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TMI Blog1988 (7) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... e case may be. Those packets are again packed into cartons. The cartons are packed into corrugated fibre containers while they were being delivered to the wholesalers at the factory gate. The cigarette which is manufactured by the assessee company is an excisable commodity falling under tariff item No. 411(2) of the first schedule to the Central Excises Salt Act, 1944. The liability to pay excise duty arises under section 3 of the Central Excises and Salt Act at the point of manufacture. The liability is absolute and not subjected to any further conditions. For the accounting year relevant to assessment year 1982-83 the company is assessable to central excise not under self-assessment scheme but under physical control and is thus falling under Rule 52 of the Central Excise Rules, 1954. Under the said rule when the manufacturer desires to remove the goods on payment of duty he has to make an application in triplicate in form AR-1. The Officer usually thereupon assess the amount of duty and on production of evidence that the amount is paid, usually allow the goods to be cleared. It is also contemplated under this rule that where there is sufficient credit balance in the account (cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation and they were also afforded an opportunity to personally represent the matter. Copy of the explanation dated 26-9-1980 submitted by the assessee company was provided at pages 15 to 17 of the paper compilation. In that explanation inter alia it is stated that previously they have received similar show-cause notice from the Assistant Collector of Central Excise on 22-5-1976. Thereupon the assessee company addressed a letter dated 3-6-76 to the Collector requesting for confirmation whether a reply to the said show-cause notice need not be sent. The Assistant Collector of Central Excise, I.D.O-II, Hyderabad by his letter No. C.No.IV/16/SRP 24/76VCII dated 3-6-76 stated that he had been directed to inform them that the cost of corrugated fibre board containers would not be included in the assessable values of cigarettes and that they need not therefore submit any reply to his show-cause notice dated 22-5-1976. They have also stated that the Cigarette Manufacturers' Association, Calcutta had taken up the issue with the Central Board of Excise and Customs, New Delhi. After considering the matter in all its aspects the Central Board gave its decision that the cost of corrugated fib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty on C.F.C. containers. The assessee company was able to secure the interim orders dated 22-10-1980 in W.P.M.P.No.7912 of 1980 in which the company was directed to clear the goods by furnishing general security bond in form B.13 prescribed under Central Excise Rules. The main writ petition (WP No. 5285) was disposed of by the judgment of the Andhra Pradesh High Court on 13-9-1982. The copy of the interim orders dated 22-10-1980 are furnished at page 21 of the paper compilation and copy of the judgment dated 13-9-1982 in writ petition 5285 of 1980 was furnished pages 23 to 25 of the paper compilation. While disposing of the matter finally by their orders dated 13-9-1982 the Hon'ble High Court directed notwithstanding the writ petition having been allowed in its favour the assessee company should continue to clear the goods only by executing the bonds in form B-13 as prescribed under Rule 9(B) of the Central Excise Rules, 1944. Leave was also granted to Union of India to appeal to the Honourable Supreme Court. Union of India preferred an appeal to the Supreme Court in Civil Appeal No. 55-61 of 1979. The Hon'ble Supreme Court disposed of the appeal by its judgment dated 30-9-1985 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 is furnished at pages 1 and 2 of the paper compilation filed before us. In that letter it is stated that the assessee firm filed advance tax return in form 29 for assessment year 1986-87 disclosing income subject to advance tax of Rs. 5,12,06,110. A sum of Rs. 1,27,29,789 will become payable as final instalment of advance tax before 15th December, 1985. The upward revision of their earlier estimate dated 12-9-1985 had solely resulted on account of Supreme Court's judgment dated 30-9-1985 holding that they were not liable to pay any excise duty on the value of corrugated fibre board containers as demanded by the excise department. Consequently a sum of Rs. 94,28,229 and Rs. 95,33,549 towards differential excise duty payable on account of corrugated fibre board containers and claimed by them as deduction in the income-tax return for the assessment years 1982-83 and 1983-84, respectively, have been treated as income for purposes of advance tax disclosed in the present estimate. It was also stated in the said letter that although the claim for deduction of the above two sums were not allowed while computing original assessments for assessment years 1982-83 and 1983-84, the learned C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not prevail with regard to the quantum of liability etc. An assessee who follows mercantile system is entitled to deduct from the profits and gains of business, such liability which has accrued during the period for which the profits and gains were computed. If deduction is not claimed in this year the assessee company would not have been able to claim the amount in the year in which the appeals are rejected. The decision of the Kerala High Court in the case of L.J. Patel Co. v. CIT [1974] 97 ITR 152 was cited in support of the plea that the circumstance that subsequent to the close of the accounting year the High Court's decision was rendered in favour of the assessee should not be taken into account by the IAC. However, it may be noticed even after allowing the writ petition the Andhra Pradesh High Court directed the assessee to keep the bank guarantee renewed. 15. The learned Departmental Representative strongly relied upon the facts that by the date of passing of the assessment order for assessment years 1982-83 and 1983-84 the Andhra Pradesh High Court's order dated 13-9-1982 was holding the field and it rules until it is reversed by the Supreme Court. Therefore, the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of a business liability before it is quantified and even when such liability is being disputed. It has further been held that even if the assessee does not make a provision for such a liability its books of account, he is still entitled to claim a deduction because the question whether the assessee is entitled to a particular deduction or not depends upon the provisions of law relating thereto, and not on the view which the assessee might take about his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. The Allahabad High Court also decided the issue before them as follows : " As has been pointed out by the Supreme Court in the case of Kedarnath Jute Mfg. Co. the question whether the company is liable to excise duty or not depends upon the provisions of the law and not on the view which the company might take. The company cannot decide for itself whether it is liable to excise duty or not. Such a question can be decided only by a competent authority or a court of law. As has been pointed out, the decisions of the Delhi and Bombay High Courts are under appeal and the question is, therefore, subjudice. The Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee relevant to assessment years 1982-83 and 1983-84 are allowable business deductions or not, in our opinion the subsequent events like the A.P. High Court's decision on 13-9-1982 and the Supreme Court's decision on 30-9-1985 cannot be taken into consideration. In our opinion the learned C.I.T.(A) was right in invoking the decision of Gujarat High Court in CWT v. Raipur Mfg. Co. Ltd. [1964] 52 ITR 482 wherein it was laid down that a subsequent event which may result in extinction of liability would not have the effect of converting a prior accrued liability into a contingent liability. The Hon'ble Gujarat High Court at page 522 held the following :--- " It is urged that where a notice has been issued under section 18A for advance payment of tax, the liability for payment of the same is not absolute and that it is open to an assessee who estimates that a lesser amount would be payable by him to proceed as laid down in sub-section (2). The mere fact that it is open to an assessee to proceed under sub-section (2) would not result in the amount which he is required to pay under the notice served upon him under section 18A(1) not becoming a debt owing by him, unless and un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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