TMI Blog1993 (9) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... 11th Aug., 1981, which was registered in accordance with the provisions of registration of contract, vide Appendix 20 of 1980-81 import policy. The said Appendix 20 permits import of carbon steel/high tensile steel structurals. By virtue of para 8 of Appendix 20 of 1980-81 policy r/w paras 16, 17 of that Appendix and para 131(1) of that policy, the said licences were valid for import of items of raw material, required for use in the factory of the holder of REP licences. In pursuance of these REP licences, the assessee imported acid oil which was one of the raw materials in the manufacture of the soap in their factory. The goods arrived at the port of Cochin. The assessee filed bills of entry No. 498 dt. 28th June, 1987, and No. 589 dt. 31st Aug., 1987, for home consumption. The Dy. Collector of customs S.I.B, Cochin alleged that the goods imported are canalised under the 1985-86 import policy and held that such goods cannot be imported under the four licences and the assessee was asked to show-cause why the goods should not be confiscated and penal action taken against the assessee. The Customs authorities ordered that 888.346 MT of industrial acid oil covered by the above bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial acid oil which was raw material for his industry. The learned assessee's counsel further argued that the assessee had no iota of doubt that the provisions of import policy will be contravened but in the meantime an import policy of 1985-88 was announced by the Government where the import of industrial acid oil came to be canalised. Under cl. 204(1) of the new policy, the learned assessee's counsel submitted that the assessee would be entitled to import the industrial acid oil. The assessee, according to the learned counsel for the assessee, drew support from the decision of the Supreme Court in the case of Oswal Woollen Mills Ltd. vs. Union of India. Copy of the decision is on the record. The learned assessee's counsel further supported that he had bona fide belief in the matter and the assessee has opened letters of credit with a banker for importing goods. The assessee's counsel further relied upon the opinion expressed by M.P. Consultancy Organisation Ltd. on 13th July, 1987. The M.P. Consultancy Organisation Ltd., according to the assessee, is a joint venture of IFCI, IDBI and State Corporation and banks and is mainly in the activities of running consultancy services to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1992) 196 ITR 274 (All); Sanghi Bros. vs. CIT (1993) 201 ITR 303 (Raj) and CIT vs. Mathura Prasad(1965) 55 ITR 476 (All), to contend that the fines and penalties paid for infraction of law without good faith are liable to be disallowed. We have carefully considered the rival contentions in the light of the material placed before us. The facts narrated are undisputed. The assessee has purchased REP licences with a view to import industrial acid oil which was required for the purposes of his business. This was possible under the industrial policy of 1980-81. There was a saving clause No. 131(1), in that policy which enables such transactions. The assessee in good faith had purchased these licences. The assessee's bona fides are supported by the decision of the Supreme Court in the case cited supra, which has more or less the same facts. The assessee further obtained the opinion of the Consultancy Organisation of the State Govt. which is very much concerned with the import and export activities of the entrepreneurs of the State. Such authority has also expressed the opinion that the assessee could import industrial acid oil. The assessee obtained such opinion on 13th July, 1987. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT vs. Loknath Co., the Delhi High Court took a view that payment of compensation to regularise certain deviations of the building construction from the sanctioned plan in the assessee's business of construction represents the saving or loss of the closing stock of the assessee. The Delhi High Court took a view that the expenses so incurred were to preserve or in other words to save the closing stock from extinction. The Delhi High Court further took a view that such payment was not in the nature of penalty for infraction of law and the claim has to be accepted. In our view, likewise the Indore Bench of the Tribunal in ITA No. 176/Ind/92 followed the same view and deleted the disallowance of similar nature. It, therefore, leaves no doubt in our mind that the Tax authorities have erred in law and on facts to have denied the assessee's claim. In our view the payment of Rs. 2,50,000 represents the additional cost of goods which should be set off in arriving at the business profit in accordance with the commercially accepted principle. Considering the bona fides and good faith at all stages of the transaction, there is no deliberate contravention by the assessee. However, bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t before they were finally transported to Bombay between 6th Nov., 1987 to 11th March, 1988. In the course of transit from exporting station till they reached the destination, there were different shortages. One such shortage was at the ship and the other was in transit. The shortage at ship was certified by the survey report and such shortage was actually allowed by the Assessing Officer. The Assessing Officer did not allow the transit shortage of the first consignment which was arrived at 19.880 MT The shortage was arrived at by the assessee on the basis of weighment certified by Hindustan Lever. All these details are filed before us in the paper book. The invoicing was done as per the certified weighment. Similarly, the second consignment of industrial acid oil arrived in drums and total weight according to the bill of lading dt. 26th Aug., 1987 was 163.725 MT of industrial acid oil. There was a shortage on account of 62 drums received in damaged condition as per the survey report. The Assessing Officer accepted the shortage as per survey report. However, the claim of the assessee was that there was a transit shortage, as the drums were received in leaking condition and such sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% in the second case. The transit shortage in the first case has been evidenced by the bills of Hindustan Lever who were invoiced as per their certified weighment. The assessee, in our view, has no hand in determining the shortage. The entire claim of 19.880 MT in the first shipment, in our view, should have been allowed as deduction. The second transit shortage of 10.233 MT works out at 6.5% is slightly on the higher side and the material were lying at the Cochin port for about 2 months and the industrial acid oil was in drums, were in damaged condition as certified by the survey report is accepted while allowing the shortage at ship. The fact that there should have been higher amount of loss in transit in the case of second consignment cannot be wholly ruled out, looking at the condition of the drums in which the industrial acid oil was transported. However, since the assessee has no independent evidence to substantiate the loss of 10.233 MT, we direct the Assessing Officer to accept the loss of 5.233 MT as a transit shortage and in respect of balance 5 MT, transit shortage is directed to be disallowed for want of independent evidence in the matter, since the basis for the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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