Mercantile accounting treats excise duty as accruing on manufacture, so later quantification does not defer the deduction.

For an assessee on the mercantile system, additional central excise duty accrues when the taxable event of manufacture occurs, even if assessment and demand are made later. The later quantification or service of demand notice does not defer the liability, because under the excise scheme assessment is only the mechanism for fixing and collecting an already accrued duty. Where the duty relates to goods manufactured during the accounting year and could be fairly estimated, it is deductible in that year notwithstanding subsequent dispute or demand.

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Issues: Whether additional central excise duty relating to the accounting year, but quantified and demanded after the close of that year, is an admissible deduction for an assessee following the mercantile system of accounting.

Analysis: Under the charging scheme of the Central Excises and Salt Act, the duty is attracted by manufacture or production, while assessment and demand are only matters of quantification and collection. For an assessee maintaining mercantile accounts, a fiscal liability accrues when the relevant taxable event occurs, and the later issue of demand notice or the assessee's challenge to the demand does not postpone the accrual of liability. The subsequent quantification of the excise duty, though made after the accounting year ended, related to goods manufactured during that year and could be fairly estimated under the statute.

Conclusion: The additional excise duty was an admissible deduction in the accounting year in which the goods were manufactured, and the question was answered in favour of the assessee and against the Revenue.

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