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TMI Blog2020 (2) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... uty by the appellant on manufacture of vehicles, the unutilised MODVAT credit could have been adjusted against the payment of such Excise Duty. In the present case, the liability to pay Excise Duty of the assessee is incurred on the removal of finished goods in the subsequent year i.e. year beginning from 01.04.1999 and what we are concerned with is unutilised MODVAT Credit as on 31.03.1999 on which date the asseessee was not liable to pay any more Excise Duty. Hence, present is not a case where appellant can claim benefit of proviso to Section 43B. The submissions of Shri Ganesh on proviso to Section 43B also does not support his claim. - Decided in favour of revenue. - CIVIL APPEAL NO. 11923 OF 2018, CIVIL APPEAL NO. 11924 OF 2018 - - - Dated:- 7-2-2020 - Ashok Bhushan And Navin Sinha, JJ. For the Appellant : Mr. S. Ganesh, Sr. Adv. Ms. Kavita Jha, AORMs. Devika Jain, Adv. Mr. Anant Mann, Adv For the Respondent : Mr. K. Radhakrishnan, Sr. Adv. Mr. Arijit Prasad, Sr. Adv. Mrs. Anil Katiyar, AOR Ms. Deeksha Rai, Adv. Mr. S.A. Haseeb, Adv JUDGMENT Ashok Bhushan, J. By these appeals the assessee has challenged the judgment of the High Court of Delhi dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ((iii) relating to the above noted disallowance in favour of the Revenue. Aggrieved by the judgment of the High Court, these appeals have been filed. 3. The two questions which were answered by the High Court in favour of the Revenue which were subject matter of this appeal are question Nos.(ii) and (iii) as framed by the High Court are to the following effect: (ii) Whether the ITAT had committed an error of law in upholding the disallowance of the amount of ₹ 69,93,00,428/which represented MODVAT credit of Excise Duty that remained unutilised by 31st March, 1999 i.e. the end of the relevant accounting year ? (iii) Whether the ITAT has committed an error of law in upholding the disallowance of ₹ 3,08,99,171/in respect of Sales Tax Recoverable Account, under Section 43B of the Income tax Act ? 4. We have heard Shri S. Ganesh, learned senior counsel for the appellant-assessee and Shri Arijit Prasad, learned senior counsel for the Revenue. 5. Shri Ganesh submits that the amount paid by way of Excise Duty by the assessee to its suppliers of raw materials and inputs, is accepted as Excise Duty under the provisions of Central Excise Act and Rules. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was entitled to the duty paid by it to the manufacturer under Rule 57A to Rule 571 of the Central Excise Rules, 1944. Further it is not in dispute that the assessee was entitled to utilise MODVAT credit towards payment of Excise Duty leviable on the final products manufactured by it. The liability under the Central Excise Act to pay Excise Duty is only on the manufacture of the excisable goods. The assessee is not one who is liable to pay Excise Duty on the raw materials/inputs. It is merely the incidence of Excise Duty that has shifted from the manufacturer to the purchaser and not the liability to pay the same. Answering the submission of counsel for the assessee based on proviso to Section 43B, it is submitted that liability to pay Excise Duty of the assessee is incurred on the removal of the finished goods in the subsequent year, therefore, on 31.03.1999, the assessee was not liable to pay the Excise Duty and, therefore, the proviso will also not come to the aid of the assessee. 8. We have considered the submissions of the learned counsel for the parties and perused the records. 9. The two issues which need to be answered by us in these appeals are: (i) Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under subsection (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. .... 11. The untilised MODVAT credit on 31.03.1999 to the credit of the assessee was ₹ 69,93,00,428/. The MODVAT credit was accumulated to the account of the assessee due to payment of Excise Duty on raw materials and inputs which were supplied to it by the suppliers and reflected in the invoices by which raw materials and inputs were supplied. There is no denial to the fact that the appellant was entitled to utilise this credit in payment of Excise Duty to which the assessee was liable in payment of Excise Duty on manufacture of its products. When we analyse provision of Section 43B of the Act the provision indicates that deduction thereunder is to be allowed on fulfilment of the following conditions: a. there should be an actual payment of Excise Duty whether by way of tax, duty, cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 57A to 57F of Central Excise Rules, 1944 as it then existed. The appellant was fully entitled to discharge his liability to pay Excise Duty on vehicles manufactured by adjusting the credit of Excise Duty earned by it as per MODVAT scheme. The liability to pay Excise Duty is not fastened on two entities as per the scheme of Central Excise Act and Central Excise Rules. It is the manufacturer of raw materials and inputs which are used by appellant who has statutory liability to pay Excise Duty. The appellant is not assessee within the meaning of Central Excise Act, 1944, with reference to raw materials and inputs manufactured by the entities from which appellant had purchased the raw materials and entities. 16. As per Section 43B(a) of Income Tax Act, deduction is allowed on any sum payable by the assessee by way of tax, duty, cess or fee. The credit of Excise Duty earned by the appellant under MODVAT scheme as per Central Excise Rules, 1944 is not sum payable by the assessee by way of tax, duty, cess. The scheme under Section 43B is to allow deduction when a sum is payable by assessee by way of tax, duty and cess and had been actually paid by him. 17. Furthermore, the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt: Provided that nothing contained in this subrule shall apply to credit of duty, if any, in respect of inputs lying in stock or contained in finished products lying in stock on the 16th day of March, 1995. 21. This Court in reference to 57F( 4A) took the view that right to credit had become absolute at any rate when the input is used in the manufacture of the final products. This court held that the scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier Scheme was applied. Following observations have been made by this Court in paragraph 5 of the above judgment: As pointed out by us that when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the fact that the provision for facility of credit is as go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in mind, we must now determine whether the Excise Duty paid on the raw material should form part of the cost of the excisable product for the purposes of Section 4(1)(b) of the Act read with Rule 6 of the Valuation Rules. 26. In the above case, this Court held that in determining the cost of the excisable product covered by MODVAT Scheme under Section 4(1)(b) of the Act read with Rule 6 of the Valuation Rules, the Excise Duty paid on raw material covered by MODVAT Scheme is not to be included. The question which was answered in the above case was entirely different to one which has arisen in the present case. 27. This Court as noted above in the above case has laid down that credit for the Excise Duty paid for the raw material can be used at any time when making payment of Excise Duty on excisable product. The user of such credit is at the time of payment of Excise Duty on the excisable product i.e. at the time when appellant is to pay Excise Duty on its manufactured vehicle. 28. The judgment of this Court in Berger Paints India Ltd. versus Commissioner of Income Tax, 2004 (266) ITR 99, has also been referred to. The assessee company in the above case had claimed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd confirmed the order of the Commissioner of Incometax. On an application made under section 256(1) of the Act at the instance of the appellant-assessee, the Tribunal, inter alia, referred the following question of law for the opinion of the High Court (see [2002] 253 IT 738, 739): Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the assessee s claim for deduction of the excise and customs duties of ₹ 98,25,833 paid in the year of account and debited in the profit and loss account, on the ground that the crediting of the profit and loss account by the value of the closing stock, which included the aforesaid duties, did not have the effect of wiping out the debit to the profit and loss account? The High Court by its judgment dated September 24, 2001, in I.T.R.No.213 of 1993 (see [2002] 253 ITR 738), answered the question referred in favour of the Revenue and against the assessee. 29. This Court in Berger Paints Ltd. (Supra) upheld the view of assessing officer and decided the question in favour of the assessee. This Court held that the Commissioner of Income Tax has incorrectly distinguished the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing the return in respect of the previous year in which the liability to pay such sum was incurred. The crucial words in the proviso to Section 43B are in respect of the previous year in which the liability to pay such sum was incurred . The proviso takes care of the situation when liability to pay a sum has incurred but could not be paid in the year in question and has been paid in the next financial year before the date of submission of the Return. In the present case, there was no liability to adjust the unutilised MODVAT credit in the year in question since had there been liability to pay Excise Duty by the appellant on manufacture of vehicles, the unutilised MODVAT credit could have been adjusted against the payment of such Excise Duty. In the present case, the liability to pay Excise Duty of the assessee is incurred on the removal of finished goods in the subsequent year i.e. year beginning from 01.04.1999 and what we are concerned with is unutilised MODVAT Credit as on 31.03.1999 on which date the asseessee was not liable to pay any more Excise Duty. Hence, present is not a case where appellant can claim benefit of proviso to Section 43B. The submissions of Shri Ganesh on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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