TaxTMI 
TaxTMI 
2019 (1) TMI 1016
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....her on the facts and in the circumstances of the case, the Tribunal erred in law in (in-effect) upholding the disallowance of Rs. 6,19,34,656/- which represented unutilised MODVAT credit of excise duty as on 31.3.1997 i.e. the end of the relevant accounting year, in terms of Section 43B of the Act? b) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in not treating the unutilised MODVAT credit, balance as at the end of the year as payment of excise duty, as allowable deduction in terms of Section 43B of the Act? c) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in not following and applying the principles laid down by the various judicial pronouncements (including those of the Hon'ble Supreme Court) to the effect that MODVAT credit is as good as tax paid and does not represent purchase cost of raw materials? 3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.403 of 2016 may be noticed. The appellantassessee is a public limited company, engaged in the manufacture and sale of consumer healthcare products. It filed its return of income for the assessment year 1997-....
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....Income Tax (Appeals) [CIT(A)] on the ground that the provisions of section 43B of the Act override the method of accounting generally followed by an assessee and mandate deduction of statutory liabilities in the year of payment thereof notwithstanding accrual in another year. The appellant asserts that in order to ensure timely payment of excise duty by the manufacturers, under Rule 173G of the Rules, a manufacturer is required to deposit excise duty in an account with the excise authorities and adjust the duty payable on excisable goods against such deposit. Vide order dated 6.3.2002, Annexure A.2, the CIT(A) set aside and reversed the assessment order, allowing deduction of Rs. 11,94,97,875/- claimed by the assessee under Section 43B of the Act. Aggrieved by the order, the revenue filed appeal before the Tribunal. In the meantime, similar disallowance was made by the Assessing Officer in the case of the assessee for the subsequent years including assessment year 2001-02 which was also set aside and deleted by the CIT(A) following the order dated 6.3.2002 for the assessment year 1997-98. Aggrieved by the said order for the assessment year 2001-02, the revenue preferred appeal befo....
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....t, it was held by the Apex Court that the advance deposit of Central Excise Duty constitutes actual payment of duty within meaning of Section 43B and, therefore, the assessee was entitled to benefit of deduction of the said amount. The relevant paras of the judgments are quoted below:- "7. On merits it has been submitted by Shri Vohra that under Section 3 of the Central Excise Act, the event for levy of excise duty is the manufacture of goods though the duty is to be paid at the stage of removal of the goods. Pointing out the provisions of Rule 173G of the Central Excise Rules, 1944 it is submitted that the advance deposit of central excise duty in a current account is a mandatory requirement from which adjustments are made, from time to time, against clearances effected. Though, sub-rule (1)(A) contemplates refund from the current account, such refund can be granted only on reasons being recorded by the concerned authority i.e., the Commissioner on the application filed by the assessee. Refund is not a matter of right. The amount deposited in the PLA is irretrievably lost to the assessee, it is argued. Payment of central excise duty takes place at the time of deposit in the PLA,....
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....learly shows that upon deposit in the PLA the amount of such deposit stands credited to the Revenue with the assessee having no domain over the amount(s) deposited. 10. In CIT V. Pandavapura Sahakara Sakkare Karkhane Ltd. [1992] 198 ITR 690 (Kar.) and CIT V. Nizam Sugar Factory Ltd. [2002] 120 Taxman 378/253 ITR 68 (AP), cited at the Bar, the High Courts of Karnataka and Andhra Pradesh respectively had occasion to consider as to whether the amounts credited to the Molasses Storage Fund out of the sale proceeds of molasses received by the assessee constitute taxable income of the assesssee. Under the scheme, the assessee had no control over the amounts deposited in the fund and the assessee was also not entitled to withdraw any amount therefrom without the approval of the authorities. Further the amount deposited could be utilized only for the purpose specified. In those circumstances, the High Court held and in our view correctly, that the deposits made, though a part of the sale proceeds of the assessee, did not constitute taxable income at the hands of the assessee. We do not see why the same analogy would not be applicable to the case in hand. 11. The Delhi High Court in t....
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....further held that the expense would certainly relate to the year in which the goods were manufactured and the amount was deposited which could not possibly be treated as an advance. The relevant paras of the judgment read thus:- "The only contention raised by learned counsel for the Revenue is that since the goods in question were not removed from the premises of the assesse during the year in question, the duty amount would be considered to have been paid in advance and accordingly the assessee was not entitled to deduction thereof during the year in question as the expense was to relate to the year in which the goods were removed from the factory. Any advance payment of taxes, which do not relate to the assessment year in question, is not a permissible deduction. On the other hand, learned counsel for the assessee submitted that the assessee was statutorily required to deposit the duty the moment goods, were manufactured and was under obligation to keep amount to the extent of duty as calculated on the goods so manufactured in the "account-current". The assessee was not entitled to refund of the amount once deposited in the "accountcurrent", however, debit entry was made at ....