately the claim of the appellant was found to be correct and the drawback was sanctioned. In such circumstances the issue that would require consideration is whether 31.05.2012 should be the date relevant for the purposes of determining interest payable to the appellant. This date cannot be the relevant date. The appellant cannot be blamed or penalized for the prolonged litigation undertaken by the department. Rule 13 of the Drawback Rules, which has been referred to by the Commissioner (Appeals) in the impugned order, clearly provides that the shipping bills shall be treated as a claim for drawback filed on a date on which the proper officer of customs makes an order permitting clearance.
In terms of section 75A of the Customs Act, the appellant is entitled to get interest from a date after the expiry of one month from 13.03.2003 upto the date of payment of the drawback amount. The appellant had, accordingly, claimed interest from 14.04.2003 but the Commissioner (Appeals) allowed interest only from 01.07.2012, which date is after the expiry of a period of one month from 31.05.2012. 26. The Commissioner (Appeals) has relied upon the decision of a learned member of this Tribunal in Web Knit Exports [2014 (1) TMI 1118 - CESTAT CHENNAI] to hold that the relevant date would be 31.05.2012 because the value of the export goods stood finalized when the adjudicating authority passed the order. The said decision of a learned Member the Tribunal would not be applicable to the facts of the present case.
In the present case, it is not the case of the department that the documents, as contemplated under rule 13 of the Drawback Rules, had not been filed by the appellant. On the other hand, the show cause notice that was issued to the appellant raising a doubt about the value of the export goods was dropped by order dated 31.01.2005. Thus, the value of the export goods declared by the appellant was found to be correct and the Deputy Commissioner after remand of the matter by the Supreme Court also dropped the show cause notice.
Conclusion - Where drawback should have been given to the appellant within a period of one month from 13.03.2003 when the “let export order” was issued and since it was not given, the appellant would be entitled to interest from a period after month at the rate provided for in section 27A of the Customs Act upto the date of payment of drawback.
Appeal allowed.
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