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TMI Blog2000 (3) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in the Central Excise Act more particularly sub-s. (4) of s. 4 of the Central Excise Act under which the assessee had liability in law to pay the central excise to the central excise department and for this reason, the provisions contained in s. 43B of the Act were fully applicable to the case of the assessee. It may also be mentioned that the interpretation made by the CIT(A) would lead to an absurd situation, where neither the customers/clients nor the assessee would be covered under the provisions contained in the s. 43B of the Act, and thus, the legislative intention in enactment of the s. 43B would get frustrated. (3) The learned CIT(A) has erred on facts and in law in treating that making of the FDR was sufficient to discharge the assessee's liability so far as payment of excise duty is concerned and in such set of circumstances, the CIT(A) has erred on facts and in law to hold that the s. 43B is not applicable in the case of the assessee. The CIT(A) failed to appreciate the purpose and intention enunciated while introducing the provisions of s. 43B of the Act, as spelt out in the speech of the Hon'ble Finance Minister and in Explanatory Memorandum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deposited the amount of Rs. 7,81,682 in the fixed deposit account with Bank of Baroda and similarly for asst. yr. 1986-87 an amount of Rs. 30,21,160 have been further deposited in the F.D. account. The total amount deposited in the excise duty FDR account from asst. yrs. 1985-86 to 1989-90 along with the interest thereon amounted to Rs. 89,12,622. These deposits are reflected in the balance sheet of the assessee which appear on pp. 60 to 65 of the paper book filed during the course of hearing before the Bench. Subsequently the Supreme Court passed the final order in the year 1987 reversing the order of the Gujarat High Court and upholding the levy of excise duty on the value of cloth belonging to merchant dealers. The assessee accordingly paid the entire amount of Rs. 88,68,331 to the excise authorities, as per details placed at p.1 of the paper book as under: -------------------------------------------- Amount Date Mode of payment -------------------------------------------- 50,00,000 28-3-1987 By transfer 40,81,194 29-6-1988 By cheque 42,78,200 16-11-1988 By transfer 8,936 16-11-1988 By transfer ---------- 88,68,331 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before us. The case of the Department, as spelt out in the grounds of appeal reproduced above is broadly based on the following points: (1) The provisions of s. 43B are clearly applicable in the case of the assessee since the liability to pay the excise duty on the cloth belonging to the merchant manufacturers is cast on the assessee-firm. (2) Making of the FDR as per the directions of the Supreme Court could not be construed as constructive payment thus taking out the case out of the mischief of s. 43B. On behalf of the Department reliance is placed on the decision of Ahmedabad Bench of the Tribunal in the case of Krishna Textiles ITA 1835/1994, order, dt. 3rd Jan., 1996. 6. On behalf of the assessee elaborate written submissions have been made and it has been argued that r. 174A of the excise rules as well as notifications of the excise authorities placed at pp. 75 and 76 of the paper book indicates that the assessee has collected duty on behalf of merchant-manufacturers who have to file authorisation under notification declaring the value of their cloth to recover excise duty on their cloth for and on their behalf and not of the assessee-firm. It is further argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee from the customers would form part of its trading receipts. Reference may further be made to the recent decisions of the Hon'ble Supreme Court in the cases of Jonballa Narasimharao Co. Ors. vs. CIT (1993) 112 CTR (SC) 126 : (1993) 200 ITR 588 (SC) and CIT vs. T. Naggi Reddy (1993) 115 CTR (SC) 418 : (1993) 202 ITR 253 (SC). 9. Now coming to the second issue regarding deducibility of excise duty liabilities in the context of the provisions of s. 43B, the section introduced by Finance Act, 1983, would have to be construed keeping in view the object, purpose and intent of the legislature in enacting this provision. To understand the circumstances in which s. 43B came to be inserted in the IT Act and the mischief which it sought to prevent, it is necessary to look at the memorandum explaining the provisions in the Finance Bill of 1983. Para 60 of the Memorandum reads as under: "60. Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty employer's contribution to provident fund, employees' state insurance scheme, etc. for long periods of time, extending sometimes to several years. For the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid facts of the assessee's case that the applicability of the provisions of s. 43B would have to be considered by us. Sec. 43B makes a departure from the accepted method of accounting adopted by the assessee and such departure is intended by the legislature for curbing the mischief of withholding of tax payments while claiming deduction in respect thereof in the income-tax assessments. Such a provision should necessarily be construed reasonably in the light of the object and purpose for enacting the same. Statutes should be construed not as theorems of euclid but with imagination of purpose behind them. This is more so since the section has been enacted by way of an exception to accepted rules of commercial accounting. A literary interpretation de hors the object and purpose of the provision would be violative of accepted rules of interpretation. Once the assessee has deposited the excise duty receipts with the Bank of Baroda and bank guarantee has been provided to the satisfaction of the excise authorities, as per the directions of the Hon'ble Supreme Court, this would in our opinion amount to 'actual payment' by the assessee in terms of the provisions of s. 43B. So far as t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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