Jurisprudentiol – Monday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Income tax

Special Audit – Principles of Natural Justice essential, but only from date of Supreme Court order in Sahara India - 2008-TIOL-73-SC-IT-LB - Not applicable to cases prior to 11 04 2008 – ITAT Special Bench

In Rajesh Kumar and Others vs. DCIT, 2006-TIOL-140-SC-IT the Supreme Court held that it was mandatory to follow the principles of Natural justice before ordering Special Audit.

The Supreme Court itself doubted this and observed in another case, “The effect of these observations appear to be that in every case where the Assessing Officer issues a direction in terms of Section 142 (2A) of the Act, the assessee has to be heard before such order is passed. This does not appear to us to be the correct position of law. Therefore, we refer the matter to a larger Bench.”

And so the case went to a Larger Bench and the Supreme Court in Sahara India (Firm) vs. CIT 2008-TIOL-73-SC-IT-LB held that principles of natural justice were indeed required to be followed. However the Court said that the ruling would apply prospectively from the date of judgement.

Now what is the fate of the appellants who won the case as per Rajesh Kumar – does this prospective application of principles of natural justice apply to them? Yes, says the Tribunal. But Sahara India did not overrule Rajesh Kumar ; in fact it confirmed it – that is beside the point?

Central Excise

Tired of trips to Tribunal, assessee accepts duty demand but claims MODVAT credit set off – Following ratio of Apex Court judgment in Formica India case 2002-TIOL-599-SC-CX , MODVAT credit allowed by CESTAT – MODVAT set off nullifies duty demand and assessee has the last laugh

The appellants were engaged in manufacture of machinery which were claimed to be agricultural implements. They did not register with the department as the said products were exempt from payment of excise duty. Departmental authorities proceeded against them for non-registration and non-payment of excise duty on the ground that the said products are hand tools and articles of iron and steel classifiable under Chapters 82 and 73 of CETA, 1985 and cannot be classified as agricultural implements.

Customs

Mis-declaration in Shipping Bill to secure undue DEPB credit – Malfeasance cannot go unpunished – since no finding given that the goods were prohibited or dutiable, section 113(h)/113(i) of Customs Act mis-applied – Confiscation not sustainable – Exporter liable to be mulcted with penalty u/s 117 of Customs Act – CESTAT.

The only point pressed by the appellant is as to whether the goods could be confiscated under section 113 of the Customs Act on the ground of violation of section 50(2) of the Customs Act and, if so, whether the exporter could be penalized under section 114 of the Act. These questions arose, the appellant contended, since there is no finding by any of the lower authorities to the effect that the goods were either prohibited or dutiable and moreover neither of the lower authorities specified any alphabetical clause of section 113 while effecting the confiscation.

See our columns Monday for the judgements