Income Tax Appellate Tribunal - Mumbai
Choksi Tube Co. Ltd. vs Inspecting Assistant Commissioner on 30 May, 1991
Equivalent citations: [1991]38ITD392(MUM)
ORDER
U.T. Shah, Vice-President 1 to 10. [These paras are not reproduced here, as they involve minor issues.]
11. In the assessment order the IAC (Asst.) has simply stated the fact of filing the revised return and the claim made by the assessee. However, he has neither discussed the issue nor allowed the claim made by the assessee.
12. In appeal, the CIT (Appeals) dealt with the issue as under :
5. The fifth ground of appeal pertains to the appellant's claim for deduction of customs duty payable on imported raw material lying in the customs bonded warehouse. It is submitted that since import duty on these goods could have been calculated and quantified as it related to the goods imported during the relevant previous year the claim for deduction should be allowed. The normal procedure followed by the appellant in respect of the customs duty payable on imported raw materials in bonded warehouses has been that the duty is paid whenever the goods are released from the warehouses. Accordingly, the duty payable on these would be allowable only at the time of the actual receipt of the goods. Thus, the value of the goods shown in the stock would be shown as inclusive of the customs duty. However, a reference to the balance sheet shows that only the CIF value of the bonded goods @ Rs. 27,52,950 has been included in the value of the stock-in-trade. It does not include the amount of customs duty payable. Even if the appellant's claim be admitted that the customs duty on the bonded goods is deductible, then this customs duty would have to be added to the value of the bonded goods shown in the stock-in-trade and, to this extent, the appellant's income would go up. The net result would be that the appellant's income would increase by the amount of the customs duty payable and the same amount would be allowed as a deduction resulting in no advantage to the appellant. In any event, in the absence of any orders of the customs authorities, levying duty on the bonded goods, the appellant's claim that deduction of the duty payable should be allowed, is not tenable as no liability to pay the duty has arisen during the year. Viewed from either angle, the appellant's claim on this point fails.
13. The learned counsel for the assessee stated that the claim for deduction pertains to the goods imported during the relevant previous year which were lying in the Bonded Warehouse. The normal duty was 60% and the auxiliary duty was 20 per cent. However, with effect from 15-4-1982, the rates of duty were revised to 300% and 30% respectively. According to the revised rate, the assessee would be entitled to claim deduction of larger amount instead of Rs. 22,56,273. The learned counsel for the assessee, however, was fair enough to state that the assessee had claimed deduction of Rs. 22,56,273 only both before the IAC (Asst.) and the CIT (Appeals). In this connection, he further stated that it would be his endeavour to impress upon us that the assessee is not only entitled to deduction of customs duty payable but also would be entitled to deduction of larger amount on the basis of the revised rates which came into force on 15-4-1982.
14. First of all, the learned counsel for the assessee invited our attention to the following relevant provisions of the Customs Act, 1962 :
Section 12 : Dutiable Goods (1) Except as otherwise providea in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the [Customs Tariff Act, 1975 (51 of 1975)] or any other law for the time being in force, on goods imported into, or exported from, India.
Date for determination of rate of duty and tariff valuation of imported goods - (1) The rate of duty (* * *) and tariff valuation, if any applicable to any imported goods, shall be the rate and valuation in force-
(a) in the case of goods entered for home consumption under Section 46, on the date on which a bill of entry in respect of such goods is presented under that section ;
(b) in the case of goods cleared from a warehouse under Section 68, on the date on which the goods are actually removed from the warehouse;
(c) in the case of any other goods, on the date of payment of duty :
Provided that if a bill of entry has been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards.
15. Thereafter, the learned counsel for the assessee invited our attention to two decisions of the Hon'ble Bombay High Court in the cases of Synthetics & Chemicals Ltd. v. S.C. Coutinho 1981 ELT 414 and Apar (P.) Ltd. v. Union of India [1985] 22 ELT 644 (FB) wherein the Hon'ble High Court had construed the expressions "import" and "imported into India" to mean that import can be said to take place as soon as the goods are brought into the territorial waters of India. In other words, the taxable event occurs when, as laid down by Section 12 of the Customs Act goods are imported into India. Since "India" includes its territorial waters, the taxable event occurs no sooner than the goods enter the territorial waters of India and does not get postponed till they are actually off-loaded on the land mass or till the goods are valued under Section 14 or till the date for determining the rate at which customs duty should be levied under Section 15 arrives. In this view of the matter, the learned counsel for the assessee submitted that the assessee ought to have been allowed deduction in respect of the customs duty payable in view of the decision of the Hon 'We Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363. Relying on the decision of the Hon'ble Madras High Court in the case of CIT v. Madras Industrial Investment Corporation Ltd. [1980] 124 ITR 454, he submitted that the assessee can claim deduction for larger amount than that claimed before the IT authorities. In this connection, he was fair enough to state that the assessee has challenged the revised rates brought into effect from 15-4-1982, in the Court of law. However, he hastened to add that that would be of no consequence to decide the point at issue. For this purpose, he relied on the decision of the Hon'ble Bombay High Court, in the case of CIT v.Tata Chemicals Ltd. [1986] 162 ITR 556, apart from the decision in the case of Kedarnath Jute Mfg. Co. Ltd.'s case (supra). He also relied on (he decision in the cases of CIT v. U.B.S. Publishers & Distributors [1984] 147 ITR 114 (All.), Motilal Padampat Sugar Mills v. CIT [1977] 106 ITR 988 (All.) and Shrikant Textiles v. CIT [1971] 81 ITR 222 (Bom.) to urge that in the mercantile system of accounting, the liability at the end of the relevant previous year is to be considered, that the additional liability during the pendency of an appeal could be considered and that the fact that the liability is likely to be reduced subsequent to the end of the relevant previous year would not be of any consequence in the mercantile system of accounting. Since the year under consideration is 1982-83, the provisions of Section 43B of the Act would not be applicable, as they were brought on the statute on 1-4-1984 and are applicable in respect of the assessment year 1984-85 and onwards. He, therefore, strongly urged that the assessee's claim for deduction of larger amount should be accepted and the IAC (Asst.) should be directed to modify the assessment accordingly.
16. The learned counsel for the assessee further submitted that the customs duty payable should not be added to the value of the bonded goods shown in the stock-in-trade resulting in enhancing the assessee's income. He, however, was fair enough to state that the majority decision of the Tribunal, in the case of Raymond Woollen Mills Ltd. v. ITO [1986] 18 ITD 64 (Bom.)(TM) is against the assessee, on this aspect of the matter.
17. The learned representative for the department, on the other hand, once again relied on the order of the CIT(A) and justified his action. He strongly urged that the assessee's claim for deduction of larger amount that Rs. 22,56,273 should not be allowed at this stage, as both before the IT authorities as well as in the memo of appeal filed before the Tribunal, the assessee had claimed deduction of Rs. 22,56,273 only. He also pointed out that so far, the assessee was following the method of accounting customs duty in the accounts only at the time of clearance of the goods from the Bonded Warehouse as could be seen from the Notes appended to the revised return (reproduced above). He, therefore, strongly submitted that the assessee should not be allowed to change the method of accounting consistently followed by it merely on the basis of the aforesaid two decisions of the Hbn'ble Bombay High Court referred to and relied upon by it. According to the learned representative for the department, since the revised rates of the customs duty were brought into effect from 15-2-1982, i.e., after the end of the relevant previous year (which ended on 30-9-1981), the assessee would not be entitled to deduction of amount, if any, higher than Rs. 22,56,273. He also referred to various reported decisions relied on behalf of the assessee and submitted that one of them further the claim of the assessee in view of the method of accounting customs duty so far followed by it. In this connection, he once again emphasised the fact that the assessee was accounting customs duty in its books only at the time of clearance of the goods from Bonded Warehouse. In this view of the matter, he submitted that the assessee should not be allowed to claim deduction on account of customs duty in respect of the goods lying in the Bonded Warehouse at the end of the relevant previous year till they are cleared from the Bonded Warehouse at a future date. In any event, he submitted that the customs duty would have to be added to the value of the bonded goods shown in the stock-in-trade in view of the majority decision of the Tribunal in the case of Raymond Woollen Mills Ltd. (supra). He, therefore, strongly urged that the order of the CIT(A) on this issue should be upheld.
18. We have carefully considered the rival submissions of the parties and the material to which ourattention was drawn at the time of hearing. The two issues involvedare :
(i) Whether the assessee is entitled to deduction of customs duty; and
(ii) If so, then at what rate the customs duty is to be worked out ?
From the sample zerox copies of invoice No. 6/7-81 dated 12-6-1981, Bill of Lading No. 199 dated 15-6-1981 and Bill of Entry No. 4491 dated 14-7-1981 as well as Import Licence No. P/E/0345283/C/XX/76/A/79 dated 28-8-1990 containing at pages 17 to 23 of the paper book, it is very clear that the goods in question entered the territorial waters of India before the end of the relevant previous year. Therefore, in view of the aforesaid two decisions of the Hon'ble Bombay High Court, the taxable event took place in the relevant previous year and the assessee would be entitled to claim deduction of customs duty. The fact that so far the assessee was following the method of accounting, custom duty in its books only at the time of the clearance of the goods from the bonded warehouses, would not be of any consequence as we have to decide the issue involved on the basis of the taxable event of customs duty. On examination of the material already brought on record and keeping in view of the aforesaid decisions of the Hon'ble Bombay High Court, we are satisfied that the basic liability for customs duty arose when the goods entered the territorial waters of India. To this extent we would accept the submissions made on behalf of the assessee.
19. In our considered opinion, the assessee would not be entitled to deduction of customs duty at the rate of 300% for more than one reasons. Firstly, the claim for deduction at higher rate was not made before the ITO or the CIT(A). Even before the Tribunal, the assessee had not taken up an additional ground in this regard. The learned counsel for the assessee simply stated that since the customs duty on the goods imported were revised upwardly from 15-4-1982, the assessee should be allowed deduction of a larger amount than that claimed before the IT authorities. In our view, the decision in the case of Madras Industrial Investment Corpn. Ltd. (supra) would not be of much help to the assessee, as in the instant case the deduction claimed at a higher amount was not a pure question of law and the exact quantification of the liability cannot be arrived at without investigation of facts. It is pertinent to note that in the court of law the assessee has challenged the very imposition of the customs duty on the goods dealt by it and not that it was not liable to be taxed at higher rate of customs duty. During the course of hearing, we gathered that the matter is still pending in the High Court. In our view, on proper reading of the decision in the case of Madras Industrial Investment Corpn. Ltd. (supra), the discretion, if at all, vested in the Tribunal, has to be exercised in a strict manner. Further, it is worthwhile to note that in the Return originally filed, the assessee had not claimed any deduction on account of customs duty payable on the stocks of stainless steel, mother pipes lying in the bonded warehouses as on 30-9-1981. It was only in the revised Return filed on 5-3-1985 that the assessee claimed deduction of Rs. 22,59,273 with a Note appended to the revised Statement of Income (reproduced above). It is significant to note that the revised rates were brought into effect on 15-4-1982, i.e., after the end of the relevant previous year, viz., 30-9-1981. We find that primafacie the liability at 300%, which got imposed consequent to the revision of rates on 15-4-1982, would arise by operation of Section 15(1) of the Customs Act, only when the goods are actually removed from the warehouses. This would be clear from the interpretation of this section given by the Bombay High Court in another case, viz.. Synthetics & Chemicals Ltd. (supra) in which the Bombay High Court held that when the goods are chargeable to duty on importation, the rate prevalent on the date of actual clearance will apply under Section 15(1)(b) of the Customs Act. The Bombay High Court held that under Section 15(1) of the Customs Act, 1962, the rate of duty applicable to the imported goods shall be the rate and valuation in force and under Section 68 of the same Act, it shall be the date on which the goods were actually removed from the warehouse. In this view of the matter, we are not prepared to accept the stand taken on behalf of the assessee that it should be allowed deduction of customs duty liability at a higher figure than that claimed before the IT authorities.
20. However, in view of the aforesaid order of the Tribunal in the case of Raymond Woollen Mills Ltd. (supra), with which we fully concur, the customs duty payable by the assessee would have to be added to the value of the bonded goods shown in the stock-in-trade. The net result, as held by the CIT(A), would be that the assessee's income will have to be increased by the amount of the customs duty of Rs. 22,56,273. We would, therefore, uphold the order of the CIT(A) on this issue.
21. In the result, the appeal is partly allowed.