1995 (10) TMI 58 - AT - Income Tax

Issues Involved:
1. Whether the excise duty collected can be treated as a trading receipt.
2. Whether the appellant was merely acting as an agent.
3. Applicability of Section 43B of the Income Tax Act.
4. Over-riding title over the excise duty collected in favor of the excise department.
5. Over-riding title in favor of the customers over the amount of excise duty collected.
6. Non-filing of any writ petition by the appellant or customers for the refund of excise duty collected.
7. Treatment of excise duty payments in the customers' books of accounts.
8. Similarity to the facts of the case of Newchem Plastics Ltd. v. Dy. CIT.
9. Agreements executed by the appellant for furnishing the bank guarantee.
10. Terms of the bank guarantee and its enforceability by the excise department.
11. Whether the bank guarantee satisfied the excise department.
12. Compliance with the Supreme Court's interim stay order regarding the furnishing of bank guarantees.
13. Whether fixed deposits with the bank for securing the bank guarantee can be treated as actual payment.

Detailed Analysis:

1. Whether the excise duty collected can be treated as a trading receipt:
The Tribunal concluded that the excise duty collected by the assessee constituted trading receipts in its hands. The principles laid down by the Supreme Court in the cases of *Chowringhee Sales Bureau (P.) Ltd.* and *Sinclair Murray & Co. (P.) Ltd.* were applied, which held that sales tax collected by a seller from customers constitutes trading receipts. The Tribunal also relied on the Gujarat High Court's decision in *Navjivan Udyog Mandir (P.) Ltd.*, which affirmed that amounts of excise duty collected from customers form part of trading receipts.

2. Whether the appellant was merely acting as an agent:
The Tribunal rejected the argument that the assessee was merely acting as an agent between the customers and the excise department. It was held that the liability to pay excise duty arises as soon as excisable goods are manufactured or produced, and the assessee was responsible for the excise duty collected, making it part of the trading receipts.

3. Applicability of Section 43B of the Income Tax Act:
The Tribunal held that Section 43B is applicable to the excise duty collected by the assessee. The provision mandates that any sum payable by way of tax, duty, cess, or fee must be paid during the previous year to qualify for deduction. The Tribunal found that the excise duty collected was payable and thus fell within the ambit of Section 43B.

4. Over-riding title over the excise duty collected in favor of the excise department:
The Tribunal noted that the excise duty collected was subject to the over-riding title in favor of the excise department. The duty was collected as a statutory obligation, and the assessee was required to pay it to the government.

5. Over-riding title in favor of the customers over the amount of excise duty collected:
The Tribunal found no over-riding title in favor of the customers over the excise duty collected. The duty was a statutory liability of the assessee, and the customers' role was limited to bearing the economic burden of the duty.

6. Non-filing of any writ petition by the appellant or customers for the refund of excise duty collected:
The Tribunal observed that the non-filing of writ petitions by the appellant or customers did not affect the nature of the excise duty collected as trading receipts.

7. Treatment of excise duty payments in the customers' books of accounts:
The Tribunal did not find the treatment of excise duty payments in the customers' books of accounts to be relevant in determining whether the excise duty collected constituted trading receipts.

8. Similarity to the facts of the case of Newchem Plastics Ltd. v. Dy. CIT:
The Tribunal distinguished the facts of the present case from those in *Newchem Plastics Ltd.* and held that the excise duty collected by the assessee constituted trading receipts.

9. Agreements executed by the appellant for furnishing the bank guarantee:
The Tribunal examined the agreements executed by the appellant for furnishing the bank guarantee and found that the bank guarantee did not amount to actual payment of excise duty.

10. Terms of the bank guarantee and its enforceability by the excise department:
The Tribunal noted that the terms of the bank guarantee allowed the excise department to enforce the guarantee in case of default by the assessee, but this did not equate to actual payment of the duty.

11. Whether the bank guarantee satisfied the excise department:
The Tribunal held that furnishing a bank guarantee did not satisfy the requirement of actual payment of excise duty under Section 43B.

12. Compliance with the Supreme Court's interim stay order regarding the furnishing of bank guarantees:
The Tribunal found that the compliance with the Supreme Court's interim stay order by furnishing bank guarantees did not amount to actual payment of excise duty.

13. Whether fixed deposits with the bank for securing the bank guarantee can be treated as actual payment:
The Tribunal rejected the argument that fixed deposits made with the bank for securing the bank guarantee constituted actual payment of excise duty. It held that the bank guarantee and fixed deposits did not satisfy the requirement of actual payment under Section 43B.

Conclusion:
The Tribunal reversed the findings of the CIT(A) and restored those of the Assessing Officer, holding that the excise duty collected by the assessee constituted trading receipts and was liable to be assessed during the year under appeal. The furnishing of bank guarantees did not amount to actual payment of excise duty, and thus, the provisions of Section 43B were applicable. The appeal by the Revenue was allowed.

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