Income Tax Appellate Tribunal - Delhi
D.J. Surfactants , New Delhi vs Assessee on 30 December, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH "F" DELHI)
BEFORE SHRI G.E. VEERABHADRAPPA, HON'BLE VICE
PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER
ITA NO. 4157(Del)2010
Assessment year: 2007-08
M/s. D.J. Surfactants, Additional Commissioner of I. Tax,
A-2/25, Model Town-I, v. Range 20, Vikas Bhawan, N.Delhi.
(Appellant) (Respondent)
Appellant by: S/Shri A.R. Madhav & Tarun Jain, Adv.
Respondent by: Shri N.K. Chand, Sr. DR
ORDER
PER A.D. JAIN, J.M.
This is assessee's appeal for the assessment year 2007-08, taking the following grounds:-
"A. The product 'LABSA' is classifiable under Chapter 34 of Central Excise Tariff Act, 1985 only.
B. Classification of 'LABSA' under Chapter 29 of Central Excise Tariff Act, 1985 is incorrect.
C. The Central Excise Authorities have approved the classification of 'LABSA' under Chapter 34. It is not open to the Income Tax Department to adopt a contrary view.
D. Principles under Harmonized System of Nomenclature(HSN) and National Industrial Classification (NIC) cannot be ignored.
2 ITA 4157(Del)2010 E. The reference to underlying idea of negative list to exclude pollutants from granting exemption is irrelevant consideration for interpretation of fiscal statute."
2. The facts of the case are that the assessee is engaged in the business of manufacture and production of Linear Alkyl Benzene Sulphonic Acid (hereinafter referred to as 'LABSA') which is a raw-material used in the manufacture of synthetic detergents and cleaning products such as scouring power, liquid detergents etc. This activity is carried out in Baddi, an area notified for exemption under section 80 IC of the Income Tax Act. The dispute relates to classification of the said product as to whether it is covered within the list of non-eligible products provided in Part B of the Schedule XIII and in particular serial number 5 thereto.
3. An objection was raised by the AO as to the classification of the product manufactured by the assessee and thus the availability of exemption u/s 80 IC. According to the AO, the treatment of LABSA manufactured by the assessee as a surface-active agent was incorrect inasmuch as it was defined-'chemical compound' and thus classifiable as 'organic chemical' under Chapter 29 of the Central Excise Tariff Act, 1985.
4. The assessee made detailed submissions before the AO with regard to classification of the product by the Central Excise Authorities, inter alia, explaining the treatment and classification of the product under National 3 ITA 4157(Del)2010 Industrial Classification (NIC), 1998 which has a bearing for exemption u/s 80IC inasmuch as reference to the same is made in Part-B of the Schedule XIII. The assessee made further submissions with respect to the Harmonized System of Nomenclature (HSN) which is the International standard for classification of products and commodities and to which the Central Excise Tariff Act, 1985 has been aligned. Additional submissions were made wherein the assessee justified their claim for exemption in terms of the Industrial Policy of 2003.
5. The AO passed the order dated 30.12.2009 holding that the claim of the assessee for exemption u/s 80IC was not sustainable as the product LABSA manufactured by the assessee is not classifiable under Chapter 34 but instead is classifiable under Chapter 29 of the Central Excise Tariff Act, 1985 and, therefore, in view of the restriction to such products under serial number 5 of Part B of Schedule XIII, the exemption is not available.
6. The assessee thereafter obtained a copy of a report given by the Central Revenue Control Laboratory(CRCL) a Government of India undertaking, which was prepared in the year 2006 itself, being report dated 08.12.2006. This report was provided by the Central Excise Authorities to the assessee on 28.01.2010.
4 ITA 4157(Del)2010 The assessee relied upon the aforesaid CRCL report dated 08.12.2006 before the ld. CIT(A) and it was submitted during the course of hearing. However, no formal application under Rule 46A of the Income Tax Rules, 1961 was filed before the ld. CIT(A). Nonetheless, the ld. CIT(A) considered the said report dated 08.12.2006 in passing the order dated 30.06.2010 u/s 250 of the Act.
7. The ld. CIT(A) took into account this report dated 08.12.2006 and the same is referred to in para 5.1, para 5.7 and para 6.3 of the impugned order dated 30.06.2010 which is in challenge in the present appeal before the Tribunal.
In the submissions made before the ld. CIT(A), the assessee explained in detail that the correct classification of the product LABSA was under
Chapter 34 for, in brief, the same was adopted by the Central Excise Authorities, the same was also borne out from the Harmonized System of Nomenclature (HSN) and also from the National Industrial Classification (NIC). Reliance was also placed upon various decisions in this regard.
8. However, by the impugned order dated 30.06.2010, the ld. CIT(A) dismissed the appeal filed by the assessee and held that the product is classifiable as Chapter 29 only, consequently denying the benefit of 5 ITA 4157(Del)2010 exemption of section 80IC to the assessee. The ld. CIT(A), inter alia, held as under:-
i) That in view of Chapter Note 1(b) of Chapter 34 of the Central Excise Tariff Act, 1985, 'separate chemically defined compounds' are not covered under Chapter 34. Since LABSA is a specifically defined chemical compound, therefore, it is not classifiable under Chapter 34.
ii) That the purpose of negative list under Chapter XIII Part-B is to prevent unnecessary exploitation of natural resources in the areas and that it is common knowledge that industries manufacturing organic chemicals are the biggest pollutant and health hazard. Therefore, over emphasis on excise classification is unwarranted and chemical industry being a polluting industry should not qualify for exemption.
iii) That the sample checks conducted by Central Excise Authorities were a futile exercise.
iv) That the product LABSA is not really a surface-active agent and, therefore, Chapter 29 is the correct classification of the produce.
9. Before us, an application under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 has been filed, seeking to produce, by way of additional evidence, the aforesaid CRCL report dated 8.12.2006. It has been contended that the said report is a report furnished by a Central Govt. Undertaking; that it is an expert report relevant for determining the issue involved in the present appeal; and that therefore, the same be admitted in evidence.
6 ITA 4157(Del)2010
10. The learned counsel for the assessee has contended that the ld. CIT(A) has erred in ignoring the aforesaid CRCL report, even though the same is an expert report and is relevant for determining the issue regarding exemption u/s 80IC of the I.T. Act. It has been submitted that non-consideration of the CRCL report has visited the assessee with injustice in the shape of non-grant of valid exemption u/s 80IC of the Act.
11. The ld. DR, on the other hand, has forcefully relied on the impugned order. It has been contended that the order passed by the ld. CIT(A) is a well reasoned and detailed order, which requires no interference at all; that it has been categorically held by the ld. CIT(A) that exemption u/s 80IC(2) of the Act is allowable under the Act only and not under the Excise Act; that it was for this reason that excise classification was not accepted by the ld. CIT(A); and that, therefore, there being no merit in the assessee's appeal, the same be dismissed. The ld. DR has also objected to the admission of the additional evidence.
12. We have heard the parties and have perused the material on record. It is seen that the ld. CIT(A) has taken note of the assessee's submissions regarding the CRCL report. Reference in this regard is contained in paras 5.1, 5.7 and 6.3 of the impugned order. The ld. CIT(A) has, however, refused to take into consideration the CRCL report, for the stated reason that 7 ITA 4157(Del)2010 exemption u/s 80IC(2) of the I.T. Act is allowed under the I.T. Act only and not under the Excise Act, due to which fact, as per the ld. CIT(A), over emphasis on excise classification is unwarranted. Not only this, the ld. CIT(A) has called into doubt the very factum of the exercise carried out by the Excise Department, terming it as 'futile', when, according to the ld. CIT(A), the tariff of excise duty is the same under both, Chapter 29 as well as Chapter 34 of the Central Excise Tariff Act, 1985.
13. The controversy herein is whether the product LABSA is classifiable under Chapter 34 of the Central Excise Tariff Act, 1985 which provides for 'Soap, Organic Surface-Active Agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modeling pastes, 'Dental Waxes' and 'Dental preparations with a basis of plaster' as claimed by the assessee or under Chapter 29 of the Central Excise Tariff Act which provides for 'Organic Chemicals' as determined by the AO and as confirmed by the ld. CIT(A) in the impugned order.
14. The AO held that the product manufactured by the assessee, i.e., LABSA, was classifiable under Chapter 29 of the Central Excise Tariff Act, 1985 and not under Chapter 34 thereof. The assessee, thereafter, applied to the Central Reserve Control Laboratories or CRCL, which is a Govt.of India 8 ITA 4157(Del)2010 undertaking, for a report in this regard. Undeniably, the CRCL is an expert body in this regard and its report is an expert report which is relevant for determining the issue. It has not been shown otherwise.
15. Therefore, the application filed by the assessee for admission of the CRCL report, as additional evidence, is allowed. The CRCL report is admitted as additional evidence. Since there was no application for additional evidence filed in this regard by the assessee before the ld. CIT(A), the same was not admitted into an evidence.
16. We, however, finding, as above, that the CRCL report is relevant for determining and deciding the controversy regarding exemption u/s 80IC(2) of the I.T. Act, remit this matter to the file of the AO, to be decided afresh in accordance with law on affording adequate opportunity of hearing to the assessee to prove its case.
17. In the result, for statistical purposes, the appeal of the assessee is treated as allowed.
Order pronounced in the open court on 27.01.2011.
Sd/- sd/-
(G.E. Veerabhadrappa) (A.D. Jain)
Vice President Judicial Member
Dated: 27.01.2011
*RM
9 ITA 4157(Del)2010
copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
True copy
By order
Deputy Registrar