TaxTMI 
TaxTMI 
1999 (11) TMI 98
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....he respective merchants for which labour charges are recovered. In the process Excise Duty is leviable, It collects the Excise Duty from the merchants on the cloth processed for them by way of a separate debit note and the same is debited to excise account of merchant in separate ledger kept for the purpose. For the sake of convenience the assessee-firm deposits certain amount with the excise department as advance and as and when the cloth is cleared, the said advance is adjusted against the Excise Duty payable in respect of the cloth cleared. The assessee-firm has kept separate excise account of each merchant. The Excise Duty paid is debited and the Excise Duty recovered from the merchants is credited to that account. The assessee-firm is not showing the receipt in the trading account nor is claiming Excise Duty paid to the excise department as an expenditure. Whatever balance remained unpaid at the end of the year is shown in the balance-sheet. The assessee-firm has shown the unpaid Excise Duty collected from the merchant owners in the balance-sheet under the head 'Deposit against differential Excise Duty". The Central Excise Department is charging Excise Duty on selling price of....
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....ble Supreme Court i.e. within four weeks of each clearance. Disputed unpaid Excise Duty has been shown by the assessee in the liabilities side of the balance-sheet under the head sundry creditors, the details of which have been given in schedule 'C' to the balance-sheet. The amount has been shown under the head deposit against differential Excise Duty. It has been pointed out that the amount of fixed deposits has been reflected in the balance-sheet in the assets side. It has been further submitted by the assessee that ultimately after the decision of Supreme Court, the excise department encashed the bank guarantee and realised the amount against the deposits after encashing the fixed deposits as under :--- 13-3-1987 Rs. 52,15,270 (before the decision of the Hon'ble Supreme Court) 15-11-1988 Rs. 1,24,02,490. 4. The Assessing Officer considered the Excise Duty collection as part of the trading receipts of the assessee by applying the following case laws :--- 1. Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542 (SC). 2. CIT v. Saraswati Industrial Syndicate Ltd. [1973] 91 ITR 501 (Punj.). 3. P. Krishna Rao v. CIT [1978] 112 ITR 26 (AP). 4. Deccan Hide....
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....deposit against which bank guarantee was issued to the Excise Department as per their requirements, also carries great force. As has been discussed above, the honourable Supreme Court has stayed the payment of the excise duty collected by the appellant on specific condition that the appellant should have to furnish a bank guarantee against the excise duty so collected to the Excise Department as per their satisfaction. In Pursuance of this direction of the Hon'ble Supreme Court, the appellant furnished the bank guarantee to the Excise Department to their satisfaction. Tentatively it was agreed that to secure interest of the Excise Department the appellants would have to put the entire excise duty collected in the fixed deposit and the bank would give bank guarantee against the amount of fixed deposits. Since the arrangement was to the satisfaction of the Excise Department and the appellant did not utilise any amount of excise duty collected from the merchant manufacturers the amounts so collected was always available with the Excise Department for appropriation but for the stay granted by the Hon'ble Supreme Court. Therefore, the contention of the ld. counsel of the appellant th....
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....of the Supreme Court in the case of Jonnalla Narashimharao & Co. has been followed by the Hon'ble Gujarat High Court in the case of Navjivan Udyog Mandir (P.) Ltd. v. CIT [1994] 207 ITR 40. In view of the binding ratio of these decisions we hold that the Assessing Officer was justified in treating the excise duty collected as a trading receipt of the assessee. Hence we are unable to agree with the finding given by the CIT(A) to the contrary on this aspect. So we reverse the order of the first appellate authority and restore the order of the Assessing Officer with respect to the nature of the trading receipt in question. 10. However, if the excise duty collected is treated as trading receipt a further point arises whether the assessee is entitled to deduction under section 43B in the circumstances mentioned above. It is clear that the assessee has made fixed deposit in the bank as security to the Central Excise Department in accordance with the ruling given by the Supreme Court during the period of stay. No part of the money has been used or could be used by the assessee and in case the excise duty is payable, the entire bank guarantee is to be acted upon by the Excise Department....