The DCIT Circle-4(1) Visakhapatnam, Visakhapatnam V. M/s SNF (India) P Ltd, Visakhapatnam

ITA 291/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56875 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Additional evidence
• Section: 43B

Judgement Text

ITA NO.291/VIZAG/2011 M/S. SNF (INDIA) P LTD., VSKP PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D MANMOHAN, VICE PRESIDENT AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.291/VIZAG/2011 ASSESSMENT YEAR: 2006-07 DCIT CIRCLE-4(1) VISAKHAPATNAM M/S. SNF (INDIA) P LTD. VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAACP 4070A APPELLANT BY: SMT. D. KOMALI KRISHNA, DR RESPONDENT BY: SHRI JITENDRA JAIN, ADVOCATE DATE OF HEARING: 15.12.2011 DATE OF PRONOUNCEMENT: 26.12.2011 ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 28.06.2011 PASSED BY LEARNED CIT(A), VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2006-07. 2. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE READ AS UNDER: 1. THE CIT(A) HAS ERRED IN ACCEPTING THE ADDITIONAL EV IDENCE WITHOUT AFFORDING ANY OPPORTUNITY TO THE ASSESSING OFFICER UNDER RULE 46A OF THE IT RULES. 2. THE CIT(A) HAS ERRED IN ACCEPTING THE ASSESSEES SU BMISSION THAT THE EXCISE DUTY LIABILITY WAS ADJUSTED FROM THE CEN VAT CREDIT WITHOUT GIVING ANY CLEAR FINDING WITH REGARD TO THE AVAILABILITY OF SPECIFIC AMOUNT OF CENVAT CREDIT AS ON THE LAST DAT E OF THE ACCOUNTING YEAR ENDED 31.03.2006. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE IS CARRYING ON THE BUSINESS OF MANUFACTURE AND SALE OF WATER SOLUBLE ITA NO.291/VIZAG/2011 M/S. SNF (INDIA) P LTD., VSKP PAGE 2 OF 5 POLYMERS. DURING THE COURSE OF SCRUTINY PROCEEDING S RELATING TO THE YEAR UNDER CONSIDERATION, IT WAS NOTICED BY THE ASSESSIN G OFFICER THAT THERE WAS AN OUTSTANDING LIABILITY OF RS.14,20,276/- AS AT TH E YEAR END ON ACCOUNT OF EXCISE DUTY, TO WHICH THE PROVISIONS OF SECTION 43B OF THE INCOME-TAX ACT WERE ATTRACTED. WHEN QUESTIONED, THE ASSESSEE HAS EXPLAINED THAT THE SAME WAS PAID THROUGH CENTRAL EXCISE VAT REGISTER B EFORE THE DUE DATE FOR FILING RETURN OF INCOME. ACCORDINGLY, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PROVISIONS OF SEC. 43B A RE NOT APPLICABLE ON THE AMOUNT CITED ABOVE. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE SAME WITH THE OBSERVATION THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE EITHER THE VAT REGISTER OR THE CHALLAN EVIDENCING PAYMENT OF T HE SAME. THE ASSESSEE CHALLENGED THE SAID DISALLOWANCE IN APPEAL BEFORE T HE LEARNED CIT(A) AND GOT RELIEF. AGGRIEVED BY THE ORDER OF LEARNED CIT( A), THE REVENUE IS IN APPEAL BEFORE US. 4. WITH REGARD TO THE FIRST ISSUE, THE LEARNED DEPA RTMENTAL REPRESENTATIVE SUBMITTED THAT THE FIRST APPELLATE A UTHORITY HAS GRANTED RELIEF ON THE BASIS OF ADDITIONAL EVIDENCES IN THE FORM OF COPIES OF RG23 REGISTER FILED BEFORE HIM AND THEY WERE NOT CONFRONTED WITH THE ASSESSING OFFICER, WHICH IS IN VIOLATION OF RULE 46A OF INCOME-TAX RUL ES. ON THE CONTRARY, THE LEARNED AR SUBMITTED THAT THE COPIES OF THE RG 23 R EGISTER WERE ALSO PLACED BEFORE THE ASSESSING OFFICER AND CONTENDED T HAT THERE IS NO VIOLATION OF RULE 46A AS ALLEGED BY THE DEPARTMENT. IN SUPPO RT OF HIS SUBMISSIONS, THE LEARNED AR INVITED OUR ATTENTION TO PAGES 5 TO 17 OF THE PAPER BOOK FILED BY THE ASSESSEE, MORE PARTICULARLY PAGES 15 T O 17 THEREOF. HE SUBMITTED THAT THE COPIES OF RG 23 REGISTER WERE FI LED BEFORE THE ASSESSING OFFICER, VIDE ASSESSEES LETTER DATED 24.12.2009. WE HAVE GONE THROUGH THE PAPER BOOK AND NOTICE THAT THE ASSESSEE HAS FURNISH ED THE COPIES OF RG 23 REGISTER ALONG WITH THE LETTER DATED 24.12.2009 FIL ED BEFORE THE ASSESSING OFFICER. WE ALSO NOTICE THAT THE LEARNED CIT(A) HA S REFERRED TO THE VERY SAME DOCUMENTS IN THE COURSE OF APPELLATE PROCEEDIN GS. HENCE, IN OUR ITA NO.291/VIZAG/2011 M/S. SNF (INDIA) P LTD., VSKP PAGE 3 OF 5 VIEW THERE IS NO VIOLATION OF RULE 46 A ON THE PART OF THE FIRST APPELLATE AUTHORITY, AS ALLEGED BY THE DEPARTMENT. ACCORDING LY, WE DISMISS THE GROUND RAISED ON THIS ISSUE. 5. THE NEXT ISSUE RELATES TO DELETION OF DISALLOWAN CE MADE UNDER SECTION 43B OF THE ACT. IN THIS CONNECTION, WE EX TRACT BELOW THE OBSERVATIONS MADE BY THE LEARNED CIT(A) AND THE DEC ISION TAKEN BY HIM. 3.3 THE APPELLANT DURING THE APPELLATE PROCEEDINGS CLAI MED THAT THE AMOUNT OF EXCISE DUTY OF RS.14,20,276/- IS ALLOWABLE DEDUCTION AS THE AMOUNT WAS PAID BEFORE THE DUE DAT E OF FILING OF RETURN BY ADJUSTMENT IN THE RG-23 REGISTER. IT IS STATED THAT THE ASSESSING OFFICER DID NOT TAKE COGNIZANCE OF RG-23 REGISTER EXTRACT FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS A S A PROOF OF PAYMENT. THE RELEVANT EXTRACT OF THE GR-23 REGISTE R WAS ALSO PRODUCED BEFORE ME FROM WHICH IT IS EVIDENT THAT TH E TOTAL EXCISE DUTY ADJUSTED AGGREGATES TO RS.1,31,35,794/- AS AGA INST THE OUTSTANDING LIABILITY OF RS.14,20,276/-. THUS, IT IS SUBMITTED BY THE APPELLANT THAT THE EXCISE DUTY LIABILITY ADJUSTED F ROM APRIL TO SEPTEMBER, 2006 FAR EXCEEDS THE EXCISE DUTY LIABILI TY OUTSTANDING AS ON 31 ST MARCH AND HENCE THE QUESTION OF MAKING ANY DISALLOWANCE UNDER SECTION 43B DOES NOT ARISE. IT IS FURTHER CLAIMED BY THE APPELLANT THAT IT IS A SETTLED POSITION UNDE R THE EXCISE LAW THAT THE PAYMENT OF EXCISE DUTY EFFECTED THROUGH AD JUSTMENT OF BALANCE IN MODVAT/CENVAT ACCOUNT IS TAKEN TO BE ACT UAL PAYMENT. THE APPELLANT ALSO PRODUCED THE COPY OF T HE RELEVANT EXTRACT OF FORM NO.3CD WHEREIN THE AUDITORS HAVE SP ECIFICALLY CLASSIFIED THE RELEVANT AMOUNTS AS PAID BEFORE FILI NG OF RETURN. A SPECIFIC NOTE IS ALSO ATTACHED WHICH SAYS AS FOLLOW S: EXCISE DUTY ON CLOSING STOCK OF FINISHED GOODS HA S BEEN ADJUSTED SUBSEQUENT TO THE YEAR END ON DISPATC H OF GOODS AGAINST LYING IN THE PERSONAL LEDGER ACCOUNT MAINTAINED UNDER 173(G) OF THE CENTRAL EXCISE ACT, 1944 AND CENVAT CREDIT. 3.4 THE APPELLANT FURTHER STATED THAT UNDER THE CE NTRAL EXCISE LAW, THERE ARE TWO WAYS IN WHICH THE OUTPUT LIABILITY OF CENTRAL EXCISE CAN BE PAID EITHER THROUGH PERSONA L LEDGER ACCOUNT (PLA) OF THE MANUFACTURER OR THROUGH UTILIZ ATION OF CENVAT CREDIT RECEIVABLE ACCOUNT, IT TANTAMOUNTS TO A CONS TRUCTIVE PAYMENT OF EXCISE DUTY. THE APPELLANT HAS PAID THE EXCISE DUTY ON CLOSING STOCK BY UTILIZATION OF THE CENVAT CREDIT A CCOUNT BEFORE THE ITA NO.291/VIZAG/2011 M/S. SNF (INDIA) P LTD., VSKP PAGE 4 OF 5 DUE DATE OF FILING THE RETURN OF INCOME. THE APPEL LANT SUBMITS THAT ADJUSTMENT MADE THROUGH RG-23 ACCOUNT CONSTITUTES V ALID PAYMENT AS THE EXCISE DUTY PAYABLE IS ALWAYS ADJUSTED THROU GH CENVAT CREDIT. THE APPELLANT IN THIS REGARD RELIED ON THE DECISION OF HAWKINS COOKERS LTD. VS. ITO 14 DTR 206 (MUM.) WHER EIN THE HON'BLE TRIBUNAL HELD THAT THE ADJUSTMENT AGAINST M ODVAT ACCOUNT ALSO AMOUNTS TO PAYMENT OF EXCISE DUTY AND ACCORDIN GLY THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 43B . THE RELEVANT EXTRACT OF THE HON'BLE TRIBUNALS ORDER IS REPRODUC ED AS UNDER: IN CASE OF WHERE THERE IS NO ACTUAL PAYMENT BUT ADJUSTABLE AGAINST MODVAT ACCOUNT, WHETHER THE ASSE SSEE IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 43B. FOR THIS PURPOSE, WE WOULD LIKE TO REFER TO THE DECISION OF ITAT SPECIAL BENCH, CHANDIGARH IN THE CASE OF DY. CIT V GLAXO SMITHKLINE CONSUMER HEALTHCARE LIMITED 107 ITD 343 (CHD)(SB) WHEREIN IT WAS HELD THAT THE MODVAT BALAN CE AS SUCH DOES NOT AMOUNT TO PAYMENT. THE BALANCE BECOM ES EQUIVALENT TO PAYMENT ONLY AT THE POINT OF TIME THE ASSESSEE EXERCISES HIS OPTION TO SET OFF THE BALANCE AGAINST THE CENTRAL EXCISE LIABILITY AND NOT BEFORE. IT IS TO NOTE THAT THE ISSUE PERTAINING TO SIMPLE ADJUSTMENT OF BALANCE IN MODVAT ACCOUNT WAS BEFORE THE ITAT SPECIAL BENCH, CHANDIGA RH. WHILE GIVING EFFECT OF SECTION 145A, THE ADJUSTMENT OF BALANCE IN MODVAT ACCOUNT WAS NOT BEFORE THE ITAT S PECIAL BENCH, CHANDIGARH. IN CASES WHERE THERE ARE STATUT ORY COMPELLATION UNDER SECTION 145A TO GIVE ADJUSTMENT IN CLOSING STOCK, IN SUCH CASES IT HAS TO PRESUME THAT THE ASSESSEE HAS EXERCISED HIS OPTION TO SET OFF AGAINS T MODVAT ACCOUNT. ON THE BASIS OF THE RATIO LAID DOWN BY TH E ITAT SPECIAL BENCH CHANDIGARH IN THE CASE OF DY. CIT V G LAXO SMITHKLINE CONSUMER HEALTHCARE LIMITED 107 ITD 343 (CHD)(SB) IT IS TO BE PRESUMED THAT THE ASSESSEE EX ERCISES HIS OPTION TO SET OFF MODVAT ACCOUNT AGAINST EXCISE LIABILITY, WHICH AMOUNTS TO PAYMENT OF EXCISE DUTY AND ACCORDI NGLY THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 43B. 4. I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLAN T. IT IS NOT DISPUTED THAT ONE OF THE MODES OF PAYMENT OF EX CISE DUTY UNDER THE EXCISE ACT IS ADJUSTMENT OF MODVAT CREDIT . IT IS ALSO NOT DISPUTED THAT THE AUDITORS VIDE 3CD REPORT CLARIFIE D THAT THE OUTSTANDING AMOUNT HAS BEEN PAID BEFORE FILING OF R ETURN BY ADJUSTMENT AS PER CENVAT REGISTER. THE CASE OF HAW KINS COOKERS LTD. CITED (SUPRA) SQUARELY COVERED THE CASE OF APP ELLANT. ITA NO.291/VIZAG/2011 M/S. SNF (INDIA) P LTD., VSKP PAGE 5 OF 5 6. ON A CAREFUL PERUSAL OF THE ORDER OF LEARNED CIT (A), WE NOTICE THAT THE FIRST APPELLATE AUTHORITY HAS CONSIDERED THE FA CTUAL MATRIX OF THE ISSUE IN A PROPER PERSPECTIVE AND HAS TAKEN THE DECISION BY DRAWING SUPPORT FROM THE DECISION RENDERED BY MUMBAI BENCH OF ITAT IN TH E CASE OF HAWKINS COOKERS LTD, (SUPRA). IN THESE CIRCUMSTANCES, WE D O NOT FIND ANY INFIRMITY IN HIS DECISION AND ACCORDINGLY UPHOLD THE SAME. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 26.12.2011. SD/- SD/- (D MANMOHAN) (B R BASKARAN) VICE PRESIDENT ACCOUNTANT M EMBER VG/SPS VISAKHAPATNAM, DATE: 26 TH DECEMBER, 2011 COPY TO 1 DCIT, CIRCLE-4(1), VISAKHAPATNAM 2 M/S. SNF (INDIA) PVT. LTD., C-20, LPANCHAVATI TOW NSHIP, AKKIREDDYPALEM, BHPV POST, VISAKHAPATNAM 3 4. THE CIT VISAKHAPATNAM THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM