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1986 (10) TMI 147
Issues:
Claim of refund on Zip Fasteners imported by the manufacturer of readymade garments invoking a specific exemption notification. Interpretation of the term "embellishment for footwear" under the notification. Validity of Import Licenses covering Import/Export linked items for the imported goods. Applicability of a previous government revision order. Requirement to establish the imported goods as embellishments for footwear used in the leather industry.
Analysis:
The case involves a Revision Application filed by the appellants concerning a claim of refund on Zip Fasteners imported for use in readymade garments, seeking exemption under Notification No. 29/79 dated 10-2-1979. The Assistant Collector denied the benefit of the exemption, stating that the goods imported did not qualify as embellishments for footwear in the leather industry. The Appellate Collector upheld this decision, emphasizing that the importers were not in the leather industry for footwear, a prerequisite of the Notification.
In their Revision Application, the appellants argued that they imported the goods against valid Import Licenses, transferable to actual users in a specific industry. They also referenced a government revision order supporting the classification of Zip Fasteners as embellishments for footwear. The department contended that the Zip Fasteners were being used in the readymade garment industry, not the leather industry for footwear, thus not qualifying for the exemption.
The Tribunal considered the arguments from both sides and highlighted that the focus should be on whether the imported goods were used as embellishments for footwear in the leather industry. The Tribunal referenced a previous case where it was established that the legislative intent behind the exemption notification required the goods to be used in the leather industry for footwear to qualify for the exemption. The burden of proof was on the appellants to demonstrate that the imported products were indeed embellishments typically used in the leather industry.
Ultimately, the Tribunal dismissed the appeal, aligning with the decision in the previous case and emphasizing the necessity for the imported goods to be utilized as embellishments in the leather industry to claim the exemption. The failure to establish this crucial aspect led to the dismissal of the appeal, reinforcing the importance of meeting the conditions specified in the exemption notification for eligibility.
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1986 (10) TMI 146
Issues:
- Refund claims rejected as time-barred under Section 27 of the Customs Act.
- Appellants argue that Limitation Act should apply instead of Customs Act.
- Contention raised regarding applicability of Section 72 of the Contract Act.
- Reference made to earlier Tribunal decision and subsequent Supreme Court ruling.
- Two appellants cite judgments for reconsideration of the decision.
Analysis:
The judgment by the Appellate Tribunal CEGAT, New Delhi involved 16 appeals that raised a common question of law regarding the rejection of refund claims as time-barred under Section 27 of the Customs Act. The appellants had initially preferred claims for refund of duty paid, which were rejected by the Assistant Collector and upheld by the Appellate Collector on the grounds of exceeding the prescribed time limit. The revision petitions against these orders were transferred to the Tribunal for consideration.
The appellants contended that their refund claims, made after the limitation period, should be governed by the provisions of the Limitation Act instead of the Customs Act. They argued that their claims fell under Section 72 of the Contract Act and should not be subject to the time limit specified in Section 27 of the Customs Act. However, a previous Tribunal decision (M/s. Miles India Limited) had rejected a similar argument, which was subsequently upheld by the Supreme Court in a related case (1985 ECR 289). The Tribunal reaffirmed that authorities under the Customs Act are bound by the Act's limitation provisions, as upheld by the Supreme Court.
Two appellants referenced judgments from the Supreme Court and the Bombay High Court to challenge the Tribunal's decision. The Supreme Court case highlighted dealt with duty claimed under an ultra-vires provision, leading to a refund outside the statute due to illegal collection. However, the Tribunal found the facts of the current appeals distinguishable, as the duty collection was not under an invalid provision. The Bombay High Court judgment was also considered, emphasizing that decisions must align with the Customs Act's provisions, not writ jurisdiction powers. Consequently, the Tribunal upheld the lower authorities' decisions to reject the refund claims as time-barred under Section 27 of the Customs Act, leading to the dismissal of the appeals.
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1986 (10) TMI 145
Issues: Classification for customs duty of imported goods under Bills of Entry: (1) No. 1712, dated 13-7-1977; (2) No. 3333, dated 13-11-1977; and (3) No. 1154, dated 8-12-1977.
In the judgment delivered by the Appellate Tribunal CEGAT, New Delhi, the issue involved pertained to the classification for customs duty of goods imported under three Bills of Entry. The goods, described as 'drill pipes,' were assessed under T.I. 73.17/19(2) of the Customs Tariff Act of 1977. The appellants contended that the drill pipes were meant for fitting into portable oil rigs falling under T.I. 84.23 of the CTA. The appellants argued that the drill pipes should be classified as parts of machinery under T.I. 84.23 instead of T.I. 73.17/19(2. They relied on Section Note 2(b) of Section XVI and Explanatory Notes to C.C.C.N. to support their classification claim.
The appellants' main contention was that the drill pipes were specifically designed for use with oil rigs falling under T.I. 84.23 of the CTA. They argued that the lower authorities erred in classifying the drill pipes under T.I. 73.17/19(2) instead of T.I. 84.23. The appellants emphasized that the drill pipes' special features, as per specifications provided, indicated their classification as parts of machinery under T.I. 84.23. They also relied on Explanatory Notes to C.C.C.N. to support their classification argument. However, they could not provide concrete evidence that the drill pipes were solely or principally meant for use in oil rigs.
The Respondent, the J.D.R., countered the appellants' arguments by pointing out that T.I. 73.17/19(2) specifically covered drilling tubes, pipes, and blanks thereof, which was a deviation from the C.C.C.N. The Respondent argued that the specific heading in the CTA should prevail over general headings, and the appellants failed to prove that the drill pipes were solely or principally for use in machinery falling under T.I. 84.23. The Respondent also cited a previous judgment to support their position that spare parts need not necessarily fall under the machinery chapter.
After careful consideration, the Tribunal found that the appellants had not substantiated their claim that the drill pipes were specific parts of machinery under T.I. 84.23. The Tribunal agreed with the Respondent that the drill pipes were correctly classified under T.I. 73.17/19(2) based on the materials and design. The Tribunal concluded that the Explanatory Note to C.C.C.N. could not aid the appellants' case, and the classification by the Customs authorities was deemed correct. Thus, the appeals on the classification for basic customs duty were dismissed.
Regarding the quantum of C.V. duty in one of the appeals, the Tribunal noted discrepancies in the rate applied for C.V. duty compared to other similar cases. The Tribunal remanded the matter to re-examine the rate of C.V. duty applicable in that specific case, allowing the appeal only to that limited extent. The Assistant Collector of Customs was directed to re-adjudicate on the rate and quantum of C.V. duty payable within four months.
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1986 (10) TMI 144
Issues Involved:
1. Classification of "stencil skin" for Central Excise duty.
2. Whether "stencil skin" qualifies as "goods."
3. Appropriate Tariff Item under which "stencil skin" should be classified (Item 17(2) or Item 68).
Detailed Analysis:
1. Classification of "Stencil Skin" for Central Excise Duty:
The appellants manufacture various stationery items, including stencil paper, which involves converting tissue paper into "stencil skin." Initially, the stencil paper was cleared under Item 68 of the Central Excise Tariff. However, the authorities later demanded reclassification under Item 17(2) and issued a demand-cum-show cause notice for differential duty. The Assistant Collector and the Collector of Central Excise (Appeals) upheld this reclassification, leading to the present appeal.
2. Whether "Stencil Skin" Qualifies as "Goods":
The appellants argued that "stencil skin" is not "goods" as it is not bought or sold in the market and is used only for captive consumption. They cited the Supreme Court's judgment in Union Carbide India Ltd., which held that to attract excise duty, an article must be capable of being sold. The appellants also referred to a Board's Tariff Advice stating that intermediate products not coming to the market should not be considered excisable. The Revenue countered this by arguing that "stencil skin" is a complete product and is capable of being sold, as evidenced by its export instances.
3. Appropriate Tariff Item Under Which "Stencil Skin" Should Be Classified:
The Revenue argued that "stencil skin" falls under Item 17(2) as it is a type of paper. The appellants contested this, stating that "stencil skin" is not used for writing, printing, or packaging, and thus does not fit the common understanding of "paper." They cited several judgments, including the Supreme Court's decision in Macneill & Barry Ltd., which held that specialized papers like ammonia paper and ferro paper are not considered "paper" in the common sense. The Tribunal examined these arguments and concluded that "stencil skin" is not "paper" and should be classified under Item 68, which covers miscellaneous manufactured goods.
Conclusion:
The Tribunal held that "stencil skin" is indeed "goods" and liable to excise duty. However, it should not be classified under Item 17(2) as "paper" but under Item 68 as manufactured goods. The appeal was disposed of accordingly.
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1986 (10) TMI 143
Issues Involved:
1. Validity of the import license.
2. Classification of palm stearin as a type of palm oil.
3. Applicability of Public Notice No. 48 of 1980.
4. Authority of the appellants to import under the given license.
Detailed Analysis:
1. Validity of the Import License:
The appellants argued that the import license, dated 24-9-1979, was valid at the time of shipment. The Collector of Customs and Central Excise, Ahmedabad, held that the license expired on 23-9-1980, and thus the import was invalid. However, the Tribunal found that, according to Paragraph 205 of the Handbook of Import Export Procedures 1980-81, the license was automatically valid until the end of September 1980. The goods were shipped under three Bills of Lading dated 23-9-1980, 25-9-1980, and 27-9-1980, all within the extended validity period. Therefore, the Tribunal held that the license was valid when the goods were shipped.
2. Classification of Palm Stearin as a Type of Palm Oil:
The Collector classified palm stearin as a type of palm oil, thus making it a canalised item under the Import Policy A.M. 1981. The Tribunal disagreed, noting that palm stearin and palmolin are derivatives of palm oil and not palm oil itself. The Tribunal referenced several decisions by the Central Board of Excise & Customs and the Government of India, which consistently held that palm stearin is different from palm oil. The Tribunal concluded that palm stearin is not a type of palm oil and was not canalised during the policy period A.M. 1981.
3. Applicability of Public Notice No. 48 of 1980:
The Collector held that Public Notice No. 48 of 1980, dated 9-12-1980, had retrospective effect from 15-4-1980, making the import of palm stearin unauthorised. The Tribunal found that Public Notice No. 48 of 1980 is non-statutory and cannot operate retrospectively. The Tribunal referenced the Supreme Court judgment in Bharat Barrel & Drum Manufacturing Co. Pvt. Ltd. and the Bombay High Court decision in M/s. Stretch Fibres (India) Ltd., which held that such notices are prospective. Therefore, the Tribunal concluded that the Public Notice could not affect imports made under a valid license issued before its date.
4. Authority of the Appellants to Import Under the Given License:
The appellants were the letter of authority holders of the license issued to Venilal's Export House Pvt. Ltd. The Collector argued that the letter of authority did not make the appellants valid importers. The Tribunal found that Paragraph 382 of the Handbook permitted the issuance of letters of authority, and the Assistant Collector had allowed the clearance of goods under OGL based on this letter. The Tribunal held that the appellants were authorised to import under the license.
Conclusion:
The Tribunal allowed the appeal, set aside the order of the Collector, and ordered the refund of the penalty imposed. The import license was valid at the time of shipment, palm stearin was not a type of palm oil and was not canalised, Public Notice No. 48 of 1980 did not have retrospective effect, and the appellants were authorised to import under the given license.
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1986 (10) TMI 142
Issues:
1. Applicability of Notification No. 97/84-C.E. dated 23-4-1984 under Section 11C of the Central Excises and Salt Act.
2. Error apparent from the record in the order dated 11-12-1985.
3. Interpretation of Notification No. 97/84 and its applicability to the case.
4. Consideration of job work basis for printing on tin sheets.
5. Majority and minority opinions on the eligibility of the appellants for the benefit of Notification No. 97/84.
Analysis:
1. The case involved a challenge to the dismissal of E-Appeal No. 1157/81-D of M/s. Neelam Tin Industries under Order No. D-438/85. The appellants claimed their case was covered by Notification No. 97/84-C.E. dated 23-4-1984. They argued that the order dated 11-12-1985 had an error apparent from the record as the notification was not considered before passing the order.
2. The Tribunal reviewed the events leading to the dismissal of the appeal. The appellants had filed the notification on 9-12-1985, before the order was issued. The Tribunal acknowledged that the notification was not taken into account before the order was passed, constituting an error apparent from the record necessitating reconsideration of the order.
3. The Tribunal examined the content of Notification No. 97/84 and its requirements. It was noted that the notification applied to cases where printing was done before the tin sheets were supplied to the manufacturers. In this instance, the printing was done after the receipt of tin sheets, albeit not within the appellants' premises. Citing a previous Tribunal decision, it was concluded that the benefit under the notification was not available to the appellants.
4. The issue of job work basis for printing on tin sheets was raised. The Tribunal deliberated on whether the printing, done on behalf of the appellants, could be considered as done by others with the aid of power as per the notification's requirements. The Tribunal determined that the printing arranged by a person other than the licensee did not meet the criteria for availing the benefit of the notification.
5. The Tribunal considered the majority and minority opinions on the eligibility of the appellants for the benefit of Notification No. 97/84. While the majority opinion dismissed the application, the minority opinion held that the benefit of the notification was available to the appellants. Ultimately, the majority decision prevailed, leading to the recall of the earlier order and allowing the appeal based on the majority opinion's interpretation of the notification.
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1986 (10) TMI 141
Issues Involved:
1. Confiscation of gold coins under the Gold (Control) Act, 1968.
2. Interpretation of Section 16(5)(b) of the Act regarding declaration requirements for gold coins and ornaments.
3. Application of legal precedents from High Courts and CEGAT rulings on the interpretation of Section 16(5)(b).
Detailed Analysis:
1. The judgment pertains to the confiscation of 22 gold coins (sovereigns) weighing 172 gms and a penalty imposed under the Gold (Control) Act, 1968. The order of the Collector of Central Excise (Appeals) confirming the confiscation was challenged in the appeals. The appellant, Govinda Rao, received the gold coins as gifts but failed to declare them as required by law. The authorities seized the coins and ascertained their purity through a certified goldsmith. The legal issue revolves around the non-declaration of the gold coins and the applicability of the Act in this case.
2. The central issue involves the interpretation of Section 16(5)(b) of the Act regarding declaration requirements for gold coins and ornaments. The appellant argued that since he possessed 835 gms of gold ornaments along with the coins, the coins should not be subject to confiscation based on the total weight of articles and ornaments owned. The appellant's counsel cited legal precedents from the Punjab and Haryana High Court, Madras High Court, and CEGAT rulings to support the argument that no declaration is necessary if the total weight of articles and ornaments owned is below 4,000 gms. The Departmental Representative contended that the weight limit under Section 16(5)(a) should be read into Section 16(5)(b) to avoid defeating the legislative intent.
3. The judgment extensively analyzed the interpretation of Section 16(5)(b) based on legal precedents. The Madras High Court, Punjab and Haryana High Court, Calcutta High Court, and CEGAT rulings established that no declaration is required under Section 16(5)(b) if the total weight of articles and ornaments owned by an individual does not exceed the prescribed limit. The judgment emphasized that the weight limit specified in Section 16(5)(a) should not be imported into Section 16(5)(b) to maintain the legislative intent. By applying the principles from these authoritative pronouncements, the Tribunal held that the appellant was not obligated to declare the gold coins under seizure as the total weight of articles and ornaments did not exceed the statutory limit. Consequently, the impugned order of confiscation was set aside for the appellant, while the appeals of other claimants were dismissed based on the same legal reasoning.
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1986 (10) TMI 116
Issues:
Claim for Project Import benefit on imported goods denied due to non-registration of contract before clearance.
Analysis:
The appellants manufactured oxygen and acetylene gases in Jamshedpur and imported 500 gas cylinders, seeking Project Import benefit. The import licence was endorsed for Project Import, but the Bill of Entry did not indicate the same. The Assistant Collector rejected the refund claim as the purchase order was registered after clearance, contrary to rules.
The appellants appealed to the Appellate Collector, who upheld the rejection based on Heading 84.66 CTA provisions. The appellants then filed a revision application, treated as an appeal by the Tribunal. The appellants argued that Project Import benefit was allowed for 1500 cylinders later imported, showing inconsistency and injustice. They claimed the import licence, with Project Import endorsement, filed with the Bill of Entry, indicated their intention.
The SDR submitted that the Bill of Entry lacked the Project Import endorsement, and the contract registration was filed after importation, not meeting the proviso under Heading 84.66 CTA. He cited a Tribunal judgment favoring the Revenue in a similar case. The Tribunal found the facts undisputed, with no endorsement on the Bill of Entry for Project Import.
The Tribunal rejected the appellants' arguments, emphasizing the mandatory nature of the proviso under Heading 84.66 CTA. The Tribunal dismissed the relevance of case laws cited by the appellants, as they did not align with the present case's circumstances. The Tribunal highlighted that the contract registration before importation was crucial for availing Project Import benefits.
Referring to a previous Tribunal order with similar facts, the Tribunal upheld the lower authorities' decision, denying the appellants the concessional assessment and refund. The Tribunal concluded that the appellants were not entitled to the Project Import benefit due to non-compliance with the mandatory requirements under Heading 84.66 CTA. The appeal was dismissed.
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1986 (10) TMI 115
Issues Involved:
1. Rejection of set off claim by the Assistant Collector.
2. Appeal to the Central Board of Excise and Customs.
3. Preliminary objection regarding the appealability of the Collector's letter.
4. Nature of the Collector's letter as an administrative or judicial order.
5. Applicability of legal precedents to the case.
Detailed Analysis:
1. Rejection of Set Off Claim by the Assistant Collector:
The appellants, M/s Wimco Ltd., applied for a set off of excise duty paid on inputs used in manufacturing matches, relying on Notification No. 178/77-CE dated 18-6-1977. The Assistant Collector of Central Excise, Dhubri, rejected this claim on 4-6-1980, citing Notification No. 201/79-CE and Notification No. 264/79-CE. The Assistant Collector noted that the goods had already been cleared without availing of the set off and that no cash refund was admissible under Notification No. 201/79, and set off was not available as duty had been paid through banderols under Notification No. 264/79.
2. Appeal to the Central Board of Excise and Customs:
The appellants filed an appeal before the Central Board of Excise and Customs, challenging both the Assistant Collector's order and a subsequent letter from the Collector dated 27-6-1980, which reiterated the rejection of the set off claim. The Central Board rejected the appeal on 31-10-1980, stating that the appellants should have appealed against the Assistant Collector's order following the proper procedure, rather than referring the matter to the Collector.
3. Preliminary Objection Regarding the Appealability of the Collector's Letter:
During the appeal, a preliminary objection was raised by the respondent, arguing that the appellants could not directly appeal to the Central Board against the Assistant Collector's order and that the Collector's letter was not an appealable order but merely an administrative communication. The appellants contended that the Collector's letter effectively denied them relief and should be considered an order subject to appeal.
4. Nature of the Collector's Letter as an Administrative or Judicial Order:
The Tribunal analyzed whether the Collector's letter dated 27-6-1980 constituted an administrative or judicial order. The letter responded to the appellants' request for intervention and reiterated the denial of the set off claim without referencing the Assistant Collector's prior order. The Tribunal noted that the letter appeared to deny relief and provided reasons for the decision, thereby meeting the criteria of a judicial order as per the Supreme Court's decision in Jaswant Sugar Mills v. Laxmi Chand.
5. Applicability of Legal Precedents to the Case:
The respondent cited several legal precedents to support their preliminary objection. The Tribunal examined these cases, including Gangadhar Baijnath v. Commissioner of Income-tax and Brooke Bond India Ltd. v. Collector of Central Excise, and found them inapplicable to the present case. The Tribunal concluded that the Collector's letter amounted to a decision or order under Section 35 of the Central Excises and Salt Act, which provided for appeals against any decision or order by a Central Excise Officer.
Conclusion:
The Tribunal overruled the preliminary objection, holding that the Collector's letter dated 27-6-1980 constituted a decision or order subject to appeal under the Central Excises and Salt Act. The appeal was directed to be posted for hearing on merits on 1-12-1986.
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1986 (10) TMI 114
Issues involved:
The issues involved in this case include discrepancies in invoices leading to exceeding the exemption limit, reliance on a Supreme Court judgment, allegations of non-accountal of goods, differences in value of goods due to packing, reliance on Trade Advice and judicial decisions, lack of evidence for clandestine removal of goods, dispute over assessable value due to packing, and imposition of penalty.
Discrepancies in Invoices and Exemption Limit:
The appellant was found preparing two sets of invoices with discrepancies in identity of buyers, quantity, and value of goods, exceeding the exemption limit of Rs. 5 lakhs under Notification No. 71/78. The department also alleged charging higher prices than approved.
Reliance on Supreme Court Judgment and Disallowed Submissions:
The appellant's advocate sought to rely on a Supreme Court judgment but was disallowed from submitting additional written arguments without permission or filing any new grounds of appeal.
Allegations of Non-Accountal of Goods:
The advocate argued that the department lacked evidence of additional unaccounted goods beyond excise records, and parties contacted denied receiving goods under parallel invoices.
Differences in Value Due to Packing:
The appellant contended that differences in value were due to secondary packing at customer request, not part of assessable value as per Trade Advice 5/68.
Lack of Evidence for Clandestine Removal:
The department's case of clandestine removal lacked tangible evidence, based on surmises and unwarranted assumptions, as per appellant's citation of Oudh Sugar Mills Ltd. case.
Dispute Over Assessable Value Due to Packing:
The department argued that packing cost should be part of assessable value, but the appellant cited Central Board instructions that certain packing should not be included.
Imposition of Penalty:
The penalty of Rs. 20,000 was deemed unjustified and set aside based on the findings in the case.
Conclusion:
The appeal was allowed with consequential relief to the appellant, highlighting the discrepancies in invoices, lack of evidence for clandestine removal, and the dispute over assessable value due to packing, leading to the setting aside of the penalty.
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1986 (10) TMI 113
Issues:
- Appeal against Board's Order No. 391-92 of 1979 under Customs Act Section 128.
- Appeal against Board's Order No. 66-67 of 1981 under Customs Act Section 128.
- Request for treating appeals as revision applications under old Section 130(1) of the Customs Act.
- Contention of appeals being time-barred under Section 128.
- Argument regarding denial of hearings by the Board.
- Examination of appellant's submissions and Board's orders.
- Consideration of natural justice principles in denying hearings to the appellants.
- Final decision on rejecting the appeals.
Detailed Analysis:
1. The judgment involves two appeals filed against the Board's orders under Section 128 of the Customs Act. The first appeal, CD(T)(BOM)300/80, was against the Board's rejection of two appeals filed by an appellant against a penalty imposed under Section 112 of the Customs Act. The second appeal, CD(T)(BOM)523/81, was filed by widows against a penalty imposed on their deceased husband. Both appeals were deemed time-barred by the Board under Section 128.
2. The appellants contended that the appeals should be treated as revision applications under old Section 130(1) of the Customs Act. However, due to the unavailability of records, the hearings proceeded solely on the question of whether the appeals were time-barred or not.
3. The appellant's representative argued that the widows had the locus to file appeals under Section 142(l)(c) of the Customs Act and that the appeals were filed within the time limit of old Section 130(1). The denial of hearings by the Board was challenged, claiming it rendered the Board's orders nullities in law.
4. On the other hand, the Collector's representative contended that the appeals were correctly rejected as time-barred under Section 128. The denial of hearings was justified as per the discretion of the Appellate authority under Section 128(2) of the Customs Act.
5. The Tribunal reserved its orders on the preliminary issue of time-barred appeals. Upon examining submissions, it was found that the appeals were correctly rejected under Section 128 and that the denial of hearings did not violate principles of natural justice. The Tribunal rejected the appeals based on the above findings.
6. The judgment emphasizes that the appeals were correctly rejected as time-barred under Section 128 of the Customs Act. The Tribunal held that the denial of hearings did not violate natural justice principles, considering the inability to condone the delay beyond the statutory period.
7. In conclusion, the Tribunal rejected the appeals based on their time-barred nature under Section 128, emphasizing that the denial of hearings did not amount to a lack of compliance with natural justice principles. The decision was made after a detailed analysis of the submissions and relevant provisions of the Customs Act.
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1986 (10) TMI 112
Issues Involved:
1. Whether the tubular knitted fabrics manufactured by the appellants are "goods" liable for excise duty.
2. Whether the fabrics used within the factory for further manufacture of hosiery articles are exempt from excise duty.
3. Validity and applicability of Notification No. 213 of 1972 and its withdrawal by Notification No. 101/79.
4. Determination of assessable value and the applicability of Rule 9A(5) of the Central Excise Rules.
5. Quantification of redemption fine and penalty.
Detailed Analysis:
Issue 1: Whether the tubular knitted fabrics manufactured by the appellants are "goods" liable for excise duty.
The appellants contended that the tubular knitted fabrics would not be "goods" attracting excise duty. However, this ground was not raised in the reply to the show cause notice or during proceedings before the Collector. The Board did not discuss this contention, and no serious arguments were advanced before the Tribunal. The Tribunal rejected this contention due to the absence of evidence and the fact that it was not pursued in earlier proceedings.
Issue 2: Whether the fabrics used within the factory for further manufacture of hosiery articles are exempt from excise duty.
The appellants argued that the fabrics used in the factory for manufacturing hosiery articles in an integrated process should not attract excise duty. However, due to the retrospective amendment of Rules 9 and 49 of the Central Excise Rules, this contention was not accepted, and no arguments were advanced in support during the hearing.
Issue 3: Validity and applicability of Notification No. 213 of 1972 and its withdrawal by Notification No. 101/79.
Notification No. 213 of 1972 exempted woollen knitted fabrics used within the factory for manufacturing hosiery articles from duty. This notification was withdrawn by Notification No. 101/79 on 1.3.1979. The appellants claimed exemption for fabrics manufactured before 28.2.1979, used subsequently in manufacturing hosiery articles. The Board held that exemption was only applicable if the fabrics were used in manufacturing hosiery articles before 28.2.1979. The Tribunal agreed with this interpretation, noting that the actual use of fabrics in manufacturing hosiery articles must have occurred before the exemption's withdrawal to claim the benefit.
Issue 4: Determination of assessable value and the applicability of Rule 9A(5) of the Central Excise Rules.
The lower authorities held that duty was payable under Rule 9A(5). The appellants contended that Rule 9A(1)(ii) should apply, referencing the Tribunal's decision in Daya Ram Metal Works Pvt. Ltd. and Bata India Ltd. The Tribunal agreed, noting that duty should be demanded in terms of Rule 9A(1)(ii) when dates of actual removal are ascertainable.
Issue 5: Quantification of redemption fine and penalty.
The Board had reduced the penalty and redemption fine but quantified them before determining the exact duty evaded and the value of the goods. The Tribunal found this premature and held that the quantification of redemption fine and penalty should occur only after ascertaining the duty evaded and the value of the goods.
Conclusion:
The appeal was allowed, and the orders of the lower authorities were set aside with the following directions:
1. No duty is payable on 6124.975 kg of woollen knitted fabrics in stock in the tailoring section on 1.3.1979.
2. Duty on the remaining quantity should be assessed in terms of Rule 9A(1)(ii) based on the dates of removal and applicable duty rates.
3. The quantum of penalty and redemption fine should be re-determined after ascertaining the value of the goods and the duty evaded.
4. The matter is remitted to the Collector for fresh adjudication and orders in light of these directions.
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1986 (10) TMI 100
Issues Involved:
1. Liability to deduct tax under section 194A.
2. Liability to pay interest under section 201(1A).
3. Treatment of branch accounts versus head office accounts.
4. Interpretation of section 194A(1) and (4).
Detailed Analysis:
1. Liability to deduct tax under section 194A:
The primary issue is whether the assessee was liable to deduct tax under section 194A on the interest amounts credited to the accounts of certain parties. The Income Tax Officer (ITO) argued that tax should be deducted at source every time interest is credited to the account of the creditor, whether at the head office or branch office. The assessee contended that the obligation to deduct tax arose only upon the real payment of interest and that tax had been deducted on the net interest payable after consolidating accounts at the head office.
The Tribunal held that section 194A(1) imposes the obligation to deduct tax at the time of crediting interest to the account of the payee or at the time of payment, whichever is earlier. The Tribunal emphasized that the liability to deduct tax arises at the time of crediting interest in the accounts, not merely upon consolidation of accounts at the head office.
2. Liability to pay interest under section 201(1A):
The ITO raised a demand for interest under section 201(1A) due to the alleged short deduction of tax at source. The assessee argued that any interest payable should be calculated based on the net interest credited in the head office consolidated accounts at the end of the accounting year.
The Tribunal clarified that the liability to deduct tax under section 194A(1) arises at the time of crediting interest in the accounts. Consequently, the liability to pay interest under section 201(1A) also arises from the date of such credit entries. The Tribunal concluded that the Commissioner (Appeals) erred in accepting the assessee's contention that interest should be calculated based on the net interest payable after consolidation at the head office.
3. Treatment of branch accounts versus head office accounts:
The assessee argued that the accounts in various branches should not be treated as different entities and that the head office's consolidation of accounts should determine the liability to deduct tax. The Commissioner (Appeals) accepted this view, stating that the head office consolidates branch accounts and determines the net interest payable, which is when the tax should be deducted.
The Tribunal disagreed, stating that each branch's transactions are conducted on behalf of the company, and the liability to deduct tax arises at the time of crediting interest in the branch accounts. The Tribunal emphasized that the head office's role in consolidating accounts does not defer the obligation to deduct tax at source as per section 194A(1).
4. Interpretation of section 194A(1) and (4):
The Tribunal examined the relevant provisions of section 194A. Sub-section (1) clearly imposes the obligation to deduct tax at the time of crediting interest to the account of the payee or at the time of payment, whichever is earlier. Sub-section (4) allows for adjustments in case of excess or deficiency in previous deductions but does not permit short deductions.
The Tribunal cited the Madras High Court's decision in Southern Brick Works Ltd. v. CIT, which clarified that the liability to deduct tax arises at the time of crediting interest to the account of the payee. The Tribunal also referred to the Board's Circular No. 288, which states that the time for deduction of tax is when interest is credited in the accounts.
Conclusion:
The Tribunal concluded that the Commissioner (Appeals) erred in his interpretation and directions. The Tribunal reversed the orders of the Commissioner (Appeals) and restored the orders of the ITO, holding that the liability to deduct tax under section 194A arises at the time of crediting interest in the accounts and that interest under section 201(1A) is payable accordingly. The appeals by the revenue were allowed.
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1986 (10) TMI 98
Issues Involved:
1. Disallowance computation under section 40A(5) of the Income-tax Act, 1961.
2. Entitlement to investment allowance for machinery leased out.
3. Entitlement to depreciation at 100% for bottles treated as 'plant'.
Issue-Wise Detailed Analysis:
1. Disallowance Computation under Section 40A(5):
The revenue contended that the Commissioner (Appeals) erred in excluding certain payments from disallowance computation under section 40A(5) of the Income-tax Act, 1961. These payments included electricity charges (Rs. 3,826), salary paid to servants (Rs. 2,790), personal accident insurance premia (Rs. 550), and club subscription (Rs. 1,080). The Commissioner (Appeals) had followed his decision from the previous year, allowing the assessee's claim that these amounts should not be treated as perquisites.
The Tribunal agreed that personal accident insurance premia and club subscriptions should not be treated as perquisites, referencing the decisions in CIT v. Amco Batteries Ltd. [1984] 150 ITR 48 and State Bank of India v. IAC [1985] 13 ITD 550 (Cal.). However, for electricity charges and salary paid to servants, the Tribunal referred to decisions in Blackie & Sons (India) Ltd. v. ITO [1983] 3 SOT 72 (Bom.) and Glaxo Laboratories (India) Ltd. v. Second ITO [1986] 18 ITD 226 (Bom.), concluding that these payments should be considered for disallowance under section 40A(5). Thus, the order of the Commissioner (Appeals) was reversed regarding electricity charges and salary paid to servants.
2. Entitlement to Investment Allowance for Machinery Leased Out:
The revenue contested the Commissioner (Appeals)'s decision that the assessee was entitled to investment allowance for machinery leased out. Both parties agreed that this issue was covered by the Tribunal's decision for the preceding year (1980-81), which followed the decision in ITO v. First Leasing Co. of India Ltd. [1985] 13 ITD 234 (Mad.) (SB). The Tribunal upheld the Commissioner (Appeals)'s order allowing the assessee's claim for investment allowance on the leased machinery, following the earlier orders.
3. Entitlement to Depreciation at 100% for Bottles Treated as 'Plant':
The Commissioner (Appeals) had allowed the assessee's claim for treating bottles as 'plant' and granted 100% depreciation under the first proviso to section 32(1)(ii) of the Act. The revenue argued that bottles, being containers, should not be considered 'plant' and are subject to breakages, thus not entitled to depreciation for wear and tear. They cited the Madras High Court decision in CIT v. Tamil Murasu Publishers (P.) Ltd. [TC No. 30 (Mad.) of 1979].
The Tribunal, however, noted that courts have given a wide interpretation to 'plant,' including any article used by a businessman for carrying on business. They referenced the Hyderabad Bench decision in Sri Krishna Bottles (P.) Ltd. and the Delhi High Court's interpretation in CIT v. National Air Products Ltd. [1980] 126 ITR 196, which included gas cylinders as 'plant.' The Tribunal held that the bottles used by the assessee in its leasing business constituted 'plant.'
However, the Tribunal did not agree with the artificial segregation of each bottle as a separate plant for 100% depreciation. They emphasized that the assessee purchased and leased out bottles in bulk, and the value of each bulk purchase exceeded Rs. 750. Following the Madras High Court's reasoning in Tamil Murasu Publishers (P.) Ltd., the Tribunal concluded that while the assessee is entitled to normal depreciation, it is not entitled to 100% depreciation under the first proviso to section 32(1)(ii). Thus, the appeal was partly allowed.
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1986 (10) TMI 96
The dispute in this case involves the addition of interest due to the minor son of the assessee under section 64 of the IT Act. The ITO added interest for seven months amounting to Rs. 3,479, which was endorsed by the AAC. The Tribunal partly allowed the appeal, directing the ITO to add interest only on the original gifted amount and not on any interest received by the minor son. The Tribunal also noted that the assessee is entitled to a re-adjustment of his share of income from the firm due to the added interest.
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1986 (10) TMI 95
Issues:
- Dispute over the valuation of shops sold by a charitable society
- Initiation of acquisition proceedings under s. 269F(6)
- Allegation of gross undervaluation by IAC (Acq)
- Appellants challenging the acquisition orders
- Consideration of guidelines under Circular No. 455 dated 16th May, 1986
Analysis:
The judgment by the Appellate Tribunal ITAT Jaipur dealt with two appeals involving a common issue of the valuation of shops sold by a charitable society. The appellants purchased shops for Rs. 49,000 each, and acquisition proceedings were initiated under s. 269F(6) based on an allegation of gross undervaluation by the Income-tax Appellate Commissioner (Acq). The Tribunal heard arguments from both parties and found merit in the appellants' contentions. The shops were let out at nominal rent, leading to a valuation estimation of not more than Rs. 12,000 each after deductions. While there were admissions that the shops could fetch a higher price if vacant, the Tribunal noted that the shops were actually let out, impacting their market value. The Tribunal also highlighted that the acquisition proceedings were initiated based on a complaint and not by the Department. The Tribunal rejected the complaint's involvement in the proceedings as it did not concern him directly. Additionally, the Tribunal considered a detailed submission by the assessee's representative justifying the sale circumstances.
Furthermore, the Tribunal referenced Circular No. 455 dated 16th May, 1986, which provided guidelines on the acquisition of immovable properties under Chapter XXA of the IT Act, 1961. The Circular emphasized that acquisition proceedings should not be initiated for minor sales with a consideration below a specified amount. The Tribunal noted that the intention was not to pursue acquisition proceedings for minor sales and found justifications for the consideration shown in the sale deeds. The Tribunal concluded that the shops were not grossly undervalued, especially considering the tenants' lack of objection to the sales. Ultimately, the Tribunal allowed the appeals and canceled the acquisition orders issued by the IAC (Acq).
In summary, the judgment addressed the dispute over shop valuation, the initiation of acquisition proceedings, the allegation of undervaluation, the appellants' challenge to the orders, and the application of guidelines under Circular No. 455. The Tribunal found in favor of the appellants, emphasizing the actual circumstances of the sales and the lack of gross undervaluation, leading to the cancellation of the acquisition orders.
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1986 (10) TMI 94
Issues:
- Determination of the cost of assets introduced in a firm for depreciation purposes.
Detailed Analysis:
1. Background:
The case involved an appeal by the revenue concerning the cost of assets introduced in a firm through one of the partners for depreciation purposes. The firm, comprising four partners, was dissolved, with Mr. Narain M. Punjabi interested to the extent of 50%. Following the dissolution, an agreement was made for Mr. Narain M. Punjabi to bring in the assets of the dissolved firm to the present firm for depreciation claims.
2. Initial Assessment by ITO and IAC:
The Income Tax Officer (ITO) considered the claim and referred to Explanation 3 of section 43 of the Income-tax Act, stating that depreciation would be allowed based on the actual cost to the earlier firm less depreciation allowed. The IAC supported this view. The written down value ultimately determined was Rs. 76,931.
3. Appeal to Commissioner (Appeals):
The assessee appealed to the Commissioner (Appeals), who found factual inaccuracies in the initial order and directed a reevaluation. The Commissioner (Appeals) considered the increase in the cost of assets due to payments made to retiring partners and the details of the assets involved in the dissolution.
4. Tribunal's Decision:
The department appealed the Commissioner (Appeals) decision, emphasizing that Explanation 3 of section 43 negated the assessee's claim. The Tribunal analyzed the issue extensively, concluding that the cost of assets does not increase due to liabilities taken over and that the actual cost remains unchanged unless a sale occurs. Citing relevant case law, the Tribunal determined the written down value to be Rs. 76,931, quashing the Commissioner (Appeals) order and reinstating that of the ITO.
In summary, the Tribunal held that the cost of assets introduced in the firm remains unchanged unless a sale occurs, rejecting the claim that liabilities taken over increase the cost. The decision was based on a thorough analysis of relevant provisions and case law, ultimately upholding the ITO's assessment and overturning the Commissioner (Appeals) decision.
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1986 (10) TMI 93
Issues Involved:
1. Legality of the Commissioner's order under Section 263 of the Income-tax Act, 1961.
2. Examination of loss suffered on the purchase and sale of rice.
3. Disallowance of certain payments under Section 40A(3) of the Income-tax Act, 1961.
4. Theory of merger of the ITO's order with the Commissioner (Appeals)'s order.
Detailed Analysis:
1. Legality of the Commissioner's Order under Section 263:
The assessee objected to the legality of the Commissioner's order under Section 263, arguing that the ITO's order had already been appealed and reviewed by the appellate authority, which had the power to examine the entire assessment. The Commissioner set aside the ITO's order to be redone de novo, which the assessee contended was not justified, especially since the appellate authority had sustained the ITO's additions.
2. Examination of Loss Suffered on the Purchase and Sale of Rice:
The assessee had provided detailed particulars of the loss suffered in the purchase and sale of rice along with the return of income. The ITO had accepted the loss after examining the transactions through an agent, Jairam Dass Baburam & Co. The Commissioner started the proceedings by examining the loss but later held that certain payments were disallowable under Section 40A(3), which were not initially put to the assessee. The Commissioner doubted the entire transaction but did not bring out anything concrete to conclude that the ITO's order was erroneous and prejudicial to the revenue.
3. Disallowance of Certain Payments under Section 40A(3):
The Commissioner disallowed certain payments under Section 40A(3), arguing that payments made in cash by the agent on behalf of the assessee should be treated as cash payments by the assessee. The assessee contended that the amount due to the agent was paid by draft, with only a small amount paid in cash, and thus the conclusion drawn by the Commissioner was incorrect. The department argued that whether the payment was made by the assessee or through the agent, it amounted to the same thing, i.e., cash purchases by the assessee.
4. Theory of Merger of the ITO's Order with the Commissioner (Appeals)'s Order:
The assessee argued that the ITO's order had merged with the Commissioner (Appeals)'s order, and thus the Commissioner could not revise the order under Section 263. The Special Bench had previously considered the merger theory, concluding that once the ITO's order was appealed, it merged with the appellate order, preventing the Commissioner from revising it under Section 263. However, the Rajasthan High Court in Smt. Ganga Devi v. CWT held that only the part of the assessment order not considered by the appellate authority did not merge, allowing the Commissioner to revise it. Following this decision, the Tribunal held that there was no merger of the ITO's order regarding the rice dealings, justifying the Commissioner's action under Section 263.
Conclusion:
The Tribunal dismissed the appeal, holding that the Commissioner's order under Section 263 was justified. The ITO's order regarding the rice dealings did not merge with the appellate order, allowing the Commissioner to invoke his powers under Section 263. The Tribunal found that the transactions appeared genuine, but the ITO did not apply his mind to the allowability under Section 40A(3), and thus the Commissioner's setting aside of the order was proper.
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1986 (10) TMI 92
Issues Involved:
1. Assessability of security forfeited by the assessee company
2. Allowability of weighted deduction under Section 35B
3. Weighted deduction on commission paid to Indian agents on exports
4. Allowability of entertainment expenditure (only for assessment years 1978-79 to 1980-81)
Issue-wise Detailed Analysis:
1. Assessability of Security Forfeited by the Assessee Company:
The assessee-Corporation forfeited various amounts as earnest money deposits from purchasers of nylon yarn, vanaspati, and foreign cars. The IAC (Assessment) treated these forfeited amounts as revenue receipts and thus assessable as income. The CIT(A) upheld this view, referencing amendments to Section 28(iv) and Section 2(24) of the Income Tax Act, which included benefits arising from business activities as taxable income.
However, the Tribunal noted the need to examine the agreements between the assessee-Corporation and its customers to determine whether the forfeited amounts were part of the trading receipts or merely security deposits. The Tribunal referenced Supreme Court rulings in K.M.S. Lakshmanier and Sons vs. CEPT and Punjab Distilling Industries Ltd. vs. CIT, which distinguished between advance payments and security deposits. The Tribunal restored the matter to the ITO to scrutinize the agreements and determine the nature of the forfeited amounts for the relevant assessment years.
2. Allowability of Weighted Deduction Under Section 35B:
For the assessment year 1977-78, the assessee claimed weighted deduction under Section 35B on expenditures, including foreign office expenses and administrative expenses. The IAC allowed partial deductions but disallowed the claim on administrative expenses. The CIT(A) estimated that only 10% of the administrative expenses related to exports and allowed a 75% deduction on this estimated amount.
The Tribunal noted that a detailed examination of each expenditure item was necessary, referencing the Tribunal Special Bench decision in the case of M/s J. Hemchand & Co., Bombay. The Tribunal restored the matter to the IAC (Asst.) for fresh examination for the assessment years 1977-78, 1978-79, and 1980-81.
3. Weighted Deduction on Commission Paid to Indian Agents on Exports:
The IAC (Asst.) had disallowed the assessee's claim for weighted deduction on commission paid to Indian agents, a decision upheld by the CIT(A) based on CIT vs. Southern Sea Foods (Pvt.) Ltd., which held that procuring orders did not qualify for deductions under Section 35B(1)(b).
The Tribunal referenced the Tribunal Special Bench decision in ITO vs. Bharath Skin Corporation, which allowed deductions for services rendered by STC, including market information and buyer identification. The Tribunal restored the matter to the IAC (Asst.) to examine the services rendered by Indian agents and determine the eligibility for weighted deductions for the relevant assessment years, excluding 1979-80.
4. Allowability of Entertainment Expenditure (Assessment Years 1978-79 to 1980-81):
The assessee incurred entertainment expenses for foreign customers, which were disallowed by the IAC (Asst.) and the CIT(A) based on Explanation 2 to Section 37(2A) introduced by the Finance Act, 1983.
The Tribunal considered the assessee's argument that part of the expenditure was for staff involved in inter-departmental meetings and business conferences. The Tribunal directed that 10% of the entertainment expenditure be considered as relating to employees and thus allowable outside the ambit of Explanation 2 to Section 37(2A) for the assessment years 1978-79 to 1980-81.
Conclusion:
The appeals were partly allowed for statistical purposes, with specific issues remanded to the ITO and IAC (Asst.) for further examination and determination based on detailed scrutiny of relevant agreements and expenditure items.
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1986 (10) TMI 91
Issues:
1. Allowance of deductions under section 35(1)(ii) of the Income-tax Act, 1961.
2. Denial of weighted deduction under section 35(2A).
3. Consideration of approval for weighted deduction.
Analysis:
The judgment by the Appellate Tribunal ITAT Jabalpur involved the appeal challenging the order of the Commissioner (Appeals) regarding the allowance of deductions under section 35(1)(ii) of the Income-tax Act, 1961 for the assessment year 1982-83. The assessee, a registered firm, had made a donation of Rs. 3 lakhs to S.J. Jindal Trust, Bangalore, supported by a photostat copy of receipts and approval from the Indian Council of Medical Research. The Income-tax Officer allowed the deduction under section 35(1)(ii) but denied the weighted deduction under section 35(2A, which was contested by the assessee.
During the appeal, the assessee argued that the donation was for a research program approved under Notification No. SO 1368 dated 7-3-1981. The Commissioner (Appeals) upheld the denial of weighted deduction under section 35(2A, stating that the program needed separate approval, which was lacking in this case. The Tribunal noted that the approval for section 35(1)(ii) was present but emphasized that approval for section 35(2A) required approval of the specific program for which the donation was made. As no evidence was provided by the assessee regarding the approval of the program, the denial of weighted deduction was confirmed.
The Tribunal found that the approval granted by the Indian Council of Medical Research was not sufficient for allowing weighted deduction under section 35(2A, as it only met the requirements of section 35(1)(ii). The assessee failed to demonstrate the approval of the specific research program for which the donation was intended. As a result, the denial of weighted deduction was deemed appropriate based on the factual position presented. The appeal was dismissed as no other grounds were raised or pressed during the proceedings.
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