M/s. D.J. Surfactants, New Delhi v. Addl. CIT, New Delhi

ITA 4157/DEL/2010 | 2007-2008
Pronouncement Date: 27-01-2011 | Result: Allowed

Appeal Details

RSA Number 415720114 RSA 2010
Assessee PAN EYEAR2006I
Bench Delhi
Appeal Number ITA 4157/DEL/2010
Duration Of Justice 4 month(s) 19 day(s)
Appellant M/s. D.J. Surfactants, New Delhi
Respondent Addl. CIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 27-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 27-01-2011
Date Of Final Hearing 27-01-2011
Next Hearing Date 27-01-2011
Assessment Year 2007-2008
Appeal Filed On 08-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F DELHI) BEFORE SHRI G.E. VEERABHADRAPPA HONBLE VICE PRESIDENT AND SHRI A.D. JAIN JUDICIAL MEMBER ITA NO. 4157(DEL)2010 ASSESSMENT YEAR: 2007-08 M/S. D.J. SURFACTANTS ADDITIONAL COMM ISSIONER OF I. TAX A-2/25 MODEL TOWN-I V. RANGE 20 VIKAS BHAWAN N.DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI A.R. MADHAV & TARUN JAIN A DV. RESPONDENT BY: SHRI N.K . CHAND SR. DR ORDER PER A.D. JAIN J.M. THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 007-08 TAKING THE FOLLOWING GROUNDS:- A. THE PRODUCT LABSA IS CLASSIFIABLE UNDER CHAP TER 34 OF CENTRAL EXCISE TARIFF ACT 1985 ONLY. B. CLASSIFICATION OF LABSA UNDER CHAPTER 29 OF CENTRAL EXCISE TARIFF ACT 1985 IS INCORRECT. C. THE CENTRAL EXCISE AUTHORITIES HAVE APPROVED T HE CLASSIFICATION OF LABSA UNDER CHAPTER 34. IT IS NOT OPEN TO THE IN COME TAX DEPARTMENT TO ADOPT A CONTRARY VIEW. D. PRINCIPLES UNDER HARMONIZED SYSTEM OF NOMENCLA TURE(HSN) AND NATIONAL INDUSTRIAL CLASSIFICATION (NIC) CANNOT BE IGNORED. ITA 4157(DEL)2010 2 E. THE REFERENCE TO UNDERLYING IDEA OF NEGATIVE L IST TO EXCLUDE POLLUTANTS FROM GRANTING EXEMPTION IS IRRELEVANT CO NSIDERATION FOR INTERPRETATION OF FISCAL STATUTE. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND PRODUCTION OF LINEAR ALKYL BENZE NE SULPHONIC ACID (HEREINAFTER REFERRED TO AS LABSA) WHICH IS A RAW -MATERIAL USED IN THE MANUFACTURE OF SYNTHETIC DETERGENTS AND CLEANING PR ODUCTS SUCH AS SCOURING POWER LIQUID DETERGENTS ETC. THIS ACTIVITY IS CA RRIED OUT IN BADDI AN AREA NOTIFIED FOR EXEMPTION UNDER SECTION 80 IC OF THE I NCOME TAX ACT. THE DISPUTE RELATES TO CLASSIFICATION OF THE SAID PRODU CT AS TO WHETHER IT IS COVERED WITHIN THE LIST OF NON-ELIGIBLE PRODUCTS PROVIDED I N PART B OF THE SCHEDULE XIII AND IN PARTICULAR SERIAL NUMBER 5 THERETO. 3. AN OBJECTION WAS RAISED BY THE AO AS TO THE CLAS SIFICATION OF THE PRODUCT MANUFACTURED BY THE ASSESSEE AND THUS THE A VAILABILITY OF EXEMPTION U/S 80 IC. ACCORDING TO THE AO THE TREATMENT OF L ABSA MANUFACTURED BY THE ASSESSEE AS A SURFACE-ACTIVE AGENT WAS INCORREC T INASMUCH AS IT WAS DEFINED-CHEMICAL COMPOUND AND THUS CLASSIFIABLE A S ORGANIC CHEMICAL UNDER CHAPTER 29 OF THE CENTRAL EXCISE TARIFF ACT 1985. 4. THE ASSESSEE MADE DETAILED SUBMISSIONS BEFORE TH E AO WITH REGARD TO CLASSIFICATION OF THE PRODUCT BY THE CENTRAL EXCISE AUTHORITIES INTER ALIA EXPLAINING THE TREATMENT AND CLASSIFICATION OF THE PRODUCT UNDER NATIONAL ITA 4157(DEL)2010 3 INDUSTRIAL CLASSIFICATION (NIC) 1998 WHICH HAS A B EARING FOR EXEMPTION U/S 80IC INASMUCH AS REFERENCE TO THE SAME IS MADE IN P ART-B OF THE SCHEDULE XIII. THE ASSESSEE MADE FURTHER SUBMISSIONS WITH RESPECT TO THE HARMONIZED SYSTEM OF NOMENCLATURE (HSN) WHICH IS TH E INTERNATIONAL STANDARD FOR CLASSIFICATION OF PRODUCTS AND COMMODI TIES AND TO WHICH THE CENTRAL EXCISE TARIFF ACT 1985 HAS BEEN ALIGNED. ADDITIONAL SUBMISSIONS WERE MADE WHEREIN THE ASSESSEE JUSTIFIED THEIR CLAI M FOR EXEMPTION IN TERMS OF THE INDUSTRIAL POLICY OF 2003. 5. THE AO PASSED THE ORDER DATED 30.12.2009 HOLDING THAT THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 80IC WAS NOT SUSTAIN ABLE AS THE PRODUCT LABSA MANUFACTURED BY THE ASSESSEE IS NOT CLASSIFIA BLE UNDER CHAPTER 34 BUT INSTEAD IS CLASSIFIABLE UNDER CHAPTER 29 OF THE CENTRAL EXCISE TARIFF ACT 1985 AND THEREFORE IN VIEW OF THE RESTRICTION TO SUCH PRODUCTS UNDER SERIAL NUMBER 5 OF PART B OF SCHEDULE XIII THE EXEMPTION IS NOT AVAILABLE. 6. THE ASSESSEE THEREAFTER OBTAINED A COPY OF A REP ORT GIVEN BY THE CENTRAL REVENUE CONTROL LABORATORY(CRCL) A GOVERNME NT OF INDIA UNDERTAKING WHICH WAS PREPARED IN THE YEAR 2006 IT SELF BEING REPORT DATED 08.12.2006. THIS REPORT WAS PROVIDED BY THE CENTR AL EXCISE AUTHORITIES TO THE ASSESSEE ON 28.01.2010. ITA 4157(DEL)2010 4 THE ASSESSEE RELIED UPON THE AFORESAID CRCL REPORT DATED 08.12.2006 BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED DURING T HE COURSE OF HEARING. HOWEVER NO FORMAL APPLICATION UNDER RULE 46A OF TH E INCOME TAX RULES 1961 WAS FILED BEFORE THE LD. CIT(A). NONETHELESS THE LD. CIT(A) CONSIDERED THE SAID REPORT DATED 08.12.2006 IN PASS ING THE ORDER DATED 30.06.2010 U/S 250 OF THE ACT. 7. THE LD. CIT(A) TOOK INTO ACCOUNT THIS REPORT DAT ED 08.12.2006 AND THE SAME IS REFERRED TO IN PARA 5.1 PARA 5.7 AND PARA 6.3 OF THE IMPUGNED ORDER DATED 30.06.2010 WHICH IS IN CHALLENGE IN THE PRESE NT APPEAL BEFORE THE TRIBUNAL. IN THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) THE ASSESSEE EXPLAINED IN DETAIL THAT THE CORRECT CLASSIFICATION OF THE PRODU CT LABSA WAS UNDER CHAPTER 34 FOR IN BRIEF THE SAME WAS ADOPTED BY T HE CENTRAL EXCISE AUTHORITIES THE SAME WAS ALSO BORNE OUT FROM THE H ARMONIZED SYSTEM OF NOMENCLATURE (HSN) AND ALSO FROM THE NATIONAL INDUS TRIAL CLASSIFICATION (NIC). RELIANCE WAS ALSO PLACED UPON VARIOUS DECI SIONS IN THIS REGARD. 8. HOWEVER BY THE IMPUGNED ORDER DATED 30.06.2010 THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE AND HELD THAT THE PRODUCT IS CLASSIFIABLE AS CHAPTER 29 ONLY CONSEQUENTLY DENYI NG THE BENEFIT OF ITA 4157(DEL)2010 5 EXEMPTION OF SECTION 80IC TO THE ASSESSEE. THE LD . CIT(A) INTER ALIA HELD AS UNDER:- I) THAT IN VIEW OF CHAPTER NOTE 1(B) OF CHAPTER 34 OF THE CENTRAL EXCISE TARIFF ACT 1985 SEPARATE CHEMICALLY DEFIN ED COMPOUNDS ARE NOT COVERED UNDER CHAPTER 34. SINC E LABSA IS A SPECIFICALLY DEFINED CHEMICAL COMPOUND THEREF ORE IT IS NOT CLASSIFIABLE UNDER CHAPTER 34. II) THAT THE PURPOSE OF NEGATIVE LIST UNDER CHAPTER XII I PART-B IS TO PREVENT UNNECESSARY EXPLOITATION OF NATURAL RESOURC ES IN THE AREAS AND THAT IT IS COMMON KNOWLEDGE THAT INDUSTRI ES MANUFACTURING ORGANIC CHEMICALS ARE THE BIGGEST POL LUTANT AND HEALTH HAZARD. THEREFORE OVER EMPHASIS ON EXCISE CLASSIFICATION IS UNWARRANTED AND CHEMICAL INDUSTRY BEING A POLLUTING INDUSTRY SHOULD NOT QUALIFY FOR EXEMPTIO N. III) THAT THE SAMPLE CHECKS CONDUCTED BY CENTRAL EXCISE AUTHORITIES WERE A FUTILE EXERCISE. IV) THAT THE PRODUCT LABSA IS NOT REALLY A SURFACE-ACTI VE AGENT AND THEREFORE CHAPTER 29 IS THE CORRECT CLASSIFIC ATION OF THE PRODUCE. 9. BEFORE US AN APPLICATION UNDER RULE 29 OF THE I NCOME TAX APPELLATE TRIBUNAL RULES 1963 HAS BEEN FILED SEEKING TO PRO DUCE BY WAY OF ADDITIONAL EVIDENCE THE AFORESAID CRCL REPORT DATE D 8.12.2006. IT HAS BEEN CONTENDED THAT THE SAID REPORT IS A REPORT FURNISHE D BY A CENTRAL GOVT. UNDERTAKING; THAT IT IS AN EXPERT REPORT RELEVANT F OR DETERMINING THE ISSUE INVOLVED IN THE PRESENT APPEAL; AND THAT THEREFORE THE SAME BE ADMITTED IN EVIDENCE. ITA 4157(DEL)2010 6 10. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE LD. CIT(A) HAS ERRED IN IGNORING THE AFORESAID CRCL REPORT EV EN THOUGH THE SAME IS AN EXPERT REPORT AND IS RELEVANT FOR DETERMINING THE I SSUE REGARDING EXEMPTION U/S 80IC OF THE I.T. ACT. IT HAS BEEN SUBMITTED T HAT NON-CONSIDERATION OF THE CRCL REPORT HAS VISITED THE ASSESSEE WITH INJUSTICE IN THE SHAPE OF NON-GRANT OF VALID EXEMPTION U/S 80IC OF THE ACT. 11. THE LD. DR ON THE OTHER HAND HAS FORCEFULLY R ELIED ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT THE ORDER PASSED BY THE LD. CIT(A) IS A WELL REASONED AND DETAILED ORDER WHICH REQUIRES NO INTERFERENCE AT ALL; THAT IT HAS BEEN CATEGORICALLY HELD BY THE LD. CIT(A) THAT EXEMPTION U/S 80IC(2) OF THE ACT IS ALLOWABLE UNDER THE ACT ONLY AND NOT UND ER THE EXCISE ACT; THAT IT WAS FOR THIS REASON THAT EXCISE CLASSIFICATION WAS NOT ACCEPTED BY THE LD. CIT(A); AND THAT THEREFORE THERE BEING NO MERIT I N THE ASSESSEES APPEAL THE SAME BE DISMISSED. THE LD. DR HAS ALSO OBJECTED T O THE ADMISSION OF THE ADDITIONAL EVIDENCE. 12. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE LD. CIT(A) HAS TAKEN NOTE OF THE A SSESSEES SUBMISSIONS REGARDING THE CRCL REPORT. REFERENCE IN THIS REGA RD IS CONTAINED IN PARAS 5.1 5.7 AND 6.3 OF THE IMPUGNED ORDER. THE LD. CIT(A) HAS HOWEVER REFUSED TO TAKE INTO CONSIDERATION THE CRCL REPORT FOR THE STATED REASON THAT ITA 4157(DEL)2010 7 EXEMPTION U/S 80IC(2) OF THE I.T. ACT IS ALLOWED UN DER THE I.T. ACT ONLY AND NOT UNDER THE EXCISE ACT DUE TO WHICH FACT AS PER THE LD. CIT(A) OVER EMPHASIS ON EXCISE CLASSIFICATION IS UNWARRANTED. NOT ONLY THIS THE LD. CIT(A) HAS CALLED INTO DOUBT THE VERY FACTUM OF THE EXERCISE CARRIED OUT BY THE EXCISE DEPARTMENT TERMING IT AS FUTILE WHEN ACCORDING TO THE LD. CIT(A) THE TARIFF OF EXCISE DUTY IS THE SAME UNDER BOTH CHAPTER 29 AS WELL AS CHAPTER 34 OF THE CENTRAL EXCISE TARIFF ACT 198 5. 13. THE CONTROVERSY HEREIN IS WHETHER THE PRODUCT LABSA IS CLASSIFIABLE UNDER CHAPTER 34 OF THE CENTRAL EXCISE TARIFF ACT 1985 WHICH PROVIDES FOR SOAP ORGANIC SURFACE-ACTIVE AGENTS WASHING PREPA RATIONS LUBRICATING PREPARATIONS ARTIFICIAL WAXES PREPARED WAXES POL ISHING OR SCOURING PREPARATIONS CANDLES AND SIMILAR ARTICLES MODELIN G PASTES DENTAL WAXES AND DENTAL PREPARATIONS WITH A BASIS OF PLASTER A S CLAIMED BY THE ASSESSEE OR UNDER CHAPTER 29 OF THE CENTRAL EXCISE TARIFF AC T WHICH PROVIDES FOR ORGANIC CHEMICALS AS DETERMINED BY THE AO AND AS CONFIRMED BY THE LD. CIT(A) IN THE IMPUGNED ORDER. 14. THE AO HELD THAT THE PRODUCT MANUFACTURED BY TH E ASSESSEE I.E. LABSA WAS CLASSIFIABLE UNDER CHAPTER 29 OF THE CEN TRAL EXCISE TARIFF ACT 1985 AND NOT UNDER CHAPTER 34 THEREOF. THE ASSESS EE THEREAFTER APPLIED TO THE CENTRAL RESERVE CONTROL LABORATORIES OR CRCL W HICH IS A GOVT.OF INDIA ITA 4157(DEL)2010 8 UNDERTAKING FOR A REPORT IN THIS REGARD. UNDENIAB LY THE CRCL IS AN EXPERT BODY IN THIS REGARD AND ITS REPORT IS AN EXPERT REP ORT WHICH IS RELEVANT FOR DETERMINING THE ISSUE. IT HAS NOT BEEN SHOWN OTHER WISE. 15. THEREFORE THE APPLICATION FILED BY THE ASSESSE E FOR ADMISSION OF THE CRCL REPORT AS ADDITIONAL EVIDENCE IS ALLOWED. T HE CRCL REPORT IS ADMITTED AS ADDITIONAL EVIDENCE. SINCE THERE WAS NO APPLICATION FOR ADDITIONAL EVIDENCE FILED IN THIS REGARD BY THE ASS ESSEE BEFORE THE LD. CIT(A) THE SAME WAS NOT ADMITTED INTO AN EVIDENCE. 16. WE HOWEVER FINDING AS ABOVE THAT THE CRCL R EPORT IS RELEVANT FOR DETERMINING AND DECIDING THE CONTROVERSY REGARDING EXEMPTION U/S 80IC(2) OF THE I.T. ACT REMIT THIS MATTER TO THE FILE OF T HE AO TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW ON AFFORDING ADEQUATE OPPORTUNI TY OF HEARING TO THE ASSESSEE TO PROVE ITS CASE. 17. IN THE RESULT FOR STATISTICAL PURPOSES THE AP PEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.01.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 27.01.2011 *RM ITA 4157(DEL)2010 9 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR