IT: Where while deciding issue, Tribunal took in account correct fact as also arguments and case laws cited, rectification of Tribunal's order could not be possible
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[2013] 40 taxmann.com 80 (Panaji - Trib.)
IN THE ITAT PANAJI BENCH
Assistant Commissioner of Income-tax, Circle-1(1)
v.
Sesa Goa Ltd.*
P.K. BANSAL, ACCOUNTANT MEMBER
AND D.T. GARASIA, JUDICIAL MEMBER
AND D.T. GARASIA, JUDICIAL MEMBER
SEPTEMBER 19, 2013
Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of [Power of rectification] - Assessment year 2009-10 - Revenue filed application for rectification contending that while deciding issue as to whether EOU units of assessee engaged in processing crude ore was manufacturing or not, Tribunal had misinterpreted case relied by revenue - In fact decision of Tribunal was based on appreciation of facts and cases relied upon - In application before Tribunal seeking rectification, revenue could not bring any fact to fore that Tribunal had failed to consider case law as cited before Tribunal or that Tribunal had not considered contentions, pleas and arguments raised before Tribunal by both sides - Even though revenue stated in its application that there were mistakes of fact, it could not point out during course of hearing that there were incorrect facts which were taken into account by Tribunal - Whether application filed by revenue had to be dismissed - Held, yes [Paras 4 & 5][In favour of assessee]
Words & Phrases: 'Record' as occurring section 254(2) of Income-tax Act, 1961
FACTS
| ■ | The EOU units of assessee was engaged in washing, screening, dressing the iron ore. The assessee filed explanation before the Assessing Officer explaining the activities of EOU units. | |
| ■ | The Tribunal after consideration of all case laws and appreciating the facts, held that the operation of mining as 'manufacture'. | |
| ■ | The revenue filed application under section 254(2) before the Tribunal for rectification, on the basis of an appeal decided by High Court in an earlier assessment year, for the same assessee where it was held that all activities from extraction of iron ore to loading of iron ore was integrated process of 'mining', did not amount to 'manufacture', as there was no creation of any new article or thing. |
HELD
| ■ | An error apparent on the face of the record cannot be defined exhaustively, there being an element of indefiniteness inherent in its very nature and it must be left to be determined judicially on the facts of each case. [Para 4.1] | |
| ■ | The word 'record', means the entire record consisting of not only grounds of appeal and the case laws relied on and referred to before the Tribunal, but also the contentions, pleas and arguments raised by the parties before the Tribunal. The word 'record' has not been defined under section 254(2) or under section 2 so as to restrict its meaning only to the grounds of appeal decided in the order of the Tribunal. The provisions of section 254(2) could not be constituted in a manner that produces an anomaly or otherwise produces irrational or illogical result. | |
| ■ | The departmental representative even though vehemently argued, but could not bring to knowledge that this Tribunal failed to consider the case law as cited before the Tribunal or the Tribunal has not considered the connections, pleas and arguments raised before the Tribunal by both the sides. Even though the revenue stated in its application filed before us that there are mistakes of fact but could not point out during the course of hearing that there are incorrect facts being taken into account by the Tribunal. The grounds taken in the application, as is apparent, require this Tribunal to re-consider its decision. The revenue, in the garb of application for rectification, has sought to re-open and argue the matter which is beyond the scope of section 254(2). | |
| ■ | The power under section 254(2) does not contemplate re-hearing which would have the effect of re-writing the order affecting the merit of the case. If the power given under section 254(2) is read in that manner, then, there will not be any difference between the power to review and the power to rectify the mistake. The legislature has not deliberately conferred the power of review on the Tribunal and the Tribunal cannot review its order under the garb of power given under section 254(2). | |
| ■ | The decision of the Tribunal is based on the appreciation of the facts and the case laws. Therefore, the Miscellaneous Application filed by the revenue, does not relate to mistake apparent on the record rectifiable, under section 254(2). Since the revenue has gone in appeal before the High Court on the same very issues, this Tribunal in view of the decision of the Special Bench, ITAT, Mumbai in the case of Tata Communications Ltd.v. Jt. CIT [2009] 121 ITD 384 cannot interfere in its order. [Para 4.1] | |
| ■ | In the result, the application filed by the revenue stands dismissed. [Para 5] |
CASE REVIEW
Tata Communications Ltd. v. Jt. CIT [2009] 121 ITD 384 (Mum.)(SB) (Para 4) followed.
CASES REFERRED TO
Chowgule & Co. (P.) Ltd. v. Union of India [1981] 7 Taxman 71 (SC) (para 2), CIT v. Sesa Goa Ltd. [2004] 266 ITR 126/137 Taxman 267 (Bom.) (para 2), CIT v. Emirates Commercial Bank Ltd. [2003] 262 ITR 55/[2004] 134 Taxman 682 (Bom.) (para 3), Tata Communications Ltd.v. Jt. CIT [2009] 121 ITD 384 (Mum.)(SB) (para 3), Sudhakar M. Shetty v. Asstt. CIT [2012] 20 taxmann.com 264 (Mum.) (para 3), ITO v. Chitra Khanna [MA No. 417 (Mum.) of 2010] (para 3), Ornate Traders (P.) Ltd. v. ITO [2008] 24 SOT 125 (Mum.) (para 3), Rolta India Ltd. v. Jt. CIT[M A No. 490 (M) of 2006] (para 3), Royal Antibiotics & Investment v. ITO [M A No. 795 (Mum.) of 2009] (para 3), Bayer Corp. Science v.Addl. CIT [2012] 25 taxmann.com 575 (Mum.) (para 3), CIT v. Simoni Gems [M A No. 240 (Mum.) of 2010] (para 3), Dakshata Finance & Investment v. ITO [M A No. 705 (Mum.) of 2009] (para 3), ACIT v. GTL Ltd. [M A No. 746 (Mum.) of 2009] (para 3), Asstt. CIT v. Safe Enterprises [2011] 128 ITD 459/9 taxmann.com 121 (Mum.) (para 3), T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 (SC) (para 4.1),Hari Vishnu Kamat v. Syed Ahmed Ishaque [1955] 1 SCR 1104 (para 4.1), Batuk K. Vyas v. Surat Borough Municipality AIR 1953 Bom. 133 (para 4.1), Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Triumale [1960] 1 SCR 890 (para 4.1) and Udhavdas Kewalram v.CIT [1967] 66 ITR 462 (SC) (para 4.1).
Asha Desai for the Appellant. Vinod Kumar Bindal, Sanjeev Kr. Bindal and Vijay Gupt for the Respondent.
ORDER
Smt. P.K. Bansal, Accountant Member-This Miscellaneous Application has been filed by the Revenue against the order of this Tribunal in ITA No. 85/PNJ/2012 dt. 8.3.2013 stating therein that following mistakes of fact are noticed in the order of this Tribunal.
| "1. | On Page No. 135 of the ITAT order it is mentioned that in view of decision of Supreme Court in the case of Chowgule & Co. (P.) Ltd. v.Union of India [1981] 7 Taxman 71, It can be held that the assessee is engaged in these units (EOU units) in 'manufacturing'. Similarly, on Page No. 138, Para No. 43.10 of ITAT order it was held that Hon'ble Supreme Court in the said judgment (in the case of Chowgule & Co. Pvt. Ltd. (supra) did not consider the expression "manufacture" since the question was decided only on the expression processing. Based on this judgment, definition of manufacture under Section 2(29B) and other decisions the ITAT concluded that the assessee is entitled for 10(B) deduction. The ITAT made a mistake in holding that processing by the EOUs resulted into a new article or thing which is contrary to the findings of the Hon'ble Supreme Court judgment in the case of Chowgule & Co. (P.) Ltd. (supra). The Supreme Court in the case ofChowgule & Co. (P.) Ltd. (supra) clearly held that "blending of different qualities of ore possessing different chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. What is produced as a result of blending is commercially the same article, namely, ore, though with different specifications than the ore which is blended and hence it cannot be said that any process of manufacture is involved in blending of ore (279G, 280B-D)". Therefore, since the findings of the Hon'ble ITAT are against the findings of Hon'ble Supreme Court which is the law of the land and hence requires to be rectified. | |
| 2. | Bombay High Court in the assessee's own case viz CIT v. Sesa Goa Ltd. [2004] 266 ITR 126/137 Taxman 267 held that operations of mining can not be termed as manufacturing. It was held that the all the activities from extraction of iron ore to the loading of iron ore in the ship are integrated process of "mining" which do not amount to "manufacture" because there is no creation of any new article or thing. Even after the amendment in the section 10 (AA) & other decisions of Supreme Court/High Courts/ITATs, the findings of Hon'ble Bombay High Court remains valid that no new article or thing has come into existence after processing of iron ore. Therefore, even after insertion of Section 2(29BA) about manufacture, holding by ITAT that the processing of iron ore amounts to "manufacturing" is against the law laid down by Bombay High Court. The order of the ITAT holding the operations of the mining as "manufacture" is contrary to the decisions of the Hon'ble Supreme Court and Bombay High Court. The EOU units of the assessee are not engaged in extraction of ore and hence the activities of EOU units do not come within the purview of even "production" in view of the above judicial decisions and hence the findings to the ITAT requires to be rectified. | |
| 3. | There is no blending activity in the EOU units of the assessee company. The EOU units are engaged only in washing, screening and dressing the ore. The explanation filed by the assessee explaining the activities of the EOU units during the course of scrutiny proceedings before the A.O. is enclosed for perusal of Hon'ble Members of ITAT. ITAT erroneously presumed that there was blending of iron ore of various grades in the EOU units. Plant & machinery in EOU does not have any mechanical blending machinery. ITAT, therefore, wrongly applied the ratio of the cases of Tata Tea & Madhu Jayanti and hence the findings of the ITAT requires to be rectified. | |
| 4. | ITAT erroneously presumed dismantling of the old plant whereas no such claim was made before lower authorities. | |
| 5. | In applying open market rate of ROM for the purpose of 10B(7) r.w.s. 801A(8), ITAT, restricted the AO to the assessee's average rate whereas some of the purchase of the assessee are not at arm's length price'. |
The application was fixed for hearing. Both the parties were heard.
2. The ld. DR vehemently contended on the basis of the Miscellaneous Application that mistake has crept into the order of this Tribunal. This Tribunal has mis-interpreted the decision of the Hon'ble Supreme Court in the case of Chowgule & Co. (P.) Ltd. v. Union of India [1981] 7 Taxman 71. There the issue was blending of different qualities of ore possessing different chemical and physical composition while in the case of the Assessee, the Assessee was processing the crude ore and therefore, there was no manufacturing in the case of the Assessee. It was also pointed out that the Hon'ble Bombay High Court in the Assessee's own case in CIT v. Sesa Goa Ltd. [2004] 266 ITR 126/137 Taxman 267 held that the operation of mining cannot be termed as manufacturing. It was pointed out even after the amendment in Sec. 10(AA), the finding of the Hon'ble High Court remains valid and no new article came into existence after processing of the iron ore. Even after insertion of Sec. 2(29BA) about manufacture, processing of iron ore does not amount to manufacture as the Tribunal has laid down law against the law laid down by the Hon'ble Bombay High Court and therefore, the finding of the Tribunal requires to be rectified. It was also submitted that there was no blending activity involved in the EO units of the Assessee Company. The ITAT erroneously presumed that there was blending of iron ore of various grades in the EO units. The Plant and Machinery in the EOU does not have any mechanical blending machinery. Therefore, the Tribunal has wrongly applied the ratios of the cases of Tata Tea & Madhu Jayanti and hence the finding of the Tribunal requires to be rectified. The Tribunal has wrongly presumed dismantling of the old plant whereas no such claim was made before the lower authorities. In applying the open market rate of ROM for the purpose of Sec. 10B(7) r.w.s. 80IA(8), ITAT restricted the assessment order to the Assessee's average rate whereas some of the purchases of the Assessee are not at arm's length price. When a query was raised by the Bench whether any appeal has been filed before the Hon'ble High Court, the ld. DR was fair enough that the Revenue has filed an appeal before the Hon'ble High Court.
3. The ld. AR, on the other hand, contended that this Tribunal does not have any power to review its order. The Tribunal has interpreted the various case laws and gone through the facts of the case of the Assessee. There is no mistake in the facts as mentioned on the top of the application by the Revenue. The Tribunal has passed a detailed order discussing the various provisions of the case laws and given a finding of facts and interpreted the law as pronounced by the various High Courts. It was also pointed out that dismantling of the old plant was claimed before the authorities below. For this, attention was drawn towards the order of CIT(A). In respect of Ground no. 5, it was submitted that the Tribunal has given a finding of fact for working the average rate and there is no mistake of facts involved. Before us, a paper book was filed showing the application being filed by the revenue before the Tribunal and it was pointed that all the points taken in the Miscellaneous Application have been taken by the Revenue before the Hon'ble High Court. It was vehemently contended that the Hon'ble Supreme Court in the case of Chowgule & Co. (P.) Ltd. (supra), as applied by the ITAT, has accepted that there is a change in the mechanical composition after processing of the iron ore in the above case. In that case, even it was held therein that even the blending of ore for the purpose of exports involved change in the mechanical and physical composition of the iron ore. The activities of the units at Amona and Chitradurga involved converting input (ROM) into output (lumps and fines) by crushing, screening, washing, stacking, loading in barges, river transport to boat and export in ships. Finished product after processing technically had different name i.e. lumps and fines. From the physical samples it was concluded that lumps and fines are entirely different from the crude ore in physical appearance. Further, use and chemical compositions were also different. The members in the said judgement noted that during the conversion of the crude ore into lumps and fines, waste is generated which is called 'tailings' which are in liquid form but converted into fines in the Codli unit. The ITAT concluded at pg. 135 in its order that in view of the above decision of the Hon'ble Supreme Court in the case of Chowgule & Co. (P.) Ltd. (supra) it can be held that the Assessee is engaged in these units in manufacturing. It was contended that this Tribunal has given a finding on the basis of the facts involved in the case of the Assessee and after appreciating the various case laws. The Tribunal does not have any jurisdiction to review its order. Thus, there is no mistake apparent in the order of the Tribunal. The Hon'ble Bombay High Court in case of Sesa Goa Ltd. (supra) as referred to by the Revenue has held that the entire processing chain is not manufacturing but it held that mining ore or extraction of ore is production. The Hon'ble High Court further held that the legislation being beneficial piece of legislation, an expanded meaning can be given as given in the case of CIT v. Emirates Commercial Bank Ltd. [2003] 262 ITR 55/[2004] 134 Taxman 682 (Bom.) In respect of the erroneous presumption of dismantling of the old plant, it was pointed out that the CIT(A) vide para 10.7 at pg. 48-49 of his order held that since there was no deletion of the block value of the machinery and equipment previously used in Amona plant, the old plant was not discarded or old plant was not dismantled. This issue has therefore undoubtedly been raised by the Assessee before the CIT(A). Further, it was pointed out on the basis of the documents furnished in the paper book before the lower authorities that this issue was before the lower authorities. In respect of ground no. 5 in this Miscellaneous Application, it was pointed out that the Tribunal has given a finding on fact at para 45.21 at pg. 166 of its order. The Department's apprehension regarding some purchases not being not at arm's length price has categorically been taken care of by the Tribunal. It was further contended that when appeal had been filed before the Hon'ble High Court, the Special Bench, ITAT, Mumbai in the case of Tata Communications Ltd. v. Jt. CIT [2009] 121 ITD 384 (Mum.)(SB) has clearly held that when the question is pending before the Hon'ble High Court, it is not right for the Assessee to agitate the same or part of the question before the Tribunal. Reliance was also placed in this regard on the various other decisions :
Sudhakar M. Shetty v. Asstt. CIT [2012] 20 taxmann.com 264 (Mum.)
ITO v. Chitra Khanna [MA No. 417 (Mum.) of 2010]
Ornate Traders (P.) Ltd. v. ITO [2008] 24 SOT 125 (Mum.)
Rolta India Ltd. v. Jt. CIT [M A No. 490 (M) of 2006]
Royal Antibiotics & Investment v. ITO [M A No. 795 (Mum.) of 2009]
Bayer Corp. Science v. Addl. CIT [2012] 25 taxmann.com 575 (Mum.)
CIT v. Simoni Gems [M A No. 240 (Mum.) of 2010]
Dakshata Finance & Investment v. ITO [M A No. 705 (Mum.) of 2009]
ACIT v. GTL Ltd. [M A No. 746 (Mum.) of 2009]
Asstt. CIT v. Safe Enterprises [2011] 128 ITD 459/9 taxmann.com 121 (Mum.)
4. We have carefully considered the rival submissions, perused the matter on record. We have also gone through the various case laws. It is a fact that in this case the Revenue has gone in appeal before the Hon'ble High Court and the same very question which has been taken in the Miscellaneous Application are before the Hon'ble High Court. This has not been denied by the ld. DR, but rather the ld. DR was fair enough to concede the said position. Under these facts, the decision of the Special Bench, ITAT, Mumbai in the case of Tata Communications Ltd. (supra) is clearly applicable. In this case, the Hon'ble Special Bench has held as under :
"20. We are of the opinion that when question is pending before the Hon'ble Bombay High Court, it is not right for the assessee to agitate some or part of the question before the Tribunal. The assessee has now to show the Hon'ble High Court that the conditions of section 80IA are satisfied on the facts and in the circumstances of the case and that he is entitled to relief under the above section. As far as Tribunal is concerned, question has already been decided and the Tribunal is now functus officio, so far as deduction of eligibility of section 80IA is concerned. It is for their Lordships of Hon'ble Bombay High Court to adjudicate on the correctness or otherwise of the decision of the Tribunal. In the view of the matter, as also bearing in mind the entirety of the case and the preceding discussions, we are of the considered view that the rectification petition filed by the assessee under section 254(2) of the Act must fail. No intereference is thus called for.
21. In the result, the miscellaneous application is dismissed. Pronounced in the open court today on 10th day of July 2009."
4.1 We have also gone through the various other decisions. We find the same consistent view has been taken by this Tribunal. Even on merit also, we noted that the Revenue, instead of pointing out mistake apparent on record on the facts as contended in the application tried to point us that this Tribunal has mis-interpreted the case law relied on by the Tribunal while deciding the issue whether the EO unit of Assessee are engaged in manufacturing or not. This Tribunal has interpreted the various case laws and given a finding on the basis of its interpretation. The Tribunal has given a finding after considering all the case laws and appreciating the facts in the case of the Assessee. The Tribunal u/s 254(2) does not have any power for review. The power u/s 254(2) is limited to rectifying the mistake which is apparent on record. Section 254(2) of the Income Tax Act specifically empowers the Tribunal to amend at any time within 4 years from the date of the order, any order passed by it u/s 254(1) with a view to rectify any mistake apparent from the record either suo moto or on application by the Assessee or the Revenue. Even without such specific provision, this Tribunal has inherent power to rectify the mistake apparent on record. However, the inherent power to rectify a wrong committed by itself by the Tribunal is not a power to review, which is a creature of the statute. The statute does not empower the Tribunal to review its order. The Tribunal can exercise the jurisdiction u/s 254(2) if there is a mistake apparent on record within the four corners of the said provision. The main question, therefore, is what is the mistake "apparent from record" ? Similarly, the expression "error apparent on the face of the record" came up for consideration before the courts while exercising certiorari jurisdiction under article 32 and 226 of the Constitution. In T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 (SC) it was held that "any mistake apparent from record" is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of 'an error apparent on the face of the record'. It was, however, conceded in all leading cases that it is very difficult to define an "error apparent on the face of the record" precisely, scientifically and with certainty. In the case of Hari Vishnu Kamat v. Syed Ahmad Ishaque [1955] 1 SCR 1104, the Constitution Bench of the Hon'ble Supreme Court quoted the observation of Chagla, C.J in Batuk K. Vyas v. Surat Borough Municipality AIR 1953 Bom. 133 that no error can be said to be apparent on the face of the record if it is not manifest or self-evident and requires an examination or argument to establish it. The court in the said judgement admitted that though the said test might apply in a majority of the case satisfactorily, it proceeded to comment that there might be case in which it might not work inasmuch as an error of law might be considered by one judge as apparent, patent and self-evident but might not be so considered by another judge. The court, therefore, concluded that an error apparent on the face of the record cannot be defined exhaustively, there being an element of indefiniteness inherent in its very nature and must be left to be determined judicially on the facts of each case. The court stated—
"It may therefore be taken as settled that a writ of 'certiorari' could be issued to correct an error of law. But it is essential that it should be something more than a mere error; it must be one which must be manifest on the face of the record. The real difficulty with reference to this matter, however, is not so much in the statement of the principle as in its application to the facts of a particular case. When does an error cease to be mere error, and become an error apparent on the face of the record ? Learned counsel on either side were unable to suggest any clear-cut rule by which the boundary between the two classes of errors could be demarcated."
In Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale [1960] 1 SCR 890, the Apex Court referring to Batuk K. Vyas and Hari Vishnu Kamath stated as to what cannot be said to be an error apparent on the face of the record. The court observed :
"An error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions can hardly be said to be an error apparent on the face of the record. As the above discussion of the rival contentions show the alleged error in the present case is far from self evident and if it can be established, it has to be established by lengthy and complicated arguments. We do not think such an error can be cured by writ of certiorari according to the rule governing the powers of the superior court to issue such a writ."
The Hon'ble Supreme Court in the case of Udhavdas Kewalram v. CIT [1967] 66 ITR 462 held that the Tribunal must, in deciding the appeal, consider with due care all the material facts and record its finding and all the contentions raised by the Assessee and Revenue in the light of the evidence and relevant law. The decision has to be made only on the basis of the facts involved therein. The word 'record', in our opinion, means the entire record consisting of not only grounds of appeal and the case laws relied on and referred to before the Tribunal, but also the contentions, pleas and arguments raised by the parties before the Tribunal. The word 'record' has not been defined u/s 254(2) or u/s 2 of the Income Tax Act so as to restrict its meaning only to the grounds of appeal decided in the order of the Tribunal. The provisions of Sec. 254(2) could not be constituted in a manner that produces an anomaly or otherwise produces irrational or illogical result. The ld. DR even though vehemently argued, but could not bring to our knowledge that this Tribunal failed to consider the case law as cited before the Tribunal or the Tribunal has not considered the contentions, pleas and arguments raised before the Tribunal by both the sides. Even though the revenue stated in its application filed before us that there are mistakes of fact but could not point out during the course of hearing that there are incorrect facts being taken into account by the Tribunal. The grounds taken in the application, as is apparent, require this Tribunal to re-consider its decision. In this case, we feel that the Revenue, in the garb of application for rectification, has sought to re-open and argue the matter which is beyond the scope of Sec. 254(2). The power u/s 254(2) does not contemplate re-hearing which would have the effect of re-writing the order affecting the merit of the case. If the power given u/s 254(2) is read in that manner, then, in our opinion, there will not be any difference between the power to review and the power to rectify the mistake. The legislature has not deliberately conferred the power of review on the Tribunal and the Tribunal cannot review its order under the garb of power given u/s 254(2). In view of our aforesaid discussion, we are of the view that the decision of the Tribunal is based on the appreciation of the facts and the case laws. Therefore, the Miscellaneous Application filed by the Revenue, in our opinion, does not relate to mistake apparent on the record rectifiable u/s 254(2) of the Act. Since the Revenue has gone in appeal before the Hon'ble High Court on the same very issues, this Tribunal in view of the decision of the Special Bench, ITAT, Mumbai in the case of Tata Communications Ltd.(supra) cannot interfere in its order passed on 8.3.2013.
5. In the result, the Miscellaneous Application filed by the Revenue stands dismissed.
SBRegards
Prarthana Jalan
__._,_.___
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