The ITO, Ward-2(4), Surat V. M/s. Murli Fabrics, Surat

ITA 2246/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85812 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 06-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: M K PATEL
• Section: 145; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD , LH LHLH LH BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI N. S. SAINI, ACCOUNTANT MEMBER. ITA. NO. 2246/AHD/2011 (ASSESSMENT YEAR:2005-06) INCOME-TAX OFFICER, WARD- 2(4), ROMM NO.119, 1 ST FLOOR, AYAKAR BHAVAN, MAJURA GATE, SURAT APPELLANT VS. M/S. MURLI FABRICS, 572, ROAD NO.5, GIDC, SURAT RESPONDENT PAN: AAKFM3991J /BY APPELLANT : SHRI M. K. SINGH, SR. D.R. /BY RESPONDENT : SHRI M. K PATEL, A.R. !' /DATE OF HEARING : 02.03.2015 #$% !' /DATE OF PRONOUNCEMENT : 13.03.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT, DAT ED 30.06.2011 FOR A.Y. 2005-06 ON THE FOLLOWING GROUND S. ITA NO. 2246/AHD/11 A.Y. 2005-06 [ITO VS. M/S. MURLI FABRICS] PAGE 2 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD. CIT(A)-II, SURAT, HAS ERRED IN DELETING THE ADDITION OF RS.14,32,533/- TOWARDS UNUTILIZED MODVAT/CENVAT WITHOUT NOTING THE FACTS THAT UNUTILIZED MODVAT/CENVAT CREDIT WAS REQUIRED TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE AND TH E ASSESSEE FAILED TO SUBSTANTIATE THE REASON FOR NOT DOING SO. 2. ONLY ISSUE IN APPEAL WITH REGARDS TO ADDITION OF RS.14,32,533/- ON ACCOUNT OF UNUTILIZED MODVAT/CENV AT CREDIT. THE ABOVE ADDITION HAS BEEN MADE VIDE ORDE R DATED 29.11.2010 U/S. 154 OF THE INCOME TAX ACT, WHEREIN ASSESSING OFFICER HAS DISCUSSED THAT IN BALANCE SHEET OF ASSE SSEE, AT THE END OF PREVIOUS YEAR IN ENDING ON 31.03.2005, UNUTI LIZED MODVAT/CENVAT CREDIT OF RS.14,32,533/- HAS BEEN SHO WN, AND SAME WAS REQUIRED TO BE ADDED U/S.154 OF THE AC T AND THEREFORE, ADDED THE SAME AFTER REJECTING THE OBJEC TION ON BEHALF OF ASSESSEE. 2.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME CIT(A) HAS DELETED T HE ADDITION. 2.2 SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF RE VENUE INTER ALIA SUBMITTED THAT CIT(A) ERRED IN DELETING ADDITION OF RS. 14,32,533/- TOWARDS UNUTILIZED MODVAT/CENVAT CREDIT WITHOUT NOTING THE FACTS THAT UNUTILIZED MODVAT/CEN VAT CREDIT WAS REQUIRED TO BE INCLUDED IN TOTAL INCOME OF ASSESSEE ITA NO. 2246/AHD/11 A.Y. 2005-06 [ITO VS. M/S. MURLI FABRICS] PAGE 3 AND ASSESSEE FAILED TO SUBSTANTIATE THE REASON FOR NOT DOING SO. ACCORDINGLY, ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHOR IZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A) AND SU BMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY ORDER OF HONBLE SUPREME COURT OF INDIA IN CIT VS. INDO NIPP ON CHEMICALS CO. LTD. [2003] 261 ITR 275 (SC). ACCORD INGLY, ORDER OF CIT(A) BE UPHELD. 2.3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT ASSESSING OFFICER HAD TAKEN DEBIT BALANCE ENTRY OF MODVAT/CENVAT CREDIT, AS CREDIT BALANCE. ASSESSEE IS DEBITING ITS PURCHASES AND CREDITING SALES, INCL USIVE OF MODVAT AND IS ALSO FOLLOWING THE METHOD OF VALUING ITS CLOSING STOCK WITH THE MODVAT AMOUNT. BALANCE APPEARING IN THE MODVAT RECEIVABLE UNDER ACCOUNT WAS ON ACCOUNT OF F ACT THAT WHILE EXCISE DUTY ON PURCHASES OF INPUT (YARN) WAS 12%, WHICH WAS AVAILABLE TO ASSESSEE FOR SET OFF AGAINST PAYME NT OF EXCISE DUTY ON CLOTH MANUFACTURED BY IT, RATE OF EXCISE DU TY ON CLOTH MANUFACTURED WAS ONLY 4%. THEREFORE, THERE WAS A D EBIT BALANCE IN THE MODVAT RECEIVABLE ACCOUNT AT THE BEG INNING OF THE YEAR AT RS.13,13,782/- . DURING THE YEAR, AN A MOUNT OF RS.12,23,462/- HAS BEEN FURTHER DEBITED, BEING THE EXCISE DUTY ON PURCHASE ACCOUNT AGAINST WHICH THE APPELLANT CRE DITED RS.7,36,858/- AND RS.3,67,833/- BEING EXCISE DUTY O N SALES ACCOUNT AND MODVAT REVERSED ACCOUNT RESPECTIVELY. T HUS, CLOSING BALANCE IN THE MODVAT RECEIVABLE ACCOUNT WA S ITA NO. 2246/AHD/11 A.Y. 2005-06 [ITO VS. M/S. MURLI FABRICS] PAGE 4 RS.14,32,533/-. ASSESSEE STATED THAT DEBIT BALANCE IS APPEARING BECAUSE PROVISIONS OF MODVAT ON MANUFACTU RING OF CLOTH WERE MADE VOLUNTARY FROM 01.8.2004 AND IT HA D OPTED NOT TO CLAIM MODVAT ON YARN AND PAID THE SAME ON CL OTH. THE STAND OF ASSESSEE HAS ALSO BEEN THAT U/S 145 A OF THE ACT, THE CLOSING STOCK IS TO BE ASSESSED WITH ANY TAX, D UTY, CESS OR FEE, AND SINCE THE CLOSING STOCK HAS ALREADY BEEN V ALUED AT COST INCLUSIVE OF EXCISE DUTY. THERE WAS NO JUSTIFICATI ON FOR ADDING DEBIT BALANCE IN MODVAT RECEIVABLE ACCOUNT TO THE I NCOME OF THE ASSESSEE. IN THIS BACKGROUND, CIT(A) WAS JUSTI FIED IN HOLDING THAT DEBIT BALANCE APPEARING IN MODVAT RECE IVABLE ACCOUNT IS AMOUNT WHICH THE ASSESSEE HAS ALREADY DE BITED IN BOOKS OF ACCOUNT ALONGWITH PURCHASES AND SINCE IT HAS OPTED OUT OF SCHEME OF EXCISE DUTY PAYMENT ON MANUFACTURE D CLOTH FROM THE MODVAT ACCOUNT, ASSESSEE HAS NOT BEEN ABLE TO SET OFF THE ABOVE RECEIVABLE ACCOUNT AGAINST ANY PAYMEN T OF EXCISE DUTY UNDER THE MODVAT SCHEME. THE PURCHASES WHICH HAVE BEEN DEBITED IN THE P & L ACCOUNT ALONGWITH MODVAT ACCOUNT AND APPEARING IN THE CLOSING STOCK ARE ALSO WITH MO DVAT ACCOUNT. THUS, NO ADJUSTMENT U/S. 145 WAS REQUIRED TO BE MADE. ACCORDINGLY, CIT(A) WAS JUSTIFIED IN DELETIN G ADDITION OF RS.14,32,533/-. SAME IS UPHELD. THIS VIEW IS FORT IFIED BY DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS . INDO NIPPON CHEMICALS CO. LTD. (SUPRA), WHEREIN IT HAS B EEN HELD THAT MODVAT CREDIT WAS AN IRREVERSIBLE CREDIT AVAIL ABLE TO MANUFACTURERS UPON PURCHASE OF DUTY-PAID RAW MATERI AL. IT ITA NO. 2246/AHD/11 A.Y. 2005-06 [ITO VS. M/S. MURLI FABRICS] PAGE 5 WOULD NOT AMOUNT TO INCOME WHICH WAS LIABLE TO BE T AXED UNDER INCOME TAX ACT, 1961. 3. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON THIS THE 13 TH DAY OF MARCH, 2015. SD/- SD/- (N. S. SAINI) (SHAILENDR A KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD: DATED 13/03/2015 TRUE COPY S.K.SINHA & & & & ' ' ' ' ('% ('% ('% ('% / COPY OF ORDER FORWARDED TO:- 1. +, / REVENUE 2. / ASSESSEE 3. // 0 / CONCERNED CIT 4. 0- / CIT (A) 5. '45 , , / DR, ITAT, AHMEDABAD 6. 589 :; / GUARD FILE. BY ORDER / & ,