Tribunal affirms CIT(A)'s order on unutilized CENVAT credit deduction for 2005-06 assessment year

The Tribunal upheld the order of Ld. CIT(A) in an appeal against the deduction of unutilized CENVAT credit for the assessment year 2005-06. The Tribunal found that including excise duty receivable in the closing stock value would necessitate its inclusion in the value of purchases without affecting profits. As a result, the Tribunal dismissed the revenue's appeal, affirming the decision in favor of the assessee.

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Issues Involved:
Appeal against deduction of unutilized CENVAT credit for assessment year 2005-06.

Analysis:
The appeal was directed against the order of Ld. CIT(A)- II, Baroda for the assessment year 2005-06. The revenue contended that the Ld. CIT(A) erred in allowing a deduction of &8377; 1,25,342/- on account of unutilized CENVAT credit. The Revenue argued that the unutilized CENVAT credit was not included in the profit & loss account as per section 145A of the Act, despite the assessee following the mercantile system of accounting.

Upon the appointed date of hearing, no one appeared on behalf of the assessee, leading to an ex-parte decision in favor of the revenue. The Ld. D.R. supported the assessment order during the proceedings.

The Tribunal examined the submissions of the Ld. D.R. and reviewed the material on record along with the orders passed by the authorities below. The assessee had explained that while the excise duty realized on sales was fully included in the sale amount, only the portion of excise duty paid on purchases utilized via MODVAT was included in the value of purchases. The remaining unutilized MODVAT credit was shown in the balance sheet as an amount receivable. The Tribunal noted that the excise duty paid but not included in purchases was reflected in the balance sheet as excise duty receivable. Consequently, the Tribunal found no grounds to make any addition to the income of the assessee, as including the excise duty receivable in the closing stock value would also require its inclusion in the value of purchases, without impacting the profits. Therefore, the Tribunal upheld the order of Ld. CIT(A).

In conclusion, the appeal of the revenue was dismissed, and the order was pronounced in the open court on the specified date.

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