9911796707
|
Home
Issues Involved:
1. Deduction of fine paid for import of industrial acid oil. 2. Addition of value for short-received industrial acid oil during transit. Issue 1: Deduction of Fine Paid for Import of Industrial Acid Oil The assessee, a manufacturer of soaps, imported industrial acid oil using REP licences obtained under the import policy of 1980-81. The import policy allowed the import of such raw materials without restriction. However, under the 1985-88 import policy, industrial acid oil became canalised. The Customs authorities at Cochin alleged that the import was unauthorised and imposed a fine of Rs. 2,50,000 to release the goods. The assessee claimed this fine as a deduction, arguing it represented an additional cost of goods. The CIT(A) disallowed the deduction, viewing the fine as a penalty for infraction of law. The assessee contended that the import was done in good faith, relying on the saving clause of 131(1) in the 1980-81 policy, which allowed the use of REP licences for importing raw materials. The assessee supported its bona fide belief with opinions from M.P. Consultancy Organisation Ltd. and a Supreme Court decision in a similar case. The assessee also cited precedents from the Delhi High Court (CIT vs. Loknath & Co.) and the Bombay High Court (CIT vs. Pannalal Narottamdas & Co.), which allowed such deductions when the infraction was not deliberate. The Departmental Representative argued that the assessee knowingly contravened the import policy by not obtaining necessary endorsements and importing a canalised item. The Department cited cases where penalties for deliberate infractions were disallowed. The Tribunal found that the assessee acted in good faith, supported by the Supreme Court decision and the consultancy opinion. The Tribunal noted that the assessee applied for the necessary endorsement upon learning about the requirement. The Tribunal concluded that the fine represented an additional cost of goods, incurred in the normal course of business, and allowed the deduction. Issue 2: Addition of Value for Short-Received Industrial Acid Oil During Transit The assessee claimed a deduction for the shortage of industrial acid oil received during transit from Cochin to Bombay and Indore. The first consignment, weighing 724.621 MT, arrived at Cochin Port and was transported to Bombay. The assessee claimed a transit shortage of 19.880 MT, based on weighment certified by Hindustan Lever. The second consignment, weighing 163.725 MT, arrived in damaged drums, and the assessee claimed a transit shortage of 10.233 MT, based on actual receipt at the destination. The Assessing Officer accepted the shortage certified by the survey report but disallowed the transit shortages, arguing that the claims were not supported by independent evidence and that the transporter should be responsible for any losses. The CIT(A) upheld this view. The Tribunal noted that the Assessing Officer accepted the shortage at the ship, indicating that some shortage during transit was plausible. The Tribunal found the assessee's claim for the first consignment credible, as it was based on Hindustan Lever's certified weighment. The Tribunal allowed the entire claim of 19.880 MT as a deduction. For the second consignment, the Tribunal acknowledged the damaged condition of the drums but found the claimed shortage of 10.233 MT (6.5%) slightly high. Without independent evidence, the Tribunal allowed a partial deduction of 5.233 MT and disallowed the remaining 5 MT for lack of substantiation. Conclusion: The appeal was partly allowed. The Tribunal allowed the deduction of the fine paid for importing industrial acid oil, considering it an additional cost incurred in good faith. The Tribunal also provided partial relief for the claimed transit shortages, allowing deductions based on the evidence presented.
|
