TaxTMI 
TaxTMI 
2025 (6) TMI 1454
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.... to Rs. 23,55,051/- is concerned, in the intimation 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/De....
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....sification of Import & Export items, but they failed to produce the same. I find that Importer 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 a....
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.... importer has waived SCN and PH. The Importer accepts the value suggested by the Charter Engineer. Therefore, I find that the assessable 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/- (R....
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....aim expenditure incurred in respect of fine and penalty as imposed u/s 125(1) and 112(a) of the Customs Act 1962 respectively. 8 At the outset it was claimed by the Assessee that the Ld. Commissioner wrongly held that the Assessee 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 canno....
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......................................... 9. In Prakash Cotton Mills Pvt. Ltd.'s case (supra), the Supreme Court pertinently observed that whenever an Page | 14 authority has to decide whether to grant or refuse deduction under section 37(1) of the Income Tax Act, the governing test would be whether 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 ....
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....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 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 ....
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....fuse to give deduction to that component which is penal in nature." 13.1 The Hon'ble Apex Court in the case of Prakash Cotton Mills Pvt. Ltd (Supra) has clearly held that when an amount paid as interest or damages or penalty as would regard as compensatory (reparatory in character), the Assessee would entitled to claim it as Page | 17 an allowable expenses 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 ....
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....ed to in sub- section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods. (3) Where the fine imposed under sub-section (1) is not paid within a period of one hundred and twenty days from the date of option given thereunder, such option shall become void, unless an appeal against such order is pending. Explanation.--For removal of doubts, it is hereby declared that in cases 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.....