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TMI Blog2019 (1) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. Advocate with Mr. Rohit Jain and Mr. Vishal Gupta, Advocate For The Respondent : Ms. Urvashi Dhugga, Sr. Standing Counsel ORDER Ajay Kumar Mittal, J. 1. This order shall dispose of a bunch of six appeals bearing ITA Nos.403 of 2016, 505 to 508 and 537 of 2008, as according to the learned counsel for the parties, the issue involved in all these appeals is identical. However, the facts are being extracted from ITA No.403 of 2016. 2. ITA No.403 of 2016 has been filed by the appellant-assessee under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 5.4.2016, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh (in short, the Tribunal ) in ITA No.475/CHD/2002 for the assessment year 1997-98, claiming following substantial questions of law:- a) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in (in-effect) upholding the disallowance of ₹ 6,19,34,656/- which represented unutilised MODVAT credit of excise duty as on 31.3.1997 i.e. the end of the relevant accounting year, in terms of Section 43B of the Act? b) Whether on the facts and in the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount of ₹ 11,94,97,875./- was in the nature of advance excise duty, the same having irretrievably gone out of its coffers in favour of the excise authorities, it was allowable as deduction under Section 43B of the Act on payment basis. The Assessing Officer vide assessment order dated 1.2.2000, Annexure A.1 passed under Section 143(3) of the Act rejected the plea of the assessee and disallowed the amount of ₹ 11,94,97,875/- claimed as deduction under Section 43B of the Act on the ground that excise duty being a post manufacturing levy, the same had been allowed as deduction to the assessee to the extent of goods cleared from the factory and the advance deposited by the assessee with the excise authorities did not amount to payment of duty as per the scheme of Section 43B of the Act. The assessee assailed the assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)] on the ground that the provisions of section 43B of the Act override the method of accounting generally followed by an assessee and mandate deduction of statutory liabilities in the year of payment thereof notwithstanding accrual in another year. The appellant asserts that in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 43B of the Act in respect of excise duty paid in advance in the Personal Ledger Account. Therein, the assessee had been claiming deduction under Section 43B of the Act in respect of the balance amount in the Personal Ledger Account at the end of each accounting year and the assessee had been adding back the same amount as part of the taxable income in the immediately succeeding accounting year in order to avoid double deduction. The said practice adopted by the assessee had been accepted by the revenue. The revenue urged that though levy of excise was on manufacture of excisable goods, actual payment of duty was at the stage of removal. Thus, the amount of advance deposit did not represent actual payment of duty so as to entitle an assessee to the benefit of deduction under Section 43B of the Act. After considering the relevant statutory provisions and the case law on the point, it was held by the Apex Court that the advance deposit of Central Excise Duty constitutes actual payment of duty within meaning of Section 43B and, therefore, the assessee was entitled to benefit of deduction of the said amount. The relevant paras of the judgments are quoted below:- 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in orderly conduct in the matter of levy and collection of excise duty when both manufacture and clearances are a continuous process. Debits against the advance deposit in the PLA have to be made of amounts of excise duty payable on excisable goods cleared during the previous fortnight. The deposit once made is adjusted against the duty payable on removal and the balance is kept in the account for future clearances/removal. No withdrawal from the account is permissible except on an application to be filed before the Commissioner who is required to record reasons for permitting an assessee to withdraw any amount from the PLA. Sub-rules (3), (4), (5) and (6) of Rule 173G indicates a strict and vigorous scrutiny to be exercised by the central excise authorities with regard to manufacture and removal of excisable goods by an assessee. The self removal scheme and payment of duty under the Act and Rules clearly shows that upon deposit in the PLA the amount of such deposit stands credited to the Revenue with the assessee having no domain over the amount(s) deposited. 10. In CIT V. Pandavapura Sahakara Sakkare Karkhane Ltd. [1992] 198 ITR 690 (Kar.) and CIT V. Nizam Sugar Factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to the benefit of deduction of the said amount. 6. Similarly, in CIT Vs. Raj San Deeps Limited [2007] 293 ITR 12 (P H), the issue before this Court was whether the Tribunal was right in law in deleting the addition made under Section 43B of the Act on account of advance excise duty paid which was neither debited to the profit and loss account nor sales account or made part of the purchase price. It was held that once it was found as a fact by the Tribunal that excise duty as per statutory provisions became payable, the moment goods were manufactured and then assessee was under obligation to deposit that much amount in account current and amount so deposited in account current being non refundable, there was no reason for the revenue to deny the benefit of deduction of excise duty in the year in question when the goods were manufactured and the amount was deposited in the account current . It was further held that the expense would certainly relate to the year in which the goods were manufactured and the amount was deposited which could not possibly be treated as an advance. The relevant paras of the judgment read thus:- The only contention raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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