TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 1454
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....mation u/s 143(1) addition / adjustment of Rs. 23,55,051/- has been made, which represent the following:- Interest on custom Duty on import of material Rs. 23,43,327/- Int. on service tax Rs. 11,724/- Total Rs. 23,55,051/- 3.1 Before the Ld. CIT(A), it was submitted that interest is compensatory in nature and not being penal in nature. However, Ld. CIT(A) was not convinced, and after going through the details, challan etc. submitted by the assessee, he was of the opinion that these are fines and thus, he held that the amount of Rs. 23,25,000/- were fines and hence, not allowable deduction u/s. 37 of the Act. He further observed that these fines were said to be in violation of provisions of Custom Act. Against the above, action of the Ld. CIT(A), assessee is in appeal before us. 4. We have heard both the parties and perused the records. At the time of hearing, Ld. Counsel for the assessee submitted the payments are not in the penal nature as and they are not penalty. He submitted that they are fines and thus he referred the decision of the tribunal in the case of Akshay Khetterpal vs. ACIT decided in ITA No. 129/Del/2019 vide order dated 31.5.2019 by which the instant issue ....
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.... did not produce any license from DGFT, hence 1 hold that the goods are liable for Page | 9 confiscated under section 111(d) & (m) of the Customs Act, 1962 and the importer is liable to pay penalty under Section 112 (a) of the Customs Act, 1962. 4. I find that import of these goods "Used digital multifunction print and copying machine (Photocopier) of Schedule III-.of Hazardous Wastes Management, Handling and Transbounday Movement) Rules, 2008 read with Environment Protection) Act, 1986. Importer has produced the Certificate No. 23-85/2012- HSMD dated 22/08/2013 issued from Ministry of Environment & Forest for import of these goods. The said Certificate specified the conditions as below. (i) MFDs must have residual life of 5 years as certified by chartered engineer, or surveyors empanelled by Custom/DGFT. (ii) the importer has license from DGFT,,if applicable; (iii) the importer have to provide a copy of invoice and contract relating to sale and/or transfer of ownership of the equipment ensuring that the equipment is destined for direct re-use and is fully functional. As per condition (i) in this case the Chartered Engineer has certified that the impugned goods ha....
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.... value of the goods imported vide Bill of entry No. 8554297 DT 10/03/2015 be re-determined as Rs. 1348479/- (Rs. THIRTEEN LAKH FOURTY EIGHT THOUSAND FOUR HUNDRED SEVENTY NINE ONLY.) under Rule 9 of CVR, 2007. 6. In view of the above, the goods imported vide BILL OF ENTRY No. 8554297 DT 10)03/2015 is liable for confiscation u/s 111(d) & 111 (m) of Custom Act 1962.The importer is also liable for penalty u/s 112(a) of the Custom Act 1962. The goods are covered under the certificate Issued from ministry of environment and forest as discussed above; hence I pass the following order: ORDER 7. (i) I order that the assessable value of goods, Imported vide Bill of entry No 8554297 DT 10/03/2015 be re-determined as Rs. 1348479/- (Rs, THIRTEEN LAKH FOURTY EIGHT THOUSAND FOUR HUNDRED SEVENTY NINE ONLY.),under Rule 9 of the Customs Valuation (Determination of Value of the imported goods) Rule 2007. (ii) I confiscate the goods, imported vide Bill of entry No. 8554297 DT 10/03/2015 having re-determined value of Rs. 1348479/- (Rs. THIRTEEN LAKH FOURTY EIGHT THOUSAND FOUR HUNDRED SEVENTY NINE ONLY.) under Section 111(d) & (m) of the Customs Act, 1962. However, I give the importer an opt....
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....ssessee do not have any permission under Environment Protection Act, 1986 whereas the Assessee had the same. We are in agreement with the aforesaid facts, however in our view it is probable that the Ld. Commissioner may be due to oversight could not have noticed the said permission. Even otherwise permission under Environment Protection Act, 1986 cannot regularize the acts which are in derogation to the specific provisions specified in particular Act, which the Customs Act in this case. 9 The Assessee also claimed that CBDT Circular No. 722 dated 23.12.1998 (supra) has clarified qua disallowances of the illegal expenses as per section 37 of the Act, which relates to payments made on accounts of protection money, extortion, hafta, bribes etc. only, but does not include fine and penalty, therefore the fine and penalty paid by the Assessee can be allowed. We are not impressed by the contention of the Assessee because the instant CBDT circular cannot be considered as exhaustive in nature as every case has its own facts and is requires adjudication as per its peculiar facts and circumstances and the laws of the land. Even otherwise explanation 1 of section 37(1) of the Act, clearly e....
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....the amount payable is compensatory in nature. In N.M. Parthasarathy's case (supra), the identical situation where redemption fine under the Customs Act was in issue, the Court after examining the scheme of the enactment held as follows: "22. Coming to the facts of the case on hand, the goods belonging to the assessee had been confiscated under section 111(d) of the Customs Act, 1962, read with section 3 of the Imports and Exports (Control) Act, 1947. However, under section 125 of the Customs Act, 1962, an option had been given to the owner assessee to pay, in lieu of such confiscation, a fine of Rs. 1,84,000 which had been reduced on appeal to Rs. 84,000 and the goods had been cleared exercising the option. If the seized goods, without the exercise of option, had been confiscated once and for all, it goes without saying that the property in the goods shall vest in the Government, in the sense of the Government becoming the absolute owner thereof. The fine amount, whatever be its quantification, that is to say, whether it is equivalent to or below the value of the goods seized, cannot at all, in such a situation, be stated to be penal in nature, notwithstanding its nomenclatu....
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....unt, whatever be its quantification, that is to say, whether it is equivalent to or below the value of the goods seized, cannot at all, in such a situation, be stated to be penal in nature, notwithstanding its nomenclature, but it is reparatory or compensatory in nature. Once it is compensatory in nature, it goes without saying that the authority has to allow deduction under s. 37(1) of the IT Act as laid down by the apex Court in the two latest decisions aforecited. Further, the expenses incurred by way of payment of fees to advocates in defending penalty proceedings must also be construed as an allowable deduction. We, therefore, answer questions Nos. 1 and 4 in the affirmative and against the Revenue. For the reasons given for answering questions Nos. 1 and 4, we concur with the conclusion reached by the Tribunal as being correct, though not for the reasons assigned by it. 6. We may now refer to one of the erroneous or fallacious reasonings, namely, that the redemption fine levied by the customs authorities is an additional duty and, therefore, there was no infraction of law, which gave rise to second question, which in the circumstances of the case, cannot at all commend ....
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.... u/s 37(1) of the Act . Therefore, whenever any statutory impost paid by an Assessee by way of damages or penalty or interest, is claimed as an allowable expenditure u/s 37(1) of IT Act, the AO is required to examine the scheme of relevant statuteproviding of such impostnot-withstanding the nomenclature of the impost as given by the statute, to find whether it is compensatory or penal in nature. The authority has to allow deduction u/s 37(1) of the IT Act, wherever such examination reveals the concern impost to be purely compensatory in nature. 13.2 The Hon'ble Apex Court further held wherever impost is found to be composite nature i.e. partly compensatory nature and partly of penal in nature, the authorities are obligated to bifurcate the two components of the impost and give deduction to that component which is compensatory in nature and refuse to give deduction to that component which is penal in nature. 14 Coming to the instant case, the goods i.e. 'used digital multifunction printer and copying machines' were imported by the Assessee without getting license from the DGFT and therefore, the same were confiscated by the Custom Authorities{we are referring only ....
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....ses where an order under sub-section (1) has been passed before the date on which the Finance Bill, 2018 receives the assent of the President and no appeal is pending against such order as on that date, the option under said sub-section may be exercised within a period of one hundred and twenty days from the date on which such assent is received. 15.1 The provisions speaks clearly that whenever confiscation of the goods is authorized by the Customs Act, the Custom Act, the Custom Authority/Officer Adjudgingis empowered to give an option to the owner of the goods [or, where such owner is not known, the person from whose possession or custody such goods have been seized] to pay in lieu of confiscation 'such fine' as the said officer thinks fit. 15.2 From the order passed by the Custom Authority it is clear that the said authority while exercising powers entrusted u/s 125 of the Act, imposed the 'FINE' under challenge to redeem the goods and therefore, the said fine amounts to compensatory in nature and is an allowable expenditure u/s 37(1) of the Act, as also held by the Hon'ble Delhi High Court in the case of Usha Micro Process Control Ltd (supra) and Hon&#....