ITO, New Delhi V. M/s Ishaan Exmico Pvt Ltd, Delhi

ITA 2078/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6788 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-11-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 05-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: RAVI GUPTA ADVCOATE

Judgement Text

ITA NO. 3456/DEL/2009 A.Y. 2003-04 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3456/DEL/2009 A.Y. : 2003-04 DCIT, CIRCLE 12(1), NEW DELHI VS. M/S HOLOSTIK INDIA LTD, 30/6, GROUND FLOOR, DEVIKA TOWER, NEW DELHI (PAN: AAACH0239F) (APPELLANT ) (RESPONDENT ) ASSEESSEE BY : SH. RAVI GUPTA, ADVCOATE DEPARTMENT BY : SMT. MONA MOHANTY, SR. D.R. ORDER PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 12.5.2 009 AND PERTAINS TO ASSESSMENT YEAR 2003-04. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF ` 17916 028/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ASSESSING CENVAT C REDIT OF ` 17916028/- AS ASSESSEES INCOME. 3. THE ASSESSING OFFICER IN THIS CASE NOTED THAT A SSESSEE HAS NOT CREDITED AMOUNT OF ` 17916028/- BY WAY OF CENVAT CRE DIT TO PROFIT AND LOSS ACCOUNT. BEFORE THE ASSESSING OFFICER IT WA S EXPLAINED THAT THE ITA NO. 3456/DEL/2009 A.Y. 2003-04 2 ASSESSEE FOLLOWS NET METHOD OF ACCOUNTING PURCHASES MEANING THEREBY THAT EXCISE DUTY IS NOT TAKEN INTO ACCOUNT AND THE AVAILABLE CENVAT, ON PURCHASES HAVE BEEN UTILIZED FOR PAYMENT OF EXCIDE DUTY OF THE FINISHED PRODUCT. THE ASSESSEE ALSO RELIE D UPON THE DECISION IN THE CASE OF C.I.T. V/S INDO NIPPON CHEMICALS CO. LI MITED AND C.I.T. VS JAY BEE INDUSTRIES. BUT THE ASSESSING OFFICER DID NOT FIND THE SUBMISSIONS SATISFACTORY AND MADE THE ADDITION OF ` 17916028/- TO THE ASSESSEES INCOME BEING CENVAT AMOUNT NOT CREDI TED TO P&L ACCOUNT. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) ELABORATELY CONSIDERED THE ISSUE AND HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT A ND FINDINGS OF THE ASSESSING OFFICER AND THE FACTS ON RECORD. AS PER ACCOUNT, TURNOVER OF MANUFACTURED GOODS IS ` 32,99, 34,000/-, WHICH INTER-ALIA COMPRISES AN AMOUNT OF 3,21,06,490/ - OF EXCISE DUTY. THE NET SALES AFTER DEDUCTING THE EXCISE DUTY (` 29,78,27,000) HAS BEEN TAKEN TO PROFIT AND LOSS ACC OUNT (SCHEDULE 12 THEREOF). WHILE ACCOUNTING FOR PURCHA SES OF RAW MATERIAL OF ` 8,49,97,000 (SCHEDULE 15 OF THE AUDIT ED ACCOUNTS), THE APPELLANT HAS CONSIDERED AN AMOUNT OF ` 1,45,24, 853/- BY WAY OF CENVAT CREDIT AVAILABLE ON PURCHASES. THIS AMOUNT OF ` ITA NO. 3456/DEL/2009 A.Y. 2003-04 3 1,45,24,853/- IS NOT PART OF THE FIGURE OF ` 849970 00/- BEING THE NET PURCHASES I.E. NET OF CENVAT. THE APPELLANT A S PER ACCOUNTS HAD AN OPENING CENVAT CREDIT AVAILABLE AMOUNTING TO ` 41,53,151/- AND FOR THE YEAR UNDER APPEAL ALSO ACCO UNTED FOR FRESH CENVAT CREDIT OF ` 1,45,24,853/-. FROM OUT OF THE ABOVE OPENING BALANCE AND FRESH CENVAT CREDIT, THE APPELL ANT UTILIZED CENVAT CREDIT OF ` 1,79,16,028/-., LEAVING A BALANC E OF ` 7,61,976/-, THE LATTER APPEARING AS PART OF THE ASS ET UNDER LOANS AND ADVANCES IN THE BALANCE SHEET. IN THE LIGHT OF THE FACTS ABOVE, IT IS TO BE ADJUDICATED AS TO WHETHER CENVA T CREDIT OF ` 1,79,16,028/- UTILIZED BY THE APPELLANT DURING THE YEAR UNDER APPEAL CAN BE ASSESSED AS INCOME. MY CONCLUSIONS ARE AS UNDER:- (A) CENVAT CREDIT HAS BEEN CLAIMED UNDER THE CENVAT CREDIT RULES, 2002. UNDER RULE 3 OF THE SAID RULE, THE MANUFACTURER OR PRODUCER OF FINAL PRODUCTS SHALL BE ALLOWED TO TAKE CREDIT OF THE EXCISE DUTY SPECIFIE D IN THE FIRST AND SECOND SCHEDULE OF THE CENTRAL EXCISE TARIFF ACT ETC. PAID ON ANY INPUT USED IN THE MANUFACTURE OF FINAL OR INTERMEDIATE PRODUCTS. UNDE R SUB-CLAUSE (3) OF RULE 3 OF CENVAT CREDIT RULES, 20 02, IT HAS BEEN STATED THAT CENVAT CREDIT MAY BE UTILIZE D ITA NO. 3456/DEL/2009 A.Y. 2003-04 4 FOR PAYMENT OF ANY DUTY OF EXCISE ON ANY FINAL PRODU CT. IT IS UNDER THE MANDATE OF THE SAID RULES THAT THE APPELLANT HAS AVAILED THE CENVAT CREDIT AND UTILIZE D A PART OF THE CREDIT TOWARDS PAYMENT OF EXCISE DUTY . (B) AS PER ACCOUNTS THE APPELLANT HAD AN OPENING BALANC E OF ` 4153151/- OF CENVAT CREDIT, AND DURING THE YEA R UNDER APPEAL, IT HAD RECOGNIZED A FURTHER AMOUNT O F ` 14524853/- BY WAY OF CENVAT CREDIT ON THE INPUTS. FROM OUT OF THE OPENING BALANCE AND FRESH CENVAT CREDIT, THE APPELLANT UTILIZED AN AMOUNT OF ` 1,79,16,028/- FOR PAYMENT OF EXCISE DUTY ON CLEARANC E OF EXCISABLE FINISHED GOODS. (C) THE APPELLANT HAS TAKEN TO THE PROFIT AND LOSS ACCO UNT NET SALES I.E. SALES LESS EXCISE DUTY. THE APPELLA NT HAS TAKEN TO THE P&L ACCOUNT NET VALUE OF PURCHASES I.E. PURCHASE LESS CENVAT CREDIT. IF BOTH EXCISE DUTY AN D CENVAT CREDIT ARE CONSOLIDATED TO THE SALES AND PURCHASES RESPECTIVELY, THEN ALSO THERE WOULD HAVE BEEN NOT CASE OF UNDER ASSESSMENT OF INCOME EQUIVALENT TO THE AMOUNT OF CENVAT CREDIT UTILIZED F OR PAYMENT OF EXCISE DUTY. THIS IS ON ACCOUNT OF THE FA CT ITA NO. 3456/DEL/2009 A.Y. 2003-04 5 THAT CENVAT CREDIT TO AN EXTENT OF ` 17916028/- HAS BEEN UTILIZED FOR PAYMENT OF EXCISE DUTY, WHICH OTHERWISE IS ALLOWABLE UNDER SUB-CLAUSE (3) OF CENV AT CREDIT RULES, 2002. IN VIEW OF THE ANALYSIS ABOVE I HOLD THAT THE ASSESSING OFFICER HAS ERRED IN ASSESSING THE AMOUN T OF CENVAT CREDIT UTILIZED FOR PAYMENT OF EXCISE DUTY AS APPELLANTS INCOME FOR THE YEAR UNDER APPEAL. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT CLEARLY THE ASSESSING OFFICER HAS ERRED IN UNDERSTANDING THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE. ASS ESSEE HAS TAKEN TO THE PROFIT AND LOSS ACCOUNT NET SALES I.E. SALE S LESS EXCISE DUTY AND THE ASSESSEE HAS ALSO TAKEN TO THE PROFIT AND LOSS ACCOUNT NET VALUE OF PURCHASES I.E. PURCHASES LESS CENVAT CREDIT. IF BOT H EXCISE DUTY AND CENVAT CREDIT ARE CONSOLIDATED TO THE SALES AND PUR CHASES RESPECTIVELY, THEN ALSO THERE WOULD HAVE BEEN NO CASE OF UNDER AS SESSMENT OF INCOME EQUIVALENT TO THE AMOUNT OF CENVAT CREDIT UTI LIZED FOR PAYMENT OF EXCISED DUTY. THIS HAS RIGHTLY BEEN HELD BY TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) TO BE ON ACCOUNT OF THE FACT T HAT CENVAT CREDIT TO ITA NO. 3456/DEL/2009 A.Y. 2003-04 6 THE EXTENT OF ` 17916028/- HAS BEEN UTILIZED FOR P AYMENT OF EXCISE DUTY, WHICH OTHERWISE, IS ALLOWABLE UNDER SUB-CLAUS E (3) OF CENVAT CREDIT RULES, 2002. 7. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) AND UPHOLD THE SAME. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/11/2010. SD/- SD/- [A.D. JAIN] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 16/11/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES