Firm not liable for excise duty. Disallowance u/s 43B unjustified. Appeals allowed. Recomputation directed.

The Tribunal held that the firm, acting as an agent for Merchant Manufacturers, was not liable for excise duty and had fulfilled its obligations as per the Supreme Court order. The disallowance u/s 43B was unjustified, and the appeals were allowed. The Tribunal directed the Assessing Officer to recompute income for all assessment years.

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Issues Involved: Appeal against disallowance u/s 43B by Commissioner of Income-tax (Appeals).

Summary:
The firm, engaged in processing cloth on job work basis, faced a dispute regarding inclusion of processing charges for excise duty. The Supreme Court clarified that the assessed value of processed fabrics includes grey cloth value, job work value, manufacturing profit, and expenses. The firm, acting as a collecting agent for excise duty, maintained separate accounts. The Assessing Officer treated customer payments as trading receipts, requiring provision for excise duty u/s 43B. The firm argued it wasn't liable for excise duty as it acted on behalf of Merchant Manufacturers. The Tribunal found the firm was not liable for excise duty and had paid 50% with a bank guarantee for the balance. The subsequent disposal of the Supreme Court case and enforcement of the bank guarantee were considered. The Tribunal distinguished a previous case and deleted the disallowance u/s 43B, directing the AO to recompute income for all assessment years.

In conclusion, the Tribunal held that the firm, acting as an agent for Merchant Manufacturers, was not liable for excise duty and had fulfilled its obligations as per the Supreme Court order. The disallowance u/s 43B was unjustified, and the appeals were allowed.

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