2010 (4) TMI 1060 - AT - Income Tax

Summary

Issues involved: Dispute over addition on account of unutilized modvat credit u/s.145A for assessment year 2004-05.

Summary:
The cross appeals were filed against the CIT[A]'s order for the assessment year 2004-05 concerning the addition on account of unutilized modvat credit. The AO noted the unutilized modvat credit balance, and added the sum to the closing stock as required by sec.145A. The CIT[A] confirmed the decision subject to modification that adjustment was also required in the opening stock. The department challenged the deletion of the addition, while the assessee disputed the adjustment u/s.145A. The Tribunal found a similar dispute in the assessee's case for A.Y 1999-2000, where adjustment in both opening and closing stock was required. The Tribunal emphasized that modvat balance did not amount to payment until set off against central excise liability. The Tribunal set aside the CIT[A]'s order and directed the AO to re-examine the issue in line with the Tribunal's decision for A.Y 1999-2000, ensuring no double deduction. Both appeals were allowed for statistical purposes.

In conclusion, the Tribunal emphasized the necessity of adjusting unutilized modvat credit in both opening and closing stock, following the precedent set in the assessee's previous case. The Tribunal clarified that modvat balance does not equate to payment until set off against central excise liability. The matter was remanded to the AO for a fresh order, with the direction to avoid double deduction and provide the assessee with a hearing opportunity.