TaxTMI 
TaxTMI 
2018 (7) TMI 1416
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....iating that the excise duty incurred means excise duty payable and it becomes payable on completion of manufacture although the goods may be in the bonded warehouse and is, therefore, liable to be included in the value of closing stock?" 3. The respondent, M/s Chhata Sugar Company is a limited company engaged in the manufacture and sale of sugar. The respondent filed return of income for the assessment year 1997-1998 on 28.11.1997 showing loss of Rs. 30,18,43,756/-. The retrun was processed under Section 143(1) of the Act on 13.03.1999. During the assessment proceedings, the respondent filed a revised return of declaring loss of Rs. 7,17,01,310. The assessment was finally completed under Section 143(3) of the Act vide order dated 24.02.2000 at a total loss of Rs. 7,15,13,989/-. 4. The Assessing Officer after examining the return inter alia noticed that while valuing the closing stock of sugar and molasses, the respondent had not included the Central Excise Duty, Cess Duty etc., and, therefore, the value of the closing stock was shown at lower figure in the trading account. The Assessing Officer, therefore, issued a notice under Section 154 of the Act on 08.03.2002 to the responde....
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.... which can be added towards closing stock. The Tribunal also held that the assessee's case was squarely covered by the decision of Madras High Court in the case of CIT vs. English Electric Co. of India Ltd.: (2000)243 ITR 512 (Madras). 7. Heard Sri Krishna Agarwal, learned counsel for the Revenue but no one has appeared on behalf of the respondent-assessee despite case having been called twice. 8. This appeal is of the year 2007. Therefore, we have decided to answer the questions and decide the appeal. 9. Learned counsel for the assessee, Sri Krishna Agarwal submits that the assessee was following mercantile system of accounting. The excise duty becomes payable as soon as exisable goods are manufactured or produced. The excise duty is payable on these goods whether or not the goods are sold. The sale or ownership of the goods is not a relevant factor for the liability of payment of excise duty. The taxable event is manufacture of excisable goods which is very clear from the provisions of Section 3 of the Central Excise Act, 1944. In support of the aforesaid submission, learned counsel has placed reliance on the judgment of Supreme Court in the case of Commissioner of Central....
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....25 : (1969) 73 ITR 735] . 17. The object of stock valuation is the correct determination of the profit and loss resulting from a year's trading. It is the true result of the trading activity of that year that must be disclosed by the books. "... the profits are the profits realised in the course of the year. What seems an exception is recognised where a trader purchased and still holds goods or stocks which have fallen in value. No loss has been realised. Loss may not occur. Nevertheless, at the close of the year he is permitted to treat these goods or stocks as of their market value."[Whimster & Co. v. IRC, (1926) 12 Tax Cases 813, 827] [(1926) 12 Tax Cases 813, 823] ." As stated by Patanjali Sastri, C.J., in Chainrup Sampatram v. CIT [(1953) 24 ITR 481, 485-86 : 1954 SCR 219 : AIR 1953 SC 509] : (ITR p. 485) "... It is wrong to assume that the valuation of the closing stock at market rate has, for its object, the bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out ....
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....usiness for the purpose of computing the chargeable income. Such a system may produce a comparatively lower valuation of the opening stock and the closing stock, thus showing a comparatively low difference between the two. In a period of rising turnover and rising prices, the system adopted by the assessee, as found by the Tribunal, is apt to diminish the assessment of the taxable profit of a year. The profit of one year is likely to be shifted to another year which is an incorrect method of computing profits and gains for the purpose of assessment. Each year being a self-contained unit, and the taxes of a particular year being payable with reference to the income of that year, as computed in terms of the Act, the method adopted by the assessee has been found to be such that income cannot properly be deduced therefrom. It is, therefore, not only the right but the duty of the Assessing Officer to act in exercise of his statutory power, as he has done in the instant case, for determining what, in his opinion, is the correct taxable income." 11. He further submits that the issue in the present case is covered by the judgment of this Court in the case of Krishi Discs (P.) Ltd. Versus ....