Symrise Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 2037/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0799 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G S D BABU
• Keywords: Business expenditure; Bonafide belief; Period of limitation
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 2037/MDS/2012 (ASSESSMENT YEAR : 2008-09) M/S SYMRISE PVT. LTD., 140, OLD MAHABALIPURAM ROAD, SEMMENCHERRY, CHENNAI - 600 119. PAN : AAACD 2686 A (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), CHENNAI - 600 034 . (RESPONDENT) APPELLANT BY : SHRI G.S.D. BABU, CA RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL . CIT DATE OF HEARING : 21.02.2013 DATE OF PRONOUNCEMENT : 21.02.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVAN CE IS THAT AN ADDITION OF ` 40,20,981/- MADE BY THE ASSESSING OFFICER, RELYING ON EXPLANATION TO SECTION 37 (1) OF INCOME-TAX ACT, 19 61 (IN SHORT 'THE ACT'), WAS CONFIRMED BY THE CIT(APPEALS). 2 I.T.A. NO. 2037/MDS/12 2. LEARNED A.R. SUBMITTED THAT THE SUM OF ` 40,20,981/- REPRESENTED CUSTOMS DUTY PAID BY THE ASSESSEE. ACCORDING TO HI M, THERE WAS NO PAYMENT EFFECTED BY THE ASSESSEE IN CONTRAVENTION O F ANY LAW. LEARNED A.R. SUBMITTED THAT ASSESSEE HAD PURCHASED DEPB LIC ENSES IN THE OPEN MARKET DURING FINANCIAL YEAR 2002-03, WHICH WERE US ED AGAINST IMPORTS OF RAW MATERIAL IN THE SAME YEAR. IN THE YEAR 2006 , ASSESSEE RECEIVED SHOW CAUSE NOTICE FROM THE CUSTOMS DEPARTMENT IN WH ICH IT WAS ALLEGED THAT SUCH LICENSES WERE FORGED ONES. AS PER LEARNE D A.R., ASSESSEE HAD PURCHASED DEPB LICENSES FROM OPEN MARKET IN THE FINANCIAL YEAR 2002-03 IN GOOD FAITH AND SUCH DEPB LICENSES ON THE FACE OF IT, DID NOT HAVE ANYTHING TO DOUBT ITS AUTHENTICITY. SINCE IT CARRIED SIGNATURES OF CUSTOMS AUTHORITIES, IN GOOD FAITH, ASSESSEE HAD US ED SUCH DEPB LICENSES FOR MAKING IMPORTS OF MATERIALS. IT HAD N O ROOM TO DOUBT THAT LICENSES WERE FORGED. SINCE COMMISSIONER OF CENTRA L EXCISE (ADJUDICATION) PASSED AN ORDER DEMANDING DUTY FROM THE ASSESSEE, TO THE EXTENT SUCH DEPB LICENSES WERE USED IN THE YEAR 2002-03, ASSESSEE WAS LEFT WITH NO OPTION BUT TO PAY IT. AC CORDING TO LEARNED A.R., THE PAYMENTS WERE EFFECTED ON 13 TH MARCH, 2008 AND DULY CLAIMED IN THE PROFIT & LOSS ACCOUNT AS AN EXPENDITURE. TH E A.O. AS WELL AS CIT(APPEALS) ERRONEOUSLY TOOK A VIEW THAT THIS WAS FOR VIOLATION OF LAW AND APPLIED EXPLANATION TO SECTION 37(1) OF THE ACT . ACCORDING TO HIM, IN 3 I.T.A. NO. 2037/MDS/12 THE GIVEN FACTS AND CIRCUMSTANCES, THIS WAS NOT A P AYMENT IN VIOLATION OF LAW NOR WAS THERE ANY ILLEGAL PAYMENT. 3. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 4. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IT IS NOT DISPUTED THAT ASSESSEE HAD PURCHASED DEPB LICEN SES FROM OPEN MARKET. SUBMISSION OF THE ASSESSEE THAT IT WAS A B ONAFIDE PURCHASER OF DEPB LICENSES AND HAD NO OCCASION TO DOUBT ITS GENU INENESS, CANNOT, IN OUR OPINION, BE LIGHTLY BRUSHED ASIDE. ASSESSEE HA D PURCHASED THESE LICENSES DURING THE PERIOD 20 TH DECEMBER, 2002 TO 27 TH JANUARY, 2003. SUCH LICENSES WERE PURCHASED BY THE ASSESSEE FROM I NTERMEDIARY BROKERS. OBVIOUSLY, THE FORGERY WAS COMMITTED BY I NTERMEDIARY BROKERS. PARA 37 OF THE ORDER OF COMMISSIONER OF CENTRAL EXC ISE (ADJUDICATION) DATED 16.11.2007, PLACED AT PAPER-BOOK PAGE 28, REA DS AS UNDER:- 37. M/S SYMRISE P. LTD. CONTENDED THAT THEY PURCHASED THE DEPB LICENSE IN THE MARKET AND BEING A BONAFIDE PURCHASE R, NO FRAUD OR SUPPRESSION CAN BE ATTRIBUTED TO THEM; THAT INVOCAT ION OF EXTENDED PERIOD OF LIMITATION IS ILLEGAL AND NOT SUSTAINABLE IN THE EYE OF LAW. I DO NOT FIND ANY FORCE IN THIS ARGUMENT. THERE IS N O DISPUTE REGARDING THE NATURE OF FORGERY COMMITTED AND THAT THE TRA/DEPB LICENSE UTILIZED WERE FORGED AND FABRICATED. HENCE ANY DEBIT OF CUSTOMERS DUTY ON SUCH FORGED / FAKE TRA/DEPB LICENS E AMOUNTS TO NONPAYMENT OF DUTY. THIS IS A SETTLED POSITION OF LAW. HONBLE SUPREME COURT WHILE UPHOLDING THE DECISION OF THE H IGH COURT OF CALCUTTA IN THE CASE OF M/S ICI INDIA LTD. V. COMMI SSIONER OF KOLKATA & OTHERS REPORTED IN 2005 (184) ELT 339 (CAL) HELD T HAT THE CREDIT IS AVAILABLE TO IMPORTERS ONLY ON THE ST RENGTH OF VALID 4 I.T.A. NO. 2037/MDS/12 DEPB LICENSE AND CONSEQUENT TRA ISSUED BASED ON SUCH VALID DEPB LICENSE. IF THE LICENSE / TRA IS FORGED, IT IS NON -EST, THEREFORE, THERE IS NO VALID DEPB LICENSE. HENCE NO CREDIT CAN BE DERIVED FROM SUCH FORGED DOCUMENTS AND THE IMPORTER WOULD BE LIA BLE TO PAY THE DUTY WITH INTEREST. THAT ASSESSEE HAD PURCHASED SUCH A DEPB LICENSE FRO M OPEN MARKET IS CLEAR FROM PARA 7 OF THE SAME ORDER WHICH READS AS UNDER:- 7. SHRI KENENGTON, MANAGER (PURCHASE & LOGISTICS) OF M/S SYMRISE PRIVATE LIMITED IN HIS STATEMENT DATED 20.10.2004 INTER ALIA STATED THE SAID COMPANY WAS EARLIER KNOWN AS M/S D RAGOCO INDIA LIMITED ENGAGED IN THE MANUFACTURE OF FLAVOUR S AND FRAGRANCES; THAT THEY ARE IMPORTING CHEMICALS AND N ATURAL OILS FROM ALL THE WORLD AND UTILIZE DEPB LICENSES FOR PAYMENT OF CUSTOMS DUTY; THAT THEY PURCHASED THE DEPB LICENSES FROM THE OPEN MARKET THROUGH SHRI MANIKCHAND, SHRI RAMESH AND SHRI VIJAY JHAVER; THAT DEPB LICENSE NOS. 0210034923 DATED 27.05.02 WITH TRA NO. 18857/20.12.02, 0210034923 DATED 27.05.02 UNDER TRA NO. 18858, 0310174678 DATED 26.12.02 UNDER TRA NO.16279/27.05.03, 0810025164 DATED 13.01.03 UNDER TRA NO. 3489/01.12.03, 0310183085 DATED 10.02.03 UNDER TRA NO. 3488/01.12.03, 2410006297 DATED 30.12.02 UNDER TRA NO. 3487/01.12.03 AND 3410005166 DATED 03.09.02 UNDER TRA NO. 1392/27.01.2003 WERE PURCHASED THROUGH SHRI MANIKCHAND HAVING HIS RESIDE NCE AT NO. 181, VELLALA STREET, PURASAWALKAM, CHENNAI-7; THAT ALL TH E DEPB LICENSES WERE UTILISED IN THE PAYMENT OF DUTY FOR THE IMPORT S MADE THROUGH CHENNAI SEAPORT AND THAT THE PAYMENT BY CHEQUES WER E MADE AGAINST THE DEBIT NOTE OF M/S SOUTHERN IMPEX, AHMEDA BAD, M/S SAKTHI ENTERPRISES, BARODA AND M/S KAMAL FINANCE, C HENNAI. 5. A PENALTY OF ` 12 LAKHS WAS IMPOSED BY THE SAID AUTHORITY VIDE TH E VERY SAME ORDER, UNDER SECTION 112(A) OF CUSTOMS AC T, 1962. HOWEVER, ASSESSEE MOVED IN APPEAL BEFORE CUSTOMS, EXCISE & S ERVICE TAX TRIBUNAL, SOUTH ZONAL BENCH AT CHENNAI AND THE SAID TRIBUNAL VIDE ITS 5 I.T.A. NO. 2037/MDS/12 ORDER DATED 14.6.2012, HAD EXONERATED THE ASSESSEE FROM ANY PAYMENT OF PENALTY AND HELD UNDER PARA 14.5 OF ITS ORDER, A S UNDER;- 14.5 IN VIEW OF THE ABOVE FINDINGS, WE HOLD THAT TH E IMPORTER APPELLANTS ARE LIABLE TO PAY THE DUTY AND INTEREST ADJUDGED AGAINST THE IMPORTS MADE BY THEM COVERED BY THE ADJ UDICATIONS UNDER APPEAL AND THE TRADERS, BROKERS AND SUB-BROKE RS OF FAKE TRAS AND DEPB LICENSE SCRIPS ARE LIABLE TO BE PENALI ZED, BEING INSTRUMENTAL IN PROVIDING SUCH INSTRUMENTS. WE UPH OLD THE ORDERS- IN-ORIGINAL. HOWEVER, IN THE FITNESS OF THE CIRCUM STANCES OF THE CASES AND TO MEET THE ENDS OF JUSTICE - (1) PENALTIES ARE SET ASIDE AGAINST THE IMPORTER- APPELLANTS WHILE CONFIRMING THE DUTY AND INTEREST DEMANDED FRO M THEM. CHALLANS USED BY THE ASSESSEE FOR MAKING PAYMENT TO EXCISE DEPARTMENT, PLACED AT PAPER-BOOK PAGES 10 AND 11, C LEARLY SHOW THAT WHAT WAS PAID WAS ONLY DUTY AND INTEREST AND NOT AN Y PENALTY. EXPLANATION TO SECTION 37(1) READS AS UNDER:- 37 (1) . .. .. .. .. . . . . . . . . . . . . . . . . . . . . . . . . . EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURP OSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFES SION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. 6. IT IS CLEAR FROM THE ABOVE THAT EXPENSES MADE OU T EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CAN BE DISALLOWED ONLY IF S UCH EXPENDITURE WAS FOR AN OFFENCE OR FOR SOMETHING DONE WHICH WAS PROH IBITED IN LAW. WE 6 I.T.A. NO. 2037/MDS/12 CANNOT SAY THAT ASSESSEE, IN THIS CASE, HAVING PURC HASED DEPB LICENSES IN GOOD FAITH AND USED IT UNDER A BONAFIDE BELIEF, HAD COMMITTED ANY OFFENCE OR DONE SOMETHING PROHIBITED BY LAW. WHAT WAS PAID WAS ONLY CUSTOMS DUTY, AS DIRECTED BY THE CUSTOMS AUTHORITIE S. WE ARE, THEREFORE, OF THE OPINION THAT THIS COULD NOT HAVE BEEN DISALLOWED, BEING GENUINE BUSINESS EXPENDITURE. HENCE, THE ADDITION OF ` 40,20,981/- MADE BY THE ASSESSING OFFICER IS DELETED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 21 ST OF FEBRUARY, 2013, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST FEBRUARY, 2013. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)- V, CHENNAI-34 (4) CIT, CHENNAI-III, CHENNAI-34 (5) D.R. (6) GUARD FILE