The DCIT.(OSD), Circle-8, Ahmedabad V. M/s. Vardhman Stampings Pvt. Ltd., Ahmedabad

ITA 1520/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9006 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 16-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD , ACCOUNTANT MEMBER ./ ITA.NO. 1520 / AHD /201 4 / ASSTT. YEAR: 2010 - 20 11 D.C.I.T (OSD) CIRCLE - 8, AHMEDABAD VS . M/S.VARDHMAN STAMPINGS PVT. LTD. S - 2, MURLIDHAR COMPLEX, S.M. ROAD, AMBAWADI, AHMEDABAD - 380015. PAN : AAACV7624G B (APPLICANT) (RESPONENT) REVENUE BY : SHRI PRASOON K ABRA, SR. DR ASSESSEE BY : SHRI MANISH J SHAH , A.R / DATE OF HEARING : 27 / 03 / 201 7 / DATE OF PRONOUNCEMENT: 28 / 03 /201 7 / O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - XIV ,AHMEDABAD, DATED 14/ 0 2/ 201 4 IN APPEAL NO.CIT(A) - X I V/DC.CIR.8/(OSD) / 358/2012 - 13 FOR ASSESSMENT YEAR 2010 - 11 . ASSESSMENT WAS FRAMED U/S 143( 3) OF IT ACT, 1961 (HEREIN AFTER REFERRED AS ACT) ON 27/02/2014 BY D CIT (OSD), CIRCLE - 8 , AHMEDABAD. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL : ITA NO.1520 /AHD/2014 ASSTT. YEAR 2010 - 1 1 2 1. THE LD.COMMISIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,93,60,624/ - MADE U/S.145A OF THE ACT. 2. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE, THE LD.COMMISSIONER OF INCOME - TAX (APPEALS)XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS)XIV, AHM EDABAD MAY BE SET - A - ASIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 3 . BRIEF FACTS OF THE CASE AS CULLED OUT FROM RECORDS ARE THAT , ASSESSE IS A PRIVATE LIMITED COMPANY ENGAGED IN MANUFACTURING OF TRANSFORMER LAMINATION AND TOROIDAL COR E AN D TRADING IN STEEL PRODUCTS. INCOME TAX RETURN , DECLARING INCOME OF RS.5,44,35,040/ - WAS FILED ON 25/09/2010. THE CASE WAS SEL ECTED FOR SCRUTINY ASSESSMENT AND N ECESSARY INFORMATION WERE CALLED FOR VIDE NOTICE UNDER SECTION 143(2) OF THE ACT, FOLLOWED BY 142(1). IN RESPONSE THEREOF AUTHORIZED REPRESENTATIVE ATTENDED AND FURNISHED THE DETAILS AS CALLED FOR. 4. THE LD. ASSESSING OFFICER, IN THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS NOT FOLLOWED THE PROVISIONS OF SECTION 145A OF THE ACT, RELATING TO VALUATIO N OF INVENTORY BY NOT INCLUDING TAXES AND DUTIES PAID IN THE VALUE OF CLOSING STOCK AND ALSO OBSERVED THAT ASSESSE HAS CLAIMED EXPENDITURE OF CST PENALTY OF RS.84,949/ - . THE ASSESSE S REPLY ALONG WITH THE VARIOUS JUDICIA L DECISION , COULD NOT CHANGE TH E VIEW OF LD.ASSESSING OFFICER, AND HE ACCORDINGLY, MAD E AN ADDITION OF RS.1,93,60,624/ - UNDER SECTION 145A OF THE ACT, FOR UNDER VALUATION OF CLOSING STOCK AND ALSO DISALLOWED CST PENALTY OF RS.84,949/ - AND ASSESSED THE INCOME AT RS . 7,38,80,610/ - ITA NO.1520 /AHD/2014 ASSTT. YEAR 2010 - 1 1 3 5. AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE LD.CIT(A) AND PARTLY SUCCEEDED A S THE ADDITION UNDER SECTION 145 AOF THE ACT WAS DELETED AND DISALLOWANCE OF CST PENALTY WAS UPHELD. 6. REVENUE IS NOW IN APPEAL BEFORE TRIBUNAL, ON THE SOLITARY I SSUE AGAIN S T CIT(A) ORDER, DELETING OF RS.1,93,60,624/ - MADE UNDER SECTION 145A OF THE ACT. AT THE OUTSET LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ISSUE RAISED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF CO - ORDINATE BENCH IN ITO VS MAMATA BRAMPTON ENGG. PVT. LTD, ITA NO.2387/AH D/2013 PRONOUNCED ON 31/08/2016, DISMISSING REVENUES APPEAL. 7. ON THE OTHER HAND LD.DR, VEHEMENTLY ARGUE D SUPPORTING THE ORDER OF THE LD.ASSESSING OFFICER AND ALSO REQUESTED FOR SETTING ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE DETAILS OF DUTIES COLLECTED BUT NOT PAID WITH THE POINT OF VIEW OF APPLICABILITY OF SECTION 43B OF THE ACT. HOWEVER, LD.DR FAILED TO DIFFERENTIATE THE FACTS OF THE CASE WITH F ACTS ADJUDICATED IN CASE OF ITO VS MAMAT A BRAMPTON ENGG. PVT. LTD (SUPRA) ON THE ISSUE OF SECTION 145A OF THE ACT. 8. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RECORDS PLACED BEFORE US AND GONE THROUGH THE DECISION RELIED BY LD .AUTHORIZED REPRESENTATIVE. IN THIS APPEAL REVENUE H AS RAI SED THREE GROUNDS, BUT THE SOLE GRIEVANCE IS AGAINST CIT(A)S ORDER DELETING THE ADDITION OF RS.1,93,60,624/ - MADE UNDER SECTION 145A OF THE ACT. 9. WE FIND THAT LD. ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASS E ESEE HAD SHOWN THE AMOUNT RECEIVABLE ON ACCOUNT OF UNUTILIZED/CLOSING BALANCE ON ACCOUNT OF ITA NO.1520 /AHD/2014 ASSTT. YEAR 2010 - 1 1 4 MODVAT/CENVAT CREDIT UNDER LOANS AND ADVANCES AN D NOT INCLUDED IT S VALUE IN THE CLOSING STOCK. LD.ASSESSING OFFICER REFERRED TO THE PROVISIONS OF SECTION 145A OF THE ACT A ND WAS OF THE VIEW THAT TAXES/DUTY/CESS/FESS RELATED TO STOCK NEED TO BE INCLUDED IN THE VALUE OF CLOSING STOCK. 10. THE LD.COUNSEL SUBMITTED BEFORE ASSESSING OFFICER THAT ASSESSEES COMPANY HAS UNUTILIZED CENVAT CREDIT OF RS.1,93,60,624/ - AS ON 31/03/20 10 ON PURCHASES OF RAW MATERIALS. CENVAT AVAILED DURING THE YEAR IS EFFECTED BY REDUCING THE COST OF MATERIAL CONSUMED IN PROFIT AND LOSS ACCOUNT AND CENVAT UTILIZED DURING THE YEAR IS EFFECTED BY REDUCING EXCISE DUTY PAYABLE ON FINISHED GOODS. BALANCE CEN VAT ACCOUNT IS TREATED AS AN ADVANCE AND SHOWN IN THE BALANCE SHEET UNDER LOANS & ADVANCE SCHEDULE. IT WAS FURTHER SUBMITTED THAT IN THE BOOKS OF ACCOUNTS RAW MATERIAL CONSUMED IS NET OF EXCISE DUTY , THEREFORE , UNUTILIZED CENVAT CREDIT IS NOT TO BE A DDED WHILE VALUING THE CLOSING STOCK. TA X AUDITOR WHILE PREPARING THE REPORT UNDER SECTION 44AB HA S FOLLOWED THE GUIDELINES PROVIDED IN GUIDANCE NOTE PUBLISHED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND HAS CERTIFIED THE EFFECT ON PROFIT AFTER COMPARING AMOUNT AS PER THE PROFIT AND LOSS ACCOUNT AND THE AMOUNT AS PER SECTION 145A OF THE ACT, AND FURTHER CERTIFIED THAT NET EFFECT ON THE PROFIT AS NIL. 11. WE FURTHER OBSERVE THAT ABOVE CONTENTION OF ASSESEE WAS BRUSHED ASIDE BY LD.ASSESSING OFFICER BUT THE VERY SAME SUBMISSION WAS DULY ACCEPTED BY LD.CIT(A), WHO ALLOWED THE ASSESSEES GROUNDS CHALLENGING THE IMPUGNED ADDITION MADE BY LD.ASSESSING OFFICER BY OBSERVING AS UNDER: ITA NO.1520 /AHD/2014 ASSTT. YEAR 2010 - 1 1 5 I AM NOT INCLINED WITH THE CONTENT ION OF A.O THAT THE UNUTILI ZED CREDIT OF TAXES VIZ. MODVAT/CENVAT IS A KIND OF SUBSIDY AND INCENTIVE GIVEN BY THE GOVT. AND IT CANNOT BE TREATE D AS ADVANCE GIVEN TO THE GOVTON ACCOUNT OF SALES TAX /CENTRAL EXCISE DUTY PAYABLE. THE A.O, HIMSELF AT PARA 4,3 AGREED THAT THIS IS A PROCE DURE TO REDUCE THE CASCADING EFFECT OF SUCH DUTIES PAYABLE BY PURCHASE AT VARIOUS STAGES OF A PRODUCT MAY FINISHED , SEMI - FINISHED OR EVEN RAW MATERIAL SO TO HAVE CONTROL OVER FINAL PRICES. THE SCHEME O FMODVAT/CENVAT IS BASED ON IMPOSITION OF SUC H INDIRECT TAXES/DUTIES ON THE AMOUNT OF VALUE ADDITION BY MANUFACTURER SO TO AVOID CASCADING EFFECT OF SUCH DUTIES IN TRADING OR NO VALUE ADDITION. THE APPELLANT FOLLOWED PROPER PROCEDURE AS PER GUIDELINES PROVIDED IN THIS REGARD AND TAX AUDITOR DULY MENTIONED ABOUT SAME IN TAX AUDIT REPORT WITH STATEMENT OF NIL IMPACT ON PROFIT TO FOLLOW SUCH EXCLUSIVE METHOD WHICH IS MANDATORY FOR COMPANIES AS PER COMPANY ACT. FURTHER I AM INCLINED WITH THE CONTENTION OF APPELLANT THAT THERE IS NO FINISHED GOODS CL OSING STOCK THEREFORE SUCH UNUTILIZED DUTIES CANNOT BE TREATED AS CLOSING STOCK OR ADDED. ANOTHER ASPECT AS EVIDENT FROM IMPUGNED ASSTT. ORDER THAT A.O. AT PARA 4.7 OF THE IMPUGNED ORDER [DISCUSSED AT PARA 4A(C)(VII) ABOVE] ADMITTED ABOUT THE TAX AUDITO R PROCEDURE OF FOLLOWING EXCLUSIVE METHOD ANDALLOWED THE CREDIT OF DUTIES PAID DURING THE YEAR FROM MODVAT CREDIT OF RS.3,67,26,896 BEING UTILISED AT RS.3,36,35,071. BUT, CONTENDED THAT - 'HOWEVER THE DUTIES WHICH ARE NOT PAID AND REMAINED OUTSTANDING AS ON 31.03.2010 NEED TO.BE ADJUSTED IN VALUE OF STOCKS.' THE A.O. NEITHER GIVEN/FIND SUCH DETAILS OF DUTIES COLLECTED NOT PAID NOR EXAMINED THIS ISSUE FROM THE POINT ,OF VIEW OF APPLICABILITY OF SECTION 43B OF THE ACT. IN APPEAL PROCEEDINGS, AFTER VERIFICATION OF AUDITED ACCOUNTS AND TAX AUDIT REPORT NO SUCH AMOUNT PAYABLE AS CENTRAL EXCISE DUTY OR SALES TAX WERE NOTICED AND THERE IS NO ADVERSE REMARKS BY AUDITORIN REFERENCE TO COLUMN RELATED TO SECTION 43B OF THE ACT. IT IS THEREFORE, I AM INCLINED WITH APPE LLANT TH AT A.O. WITHOUT APPRECIATING TH E FACTS, IN A MECHANICAL MANNER MADE ADDITION ON THE BASIS OF ASSUMPTION, PRESUMPTION AND SURMISES. WITH DUEREGARDS TO VARIOUS CASE LAWS RELIED ON BY A.O., THE FACTS AND CIRCUMSTANCES IN ITA NO.1520 /AHD/2014 ASSTT. YEAR 2010 - 1 1 6 THOSECASE LAWS ARE INAPPLICABLE IN THE CASE OF APPELLANT, I AM INCLINED WITH APPELLANT THAT RATIO OF CASE LAWS RELIED ON I.E. R.R. KABLE LTD, (SUPRA). NARMADA CHEMTUR. PETROCHEMICALS LTD .(SUPRA), MAHAVIR ALUMINIUM I TD (SUPRA) ETC. ARE SQUARELY APPLICABLE TO THE CASE OF APPE LLANT. AS REGARDS, THE APPLICATION OF SECTION 145A WHICH MANDATORILY PRESCRIBES THE VARIATION OF INVENTORY BY INCLUSIVE METHOD, THE APPELLANT HAS FULFILLED THE OBLIGATION BY WAY OF OBSERVATIONS IN THE AUDIT REPORT. THE SAME PRACTICE WAS FOLLOWED IN THE EA RLIER YEARS. SO IT CANNOT BE SAID THAT THE APPELLANT IS NOT FOLLOWING THE PROVISIONS OF SECTION 145A. HONOURABLE ITAT BENCH OF AHMEDABAD IN A DECISION IN THE CASE OF ALPANIL INDUSTREIS VS. ACIT IN ITA NO.169/AHD/2005 AND 170/AHD/2005 FOR A. Y. 99 - 2000 & 20 00 - 01 HAS DISCUSSED THE PRINCIPLE RELATED TO VALUATION OF CLOSING STOCK U/S. 145A OF THE AC T AND IT WOULD BE RELEVANT TO QU OTE THE FINDING OF THE HONOURABLE BENCH WHICH CLARIFIES THE ISSUE COMPLETELY. '77. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE DISPUTE IS REGARDING VALUATION OF CLOSING STOCK IN VIEW OF THE INSERTION OF PROVISIONS OF SECTION 145A OF THE ACT. THE LEARNED ASSESSING OFFICER OBSERVED THA T THE ASSESSEE HAS NOT INCLUDED THE ELEMENT OF EXCISE DUTY WHICH WAS PAID BY THE ASSESSEE ON HIS PURCHASES OF RAW MATERIAL. IN VIEW OF NON INCLUSION OF THIS EXCISE DUTY IN RESPECT OF WHICH MODVAT CREDIT WAS AVAILABLE TO THE ASSESSEE, ACCORDING TO THE LEARN ED COMMISSIONER OF INCOME TAX(APPEALS), INCOME OF RS.26,95,884/ - WAS UNDERSTATED BY THE ASSESSEE. ON THE OTHER HAND THE CLAIM OF THE ASSESSEE IS THAT BY INCLUSION OF THIS EXCISE DUTY IN THE CLOSING STOCK THERE WILL NO EFFECT IN THE PROFIT AS THE CORRESPOND ING AMOUNT WILL ALSO BE THEN INCLUDED IN THE PURCHASES. THE ASSESSEE IN SUPPORT OF THE ABOVE ARGUMENT RELIED UPON THE VIEW EXPRESSED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IN ITS GUIDELINES, WHEREIN IT WAS EXPLAINED THAT FOLLOWING OF EITHER INC LUSIVE METHOD OF ACCOUNTING OR EXCLUSIVE METHOD OF ACCOUNTING WILL NOT HAVE ANY EFFECT ON THE PROFIT DISCLOSED BY THE PROFIT AND LOSS ACCOUNT. THE ONLY EFFECT OF FOLLOWING INCLUSIVE METHOD WILL BE THAT THE EXCISE DUTY LIABILITY WILL APPEAR IN THE BALANCE S HEET WHICH WILL BE ADDED BACK TO THE INCOME OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 43B TO THE EXTENT NOT PAID BY THE ASSESSEE BEFORE THE DUE DATE OF FURNISHING OF RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. THE ABOVE VIEW WAS ALSO EXPRE SSED BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 1, BARODA VS. GUJARAT FLUORO - CHEMICALS LTD. IN ITA NO.3742/AHD/2002 ASSESSMENT ITA NO.1520 /AHD/2014 ASSTT. YEAR 2010 - 1 1 7 YEAR 1999 - 00 ORDER DATED 28.09.2006. IN OUR CONSIDERED OPINION, THE LOWER AUTHORI TIES HAVE NOT PROPERLY APPRECIATED THE EFFECT OF SECTION 145A OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BY WAY OF AN ILLUSTRATION CONCLUDED THAT THERE WILL BE A DIFFERENCE IN THE PROFIT ON FOLLOWING INCLUSIVE AND EXCLUSIVE METHOD OF ACCOU NTING FOR EXCISE DUTY. IN THE ILLUSTRATION CITED IN THE ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOUND THE DIFFERENCE AT RS.80/ - . ACCORDING TO THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE INCLUSIVE METHOD IN THE ILLUSTRATION, THE AS SESSEE'S PROFIT WORKED OUT TO RS.380/ - WHEREAS IN THE EXCLUSIVE METHOD, THE ASSESSEE'S PROFIT COMES TO RS.300/ - . THUS, THERE WAS A DIFFERENCE OF RS.80/ - IN THE PROFIT. WE ON A CLOSER LOOK AT THE ILLUSTRATION FIND THAT THE DIFFERENCE HAS OCCURRED DUE TO AN ERROR BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN NOT CONSIDERING THE EXCISE DUTY EXPENDITURE OF THE ASSESSEE. IT WAS OBSERVED FROM THE ILLUSTRATION THAT ASSESSEE HAS COLLECTED EXCISE DUTY OF RS.180/ - BY UTILIZING THE RAW MATERIAL ON WHICH EXCISE DUTY OFRS.100/ - WAS PAID TO THE GOVERNMENT. THUS, THE ASSESSEE WAS LIABLE TO PAY A FURTHER EXCISE DUTY OF RS.80/ - TO THE GOVERNMENT. WHEN THE EXPENDITURE OF RS.80/ - IS TAKEN INTO ACCOUNT IN THE ILLUSTRATION, GIVEN FOR INCLUSIVE METHOD THEN THE PROFIT AS P ER INCLUSIVE METHOD ALSO WORKS OUT TO RS.300/ - WHICH IS EXACTLY THE SAME AS PER EXCLUSIVE METHOD. FURTHER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE ILLUSTRATION CITED IN HIS ORDER HAS NOT ACCOUNTED FOR THE AMOUNT OF MODVAT UTILISED BY THE ASS ESSEE IN PAYMENT OF EXCISE DUTY IN RESPECT OF RAW MATERIAL NOT UTILISED FOR MANUFACTURING. IN THE ILLUSTRATION, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS SHOWN THAT ASSESSEE HAS UTILISED AMOUNT OF RS.180/ - OUT OF AMOUNT OF RS.200/ - OF EXCISE DUTY PAID ON PURCHASE AGAINST THE EXCISE DUTY LIABILITY OF RS.180 ON SALES. HOWEVER, THIS UTILIZATION OF RS.180/ - WAS ALLOWED TO THE ASSESSEE IN RESPECT OF STOCK WHICH WAS NOT USED FOR MANUFACTURING ALSO TO THE EXTENT OF RS.80/ - . THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) IGNORED THE FACT THAT IF IN FUTURE THE CLOSING STOCK IS NOT UTILISED FOR MANUFACTURING, THEN THE MODVAT CREDIT UTILISED WOULD BE REVERSED AND THE ASSESSEE WOULD BE FURTHER LIABLE TO PAY RS. 80/ - TO THE GOVERNMENT. IN A NUTSHELL THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) ARRIVED AT A WRONG CONCLUSION BECAUSE OF NOT CONSIDERING THE ASSESSEE'S LIABILITY FOR UTILIZATION OF MODVAT CREDIT IN RESPECT OF UNCONSUMED RAW MATERIAL. THE ISSUE CAN BE LOOKED INTO FROM YET ANOTHER ANGLE. SECTION 145 A REQUIRES REVALUATION OF NOT INVENTORY ALONE BUT ALSO REQUIRES REVALUATION OF PURCHASE AND SALES. ON REVALUATION OF PURCHASE BY INCLUDING THE AMOUNT OF EXCISE DUTY IN RESPECT OF WHICH MODVAT CREDIT IS AVAILABLE TO THE ASSESSEE, THE PURCHASE OF THE ASSESSE E WILL INCREASE RESULTING IN CORRESPONDING DECREASE IN THE PROFIT OF THE ASSESSEE. THE ASSESSEE'S CONTENTION THAT VALUE OF CLOSING STOCK IS CREDITED IN THE PROFIT AND LOSS ACCOUNT TO SET OFF THE VALUE OF UNCONSUMED ITEMS OF PURCHASE AND THEREFORE, BOTH SHO ULD HAVE SAME BASIS CANNOT BE CONTROVERTED. THE ONLY EXCEPTION TO THIS THEORY IS THAT WHEN THE MODVAT VALUE IS LESS THAN THE COST THEN EFFECTIVELY UNREALISED LOSS IS ALLOWED AS A DEDUCTION TO THE ASSESSEE ON THE WELL SETTLED PRINCIPLES. IN THE INSTANT CASE , THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN REVALUING ONLY CLOSING STOCK SO AS TO INCLUDE THE AMOUNT OF ITA NO.1520 /AHD/2014 ASSTT. YEAR 2010 - 1 1 8 EXCISE DUTY PAID ON PURCHASE WITHOUT REVALUING THE CORRESPONDING PURCHASES. WE HAVE GONE THROUGH THE GUIDELINES EXPLAINED BY THE ICAI AND FIND OURSELV ES IN AGREEMENT THEREWITH THAT THERE WILL NOT BE ANY EFFECT ON THE PROFIT OF LOSS ARRIVED AT EITHER BY FOLLOWING INCLUSIVE METHOD OF ACCOUNTING OR EXCLUSIVE METHOD OF ACCOUNTING FOR EXCISE DUTY. THE ONLY EFFECT WILL BE THAT THE EXCISE DUTY PAYABLE ON CLOSI NG STOCK OF FINISHED GOODS WILL BE TO THE EXTENT NOT DEPOSITED WITH THE GOVERNMENT BEFORE THE DUE DATE OF FURNISHING OF RETURN WILL BE ADDED TO THE INCOME OF THE ASSESSEE IN VIEW OF PROVISION OF SECTION 43B OF THE ACT. IN VIEW OF THE DISCUSSION MADE HEREIN ABOVE, IN OUR CONSIDERED OPINION, THERE WILL BE NO EFFECT IN THE TAXABLE PROFIT OF THE ASSESSEE BY INCLUDING THE AMOUNT OF EXCISE DUTY PAID ON PURCHASES IN THE VALUE OF CLOSING STOCK OF RAW MATERIAL, WHETHER AS RAW MATERIAL OR AS FORMING PART OF WORK - IN PR OGRESS OR FINISHED GOODS. WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE IN BOTH THE YEAR UNDER APPEAL AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE.' 12. WE FURTHER, OBSERVE THAT SIMILAR ISSUE RELATING TO ADDITION MADE BY INVOKING PROVISIONS OF 145A OF THE ACT, CAME UP BEFORE THE CO - ORDINATE BENCH IN THE CASE OF ITO V/S MAMATA BRAMPTOM ENGG. PVT. LTD (SUPRA) AND W AS DECIDED AGAINST THE REVENUE , FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF NARMADA CH EMATUR PETROCHEMICALS LTD.(327 ITR 369) BY OBSERVING AS FOLLOWS: WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE ADD ITION OF UNUTILIZED CENVAT CREDIT TO THE CLOSING STOCK. WE FIND THAT THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE HAS GIVEN A FINDING THAT ASSESSEE IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING WHEREBY THE EXCISE DUTY IS NOT INCLUDED IN THE V ALUATION OF STOCK AND RAW - MATERIALS AS THE EXCISE DUTY PAID AND COLLECTED IS NOT MADE PART AND PARCEL OF THE PROFIT & LOSS A/C. HE HAS FURTHER GIVEN A FINDING THAT ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 145A OF THE ACT AND THE EFFECT OF INCLU DING EXCISE DUTY IS VALUATION OF CLOSING STOCK DOES NOT AFFECT THE PROFIT AND IS REVENUE NEUTRAL. HE HAS FURTHER RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF NARMADA CHEMATUR PETROCHEMICALS LTD.(SUPRA). BEFORE US, REVENUE HAS NEITHER CONTROVERTED THE FINDING OF LD.CIT(A) NOR HAS PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. WE FURTHER FIND THAT THE HONBLE APEX COURT IN THE CASE OF INDO NIPPO CHEMICALS (2003) 261 ITR 375 HAS HELD THAT UNAVAILED MODVAT CREDIT CANNOT BE CONSTRUE D AS INCOME AND THERE IS NO LIABILITY TO PAY TX ON SUCH UNAVAILED MODVAT CREDIT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). THIS GROUND OF REVENUE IS DISMISSED ITA NO.1520 /AHD/2014 ASSTT. YEAR 2010 - 1 1 9 13. RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH, AND IN VIEW OF TOTALITY OF FACTS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT UNAVAILED CENVAT CREDIT CANNOT BE CONSTRUED HAS INCO ME AS THERE IS NOT LIABILITY TO PAY TAX ON SUCH UNAVAILED CENVAT CREDIT AND ALSO THERE WILL BE NIL EFFECT ON THE PROFIT AS THE TAXES AND DUTIES IF ADDED TO THE CLOSING STOCK WILL FORM PART OF THE OPENING STOCK IN THE SUBSEQUENT YEAR. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). WE UPHOLD THE SAME. 14. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 28 TH MARCH , 2017 AT AHMEDABAD. SD/ - SD/ - ( RAJPAL YADAV ) JUDICIAL MEMBER (MANISH BORA D ) ACCOUNTANT MEMBER TRUE COPY AHMEDABAD; DATED 28 / 03 /2017 MANISH / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, 6. / GUARD FILE .