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TMI Blog2005 (6) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case are that the assessee is a manufacturer of drugs and organic items. It showed finished goods in the closing stock at Rs. 25,18,192. This was kept, after manufacture, in the bonded warehouse. In respect of these goods excise duty of Rs. 3,03,080 was paid before filing of the return for the assessment year 1995-96 and was claimed as deduction under section 43B in the assessment year 1995-96. The Assessing Officer, however, thought that the assessee company could not specify any date during financial year 1994-95 when the said excise duty could have been said to have been crystallised. According to him, it was a contingent liability. This had arisen only in April, 1995, when the goods were sold. In response to the queries raised by Assessing Officer on this issue, the assessee vide his letter dated 13-2-1998, replied to the Assessing Officer that liability to pay excise duty arises when the excisable goods are manufactured and not when goods are removed. The assessee relied on the decisions in Lakhanpal National Ltd. v. ITO [1986] 162 ITR 240 1 , and decision of ITAT, Delhi reported in S.R. Pauskar v. Third ITO [1994] 49 ITD 36 (Delhi) and Philipson Stow v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds are removed from the factory premises is not correct and the fact remains that once goods are manufactured as finished entity, they cannot be removed without the payment of the duty. In strict sense, the liability to pay duty arises when excisable goods are manufactured in the finished form. Thus, when the closing stock when included an element of excise duty was sold in the subsequent period and the duty has been paid before the filing of return the same is allowable under section 43B. 2.3 More so, when the excise duty which is claimed by the assessee in the return on the basis of payment in subsequent year is written back in the return of income in the next year to void the double claim. Hence the disallowances unwarranted and the same is deleted." The revenue is in appeal against the above order of the CIT(A). 4. Before us, the learned DR submitted that it is necessary that accounting entries should have been passed by increasing the value of closing stock by excise duty. If it is not done, then the claim cannot be allowed during the financial year, as there is no evidence that claim pertained to the accounting year 1994-95 relevant to assessment year 1995-96. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factory. Rule 9A of the Central Excise Rules, 1944, merely does that. That is the scheme of the Central Excises and Salt Act, 1944. Rule 9A does not make removal the taxable event. The taxable event is the manufacture but the liability to pay the duty is postponed till the time of removal under rule 9A. Even though on the date of manufacture the goods are exempt from excise duty, on the basis of rule 9A, the central excise authorities are within their competence to apply the rate of excise duty prevailing on the date of removal. 7. In many other cases also it has been held by the Hon ble Supreme Court that levy of excise duty is at the stage of manufacture or production of goods and realisation is only postponed or differed at the removal or sale point. In Ujagar Prints v. UOI [1989] 179 ITR 317 (SC), the Hon ble Supreme Court observed as under : "The retrospective operation of the amendments to the definition of "manufacture" in the Central Excises and Salt Act, 1944, so as to include processing is not an unreasonable restriction on the fundamental right of the processors (of grey fabric provided by the manufacturers) under article 19(1)( g ) of the Constitution of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier year, but paid in subsequent year, the claim will be added back in that subsequent year and will be made in current year as per proviso to section 43B on actual payment basis before filing the return of income. This is exactly what the assessee has done in the case before us. 9. Thus, in either situation, whether the entry is passed through books or not, it will not make any difference so long as the excise duty pertaining to goods manufactured or produced in earlier year and is paid next year within the time allowed by first proviso to section 43B. Now coming to section 43B and first proviso, they read as under : " 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of ( a )any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or ( b )to ( f )****** shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous ..... X X X X Extracts X X X X X X X X Extracts X X X X
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