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TMI Blog2014 (10) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent are subject to excise duty. For the activity undertaken between 27.09.1982 and 30.09.1985, there existed some dispute, as to the extent of excise duty. While according to the Jurisdictional Commissioner of Central Excise, the duty was leviable on the cost of the product, arrived at by taking into account, the value of the raw-material supplied by the respondent, the Conversion Unit insisted that it must be only on the basis of conversion charges paid to it. As provided for under Rule 9-B of the Central Excise Rules, the products were cleared at the relevant period, on payment of the undisputed rate of duty, however, subject to execution of the bond in Form B-13, undertaking to pay the differential duty, as may be determined by the competent authority. According to the agreement between the respondent and the Conversion Unit, the former is under obligation to compensate or pay the duty component suffered by the latter. In the returns submitted by the respondent, deductions were claimed to the extent of excise duty, actually paid. So far as the differential amount covered by the bonds is concerned, provision was made in the books of account, to the tune of Rs. 1,66,62,866/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect in law in deleting the addition of Rs. 1,66,62,866/- for the assessment year 1992-93. 2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in holding that a sum of Rs. 1,66,62,866/- is a contractual liability in terms of agreement between the assessee company and the conversion unit, even though the liability to assessee company arises only when the conversion unit pays the amount to the Central Excise Department. 3. Whether on the facts and in the circumstances of the case, Tribunal was right in holding that there was no cessation of liability when in fact the liability as claimed by the assessee ceased by virtue of the order dated 16.07.1992 of the Collector of Central Excise (Appeals) setting aside the demands raised by the lower authorities. The same is subject matter of R.C.No.111 of 2001. It has been already mentioned in the preceding paragraphs that the benefit of refund of duty was extended to the Conversion Unit through an order, dated 19.05.1993. The effect thereof was not shown in the returns filed for the assessment year 1993-94. According to the respondent, it is only in the subsequent assessment year i.e., 1994-95 that the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case and the legal position that emerges from the above discussion, we are of the considered opinion that there was neither cessation nor remission of the assessees liability under its contract with the Conversion Unit with regard to Central Excise duty payable by the Conversion Unit, and notwithstanding the entries made by the assessee in the books of its account, the lower authorities were not justified in brining to tax the said liability of Rs. 1,66,62,866/- under Section 41 (1) of the Income Tax Act. We accordingly delete this addition of Rs. 1,66,62,866/- made by the assessing officer and sustained by the CIT (A) in the impugned order. If this is read in isolation, it gives an impression that the amount of Rs. 1,66,62,866/- cannot be brought into the purview of Section 41 (1) of the Act at all. In all fairness, learned counsel for the respondent submitted that the dispute is only about the order of assessment and not the total liability as such. Both the proceedings arose as a consequence of the determination of the actual quantum of the excise duty, payable on the products manufactured by the Conversion Unit, for and on behalf of the respondent. Though the liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. The gist thereof is that if an assessee has made any de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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