M/s. Cradel Pharmaceuticals(P)Ltd, Kolkata V. DCIT, Circle -10, Kolkata, Kolkata

ITA 1135/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3204 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 06-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMITABHA RO Y SR DR PER
• Assessee Lawyers: S M SURANA
• Section: 145; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI N.S.SAINI, A.M. & SHRI MAHAVIR SINGH, J.M. ] I.T.A. NO.1135/KOL/2012 : ASSESSMENT YEAR : 2006-07 M/S. CRADEL PHARMACEUTICALS PVT.LTD., KOL . VS- DCIT, CIRCLE-10, KOL. PAN : AABCC 0202E ( APPELLANT ) ( RESPONDENT ) DATE OF CONCLUDING THE HEARING : 14.06.2013 DATE OF PRONOUNCING THE ORDER : 21.06.2013 APPEARANCES : FOR THE APPELLANT : SHRI S.M.SURANA : FOR THE RESPONDENT : SHRI AMITABHA RO Y, SR.DR O R D E R PER SHRI N.S.SAINI, A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT(A)-XII KOLKATA DATED THE 3 RD MAY, 2012 FOR THE ASSESSMENT YEAR 2006-07 CONFIRMI NG THE ADDITION OF RS.13,59,378/- FOR NOT INCLUDING THE EX CISE DUTY IN THE VALUE OF CLOSING STOCK. 2. BRIEF FACTS OF THE CASE ARE THAT THE AO MADE AN ADDITION OF RS.13,59,378/- ON ACCOUNT OF EXCISE DUTY NOT INCLUDED IN THE CLOSI NG STOCK OF FINISHED GOODS BY INVOKING THE PROVISIONS OF SECTION 145A OF THE INCO ME-TAX ACT, WHICH WAS CONFIRMED IN APPEAL BY THE LD. CIT(A). 3. THE A.R. OF THE ASSESSEE HAS FILED BEFORE US A C OPY OF THE ORDER OF AHMEDABAD C BENCH OF THE TRIBUNAL IN THE CASE OF PRECICHEM CORPORATION VS- ACIT REPORTED IN 2011 TAXPUB(DT) 1816 (AHD-TRIB), W HEREIN THE TRIBUNAL, 2 I.T.A. NO.1135/KOL/2012 M/S. CRADEL PHARMACEUTICALS PV T.LTD. A.Y.2006-07 FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ACIT -VS- NARMADA CHEMATUR PETROCHEMICALS LTD. [2010] 327 ITR 369 (GUJ.) HELD AS UNDER: 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE HONBLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE IDENT ICAL ISSUE IN THE CASE OF NARMADA CHEMATUR PETROCHEMICALS LTD. (SUPRA) AND H ELD AS UNDER: ONE READS S. 3(1) OF THE EXCISE ACT IN ISOLATION, IT APPEARS TO INDICATE THAT THE CHARGE IS LEVIED IN S 3 AND THE LIABILITY STANDS INCURRED UPON MANUFACTURE OF EXCISABLE GOODS AT THE RATES SET OUT IN FIRST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT, 1985. HOWEVER, TH OUGH THE OPENING PORTION OF SUBS. (1) STATES THAT THERE SHALL BE LEV IED AND COLLECTE4 THERE IS NO OTHER PROVISION FOR COLLECTION IN THE S AID SECTION AND THE MANNER OF COLLECTION AS WELL AS LEVY ARE FOUND IN T HE RULES AS PRESCRIBED. IT MAY INDICATE THAT S. 4 WOULD BE A ST ANDALONE PROVISION, BUT WHEN ONE READS THE SAID PROVISION IT BECOMES CL EAR THAT THE LEVY IS INCOMPLETE, IN AS MUCH AS THE ASSESSEE UNDER THE EXCISE ACT IS NOT REQUIRED TO DISCHARGE THE LIABILITY TO PAY DUTY LEV IED UPON THE MANUFACTURE OF EXCISABLE GOODS, TILL SUCH GOODS ARE REMOVED FROM THE FACTORY PREMISES, OR A BONDED WAREHOUSE. THE TEST T O DETERMINE AS TO WHETHER THE LIABILITY HAD BEEN INCURRED OR NOT WOUL D BE AS TO WHETHER A CORRESPONDING RIGHT IS AVAILABLE WITH THE EXCISE AUTHORITY TO ENFORCE SUCH A LIABILITY. MERE PRODUCTION OR MANUFACTURE BY ITSELF WOULD NOT BE SUFFICIENT. THOUGH THERE MIGHT BE LEVY UNDER S. 3 OF THE EXCISE ACT, YET NEITHER THE RATE NOR THE VALUE WOULD BE DETERMI NABLE TILL THE POINT OF TIME OF REMOVAL OF THE EXCISABLE GOODS FROM THE FACTORY PREMISES AND HENCE THE SCHEME ITSELF INDICATES THAT SO FAR A S AN ASSESSEE IS CONCERNED, HE INCURS LIABILITY TO PAY EXCISE DUTY O NLY UPON BOTH THE EVENTS TAKING PLACE, NAMELY MANUFACTURE OF EXCISABL E GOODS AND REMOVAL OF EXCISABLE GOODS. THIS POSITION HAS TO BE NECESSARILY ADOPTED CONSIDERING THAT THE DUTY OF CENTRAL EXCISE IS LEVIED AND COLLECTED ON AN AD VALOREM BASIS. IN OTHER WORDS, U NLESS AND UNTIL THE VALUE IS KNOWN, THE LEVY AND THE COLLECTION WOULD N OT BE CORRECT AND VALID. THE DUTY IS LEVIABLE AND IS ACTUALLY IMPOSED ON THE TRANSACTION VALUE DEFINED IN SUB-S.(3)(D) OF S.4 OF THE EXCISE ACT. IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE TO STATE THAT UND ER THE EXCISE ACT, THE DUTY HAS BECOME DUE AND PAYABLE ONLY BY OPERATION O F S. 3 SIMPLICITER. IF S. 3 OF EXCISE ACT IS CONSIDERED TO BE THE ONLY CHARGING SECTION AND S. 4 OF THE EXCISE ACT IS CONSIDERED AS ONLY A PROVISION FOR ASSESSMENT, THE CHARGE LEVIED BY S. 3 OF THE EXCISE ACT CANNOT BE BROUGHT HOME. SECS. 3 AND 4 HAVE TO BE READ TOGETHE R TO BRING THE CHARGE HOME. THE CHARGE IS PARTIALLY EMBEDDED IN BO TH THE 3 I.T.A. NO.1135/KOL/2012 M/S. CRADEL PHARMACEUTICALS PV T.LTD. A.Y.2006-07 PROVISIONS. IT IS IN THIS CONTEXT THAT ONE FINDS VA RIOUS JUDGMENTS IN RELATION TO DISPUTES RAISED ON THE BASIS OF A PARTI CULAR CUT-OFF DATE SAY, 28TH FEBRUARY OR 1ST MARCH QUA THE GOODS ALREA DY MANUFACTURED AND LYING IN STOCK UPTO 28TH FEBRUARY WHICH BECOME AMENABLE TO DUTY OF CENTRAL EXCISE ONLY UPON THE POINT OF TIME OF REMOVAL, NAMELY, AFTER 1ST MARCH THEREFORE, TO READ PROVISIONS OF S. 3 OF THE EXCISE ACT TO BE A COMPLETE PROVISION FOR THE PURPOSES OF CHAR GING DUTY OF CENTRAL EXCISE WOULD NOT BE A FULLY CORRECT PROPOSI TION OF LAW. UNDER A TAXING STATUTE WHEN A CHARGE IS FASTENED THE PURP OSE IS TO COLLECT TAX. A LEVY IS FOR THE PURPOSES OF IMPOSING A TAX O R A DUTY, BY WHATEVER NAME CALLED, AND FOR THE PURPOSES OF COLLE CTION OF SUCH IMPOST. A STATE CANNOT BE INTERESTED IN A LEVY WHIC H DOES NOT RESULT IN INFLOW OF REVENUE TO THE EXCHEQUER. THE POSITION IN LAW IS, THEREFORE, THAT FOR THE PURPOSES OF LEVY AND COLLECTION OF DUL Y OF CENTRAL EXCISE, THE PROVISIONS OF EXCISE ACT READ WITH RULES THEREU NDER EVOLVE A SELF- CONTAINED SCHEME UPON A CONJOINT READING OF SS. 3 A ND 4 OF THE EXCISE ACT WITH RR. 9 AND 9A OF THE CENTRAL EXCISE RULES. THEN, FOR THE PURPOSES OF THE ACT, NAMELY, IT ACT, THE POSITION I N LAW CANNOT BE DIFFERENT. AN INTERPRETATION OF A PARTICULAR STATUT E SHOULD NOT ORDINARILY BE IN CONFLICT WITH ANOTHER STATUTE UNLE SS AND UNTIL SPECIFICALLY PROVIDED SO BY THE OTHER STATUTE. THE ACT DOES NOT PROVIDE FOR ANY CONTRARY INTERPRETATION, I.E., WHAT IS CONT RARY TO THE POSITION PREVAILING UNDER THE EXCISE LAW. THE POINT OF TIME OF REMOVAL OF EXCISABLE GOODS IS THE POINT OF RIME WHEN THE LIABI LITY TO PAY CENTRAL EXCISE DUTY IS INCURRED RESULTING IN CORRESPONDING RIGHT UNDER LAW IN THE EXCISE DEPARTMENT TO TAKE STEPS TO EFFECT RECOV ERY TITHE LIABILITY IS NOT DISCHARGED TILL THAT POINT OF TIME LIABILITY TO PAY DUTY OF CENTRAL EXCISE CANNOT BE STATED TO HAVE BEEN INCURRED IN LA W AS THE SAME IS NOT DUE AND PAYABLE. ON BEHALF OF THE REVENUE RELIANCE HAS ALSO BEEN PLA CED ON PROVISIONS OF S. 1454 WHICH HAS BEEN INSERTED BY FINANCE (NO. 2) ACT, 1998, W.E.F 1 ST APRIL, 1999. THE ASSESSMENT YEAR BEING 199 7-98 TH E SAID PROVISION CANNOT BE INVOKED. THOUGH THE BILL PROPOS ED RETROSPECTIVE INSERTION ULTIMATELY THE SECTION HAS COME ON THE ST ATUTE BOOK ONLY FROM 1ST APRIL, 1999. WHAT IS MORE MATERIAL IS THAT THE SAME RELATES TO INCLUSION IN THE VALUE OF INVENTORY THE AMOUNT OF A NY TAX, DUTY ETC. PAID OR LIABILITY INCURRED FOR THE SAME UNDER ANY L AW IN FORCE. MEANING THEREBY SUCH TAX, DUTY, ETC. SHOULD HAVE BE EN ACTUALLY PAID OR SHOULD BE ACTUALLY DUE AND PAYABLE UNDER THE LAW APPLICABLE TO SUCH TAX, DUTY, ETC. IN FORCE. OTHERWISE EVEN S. 14 54 WILL ALSO NOT CARRY CASE OF REVENUE ANY FURTHER. THE TRIBUNAL WAS THEREFORE JUSTIFIED IN LAW IN EXCLUDING THE EXCISE DUTY AT TH E TIME OF VALUATION OF 4 I.T.A. NO.1135/KOL/2012 M/S. CRADEL PHARMACEUTICALS PV T.LTD. A.Y.2006-07 THE CLOSING STOCK OF FINISHED GOODS AT THE END OF T HE ACCOUNTING PERIOD. FROM THE ABOVE, IT IS EVIDENT THAT THEIR LORDSHIPS HAVE EXAMINED THE LIABILITY OF THE ASSESSEE TO THE EXCISE DUTY AND H AVE ARRIVED AT THE CONCLUSION THAT THE LIABILITY OF EXCISE DUTY IS INCURRED ONLY WHEN TWO EVENTS TAKES PLACE, VIZ, MANUFACTURER OF EXCISABLE GOODS AND ALSO REMO VAL OF EXCISABLE GOODS. THEIR LORDSHIPS HAVE ALSO EXAMINED THE SECTION 145 A AND HAVE HELD THAT THE SECTION 145A WILL BE APPLICABLE FROM A.Y.1999-2000 AND HAS ALSO EXAMINED UNDER WHAT CIRCUMSTANCES SECTION 145A WOULD BE APP LICABLE. THEIR LORDSHIPS HELD THAT THE SECTION 145A WOULD BE APPL ICABLE WHEN THE LIABILITY OF THE TAX, DUTY IS ACTUALLY PAID OR ACTUALLY DUE AND PAYABLE AS PER THE LAW. HOWEVER, SINCE THE LIABILITY OF EXCISE DUTY IS TO BE PAYABLE ONLY UPON THE REMOVAL OF THE EXCISABLE GOODS, MERELY BECAUSE THE GOODS WERE MANUFACTURED DURING THE YEAR UNDER CONSIDERATION, NO LIABILITY IS INCURRED BY THE ASSESSEE. SINCE NO LIABILITY IS INCURRED BY THE ASSESSEE, THE SAME CANNOT BE INCLUDED IN THE VALUATION OF THE CLOSING STOCK EVEN AFTER THE APPLICABILITY OF SECTION 145A. 4. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE OR DER OF THE AO. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE F IND THAT THE AO MADE THE ADDITION UNDER SECTION 145A OF THE ACT OF RS.13,59, 378/- TO THE VALUE OF CLOSING STOCK OF FINISHED GOODS OF THE ASSESSEE ON THE GROU ND THAT EXCISE DUTY WAS NOT INCLUDED IN THE VALUE OF FINISHED GOODS, WHICH WAS CONFIRMED IN APPEAL BY THE LD. CIT(A). THE LD. A.R. OF THE ASSESSEE HAS FILED BEFO RE US THE ORDER OF THE AHMEDABAD C BENCH OF THE TRIBUNAL IN THE CASE OF PRECICHEM CORPORATION ( SUPRA ), WHEREIN THE TRIBUNAL, FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NARMADA CHEMATUR PETROCHEMICAL S LTD. HELD THAT EXCISE DUTY ON FINISHED GOODS WAS NOT INCLUDIBLE IN THE VALUE O F THE CLOSING STOCK. FURTHER, THE LD. A.R. OF THE ASSESSEE HAS ALSO SUBMITTED THAT IF THE AMOUNT OF EXCISE DUTY IS INCLUDED IN THE VALUE OF CLOSING STOCK, THEN THE AS SESSEE IS ENTITLED TO DEDUCTION FOR THE EXCISE DUTY BECAUSE THE ASSESSEE HAS MADE THE P AYMENT FOR THE SAME BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTIO N 139(1) OF THE ACT. THUS, THE ADDITION WAS MADE WOULD BE REVENUE NEUTRAL. THEREFO RE, WE SET ASIDE THE ORDERS OF 5 I.T.A. NO.1135/KOL/2012 M/S. CRADEL PHARMACEUTICALS PV T.LTD. A.Y.2006-07 THE LOWER AUTHORITIES AND DIRECT THE AO TO DELETE T HE ADDITION OF RS. 13,59,378/- MADE TO THE VALUE OF THE FINISHED GOODS SHOWN IN TH E CLOSING STOCK BY THE ASSESSEE ON ACCOUNT OF EXCISE DUTY. HENCE, GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN THE COURT ON 21 ST JUNE, 2013. SD/- SD/- (MAHAVIR SINGH) (N. S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED : 21 ST JUNE, 2013 COPY OF THE ORDER FORWARDED TO: 1. M/S. CRADEL PHARMACEUTICALS PVT.LTD., 17, COLLIN LA NE, 1 ST FLOOR, KOLKATA 700 016. 2. DCIT, CIRCLE-10,KOLKATA 3. THE CIT(A), KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA TALUKDAR(SR.P.S.)