TMI Blog1992 (8) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 30 bags of wool waste from M/s. M. J. Co. Stross Ltd., U. K. But on inspection by the customs authorities these goods were found to be synthetic/acrylic waste and fibre with negligible quantities of wool waste. Since this was a case of violation of law, the Collector of Customs, Bombay, passed an order confiscating the said goods. The assessee was, however, given an option to take delivery of the goods on payment of fine and penalty amounting to Rs. 1,25,000 and Rs. 25,000 respectively aggregating to Rs. 1,50,000. The assessee did not exercise the option and allowed the goods to be confiscated. The plea of the assessee before the Assessing Officer was that if he had taken delivery of the goods, he would have paid a substantial amount by way of demurrage in addition to the aforesaid fine and penalty which would have resulted in a higher loss. The Assessing Officer, however, held that the loss of Rs. 3,32,148 was on account of forfeiture of goods by the Customs Authorities which was not incidental to the assessee's business and was therefore, not an allowable deduction. 3. The assessee preferred an appeal before the CIT (A) and the CIT (A) relying on a host of judgments came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [1990] 186 ITR 594 in support of his contention that the loss of Rs. 3,32,148 was an admissible loss. Shri Aggarwal also relied on the decision of the Punjab and Haryana High Court in the case of CIT v. Shri Ram Chander [1986] 159 ITR 689 and submitted that the loss claimed by the assessee was an allowable loss. 6. In reply, the learned D. R. submitted that the facts in the cases of International Woollen Mills, Zenith Steel Pipes Ltd, (No. 2) and Ram Chander were distinguishable. 7. We have carefully considered the rival submissions as also the facts on record. Before we come to a clear-cut finding, it would be necessary to examine the cases which have been relied upon before us. As regards the case of International Woollen Mills, the facts were that the assessee had imported woollen rags on genuine belief that they were covered by the import licence issued by the Government. Moreover the import had been canalised through the State Trading Corporation of India and not effected directly by the assessee. The exporter had given a certificate in clear terms that these were woollen rags. There was no definition of the term ' rags ' in the Customs Act. The assessee to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s. Insimax Corporation, Bombay who were paid their fees of Rs. 3,500. The said consignment was traced but the assessee found that the spare parts imported by it were rusted and it was not worthwhile to clear them after paying duty, wharfage, demurrage etc. Accordingly the assessee decided not to take the delivery of the goods and wrote off the amounts paid as purchase price and the fee amounting to Rs. 46,668 as business loss. The matter was ultimately decided in favour of the assessee by the High Court. While deciding the issue, the High Court took pains to emphasise that there was not even a suggestion that the goods were wrongly imported or that the Customs Authorities would have otherwise confiscated them. By implication it means that if the goods had been wrongly imported or if the customs authorities had confiscated the goods, then the loss would not have been allowed as a business loss. From the facts narrated above, it is clear that there was no infraction of law involved in that case. What had happened was that the assessee had imported certain goods which remained untraced at the Bombay port for a long time and because of the passage of time, the goods deteriorated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee's business and was incidental to the business. The facts clearly show that the assessee had to abide by the scheme of import licences under which the assessee had to pay premiums to the Federation in advance covering the entire import entitlement. Owing to the business exigencies, the assessee could not fully utilise the import entitlement resulting in a forfeiture of part of the advance deposited with the Federation. On these facts, the forfeiture was held to be for business purposes and the amounts written off had to be allowed as a deduction. The facts clearly show that the write-off of the loss was incidental to the assessee's business and there was no infraction of law as such. The facts of the present case, however, are clearly different involving infraction of law. 12. In the case of Lakshmi Mills Co. Ltd., the facts were these. Under the Scheme of canalising of imports of foreign cotton through the Indian Cotton Mills Federation, each mill had to give a guarantee at the rate of Rs. 100 per bale of cotton for the quantity of foreign cotton which the mill had agreed to obtain by way of import based on the number of spindles working on higher counts in each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Automobiles. The penalty of Rs. 4,400 was held to have been rightly added to the income of the assessee. 15. The facts of the above case are more or less akin to the facts of the instant case. It was the assessee in the present case who had imported the goods and it was the fault of the assessee if the goods imported did not conform to the specifications of the licence. In a case like this the assessee cannot plead innocence if the goods are not found to conform to the specifications of the import licence. The fault clearly lies at the door of the assessee. No evidence has been produced by the assessee to establish his innocence in this regard. The foreign party would not have issued a sales invoice at the behest of the assessee. When the assessee plays with fire, he cannot turn round to say that his fingers have been burnt. The only difference in the case before the Bombay High Court and the present case is that in that case the assessee had exercised the option and paid the penalty and got its goods released whereas in the present case the assessee did not exercise the option and allowed the goods to be confiscated. The goods were, however, confiscated because of infraction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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