VIKAS CHEMICALS Vs. ASSISTANT COMMISSIONER OF INCOME TAX
LAWS(IT)-1994-2-16
INCOME TAX APPELLATE TRIBUNAL
Decided on February 21,1994

Appellant
VERSUS
Respondents

JUDGEMENT

A. Kalyanasundharam, Accountant Member - (1.) THE assessee, a limited company has filed this appeal and has raised a few issues. Each of these issues have been taken in seriatim and have been disposed of in that order.
(2.) The first issue is related to the addition of Rs. 99,69,146 representing profit that has accrued on sale of 630 MT of isabutanol. The brief facts of this issue are stated below. M/s India Crafts (hereinafter referred to as IC) had Imported 630 MT of isabutanol from Netherlands against the REP licences that had been provided to it for the various exports made by it. The goods were sent through a ship named 'Rainbow' on 6-6-1987 and the documents were sent through the supplier's bankers, Bank of Credit & Commerce Hongkong Ltd. On 9-6-1987, the assessee entered into an agreement with IC for purchase of 630 MT of Isabutanol on High Sea sale basis, as an actual user. This agreement provided for (a) the assessee shall make full payment of document consisting of CIF value, L/C, bank's interest, commission and other charges levied in connection with the retirement of the documents to IC; (b) all titles to the goods would be transferred to the assessee on the retirements of the documents from the bank; (c) the assessee to arrange for the clearance of the goods, pay the custom duties, clearing charges, etc.; and (d) that IC shall subrogate their rights in favour of the assessee in case of insurance claim. The Bank of Credit & Commerce Hongkong Ltd. advised the bankers of the assessee vide letter dated 31-7-1987 about the substitution of the name of the assessee and advised the assessee's bankers to send the revised documents. The goods landed at Kandla Port in June 1987 and the Bill of Entry bearing No. 2719 was prepared on 26-6-1987, based on which the purchase of 630 MT of isabutanol was entered in the books of the assessee. The assessee moved the Custom authorities for the clearance of the goods on the strength of the Bill of Entry and the goods were moved to the Custom Bonded Tank on 29-6-1987. On testing the Custom authorities were satisfied the goods imported was only isabutanol. The assessee also placed the REP licences that endorsed in its favour by IC, on the strength of which the import was made. The Custom authorities on examination of the REP licences, felt that, the import of isabutanol could not be permitted under those licences, by referrring to the requirements of issuance of licences against exports effected and did not permit clearance of the goods. The Collector of Customs vide his show-cause notice dated 21-1-1988, called upon the assessee to give reasons as to why 630 MT of isabutanol should not be confiscated under Section 111(d) of the Customs Act, 1962 and why penalty should not be imposed on it under Section 112 of the Customs Act. This was followed by another notice dated 15-2-1988 from the Dy. Collector of Customs reiterating the earlier notice dated 21-1-1988 and stating further that, Section 3(2) of the Import & Exports (Control) Act, 1947, read with Section 11, of the Customs Act have been contravened, for which, the assessee was called upon to file its reply in writing and also the present itself before the Dy. Collector of Customs. The assessee, instead of filing any reply to the above notices, filed writ petition before the Gujarat High Court (from now on referred to as GHC) challenging the detention of the goods, claiming that the goods are proper imports made under valid licences and also the show-cause notices. On 25-3-1988, GHC directed the assessee to reply to the show-cause notices, at the same time directed the Customs authorities to hear the parties and then pass the order according to law and also directed the Customs authorities to file the order so passed with GHC by 8-4-1988. The assessee filed it reply to the show-cause notices on 4-4-1988, stating therein that, the REP licences allowed the import of isabutanol by the actual user and that, the assessee was an actual user, in support of which, it was claimed that, the letter of authority for importing on in its behalf was given to IC. It was also stated that, Import & Exports (Control) Policy permitted such imports and that, full particulars of the REP licences were so provided along with the Bill of Entry and prayed that, the import being validly made, the proceedings be quashed.
(3.) THE Collector of Customs passed his order on 13-4-1988, which is reproduced below, for the sake of facility. Having carefully considered all the relevant facts and circumstances of the case, I order confiscation under Section 111(d) of the Customs Act, 1962 of Isabutanol weighing 629.250 MT of CIF value Rs. 29,62,486.70. THE market value of Isabutanol is Rs. 30 per Kg. and accordingly the market value of Rs. 1,88,77,500. THE landed cost consisting of CIF value plus 5% of CIF duty and duty works out to Rs. 73,40,256.88. It is thus observed that the net margin of profit available is Rs. 1,15,37,243.12. Against the aforesaid confiscation I give an option under Section 125 of the Customs Act, 1962 to M/s Vikas Chemicals, New Delhi, an option to pay a fine of Rs. 90 lakhs in lieu of confiscation within a period of thirty days from the receipt of this order. THE margin of profit as mentioned above is Rs. 1,15,37,243.12 but considering the period of filing of Bill of Entry in June 87 the fine in lieu of confiscation has been adjudged as above. It is also clarified for removal of doubt that the importer shall pay appropriate duty leviable thereon in addition to the fine so imposed. From the above facts and circumstances it is evident that M/s Vikas Chemicals, New Delhi had intended to clear the aforesaid imported Isabutanol on the licences which were not valid for the said import and have also cited separate set of replenishment licences in the writ petition 5190/87. Even these new set of licences are also not valid for the import of Isabutanol. M/s. Vikas Chemicals, New Delhi had therefore clear mens rea to import Isabutanol an invalid licences and accordingly are liable for penalty under Section 112(a)(i) as aforesaid. I therefore impose upon M/s Vikas Chemicals, New Delhi a penalty of Rs. 10 lakhs under the aforesaid provisions. This would be paid forthwith. M/s India Crafts, of New Delhi, the licence holder have so far not replied to show-cuase notice dated 21-1-1988. Since I have to adjudicate the matter within the time schedule stipulated by the Hon'ble High Court of Gujarat, I reserve my right to take appropriate action for penal liabilities on the said M/s India Crafts at appropriate time hereafter.;


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.