High Court Of Punjab & Haryana
CIT vs. Groz Beckert Asia Ltd.
Section 80HHC, 145
Adarsh Kumar Goel & Rajesh Bindal, JJ.
IT Appeal No. 136 of 2005
28th July, 2006
Counsel Appeared :
Dr. N.L. Sharda, for the Appellant : Ms. Radhika Suri, for the Respondent
ORDER
By the court :
This is an appeal by the Revenue against order dt. 24th Sept., 2004, passed by the Tribunal, Chandigarh, Bench ‘B’, Chandigarh (for short, ‘the Tribunal’), in ITA No. 375/Chd/1999, raising the following substantial questions of law :
“(i) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that Central excise duty component could not be included in the value of closing stock ?
(ii) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that for the purpose of calculation of deduction under s. 80HHC of the IT Act, 1961, sales-tax and excise duty component cannot be included in the total turnover ?”
2. As far as question No. (i) is concerned, the Tribunal, while rejecting the appeal of the Revenue, against the order passed by the CIT(A), relied upon the order passed by it for the earlier year in the case of the assessee, wherein it was held as under : “Similar issue had come up before the Tribunal in assessee’s own case for asst. yrs. 1991-92 to 1995-96 and the same was decided in favour of the assessee vide para 9 of order dt. 3rd Oct., 1997 in ITA No. 462/Chd/1995 and para 11 of order dt. 13th May, 2003 in ITA Nos. 99 and 198/Chd/1996, ITA Nos. 85, 299 and 1237/Chd/1998. The relevant para 9 of the order of the Tribunal in ITA No. 462/Chd/1995 is reproduced below : “9. Coming to ground No. 5, the Dy. CIT has dealt with the issue in para 8 of the assessment order, which mentions that the assessee had not included excise duty on stock of finished needles as on 31st March, 1991. The assessee’s contention that the excise duty does not form part of the cost of goods where the goods have been manufactured but have not been cleared for excise, was not accepted by Dy. CIT. It was observed by him that the liability for payment of excise duty accrues on completion of production but collection of the same is postponed to the date of removal of the goods. Before learned chartered accountant (sic), it was submitted that the assessee has been consistently valuing inventory at cost. Other contentions put forth by the assessee have been recorded in paras 6.2 to 6.5 of the impugned order and learned CIT(A) ultimately deleted the addition. Learned Departmental Representative relied on the order of the Dy. CIT and submitted that the case law cited before learned CIT(A) stands overruled in CIT vs. British Paints India Ltd. (1991) 91 CTR (SC) 108 : (1991) 188 ITR 44 (SC) and it was urged for restoration of AO’s order. Learned counsel, on the other hand, submitted that since this excise duty amount was added by the Dy. CIT in valuing closing stock and added, it cannot form part of the closing stock, as it has not been expended during the year under consideration and thus cannot form part of valuing closing stock. Reliance was placed on ITO vs. Food Specialities Ltd. (1994) 48 TTJ (Del)(SB) 621 : (1994) 49 ITD 21 (Del)(SB) and it was urged that learned CIT(A) has rightly deleted the addition. In view of the facts and circumstances of the case, we uphold the order of learned CIT(A) on the point for the reasons given therein and find no merit in the ground of the Revenue, which fails.”
3. Further, while dealing with an issue involving Modvat credit on unconsumed material, Hon’ble the Supreme Court in CIT vs. Indo Nippon Chemicals Co. Ltd. (2003) 182 CTR (SC) 291 : (2003) 261 ITR 275 (SC) held that merely because the Modvat credit was an irreversible credit available to manufacturers upon purchase of duty paid raw material, that would not amount to income which was liable to be taxed under the Act; income was not generated to the extent of the Modvat credit on unconsumed raw material.
4. It cannot be disputed that excise duty is to be paid to the State and the same is not a kind of profit in the hands of the assessee. Accordingly, while accepting the findings of the Tribunal, the issue is decided against the Revenue.
5. As far as question No. (ii) is concerned, while delivering judgment in ITA No. 293 of 2005—CIT vs. Vardhman Polytex Ltd., decided on 22nd May, 2006 [reported at (2006) 203 CTR (P&H) 397— Ed.], we have already decided an identical issue against the Revenue and in favour of the assessee. For the reasons recorded therein, we reject the appeal of the Revenue. Accordingly, finding no merit, the appeal of the Revenue is dismissed on both counts.
[Citation : 296 ITR 401]
