DXN Herbal Manufacturing India Pvt. Ltd., Pondicherry V. ACIT, Pondicherry

ITA 2438/CHNY/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9070 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-01-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 29-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AR V SREENIVASANJCITD R
• Assessee Lawyers: K RAVI
• Keywords: Principle of natural justice; Question of law; Revised return
• Section: 43B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , . , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2438/CHNY/2014 / ASSESSMENT YEAR : 2010-11 M/S.DXN HERBAL MANUFACTURING INDIA PVT LTD., RS NO.14/4 & 142/5,WHIRLPOOL ROAD, THIRUVANDAR KOIL, PONDICHERRY 605 102. VS. THE ACIT, CIRCLE-I, PONDICHERRY. [PAN AAABCD 4141 M ] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : MR.K.RAVI,ADVOCATE $% ! ' # /RESPONDENT BY : MR.AR.V.SREENIVASAN,JCIT,D.R & ' ' () / DATE OF HEARING : 11 - 12 - 201 8 * ' () / DATE OF PRONOUNCEMENT : 13 - 12 - 201 8 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VI, CHENN AI IN ITA NO.671/13-14 DATED 30.03.2014 FOR THE ASSESSMENT YEAR 2010-11. ITA NO.2438/CHNY/2014 :- 2 -: 2. SHRI K.RAVI REPRESENTED ON BEHALF OF THE ASSESS EE AND SHRI AR.V.SREEVIVASAN REPRESENTED ON BEHALF OF THE REVENUE. 3. THE APPEAL FILED BY THE ASSESSEE IS DELAYED BY 8 7 DAYS FOR WHICH THE ASSESSEE HAS FILED AN AFFIDAVIT FOR EXPLAINING THE REASONS FOR THE DELAY. THE LD.D.R HAS NOT RAISED SERIOUS OBJECTION S IN REGARD TO THE DELAY. FURTHER, THE AFFIDAVIT FILED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE. CONSEQUENTLY THE DELAY IN FILING THE A PPEAL IS CONDONED AND THE APPEAL IS DISPOSED OF ON MERIT. 4. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THAT OF THE ASSESSING OFFICER IS CONTRARY TO THE LAW, FA CTS AND CIRCUMSTANCES OF THE CASE AND IN ANY CASE VIOLATIVE OF THE PRINCIPLES OF EQUITY AND NATURAL JUSTICE. DEDUCTION U/S 801B WHETHER MANUFACTURE OR NOT: 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN DENYI NG BENEFIT U/S 801B FOR THE REASON THAT THE APPELLANT HEREIN IS NOT ENGAGED IN MANUFACTURING ACTIVITY. 3. THE LEARNED ASSESSING OFFICER HAS RELIED ON THE APPELLANTS OWN CASE IN THE ITAT THE DEDUCTION WAS DENIED AS THE APPELLANT WAS NOT MANUFACTURING OR PRODUCING AS PER THE DEFINITION OF SECTION 801B. ITA NO.2438/CHNY/2014 :- 3 -: 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT C ONSIDERING THE FACT THAT THE APPELLANT HEREIN IS REGISTERED WITH THE CENTRAL EXCISE ACT, 144 AND DULY PAYING THE EXCISE DUTY FOR THE MANUFACTURER OF DRUG S. DEFINITION OF SMALL SCALE INDUSTRIES THE LEARNED ASSESSING OFFICER HAS ERRED IN DENYING THE BENEFIT U/S 801B FOR THE REASON THAT THE AYURVEDIC MEDICINE MANUFACTURED BY THE APPELLANT IS NOT IN THE LIST OF ITEMS COVERED BY SCHEDULE III SPECIF IED IN THE NOTIFICATION S.O 477 (E) DATED 25/07/1991 ISSUED BY THE GOVERNMENT O F INDIA UNDER SECTION 11B OF THE INDUSTRIES (DEVELOPMENT & REGULATION) AC T, 1951. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER HAVE FAILED TO CONSIDER THE FACT THAT WHEN THE WORD MANUFACTURER HAS NOT BEEN DEFINED IN THE INCOME TAX ACT, IT HAS TO BE GIVEN THE MEANING AS UNDERSTOOD IN THE COMMON PARLANCE. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER HAVE FAILED TO SEE THAT THE OPERATIONS OF Y OUR APPELLANT WOULD AMOUNT TO PRODUCTION OF CAPSULES, EVEN ASSUMING BUT NOT ADMITTING THAT THEY ARE NOT MANUFACTURE. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER HAVE ERRED IN NOT CONSIDERING THE FACT THAT THE APPELLANT HEREIN IS REGISTERED WITH THE CENTRAL EXCISE ACT, 144 AND DUL Y PAYING THE EXCISE DUTY FOR THE MANUFACTURER OF DRUGS. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THE FACT THAT THE DRUG MANUFACTURED BY THE APPELLANT UNDERGO SEVERAL PROCESS INVOLVING FIL LING OF CAPSULES, POLISHING, SORTING/INSPECTING, TESTING, COUNTING AND BOTTLING, LABELING, PACKING PROCESS AND THAT A DISTINCT CHANGE COMES IN THE FINISHED PR ODUCT WHICH CAN BE COMMERCIALLY MARKETED FOR CONSUMPTION OF MEDICINE. DEDUCTION U/S 43B 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DENYING THE DEDUCTION U/S 4313 FOR THE EXCISE DUTY PAID UND ER PROTEST AS THE PAYMENT HAS BEEN MADE DE HORS LIABILITY. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DENYING THE BENEFIT OF DEDUCTION FOR THE REASON THAT THE EX CISE DUTY WAS NOT CHARGED IN THE PROFIT AND LOSS ACCOUNT AND WAS CLASSIFIED U NDER CURRENT ASSETS AS ADVANCES. ITA NO.2438/CHNY/2014 :- 4 -: 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN DENYING THE BENEFIT OF DEDUCTION FOR THE REASON THA T THE EXCISE DUTY WAS NOT INCLUDED IN THE SALES INVOICE. 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN DENYING THE BENEFIT OF DEDUCTION ON THE GROUND THAT THE APPELLANT HAD PAID THE DUTY UNDER PROTEST. 5. IN REGARD TO GROUND NOS.2 TO 8, THE LD.A.R SUBM ITTED THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT(A) A ND THE LD. ASSESSING OFFICER IN DENYING THE ASSESSEES CLAIMING OF BENEF IT OF DEDUCTION U/S.80-IB OF THE ACT ON THE GROUND THAT THE ASSESSE E WAS NOT ENGAGED IN MANUFACTURING ACTIVITY. IT WAS SUBMITTED BY LD.A .R THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURE AND PRODUCTIO N OF AYURVEDIC PRODUCTS. IT WAS A SUBMISSION THAT THE ISSUE WAS NO W SQUARELY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE IN T.C.(A) NOS.341 & 342 OF 2007 DATED 21. 06.2018 WHEREIN PARAS 23-25 AT PAGE-19, THE HONBLE MADRAS HIGH COU RT HAS HELD AS FOLLOWS:- 23. THE FACTUAL MATRIX CLEARLY DEMONSTRATES THAT WHAT HAS BEEN DONE BY THE ASSESSEE IS MANUFACTURE. THE DECIS ION RELIED ON BY THE REVENUE IN THE CASE OF SACS EAGLES CHICORY V S. COMMISSIONER OF INCOME TAX REPORTED IN [(2003) 255 ITR 178 SC] IS DISTINGUISHABLE ON FACTS AS THE ACTIVITY WHI CH WAS THE SUBJECT MATTER OF THE SAID CASE WAS MAKING POWDER F ROM CHICORY ROOTS AND THE APPEAL BY THE ASSESSEE WAS DISMISSED AS THE ASSESSEE FAILED TO SATISFY THE TEST LAID DOWN IN AS PINWALL & CO. ITA NO.2438/CHNY/2014 :- 5 -: LTD., CASE. THE LEARNED COUNSEL FOR THE REVENUE REL IED UPON THE DECISION OF THE DIVISION BENCH OF THIS COURT IN COM MISSIONER OF INCOME-F TAX VS. MADURAI PANDIAN ENGG. CORPN. LTD., REPORTED IN [(1999) 239 ITR 375 (MADRAS]. THE QUESTION WAS WHET HER THE BUSINESS OF TYRE RETREADING DONE BY THE ASSESSEC AM OUNTS TO PRODUCTION OF A NEW ARTICLE AND WHETHER THE ASSESSE E WAS ENTITLED TO RELIEF UNDER SECTIONS 80J AND 8OHH OF THE ACT. 24. THIS COURT HELD THAT THE COMMON THREAD WHICH R UNS IN ALL THE DECISIONS IS THAT ONLY WHEN A NEW DISTINCT COMM ODITY COMMERCIALLY ACCEPTED AS SUCH, COMES INTO EXISTENCE AS A RESULT OF PROCESSING, THAT A COMMODITY CAN BE SAID TO HAVE BEEN MANUFACTURED AND IN THE SAID CONTEXT, RETREADING OF TYRES DID NOT RESULT IN THE PRODUCTION OF AN ARTICLES FOR THE PUR POSE OF SECTION 8OHH OF THE ACT. THE SAID DECISION IS CLEARLY DISTI NGUISHABLE ON FACTS. IN THE ASSESSEES CASE, THE PRODUCT WHICH EM ERGES AFTER THE PROCESS OF MANUFACTURE IS COMMERCIALLY A DISTIN CT COMMODITY, CAN BE OF CONSUMPTION AS SUCH CONTAINING A REQUISIT E AMOUNT OF INGREDIENTS IN THE APPROPRIATE PERCENTAGE, PRESERVE D IN PROPER FORM AS CONTAINED IN THE LICENCE ISSUED UNDER THE A UTHORISED ENACTMENTS AS WELL AS THE TECHNICAL LOGO SHARED BY THE FOREIGN COMPANY. 25. FOR THE ABOVE REASONS, THE QUESTION NO.1 IS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IT WAS SUBMITTED BY LD.A.R THAT THE ISSUE BEING SQ UARELY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2003-04 & 2004-05, THE LD. ASS ESSING OFFICER MAY BE DIRECTED TO GRANT THE ASSESSEE THE BENEFIT O F DEDUCTION U/S.80IB OF THE ACT. ITA NO.2438/CHNY/2014 :- 6 -: 6. IN REPLY, THE LD.D.R VEHEMENTLY SUPPORTED THE O RDERS OF LD. ASSESSING OFFICER AND THE LD.CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN AS SESSEE'S OWN CASE FOR ASSESSMENT YEARS 2003-04 & 2004-05 SHOWS THAT THE H ONBLE JURISDICTIONAL HIGH COURT HAS ANSWERED THE QUESTION AS TO WHETHER THE ASSESSEE WAS ENTITLED TO CLAIM BENEFIT U/S.80IB OF THE ACT IN FAVOUR OF THE ASSESSEE AND HAS HELD THAT THE FACTUAL MATRIX C LEARLY DEMONSTRATES THAT WHAT HAS BEEN DONE BY THE ASSESSEE IS MANUFACT URE. THIS BEING SO, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2 003-04 & 2004-05 REFERRED TO SUPRA, THE LD. ASSESSING OFFICER IS DIR ECTED TO GRANT ASSESSEE THE BENEFIT OF DEDUCTION U/S.80-IB OF THE ACT AS CLAIMED. 8. IN RESPECT OF GROUND NOS.6 TO 9, IT WAS SUBMITT ED BY LD.A.R THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CI T(A) AND THE LD. ASSESSING OFFICER IN DENYING THE ASSESSEES CLAIMIN G OF BENEFIT OF DEDUCTION U/S.43B OF THE ACT IN RESPECT OF EXCISE D UTY PAID BY THE ASSESSEE. IT WAS SUBMITTED BY LD.A.R THAT THE DECIS ION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE IN T.C.(A) NOS.341 & 342 OF 2007 DATED 21.06.2018 WHEREIN PARA-26 THE HO NBLE MADRAS HIGH COURT HAS HELD AS FOLLOWS:- ITA NO.2438/CHNY/2014 :- 7 -: 26. QUESTION NO.2 IS FRAMED BY THE ORDER DATED 20. 03.2007, IS TO THE EFFECT THAT WHETHER ITAT WAS RIGHT IN DENYING T HE CLAIM UNDER SECTION 43B, IN FACT, THE QUESTION OF PAYMENT ITSEL F WAS NOT DISPUTED. THE ASSESSING OFFICER REJECTED THE CLAIM ON THE GROUND THAT THE PAYMENT WAS NOT MADE AT THE TIME OF FILING THE RETURN, BUT WAS MADE ONLY DURING THE COURSE OF ASSESSMENT A ND THAT SUCH STEP COULD NOT HAVE TAKEN UNLESS THE REVISED R ETURN HAD BEEN FILED. TO THAT EFFECT, THE ASSESSING OFFICER, REFERRED TO THE DECISION OF THE SUPREME COURT IN GOETZE (INDIA) LTD ., VS., COMMISSIONER OF INCOME TAX REPORTED IN [(2006) 157 TAXMAN 1 (SC)] AND SAME WAS THE VIEW TAKEN BY CIT(A). HOWEVE R, ITAT PROCEEDED ON A SLIGHTLY DIFFERENT ANGLE, NOT ON THE GROUND THAT THE PETITIONER HAD NOT FILED THE REVISED RETURN THA T BEING ENTITLED TO THE CLAIM OF THE BENEFIT UNDER SECTION 43B, I.E. , TO SAY, ON THE GROUND THAT WHILE THE ASSESSEE IS NOT IN A POSITIO N TO SPELL OUT THE NATURE OF THE LIABILITY, AND IT WAS MAKING ONLY VERBAL ARGUMENT WITHOUT STATING THE NATURE OF EXPENDITURE AND THAT THE ASSESSEE HAS NOT PRODUCED ANY ORDER OF THE EXCISE DEPARTMENT , THROUGH WHICH THE LIABILITY STATED TO HAVE EMERGED AND IT A LSO OPINED THAT, TO AVAIL DEDUCTION, THE PAYMENTS ARE REQUIRED TO BE ACTUALLY PAID WITHIN THE TIME STIPULATED TO THE PROVISO TO SECTIO N 43B OF THE ACT. IN THE PREVIOUS PARAGRAPHS, WE HAVE NOTED THE ADMIT TED FACTS RECORDED BY THE ASSESSING OFFICER, WHICH CLEARLY SH OWS THE SSESSEE HAS AVAILED THE CENVAT CREDIT AND PAID THE EXCISE DUTY. THAT APART THE ASSESSEE WON THE CASE FOR THE SUBSEQ UENT YEAR 2009-2010 IN T.C.A.NO.730 OF 2015, WHICH WAS FILED BY THE REVENUE AGAINST THE ASSESSEE. THUS, THE SUBSTANTIAL QUESTION OF LAW NO.2 IS ANSWERED IN FAVOUR OF THE ASSESSEE ARID AGAINST THE REVENUE. 9. IN REPLY, THE LD.D.R VEHEMENTLY SUPPORTED THE O RDERS OF LD. ASSESSING OFFICER AND THE LD.CIT(A). ITA NO.2438/CHNY/2014 :- 8 -: 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IN RESPECT OF EXCISE DUTY HAS BEEN H ELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE FO R ASSESSMENT YEARS 2003-04 & 2004-05 IN FAVOUR OF THE ASSESSEE, RESPEC TFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2003-04 & 2004-05 REFERRED TO SUPRA, THE LD. ASSESSING OFFICER IS DIRECTED TO GRANT ASSESSEE THE BENEFIT OF DEDUCTION U/S.43B OF THE ACT IN RESPECT OF EXCISE DUTY PAID. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 13 TH DECEMBER, 2018, AT CHENNAI. SD/ - SD/ - ( . ) (A.MOHAN ALANKAMONY) ! '# / ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ '# / JUDICIAL MEMBER - ' / CHENNAI . / DATED: 13 TH DECEMBER, 2018. K S SUNDARAM / ' $(01 2 1( / COPY TO: 1 . ! / APPELLANT 4. & 3( / CIT 2. $% ! / RESPONDENT 5. 145 $(6 / DR 3. & 3( () / CIT(A) 6. 57 8' / GF