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TMI Blog2004 (8) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) may kindly be reversed, allowing to the assessee the appropriate relief admissible to him under the law. The assessee craves leave to add to alter or amend the above ground of appeal before the same is heard and disposed off." 3. The grievance of the assessee in this appeal relates to the confirmation of disallowance of Rs. 1,50,000 on account of redemption fine and Rs. 5,000 on account of penalty. 4. The facts of the case in brief are that during the course of assessment proceedings, the AO got information that fine amounting to Rs. 1,50,000 and penalty of Rs. 5,000 had been imposed upon the assessee by the customs authorities for infraction of custom law. Accordingly, the assessee was asked to furnish the relevant details of goods imported on which the fine was imposed and was also asked to furnish the date of imposition of fine and how that fine was accounted for in the books of account. The AO also asked the assessee to furnish copy of relevant order of custom authorities imposing this fine. The assessee was also asked to show cause why the fine of Rs. 1,50,000 and penalty of Rs. 5,000 should not be disallowed and added back to the income of the assessee. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by it would have been payable in the normal course on the goods actually imported. On the other hand, fine and penalty were levied for the infringement of law. Learned CIT(A) confirmed the order of AO. Now the assessee is in appeal. 7. Before us, learned counsel for the assessee reiterated the submissions made before the authorities below. He further submitted that the fine and penalty had been levied because there was difference in the size of re-rollable scrap but the fine and penalty had not been imposed for the infringement of law. He further stated that scrap could not be segregated and was shown in the documents. He further explained that the fine and penalty had been imposed by the custom authorities as 40 per cent of the goods were of bigger sizes than the sizes mentioned in the ISIS code HMS I and since all the goods worth Rs. 5,68,010 were confiscated the assessee had no option except to make the payment of Rs. 1,55,000 and to get the goods released. Therefore, the payments made by the assessee were compensatory in nature and not penal in nature. Reliance was placed on the following case laws. (i) CIT vs. N.M. Parthasarathy; (ii) CIT vs. Ahmedabad Cotton Mfg. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit claimed by the assessee was allowed on the basis of declaration made by the assessee and the duty was paid by the assessee. However, when the goods were examined by the Dock's Customs staff, it was found that 40 per cent of the goods were of heavy melting scrap of iron and steel, 20 per cent goods were re-rollable scrap of iron and steel and 40 per cent goods were of bigger sizes than the sizes mentioned. 10. The assessee explained before the custom authorities that scrap in question including oversized one was meant for melting and since it was melting scrap, they would submit end use certificate from the assessment. Commissioner of Central Excise concerned to show that the material had been actually used in the electric arc furnace/induction furnace. As regards 20 per cent of the re-rollable material, it was stated that the same had come with the lot without any mala fide intention and they were ready to pay appropriate rate of duty applicable to re-rollable scrap. 11. Addl. Commissioner who passed the aforesaid order stated that the re-rollable scrap attracted duty @ 30 per cent + 2 per cent + 15 per cent CVD and certain types of scrap attracted duty @ 20 per cent + 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, of any expenditure incurred in violation of the provisions of another statute or any penalty imposed under another statute. If the deductions claimed by the assessee were allowed, the penal provisions of the Foreign Exchange (Regulation) Act would become meaningless. It has also to be borne in mind that evasion of law cannot be a trade pursuit. The expenditure in this case could not be allowed as wholly and exclusively laid out for the purpose of the assessee's business." Their Lordships had also observed at p. 544 that— "no deduction can be allowed if the expenditure fell on the assessee in some character other than that of a trader. If a sum has to be paid by an assessee because in conducting his business, he had acted in a manner which had rendered him liable for penalty for infraction of law, it could not be claimed as a deduction. Infraction of law is not a normal incidence of business. It is only if it could be shown that it was spent for the purpose of the trade that the deduction can be permitted unless the entire trade was unlawful." In the present case also, the assessee had not declared the goods which were imported and thus the assessee tried to pay less cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrap which was not mentioned in the B/E and invoice. Therefore, the facts of the present case are not identical to the facts of the aforesaid case. 15. Similarly, in the case of Dy. CIT vs. Dimexon Tribunal Mumbai Bench (C) held as under: "In cases where the penalty/fine has to be incurred because of the fault of the assessee himself, as for instance for the reason of his having carried on his business in an unlawful manner or in contravention of certain rules and regulations, the penalty/fine paid by the assessee for such conduct thereof cannot be regarded as wholly laid out for the purpose of the business, because the incurring of the said expenses has not been necessitated by the business but by the conduct of the assessee in trying to carry out the business in an unlawful manner. However, if on the other hand, the assessee has acted in good faith without any intention of contravening the provisions of law and in the course of the business any expenditure is incurred towards the cost of goods by way of fine in lieu of confiscation, such expenditure would fall within the ambit of the expenditure wholly laid out for the purpose of the business." However, in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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