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2014 (9) TMI 271 - HC - Income TaxAllowability of excise duty u/s 43B r.w. section 145A - valuation of closing stock - Duty shown as payable but not paid to be allowed as expenditure or not Held that - The manufactured sugar was lying in stock and the same were not cleared from the factory - the Tribunal was justified in holding that in respect of unsold sugar lying in stock, central excise liability was not incurred and consequently the addition of excise duty made by the assessing officer to the value of the excisable goods was liable to be deleted - The closing stock can consist of opening stock, purchases and manufactured stock - Reference was then made to the statutory mandate of Section 145A of the Act, that the valuation of the closing stock must include any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods to the place of its location and condition on the date of valuation - on manufactured goods, excise duty is payable after adjustment of CENVAT or MODVAT credit on the date of removal and not on the date of manufacture relying upon CBDT circular No. 772 dated 23.12.1998 and CIT Vs. Lakshmi Sugar Mills Co. Ltd. 2013 (7) TMI 385 - DELHI HIGH COURT - MODVAT credit cannot be reduced from the value of opening or closing stock thus, the matter is to be remitted back to the Tribunal for fresh adjudication Decided in favour of revenue.
Issues:
1. Interpretation of Section 43B and Section 145A of the Income Tax Act, 1961 regarding excise duty disallowance. 2. Application of Section 145A in determining excise duty liability on manufactured goods. 3. Correct valuation of closing stock including excise duty. Issue 1: Interpretation of Section 43B and Section 145A: The case involved a substantial question of law regarding the allowance of excise duty as an expenditure under Section 43B read with Section 145A of the Income Tax Act, 1961. The Assessing Officer disallowed the excise duty amount of Rs. 70,87,357 by invoking Section 43B, which was upheld in the first appeal but later overturned in favor of the respondent-assessee. The High Court referred to Section 145A, a non-obstante provision, which directs the inclusion of tax, duty, etc., actually paid or incurred for valuation purposes. The judgment highlighted the importance of the actual payment of duty and the duty being payable upon removal of goods. The Court held that the duty was payable but not paid, thus deciding against the respondent-assessee. Issue 2: Application of Section 145A on Excise Duty Liability: The judgment discussed the liability to pay excise duty on manufactured goods lying in stock. Referring to a Bombay High Court decision, it was noted that excise duty liability crystallizes upon the clearance of goods, not at the time of manufacture. The Court cited a Supreme Court case to support that excise duty liability is determined at the time of clearance, not manufacture. In this case, since the manufactured sugar was unsold and lying in stock, the excise duty liability was not incurred. Therefore, the addition of excise duty to the value of unsold goods was deemed unjustified and liable to be deleted. Issue 3: Correct Valuation of Closing Stock: The Court emphasized the correct valuation of closing stock under Section 145A, which mandates the inclusion of any tax, duty, etc., actually paid or incurred by the assessee. The respondent-assessee argued that excise duty is payable upon removal of goods after adjusting CENVAT or MODVAT credit, not at the time of manufacture. The Court acknowledged the complexity of the issue and remanded the case to the Tribunal for a fresh decision based on factual verification and legal considerations. The Tribunal was directed to determine the actual factual position before deciding the issue. In conclusion, the High Court's judgment delved into the interpretation of statutory provisions, the timing of excise duty liability, and the correct valuation of closing stock. The decision provided clarity on the application of Section 145A in determining excise duty liability and directed a reevaluation of the case based on factual accuracy and legal principles.
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