Closing stock valuation and bonded warehouse excise duty: duty not accrued or paid cannot be added under section 145A.

Section 145A requires valuation of closing stock to include taxes and duties actually paid or incurred to bring goods to their relevant condition and location. In relation to excise duty on goods lying in a bonded warehouse, duty becomes payable only on removal from the warehouse or approved storage, so no liability had accrued and no duty had been paid or incurred on those goods as on the valuation date. On that basis, such duty could not be added to closing stock. The Commissioner's view that it was necessarily includible was therefore incorrect, and revision under section 263 was not sustainable.

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Issues: Whether the Commissioner was justified in revising the assessment under section 263 on the ground that excise duty relatable to finished goods lying in bonded warehouse had to be included in the valuation of closing stock under section 145A.

Analysis: The assessment records showed that the assessee had included in closing stock the excise duty actually paid on goods removed from the warehouse, while no duty had been paid on goods still lying in bonded warehouse. Section 145A requires valuation to be adjusted to include taxes, duties, cess or fee actually paid or incurred to bring the goods to the place of location and condition as on the valuation date. Reading the excise provisions, duty becomes payable on removal from the place of removal or approved storage, and until such removal the assessee is not liable to pay the duty. Since the duty on goods in bonded warehouse had neither accrued as payable nor been actually paid or incurred, it could not be added to closing stock. The Commissioner's view that such duty was necessarily includible was therefore not correct, and on that basis the assessment could not be treated as erroneous and prejudicial to the interests of revenue.

Conclusion: The revision under section 263 was not sustainable, and the assessee succeeded.

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