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2016-TIOL-1664-HC-MAD-CUS + Story
MALABAR DIAMOND GALLERY PVT LTD Vs DRI: MADRAS HIGH COURT (Dated: July 28, 2016)
Customs - Smuggling of gold jewellery - Provisional release - Writ appeal against rejection of provisional release of seized jewellery on the ground that the same are not prohibited goods and can be released to the appellant pending adjudication proceedings - Smuggled gold jewellery are prohibited goods under Sec 2(33) and the discretion exercised by the competent authority, to deny provisional release, is in accordance with law - Appeal dismissed.
Smuggled gold is prohibited goods - As per the precedent orders of the Supreme Court and the High Courts, it is clear that gold, may not be one of the enumerated goods, as prohibited goods, still, if the conditions for such import are not complied with, then import of gold, would squarely fall under the definition, "prohibited goods", in Section 2(33) of the Customs Act, 1962, which states that, "any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. (para 64)
A conjoint reading Sections 2(33), 11 or 11A of the Act and other provisions in the Customs Act, 1962, and any other law, for the time being in force, would also make it clear that importation of goods, defined as illegal or prohibited or without complying with the conditions, or in violation of statutory provisions in the Customs Act, 1962 or any other law for the time being in force and in all cases, whether there is either total prohibition or restriction, in the light of the judgmnet of the Apex Court in Om Prakash Bhatia's case, such goods should fall within the definition of Prohibited goods. When import is in contravention of statutory provisions, in terms of Sections 11 or 11A of the Customs Act, 1962 or any other law, for the time being in force and when such goods squarely fall within the definition "illegal import", or the other provisions in the statute, dealing with prohibition/restriction, the same are to held as, "prohibited goods" and liable for confiscation. (para 76)
If the importer fails to discharge the burden that the goods seized from him, were not smuggled, then there is a strong reason for the proper officer to seize such goods. Smuggling is nothing but importing goods clandestinely, without payment of duty and such goods would squarely fall within the definition of "Prohibited goods", under Section 2(33) of the Act. (para 77)
The expression, "subject to the prohibition under the Customs Act, 1962 or any other law for the time being in force, in Section 2(33) of the Customs Act, has to be read and understood, in the light of what is stated in the entirety of the Act and other laws. Production of legal and valid documents for import, along with payment of duty, determined on the goods imported, are certainly conditions to be satisfied by an importer. If the conditions for import are not complied with, then such goods, cannot be permitted to be imported and thus, to be treated as prohibited from being imported. (para 78)
Section 110A, states that, "Any goods, documents or things seized under section 110, may, pending the order of the adjudicating officer, be released to the owner on taking a bond from him in the proper form with such security and conditions as the Commissioner of Customs may require." The word used in Section 110A is "may" and having regard to the prohibitions/restrictions in the Act and the conditions to be complied with, in terms of Section 2(33) of the Act, it cannot be contended by the appellant, that de hors the prohibition/restriction in the Customs Act, 1962 or any other law for the time being in force, provisional release of the goods, liable for confiscation, is automatic. While considering the right of an importer or any person, covered under Section 112 of the Act, for provisional release, the authority is mandated to consider, what is prohibition and restriction in the Customs Act, 1962 and any other law for the time being in force and the decision in Om Prakash Bhatia's case. (para 81)
Under the Customs Act, 1962, the authorities are duty bound to pass orders for confiscation, impose penalty, initiate prosecution and pending conclusion of the adjudicating proceedings, may order provisional release. At the time, when discretion is exercised under Section 110A and if any challenge is made under Article 226 of the Constitution of India, the twin test, to be satisfied is "relevance and reason". Testing the discretion exercised by the authority, on both subjective and objective satisfaction, as to why, the goods seized, cannot be released, when smuggling is alleged and on the materials on record, it is held that the discretion exercised by the competent authority, to deny provisional release, is in accordance with law. When there is a prima case of smuggling, for which, action for confiscation is taken, such proceedings taken should be allowed, to reach its logical end, and not to the stiffed, by any provisional release. (para 95)
Writ Appeal dismissed
Punjab VAT Act, 2005 - Section 13(4) & (5).
Keywords - input tax credit.
Whether an assessee is entitled for full input tax credit of the tax paid on purchase of pet coke, when it is used for generation of power for captive consumption- YES: HC
The assessee engaged in manufacturing of paper and paper products and its factory is situated at Fatehgarh Road, Amritsar. During course of manufacturing process, assessee uses various raw materials including waste paper, chemicals, packing material and pet coke. Goods manufactured by assessee are either sold during course of intra-state or inter-state trade. Pet coke is purchased by assessee for generation of power for captive consumption. Value added tax is paid thereon @ 4.5% with surcharge @ 10% thereon. As assessee is entitled to input tax credit on pet coke used in generation of power for captive consumption in terms of provisions of Section 13 of Punjab Value Added Tax Act, 2005, however, with a view to avoid any ambiguity later on, a clarification was sought vide application dated 16.12.2012 filed under Section 85 of the Act to Excise and Taxation Commissioner for clarifying the issue regarding entitlement of assessee to input tax credit on the transactions. The Excise and Taxation Commissioner, vide order dated 26.4.2014, clarified that assessee will not be entitled to benefit of input tax credit as same is available on goods mentioned in Section 13(4) of the Act. The order was challenged before Tribunal, who vide its order dated 4.12.2015 dismissed the appeal relying upon an earlier judgment of this court in Malwa Cotton & Spinning Mills Ltd..
Having heard the parties, the High Court held that,
++ while harmoniously constructing the provisions of the Act, the only conclusion which can be arrived is that on the goods specifically mentioned in Section 13(4) of the Act, the benefit shall be available to the extent provided therein, whereas on the other goods, there would be no restriction as such for claiming the benefit of input tax credit, except those specifically mentioned in Section 13(5)(b) of the Act, namely, petrol, diesel, aviation turbine fuel, liquefied petroleum gas and condensed natural gas, as even many of those goods may be used in generation of power for captive consumption;
++ undisputed fact in the present appeal is that pet coke, which the assessee is purchasing for use in production of power for captive consumption, is not mentioned in Section 13(5)(b) of the Act, for dis-entitling the assessee input tax credit thereon in its entirety or restricting the claim to certain limit, as provided in Section 13(4) of the Act. Substantial question of law is answered in positive in favour of assessee holding that assessee shall be entitled to full input tax credit of the tax paid on purchase pet coke, where it is used for generation of power for captive consumption.
Assessee's appeal allowed
2016-TIOL-1673-HC-DEL-IT
CIT Vs AMAN KHERA : DELHI HIGH COURT (Dated: August 3, 2016)
Income Tax - Sections 143(3) & 271(1)(c).
Keywords - cash system of accounting - mercantile system - professional/management consultancy.
Whether the concept of accural of income would be applicable when no books of accounts were maintained by the assessee and accordingly it had to be presumed that they cash system of accounting was being followed - No: HC
Whether AS-9 issued by the ICAI, which deals with the principle of revenue recognition, apply only to companies and not individuals - Yes: HC
The assessee is an individual. Dr. B.L. Khera Charitable Trust was the owner of a hospital known as Khera Hospital. An agreement was entered into between the trust and Metro Hospital and Heart Institute to run and manage the Khera Hospital. The agreement was signed on behalf of the Trust by assessee who was one of the trustees. UG Hospitals Pvt. Ltd. (UGHPL) which was running Metro Hospital and the Heart Institute issued a letter to the assessee appointing him as a management consultant for the chain of hospitals run and managed by us for a period of 5 years and also paid a consolidated amount in advance for the above mentioned appointment. An amount on account of TDS was deducted from the lump sum amount. However, the assessee did not disclose the entire amount received from UGHPL in its return. The returns of income were picked up for scrutiny and assessment orders under Section 143(3) of the Act were passed. Assessee claimed that the amount received from UGHPL was on account of professional/management consultancy. The AO observed that the assessee was not able to produce his regular books of accounts or receipts to show the source of the salary income or the income from business. As regards the receipt from UGHPL, the AO noticed that TDS had been deducted on the entire payment made in lump sum by UGHPL. The claim of the assessee that the amount was received as advance on account of appointment as hospital/management consultant for five years and, therefore, the amount should be spread over for a period of five years, was not accepted by the AO. It was noticed that "there is no regular books of accounts maintained by the Assessees in any system cash or mercantile."Accordingly, the entire receipt from UGHPL by each of the Assessees was treated as their respective income for the AY in question. the AO permitted 35% of the total receipt on an estimated basis as expenses and took the balance amount as income of the Assessee which was added to the return income. Penalty proceedings under Section 271(1)(c) of the Act were also directed to be initiated. The CIT (A) upheld the conclusions of the AO that receipts from UGHPL was chargeable in this year. Upon appeal before the ITAT, the orders of the AO and the CIT(A) were accordingly set aside and the appeals were allowed.
After hearing the parties, the High Court held that,
++ the mere terming of the money received as 'advance' will not per se render the payment as such when in fact it admittedly was paid upfront as a lump sum amount on which TDS was been deducted as such for the period 1st January to 31st March 2006. The decision in CIT v. Dinesh Kumar Goel is distinguishable on facts. There the issue was about collecting fees from students for coaching classes, payable for two years at one point in time. There the Court noted that the amount had to be treated as refundable even though there was no clause as such since complaints could be filed in the consumer forum by the students. The spread over of the receipt over two years was specific to the facts of the case which involved a coaching institute offering courses for two years. There could be no comparison of those facts with the case on hand. Here the payments were irrevocable and non-refundable;
++ there is merit in the contention of the Revenue that since admittedly no books of accounts was maintained by the assessee it had to be presumed that they followed the cash system of accounting. In that view of the matter, the question of income accruing or the right to earn income accruing only upon the performance of a service at the end of a period would not arise;
++ the matching principle or the application of AS-9 issued by the ICAI which deals with the principle of revenue recognition appear to apply only to companies and not individuals. Once it is clear that it is the cash system of accounting that is followed, the further question whether the sum received in one year could be spread over several years, and that too in the absence of any agreement at the time of such payment would not arise. The ITAT could not have overlooked the fact that the agreements produced before the CIT(A) regarding engaging the assessee as hospital consultant was more than four years after the amount had been paid. Such agreements were not reliable pieces of evidence. The Court does not find any reason to interfere with the order of the CIT(A) to the extent that he has disallowed expenditure at an estimated 35% beyond what has already been allowed in relation to the business income in the returns of the Assessees. There is indeed no basis for any estimation of expenditure with the Assessees not maintaining accounts and being unable to produce any vouchers or bills as proof of any expenditure;
++ as far as the penalty appeals are concerned, since the CIT(A) set aside the penalties imposed by the AO only on the ground that the ITAT had deleted the addition, it is necessary for the Court as a result of setting aside the order of the ITAT to remand the appeals concerning the penalty issue to the file of the CIT(A).
Revenue's appeal partly allowed
NOTIFICATION
it16not65
CBDT notifies MUDRA under Section 194A(3)
MIXED BUZZ
100% FDI in petroleum sector extended across the Hydrocarbon value chain
Manifold increase in e-return filed this 'Fiscal' as compared to Previous Year
