NABROS PHARMA PVT LTD Vs DCIT : GUJARAT HIGH COURT (Dated: July 12, 2017)
Income tax - Sections 10A, 115JB, 147 & 148
Keywords - over statement - export turnover - reopening - escaped assessment
The assessee, engaged in the business of manufacturing pharmaceuticals, had manufacturing units located in Kheda and Kazipura. For the A.Y 2009-10, the assessee filed its return declaring total income of Rs.14.75 crores under the normal provisions of Income Tax Act. The book profit of assessee computed u/s 115JB of the Act came to Rs.47.98 crores. The AO took the return in scrutiny and various claims of company were examined which included the assessee’s claim of deduction u/s 10A. The AO thereafter passed order u/s 143(3) making certain additions. The claim of deduction u/s 10A of the Act was, however, accepted. Subsequently, the AO noticed from assessment records that the assessee had included 'Freight & Insurance amounting to Rs.15253173/- in the 'export turnover’ which resulted in over statement of export turnover to that extent and incorrect computation of deduction u/s 10A. Thus there was excess allowance of deduction to the tune of Rs.1,14,59,450/-, which resulted in short levy of tax of Rs.38,95,067/- plus interest u/s 234B of Rs. 8,17,950/- aggregating to Rs.47,13,017/-. Therefore, the AO had reason to believe that income of assessee had escaped assessment for A.Y 2009-10 within the meaning of u/s 147.
On appeal, the HC held that,
Whether notice for reopening issued under the directives and compulsion of the audit party, is not sustainable - YES: HC
++ it is true that in the present petition, the assessee has not specifically taken the contention regarding the reopening notice being issued at the instance of the audit party. However, as noted earlier, such contention was very much taken in the objections raised by the petitioner and the order passed by the Assessing Officer rejecting such objection did not deal with this ground at all. Therefore, we had called upon the counsel for the revenue to produce the original file to put this factual aspect beyond controversy. Upon perusal of the file, we notice that the audit party had raised an objection of the freight and insurance charges being included in the export turnover for computation of benefit u/s 10A of the Act. We may recall, this was the sole ground on which notice for reopening of the assessment has been issued. In response to such audit query, the then AO had conveyed to the CIT. It can, thus, be seen that the AO, then incharge of the assessment of the petitioner, did not accept the audit objection. In fact he gave detailed reasons why the stand was incorrect. He pointed out that the amount in question is really not in the nature of freight and insurance charges. In any case, if such amount is to be deducted from the export turnover forming the numerator part of the formula the same will also have to be deducted from the total turnover forming the denominator part. On such grounds, he opposed the audit objection. He, however, lastly conveyed that in any case this would be a case where exercise of revisional powers would be appropriate;
++ once again, the AO wrote to the Deputy Accountant General of Audit and conveyed that if the freight and insurance is to be excluded from the export turnover the same should also be excluded from the total turnover to arrive at the actual claim of deduction u/s.10A. The Assessing Officer in the meantime changed. The new AO also asserted that the audit objection is not valid. Despite such internal correspondences, apparently the notice for reopening came to be issued which was passed solely on the ground of the assessee’s claim of deduction u/s 10A and reduction of the freight and insurance charges from the export turnover. Thus, clearly the notice for reopening was issued under the directives and compulsion of the audit party, a mode which is not permissible as held by the decision of this Court in the case of Adani Exports vs. Deputy Commissioner of Income Tax (Assessments) reported in [1999] 240 ITR 224. In the result, the impugned notice dated 27.01.2014 is set aside.
Assessee's petition allowed
2017-TIOL-1357-HC-MAD-CX
THIRU AROORAN SUGARS Vs CESTAT :
MADRAS
HIGH COURT (Dated: July 10, 2017)
CX - The first assessee firm availed Cenvat on HR plates, MS channels and MS Joints, used as supporting structurals for keeping distillation machinery and evaporator in position - Revenue challenged such availment on grounds that distillation machinery and evaporator were not capital goods - Duty demand was imposed, was set aside by Commr.(A) and then again imposed by Tribunal - The second assessee firm availed Cenvat credit of MS Plates, MS Angles and MS Channels, cement and steel used in construction of factory foundations - Revenue challenged such availment and imposed duty demand, which was subsequently upheld by the Tribunal.
Held - As long as the components, spares and accessories in issue, pertain to capital goods falling under Rule 2(a)(A)(i), i.e., Chapter 82,84,85,90 and Heading No.68.05 and 68.04 of the first schedule to CETA, they would have to be treated as capital goods - Hence, they would be eligible for Cenvat credit - Besides, a close reading of Rule 2(k)(i) with Explanation 2 would show that 'inputs' were not only goods used in the manufacture of final products, but also those which are "used in" or in relation to the manufacture of the final products - Such relationship could be either direct or indirect without being weighed down by the fact that they are not included in the final product - Their inclusion or exclusion from the final product was immaterial, as long as the said exercise happened within factory precincts, used for the purposes of production - Therefore, structurals, cement, iron & steel used to erect foundations, would come within the definition of 'input' as they form part of the capital goods, which, in turn, were used in the manufacture of final product - The Explanation 2 could not restrict the scope and ambit of Rule 2k(i) or be read in a manner that it constricts, the scope and ambit of Rule 2k(i) - Hence MS structurals, which support the plant and machinery, which in turn were used in the manufacture of sugar and molasses were an integral part of such plant and machinery - The Assessee clearly demonstrated that structurals as well as foundations, which were erected by using steel and cement were integral part of the plant and machinery, as they hold it in position, enabling it to manufacture the final product - Therefore, the Assessees, were eligible for Cenvat Credit, as they fall within the scope and ambit of both Rule 2(a)(A) and 2k of the 2004 Rules: High Court (Para 7-13.5,31-32,44)
Appeals Allowed
2017-TIOL-2532-CESTAT-ALL
CCE Vs NUTRICIA INDIA PVT LTD : ALLAHABAD CESTAT (Dated: June 14, 2017)
CX - Assessee engaged in manufacture of Edible preparation and were classifying the same under Chapter Heading No. 2108.00 and were claiming abatement of 40% on MRP while Revenue views that goods manufactured by assessee contained Malt Extract and were flavored with Cocoa, therefore, same were classifiable under Chapter Sub Heading No. 1901.92 where abatement available was 35% on MRP - Under Chapter Heading 19.01, title of heading includes food preparations containing Malt Extract and containing Cocoa less than 40% by weight - Said goods are divided through single dash in two categories, one category is "put up in unit containers" and the other category is "others" - 1901.92 is sub set through double dash of "others" - Since goods manufactured by assessee are put up in unit containers, therefore, obviously they will not fall in category "others" which includes 1901.92: CESTAT
Appeal dismissed
