TaxTMI 
TaxTMI 
2002 (6) TMI 169
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....wo units, Kabsons Industries, Hosur and G.K. Kabra Enterprises, Pune run LPG gas filling stations under the brand-name 'Kabsons Gas'. Kabsons Gas is filled in gas cylinders of 2-Kg. capacity and the cylinders are sold with certain appliances like Gas lamp, stove, food warmer, blazing torch, infra-red heater, gas ton door, etc. Each cylinder is sold with a particular appliance. The unit, Kabsons Control, Hyderabad does not run a filling station. It does not even manufacture cylinder or the appliances, but manufacturers regulators and valves used with the appliances/cylinders. In the return filed by the assessee, he described the business of Kabsons Control as under-- "This is a proprietary concern promoted by Mr. G.K. Kabra, who is a qualified Engineer having more than 3 decades of experience in the Engineering line. The concern was promoted to manufacture LPG valves and regulators castings required by M/s. Kabsons Gas Equipment Ltd., who are one of the major suppliers to the oil companies of Government of India. However, the requirements of valves and regulators of other cylinders like Oxygen, Nitrogen, CO2 etc. were also kept in view. From the beginning they are doing machin....
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....bsp; ----------------------------------------------------- Gas Others Gas Others ------------------------------------------------------------------------ Kabsons Control 61200.00 1550167.80 127500.00 2130284.60 G.K.K. Entp. 2330515.26 5676249.88 Kabsons Industries 1600578.90 315708.38 3527886.30 589841.19 ----------------------------------------------------- &n....
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.... less than Rs. 5,000, it was claimed to be entitled for cent per cent depreciation under section 32(1)(ii) of the Act. The Assessing Officer in his order for the assessment year 1994-95 observed that the so-called loan of cylinders was actually a sale transaction. He observed that sale of cylinders was not allowed under Indian Explosives Act, and hence the loaning was undertaken to conceal the transaction of sale. According to him, though the assessee described the transaction as of loaning of cylinders, what it effected was only a sale of cylinders. He also observed that the assessee did not have the details of final users of cylinders and did not have control over the cylinders. He also observed that there was no proof of substituting cylinders lost by another ones free of cost and there was no refund of security deposit received by the assessee and that the cylinders can be filled by any other gas company. He rejected the claim of the assessee that the security deposit is not and cannot be treated as sale proceeds in the light of the decision of the Tribunal in the case of Detective Devices (P.) Ltd v. ITO [1987] 22 ITD 9 (Hyd.)(SB). He accordingly held that though the transacti....
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....ified. He accordingly, upheld the disallowance of depreciation, but directed the Assessing Officer to delete the profit on the sale of cylinders. While coming to this conclusion, the CIT(A) relied on his own appellate order dated 29-12-1999 in the case of M/s. Kabsons Gas Equipment Limited for the assessment years 1995-96 and 1996-97. He noted the plea of the Revenue that the various concerns of Kabsons Group were using the plea of loaning of cylinders solely to reduce the taxable income and the transactions did not have any genuine commercial purpose. He initially noted the following statistics in respect of each of the concerns of the Kabsons group- A. Kabsons Gas Equipments Ltd. ---------------------------------------------------------------------------------- Asstt. year Cylinders Income before Depreciation claim Net total given on depreciation on cylinder &....
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....sp; 2954232 Nil (B/f Unab Depn.) Adjustment of B/F losses 4520725 1996-97 PKL Ltd. 9701053 15436071 (-)6566010 1997.98 PKL Ltd. 11033793 31833755&n....
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....nbsp; Depreciation Net Total given on Depn. on cylinder income deposit to Rs. Rs. Rs. ---------------------------------------------------------------------------------- 1994.95 PKL Ltd. 486588 1133778 823430 1995-96 PKL Ltd. &nb....
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.... 1426994 1601582 (-)249253 1997-98 150448 2895009 (-)2744551 ---------------------------------------------------------------------------------- F. SK Leasing Services - Propritor Shri Satish Kabra ---------------------------------------------------------------------------------- Asstt. year Cylinders Income before Depreciation Net Total given on Depn. &nbs....
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....ransaction and has taxed the difference between security deposit and purchase consideration as profit. This part of the assessment order cannot be sustained. Since the entire transaction is being treated as an artificial and colourable device not having any commercial purpose, the transaction cannot be considered to be sale transaction. The Assessing Officer is therefore directed to exclude the profits computed by her in this regard from the taxable income of the appellant. The appellant gets relief for Rs. 23,97,455 for assessment year 1995-96 and Rs. 6,36,607 for assessment year 1996-97." As the facts of the assessee are similar, the CIT(A) adopted the reasoning given in his appellate order in the case of Kabsons Gas Equipment Ltd. discussed above, and held in the case of the present assessee also as under-- "3.1 Since facts in the present appeals are similar to the facts in the case of Kabsons Gas Equipment Limited for assessment years 1995-96 and 1996-97 following my appellate order dated 29-12-1999 in the case of Kabsons Gas Equipment Limited, I confirm the rejection of the claim of 100% depreciation on cylinders in the present case. I also hold that loaning of the cylin....
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....not considering the basis of the total facts of the Appellant and only relying on the facts of Kabsons Gas Equipment Limited. 5. The learned CIT(A) failed to appreciate that the details/statistics as furnished by the Assessing Officer and reproduced at Paras 5.1 & 6.3 of the impugned Order are erroneous. 6. The learned CIT(A) erred in not following the decision of Hon'ble Special Bench of Income-tax Appellate Tribunal in the case of Detective Devices Private Limited reported in 22 ITD Special Bench 9 and also not following judgment of the Tribunal in the appellant's own case for the assessment year 1990-91. 7. Your appellant craves to leave to add, alter, amend, vary or change any of the grounds of appeal at any time before or at the time of hearing of the appeal as they may be advised." The grounds taken in the appeal for the assessment year 1995-96 are almost identical, except for the amount stated in Ground No.1 above, which in that appeal is mentioned as Rs. 32,55,476. 11. Before us, the case was initially argued by Shri KL. Rathi, Advocate. He, however, withdrew his brief, vide his letter dated 4-3-2002, for personal reasons, when Shri Shankar, the learned Couns....
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.... be affixed to the cylinder by soldering if there is a risk of corrosion or embrittlement. (c) In conjunction with the original marking, space shall be provided for stamping the test date obtained at the periodic inspection. (d) Markings shall be so carried out and the letters and numerals used shall be of such shape and size, that the marking is clear and easily readable and does not give place for misreading. (2) Marking on permanent and liquefiable gas cylinders: (a) Every cylinder shall be marked with the following markings, namely:-- (i) manufacturer's, owner's and inspector's marking and rotation number (these markings shall be registered with the Chief Controller); (ii) specification to which the cylinder has been made; (iii) a symbol to indicate the nature of heat treatment given to the cylinder during manufacture or after repairs; (iv) the date of the last hydrostatic test or hydrostatic stretch test, as the case may be, with the code mark of recognised testing station where the test was carried out. The code mark shall be registered with the Chief Controller. In the case of liquefied petroleum gas cylinders, the quarter and the year of test shall b....
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.... of cylinders in the licensed premises. 52. No licence needed for filling and possession in certain cases.Notwithstanding anything contained in Rule 51, no licence shall be necessary for:-- (a) filling a small quantity of compressed gas from one cylinder to another for the purpose of any experiment or test or for breathing; (b) ............... (c) possession of cylinder filled with- (i) liquefied petroleum gas when the total quantity of gas does not exceed 100 kg. at any one time; (ii) any other flammable but non-toxic gas when the total number of cylinders containing such gas does not exceed 15 or the total weight of gas does not exceed 125 kg., whichever is less, at anyone time; 53. to 57.................. 58. Period for which licences may be granted or renewed--(1) A licence in Form 'D' for the import of cylinders filled or intended to be filled with compressed gas may be granted for such period as the Chief Controller may deem necessary subject to a maximum of one year. (2) A licence in Form 'E', or Form 'F for filling and storage of compressed gas respectively granted or renewed under these rules shall remain in force till the 31st day of March of....
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....e letter Controller of Explosives dated 10 April, 1985 for purchase of Cylinders 2. Manufacturing and Rule 3(b) All cylinder Certificates are supply of cylinders issued by Bureau of Indian specifically for Kabsons Standards. Control under Bureau of Indian Standards Certificates 3. Chief Controller of  ....
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.... Plant with whom Kabsons Control has made the filling arrangements. ----------------------------------------------------------------------------------------------- 14. We have already reproduced hereinabove the relevant Rules of the Gas Cylinder Rules, 1981, which have been cited by the assessee. The permission dated 10-4-1985, allowing the assessee to purchase the cylinders is at page 28 of the assessee's paper book, and it reads as under-- ...................... &....
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....; ......." It may be observed that the above permission only permits the assessee to purchase the LPG cylinders from M/s. Ideal Engineers Hyderabad P. Ltd., whereas in the year of account relevant for assessment year 1994-95, the cylinders were purchased from M/s. Detective Devices Ltd., as we have already mentioned hereinabove. The permission dated 3-5-1985 mentioned against Sl. No. 3 in the statement on page 27 of the paper-book No. II of the assessee extracted above, reads as under- GO (SC) F-36/AP  ....
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....Gas Cylinders Rules, 1981 framed under Explosives Act, 1884 are complied with. Yours faithfully, sd/- &....
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....bsp; Nagpur, Dated, the 27th May 86 1. M/s. Ideal Engineers Hyderabad Pvt. Ltd. Plot No. 42, CIE, Exp. Prog. Gandhinagar, Balanagar, Hyderabad-37. 2. M/s. Kabsons Industries C-17-18, Sidco Indl. Estate. Hosur-636126 (Tamil Nadu). 3. M/s. Flame Gas Appliances Pvt. Ltd. 32 Civil Lines Roorkee-247667. 4. M/s. G.K. Kabra Enterprises, Gate No. 737, Post Velu, Talap, Bhor, Distt. Pune (MS). Sub: Filling of ES-34 (LPG) in an various water capacity of cylinders in your filling plants-- Dear Sirs, Please refer to your letter No. IEHPL/MD/86/154 dated 26-5-1986. There is no objection to your filling ES-34 (LPG) into cylinders of various water capacity which have been specific and approved by this ....
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....cimen copy of the filling permission for the cylinders, referred to in the above table against Sl. No. 5 reads as under-- Government of India Department of Explosives No. G-3(42) 370/P/PM/96 Nagpur, Dated the 29/10/1996 To M/s. Primus Kabsons Ltd., 8-3-1087, Plot No. 48, Srinagar Colony, Hyderabad-500 873. Sub: 33200 Nos. LPG cylinders bearing Sr. Nos. from 280236 to 467630 as per annexure 'A' having water capacity 4.8 litres covered under certificate Nos. IE/BIS/PKC-798 to C-715, IE/BIS/PK/C-837 to C-846, IE/BIS/PK/C-904, C-933, C-940 to C-944, C-1001, IE/BIS/PK/C-1025 to C-1059 and IE/BIS/PK/C-1150 to C-1162 conforming to is: 12586-88 specification manufactured by M/s. Ideal Engineers Hyderabad Pvt. Ltd., Inspected and certified by BIS - Permission for filling. Dear Sirs, There is no objection to the filling of subject cylinders with LPG provided that:-- 1. the cylinders are filled with not exceeding 2 kg. of gas. 2. the cylinders are provided with your logo prominently by means of stencilling, only from who of the top-half of the cylinders. The size of the logo shall be at least 50 mm. high having line thickness of 10 mm. 3. the cylin....
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..../4/95. Sd/- for Chief Controller of Explosives. It may be observed that the above permission is given in respect of each batch of cylinders manufactured like C-715, C-837 etc. and even the individual numbers of cylinders are indicated. It may also be observed that the permission is in the name of M/s. Primus Kabsons Ltd., which is the loanee of the cylinders from M/s. Kabsons Control, and the permission is not in the name of M/s. Kabsons Control. 15. We reproduce hereunder relevant portion of the specimen copy of the certificate issued by the Bureau of Indian Standards, noted against Sl. No. 2 in the table extracted above- "Ideal Engineers Hyderabad Private Limited B-14, C.I.E. Balanagar, Hyderabad-500037. IS: 12586 LPG Cylinder Certificate ISI CM/L: 2195758 Certificate No. : IE/BIS/PK/C-893 Date: 21.10.94 Manufacturer: Ideal Engineers Hyderabad Private Limited, Hyderabad Purchaser : M/s. Kabsons Controls, Hyderabad. Order No. : 001 Dtd.25.10.94 Batch No. : C-893 Cylinder description: 4.80 ltrs. water capacity Two piece Brazed LPG cylinder working pressure 1657.32 KPa at 65 Degrees Centigrade Temperature. This is to certify t....
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....nbsp; : B.No. C-893 (12) Proof Test : 2.48 MPa : Passed (13) Leakage Test 0.686 MPa : Passed (14) Acceptance Test (1) 358849 (From Annexure B-1) Serial No. of cylinders selected (15) Hydrostatic stretch Test (2) 359138 & Bursting Test Results : (i) Cylinder No. : 359200 Min Max (il) Permanent stretch% : 0.78 UTS MPa : 300 307 (iii) Burst pressure : 10.78 MPa Y.S. MPa : 210 285 (iv) Nominal Hoop Stress 640 MPa% Elongation &nb....
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....sp; 400 -------------------------------------------------- Cast No. of Sheet 17519 Steel used: As per approved drawing Properties of Raw Material from Supplier's Test Certificate M/s. NSL Ltd., Hyderabad Physical Properties T.C. No. 94094856 Dtd. 13-9-94 (i) Tensile Strength 304 MPa (31 Kgf/mm2) (ii) Yield Strength 216 MPa (22 Kgf/mm2) (iii) Elongation 40% Chemical Composition (from suppliers test certificate) Carbon 0.053% Sulphur 0.01% Silicon - % Manganese 0.28% Phosphorus 0.012% Nitrogen 0.0039%....
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....e them. It has been made out before us that the Assessing Officer was totally wrong in holding that the case of the assessee is distinct from that of Detective Devices (P.) Ltd. considered by the Special Bench. The learned Counsel for the assessee has also pointed out that the assessee has been extended the benefit of the decision of the Special Bench in the case of Detective Devices (P.) Ltd., vide orders dated 23-10-1990 in ITA No. 1920/Hyd/1987 and dated 23-10-1994 in ITA No. 242/Hyd/90. both of which are filed at pages 109 to 114 of the assessee's paper-book Volume-I. It is strenuously contended that the principles of judicial discipline require that the subordinate authorities should not violate the orders of the Tribunal, and the decision of the Special Bench of the Tribunal is binding on the Division Bench and the decision of the Special Bench cannot be flouted with impugnity even by the Tribunal. In this context, he has relied upon a number of decisions like that of the Apex Court in the case of Union of India v. Kamlakshi Finance Corpn. [1991] 55 ELT 433 (SC) and Bhopal Sugar Industries v. ITO [1960] 40 ITR 618. We do not find it necessary to elaborate the case-law cited b....
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....totally wrong in observing that the gas sales were a minor portion of the business of the assessee, whereas actually the gas sales constituted a major portion of the turnover. We have already extracted the turnover of all the three units of the assessee in para 5 above. The learned Counsel for the assessee pleaded that the assessable entity in the present case constituted all the three units, and it is only for the purpose of operational control that the assessee named them differently. So, according to him, gas sales in all the three units should be clubbed together to ascertain the scale of assessee's business in gas. In other words, the plea of the assessee is that the CIT(A) was not justified in considering the gas sales exclusively in Kabsons Control. But for this difference in approach to the matter, no other factual mistake in the figures adopted by the CIT(A) was pointed out. 19. Adverting to the point made by the Revenue authorities that the cylinders were filled only by 1/2 kg. in each, whereas they have a capacity of 2.3 kg., he mentioned that this was done only because the cylinders have to be filled at the stations of Ideal Engineers whose permission for storage had....
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....s. It was also mentioned that the discrepancy in question is of minor significance because the name of the owner or the buyer from the manufacturer is reflected in the certificate issued by the Bureau of Indian Standards (BIS), and so, all concerned parties like the manufacturers, CCOE and the buyers were aware of the identity of the owner and simply because the permission was given in the name of a different party, it did not mean that the permission was given to the other party, and not the concerned owner. 22. The assessee has also relied on two letters received by the Assessing Officer in the case of M/s. Kabsons Gas Equipment Ltd., to which the CIT(A) made a reference, and it is claimed that the said letters completely clarified the position and supported the stand of the assessee. As both the parties have relied upon those letters in support of their respective stands, it is useful to reproduce at this stage, the letters addressed by the Assessing Officer to CCOE and the two replies received by the Assessing Officer from him. The Assessing Officer addressed the following letter dated 8-3-1999 to CCOE- "...................... &nbs....
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....ted to MI s. Primus Kabsons Ltd. to fill gas in cylinders of specified batches. However, in the proceedings before the Tax authorities, these cylinders are claimed to be owned by M/s. KGEL and the same are claimed to be loaned out to M/s. Primus Kabsons Ltd. after filling-in-1 1/2 kg. of gas in each of the cylinder. The remaining portion left out of 2.3 Kgs. is claimed to be filled subsequently by M/s. Primus Kabsons Ltd. (3) It may be observed here that M/s. KGEL claimed that Rule 51 is not applicable to it as no cylinder filled with gas is stored by it in any godown other than gas filling plant of M/s. Ideal Engineers (Hyderabad) Ltd. (4) In this connection, the Chief Controller of Explosives (CCE) is hereby requested to clarify- (a) M/s. Ideal Engineers (Hyd.) Ltd. has a licence as required under Rule 3(1)(b) of the Gas Cylinder Rules, 1981. Whether it can permit any other person to fill his cylinders without obtaining permission or licence from CCE. (b) Whether M/s. KGEL can fill in 1/2 Kg. gas in the above cylinders owned by it before loaning it to M/s. PKL without obtaining a licence from CCE. (c) Whether the Cylinders in each of which 11 Kg. gas has been claim....
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....sp; Circle 4(5), Hyderabad............" The CCOE replied to the above letter, vide his letter dated 15-3-99, which reads as under- Nagpur, Dated the 15/03/99 To The Dy. Commissioner of Income-tax, Circle 4(5), Hyderabad. Sub; Request for information u/s. 133(6) of the I.T. Act in the case of M/s. Kabsons Gas Equipment Ltd., 7-1-214/1A, Dharam Karam Road, Ameerpet, Hyd. - AYs 93-94 to 97-98- reg. Madam, Please refer to your letter dated 8/3/99. The parawise reply as requested is appended below-- (a) M/s. Ideal Engineers Hyderabad Ltd. is holding licence under Gas Cylinder Rules, 1981 for filling and storage of RLNG/ES. 34 in cylinders as provided under rule 51 of the Gas Cylinder Rules, 1981. Rule 3(1)(b) refers to individual cylinder with specific reference to its standard, design approval and obtaining filling permission in respect of the said cylinder. Any licensee holding valid licence for their bottling plant can fill the cylinders which have been specifically approved for filling....
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....deal Engineers is limited to 8,000 kgs. and it is this limitation that explained the so-called abnormality of filling each cylinder only to the extent of 1/2 kg. In other words, it is argued that there is no bar against two step filling of each cylinder adopted by the assessee. 23. The Assessing Officer followed up the above letter by a fax message dated 22-3-1999, which reads as under-- Dt. 22-03 -1999 To The Chief Controller of Explosives, Department of Explosives, Government of India, Nagpur. Sir, Sub: Request for information U/s. 133(6) of the I.T. Act - In the case of M/s. Kabsons Gas Equipment Ltd., Hyderabad - Reg. Ref: Letter from this office dated 8.3.99 and Reply of Controller of Explosives dated 15-3-99. Kindly refer to my above referred letter and reply from the Office of Controller of Explosives dated 15-3-99. In the reply, the Controller of Explosives has mentioned that M/s. Kabsons Gas Equipment Ltd. has been permitted vide their office letter No. GC (SC)F-38/AP/GS(SC)S17/AP, dated 3.5.85 to get their cylinders filled through M/s. Ideal Engineers Hyd. Ltd. subject to observing the relevant conditions of the licences under Gas Cylinder....
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.... No. GC(SC)F-38/AP/-GC(SC)S-171/AP dated 03/05/85 to get their cylinders filled through M/s. Ideal Engineers Hyd. Ltd., subject to observing the relevant conditions of the licence and the provisions of the Gas Cylinder Rules, 1981. From this office record it is seen that filling permissions have been issued in the name of M/s. Ideal Engineers Hyd. Ltd. & M/s. P.K.L. Ltd. (M/s Primus Kabsons Ltd.) who are holding licences in form 'E' & 'F' of Gas Cylinder Rules, 1981 for filling and storage of the filled cylinders respectively. It is informed that filling permission are not issued on the basis of the financial year but is issued on permanent basis after scrutinizing the manufacturers test and inspection certificates issued by Bureau of Indian Standards and the filling permission valid till the service life of the cylinder. It is for M/s. Kabsons Gas Equipment Ltd., to prove that they have obtained filling permission in respect of the individual cylinders owned by them. To cite an example a copy of this office filling permission No.-G.3(42)370/P/PM/99/I dated 18-03-99 issued in favour of M/s. Primus Kabsons Ltd., covering 59200 Nos. of LPG cylinders is enclosed herewith for your p....
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....placed. He mentioned that what the assessee adopted was at the worst permissible tax planning and there is actually no bar against such tax planning. In this context, he relied on the decision of the Gujarat High Court in Banyan and Berry v. CIT [1996] 222 ITR 831 in whicl1 the decision of the Apex Court in the case of McDowell & Co. Ltd. was explained and it was observed as under-- "In McDowell and Co. Ltd. v. CTG [1985] 154 ITR 148 (SC), it was apparent that on the factual aspect the Court was considering a case where in a going business a liability to pay duty which was legally of the assessee and which on such payment was to become part of the cost of commodity sold by it and to become part of its selling price to the buyers, was as a result of arrangement between the seller and buyer split into two, namely, duty so far paid separately directly to the tax authorities and the balance so paid to the seller; the arrangement was existing solely for the purpose of not paying the tax and it was not a transaction in reality of receiving a lower price than the one on which it was marketing. The Court nowhere said that every action or inaction on the part of the taxpayer which result....
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.... key person in all the concerns involved in the transaction of the so-called purchase and loaning of cylinders, and he is able to avail 100% depreciation on a fake transaction of loaning of cylinders, so as to siphon off the loss from PKL to the assessee, so as to reduce the tax liability of the assessee by a dubious method of tax planning. The assessee in the two years concerned in these appeals, has huge profits, and he planned to reduce tax liability in relation to these profits, by claiming 100% depreciation on the cylinders. But for the claim of depreciation, his taxable income for the assessment year 1994-95, would have been Rs. 23,03,388 instead of returned income of Rs. 6,32,140; and for the assessment year 1995-96 it would have been Rs. 31,30,281 instead of returned loss of Rs. 1,89,280. In support of this proposition, the learned Departmental Representative filed before us, written submissions and chart of permissions received for filling vis-a-vis individual cylinders, and on the basis of the chart, to which we shall advert later, he has argued that the permission from CCOE Nagpur in respect of individual cylinders was received after the so-called loaning of the concerne....
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....rt in the case of McDowell & Co. Ltd. and argued that it is unimaginable that the assessee thought it fit to fill cylinders as a one time measure with 1/2 kg. of gas and loaned the cylinders and did not have any occasion to have them refilled. It is pleaded that the version of the assessee that the same cylinder which were loaned in Hyderabad came back to him in Hosur or Pune, is too incredible to be accepted. At any rate, there is no evidence of the cylinders coming back to him. The learned Departmental Representative also invited our attention to some of the permissions received in the name of M/s. PKL and pointed out that the permissions referred to series of batches of cylinders and some batches related to PKL and other batches ostensibly relate to the assessee, and it is pleaded that again, it is incredible that the CCOE granted permission in a lot, which included some cylinders of PKL and others of the assessee. It is pointed out that the sale of cylinders must have been effected directly from M/s. Ideal Engineers to M/s. PKL and some of the cylinders were intercepted and routed through the assessee and shown against his name. Finally, it is pleaded that whether the case of t....
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....ng the fact that the son of the assessee is a Director there, it cannot be assumed that they would cater to the tax-avoid-needs of the assessee. So, it is pleaded that the Revenue authorities have proceeded on surmises and conjunctures and so, their orders deserve to be set aside. 29. We are of the view that the Revenue deserves to succeed. Firstly, we will make it clear that it is not a case where the question is whether the security deposits received by the assessee of Rs. 17,28,000 in assessment year 1994-95 and of Rs. 36,00,000 for assessment year 1995-96 has to be treated as sale proceeds of the assessee. So, to this extent, we are of the view that the ratio of the Special Bench decision of the Tribunal in Detective Devices case does not apply for these years to the assessee, even though for some of the earlier years, the benefit of that decision was extended. In those years, it as not the case of the Revenue that the transaction of purchase and loaning of cylinders in question was sham. So, this issue was not before the Special Bench in the case of Detective Devices or in the case of the assessee for the earlier years. Nobody can quarrel with the binding nature of a preced....
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....iption vouchers issued by the assessee, filed by the assessee before us. Where the permissions refer to a number of letters and it is not possible to identify a particular batch, that particular letter/letter are mentioned in the column. Where the subscription voucher cannot be identified with a particular batch, it is mentioned that the date of loan is between the first and last date of the relevant vouchers. 33. The detailed tabulation for the assessment year 1994-95 is as under-- ----------------------------------------------------------------------------------------------- Batch No. of Invoice No. & Date of Letter No. Dt. of Date of Empty Cylind- date of M/s. BIS cer- and Date of receipt loan to ers (Each batch Detective tificate ide....
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....------------------ (1) (2) (3) (4) (5) (6) ----------------------------------------------------------------------------------------------- 606 300 741 Not Filed IE/GM/MLG/- 13-02-1995 Between Dt.19-03-1994 94/2005 & 24-3-1994 &nbs....
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....bsp; 26-5-1994 610 300 741 Not Filed -do- 13-02-1995 -do- Dt.27-1O-1994 611 300 741 Not Filed -do- 13-02-1995 -do- Dt.27-1O-1994 612 300 741 Not Filed IE/GM/M/IG/ &....
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.... Not Filed -do- 22-02-1995 -do- Dt.19-03-1994 619 300 741 Not Filed -do- 22-02-1995 -do- Dt.19-03-1994 620 300 742 Not Filed -do- 22-02-1995 -do-  ....
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....p; Not Filed -do- 22-02-1995 -do- Dt.20-03-1994 627 300 742 Not Filed -do- 22-02-1995 -do- Dt.20-03-1994 628 300 742 Not Filed -do- 22-02-1995 -do- Dt.20-03-1994 ....
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.... gas in the year of account relevant for assessment year 1994-95, viz., before 31-3-1994, it means that the cylinders were filled without permission. The contention of the assessee all along has been that his business is under the control of CCOE and that it has complied with all the legal requirements. But, we find a situation where the cylinders are filled without permission. Of course, the assessee has sought to explain that the permission is valid over the entire service life of the cylinder and also that post facto permissions have been received. The contention is unacceptable because even if a permission is valid for entire service life of cylinder, it does not mean that a permission validates fillings effected even before the permission was issued. A permission cannot have retrospective effect. At least, no evidence to this effect has been shown to us or brought to our notice. Even the argument that post facto permissions have been received has no basis. Unless it is shown that a letter seeking post facto permission has been addressed, it cannot be assumed that post facto permissions have been issued or that the permissions have been with retrospective effect. 34. Vide....
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....dia, Old High Court Building, Nagpur-440 001. Sub: Filling permission of 4.8 Litres Water Capacity Cylinders Batch No. C-605 to C-611. Dear Sir, We are enclosing herewith the test Certificates of Batch No. C-605 to 611 of 4.8 Litres Water Capacity Cylinders along with the detailed statement showing the actual serial number of Cylinders passed as per Annexure 'A'. We request you to kindly accord filling permission for the above said Cylinders and oblige. Thanking you, Yours faithfully, For Ideal Engineers Hyd. Pvt. Ltd., Sd/-- (M.L. Goud) Encl: Test Certificate and Statement" The following note appears on the copy of the letter filed with us- "Resubmitted along with our office copies of Test Certificates vide Letter No. IE/GM/MLG/94/2008 dt. 26-5-1994 as advised by Mr. Ramdas. This letter is misplaced in CCE Office." It has been explained that the above letter was misplaced and so, it was followed up by another letter dated 26-5-1994, which reads as under- "IE/GM/MLG/94/2008 26-5-1994 To The Chief Controller of Explosives, Department of Explosives, Government of India, Old High Court Building, Nagpur - 440 001. Sub....
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.... purchased by the assessee, whereas the same permission refers to Batch Nos. 607 and 608 and others, which are not purchased by the assessee. The relevant certificate issued by the BIS is dated 4-2-1994 and covers batches Nos. C-606 to C-608 and it is not clear how the certificate issued by BIS also consolidated the batches relating to the assessee and other concerns. The permission of CCOE was issued in response to M/s. Ideal Engineers Hyderabad's letter dated 26-5-1994. It is not clear how M/s. Ideal Engineers has consolidated the batches belonging to different concerns inclusive of the assessee. Similar position can be noticed from the other permissions issued by CCOE and certificates issued by BIS. It leads to the inference as pointed out by the learned Departmental Representative that a particular batch series was broken and the name of the assessee was got inserted in respect of some batches of cylinders, and also that the assessee and his sister concerns operated as found convenient without regard to the fact that they are, on paper, separate legal entities. 37. Corresponding tabulation for the assessment year 1995-96 reads as under-- ----------------------------------....
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....nbsp; (3) (4) (5) (6) ----------------------------------------------------------------------------------------------- 876 177 08-10-1994 IE/GM/MLG/- 22-2-1995 Between Dt.27-1O-1994 94/2018 & 1-11-1994 &n....
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.... Dt. 28-10-1994 897 179 27-10-1994 -do- 22-02-1995 -do- Dt. 28-10-1994 898 181 27-10-1994 -do- 22-02-1995 -do- Dt. 28-10-1994 899 181 ....
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....sp; 2033 dt. 2-6-94 21-9-1994, 11-1-1995, &n....
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....sp; -do- 26-11-1994 to fill to fill 939 209 23-11-1994 -do- -do- -do- 26-11-1994 940 213 23-11-1994 IE/GM/MLG/ 29-10-1996 Betwwen &nb....
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....bsp; 16-2-1995 & 8-4-1995 941 213 23-11-1994 -do- 20-10-1996 -do- Dt. 30-10-1994 972 241 11-12-1994 IE/GM/MLG/ 22-02-1995 -do- ....
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....nbsp; 242 18-12-1994 -do- 22-02-1995 -do- Dt. 21-10-1994 988 244 18-12-1994 -do- 22-02-1995 -do- Dt. 21-10-1994 989 244 18-12-1994 -do- 22-02-1995 -do- ....
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....IE/GM/MLG/ 20-10-1996 -do- 27-11-1994 94/2009,2015, 2027, 2028, &nbs....
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.... 19-02-1995 -do- 24-01-1997 -do- Dt. 23-10-1994 1089 313 19-02-1995 -do- 24-01-1997 -do- Dt. 23-10-1994 1090 315 19-02-1995 IE/GM/HND/ 24-01-1997 Betwwen 27-11-1994&nbs....
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....p; -do- Dt. 23-10-1994 ----------------------------------------------------------------------------------------------- 38. For this year, the assessee could not furnish the batchwise details of the exact dates of loan to PKL. The assessee has furnished certain subscription vouchers relating to the loaning of the said cylinders, and the subscription vouchers give the following details of the number of cylinders allegedly loaned vide each voucher-- ---------------------------------------------------------------- Subscription Voucher No. Date Quantity ---------------------------------------------------------------- 500010 01-11-1994 800 500011 02-11-1994 &nbs....
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....p; ------------- 15,000 ---------------------------------------------------------------- It is explained that no record has been maintained as to which voucher relates to each of the batches loaned. So, in the above tabulation, the dates of loan are taken as falling between 1-11-1994 and 24-2-1995, as all the vouchers fall between these two dates. 39. When we asked for the dates of loan, assessee gave an explanation, which reads as under-- "Cylinders supplied on loan are from the stocks available at any given time. Customers may have in one Subscription Voucher Cylinders belonging to more than one batch. Cylinders are not supplied batchwise. In any case, all cylinders get mixed up once they enter in service. Clarifications: 1. Cylinders loaned by Assessee are for supply of LPG. These cylinders circulat....
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....0. The practice of Subscription vouchers carrying only the quantity of cylinders loaned and amount of refundable deposit, being only practical, is consistent with the practice in the trade, the Public Sector Oil Companies also doing exactly the same." We do not see the significance of the above explanation. What we asked was the dates on which the specific batches of cylinders were given on loan. On the one hand, the assessee claims that he maintained all the records of the cylinders as per statute. On the other hand, his stand was that the particulars of the dates on which particular batches were given on loan were not available. The claim that the subscription vouchers carried only the number of cylinders loaned and not the batch numbers and that such a practice is consistent with the practice of public sector oil companies is, to our mind, quite misleading because the claim of the assessee is that it obtained batchwise and even cylinderwise permission from CCOE and in the absence of batch numbers of the cylinders loaned, it is not clear how the assessee can claim that the cylinders loaned are permitted by CCOE to be filled. Further, it is the claim of the assessee that he is ....
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....buyer. The assessee must have been shown as the owner in the BIS certificate before he bought the concerned cylinders only because the suppliers were sister concerns and were obliging. It is also not clear how the assessee filled the cylinders with 1/2 kg. gas and loaned them to PKL before the cylinderwise permission for filling either in the name of assessee or PKL was received from CCOE. It can only mean that either the assessee flouted the relevant rules or that the entire transaction was a sham and the latter seems to be more the case as held by CIT(A). In his letter dated 22-3-1999, the CCOE has clearly mentioned that it is for the assessee to prove that cylinderwise permission has been obtained by him. Cylinderwise permission relating to the batches allegedly purchased by the assessee stand in the name of the PKL and, as already mentioned, they do not reflect the assessee as the licencee or permit holder. As we have already mentioned, it is difficult to accept the plea of the assessee that the permission standing in the name of PKL has to be interpreted as relating to the assessee. Assessee's explanation is clearly an attempt to explain away the fact that the permission in re....
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....inders and gas was only to serve the twin claims of security deposit being not taxable in the light of the Special Bench decision in the case of Detective Devices and the claim of depreciation. The plea of the assessee that the cylinders loaned to PKL in Hyderabad came back to him for refilling in Tamil Nadu or Maharashtra is far fetched, and is quite remote from reality and at any rate, there is no evidence in support of such a claim. The contention of the assessee that to ascertain the turnover of the assessee in respect of gas business, all the three units, i.e., in Hosur (Tamil Nadu), Pune (Maharashtra) and Hyderabad should be considered together is, to our mind, without substance. The three units are in three separate States, and it is too much to claim that the cylinders loaned in Hyderabad found their way to the assessee's filling stations in Hosur or Pune. Even as per the assessee's own description of the business of Kabsons Control, which we have reproduced in para 2 above, the main business of the assessee is only manufacture of LPG valves and regulators, and its dealing in gas is nominal. Further contention of the assessee that the order of the CIT(A) does not seem to be....