9911796707
TMI Blog1993 (3) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, because the processing of cloth is considered to be manufacture for the purpose of levy of excise duty, the assessee had obtained a licence under the Central Excise Act on behalf of the customers, who were called Merchant Manufacturers. The Proforma to Trade Notice No. 55(MP) General (13)/1985 issued by the Bombay Collectorate of the Central Excise states that the Merchant Manufacturer namely, the customer authorises the processor namely, the assessee to manufacture the processed cloth on their behalf and to furnish the information relating to the price at which the goods are to be assessed to excise duty. It also contains an undertaking that the Merchant Manufacturer will pay the differential duty when demanded by the Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusive of processing charges. Accordingly, the assessee had paid 50% of the dues and had also deposited the balance of 50% with the Union Bank of India for obtaining a bank guarantee. Consequently, in the balance-sheet as on 30-6-1985, the assessee had shown as a liability of central excise duty at Rs. 26,70,827 and on the asset side fixed deposit with the Union Bank of India at Rs. 13,40,000. As on 30-6-1986, the figures were Central Excise duty Rs. 68,00,026 and fixed deposit of Rs. 38,31,527 with Union Bank of India. In the balance-sheet as on 30-6-1987, central excise duty payable was Rs. 1,13,47,253 and the fixed deposit was Rs. 93,41,400 with Vijaya Bank and Rs. 1,46,000 with Union Bank of India. Consequently, the assessee did not cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court was disposed of on 4-11-1988 prior to the making these assessments which were on 29-3-1989 for all the three years and therefore, that subsequent event should be taken note of to hold that there was no unpaid provision required to be added back under section 43B. On the other hand, the Revenue supported the orders of the authorities below while pointing out that the correct method of accounting was to take the excise duty collection as part of the trading receipts and as long as the stay was in force during the previous years, the provisions of section 43B had to be applied. Reference was also made to the decision of the Tribunal in the case of Radha Dyeing & Printing Mills [IT Appeal No. 9200 (Bom.) of 1988 dated 3-6-199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Merchant Manufacturers for the purpose of collecting the duty and passing it to the Government. This is strengthened by the fact that in the proforma the Merchant Manufacturer assures that no other consideration flows to him from his buyers and also undertakes to pay any extra duty demanded at the time of final assessment. This clearly establishes the fact that the excise duty was a levy on the merchant manufacturer and not the liability of the processor and hence the assessee was not at all required to make a provision for payment of excise duty in the Profit & Loss account. 6. Even assuming that the excise duty was to be treated as part of the trading receipt of the assessee and its P&L account is to be recast, we do not think this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocessor has no direct liability to pay excise duty but acts only as an agent for the merchant manufacturers was not considered. Secondly, it was noted that the deduction was granted in the year in which actual payment was made and therefore, it was considered unnecessary to interfere with the disallowance made in the earlier year under section 43B. In the present case, however, since the assessee had never made a provision for payment of excise duty or claimed a deduction, such a question of disallowing a provision in the earlier year or allowing the deduction in the year of payment did not arise. We are convinced that on the peculiar facts of the case, the disallowance made under section 43B by recasting the Profit & Loss account was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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