M/s. Bharti Auto Products, JAMNAGAR V. The Income Tax Officer, TDS-III, JAMNAGAR

ITA 391/RJT/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72574 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-04-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 14-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV RANADE
• Assessee Lawyers: B R POPAT CAS; D M RINDANI P M MAHARSHI
• Keywords: Sale consideration of property below Jantri Value; Recovery proceedings; Search and seizure; Bonafide belief; Additional evidence
• Section: 43B; 133A; 201(1); 15; 139

Judgement Text

THE INCOME TAX APPELLATE TRIBU N AL : SPECIAL BENCH : RAJKOT BEFORE S/ SHRI G C GUPTA, VP, D K SRIVASTAVA, AM AND A M ALANKAMONY, AM ITA NO S . 39 1 &392 /RJT/2011 ASSESSMENT YEAR S 200 9 - 10 & 2010 - 11 M/S. BHARTI AUTO PRODUCTS V. CIT - II, RAJKOT 408/1, GIDC, SHANKER TEKRI , JAMNAGAR PAN: A A C FB1550C / RKTB00649F . DATE OF HEARING: 18.06.2013 DATE OF PRONOUNCEMENT: 06.09 .2013 ASSESSEE BY: S/ SHRI D M RINDANI, P M MAHARSHI, AND B R POPAT, CAS REVENUE BY : SHRI RAJIV RANADE, CIT - DR ORDER SRIVASTAVA : IN EXERCISE OF POWER S CONFERRED BY SECTION 255 OF THE INCOME - TAX ACT, THE HONBLE PRESIDENT HAS CONSTITUTED THIS SPECIAL BENCH TO HEAR AND D ISPOSE OF BOTH THE AFORESAID APPEALS . THE LD. COMMISSIONER (APPEALS) HAS PASSED A COMMON ORDER TO DISPOSE OF THE APPEALS FOR BOTH THE ASSESSMENT YEARS. BESIDES, F ACTS AS WELL AS ISSUES INVOLVED IN BOTH THE APPEALS ARE COMMON . I T IS THEREFORE CONVENIENT TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATED ORDER. 2. IN ITA NO.391/RJT/2011 RELATING TO ASSESS MENT YEAR 2009 - 10, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, RAJKOT ERRED IN CONFIRMING THE ORDER OF ITO(TDS) 3, JAMNAGAR HOLDING THE APPELLANT LIABLE FOR DEFAULT OF TC S OF RS.2,61,225/ - AND INTEREST AMOUNTING TO RS.28,723/ - . 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) II, RAJKOT ERRED IN INTERPRETING THE DEFINITION OF SCRAP U/S.206(C)(1). 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) II, RAJKOT FAI LED TO APPRECIATE THAT SINCE THE APPELLANT HELD A BONAFIDE BELIEF REGARDING INTERPRETATION OF DEFINITION OF SCRAP U/S.206, IT COULD NOT HAVE BEEN TREATED AS AN ASSESSEE DEEMED TO BE IN DEFAULT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, WITHDRAW ANY GROUND OF APPEAL ANYTIME UPTO THE HEARING OF THIS APPEAL. 2 ITA 391 & 392/RJT/2011 3. IN ITA NO.392/RJT/2011 RELATING TO ASSESSMENT YEAR 2010 - 11, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, RAJKOT ERRED IN CONFIRMING THE ORDER OF ITO(TDS) 3, JAMNAGAR HOLDING THE APPELLANT LIABLE FOR DEFAULT OF TC S OF RS. 6,28,614 / - AND INTEREST AMOUNTING TO RS. 10,519 / - . 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) II, RAJKOT ERRED IN INTERPRETING THE DEFINITION OF SCRAP U/S.206(C)(1). 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) II, RAJKOT FAILED TO APPRECIATE THAT SINCE THE APPELLANT HELD A BONAFIDE BELIEF REGARDING INTERPRETATION OF DEFINITION OF SCRAP U/S.206, IT COULD NOT HAVE BEEN TREATED AS AN ASSESSEE DEEMED TO BE IN DEFAULT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, WITHDRAW ANY GROUND OF APPEAL ANYTIME UPTO THE HEARING OF THIS APPEAL. 4. IN BOTH THE AFORESAID APPEAL S , THE ASSESSEE HAS PRAYED FOR ADMISSION OF THE FOLLOWIN G ADDITIONAL GROUNDS OF APPEAL: - ADDITIONAL GROUND NO.1. THE INCOME - TAX OFFICER (TDS - 3), JAMNAGAR ERRED IN NOT DISCHARGING THE ONUS OF SHOWING AS TO HOW THE MATERIAL IMPORTED BY THE APPELLANT FELL WITHIN THE DEFINITION OF SCRAP AS GIVEN IN SECTION 206C OF THE ACT AND THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE ORDER OF THE INCOME - TAX OFFICER (TDS - 3), JAMNAGAR . ADDITIONAL GROUND NO. 2 THE INCOME - TAX OFFICER (TDS - 3), JAMNAGAR FAILED TO APPRECIATE THAT SECTION 206C ST RICTLY DID NOT APPLY TO THE FACTS OF THE APPELLANT IN AS MUCH AS THE SALE OF MATERIALS MADE BY THE APPELLANT WAS NOT OF THE NATURE AND KIND COVERED WITHIN THE DEFINITION OF A BUYER AS GIVEN IN SECTION 206C OF THE ACT. ADDITIONAL GROUND NO.3 3 ITA 391 & 392/RJT/2011 THE I.T.O . AND THE LEARNED C.I.T.(APPEALS) FAILED TO APPRECIATE THAT WHERE THE ASSESSEE STATED THAT BUYERS WERE ASSESSED TO TAX, THERE WOULD BE NO DOUBLE RECOVERY OF TAX ON THE SAME SUM AND THUS THE I.T.O. ERRED IN TREATING THE ASSESSEE AS DEEMED TO BE IN DEFAULT W ITHOUT FIRST ASCERTAINING THIS FACT FROM THE BUYERS. 5. IT WAS PRAYED THAT ALL THE AFORESAID THREE GROUNDS OF APPEAL SHOULD BE ADMITTED AS THEY WERE LEGAL IN NATURE AND, AFTER ADMISSION, THEY SHOULD BE RESTORED TO THE FILE OF THE CIT(A) IN VIEW OF THE JUDGMENT OF THE HONBLE MP HIGH COURT IN CIT V. TOLLARAM HASSOMAL, 153 TAXMAN 532 (MP). WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES. ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE NOT INDEPENDENT GROUNDS OF APPEAL BUT ARE ELABORATIONS OF THE MAIN GROUNDS OF APPEAL. THE AFORESAID ADDITIONAL GROUND S OF APPEAL ARE INEXTRICABLY LINKED WITH THE ISSUES RAISED IN THE MAIN GROUNDS OF APPEAL . APART FROM BEING INTEGRAL PART OF THE MAIN GR OUNDS OF APPEAL, T HEY ARE PREDOMINANTLY OF LEGAL NATURE AND THEREFORE NO USEFUL PURPOSE WOULD BE SERVED BY RESTORING THE MATTER TO THE FILE OF THE CIT(A). IN THIS VIEW OF THE MATTER, ALL THE AFORESAID THREE GROUNDS OF APPEAL ARE ADMITTED FOR ADJUDICATION T OGETHER WITH MAIN GROUNDS OF APPEAL. 6. THE ASSESSEE IS AN INDIVIDUAL. HE IS AN IMPORTER , TRADER AND SELLER OF BRASS SCRAP. SURVEY U/S 133A OF THE INCOME - TAX ACT WAS CARRIED OUT AT HIS BUSINESS PREMISES ON 21 - 01 - 2010. IT WAS NOT ICED THAT THE ASSESSEE HAD IMPORTED AND SOLD BRASS SCRAP AMOUNTING TO RS.2,61,22,573/ - IN ASSESSMENT YEAR 2009 - 10 AND RS.6,28,61,420/ - IN ASSESSMENT YEAR 2010 - 11 WITHOUT COLLECTING TAX AT SOURCE AS REQUIRED BY SECTION 206C(1) OF THE INCOME - TAX ACT. THE ASS ESSING OFFICER THEREFORE ISSUED A SHOW CAUSE NOTICE ON 01.02.2010 CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY HE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT FOR NON - COLLECTION OF TAX AT SOURCE @ 1% OF SALES OF BRASS SCRAP MADE BY HIM IN BOTH THE ASS ESSMENT YEAR S UNDER APPEAL. IN REPLY, THE ASSESSEE, VIDE HIS LETTER DATED 12.02.2010 , SUBMITTED BEFORE THE AO THAT HE WAS A MERE TRADER OF IMPORTED BRASS SC RAP . IT WAS ALSO SUBMITTED THAT THE BRASS SC RAP SOLD BY HIM W AS NOT GENERATED FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIAL AND THEREFORE THE BRASS SC RAP SOLD BY HIM WAS NOT SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 206C OF THE 4 ITA 391 & 392/RJT/2011 INCOME - TAX ACT. THE ASSESSING OFFICER CONSIDERED THE SUBMISSION S MADE BY THE ASSESSEE. HE HOWEVER REJ ECTED THEM FOR THE DETAILED REASONS GIVEN IN THE ORDER PASSED BY HIM U/S 206C OF THE INCOME - TAX ACT ON 09.03.2010 . IT HAS BEEN HELD BY HIM THAT THE ASSESSEE HAS FAILED TO COLLECT THE TAX AT SOURCE AS REQUIRED BY SEC TION 206C(6) OF THE INCOME - TAX ACT ON THE SALE OF SCRAP MADE BY HIM TO VARIOUS DEALERS IN BOTH THE YEARS UNDER APPEAL AND THEREFORE HE IS LIABLE TO PAY A SUM OF RS.2,61,225/ - U/S 206C (6) AND FURTHER SUM OF RS.28,723/ - BEING INTEREST THEREON U/S.206C( 7 ) FOR ASSESSMENT YEAR 2009 - 10 AND FURTHER SUM OF RS.6,28,614/ - U/S 206C(6) AND INTEREST THEREON AMOUNTING TO RS.10 , 519/ - U/S.206C(7) OF THE INCOME - TAX ACT FOR ASSESSMENT YEAR 2010 - 11 . AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) H AS DISMISSED BOTH THE APPEALS WITH THE FOLLOWING OBSERVATIONS: - 8. I AM NOT IN AGREEMENT WITH THE ABOVE CONTENTIONS OF THE APPELLANT. IT IS RIGHTLY LIABLE FOR COLLECTING THE SUMS AT 1% FROM THE BUYERS OF THE IMPORTED BRASS SCRAP U/S.206C. MY REASONS FOR REACHING THIS CONCLUSION ARE AS BELOW: - (A) FIRSTLY, ONE HAS TO FIND OUT WHETHER THE APPELLANT SHOULD BE A MANUFACTURER, THUS BECOMING LIABLE FOR TCS U/S.206C OF THE ACT OR NOT? I AM AFRAID, IT IS NOT. EVEN A TRADER CAN BE VERY WELL BROUGHT UNDER THE PURVIEW OF SECTION 206C. T HE REASONS ARE EXPLAINED IN THE FOLLOWING LINES: - THE TITLE OF SECTION 206C READS AS PROFITS AND GAINS FROM THE BUSINESS OF TRADING IN ALCOHOLIC LIQUOR, FOREST PRODUCE, SCRAP ETC. THIS CLEARLY INDICATES THAT A N ASSESSEE, WHO HAS BEEN TRADING IN SCRAP, FALLS WITHIN THE PURVIEW OF SECTION 206C. IT IS NOT NECESSARY TO FIND OUT WHETHER THE APPELLANT SELLS THE SCRAP ORIGINATED FROM ITS MANUFACTURING ACTIVITY, IF ANY, OR SCRAP IS PROCURED FROM OUTSIDE SOURCE AND SOLD THEREAFTER. WHATEVER THE ORIGIN OF THE SCRAP, AS THE APPELLANT IS TRADING IN SCRAP, THIS ACTIVITY IS SQUARELY COVERED U/S. 206C OF THE ACT. 5 ITA 391 & 392/RJT/2011 SECTION 206C STIPULATES THAT EVERY PERSON BEING A SELLER, AT THE TIME OF SELLING OF ANY OF THE GOODS OF THE NATURE SPECIFIED IN THAT SECTION WILL COLLECT SUM AT A CERTAIN PERCENTAGE. THE DEFINITION OF SELLER UNDER EXPLANATION (C) OF SECTION 206C(11) ALSO DOES NOT STIPULATE THAT THE SELLER SHOULD BE A MANUFACTURER ONLY. IT TALKS ONLY ABOUT THE STATUS. BUYER IS ALS O DEFINED IN EXPLANATION (A) OF SECTION 206C(11) AS A PERSON WHO OBTAINS GOODS ON SALE BY CERTAIN SPECIFIED MODES. BUYER MAY BE A MANUFACTURER OR A TRADER. THE EXPLANATION DOES NOT DIFFERENTIATE EVEN THIS ASPECT AS WELL. THE APPELLANT TRIES TO DRAW SUPPOR T FOR HIS CONTENTION THAT ONLY A MANUFACTURER IS SUBJECT TO RIGORS OF SECTION 206C BY PICKING A SPECIFIC WORD FROM THE DEFINITION OF SCRAP GIVEN IN THE EXPLA NATION. BUT THE APPELLANT FORGETS THAT THE SUBSTANTIVE PORTION, I.E. THE TITLE OF SECTION CLEARLY STIPULATES PROFITS FROM THE BUSINESS OF TRADING IN SCRAP . THE SUBSTANTIVE PART WEIGHTS MORE THAN THE DEFINITION GIVEN IN THE EXPLANATION. (B) SECONDLY, THE APPELLANTS ARGUMENT THAT IT IS NOT A MANUFACTURER AND THUS IT IS NOT IN A POSITION TO GENERATE WASTE/SCRAP IS NOT ACCEPTABLE AS THE DEFINITION OF SCRAP READS AS UNDER: - [(B) SCRAP MEANS WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS. [EXPLANATION (B) OF SEC.206C(11)] IT HAS TWO DISTINCT LIMBS. EVEN IF ONE OF THE LIMBS IS APPLICABLE, AN ASSESSEE CAN BE TREATED AS IF HE DEALS IN SCRAP, NOT USABLE AS SUCH ( I ) SCRAP MEANS WASTE; AND ( II ) SCRAP GENERATED FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS. 6 ITA 391 & 392/RJT/2011 THE ABOVE INDICATES THAT ONLY WASTE MATERIALS MAY PARTAKE THE CHARACTER OF SCRAP. THIS FIRST LIMB OF THE DEFINITION DEFINITELY APPLIES TO THE APPELLANTS CASE BECAUSE IT IMPORTS BRASS SCRAPS. THIS FURTHE R CONVEYS THAT THERE IS NO NEED TO APPLY THE SECOND LIMB TO THE APPELLANT (I.E. SCRAP NEED NOT TO HAVE ARISEN FROM ANY MANUFACTURING OR MECHANICAL ACTIVITY IF THE FIRST LIMB IS APPLICABLE AND APPLIED. IN THE SALES CONTRACT ON HIGH SEAS SALE BASIS, THE NA TURE OF THE MATERIAL SOLD IS TO BE INVARIABLY MENTIONED AND IN THE APPELLANTS CASE, IT IS ADMITTEDLY BRASS SCRAPS . EVEN BILLS OF ENTRY FOR HOME CONSUMPTION ISSUED BY CUSTOMS AUTHORITIES, BILLS ISSUED BY SUPPLIER, BILLS RAISED BY THE APPELLANT ON OTHER P ARTIES AND BILLS OF LANDING INDICATE VERY CLEARLY WHAT THE APPELLANT SOLD IS ONLY S C RAP. IT IS ALSO UNDERSTOOD THAT THE CUSTOMS DUTY WAS PAID BY THE APPELLANT BY CLAIMING THE GOODS IMPORTED AS SCRAP AT A PARTICULAR RATE. IN NUTSHELL, IN THE APPELLANTS CASE, SCRAP MEANS WASTE WHICH IS DEFINITELY NOT USABLE AS IT IS. SCRAP MIGHT HAVE BEEN BOUGHT AND SOLD. SCRAP MIGHT HAVE ARISEN DUE TO MANUFACTURING ACTIVITY WHICH IS SOLD. WHATEVER MAY IT BE, IT IS A FACT THAT THE APPELLANT H AD THE SCRAP FOR SALE. (C) THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE OF ITS CLAIM REGARDING DISCLOSURE OF SUCH PURCHASES BY ITS BUYERS AND CONSEQUENT PAYMENT OF TAX IN ANY OF THE CASE. HENCE, THIS ARGUMENT ALSO DOES NOT SURVIVE. FURTHER, HERE THIS CO NTENTION IS NOT RELEVANT AS THE ISSUE UNDER CONSIDERATION IS THAT OF TCS DEFAULT. 9. IN THE END RESULT, I FULLY ENDORSE THE VIEWS TAKEN BY THE A.O. IN INVOKING S ECTION 206C(1) OF THE ACT IN THE APPELLANTS CASE. CONSEQUENTLY , THE APPEALS OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS , I.E. , AYS 2009 - 10 & 2010 - 11 ARE DISMISSED. 7 ITA 391 & 392/RJT/2011 7 . AGGRIEVE D BY THE ORDER PASSED BY THE CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. AT THE TIME OF HEARING, THE ASSESSEE PRAYED FOR ADMISSION OF THE FOLLOWING DOCU MENTS PLACED AT PP 6 - 29 OF PAPER - BOOK (VOLUME - II) FILED BY THE ASSESSEE ON 12.06.2013 AS ADDITIONAL EVIDENCE UNDER RULE 29 OF THE INCOME - TAX (APPELLATE TRIBUNAL) RULES: - A . COPY OF LETTER FROM M/S. AL - NAWAZ METAL TR. LLC (FOREIGN SUPPLIER) REGARDING NATURE AND ORIGIN OF MATERIAL, WITH SAMPLE INVOICES AND IMPORT DOCUMENTS. B . COPY OF LETTER FROM M/S. DIETIKER AG FUR ROHMENTALLE (FOREIGN SUPPLIER) REGARDING NATURE AND ORIGIN OF MATERIAL, WITH SAMPLE INVOICES AND IMPORT DOCUMENTS. C . COPY OF LETTER FROM M/S. OVERSEAS METAL TRADING (FOREIGN SUPPLIER) REGARDING NATURE AND ORIGIN OF MATERIAL, WITH SAMPLE INVOICES AND IMPORT DOCUMENTS. 8. THE AFORESAID DOCUMENTS ARE STATED TO BE RELEVANT FOR DISPOSAL OF APPEAL. IT IS THE CASE OF THE ASSESSEE THAT HE COULD NOT FI LE THEM BEFORE THE AO/CIT(A) AS THEY WERE NOT AVAILABLE WITH HIM AT THAT TIME. THE LD. DEPARTMENTAL REPRESENTATIVE DID NOT OBJECT TO THE ADMISSION OF THE AFORESAID DOCUMENTS AS ADDITIONAL EVIDENCE. THEY ARE THEREFORE BEING ADMITTED TO AVOID ANY PREJUDICE T HAT MAY BE CAUSED TO THE ASSESSEE DUE TO NON - ADMISSION OF THE AFORESAID DOCUMENTS AS ADDITIONAL EVIDENCE. 9. IN SUPPORT OF BOTH THE APPEALS, S/SHRI RINDANI, MAHARSHI AND POPAT, CHARTERED ACCOUNTANTS, DULY AUTHORIZED BY THE ASSESSEE U/S 288 OF THE INCOME - TAX ACT HAVE ENTERED APPEARANCE ON BEHALF OF THE ASSESSEE BEFORE THIS TRIBUNAL. THEY HAVE FILED WRITTEN SUBMISSIONS AND PAPER - BOOKS. 10. SHRI RINDANI HAS FILED WRITTEN SUBMISSIONS RUNNING INTO 6 PAGES UNDER THE SIGNATURE OF THE ASSESSEE AND ALSO MADE ORAL SUBMISSIONS AT THE TIME OF HEARING. HIS SUBMISSIONS , IN BRIEF, ARE AS UNDER: 8 ITA 391 & 392/RJT/2011 (I) T HE AO HAS STRAIGHTWAY CONCLUDED THAT THE ASSESSEE WAS LIABLE TO COLLECT TAX AT SOURCE WITHOUT EXPLICITLY SHOWING AS TO HOW THE MATERIAL S DEALT WITH BY THE ASSESSEE AND NOTI CED BY THE DEPARTMENT DURING SURVEY FELL WITHIN THE DEFINITION OF SCRAP. ACCORDING TO HIM, THE AO FAILED TO DISCHARGE THE AFORESAID ONUS AND HENCE HIS ACTION OF TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT WAS NOT SUSTAINABLE IN LAW IN VIEW OF THE DECISION S IN TEJ QUEBECOR PRINTING LTD. V. JCIT, 84 ITD 684; SOL PHARMACEUTICALS LTD. V. ITO, 83 ITD 72; AND SENIOR ACCOUNTS OFFICER V. CIT, 34 DTR 69 (MP). (II) THE MATERIAL TRADED BY THE ASSESSEE WAS NOT SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 296C NOTWITHSTANDING THE FACT THAT IT WAS IMPORTED AND DECLARED AS SCRAP BEFORE THE CUSTOMS AUTHORITIES. ACCORDING TO HIM, THE ASSESSEE HIMSELF WAS N EITHER A MANUFACTURER NOR HAD HE CARRIED OUT ANY MECHANICAL WORKING ON THE MATERIALS IMPORTED BY HIM. IT WAS SUBMITTED THAT THE DEFINITION OF SCRAP AS GIVEN IN EXPLANATION (B) TO SECTION 206C SHOULD BE RESTRICTED TO MEAN AND INCLUDE THE SCRAP GENERATED FROM THE MANUFACTURE OR MECHANICAL WORKING BY THE ASSESSEE HIMSELF ON SALE OF WHICH ALONE LIABILITY U/S 206C COULD BE FASTENED. (III) THE MATERIAL IMPORTED AND TRADED BY THE ASSESSEE HAS NOT ARISEN FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS UNDERTAK EN BY THE ASSESSEE AS THE BRASS SCRAP IMPORTED BY THE ASSESSEE COMPRISED OF LOOSE AND COLLECTED ITEMS MADE OF BRASS SUCH AS UTENSILS, WATER TAPS, HARDWARE ITEMS, BRASS STOVE, BRASS SHOW PIECES, HOUSEHOLD ITEMS OF BRASS, ETC. ACCORDING TO HIM, THE ITEMS IMP ORTED AND SOLD BY THE ASSESSEE WERE DISCARDED ITEMS AND NOT SCRAP ARISING FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS. RELYING UPON THE JUDGMENT IN VIJAY SHIP BREAKING CORPORATION V. CIT, 314 ITR 309 (SC), HE SUBMITTED THAT THE WORD MANUFACTUR E USED IN EXPLANATION (B) TO SECTION 206C WAS NARROWER IN MEANING THAN THE WORD PRODUCTION AND THEREFORE DISCARDED ITEMS TRADED BY THE ASSESSEE, WHICH WERE OF PERSONAL USE BY SOMEONE AT SOME POINT OF TIME IN THE PAST, WOULD NOT QUALIFY TO BE CALLED SCR AP IN TERMS OF EXPLANATION (B). 9 ITA 391 & 392/RJT/2011 (IV) RELYING UPON THE DECISIONS OF THIS TRIBUNAL IN NATHULAL P LAVTI V. ITO , ITA NOS.1167 & 116 8 /RJT./2010; AND NAVINE FLUORINE INTERNATIONAL LTD. V. ACIT, 45 SOT 86, HE SUBMITTED THAT BOTH THE WORDS WASTE AND SCRAP IN EXPLANATION (B) WERE ONE WORD AND THEREFORE BOTH OF THEM ARE QUALIFIED BY THE WORDS FOLLOWING THEM, NAMELY, FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS. ACCORDING TO HIM, WASTE AS WELL AS SCRAP MUST ARISE FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS UNDERTAKEN BY THE ASSESSEE HIMSEL F IN ORDER TO CONSTITUTE SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 206C. (V) EVERY KIND OF SCRAP UNDER THE SUN CANNOT BE SAID TO BE COVERED UNDER THE DEFINITION OF SCRAP AS GIVEN IN EXPLANATION (B) AS SUCH AN INTERPRETATION WOULD RENDER THE LATER PART OF THE DEFINITION, I.E., FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS OTIOSE. HE CONTENDED THAT ANY INTERPRETATION WHICH RENDERED LAT ER PART OF THE DEFINITION OF SCRAP OTIOSE SHOULD BE AVOIDED. ACCORDING TO HIM, IT CAN BE AVOIDED ONLY IF (I) BOTH THE WORDS, NAMELY, WASTE AS WELL AS SCRAP ARE HELD TO BE ONE WORD; AND (II) BOTH THE AFORESAID WORDS ARE HELD TO BE QUALIFIED BY THE WOR DS FOLLOWING THEM. IF SO INTERPRETED, THE ITEMS TRADED BY THE ASSESSEE WOULD NOT FALL UNDER THE DEFINITION OF SCRAP AS THEY HAVE NOT BEEN GENERATED BY THE ASSESSEE FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS UNDERTAKEN BY HIM. (VI) REFERRIN G TO CIRCULAR NO.528 DATED 16.12.1998 ISSUED BY THE CBDT, HE SUBMITTED THAT THE AFORESAID CIRCULAR SIMPLY EXPLAINS THE INTENTION BEHIND INSERTING SECTION 206C IN THE INCOME - TAX ACT. IT DOES NOT EXPLAIN THE MEANING OR SCOPE OF THE TERM SCRAP USED IN EXPLA NATION (B) TO SECTION 206C AND THEREFORE IS OF NO USE IN INTERPRETING THE SAID TERM. REFERRING TO CIRCULAR NO.525 DATED 24.11.1988 ISSUED BY THE CBDT , HE SUBMITTED THAT THE PROVISIONS OF SECTION 206C WERE INTENDED TO BE USED IN THOSE CASES WHERE 10 ITA 391 & 392/RJT/2011 PERSONS EN GAGED IN CERTAIN TRADES/BUSINESSES WERE UNTRACEABLE AND NOT IN THOSE CASES WHERE THEY WERE TRACEABLE AS IN THE CASE OF THE ASSESSEE . (VII) INVITING OUR ATTENTION TO THE FIRST PROVISO INSERTED IN SUB - SECTION (6A ) OF SECTION 206C WITH EFFECT FROM 1.7.2012, HE SUBMITTED THAT THE PROVISIONS OF SECTION 206C WOULD NOT APPLY TO A CASE WHERE IT IS SHOWN THAT THE BUYER HAS FURNISHED HIS RETURN OF INCOME AND SATISFIED ALL OTHER CONDITIONS STIPULATED BY THE SAID PROVISO. IN THIS CONNECTION, HE REFERRED TO THE JUDGMENTS IN HINDUSTAN COCA COLA BEVERAGE (P) LTD. V. CIT, 293 ITR 226 AND SREE MANJUNATHA WINES V. CIT, 202 TAXMAN 620 (KARN.). 1 1 . ELABORATING HIS ARGUMENTS FURTHER REGARDING THE APPLICABILITY OF FIRST PROVISO TO SUB - SECTION (6A) OF SECTION 206, SHRI RINDANI SUBMITTED THAT A PERSON, OTHER THAN A PERSON, REFERRED TO IN SUB - SECTION (1D) RESPONSIBLE FOR COLLECTING TAX, WHO FAILS TO COLLECT THE WHOLE OR ANY PART OF THE TAX ON THE AMOUNT RECEIVED FROM A BUYER OR LICENSEE OR LE S SEE OR ON THE AMOUNT DE BITED TO THE ACCOUNT OF THE BUYER OR LICENSES OR LE S SEE SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEF AULT IN RESPECT OF SUCH TAX IF SUCH BUYER OR LICENSEE OR LE S SEE HAS FULFILLED THE CONDITIONS LAID DOWN IN THE SAID PROVISO. HE SUBMITTED THAT THIS ASPECT OF THE MATTER HAS NOT BEEN EXAMINED BY THE AO AND THEREFORE THE MATTER SHOULD BE RESTORED TO THE FILE OF THE A SSESSING OFFICER. 1 2 . APPEARING FOR THE ASSESSEE, SHRI MAHARISHI MADE SIMILAR SUBMISSIONS AS THOSE MADE BY SHRI RINDANI. HE SUBMITT ED 5 UNSIGNED LOOSE SHEETS TITLED WRITTEN SUBMISSION ON THE DEFINITION OF SCRAP CONTAINED IN EXPLANATION (B) TO SECTION 206C IN WHICH EXTRACTS EXPLAINING THE MEANING OF SCRAP AS DOWNLOADED FROM VARIOUS SOURCES AVAILABLE ON INTERNET HAVE BEEN REPRODUCED . THESE SOURCES ARE MARIAM WEBSTER DICTIONARY, WWW.ASK.COM AND WIKIPEDIA. ACCORDING TO HIM, MARIAM WEBSTER DICTIONARY DEFINES SCRAP AS FRAGMENTS OF STOCK REMOVED IN MANUFACTURING AND MANUFACTURED ARTICLES OR PARTS REJECTED OR DISCARDED AND USEFUL ONLY AS MATERIAL FOR REPROCESSING; ESPECIALLY WASTE AND DISCARDED METALS. HE FURTHER SUBMITTED THAT THE TERM WASTE AS DEFINED IN THE SAID D ICTIONARY WOULD MEAN DAMAGED, DEFECTIVE, OR SUPER FL U OUS MATERIALS PRODUCED BY A MANUFACTURING PROCESS, AS (1) MATERIALS REJECTED DURING A TEXTILE MANUFACTURING PROCESS AND USED 11 ITA 391 & 392/RJT/2011 USUALLY FOR WIPING AWAY DIRT AND OIL ; (2) SCRAP; (3) AND UNWANTED BYE - PRODUCT OF A MANUFACTURING PROCESS, CHEMICAL LABORATORY OR NUCLEAR REACTOR . RELYING UPON THE WEBSITE WWW.ASK.COM , HE SUBMITTED THAT THE DIFFERENCE BETWEEN SCRAP AND WASTE IS THAT SCRAP IS A LOSS CONN ECTED WITH THE OUTPUT MOSTLY AN UNFORESEEN LOSS OF RAW MATERIALS IN PRODUCTION PRO CESS WHILE WASTE IS A FORESEEN AND CALCULATED PERCENTAGE OF LOSS OF RAW MATERIALS O R AN OUTPUT THAT DOES NOT HAVE ANY SALES OR USE. ACCORDING TO HIM , WIKIPEDIA DEFINES MATERIAL AS ANYTHING MADE OF MATTER, CONSTITUTED OF ONE OR MORE SUBSTANCES. BASED ON THE AFORESAID SOURCES, HE SUBMITTED THAT BOTH SCRAP AND WASTE MUST ARISE FROM THE MANU FACTURE OR MECHANICAL WORKING OF MATERIALS IN ORDER TO CONSTITUTE SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 206C. HE ALSO REFERRED TO THE DEFINITION OF WASTE AND SCRAP AS GIVEN IN NOTE 8(A) OF SECTION XV OF FIRST SCHEDULE OF THE CENTRAL EXCISE TARIFF ACT 1985 AND ALSO TO THE JUDGMENTS IN M/S GRASIM INDUSTRIES LTD. V. UNION OF INDIA, CIVIL APPEAL NO.7453 OF 2008; COLLECTOR OF CUSTOMS V. IM KEMEX INDIA LTD., 1996 (86) ELT 95 (TRIBUNAL) ; AND HINDALCO INDUSTRIES LTD. V . CCE, 2002 (144) ELT 339 (TRIBUNAL) RENDERED IN THE CONTEXT OF THE DEFINITION OF WASTE AND SCRAP AS GIVEN IN NOTE 8(A) OF SECTION XV OF FIRST SCHEDULE OF THE CENTRAL EXCISE TARIFF ACT. 1 3 . SUPPORTING THE DECISIONS CITED BY SHRI RINDANI, SHRI MAHARS HI ALSO SUBMITTED THAT BOTH THE WORDS , NAMELY WASTE AND SCRAP, USED IN EXPLANATION (B) TO SECTION 206C OF THE INCOME - TAX ACT WERE ONE PHRASE . HE EMPHASIZED THAT NO MATERIAL WOULD BE SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 206C OF THE I NCOME - TAX ACT UNLESS IT WAS GENERATED FROM MANUFACTURE OR MECHANICAL WORKING OF MATERIAL S . ACCORDING TO HIM, THE PROCESS OF MANUFACTURE OR MECHANICAL WORKING CAN BE CARRIED OUT ONLY ON MATERIALS AND THEREFORE ONLY THOSE ITEMS C OULD BE TREATED AS SCRAP , WHICH WERE GENERATED FROM THE MANUF A C T URE OR MECHANI CAL WORK ING OF MATERIALS . HE CONT ENDE D THAT IF THE ITEMS OF SCRAP WERE NOT GENERATED IN THE COURSE OF MANUFACTURE OR MECHANICAL WORKING OF MATERIALS, SUCH ITEMS WOULD NOT BE SCRAP AS DEFINED IN EXP LANATION (B) . IN THIS CONNECTION, HE CITED THE EXAMPLE OF SALE OF OLD NEWSPAPER S . HE SUBMITTED THAT OLD NEWSPAPERS ARE NOT GENERATED FROM MANUFACTURE OR M E CH A NICAL WORKING OF MATERIALS A ND THEREFORE THE Y WOULD NOT BE 12 ITA 391 & 392/RJT/2011 SC R AP WITHIN THE MEANING OF EXPLANA TION (B) TO SECTION 206C OF THE INCOME - TAX ACT. ON THIS ANALOGY, HE SOUGHT TO EMPHASI ZE THAT DISCARDED ITEMS AS SOLD BY THE ASSESSEE WOULD NOT BE SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 206C. IT WAS SUBMITTE D BY HIM THAT THE AFORESAID PROPOSITION WOULD CLEARLY EMERGE IF THE DEFINITION OF SCRAP AS GIVEN IN EXPLANATION (B) TO SECTION 206C OF THE INCOME - TAX ACT IS CONSIDERED IN ITS ENTIRETY. HE CONTENDED THAT THE SCRAP SHOULD NOT ONLY BE GENERATED FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIAL S BUT ALSO SUCH SCRAP SHOULD NOT DEFINITELY BE USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS. HAVING THUS EXPLAINED THE MEANING OF SCRAP AS USED IN EXPLANATION (B) TO SECTION 206C, HE SUBMITTED THAT DISCARDED MATERIAL S GENERATED ON DISMANTLING OF BUILDING, AS IN THE MATTER UNDER APPEAL, WOULD NOT QUALIFY TO BE CALLED SCRAP WITHIN THE MEANING OF SECTION 206C. 1 4 . SHRI POPAT HAS ALSO FILED UNSIGNED WRITTEN SUBMISSIONS RUNNING INTO 7 SHEETS, WHICH INCORPORATE SYNOPSIS OF HIS SUBMISSIONS. ACCORDING TO HIM, THE PROVISION S OF SECTION 206C WOULD BE ATTRACTED ONLY WHEN SCRAP WAS SOLD TO A BUYER. HE SUBMITTED THAT THE SALE OF SCRAP TO A PERSON OTHER THAN A BUYER WOULD NOT ATTRACT THE PROVISION S OF SECTION 206C. HE INVITED OUR ATTENTION TO THE TERM BUYER USED IN EXPLANATION (AA) TO SECT ION 206C OF THE INCOME - TAX ACT AND SUBMITTED THAT THE BUYER IS A PERSON WHO OBTAINS SPECIFIED GOODS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE OR THE RIGHT TO RECEIVE A NY SUCH GOODS . HE SUBMITTED THAT A PERSON WOULD NOT BE A BUYER UNLESS HE OBTAINS SPECIFIED GOODS IN ANY SALE BY WAY OF AUCTION, TENDER OR ANY OTHER LIKE MODE. HE CONTENDED THAT THE PHRASE ANY OTHER MODE IS PRECEDED BY AUCTION, TENDER AND THEREFORE SALE BY ANY OTHER MODE MUST BY ANALOG OUS T O AUCTION OR TENDER. IN THIS CONNECTION, HE REFERRED TO THE PRINCIPLE OF NOSCITUR A SOCIIS ACCORDING TO WHICH THE MEANING OF QUESTIONABLE OR DOUBTFUL WORDS OR PHRASES IN A STATUTE MAY BE ASCERTAINED BY REFERENCE TO THE MEANING OF OTHER WORDS OR PHRASES ASSOCIATED WITH IT AND ALSO TO THE PRINCIPLE OF EJUSDEM GENERIS . HE SUBMITTED THAT SALE OF GO ODS BY AN ASSESSEE TO A BUYER IN RETAIL SALE OF SUCH GOODS CANNOT THEREFORE BE CONSTRUED AS SALE TO A BUYER AS SUCH SALE WAS NOT BY WAY OF AUCTION OR TENDER OR ANY OTHER LIKE MODE AND THEREFORE SUCH TRANSACTION S IN RETAIL SALE BETWEEN THE ASSESSEE AND HIS BUYER WOULD CLEARLY BE OUTSIDE THE SCOPE OF 13 ITA 391 & 392/RJT/2011 SECTION 206C. IN THIS CONNECTION, HE COMPARED THE PROVISIONS OF SUB - CLAUSE (II) WITH THOSE OF SUB - CLAUSE (I) OF CLAUSE (AA) OF EXPLANATION TO 206C OF THE INCOME - TAX ACT. HE SUBMITTED THAT SUB - CLAUSE (I) DEFINES A BUYER AS A PERSON WHO OBTAINS SPECIFIED GOODS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE WHILE SUB - CLAUSE (II) DEFINES A BUYER FOR THE PURPOSE OF SUB - SECTION (1D) AS A PERSON WHO OBTAINS SPECIFIED GOODS IN ANY SALE. BASED ON THE A FORESAID CO MPARISON, HE SUBMITTED THAT THE LEGISLATIVE INTEN T WAS QUITE CLEAR THAT THE BUYER, EXCEPT FOR THE PURPOSES OF SUB - SECTION (1D) OF SECTION 206C, W OULD BE A PERSON WHO OBTAINS SPECIFIED GOODS IN ANY SALE WHICH MUST NECESSARILY BE BY WAY OF AUCTION, TENDER OR ANY OTHER MODE ANALOGOUS TO AUCTION OR TENDER AND NOT BY WAY OF RETAIL SALE AS IN SUB - CLAUSE ( II) OF CLAUSE (AA) OF EXPLANATION 206C. TURNING TO THE FACTS OF THE CASE, HE SUBMITTED THAT THE REVENUE HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THE ASSESS EE HA S SOLD BRASS SCRAP TO A BUYER BY WAY OF AUCTION, TENDER OR ANY SIMILAR MODE. ACCORDING TO HIM, THE ASSESSEE HAS SOLD BRASS SCRAP IN RETAIL SALE AND NOT BY WAY OF AUCTION, TENDER OR SIMILAR MODE AN D THEREFORE THE GOODS SOLD BY HIM CANNOT BE SAID TO H AVE BEEN SOLD TO A BUYER FOR THE PURPOSES OF SUB - SECTION ( 6 ) OF SECTION 206C. 15 . IN REPLY, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS PASSED BY THE ASSESSING OFFICER AND THE LD. COMMISSIONER (APPEALS) . H E HAS FILED A PAPER - BOOK, WHICH CONTAINS , INTER - ALIA, HIS WRITTEN SUBMISSIONS IN 14 PAGES . HIS SUBMISSIONS , IN BRIEF , ARE AS UNDER: (I) SECTION 206C HAS BEEN INSERTED IN THE INCOME - TAX ACT TO ENSURE COLLECTION OF TAXES AT SOURCE FROM PERSONS CARRYING ON PARTICULAR TRADES IN VIEW OF PEC ULIAR DIFFICULTIES EXPERIENCED BY THE REVENUE IN THE PAST IN COLLECTING TAXES FROM THEM. SECTION 206C THUS SEEKS PREVENT ION OF EVASION OF TAXES. IN INTERPRETING THE AFORESAID PROVISIONS, WHICH ARE INTENDED TO PLUG LEAKAGE OF REVENUE AND PREVENT TAX EVASION , A CONSTRUCTION WHICH WOULD DEFEAT ITS PURPOSE SHOULD BE ESCHEWED AND A CONSTRUCTION WHICH PRESERVES ITS WORKABILITY AND EFFICACY SHOULD BE PREFERRED. (II) PROVISIONS OF SECTION 206C ARE APPLICABLE TO T RADERS AS WELL AS MANUFACTURERS AS THERE IS NO RE QUIREMENT IN SECTION 206C THAT THE SELLER 14 ITA 391 & 392/RJT/2011 SHOULD BE A MANUFACTURER ALSO . IN THIS CONNECTION, HE REFERRED TO THE HEAD - NOTE OF SECTION 206C AND OTHER RELEVANT PROVISIONS OF THE SAID SECTION IN THIS BEHALF. (III) WASTE AND SCRAP AS MENTIONED IN THE DEFIN ITION OF SCRAP IN SECTION 206C ARE DIFFERENT AND DISTINCT ITEMS AND NOT THE SAME. MATERIALS NOT ARISING FROM MANUFACTURE OR MECHANICAL WORKING OF MATERIALS ARE ALSO COVERED BY THE DEFINITION OF SCRAP AS GIVEN IN SECTION 206C. DISCARDED MATERIALS OR MATER IALS WHICH ARE NO LONGER USEFUL ALSO FALL UNDER THE DEFINITION OF SCRAP. (IV) THE DEFINITION OF SCRAP IN EXPLANATION (B) IS QUITE COMPREHENSIVE IN ITS AMBIT AND SCOPE IN THE SENSE THAT IT COVERS BOTH, NAMELY , WASTE A S WELL AS SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH THE USE OF THE WORDS WHICH IS IN THE PHRASE SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS NOT DEFINITELY USABLE AS SUCH IN EXPLANATION (B ) ALSO SUPPORTS THE AFORESAID VIEW THAT ANYTHING WHICH IS UNUSABLE AS SUCH IS SCRAP. (V) THE DEFINITION OF SCRAP AS GIVEN IN EXPLANATION (B) IS WIDE ENOUGH TO INCLUDE WASTE AND SCRAP AS DEFINED IN NOTE 8(A) OF SECTION XV OF SCHEDULE I OF THE CUSTOM S TARIFF ACT AND CENTRAL EXCISE TARIFF ACT AND THEREFORE ANY MATERIAL WHICH IS DECLARED AS WASTE AND SCRAP FOR THE PURPOSES OF THE CUSTOMS TARIFF ACT OR CENTRAL EXCISE TARIFF ACT NOTE 8 WOULD BE COVERED BY THE DEFINITION OF SCRAP IN SECTION 206C . ( V I ) RELYING UPON LETTER F. NO. 275/86/2011 - IT(B) DATED 18 TH MAY 2012, CIRCULATED BY THE CBDT TO ALL THE COMMISSIONERS/DIRECTORS OF INCOME - TAX (TDS) , HE SUBMITTED THAT (1) THE TERM SCRAP IS CLEARLY DEFINED IN THE EXPLANATION TO SECTION 206C AND THERE IS NO REQUIREMENT THAT THE GOODS TO BE ELIGIBLE FOR SCRAP SHOULD BE PRODUCED/MANUFACTURED BY THE SELLER ITSELF; (2) THE TERM BUYER IS ALSO DEFINED IN T HE SAME EXPLANATION ACCORDING TO WHICH A BUYER IS A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE, GOODS OF THE SPECIFIED NATURE AND THUS A BUYER IN TERMS OF THE SAID EXPLANATION IS NOT RESTRICTED TO A PERSON WHO BUYS THE SP ECIFIED GOODS IN 15 ITA 391 & 392/RJT/2011 AN AUCTION OR TENDER ALONE BUT COVERS A BUYER IN THE RETAIL SALE OF SPECIFIED GOODS AS WELL; AND (3) ALL THE SELLERS OF SCRAP INCLUDING THOSE TRADING IN SCRAP ARE LIABLE TO COLLECT TAX AT SOURCE FROM THE BUYERS OF SUCH SCRAP. 16 . IT WA S FURTHER SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE HIMSELF HAS SHOWN AND DECLARED THE GOODS SOLD BY HIM AS SCRAP BEFORE THE CUSTOMS AUTHORITIES AND PAID CUSTOMS DUTY ACCORDINGLY AND THEREFORE THERE WAS NO DISPUTE THAT WHAT WAS IMPORTED AND SUBSEQUENTLY SOLD BY THE ASSESSEE WAS SCRAP AND NOTHING ELSE. 17 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS INCLUDING THE AUTHORITIES REFERRED TO BY THEM AT THE TIME OF HEARING AND ALSO IN THE WRITTEN SUBMISSI ONS FILED BY THEM. THE FACTS, AS FOUND BY THE ASSESSING OFFICER AND THE CIT(A), ARE THAT THE ASSESSEE IS AN INDIVIDUAL . H E IS AN IMPORTER. IT HAS BEEN FOUND BY THE ASSESSING OFFICER AND THE CIT(A) THAT HE HAS IMPORTED BRASS SCRAP AND SOLD THE SAME TO VARIO US PARTIES IN BOTH THE YEARS UNDER APPEAL. IT HAS ALSO BE EN FOUND BY THEM THAT BILLS OF ENTRY ISSUED BY THE CUSTOMS AUTHORITIES , BILLS ISSUED BY THE SUPPLIER, BILLS RAISED BY THE ASSESSEE AND BILLS OF LANDING , ETC., ALSO INDICATE THAT THE ASSESSEE HAS IMPORTED SCRAP AND SOLD THE SAME AS SUCH . IT IS ALSO STATED IN THE APPELLATE ORDER PASSED BY THE CIT(A) THAT THE ASSESSEE HAS DECLARED IMPORTED GOODS AS SCRAP FOR PAYMENT OF CUSTOMS DUTY AND ACCORDINGLY PAID THE CUSTOMS D UTY AS PER THE RATES PRESCRIBED FOR SCRAP . I T HAS ALSO BEEN FOUND BY BOTH THE AO AND THE CIT(A) THAT THE ASSESSEE HAS NOT COLLECTED THE TAX AT SOURCE FROM THE BUYERS IN CONFORMITY WITH THE PROVISIONS OF SECTION 206C OF THE INCOME - TAX ACT AND THEREFORE THE ASSESSEE , ACCORDING TO THEM, WAS LIABLE TO BE TREATED AS ASSESSEE IN DEFAULT U/S 206C(6) AND (7) OF THE INCOME - TAX ACT. 1 8 . BEFORE TAKING UP THE GROUNDS OF APPEAL AS ALSO THE AFORESAID ISSUES FOR CONSIDERATION AND ADJUDICATION, IT IS NECESSARY TO REPRO DUCE SECTION 206C OF THE INCOME - TAX ACT IN SO FAR AS IT IS RELEVANT FOR DISPOSAL OF THE ISSUES UNDER APPEAL. RELEVANT PORTIONS OF SECTION 206C READ AS UNDER: - 16 ITA 391 & 392/RJT/2011 BB. COLLECTION AT SOURCE PROFITS AND GAINS FROM THE BUSINESS OF TRADING IN ALCOHOLIC LIQUOR, FOREST PRODUCE, SCRAP, ETC. 206C. (1) EVERY PERSON, BEING A SELLER SHALL, AT THE TIME OF DEBITING OF THE AMOUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF THE BUYER OR AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM THE SAID BUYER IN CASH OR BY THE ISSUE OF A CHEQ UE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, COLLECT FROM THE BUYER OF ANY GOODS OF THE NATURE SPECIFIED IN COLUMN (2) OF THE TABLE BELOW, A SUM EQUAL TO THE PERCENTAGE, SPECIFIED IN THE CORRESPONDING ENTRY IN COLUMN (3) OF THE SAID TABLE, OF SU CH AMOUNT AS INCOME - TAX: TABLE SL. NO. NATURE OF GOODS PERCENTAGE (1) (2) (3) ( VI ) SCRAP ONE PER CENT PROVIDED THAT .. . (6) ANY PERSON RESPONSIBLE FOR COLLECTING THE TAX WHO FAILS TO COLLECT THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION, SHALL, NOTWITHSTANDING SUCH FAILURE, BE LIABLE TO PAY THE TAX TO THE CREDIT OF THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE PROVI SIONS OF SUB - SECTION (3). (6A) IF ANY PERSON RESPONSIBLE FOR COLLECTING TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION DOES NOT COLLECT THE WHOLE OR ANY PART OF THE TAX OR AFTER COLLECTING, FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT, HE S HALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF THE TAX: PROVIDED THAT ANY PERSON, OTHER THAN A PERSON REFERRED TO IN SUB - SECTION (1D), RESPONSIBLE FOR COLLECTING TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION, WHO FAILS TO COLLECT THE WHOLE OR ANY PART OF THE TAX ON THE AMOUNT RECEIVED FROM A BUYER OR LICENSEE OR LESSEE OR ON THE AMOUNT DEBITED TO THE ACCOUNT OF THE BUYER OR LICENSEE OR LESSEE SHALL NOT BE DEEMED TO BE 17 ITA 391 & 392/RJT/2011 AN ASS ESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH BUYER OR LICENSEE OR LESSEE ( I ) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 ; ( II ) HAS TAKEN INTO ACCOUNT SUCH AMOUNT FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND ( III ) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED: PROVIDED FURTHER . (7) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB - SECTION (6), IF THE PERSON RESPONSIBLE FOR COLLECTING TAX DOES NOT COLLECT THE TAX OR AF TER COLLECTING THE TAX FAILS TO PAY IT AS REQUIRED UNDER THIS SECTION, HE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF ONE PER CENT PER MONTH OR PART THEREOF ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS COLLECTIBLE TO THE DATE ON WHICH THE TAX WAS ACTUALLY PAID AND SUCH INTEREST SHALL BE PAID BEFORE FURNISHING THE QUARTERLY STATEMENT FOR EACH QUARTER IN ACCORDANCE WITH THE PROVISIONS OF SUB - SECTION (3): PROVIDED THAT EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( A ) 'ACCOUNTANT' SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO SUB - SECTION (2) OF SECTION 288 ; ( AA ) 'BUYER' WITH RESPECT TO ( I ) SUB - SECTION (1) MEANS A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE, GOODS OF THE NATURE SPECIFIED IN THE TABLE IN SUB - SECTION (1) OR THE RIGHT TO RECEIVE ANY SUCH GOODS BUT DOES NOT INCLUDE, 18 ITA 391 & 392/RJT/2011 ( A ) A PUBLIC SECTOR COMPANY, THE CENTRAL GOVERNMENT, A STATE GOVERNMENT, AND AN EMBASSY, A HIGH COMMISSION, LEGATION, COMMISSION, CONSULATE AND THE TRADE REPRESENTATION, OF A FOREIGN STATE AND A CLUB; OR ( B ) A BUYER IN THE RETAIL SALE OF SUCH GOODS PURCHASED BY HIM FOR PERSONAL CONSUMPTION; ( II ) SUB - SECTION (1D) MEANS A PERSON WHO OBTAINS IN ANY SALE, GOODS OF THE NATURE SPECIFIED IN THE SAID SUB - SECTION; ( AB ) XXXXXXXX ( B ) 'SCRAP' MEANS WASTE AND SCRAP FROM TH E MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS; ( C ) 'SELLER' MEANS THE CENTRAL GOVERNMENT, A STATE GOVERNMENT OR ANY LOCAL AUTHORITY OR CORPORATION OR AUTHORIT Y ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT, OR ANY COMPANY OR FIRM OR CO - OPERATIVE SOCIETY AND ALSO INCLUDES AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED O N BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE ( A ) OR CLAUSE ( B ) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH THE GOODS OF THE NATURE SPECIFIED IN THE TABLE IN SUB - SECTION (1) OR SUB - SECTION (1D) ARE SOLD. 19 . SECTION 206C AS ORIGINALLY ENACTED DID NOT PROVIDE FOR COLLECTION OF TAX AT SOURCE ON SALE OF SCRAP. BY THE FINANCE ACT 2003, SCRAP HAS BEEN INCLUDED AND PLACED IN THE TABLE IN SUB - SECTION (1) OF SECTION 206C AS A RESULT OF WHICH EVERY SELLER {AS DEFINED IN EXPLANATION (C) TO SECTION 206C} OF SCRAP IS REQUIRED TO COLLECT TAX @ 1% AT THE TIME OF DEBITING THE AMOUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF THE BUYER OR AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM THE SAID BUYER IN CASH OR BY THE ISSUE OF A CHEQ UE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER. THE LIABILITY OF A SELLER TO COLLECT TAX AT SOURCE IN TERMS OF SECTION 206C IS ABSOLUTE UNLESS 19 ITA 391 & 392/RJT/2011 REQUISITE DECLARATION FROM THE BUYER IS OBTAINED AND A COPY THEREOF IS DELIVERED TO THE CHIEF COMMISSIONE R OR COMMISSIONER IN TERMS OF THE PROVISIONS OF SUB - SECTION (1A) AND (1B) OF SECTION 206C. 2 0 . REASONS FOR INSERTING SECTION 206C IN THE INCOME - TAX ACT HAVE BEEN EXPLAINED IN CIRCULAR NO. 525 DATED 24.11.1988 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES AS UNDER: 1. CONSIDERABLE DIFFICULTY HAS BEEN FELT IN THE PAST IN ASSESSING INCOME OF PERSONS WHO TAKE CONTRACTS FOR SALE OF LIQUOR, FOREST PRODUCE, ETC. IT HAS BEEN THE DEPARTMENTS EXPERIENCE THAT FOR TAKING SUCH CONTRACTS, FIRMS OR ASSOCIATIONS OF PERSONS ARE SPECI FICALLY CONSTITUTED AND VERY OFTEN NO TRACE IS LEFT OF THEM OR THEIR MEMBERS AFTER THE CONTRACT HAS BEEN EXECUTED. PERSONS HAVE ALSO BEEN FOUND TO HAVE TAKEN CONTRACTS IN BENAMI NAMES BY FLOATING UNDERTAKINGS OR ASSOCIATIONS FOR SHORT PERIODS. SINCE TAX IS PAYABLE IN THE ASSESSMENT YEARS ON THE INCOMES OF THE PREVIOUS YEARS, THE TIME BY WHICH THE INCOMES FROM SUCH SOURCES BECOME ASSESSABLE, SUCH PERSONS BECOME UNTRACEABLE. MOREOVER, AT THE TIME OF ASSESSMENT YEARS IN THESE CASES, EITHER THE ACCOUNTS ARE N OT AVAILABLE OR THEY ARE MOSTLY INCORRECT OR INCOMPLETE. THUS, EVEN IF ASSESSMENTS COULD BE MADE ON EX PARTE BASIS, IT BECOMES ALMOST IMPOSSIBLE TO COLLECT THE TAX FOUND DUE, EITHER BECAUSE IT BECOMES DIFFICULT TO ESTABLISH THE IDENTITY OF THE PERSONS AND TRACE THEM OR BECAUSE OF THE FACT THE PERSONS IN WHOSE NAMES CONTRACTS WERE TAKEN ARE MEN OF NO MEANS. WITH A VIEW TO COMBATING LARGE SCALE TAX EVASION BY PERSONS DERIVING INCOMES FROM SUCH BUSINESS, THE FINANCE ACT, 1988 HAS INSERTED A NEW SECTION 44AC TO PROVIDE FOR DETERMINATION OF INCOME IN SUCH CASES. FURTHER, WITH A VIEW TO FACILITATING COLLECTION OF TAXES FROM SUCH ASSESSEES, THE FINANCE ACT, 1988 HAS INSERTED A NEW SECTION 206C TO PROVIDE FOR COLLECTION OF SUCH TAX AT SOURCE. 2 1 . IT IS QUITE OBVIO US THAT THE PROVISIONS OF SECTION 206C HAVE BEEN ENACTED TO ENSURE COLLECT ION OF TAXES FROM PERSONS CARRYING ON PARTICULAR TRADES IN VIEW OF PECULIAR DIFFICULTIES EXPERIENCED BY THE REVENUE IN THE PAST IN COLLECTING TAXES FROM 20 ITA 391 & 392/RJT/2011 THEM . SECTION 206C THUS SEEKS TO PREVENT EVASION OF TAXES. IT THEREFORE NEEDS TO BE CONSTRUED STRICTLY AND IN A MANNER THAT SEEKS TO ACHIEVE THE PURPOSE FOR WHICH IT HAS BEEN ENACTED . 2 2 . AS RIGHTLY SUBMITTED BY BOTH THE PARTIES THAT IT IS NOT A SOUND PRINCIPLE OF CONSTRUCTION TO BRUSH ASIDE WORDS IN A STATUTE AS BEING INAPPOSITE SURPLUSAGE , IF THEY CAN HAVE APPROPRIATE APPLICATION IN CIRCUMSTANCES CONCEIVABLY WITHIN THE CONTEMPLATION OF THE STATUTE. T HE COURTS, IN THE INTERPRETATION OF STATUTE S , ALWAYS PRESUME THAT THE LEGISLATURE INSERTED EVERY PART THEREOF FOR A PURPOSE AND THE LEGISLATIVE INTENTION IS THAT EVERY PART OF THE STATUTE SHOULD HAVE EFFECT. THE LEGISLATURE IS DEEMED NOT TO WASTE ITS WORDS OR TO SAY ANYTHING IN VAIN AND A CONSTRUCTION WHICH CONTRIBUTES REDUNDANCY TO THE LEGISLATURE SHOULD NOT BE ACCEPTED, EXCEPT FOR COMP ELLING REASONS. 2 3 . THE ISSUES UNDER APPEAL HAVE BEEN CLARIFIED BY THE CENTRAL BOARD OF DIRECT TAXES IN ITS LETTER NO.275/86/2011 - IT(B) DATED 18 TH MAY 20 12 ADDRESSED TO ALL THE COMMISSIONERS/DIRECTORS OF INCOME - TAX (TDS) AS UNDER: SUBJECT: LIABILITY OF OLD IRON (SCRAP) DEALERS CUM TRADERS UNDER SECTION 206C OF THE INCOME TAX ACT 1961 REGARDING REPRESENTATIONS WERE RECEIVED FROM CERTAIN ASSOCIATIONS OF OLD IRON SCRAP DEALERS CUM TRADERS ALLEGING WRONG INTERPRETATION OF LAW REGARDING APPLICABILITY OF PROVISIONS OF SECTION 206 C OF THE INCOME TAX ACT 1961 IN THEIR CASE. THE INCOME TAX ACT, 1961 AS PER SECTION 206C REQUIRES A SELLER OF GOODS OF SPECIFIED NATURE (DEFINED IN THE ACT AND INCLUDES SCRAP) TO COLLECT T AX AT SOURCE AT SPECIFIED PERCENTAGE OF THE RECEIPT FROM THE BUYER AND DEPOSIT THE SAME IN THE GOVERNMENT ACCOUNT. THE TERM SCRAP IS CLEARLY DEFINED IN THE EXPLANATION TO THIS SECTION AND THERE IS NO REQUIREMENT THAT THE GOODS TO BE ELIGIBLE FOR SCRAP SHOULD BE PRODUCED/MANUFACTURED BY THE SELLER ITSELF. FURTHER THE TERM BUYER IS ALSO DEFINED IN THE SAME EXPLANATION AND MEANS A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE, 21 ITA 391 & 392/RJT/2011 GOODS OF THE SPECIFIED NATURE. THUS A BUYER IS NOT RESTRICTED TO A PERSON WHO BUYS THE SPECIFIED GOODS IN AN AUCTION OR TENDER AND THUS INCLUDES A BUYER IN THE RETAIL SALE OF SPECIFIED GOODS AS WELL. AS PER TAXATION LAWS (AMENDMENT) ACT 2003, W.E.F. 08 - 09 - 2003, IF A BUYER IN THE RETAI L SALE OF SUCH GOODS BUYS IT FOR PERSONAL CONSUMPTION AND FURNISHES BEFORE THE SELLER SUCH DECLARATION IN PRESCRIBED FORM 27C, THEN THE SELLER IS NOT LIABLE TO COLLECT TAX ON THE SAME. THUS ALL SELLERS OF SCRAP, WITHIN THE MEANING OF SECTION 206C, INCLUDING THOSE TRADING IN SCRAP ARE LIABLE TO COLLECT TAX AT SOURCE FROM THE BUY ERS OF SUCH SCRAP. HOWEVER IF THE BUYER DECLARES BY FURNISHING FORM 27C BEFORE THE SELLER ITS PURPOSE FOR OBTAINING SUCH GOODS BEING MANUFACTURING/PROCESSING/PRODUCING ARTICLES AND NOT TRADING PURPOSE THEN THE SELLER IS EXEMPTED FROM COLLECTING SUCH TAX FR OM SUCH BUYER. IF IT MAY BE ADDED THAT SELLERS AS DEFINED IN THE EXPLANATION TO SECTION 206C ONLY ARE LIABLE TO COLLECT TAX AT SOURCE. IT MAY FURTHER BE ADDED THE ACT AS PER SECTION 206C (9) ALLOWS ANY BUYER TO APPROACH THE ASSESSING OFFICER FOR OBTAINING A CERTIFICATE OF LOWER RATE OF COLLECTION OF TCS. 2 4 . EXPLANATION (B) TO SECTION 206C DEFINES SCRAP AS WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS. IT IS EVIDENT THAT THE WORD SCRAP OCCURS TWICE IN THE SAID DEFINITION. IT IS FIRST USED AS A TERM WHICH IS SOUGHT TO BE DEFINED AND WHICH INCLUDES WASTE ALSO AND THEREAFTER THE WORD SCRAP IS USED AGAI N IN THE EXPRESSION SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS . THE SAID DEFINITION IS IN TWO PARTS. ITS FIRST PART, I.E., WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS , REFERS TO WHAT WOULD CONSTITUTE SCRA P WHILE ITS SECOND PART, NAMELY, WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS REFERS TO THE CHARACTERISTICS WHICH A MATERIAL HAS TO POSSESS IN ORDER TO FALL IN THE CATEGORY OF SCRAP. THE SECOND PART OF DEFINITION , BEING INTEGRAL PART OF THE DEFINITION, ALSO THROWS LIGHT ON THE SCOPE AND AMBIT OF THE TERM SCRAP AND THEREFORE NEEDS TO BE TAKEN INTO CONSIDERATION WHILE INTERPRETING THE FIRST PART OF THE DEFINITION OF SCRAP. 22 ITA 391 & 392/RJT/2011 2 5 . WE SHALL FIRST TAKE UP THE FIRST PART OF THE DEFINITION, NAMELY, WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS. THE FIRST PART OF THE DEFINITION SEEKS TO COVER BOTH WASTE AS WELL AS SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS. IN THE ABSENCE OF ANY DEFINITION OF THE TERM WASTE IN THE INCOME - TAX ACT, WE HAVE TO TURN TO ITS MEANING AS IT IS UND ERSTOOD IN COMMON PARLANCE. IN COMMON PARLANCE, WASTE IS UNDERSTOOD AS SOMETHING UNUSABLE OR UNWANTED MATERIAL. ACCORDING TO THE CONCISE OXFORD DICTIONARY, WASTE IS SOMETHING WHICH HAS BEEN ELIMINATED OR DISCARDED AS NO LONGER USEFUL OR REQUIRED. SC RAP, ON THE OTHER HAND, REPRESENTS SOMETHING WHICH IS LEFT OVER AFTER THE GREATER PART HAS BEEN USED OR CONSUMED. SCRAP THUS REFERS TO THE INCIDENTAL RESIDUE DERIVED FROM CERTAIN TYPES OF MANUFACTURE, WHICH IS RECOVERABLE WITHOUT FURTHER PROCESSING. IT IS IN THIS CONTEXT THAT THE WORDS FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS QUALIFY THE PRECEDING WORD SCRAP AND NOT WASTE. T HE DEFINITION OF SCRAP AS GIVEN IN EXPLANATION (B) IS NOT LIMITED TO SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS ALONE BUT EXTENDS TO COVER WASTE ALSO. THEREFORE THE SCOPE OF THE TERM SCRAP AS DEFINED IN EXPLANATION (B) CANNOT BE INTERPRETED SO AS TO RESTRICT ITS APPLICATION TO SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS AL ONE. WHILE WASTE COVERS EVERYTHING THAT IS UNUSABLE OR HAS BEEN DISCARDED AS NO LONGER USEFUL AS SUCH , SCRAP COVERS EVERYTHING THAT ARISES FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS . BY ITS VERY NATURE, WASTE IS A TERM OF WIDER IMPORT WH ILE SCRAP IS NARROWER IN ITS SCOPE. 2 6 . THE FIRST PART OF THE DEFINITION OF SCRAP IN EXPLANATION (B) REFERS NOT ONLY TO SCRAP FROM THE MANUFACTURE BUT ALSO TO MECHANICAL WORKING OF MATERIALS. BOTH THE PHRASES, NAMELY, MANUFACTURE AND MECHANICAL W ORKING OF MATERIALS DIFFER IN THEIR MEANING AND CONTENT. IN BLACKS LAW DICTIONARY, THE MEANING OF THE TERM MANUFACTURE HAS BEEN EXPLAINED THUS: MANUFACTURE. V. FROM LATIN WORDS MANUS AND FACTURA, LITERALLY PUT TOGETHER BY HAND. NOW IT MEANS THE PROCESS OF MAKING PRODUCTS BY HAND, MACHINERY OR OTHER AUTOMATED MEANS THE TERM MANUFACTURE AS A NOUN IS ALSO DEFINED IN THE SAME DICTIONARY AS FOLLOWS: MANUFACTURE. N. THE PROCESS OR OPERATION OF MAKING GOODS OR ANY MATERIAL PRODUCED BY HAND, BY 23 ITA 391 & 392/RJT/2011 MACHINERY, OR BY OTHER AGENCY; ANYTHING MADE FROM RAW MATERIALS BY THE HAND, BY MACHINERY, OR BY ART. M ECHANICAL WORKING OF MATERIALS REFERS TO PHYSICAL OPERATIONS ON MATERIAL S . IT SIGNIFIES PHYSICAL OPERATIONS TO BRING ABOUT PHYSICAL CHANGE TO WHICH THE MATERIAL IS SUBJECTED IN ORDER TO CHANGE ITS SHAPE, PROPERTIES OR STRUCTURE. IN ORDER TO FALL IN THE DEFINITION OF SCRAP , IT IS NOT NECESSARY THAT THE SAME SHOULD OCCUR IN THE COURSE OF MANUFACTURE; IT CAN ALSO OCCUR IN THE COURSE OF MECHANICAL WORKING OF MATERI ALS, I.E., IN THE COURSE OF PHYSICAL OPERATIONS ON MATERIALS. THUS, B OTH THE OPERATIONS/PROCESSES , NAMELY, THE MANUFACTURE AND MECHANICAL WORKING OF MATERIALS, CAN GIVE RISE TO SCRAP. ANY ARTICLE OR THING ARISING FROM THE PHYSICAL OPERATIONS ON MATERIALS W HICH IS NOT USABLE AS SUCH WOULD THEREFORE FALL IN THE CATEGORY OF SCRAP. AS STATED EARLIER, THE SECOND PART OF THE DEFINITION, I.E., WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS ALSO THROWS LIGHT ON THE SCOPE OF THE TERM SCRAP I N AS MUCH AS IT SEEKS TO DEFINE THE CHARACTERISTICS OF SCRAP. IN ORDER TO CONSTITUTE SCRAP, THE ARTICLE OR THING MUST NOT BE USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS. THE USE OF THE WORDS OTHE R REASONS IN THE SECOND PART OF THE DEFINITION OF SCRAP IS SIGNIFICANT. IN ORDER TO CONSTITUTE SCRAP , WHAT IS CONTEMPLATED BY EXPLANATION (B) IS THE NON - USABILITY OF MATERIALS AS SUCH, WHICH COULD EVEN BE FOR A REASON OTHER THAN BREAKAGE, CUTTING UP A ND WEAR. THE PHRASEOLOGY EMPLOYED IN EXPLANATION (B) SHOWS THAT THE TERM SCRAP HAS BEEN DEFINED IN WIDE TERMS SO AS TO INCLUDE BOTH (I) WASTE , AND (II) SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS . HOWEVER BOTH OF THEM HAVE BEEN USED AS ONE PHRASE, I.E., AS WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS , FOR THE SECOND PART OF THE DEFINITION AND THEREFORE BOTH OF THEM SHOULD DEFINITELY BE NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR OR OTHER REASONS. 27 . AT THE TIME OF HEARING, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE USE OF THE WORD AND IN THE EXPRESSION WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS SUGGEST S THAT BOTH OF THEM, NAMELY, WASTE AND SCRAP, MUST ARISE FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS AND THAT WASTE PER SE CANNOT BE SCRAP UNLESS IT, LIKE SCRAP, ALSO ARISES FROM THE MANUFACTURE 24 ITA 391 & 392/RJT/2011 OR MECHANICAL WORKING OF MATERI ALS. WE DO AGREE WITH THE SUBMISSION THAT THE WORD AND IN THE SAID EXPRESSION JOINS BOTH THE WORDS, NAMELY, (I) WASTE; AND (II) SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS AND TO THAT EXTENT THEY CONSTITUTE ONE PHRASE, I.E., WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS AND THAT IS WHY THE WORDS WHICH IS HAVE BEEN USED AS LINK BETWEEN THE FIRST PART AND SECOND PART OF THE DEFINITION. HOWEVER, THE WORD AND IN THE SAID PHRASE HAS BEEN USED TO ENLARGE THE SCO PE OF SCRAP, WHICH IS SOUGHT TO BE DEFINED BY EXPLANATION (B) TO SECTION 206C, SO AS TO COVER BOTH, I.E., WASTE AS WELL AS SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS. IF THE LEGISLATIVE INTENT WAS TO EXCLUDE WASTE FROM THE DEFINITION O F SCRAP, IT COULD HAVE EASILY DONE SO BY NOT INCLUDING THE WASTE IN THE DEFINITION OF SCRAP. 28 . IT IS THE CASE OF THE REVENUE THAT THE ITEMS IMPORTED AND SUBSEQUENTLY SOLD BY THE ASSESSEE AS BRASS SCRAP FALL UNDER THE REVISED INDIAN TRADE CLASS IFICATION CODE (RITC) 74040022 AS DECLARED BY THE ASSESSEE HIMSELF BEFORE THE CUSTOMS AUTHORITIES. IN THIS CONNECTION, THE LD. DEPARTMENTAL REPRESENTATIVE REFERRED TO THE DEFINITION OF WASTE AND SCRAP AS GIVEN IN NOTE 8(A) TO SCHEDULE I (IMPORT TARIFF) OF THE CUSTOMS TARIFF ACT AND SUBMITTED THAT THE GOODS IMPORTED BY THE ASSESSEE WERE KNOWN AS METAL SCRAP IN TRADE CIRCLES, BOTH IN INDIA AND ABROAD. IN THIS CONNECTION, H E REFERRED TO THE HARMONIZED COMMODITY AND CODING SYSTEMS, WHICH ARE POPULARLY KNOWN AS HSN OR HS, DEVELOPED BY THE WORLD CUSTOMS ORGANIZATION AND FOLLOWED BY OVER 200 COUNTRIES INCLUDING INDIA TO FACILITATE EASY IDENTIFICATION OF MERCHANDISE IN INTERNATIO NAL TRADE. ACCORDING TO HIM, THE GOODS IMPORTED AND SOLD BY THE ASSESSEE BEING BRASS SCRAP FALL UNDER THE CLASSIFICATION OF WASTE AND SCRAP UNDER THE SAID CODING SYSTEM. IN SUPPORT OF HIS SUBMISSIONS, HE RELIED UPON THREE JUDGMENTS OF THE HONBLE CUSTOMS, EXCISE AND GOLD TRIBUNAL/CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NAMELY, SUJANA STEELS LTD. V. COMMISSIONER OF CENTRAL EXCISE, 2000 ECR 776 TRI CHENNAI; QUICK CAR WASH PVT. LTD. V. COMMISSIONER OF CUSTOMS, 2007 - TIOL - CESTAT - DEL; COLLECTOR OF CUS TOMS V. SHANKAR METAL TRADING CO., 1991 ECR 309 TRI DELHI. 25 ITA 391 & 392/RJT/2011 29 . WE HAVE PERUSED THE DEFINITION OF WASTE AND SCRAP AS GIVEN IN NOTE 8(A) OF SECTION XV OF SCHEDULE I (IMPORT TARIFF) OF THE CUSTOMS TARIFF ACT , WHICH READS AS UNDER: 8. IN THIS SECTION, T HE FOLLOWING EXPRESSIONS HAVE THE MEANINGS ASSIGNED TO THEM: ( A ) WASTE AND SCRAP: METAL WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF METALS, AND METAL GOODS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR OR OTHER REASONS. 3 0 . THE ASSESSEE HAS DECLARED THE GOODS IMPORTED BY HIM UNDER THE REVISED INDIAN TRADE CLASSIFICATION CODE (RITC) 74040022, WHICH INCLUDES WITHIN ITSELF BRASS SCRAP OF VARIOUS DESCRIPTIONS. THE GOODS IMPORTED BY THE ASSESSEE ARE CATEGORIZED AS COPPER W ASTE AND SCRAP (INCLUDING BRASS SCRAP) UNDER THE HARMONIZED COMMODITY AND CODING SYSTEMS. IN TRADE CIRCLES ALSO, THE GOODS IMPORTED BY THE ASSESSEE ARE CATEGORIZED AS METAL WASTE AND SCRAP. IN QUICK CAR WASH PVT. LTD. V. COMMISSIONER OF CUSTOMS (SUPRA), H OT/COLD ROLLED SHEETS OF DEFECTIVE QUALITY AND IN RUSTED CONDITION WERE IMPORTED AND THEREFORE WERE NOT US ABLE AS SUCH. ON THE AFORESAID FACTS, IT WAS HELD THAT THE AUTHORITIES WERE NOT JUSTIFIED IN TREATING THE SAID MATERIALS AS NOT OF METAL WASTE. RELEVA NT OBSERVATIONS MADE BY THE HONBLE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL IN THIS BEHALF READ AS UNDER: 8. UPON PERUSING THE RECORD AND CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES, WE FIND IN FAVOUR OF THE APPELLANT. IT IS TO BE NOTED THAT THE CONSIGNMENT IS OF MIXED DIMENSIONS, 50% OF IT HAS BEEN FOUND TO BE RUSTED. IT HAS ALSO BEEN NOTED THAT THE MATERIAL I S SECONDARY/DEFECTIVE. MATERIALS OF THIS DESCRIPTION IS CLEARLY NOT CAPABLE OF BEING SOLD AS FERROUS PRODUCTS. THEREFORE, WE FEEL THAT THE AUTHORITIES WERE NOT JUSTIFIED IN TREATING THE CONSIGNMENTS AS NOT OF METAL WASTE. THE HSN NOTE RELIED UPON BY THE LE ARNED SDR ALSO DOES NOT SEEM TO SUPPORT A CONTRARY VIEW. THERE IS ALSO A MENTION THAT WASTE AND SCRAP OF IRON AND STEEL OF A MISCELLANEOUS NATURE 26 ITA 391 & 392/RJT/2011 WOULD NOT BE USABLE AS SUCH. IN THE PRESENT CASE, THERE IS NO EVIDENCE THAT THE GOODS IN THE CONSIGNMENTS COUL D BE SOLD AS FERROUS PRODUCTS OR \ USED AS SUCH. IT IS DIFFICULT TO PLEAD THAT RUSTED IRON IS CAPABLE OF USE AS IRON SHEETS, PARTICULARLY WHEN THE CONSIGNMENT HAS BEEN FOUND BY THE EXPERT TO BE OF 50% RUSTED. 3 1 . METAL WASTE AND METAL GOODS, WHICH ARE NOT USABLE AS SUCH , ARE CATEGORIZED AS WASTE AND SCRAP UNDER THE CUSTOMS TARIFF ACT. THE CRUX OF THE MATTER IS NON - USABILITY OF THE MATERIAL AS SUCH. IF THE MATERIAL IS NOT USABLE AS SUCH, IT HAS TO NECESSARILY FALL IN THE CATEGORY OF WASTE AND SCRAP. T HE DEF INITION OF SCRAP AS GIVEN IN EXPLANATION (B) TO SECTION 206C OF THE INCOME - TAX ACT COVERS ALL KINDS OF WASTE INCLUDING METAL WASTE AND METAL GOODS WHICH ARE NOT USABLE AS SUCH AND THEREFORE IS SIGNIFICANTLY WIDER IN ITS SCOPE THAN THE DEFINITION OF WAST E AND SCRAP AS GIVEN IN NOTE 8(A) OF SECTION XV OF SCHEDULE I OF THE C USTOMS TARIFF ACT . IN THIS VIEW OF THE MATTER, THE DEFINITION OF SCRAP AS GIVEN IN EXPLANATION (B) TO SECTION 206C INCLUDES NOT ONLY WASTE AND SCRAP OF METAL AS CONTEMPLATED BY NOTE 8(A) OF SECTION XV OF SCHEDULE I OF THE CUSTOMS TARIFF ACT BUT ALSO ALL KINDS OF WASTE AND SCRAP INCLUDING THOSE ARISING FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS PROVIDED SUCH WASTE AND SCRAP IS NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUT TING UP, WEAR AND OTHER REASONS. 3 2 . IT WAS STRENUOUSLY ARGUED ON BEHALF OF THE ASSESSEE THAT THE COURTS AND TRIBUNAL HAVE CONSISTENTLY TAKEN THE VIEW , IN THE CONTEXT OF THE LEVY OF CENTRAL EXCISE DUTY UNDER THE CENTRAL EXCISE ACT READ WITH CENTRAL EXCISE TARIFF ACT, THAT USED, WORN - OUT, OBSOLETE AND SCRAP ITEMS OF BRASS AS ITEMS OF COLLECTION WERE NOT LIABLE TO EXCISE DUTY AS THEY DO NOT ARISE AS PART OF MANUFACTURE OF PRIME PRODUCT. IN THIS CONNECTION, THREE JUDGMENTS HAVE BEEN CITED, NAMELY, M/S GRASIM INDUSTRIES LTD. V. UNION OF INDIA, WHICH IS A JUDGMENT OF THE HONBLE SUPREME COURT IN CIVIL APPEAL NO.7453 OF 2008; AND TWO JUDGMENTS OF THE HONBLE CEG AT IN COLLECTOR OF CUSTOMS V. IM KEMEX LTD., 1996 (86) ELT 95 AND HINDALCO INDUSTRIES LTD. V. COMMISSIONER OF CENTRAL EXCISE, 2002 (144) ELT 339. WE HAVE PERUSED THEM. 27 ITA 391 & 392/RJT/2011 3 3 . SECTION 3 OF THE CENTRAL EXCISE ACT MANDATES LEVY OF DUTY ON ALL EXCISABLE GOODS (EXCLUDING GOODS PRODUCED OR MANUFACTURED IN SPECIAL ECONOMIC ZONES) WHICH ARE PRODUCED OR MANUFACTURED IN INDIA AS, AND AT THE RATES, SET FORTH IN THE FIRST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT, 1985. IT THEREFORE FOLLOWS THAT THE CENTRAL EXCISE DUTY CANNOT BE LEVIED ON THE GOODS INCLUDING SCRAP WHICH ARE NOT MANUFACTURED OR PRODUCED IN INDIA. IT IS IN THE CONTEXT OF THE AFORESAID PROVISION THAT THE COURTS AND TRIBUNAL HAVE HELD , IN THE CONTEXT OF LEVY OF EXCISE DUTY, THAT THE W ASTE AND SCRAP NOT GENERATED FROM THE MANUFACTURE OF THE PRIME PRODUCT CANNOT BE SUBJECTED TO LEVY OF CENTRAL EXCISE DUTY IN THE HANDS OF NON - MANUFACTURERS . TH IS CONTEXT IS COMPLETELY ABSENT IN THE INCOME - TAX ACT AND THEREFORE THE REQUIREMENT THAT THE WAST E AND SCRAP MUST BE GENERATED BY THE ASSESSEE HIMSELF FROM THE MANUFACTURE OF THE PRIME PRODUCT AS REQUIRED BY THE CENTRAL EXCISE LEGISLATIONS CANNOT BE READ INTO THE INCOME - TAX ACT. SECTION 206C OF THE INCOME - TAX ACT, ON THE OTHER HAND, FASTENS LIABILITY ON A SELLER OF SCRAP FOR COLLECTION OF TAX AT SOURCE . THERE IS NO REQUIREMENT THAT SUCH A SELLER SHOULD HIMSELF GENERATE SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS UNDERTAKEN BY HIM. 3 4 . IT WAS VEHEMENTLY CONTENDED ON BEHALF OF THE ASSESSEE THAT SECTION 206C APPLIES TO SALE OF SCRAP WHICH IS GENERATED BY THE ASSESSEE HIMSELF FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS . WE ARE UNABLE TO ACCEPT THE AFORESAID SUBMISSION FOR SEVERAL REASONS. ONE , THE HEAD NOT E OF SECTION 206C SHOWS THAT THE PROVISIONS OF SECTION 206C ARE APPLICABLE TO BUSINESS OF TRADING, INTER - ALIA, IN SCRAP. THE USE OF THE WORDS BUSINESS OF TRADING IN THE SAID HEAD NOTE MAKES IT CLEAR THAT THE APPLICABILITY OF SECTION 206C IS NOT RESTRICTE D TO SALE OF SCRAP GENERATED FROM THE BUSINESS OF MANUFACTURING UNDERTAKEN BY THE ASSESSEE HIMSELF BUT COVERS SALE OF SCRAP IN THE BUSINESS OF TRADING IN SCRAP ALSO. TWO , SUB - SECTION (1) OF SECTION 206C REQUIRES THE SELLER TO COLLECT TAX AT SOURCE. THE T ERM SELLER IS DEFINED IN EXPLANATION (C) TO SECTION 206C ACCORDING TO WHICH THE TERM SELLER MEANS THE CENTRAL GOVERNMENT, A STATE GOVERNMENT OR ANY LOCAL AUTHORITY OR CORPORATION OR AUTHORITY ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT, OR ANY COMPANY OR FIRM OR CO - OPERATIVE SOCIETY AND ALSO INCLUDES AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE 28 ITA 391 & 392/RJT/2011 BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMIT AS SPECIFIED THEREIN. EXP LANATION (C) TO SECTION 206C DOES NOT REQUIRE THAT A SELLER OF SCRAP MUST HIMSELF GENERATE SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS. THEREFORE SUCH A REQUIREMENT CANNOT BE READ IN SECTION 206C FOR ITS APPLICABILITY TO SALE OF SCRAP. THREE , THE SUBJECT MATTER OF SALE ON WHICH TAX IS REQUIRED TO BE COLLECTED AT SOURCE FROM THE BUYER IS , INERT - ALIA, SCRAP, WHICH IS DEFINED IN EXPLANATION (B) TO SECTION 206C TO MEAN WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS. IT DOES NOT FURTHER REQUIRE THAT THE SCRAP , IN ORDER TO BE COVERED BY EXPLANATION (B) TO SECTION 206C, SHOULD ALSO BE GENERATED BY THE ASSESSEE FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS UNDERTAKEN BY THE ASSESSEE HIMSELF . SCRAP FROM THE MANU FACTURE OR MECHANICAL WORKING OF MATERIALS MAY ARISE AS A RESULT OF MANUFACTURING ACTIVITY UNDERTAKEN BY THE ASSESSEE HIMSELF OR BY ANYONE ELSE. SIMILARLY, SCRAP MAY ALSO ARISE FROM THE MECHANICAL WORKING OF MATERIALS, WHICH IS DIFFERENT FROM MANUFACTURE. FOR THE AFORESAID REASONS, IT IS HELD THAT TAX IS REQUIRED TO BE COLLECTED AT SOURCE FROM THE BUYER, IN TERMS OF SECTION 206C, ON SALE OF, INTER - ALIA, SCRAP BEING WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS UNDERTAKEN BY THE AS SESSEE HIMSELF OR BY ANYONE ELSE. A S ELLER OF SCRAP IS NEITHER REQUIRED TO BE A MANUFACTURER HIMSELF NOR THE SCOPE OF SCRAP , AS DEFINED IN EXPLANATION (B), IS RESTRICTED TO SCRAP GENERATED FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS UNDERTAKEN BY THE SELLER HIMSELF. IT IS SUFFICIENT FOR THE APPLICABILITY OF SECTION 206C IF THE PERSON SOUGHT TO BE FASTENED WITH LIABILITY U/S 206C IS A SELLER OF SCRAP BEING WASTE A S WELL AS SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS P ROVIDED ALL OTHER CONDITIONS FOR THE APPLICABILITY OF SECTION 206C ARE ALSO SATISFIED. 3 5 . IN THE MATTER UNDER APPEAL BEFORE US, THE ASSESSEE HIMSELF HAS DECLARED THE GOODS IMPORTED BY HIM AS BRASS SCRAP BEFORE THE CUSTOMS AUTHORITIES. HE IS THEREFORE B OUND BY THAT DECLARATION. ONCE IT IS DECLARED AS WASTE AND SCRAP UNDER THE CUSTOMS TARIFF ACT, IT NECESSARILY FOLLOWS THAT IT IS IN THE NATURE OF WASTE AND SCRAP, WHICH IS DEFINITELY NOT USABLE AS SUCH. BE THAT AS IT MAY, THE DEFINITION OF SCRAP UNDER E XPLANATION (B) IS WIDER IN SCOPE THAN THE DEFINITION OF SCRAP AS 29 ITA 391 & 392/RJT/2011 GIVEN IN THE CUSTOMS TARIFF ACT . IN THIS VIEW OF THE MATTER, MATERIALS RECOVERED ON DEMOLITION OF BUILDINGS, OLD MACHINES /FIXTURES/FITTINGS SOLD AS SCRAP, DISCARDED PACKING MATERIALS, ETC., WOULD ALSO FALL IN THE CATEGORY OF SCRAP AS DEFINED IN EXPLANATION (B) AS ALL OF THEM ARE ITEMS, WHICH ARE NO LONGER USEFUL AS SUCH, AND THEREFORE FALL IN THE CATEGORY OF WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS , WHICH IS DEFINITELY NOT USABLE AS SUCH. RESULTANTLY, G ROUND N OS. 1 AND 2 TAKEN BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS UNDER APPEAL ARE DISMISSED. 3 6 . APROPOS GROUND NO. 3, IT WAS SUBMITTED THAT THE ASSESSEE WAS UNDER A BONA - FIDE BELIEF THAT WHAT WAS IMPORTE D AND SOLD BY HIM WAS NOT SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 206C. WE ARE UNABLE TO ACCEPT THE AFORESAID SUBMISSION FOR T WO PRINCIPAL REASONS. ONE, THE ASSESSEE HAS PLACED NO MATERIAL EITHER BEFORE THE AO OR BEFORE THE CIT(A) OR BEFO RE US TO ESTABLISH HIS BONA - FIDE IN THE MATTER. IT IS NOT HIS CASE THAT HE WAS ADVISED BY ANY COMPETENT PROFESSIONAL THAT THE SCRAP SOLD BY HIM WOULD NOT ATTRACT THE PROVISIONS OF SECTION 206C. TWO, THE PROVISIONS OF SECTION 206C ARE NOT SUBJECT TO REASONA BLE CAUSE OR BONA - FIDE BELIEF LIKE PROVISIONS RELATING TO LEVY OF PENALTY. IN THIS VIEW OF THE MATTER, GROUND NO. 3 IN BOTH THE APPEALS IS DISMISSED. 3 7 . APROPOS ADDITIONAL GROUND NO. 1, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFI CER HAS FASTENED THE LIABILITY ON THE ASSESSEE U/S 206C WITHOUT BRINGING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS SOLD SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 206C. WE ARE UNABLE TO ACCEPT THE AFORESAID SUBMISSION FOR TWO PRINCIP AL REASONS. ONE, IT IS THE ASSESSEE HIMSELF WHO HAD DECLARED THAT THE MATERIALS SOLD BY HIM WAS IMPORTED BY HIM AS SCRAP. THE AO IS NOT REQUIRED TO PROVE FACTS ADMITTED BY THE ASSESSEE HIMSELF. ONCE THE ASSESSEE MAKES A DECLARATION TO THAT EFFECT BEFORE TH E GOVERNMENT AND THE GOVERNMENT ALSO ACTS UPON THAT DECLARATION, HE IS PRECLUDED FROM PLEADING OTHERWISE BEFORE THE GOVERNMENT . SECTION 115 OF THE EVIDENCE ACT IS QUITE APPOSITE. BOTH THE AUTHORITIES, NAMELY, THE AO AND THE CIT(A), HAVE TAKEN COGNIZANCE OF THE AFORESAID DECLARATION MADE BY THE ASSESSEE BEFORE THE CUSTOMS AUTHORITIES BEFORE FIXING THE LIABILITY ON THE ASSESSEE. IT CANNOT THEREFORE BE SAID THAT THE AO HAS NOT BROUGHT OUT ANY 30 ITA 391 & 392/RJT/2011 MATERIAL ON RECORD TO SHOW THAT THE MATERIAL IMPORTED AND SUBSEQUENT LY SOLD BY THE ASSESSEE WAS SCRAP. TWO, WE HAVE ALSO TAKEN THE VIEW THAT THE MATERIAL IMPORTED AND SUBSEQUENTLY SOLD BY THE ASSESSEE WAS SCRAP WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 206C. IN THIS VIEW OF THE MATTER, ADDITIONAL GROUND NO.1 TAK EN BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS UNDER APPEAL IS DISMISSED. 3 8 . APROPOS ADDITIONAL GROUND NO. 2, I T WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 206C REQUIRE A SELLER TO COLLECT THE TAX AT SOURCE FROM THE BUYER ( AND FROM NONE ELSE ) ON SALE , INTER - ALIA, OF SCRAP. OUR ATTENTION WAS DRAWN TO THE DEFINITION OF BUYER AS GIVEN IN SUB - CLAUSE (I) OF CLAUSE (AA) OF EXPLANATION TO SECTION 206C, WHICH DEFINES A BUYER AS A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTIO N, TENDER, OR ANY OTHER MODE, GOODS OF THE NATURE SPECIFIED IN THE TABLE IN SUB - SECTION (1) IT WAS SUBMITTED THAT THE BUYER FROM WHOM TAX IS REQUIRED TO BE COLLECTED AT SOURCE SHOULD BE ONE WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHE R MODE, GOODS OF THE SPECIFIED NATURE. PLACING RELIANCE ON THE INTERPRETATIVE TOOLS OF NOSCITUR A SOCIIS AND EJUSDEM GENERIS, I T WAS SUBMITTED THAT THE PHRASE ANY OTHER MODE IN THE EXPRESSION A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER O R ANY OTHER MODE .. I N EXPLANATION (AA)(I) WOULD GET ITS MEANING FROM THE WORDS PRECEDING IT, NAMELY, BY WAY OF AUCTION, TENDER AND THEREFORE THE SAID PHRASE, NAMELY, ANY OTHER MODE WOULD HAVE TO BE CONSTRUED NARROWLY AND IN THE SAME SENSE AS SOMETHI NG AKIN TO AUCTION OR TENDER. IT WAS FURTHER SUBMITTED THAT SALE OF SCRAP IN RETAIL SALE/ TRADE COULD NOT BE CONSTRUED AS SALE BY WAY OF AUCTION, TENDER OR ANY OTHER SIMILAR MODE AND THEREFORE SUCH A PURCHASER OF SCRAP IN RETAIL SALE COULD NOT BE TREATED AS BUYER WITHIN THE MEANING OF EXPLANATION (AA)(I) TO SECTION 206C. SEVERAL JUDGMENTS , I.E., AHMEDABAD PRIVATE PRIMARY TEACHERS V. ADMINISTRATIVE OFFICER, AIR 2004 SC 1426; ROHIT PULP AND PAPER MILLS LTD. V. COLLECTOR OF CENTRAL EXCISE, AIR 1991 SC 754; SIDDHESWARI COTTON MILLS V. UNION OF INDIA, AIR 1989 SC 1019; HOUSING BOARD OF HAVANA V. HAVANA HOUSING BOARD EMPLOYEES, AIR 1996 SC 434; AMAR CHANDRA CHAKROBORTY V. COLLECTOR OF EXCISE, AIR 1972 SC 1863; M/S GRASIM INDUSTRIES LTD. V. COLLECTOR OF CUSTOMS, JUDGMENT DATED 4 TH APRIL 2002 OF THE SUPREME COURT IN CIVIL APPEAL NO. 1951 OF 1998; KAVALAPPARA KOTTARATHIL KOCHUNI V. STATE OF MADRAS, AIR 1960 SC 31 ITA 391 & 392/RJT/2011 1080; THAKUR AMARSINGHJI V. STATE OF RAJASTHAN, AIR 1955 SC 504; LOKMAT NEWSPAPERS PVT. LTD. V. SHANKARPRA SAD, JUDGMENT DATED 19.7.1999 OF THE SUPREME COURT ; GWALIOR RAYON SILK MFG. (WVG.) CO. V. CUSTODIAN OF VESTED FORESTS, AIR 1990 SC 1747; GHANSHYAM DAS V. REGIONAL ASSISTANT COMMISSIONER OF SALES TAX, AIR 1964 SC 766; UNION OF INDIA V. DEOKI NANDAN AGGARWAL , AIR 1992 SC 96, WERE CITED BY HIM IN WHICH BOTH THE AFORESAID PRINCIPLES HAVE BEEN EXPLAINED. IT WAS CONTENDED THAT THE ASSESSEE HAS SOLD THE SCRAP IN RETAIL TRADE AND NOT BY WAY OF AUCTION OR TENDER OR ANY SIMILAR MODE OR MODE AKIN TO AUCTION OR TENDER AND THEREFORE IT WAS NOT REQUIRED TO COLLECT TAX AT SOURCE FROM THEM U/S 206C AS SUCH PURCHASERS IN RETAIL TRADE WERE NOT BUYERS WITHIN THE MEANING OF EXPLANATION (AA)(I) TO SECTION 206C . 3 9 . THE PRINCIPLE UNDERLYING THE DOCTRINE OF NOSCITUR A SOCIIS I S THAT HE WHO CANNOT BE KNOWN FROM HIMSELF MAY BE KNOWN FROM HIS ASSOCIATES. UNDER THE SAID DOCTRINE, THE MEANING OF QUESTIONABLE OR DOUBTFUL WORDS OR PHRASES IN A STATUTE MAY BE ASCERTAINED BY REFERENCE TO THE MEANING OF OTHER WORDS OR PHRASES ASSOCIATED WITH IT: BLACKS LAW DICTIONARY. UNDER EJUSDEM GENERIS CANON OF STATUTORY CONSTRUCTION, WHERE GENERAL WORDS FOLLOW THE ENUMERATION OF PARTICULAR CLASSES OF THINGS, THE GENERAL WORDS WILL BE CONSTRUED AS APPLYING ONLY TO THINGS OF THE SAME GENERAL CLASS A S THOSE ENUMERATED. THE AFORESAID PRINCIPLE HOWEVER DOES NOT NECESSARILY REQUIRE THAT THE GENERAL PROVISION BE LIMITED IN ITS SCOPE TO THE IDENTICAL THINGS SPECIALLY NAMED. NOR DOES IT APPLY WHEN THE CONTEXT MANIFESTS A CONTRARY INTENTION. EJUSDEM GENERIS RULE IS EXPLAINED IN HALSBURY'S LAWS OF ENGLAND THUS: 'AS A RULE, WHERE IN A STATUTE THERE ARE GENERAL WORDS FOLLOWING PARTICULAR AND SPECIFIC WORDS, THE GENERAL WORDS MUST BE CONFINED TO THINGS OF THE SAME KIND AS THOSE SPECIFIED, ALTHOUGH THIS, AS A RULE OF CONSTRUCTION, MUST BE APPLIED WITH CAUTION, AND SUBJECT TO THE PRIMARY RULE THAT STATUTES ARE TO BE CONSTRUED IN ACCORDANCE WITH THE INTENTION OF PARLIAMENT. FOR THE EJUSDEM GENERIS RULE TO APPLY, THE SPECIFIC WORDS MUST CONSTITUTE A CATEGORY, CLASS OR GENUS, THEN ONLY THINGS WHICH BELONG TO THAT CATEGORY, CLASS OR GENUS FALL WITHIN THE GENERAL WORDS'. 40 . THE EJUSDEM GENERIS RULE IS NOT A RULE OF LAW BUT IS MERELY A RULE OF CONSTRUCTION TO AID THE COURTS TO FIND OUT THE TRUE INTENTION OF TH E LEGISLATURE. LIKE ALL 32 ITA 391 & 392/RJT/2011 OTHER LINGUISTIC CANONS OF CONSTRUCTION, THE EJUSDEM GENERIS PRINCIPLE APPLIES ONLY WHEN A CONTRARY INTENTION DOES NOT APPEAR OR MEANING OF QUESTIONABLE OR DOUBTFUL WORDS OR PHRASES IN A STATUTE IS REQUIRED TO BE ASCERTAINED. IF A G IVEN PROVISION IS PLAIN AND UNAMBIGUOUS AND THE LEGISLATIVE INTENT IS CLEAR, THERE IS NO OCCASION TO CALL IN AID THAT RULE. SIMILARLY, A PHRASE CANNOT BE CONSTRUED EJUSDEM GENERIS UNLESS IT IS SUSCEPTIBLE OF MEANING ANALOGOUS TO THE PRECEDING WORDS. THE AF ORESAID PROPOSITION S ARE WELL SUPPORTED NOT ONLY BY THE JUDGMENTS CITED ON BEHALF OF THE ASSESSEE BUT ALSO BY SEVERAL OTHER JUDGMENTS OF THE HONBLE SUPREME COURT , E.G., U.P. STATE ELECTRICITY BOARD V. HARI SHANKER JAIN, AIR 1980 SC 65; LILAVATI BAI V. STA TE OF BOMBAY, AIR 1957 SC 521; AMAR CHAND CHAKRABORTY V. COLLECTOR OF EXCISE, AIR 1972 SC 1863 ; MAHARASHTRA UNIVERSITY OF HEALTH SCIENCES V. SATCHIKITSA PRASARAK MANDAL, CIVIL APPEAL NO. 2050 OF 2010. 41 . AS ALREADY STATED EARLIER, S ECTION 206C SEEKS TO PREVENT MISCHIEF, I.E., EVASION OF TAXES IN CERTAIN TYPES OF BUSINESSES. THE WORDS DEFINING A BUYER AS A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE .. IN EXPLANATION (AA)(I) ARE PLAIN AND SIMPLE IN THEIR MEANING AND CONTENT. THE BUYER IS ONE WHO OBTAINS SPECIFIED GOODS IN ANY SALE WHICH COULD BE BY WAY OF AUCTION, TENDER OR ANY OTHER MODE. THE USE OF THE WORD OR IN THE AFORESAID EXPRESSION SHOWS THAT ALL THE THREE PHRASES (NAMELY, AUCTION, TENDER OR ANY OTH ER MODE) ARE INTENDED TO CARRY INDEPENDENT MEANING WITHOUT BEING CONTROLLED BY EACH OTHER. THE USE OF THE WORDS ANY OTHER MODE IN THE SAID EXPRESSION FURTHER SHOWS THAT THE MODE OF SALE NEED NOT BE BY WAY OF AUCTION OR TENDER ALONE BUT COULD BE BY ANY OT HER MODE. THE WORDS ANY OTHER MODE ARE WORDS OF WIDE AMPLITUDE AND THEREFORE COVER ALL POSSIBLE MODES OF SALES IN ADDITION TO SPECIFIC MODES OF SALES BY WAY OF AUCTION OR TENDER. HENCE THEY CANNOT BE CONSTRUED EJUSDEM GENERIS OR AS REFERRING TO SIMILAR S ALES AS THOSE BY WAY OF AUCTION OR TENDER. THE LEGISLATURE HAS BEEN CAUTIOUS AND THOROUGH - GOING ENOUGH TO BAR ALL AVENUES OF ESCAPE BY USING THE WORDS 'OR ANY OTHER MODE'. TH E SE WORDS (I.E., ANY OTHER MODE) ARE NOT WORDS OF LIMITATION BUT OF EXTENSION SO AS TO COVER ALL POSSIBLE WAYS IN WHICH A PERSON (I.E., A BUYER) COULD OBTAIN SPECIFIED GOODS IN SALE. THE WORDS OR ANY OTHER MODE IN EXPLANATION (AA)(I) IN SECTION 206C ARE INTENDED TO COVER ALL OTHER MODES OF SALES 33 ITA 391 & 392/RJT/2011 WHICH MAY NOT COME WITHIN THE MEANIN G OF THE PRECEDING WORDS, NAMELY, AUCTION OR TENDER. HENCE, FAR FROM USING THOSE WORDS (I.E., ANY OTHER MODE) EJUSDEM GENERIS WITH THE PRECEDING WORDS OF THE E XPLANATION (AA)(I) , THE LEGISLATURE HAS USED THOSE WORDS IN AN ALL INCLUSIVE SENSE. NO DECIDED CASE OF ANY COURT HOLDING THAT THE WORDS 'OR ANY OTHER MODE ' HAVE EVER BEEN USED IN THE SENSE CONTENDED ON BEHALF OF THE ASSESSEE HAS BEEN BROUGHT TO OUR NOTICE. IN OUR CONSIDERED OPINION, IN THE CONTE XT OF THE OBJECT SOUGHT TO BE ACHIEVED, MISCHIEF SOUGHT TO BE AVOIDED, THE LANGUAGE USED IN EXPLANATION (AA)(I) OF SECTION 206C , AND THE CLARITY WITH WHICH THE LEGISLATIVE INTENT HAS BEEN EXPRESSED , THERE IS NO ROOM TO CONSTRUE THE WORDS OR ANY OTHER MODE EJUSDEM GENERIS THE PRECEDING WORDS IN EXPLANATION (AA)(I) . WE THEREFORE HOLD THAT A PERSON WHO OBTAINS SPECIFIED GOODS IN RETAIL SALE OR BY ANY OTHER MODE OF SALE WOULD ALSO BE A BUYER WITHIN THE MEANING OF EXPLANATION (AA)(I ) AS SUCH SALE WOULD FALL IN THE CATEGORY OF SALE BY ANY OTHER MODE. IN THIS VIEW OF THE MATTER, ALL THE SUBMISSIONS MADE IN THIS BEHALF BY THE ASSESSEE ARE REJECTED. RESULTANTLY, ADDITIONAL GROUND NO. 2 IS DISMISSED. 42 . WE SHALL NOW TURN TO ADDITIONAL GROUND NO. 3. AT THE TIME OF HEARING, O UR ATTENTION WAS ALSO DRAWN TO THE FIRST PROVISO INSERTED IN SUB - SECTION (6A) OF SECTION 206C WITH EFFECT FROM 1.7.2012 ACCORDING TO WHICH ANY PERSON, OTHER THAN A PERSON REFERRED TO IN SUB - SECTION (1D) OF SECTION 206 C, RESPONSIBLE FOR COLLECTING TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION, WHO FAILS TO COLLECT THE WHOLE OR ANY PART OF THE TAX ON THE AMOUNT RECEIVED FROM A BUYER OR LICENSEE OR LESSEE OR ON THE AMOUNT DEBITED TO THE ACCOUNT OF THE BUYER OR LIC ENSEE OR LESSEE SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH BUYER OR LICENSEE OR LESSEE ( I ) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 ; ( II ) HAS TAKEN INTO ACCOUNT SUCH AMOUNT FOR COMPUT ING INCOME IN SUCH RETURN OF INCOME; AND ( III ) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PERSON RESPONSIBLE FOR COLLECTING TAX AT SOURCE FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MA Y BE PRESCRIBED , WHICH, ACCORDING TO RULE 37J OF THE INCOME - TAX RULES, SHALL BE FURNISHED IN FORM NO. 27BA . THE AFORESAID PROVISO RELAXES THE RIGOURS OF CONSEQUENCES FLOWING FROM NON - COLLECTION OF TAX AT SOURCE IF THE CONDITIONS STIPULATED BY THE SAID PROV ISO ARE FULFILLED. 34 ITA 391 & 392/RJT/2011 4 3 . THERE IS NO DISPUTE THAT THE SAID PROVISO HAS BEEN INSERTED IN SUB - SECTION (6A) OF SECTION 206C WITH EFFECT FROM 1.7.2012. AMENDMENTS ON EXACTLY SIMILAR LINES HAVE BEEN CARRIED OUT IN SECTION 201 OF THE INCOME - TAX ACT BY INSERTING A PROVISO TO SUB - SECTION (1) THEREOF WITH EFFECT FROM 1.7.2012. THE NEED FOR SUCH AMENDMENT HAS BEEN EXPLAINED IN THE EXPLANATORY NOTES TO THE FINAN CE BILL 2012 AS UNDER: E. RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS) AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS IN ORDER TO PROVIDE CLARITY REGARDING DISCHARGE OF TAX LIABILITY BY THE RESIDENT PAYEE ON PAYMENT OF ANY SUM RECEIVED BY HIM WITHOU T DEDUCTION OF TAX, IT IS PROPOSED TO AMEND SECTION 201 TO PROVIDE THAT THE PAYER WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX ON THE PAYMENT MADE TO A RESIDENT PAYEE SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH R ESIDENT PAYEE (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PA YER FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. THE DATE OF PAYMENT OF TAXES BY THE RESIDENT PAYEE SHALL BE DEEMED TO BE THE DATE ON WHICH RETURN HAS BEEN FURNISHED BY THE PAYE E . IT IS ALSO PROPOSED TO PROVIDE THAT WHERE THE PAYER FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX ON THE PAYMENT MADE TO A RESIDENT AND IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) ON ACCOUNT OF PAYMENT OF TAXES BY THE SUCH RESIDENT, THE INTEREST UNDER SECT ION 201(1A)(I) SHALL BE PAYABLE FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE OF FURNISHING OF RETURN OF INCOME BY SUCH RESIDENT PAYEE. 35 ITA 391 & 392/RJT/2011 AMENDMENTS ON SIMILAR LINES ARE ALSO PROPOSED TO BE MADE IN THE PROVISIONS OF SECTION 206C RELATING TO TCS FOR CLARIFYING THE DEEMED DATE OF DISCHARGE OF TAX LIABILITY BY THE BUYER OR LICENSEE OR LESSEE. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST JULY, 2012. 4 4 . FIRST PROVISO INSERTED IN SUB - SECTION (6A) OF SECTION 206C SEEKS TO ACHIEVE THREE - FOLD OBJECTIVE S. ONE, IT SEEKS TO (1) ENSURE THAT THERE IS NO LOSS TO THE REVENUE, I.E., (I) THE BUYER HAS FURNISHED HIS RETURN OF INCOME U/S 139, (II) THE BUYER HAS TAKEN INTO ACCOUNT SUCH SUM ON WHICH TAX WAS REQUIRED TO BE COLLECTED AT SOURCE U/S 206C FOR COMPUTING INCOME IN SUCH RETURN OF INCOME, (III) THE BUYER HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, (IV) THE PAYER, I.E., THE PERSON RESPONSIBLE FOR COLLECTING THE TAX AT SOURCE U/S 206C, HAS FURNISHED A CERTIFICATE IN FORM NO. 27 BA CONFIRMING THE AFORESAID; (2) RATIONALIZE THE PROVISIONS RELATING TO COLLECTION OF TAX AT SOURCE; (3) PROVIDE RELIEF TO THE COLLECTOR OF TAX AT SOURCE FROM THE CONSEQUENCES OF NON/SHORT DEDUCTION COLLECTION OF TAX AT SOURCE AND TO THAT EXTENT IT IS A BE NEFICIAL PROVISION. IN THE AFORESAID BACKGROUND, THE ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE FIRST PROVISO TO SECTION 206C(6A) IS APPLICABLE TO PENDING MATTERS ALSO NOTWITHSTANDING THE FACT THAT IT HAS BEEN MADE EFFECTIVE FROM 1.7.2012. 4 5 . IN CIT V. CHANDULAL VENICHAND, 209 ITR 7 (GUJ.), THE ISSUE BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WAS WHETHER THE FIRST PROVISO INSERTED IN SECTION 43B WITH EFFECT FROM 1.4.1988, WHICH WAS INTENDED TO BE A BENEFICIAL PROVISION, WOULD APPLY RETROSPECTIV ELY. THE HONBLE HIGH COURT HAS HELD: ONCE IT IS HELD THAT THE PROVISO IS INSERTED AS A REMEDIAL AND CURATIVE MEASURE FOR REMOVING THE DIFFICULTIES FACED BY THE TAXPAYERS BECAUSE OF INADVERTENT MISTAKE OR OMISSION WHICH HAS CREPT IN IN DRAFTING SECTION 43 B, IT WOULD BE JUST AND PROPER TO HOLD THAT IT WOULD RELATE BACK TO THE DATE WHEN SECTION 43B WAS INTRODUCED. THE AFORESAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN APPROVED BY THE HONBLE SUPREME COURT IN ALLIED MOTORS (P.) LTD. V. CIT, 224 ITR 677 (SC). KEEPING IN VIEW THE FACT THAT THE FIRST PROVISO TO SUB - SECTION (6A) OF SECTION 206C NOT ONLY SEEKS TO RATIONALIZE THE PROVISIONS RELATING TO COLLECTION OF TAX AT SOURCE BUT IS ALSO BENEFICIAL 36 ITA 391 & 392/RJT/2011 IN NATURE IN THAT IT SEEKS TO PROVIDE RELIEF TO THE COLLECTORS OF TAX AT SOURCE FROM THE CONSEQUENCES FLOWING FROM NON/SHORT COLLECTION OF TAX AT SOURCE AFTER ENSURING THAT THE INTEREST OF THE REVENUE IS WELL PROTECTED , WE HAVE NO HESITATION TO HOLD THAT THE SAID PROVISO WOULD APPLY RETROSPECTIVELY A ND THEREFORE TO BOTH THE ASSESSMENT YEARS UNDER APPEAL. WE THEREFORE DIRECT THE ASSESSEE TO APPEAR BEFORE THE ASSESSING OFFICER ALONG WITH RELEVANT DOCUMENTS AS STIPULATED BY THE FIRST PROVISO TO SUB - SECTION (6A) OF SECTION 206C WITHIN TWO MONTHS OF THE DA TE ON WHICH THIS ORDER IS PRONOUNCED UPON WHICH THE AO SHALL EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE SAID PROVISIONS AND PASS APPROPRIATE ORDER ACCORDINGLY IN CONFORMITY WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE ISSUE RAISED IN ADDITIONAL GROUND NO. 3 STANDS RESTORED TO THE FILE OF THE AO WITH THE AFORESAID OBSERVATIONS. 4 6 . IN VIEW OF THE FOREGOING, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. SD/ - SD/ - SD/ - ( A M ALANKAMONY) (G C GUPTA) ( D. K. SRIVASTAVA) ACCOUNTANT MEMBER VICE PRESIDENT ACCOUNTANT MEMBER 06 - 0 9 - 201 3 . PRONOUNCEMENT OF ORDER UNDER RULE, 34 OF ITAT RULES , 1963 ITA N O. 391 & 392 /RJT/2011 - M/S. BHARTI AUTO PRODUCTS V S CIT RESULT PARTLY ALLOWED SD/ - SD/ - SD/ - ( A MOHAN ALANKAMONY) (G C GUPTA) ( D. K. SRIVASTAVA) ACCOUNTANT MEMBER VICE PRESIDENT ACCOUNTANT MEMBER DATE : 06/09/2013 37 ITA 391 & 392/RJT/2011 COPY OF ORDER FORWARDED TO: - 1 . APPELLANT - M/S. BHARTI AUTO PRODUCTS, JAMNAGAR. . 2 . RESPONDENT - THE COMMISSIONER OF INCOME TAX - II, RAJKOT. . 3 . CONCERNED CIT - TDS, RAJKOT. 4 . CIT (A) - II, RAJKOT. 5 . DR, ITAT, RAJKOT 6 . GUARD FILE. BY ORDER , PRIVATE SECRETARY I TAT, RAJKOT