THE issues before the Bench are - Whether the goods which were
imported as scrap and sold by the assessee without any manufacturing is covered
under section 206(C) of the Income tax Act and assessee is required to collect
tax at source; Whether first proviso inserted in sub-section (6A) of section
206C with effect from 1.7.2012 is retrospective in nature as it not only seeks
to rationalize the provisions relating to collection of tax at source but is
also beneficial in nature in that it seeks to provide relief to the collectors
of tax at source from the consequences flowing from non/short collection of tax
at source after ensuring that the interest of the Revenue is well protected and
Whether the definition of 'scrap' under the I-T Act is wider than the same under
the Customs Act. And the verdict partly goes in favour of the
Revenue.
Assessee is an importer, trader and seller of brass scrap. In survey u/s 133A, it was noticed that assessee had imported and sold brass scrap without collecting tax at source as required by section 206C(1). Assessee contended that he was a mere trader of imported brass scrap. The brass scrap sold by him was not generated from the manufacture or mechanical working of material and therefore it was not “scrap” within the meaning of Explanation (b) to section 206C. AO rejected the claim of assessee and held that the assessee had failed to collect the tax at source as required by section 206C(6) on the sale of scrap made by him to various dealers and therefore he was liable to pay a sum u/s 206C(6) and interest thereon u/s 206C(7).
CIT (A) also rejected the appeal of assessee holding that even a trader can be very well brought under the purview of Section 206C as the title of Section 206C reads as “Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap etc. which clearly indicates that an assessee, who has been trading in scrap, falls within the purview of Section 206C. It is not necessary to find out whether the appellant sells the scrap originated from its manufacturing activity, if any, or scrap is procured from outside source and sold thereafter. The definition of ‘seller’ under explanation (c) of section 206C(11) also does not stipulate that the seller should be a manufacturer only. ‘Buyer’ is also defined in explanation (a) of section 206C(11) as a person who obtains goods on sale by certain specified modes. Buyer may be a manufacturer or a trader. The word “scrap” means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. The first limb of the definition that scrap means waste applies to the appellant’s case because it imports brass scraps. There is no need to apply the second limb to the assessee (i.e. scrap need not to have arisen from any manufacturing or mechanical activity if the first limb is applicable and applied. In the ‘Sales contract’ on high seas sale basis, the nature of the material sold is ‘brass scraps’. The customs duty was paid by claiming the goods imported as ‘scrap’ at a particular rate.
Before ITAT, the assessee contended that AO straightway concluded that the assessee was liable to collect tax at source without explicitly showing as to how the materials dealt with by the assessee and noticed by the Department during survey fell within the definition of scrap. Thus, AO failed to discharge his onus. Assessee himself was neither a manufacturer nor had he carried out any mechanical working on the materials imported by him. The definition of “scrap” as given in Explanation (b) to section 206C should be restricted to mean and include the scrap generated from the manufacture or mechanical working by the assessee himself on sale of which alone liability u/s 206C could be fastened. The items imported and sold by the assessee were discarded items and not scrap arising from the manufacture or mechanical working of materials. Both the words “waste” and “scrap” in Explanation (b) were one word and therefore both of them are qualified by the words following them, namely, “from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons”. As per Circular No.525 dated 24.11.1988 issued by the CBDT, the provisions of section 206C were intended to be used in those cases where persons engaged in certain trades/businesses were untraceable and not in those cases where they were traceable as in the case of the assessee. Further as per first proviso inserted in sub-section (6A) of section 206C with effect from 1.7.2012, the provisions of section 206C would not apply to a case where it is shown that the buyer has furnished his return of income and satisfied all other conditions stipulated by the said proviso. A person, other than a person, referred to in sub-section (1D) responsible for collecting tax, who fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licenses or lessee shall not be deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee has fulfilled the conditions laid down in the said Proviso.
It was further contended that as per Mariam Webster Dictionary scrap is “fragments of stock removed in manufacturing” and “manufactured articles or parts rejected or discarded and useful only as material for reprocessing; especially waste and discarded metals”. The term “waste” as defined in the said Dictionary would mean “damaged, defective, or superfluous materials produced by a manufacturing process. The difference between scrap and waste is that “scrap” is a loss connected with the output mostly an unforeseen loss of raw materials in production process while “waste” is a foreseen and calculated percentage of loss of raw materials or an output that does not have any sales or use. Thus, both scrap and waste must arise from the manufacture or mechanical working of materials in order to constitute “scrap” within the meaning of Explanation (b) to section 206C. The process of manufacture or mechanical working can be carried out only on materials and therefore only those items could be treated as “scrap”, which were generated from the manufacture or mechanical working of “materials”. For example old newspapers are not generated from manufacture or mechanical working of “materials” and therefore they would not be “scrap” within the meaning of Explanation (b) to section 206C of the Income-tax Act.
Assessee further contended that the sale of scrap to a person other than a buyer would not attract the provisions of section 206C. The term “buyer” used in Explanation (aa) to section 206C of the Income-tax Act is a person who obtains specified goods in any sale, by way of auction, tender or any other mode or the right to receive any such goods. A person would not be a buyer unless he obtains specified goods in any sale by way of auction, tender or any other like mode. The phrase “any other mode” is preceded by “auction, tender” and therefore sale “by any other mode” must by analogous to auction or tender. Sale of goods by an assessee to a buyer in retail sale of such goods cannot therefore be construed as sale to a buyer. Sub-clause (i) defines a buyer as a person who obtains specified goods in any sale, by way of auction, tender or any other mode while sub-clause (ii) defines a buyer for the purpose of sub-section (1D) as a person who obtains specified goods in any sale. The legislative intent was quite clear that the buyer, except for the purposes of subsection (1D) of Section 206C, would be a person who obtains specified goods in any sale which must necessarily be by way of auction, tender or any other mode analogous to auction or tender and not by way of retail sale as in sub-clause (ii) of clause (aa) of Explanation 206C. Revenue has brought no material on record to show that the assessee has sold brass scrap to a “buyer” by way of auction, tender or any similar mode. Therefore the goods sold cannot be said to have been sold to a “buyer” for the purposes of sub-section (6) of section 206C.
Revenue contended that provisions of section 206C are applicable to traders as well as manufacturers as there is no requirement in section 206C that the seller should be a manufacturer also. Materials not arising from manufacture or mechanical working of materials are also covered by the definition of “scrap” as given in section 206C. The definition of “scrap” as given in Explanation (b) is wide enough to include “waste and scrap” as defined in Note 8(a) of Section XV of Schedule I of the Customs Tariff Act and Central Excise Tariff Act and therefore any material which is declared as waste and scrap for the purposes of the Customs Tariff Act or Central Excise Tariff Act Note 8 would be covered by the definition of “scrap” in section 206C. There is no requirement that the goods to be eligible for scrap should be produced / manufactured by the seller itself. A “buyer” in terms of the said Explanation is not restricted to a person who buys the specified goods in an auction or tender alone but covers a buyer in the retail sale of specified goods as well and all the sellers of scrap including those trading in scrap are liable to collect tax at source from the buyers of such scrap.
After hearing both the parties, the ITAT held that,
++ Section 206C as originally enacted did not provide for collection of tax at source on sale of scrap. By the Finance Act 2003, “scrap” has been included and placed in the Table in sub-section (1) of section 206C as a result of which every seller {as defined in Explanation (c) to section 206C} of scrap is required to collect tax @ 1% at the time of debiting the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier. The liability of a seller to collect tax at source in terms of section 206C is absolute unless requisite declaration from the buyer is obtained and a copy thereof is delivered to the Chief Commissioner or Commissioner in terms of the provisions of sub-section (1A) and (1B) of section 206C;
++ the provisions of section 206C have been enacted to ensure collection of taxes from persons carrying on particular trades in view of peculiar difficulties experienced by the Revenue in the past in collecting taxes from them. Section 206C thus seeks to prevent evasion of taxes. It therefore needs to be construed strictly and in a manner that seeks to achieve the purpose for which it has been enacted;
++ Explanation (b) to section 206C defines “scrap” as “waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons”. It is evident that the word “scrap” occurs twice in the said definition. It is first used as a term which is sought to be defined and which includes “waste” also and thereafter the word “scrap” is used again in the expression “scrap from the manufacture or mechanical working of materials”. The said definition is in two parts. Its first part, i.e., “waste and scrap from the manufacture or mechanical working of materials”, refers to what would constitute “scrap” while its second part, namely, “which is definitely not usable as such because of breakage, cutting up, wear and other reasons” refers to the characteristics which a material has to possess in order to fall in the category of “scrap”. The second part of definition, being integral part of the definition, also throws light on the scope and ambit of the term “scrap” and therefore needs to be taken into consideration while interpreting the first part of the definition of “scrap”;
++ the first part of the definition seeks to cover both “waste” as well as “scrap from the manufacture or mechanical working of materials”. In common parlance, “waste” is understood as something unusable or unwanted material. According to the Concise Oxford Dictionary, “waste” is something which has been “eliminated or discarded as no longer useful or required”. “Scrap”, on the other hand, represents something which is left over after the greater part has been used or consumed. “Scrap” thus refers to the incidental residue derived from certain types of manufacture, which is recoverable without further processing. It is in this context that the words “from the manufacture or mechanical working of materials” qualify the preceding word “scrap” and not “waste”. The definition of “scrap” as given in Explanation (b) is not limited to scrap from the manufacture or mechanical working of materials alone but extends to cover “waste” also. Therefore the scope of the term “scrap” as defined in Explanation (b) cannot be interpreted so as to restrict its application to scrap from the manufacture or mechanical working of materials alone. While “waste” covers everything that is unusable or has been discarded as no longer useful as such, “scrap” covers everything that arises from the manufacture or mechanical working of materials. By its very nature, “waste” is a term of wider import while “scrap” is narrower in its scope;
++ the first part of the definition of “scrap” in Explanation (b) refers not only to scrap from the “manufacture” but also to “mechanical working of materials”. As per the definition of Black’s Law Dictionary, Manufacture is the process or operation of making goods or any material produced by hand, by machinery, or by other agency; anything made from raw materials by the hand, by machinery, or by art….” “Mechanical working of materials” refers to physical operations on materials. In order to fall in the definition of “scrap”, it is not necessary that the same should occur in the course of manufacture; it can also occur in the course of mechanical working of materials, i.e., in the course of physical operations on materials. The second part of the definition, i.e., “which is definitely not usable as such because of breakage, cutting up, wear and other reasons” also throws light on the scope of the term “scrap”. In order to constitute “scrap”, the article or thing must not be usable as such because of breakage, cutting up, wear and other reasons. In order to constitute “scrap”, what is contemplated by Explanation (b) is the non-usability of materials as such, which could even be for a reason other than breakage, cutting up and wear;
++ the word ‘and” joins both the words, namely, (i) waste; and (ii) scrap from the manufacture or mechanical working of materials and to that extent they constitute one phrase, i.e., “waste and scrap from the manufacture or mechanical working of materials” and that is why the words “which is” have been used as link between the first part and second part of the definition. However, the word “and” in the said phrase has been used to enlarge the scope of “scrap”, which is sought to be defined by Explanation (b) to section 206C, so as to cover both, i.e., waste as well as scrap from the manufacture or mechanical working of materials. If the legislative intent was to exclude waste from the definition of “scrap”, it could have easily done so by not including the “waste” in the definition of “scrap”;
++ the goods imported by the assessee are categorized as “copper waste and scrap” (including brass scrap) under the Harmonized Commodity and Coding Systems. In trade circles also, the goods imported by the assessee are categorized as metal waste and scrap, which are not usable as such, and are categorized as waste and scrap under the Customs Tariff Act. If the material is not usable as such, it has to necessarily fall in the category of waste and scrap. The definition of “scrap” as given in Explanation (b) to section 206C includes not only “waste and scrap” of metal as contemplated by Note 8(a) of Section XV of Schedule I of the Customs Tariff Act but also all kinds of waste and scrap including those arising from the manufacture or mechanical working of materials provided such “waste and scrap” is not usable as such because of breakage, cutting up, wear and other reasons.
Facts of the
case
Assessee is an importer, trader and seller of brass scrap. In survey u/s 133A, it was noticed that assessee had imported and sold brass scrap without collecting tax at source as required by section 206C(1). Assessee contended that he was a mere trader of imported brass scrap. The brass scrap sold by him was not generated from the manufacture or mechanical working of material and therefore it was not “scrap” within the meaning of Explanation (b) to section 206C. AO rejected the claim of assessee and held that the assessee had failed to collect the tax at source as required by section 206C(6) on the sale of scrap made by him to various dealers and therefore he was liable to pay a sum u/s 206C(6) and interest thereon u/s 206C(7).
CIT (A) also rejected the appeal of assessee holding that even a trader can be very well brought under the purview of Section 206C as the title of Section 206C reads as “Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap etc. which clearly indicates that an assessee, who has been trading in scrap, falls within the purview of Section 206C. It is not necessary to find out whether the appellant sells the scrap originated from its manufacturing activity, if any, or scrap is procured from outside source and sold thereafter. The definition of ‘seller’ under explanation (c) of section 206C(11) also does not stipulate that the seller should be a manufacturer only. ‘Buyer’ is also defined in explanation (a) of section 206C(11) as a person who obtains goods on sale by certain specified modes. Buyer may be a manufacturer or a trader. The word “scrap” means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. The first limb of the definition that scrap means waste applies to the appellant’s case because it imports brass scraps. There is no need to apply the second limb to the assessee (i.e. scrap need not to have arisen from any manufacturing or mechanical activity if the first limb is applicable and applied. In the ‘Sales contract’ on high seas sale basis, the nature of the material sold is ‘brass scraps’. The customs duty was paid by claiming the goods imported as ‘scrap’ at a particular rate.
Before ITAT, the assessee contended that AO straightway concluded that the assessee was liable to collect tax at source without explicitly showing as to how the materials dealt with by the assessee and noticed by the Department during survey fell within the definition of scrap. Thus, AO failed to discharge his onus. Assessee himself was neither a manufacturer nor had he carried out any mechanical working on the materials imported by him. The definition of “scrap” as given in Explanation (b) to section 206C should be restricted to mean and include the scrap generated from the manufacture or mechanical working by the assessee himself on sale of which alone liability u/s 206C could be fastened. The items imported and sold by the assessee were discarded items and not scrap arising from the manufacture or mechanical working of materials. Both the words “waste” and “scrap” in Explanation (b) were one word and therefore both of them are qualified by the words following them, namely, “from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons”. As per Circular No.525 dated 24.11.1988 issued by the CBDT, the provisions of section 206C were intended to be used in those cases where persons engaged in certain trades/businesses were untraceable and not in those cases where they were traceable as in the case of the assessee. Further as per first proviso inserted in sub-section (6A) of section 206C with effect from 1.7.2012, the provisions of section 206C would not apply to a case where it is shown that the buyer has furnished his return of income and satisfied all other conditions stipulated by the said proviso. A person, other than a person, referred to in sub-section (1D) responsible for collecting tax, who fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licenses or lessee shall not be deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee has fulfilled the conditions laid down in the said Proviso.
It was further contended that as per Mariam Webster Dictionary scrap is “fragments of stock removed in manufacturing” and “manufactured articles or parts rejected or discarded and useful only as material for reprocessing; especially waste and discarded metals”. The term “waste” as defined in the said Dictionary would mean “damaged, defective, or superfluous materials produced by a manufacturing process. The difference between scrap and waste is that “scrap” is a loss connected with the output mostly an unforeseen loss of raw materials in production process while “waste” is a foreseen and calculated percentage of loss of raw materials or an output that does not have any sales or use. Thus, both scrap and waste must arise from the manufacture or mechanical working of materials in order to constitute “scrap” within the meaning of Explanation (b) to section 206C. The process of manufacture or mechanical working can be carried out only on materials and therefore only those items could be treated as “scrap”, which were generated from the manufacture or mechanical working of “materials”. For example old newspapers are not generated from manufacture or mechanical working of “materials” and therefore they would not be “scrap” within the meaning of Explanation (b) to section 206C of the Income-tax Act.
Assessee further contended that the sale of scrap to a person other than a buyer would not attract the provisions of section 206C. The term “buyer” used in Explanation (aa) to section 206C of the Income-tax Act is a person who obtains specified goods in any sale, by way of auction, tender or any other mode or the right to receive any such goods. A person would not be a buyer unless he obtains specified goods in any sale by way of auction, tender or any other like mode. The phrase “any other mode” is preceded by “auction, tender” and therefore sale “by any other mode” must by analogous to auction or tender. Sale of goods by an assessee to a buyer in retail sale of such goods cannot therefore be construed as sale to a buyer. Sub-clause (i) defines a buyer as a person who obtains specified goods in any sale, by way of auction, tender or any other mode while sub-clause (ii) defines a buyer for the purpose of sub-section (1D) as a person who obtains specified goods in any sale. The legislative intent was quite clear that the buyer, except for the purposes of subsection (1D) of Section 206C, would be a person who obtains specified goods in any sale which must necessarily be by way of auction, tender or any other mode analogous to auction or tender and not by way of retail sale as in sub-clause (ii) of clause (aa) of Explanation 206C. Revenue has brought no material on record to show that the assessee has sold brass scrap to a “buyer” by way of auction, tender or any similar mode. Therefore the goods sold cannot be said to have been sold to a “buyer” for the purposes of sub-section (6) of section 206C.
Revenue contended that provisions of section 206C are applicable to traders as well as manufacturers as there is no requirement in section 206C that the seller should be a manufacturer also. Materials not arising from manufacture or mechanical working of materials are also covered by the definition of “scrap” as given in section 206C. The definition of “scrap” as given in Explanation (b) is wide enough to include “waste and scrap” as defined in Note 8(a) of Section XV of Schedule I of the Customs Tariff Act and Central Excise Tariff Act and therefore any material which is declared as waste and scrap for the purposes of the Customs Tariff Act or Central Excise Tariff Act Note 8 would be covered by the definition of “scrap” in section 206C. There is no requirement that the goods to be eligible for scrap should be produced / manufactured by the seller itself. A “buyer” in terms of the said Explanation is not restricted to a person who buys the specified goods in an auction or tender alone but covers a buyer in the retail sale of specified goods as well and all the sellers of scrap including those trading in scrap are liable to collect tax at source from the buyers of such scrap.
After hearing both the parties, the ITAT held that,
++ Section 206C as originally enacted did not provide for collection of tax at source on sale of scrap. By the Finance Act 2003, “scrap” has been included and placed in the Table in sub-section (1) of section 206C as a result of which every seller {as defined in Explanation (c) to section 206C} of scrap is required to collect tax @ 1% at the time of debiting the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier. The liability of a seller to collect tax at source in terms of section 206C is absolute unless requisite declaration from the buyer is obtained and a copy thereof is delivered to the Chief Commissioner or Commissioner in terms of the provisions of sub-section (1A) and (1B) of section 206C;
++ the provisions of section 206C have been enacted to ensure collection of taxes from persons carrying on particular trades in view of peculiar difficulties experienced by the Revenue in the past in collecting taxes from them. Section 206C thus seeks to prevent evasion of taxes. It therefore needs to be construed strictly and in a manner that seeks to achieve the purpose for which it has been enacted;
++ Explanation (b) to section 206C defines “scrap” as “waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons”. It is evident that the word “scrap” occurs twice in the said definition. It is first used as a term which is sought to be defined and which includes “waste” also and thereafter the word “scrap” is used again in the expression “scrap from the manufacture or mechanical working of materials”. The said definition is in two parts. Its first part, i.e., “waste and scrap from the manufacture or mechanical working of materials”, refers to what would constitute “scrap” while its second part, namely, “which is definitely not usable as such because of breakage, cutting up, wear and other reasons” refers to the characteristics which a material has to possess in order to fall in the category of “scrap”. The second part of definition, being integral part of the definition, also throws light on the scope and ambit of the term “scrap” and therefore needs to be taken into consideration while interpreting the first part of the definition of “scrap”;
++ the first part of the definition seeks to cover both “waste” as well as “scrap from the manufacture or mechanical working of materials”. In common parlance, “waste” is understood as something unusable or unwanted material. According to the Concise Oxford Dictionary, “waste” is something which has been “eliminated or discarded as no longer useful or required”. “Scrap”, on the other hand, represents something which is left over after the greater part has been used or consumed. “Scrap” thus refers to the incidental residue derived from certain types of manufacture, which is recoverable without further processing. It is in this context that the words “from the manufacture or mechanical working of materials” qualify the preceding word “scrap” and not “waste”. The definition of “scrap” as given in Explanation (b) is not limited to scrap from the manufacture or mechanical working of materials alone but extends to cover “waste” also. Therefore the scope of the term “scrap” as defined in Explanation (b) cannot be interpreted so as to restrict its application to scrap from the manufacture or mechanical working of materials alone. While “waste” covers everything that is unusable or has been discarded as no longer useful as such, “scrap” covers everything that arises from the manufacture or mechanical working of materials. By its very nature, “waste” is a term of wider import while “scrap” is narrower in its scope;
++ the first part of the definition of “scrap” in Explanation (b) refers not only to scrap from the “manufacture” but also to “mechanical working of materials”. As per the definition of Black’s Law Dictionary, Manufacture is the process or operation of making goods or any material produced by hand, by machinery, or by other agency; anything made from raw materials by the hand, by machinery, or by art….” “Mechanical working of materials” refers to physical operations on materials. In order to fall in the definition of “scrap”, it is not necessary that the same should occur in the course of manufacture; it can also occur in the course of mechanical working of materials, i.e., in the course of physical operations on materials. The second part of the definition, i.e., “which is definitely not usable as such because of breakage, cutting up, wear and other reasons” also throws light on the scope of the term “scrap”. In order to constitute “scrap”, the article or thing must not be usable as such because of breakage, cutting up, wear and other reasons. In order to constitute “scrap”, what is contemplated by Explanation (b) is the non-usability of materials as such, which could even be for a reason other than breakage, cutting up and wear;
++ the word ‘and” joins both the words, namely, (i) waste; and (ii) scrap from the manufacture or mechanical working of materials and to that extent they constitute one phrase, i.e., “waste and scrap from the manufacture or mechanical working of materials” and that is why the words “which is” have been used as link between the first part and second part of the definition. However, the word “and” in the said phrase has been used to enlarge the scope of “scrap”, which is sought to be defined by Explanation (b) to section 206C, so as to cover both, i.e., waste as well as scrap from the manufacture or mechanical working of materials. If the legislative intent was to exclude waste from the definition of “scrap”, it could have easily done so by not including the “waste” in the definition of “scrap”;
++ the goods imported by the assessee are categorized as “copper waste and scrap” (including brass scrap) under the Harmonized Commodity and Coding Systems. In trade circles also, the goods imported by the assessee are categorized as metal waste and scrap, which are not usable as such, and are categorized as waste and scrap under the Customs Tariff Act. If the material is not usable as such, it has to necessarily fall in the category of waste and scrap. The definition of “scrap” as given in Explanation (b) to section 206C includes not only “waste and scrap” of metal as contemplated by Note 8(a) of Section XV of Schedule I of the Customs Tariff Act but also all kinds of waste and scrap including those arising from the manufacture or mechanical working of materials provided such “waste and scrap” is not usable as such because of breakage, cutting up, wear and other reasons.
++
Section 206C of the Income-tax Act, fastens liability on a seller of scrap for
collection of tax at source. There is no requirement that such a seller should
himself generate scrap from the manufacture or mechanical working of materials
undertaken by him. Section 206C shows that the provisions of section 206C are
applicable to business of trading, inter-alia, in scrap. The use of the words
“business of trading” in the said head note makes it clear that the
applicability of section 206C is not restricted to sale of scrap generated from
the business of manufacturing undertaken by the assessee himself but covers sale
of scrap in the business of trading in scrap also. The subject matter of sale on
which tax is required to be collected at source from the buyer is, inert-alia,
scrap, which is defined in Explanation (b) to section 206C to mean waste and
scrap from the manufacture or mechanical working of materials. “Scrap from the
manufacture or mechanical working of materials” may arise as a result of
manufacturing activity undertaken by the assessee himself or by anyone else.
Thus, tax is required to be collected at source from the buyer, in terms of
section 206C, on sale of, inter-alia, scrap being waste and scrap from the
manufacture or mechanical working of materials undertaken by the assessee
himself or by anyone else;
++ the assessee himself has declared the goods imported by him as brass scrap before the Customs authorities. Once it is declared as waste and scrap under the Customs Tariff Act, it necessarily follows that it is in the nature of waste and scrap, which is definitely not usable as such. Be that as it may, the definition of “scrap” under Explanation (b) is wider in scope than the definition of “scrap” as given in the Customs Tariff Act;
++ it was submitted on behalf of the assessee that the Assessing Officer has fastened the liability on the assessee u/s 206C without bringing any material on record to show that the assessee has sold scrap within the meaning of Explanation (b) to section 206C. The same is not acceptable as one, it is the assessee himself who had declared that the materials sold by him was imported by him as scrap. Two, the material imported and subsequently sold by the assessee was “scrap” within the meaning of Explanation (b) to section 206C;
++ the Ejusdem Generis rule is not a rule of law but is merely a rule of construction to aid the courts to find out the true intention of the legislature. Like all other linguistic canons of construction, the ejusdem generis principle applies only when a contrary intention does not appear or meaning of questionable or doubtful words or phrases in a statute is required to be ascertained. If a given provision is plain and unambiguous and the legislative intent is clear, there is no occasion to call in aid that rule. The words defining a buyer as “a person who obtains in any sale, by way of auction, tender or any other mode …..” in Explanation (aa)(i) are plain and simple in their meaning and content. The buyer is one who obtains specified goods “in any sale” which could be by way of auction, tender “or any other mode”. The use of the word “or” in the aforesaid expression shows that all the three phrases (namely, auction, tender or any other mode) are intended to carry independent meaning without being controlled by each other. The use of the words “any other mode” in the said expression further shows that the mode of sale need not be by way of auction or tender alone but could be by any other mode. These words (i.e., “any other mode”) are not words of limitation but of extension so as to cover all possible ways in which a person (i.e., a buyer) could obtain specified goods in sale. The language used in Explanation (aa)(i) of section 206C, and the clarity with which the legislative intent has been expressed, there is no room to construe the words “or any other mode” ejusdem generis the preceding words in Explanation (aa)(i);
++ the first proviso has been inserted in sub-section (6A) of section 206C with effect from 1.7.2012. First Proviso inserted in sub-section (6A) of section 206C seeks to achieve three-fold objectives. One, it seeks to (1) ensure that there is no loss to the Revenue, i.e., (i) the buyer has furnished his return of income u/s 139, (ii) the buyer has taken into account such sum on which tax was required to be collected at source u/s 206C for computing income in such return of income, (iii) the buyer has paid the tax due on the income declared by him in such return of income, (iv) the payer, i.e., the person responsible for collecting the tax at source u/s 206C, has furnished a certificate in Form No. 27BA confirming the aforesaid; (2) rationalize the provisions relating to collection of tax at source; (3) provide relief to the collector of tax at source from the consequences of non/short deduction collection of tax at source and to that extent it is a beneficial provision. The issue that arises for consideration is whether the first proviso to section 206C(6A) is applicable to pending matters also notwithstanding the fact that it has been made effective from 1.7.2012. The first proviso to sub-section (6A) of section 206C not only seeks to rationalize the provisions relating to collection of tax at source but is also beneficial in nature in that it seeks to provide relief to the collectors of tax at source from the consequences flowing from non/short collection of tax at source after ensuring that the interest of the Revenue is well protected, it is held that the said proviso would apply retrospectively. It is therefore directed to assessee to appear before AO along with relevant documents as stipulated by the first proviso to subsection (6A) of section 206C and AO shall examine the claim of the assessee in view of the said provision.
++ the assessee himself has declared the goods imported by him as brass scrap before the Customs authorities. Once it is declared as waste and scrap under the Customs Tariff Act, it necessarily follows that it is in the nature of waste and scrap, which is definitely not usable as such. Be that as it may, the definition of “scrap” under Explanation (b) is wider in scope than the definition of “scrap” as given in the Customs Tariff Act;
++ it was submitted on behalf of the assessee that the Assessing Officer has fastened the liability on the assessee u/s 206C without bringing any material on record to show that the assessee has sold scrap within the meaning of Explanation (b) to section 206C. The same is not acceptable as one, it is the assessee himself who had declared that the materials sold by him was imported by him as scrap. Two, the material imported and subsequently sold by the assessee was “scrap” within the meaning of Explanation (b) to section 206C;
++ the Ejusdem Generis rule is not a rule of law but is merely a rule of construction to aid the courts to find out the true intention of the legislature. Like all other linguistic canons of construction, the ejusdem generis principle applies only when a contrary intention does not appear or meaning of questionable or doubtful words or phrases in a statute is required to be ascertained. If a given provision is plain and unambiguous and the legislative intent is clear, there is no occasion to call in aid that rule. The words defining a buyer as “a person who obtains in any sale, by way of auction, tender or any other mode …..” in Explanation (aa)(i) are plain and simple in their meaning and content. The buyer is one who obtains specified goods “in any sale” which could be by way of auction, tender “or any other mode”. The use of the word “or” in the aforesaid expression shows that all the three phrases (namely, auction, tender or any other mode) are intended to carry independent meaning without being controlled by each other. The use of the words “any other mode” in the said expression further shows that the mode of sale need not be by way of auction or tender alone but could be by any other mode. These words (i.e., “any other mode”) are not words of limitation but of extension so as to cover all possible ways in which a person (i.e., a buyer) could obtain specified goods in sale. The language used in Explanation (aa)(i) of section 206C, and the clarity with which the legislative intent has been expressed, there is no room to construe the words “or any other mode” ejusdem generis the preceding words in Explanation (aa)(i);
++ the first proviso has been inserted in sub-section (6A) of section 206C with effect from 1.7.2012. First Proviso inserted in sub-section (6A) of section 206C seeks to achieve three-fold objectives. One, it seeks to (1) ensure that there is no loss to the Revenue, i.e., (i) the buyer has furnished his return of income u/s 139, (ii) the buyer has taken into account such sum on which tax was required to be collected at source u/s 206C for computing income in such return of income, (iii) the buyer has paid the tax due on the income declared by him in such return of income, (iv) the payer, i.e., the person responsible for collecting the tax at source u/s 206C, has furnished a certificate in Form No. 27BA confirming the aforesaid; (2) rationalize the provisions relating to collection of tax at source; (3) provide relief to the collector of tax at source from the consequences of non/short deduction collection of tax at source and to that extent it is a beneficial provision. The issue that arises for consideration is whether the first proviso to section 206C(6A) is applicable to pending matters also notwithstanding the fact that it has been made effective from 1.7.2012. The first proviso to sub-section (6A) of section 206C not only seeks to rationalize the provisions relating to collection of tax at source but is also beneficial in nature in that it seeks to provide relief to the collectors of tax at source from the consequences flowing from non/short collection of tax at source after ensuring that the interest of the Revenue is well protected, it is held that the said proviso would apply retrospectively. It is therefore directed to assessee to appear before AO along with relevant documents as stipulated by the first proviso to subsection (6A) of section 206C and AO shall examine the claim of the assessee in view of the said provision.
No comments:
Post a Comment