Excise duty accrues on manufacture, and mercantile deduction for the provision is allowable despite later payment.

Excise duty on finished goods in closing stock accrues on manufacture, because the charging provision fixes the taxable event at production and the rules govern only collection and payment. The assessee, maintaining mercantile accounts, could claim deduction for a provision made toward that accrued liability, and later payment did not defeat the deduction. The contention that the duty amount had to be added to closing stock was rejected, since the liability had already arisen on manufacture. The revenue's adjustment on this issue was deleted.

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Issues: Whether excise duty liability on finished goods in closing stock accrued on manufacture or only on removal, and whether the assessee following the mercantile system was entitled to deduction of the provision made for such liability.

Analysis: The statutory charging provision creates the levy on manufacture or production of excisable goods, while the rules regulate the manner of collection and the point of payment. The taxable event is therefore manufacture, and the liability to pay excise duty accrues when excisable goods are produced, even though actual collection may be postponed until removal. The cases relied upon on both sides were distinguished by the different factual setting of levy, collection, and the rate applicable at removal. As the assessee maintained mercantile accounts and had made a provision for the liability, the deduction was not to be denied merely because payment occurred later. The contention that the amount had to be added to closing stock was also rejected.

Conclusion: The excise duty liability accrued on manufacture, and the assessee was entitled to deduction of the provision made for that liability; the addition made by the revenue on this issue was deleted.

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