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TMI Blog2014 (9) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... or the applicable rules – decided against revenue. - ITA 495/2013 - - - Dated:- 3-9-2014 - Sanjiv Khanna And V. Kameswar Rao,JJ. For the Appellant : Mr.N.P.Sahni, Sr.Standing Counsel For the Respondent : Mr.M.P.Rastogi, Mr.K.N.Ahuja, Advocates ORDER Sanjiv Khanna, J. (Oral) 1. By order dated 28.04.2014, the following substantial question of law was framed in this appeal, which pertains to the Assessment Year 2004-05: Did the Tribunal fall into error in holding that no addition could be made in excess in the value of closing stock of finished goods to the tune of ₹ 3,04,39,626/-, made originally by the AO? 2. The respondent-Assessee during the relevant period was engaged in the business of manufacture and sale of alcohol and vanaspati. In addition, the assessee was having rental and interest income. 3. As is apparent from the substantial question of law which has been admitted for hearing, the issue raised is limited and a narrow one. The Assessing Officer, in the assessment order dated 26.12.2006 made addition of ₹ 3,04,39,626/- for the following reasons: 6. Excise duty in closing stock It is noticed that excise duly has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount is required to be matched or balanced with the corresponding increase in the valuation of the closing stock. In Commissioner of Income Tax, Tamil Nadu Vs. Dynavision Ltd. [2012] 210 Taxman 239 (SC), the Assessing Officer had made addition of ₹ 16,39,000/- to the valuation of the closing stock on the ground that excise duty was payable but the plea of the Revenue was rejected observing as under: 2. At the outset, it may be stated, that, it is not in dispute that the assessee has been following consistently the method of valuation of closing stock which is cost or market price whichever is lower. Moreover, the AO conceded before the CIT(A) that he revalued the closing stock without making any adjustment to the opening stock (see: page 50 of the Paper Book). Lastly, though under section 3 of the Central ExciseAct,1944, the levy of excise duty is on the manufacture of the finished product the same is quantified and collected on the value (i.e. selling price). Before concluding, we may rely on judgment of this Court in the case of Chainrup Sampatram V. CIT [1953] 24 ITR 481 in which it has been held that valuation of unsold stock at the close of the accounting period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods to the place of its location and condition as on the date of valuation. In case of actual payment there would be no difficulty, but when actual payment is not made it has to be ascertained with reference to the applicable statute or the rule, whether tax, duty, cess, fee has been incurred by the Assessee to bring the goods to the place of its location and condition as on the date of valuation. In Commissioner of Income Tax Vs. Lakshmi Sugar Mills Co. Ltd., [2013] 215 Taxman 126 (Del.), appeal filed by the Revenue was allowed after recording that the excise duty, no doubt was unpaid, but the goods had been removed and therefore, the duty was payable. Thus, the taxable event had occurred, liability incurred and Section 145A of the Act was applicable. Reference was made to the decision of the Supreme Court in Orient Paper Mills Ltd. Vs. Union of India, AIR 1967 SC 1564. It was observed that removal of goods from the factory premises, or any other specified place, implied that the excise duty was leviable and the liability was not postponed. The following observations of the Supreme Court in Orient Paper Mills Ltd. (supra) were quoted: Thus, though Section 3 of the Excise Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of clearance of the goods. In other words, in respect of the excisable goods manufactured and lying in stock, excise duty liability would crystallize on the date of clearance of goods and not on the date of manufacture. This would be the date on which goods are removed as per the mandate of Excise Act and the applicable Rules. This aspect has been highlighted as noticed in the decision of the Delhi High Court in Lakshmi Sugar Mills Co. Ltd. (supra). 8. With regard to the MODVAT credit etc., we may notice that Central Board of Direct Taxes (CBDT) has issued circular No. 772 dated 23.12.1998, the relevant portion of which reads as under: 52. Method of accounting in certain cases. 52.1. The issue relating to whether the value of the closing stock of the inputs work-in-progress and finished goods must necessarily include the element for which MODVAT credit is available, has been a matter of considerable litigation over the years. 52.2 Consequent with the other provisions of the Act, with a view to put an end to this point litigation and in order to ensure that the value of opening and closing stock reflect the correct value, a new section 145A is inserted. This sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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