TaxTMI 
TaxTMI 
2011 (2) TMI 49
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....mputing the income. In this connection, the AO noted that the liability to pay excise duty arises even if goods are lying in the bonded warehouse in the light of the provisions contained in section 145A. No comment has been made on this issue in form no. 3CD. The word "paid" is defined in section 43(2) to mean actually paid or incurred according to method of accounting on the basis of which profits and gains are computed under the head "profits and gains of business or profession". Further, it is noted that unexpired MODVAT credit available to the assessee on the last date of the previous year does not amount to payment of excise duty u/s 43B. In view thereof, the sum of Rs. 33,01,199/- was added in absence of actual payment of the central excise duty. 3. The ld. CIT(Appeals) was of the view that the goods were lying in the bonded warehouse. The liability to pay the central excise duty arises when the goods are removed. The liability may be discharged by actual payment or by adjustment from MODVAT credit available to the assessee. Since the goods were not removed, the liability to pay excise duty did not arise in this year. It arose in the next year when it was settled by settin....
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....ase of Eicher Motors (supra). The argument of the ld. counsel is that the Supreme Court has held that the facility of Modvat credit is as good as tax paid. He argued that the unexpired Modvat credit available to an assessee is to be treated as good as central excise duty paid by the assessee on account. But we find that the context in which the observation was made by the Supreme Court has to be noted of. The observation of the Supreme Court had been made in a case where the assessee had set off the Modvat credit against the demand of excise duty. When the unexpired Modvat credit is set off against the excise duty payable and thereby the liability has been extinguished/reduced, that the Supreme Court has held that setting off Modvat credit is as good as tax paid. The above observation of the Supreme Court become operative only when the unexpired Modvat credit has actually been set off against the central excise duty payable by the assessee. The unexpired Modvat credit available in the hands of the assessee on the last day of the previous year is the amount, which has not so far been set off against payment of excise duty. There is a distinction between unexpired Modvat credit avail....
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.... and condition as on the date of valuation. Explanation- For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment." 5.1 Section 43(2) defines certain terms relevant to income from profits and gains of business or profession. Sub-section (2) defines the word "paid" to mean actually paid or incurred according to method of accounting. The definition reads as under:- "(2) "paid" means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head 'Profits and gains of business or profession';" 5.2 Section 43B starts with a non-obstante clause and permits the deduction of any sum payable by way of tax, duty, cess or fee, by whatever name called, in the year in which the sum is actually paid irrespective of the method of accounting regularly employed by the assessee. On conjoint reading of the provisions contained in sections 43B and 43(2), it will transpire that deduction in respect of central excise duty will be allowed only in the y....
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.... argument of the ld. counsel was that MODVAT credit is as good as tax paid. The Tribunal mentioned that the observations of the Supreme Court had been made in a case where the assessee had set off the MODVAT credit against the demand of excise duty. When the unexpired MODVAT credit is set off against the excise duty payable and thereby the liability has been extinguished or reduced, the Supreme Court held that setting off of MODVAT credit is as good as duty paid. The above observation becomes operative only when the unexpired MODVAT credit has actually been set off against the central excise duty payable by the assessee. However, unexpired MODVAT credit available in the hands of the assessee on the last date of the previous year has not been so set off. The two situations are distinguishable. The time lag between two points cannot be ignored. Therefore, it was held that unexpired MODVAT credit cannot be treated as tax paid before it is set off against the duty payable. Coming to the facts of this case, the credit remained unexpired for the simple reason that it was actually adjusted in April-May, 2005. Further, it was adjusted in these months. Therefore, it can be said that the adj....
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....he duty liable to be paid on the final products and thus the credit of duty earned on inputs gets fully utilized and some amount has to be paid by the manufacturer by way of cash. Prior to 1995-96 budget, the excise duty on inputs used in the manufacture of tractors, commercial vehicles varied from 15% to 25%, whereas the final products were attracted excise duty of 10% or 15% only. The value addition was also not of such a magnitude that the excise duty required to be paid on final products could have been exceeded the total input credit allowed., Since the excess credit could not have been utilized for payment of the excise duty on any other product, the unutilized credit was getting accumulated. The stand of the assessees is that they have utilized the facility of paying excise duty on the inputs and carried the credit towards excise duty payable on the finished products. For the purpose of utilization of the credit all vestitive facts or necessary incidents thereto have taken place prior to 16.3.1995 or utilization of the finished products prior to 16.3.1995. Thus, the assessees became entitled to take the credit of the input instantaneously once the input is received in the fa....