1982 (10) TMI 110 - AT - Income Tax

Tribunal partially allows appeal, rejects Excise Duty liability, upholds decision in Kerala.

The Tribunal partially allowed the appeal, rejecting the Excise Duty liability of Rs. 63,19,171, except for the Kerala range where the assessee's stand ... - Issues:1. Sec. 35B Weighted deduction - Interest paid to State Bank of Mysore on packing credit.2. Excise Duty liability computation on net billing price.Analysis:1. Sec. 35B Weighted deduction - Interest payment:The Tribunal restored the issue of weighted deduction on interest paid to the State Bank of Mysore for packing credit to the CIT(A) for fresh decision. The Tribunal referred to a previous order in the assessee's case for the assessment year 1974-75 where the matter was sent back for reconsideration. The appellate order was restored based on the previous decision.2. Excise Duty liability computation:The dispute revolved around the Excise Duty liability of Rs. 63,19,171 demanded by the Excise Authorities based on their interpretation of levying duty on the net billing price. The assessee contended that duty should be calculated on the manufacturing cost and profit, not the sale price. The Kerala High Court upheld the assessee's stand, relieving them from the excess amount. However, the Central Excise Department challenged this decision in the Supreme Court. In the Madras Range, conflicting orders were issued by the Asstt. Collector and the Appellate Collector, leading to a pending revision by the Ministry of Finance. The Goa factory's liability was dependent on the outcome of the Kerala High Court judgment appeal.3. Assessment of Excise Duty liability:The assessee sought to deduct the disputed amount as a contingent liability due to the pending Supreme Court appeal. The ITO and CIT(A) denied the deduction, considering it contingent on the Supreme Court's decision. The Tribunal upheld the decision, stating that no liability existed in the relevant accounting year based on subsequent events and the Kerala High Court judgment.4. Interpretation of Excise Law:Regarding the excise duty payable in the year of manufacture, the Tribunal analyzed the conflicting interpretations between the assessee and the Excise Department. The Tribunal emphasized that if the department's interpretation was the only plausible one, the liability would differ. The Tribunal held that the ITO rightly concluded no liability existed in the relevant year post the Kerala High Court judgment.5. Future liability considerations:The assessee argued that a potential liability post the Supreme Court decision might not be deductible in subsequent years due to the mercantile accounting system. The Tribunal directed that if the Supreme Court reversed the Kerala High Court judgment, the amount in question should be allowed as a deduction in the current year without any time limitation to safeguard the assessee's interests.6. Conclusion:Ultimately, the Tribunal partially allowed the appeal, rejecting the Excise Duty liability of Rs. 63,19,171, except for the Kerala range where the assessee's stand was upheld by the Kerala High Court judgment. The liabilities for Madras and Goa were deemed non-existent, leading to the rejection of the deduction claims for those amounts.