ACIT, UDAIPUR V. M/s. Mumal Marbles Ltd., UDAIPUR

ITA 498/JODH/2009

• Counselvise Citation: 49823314 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 28-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MN MO RYA
• Assessee Lawyers: SURESH GANG
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ JODHPUR BENCH, JODHPUR ] BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RAN JAN, AM I. T. APPEAL NO. 498 (JODH.) OF 2009. ASSESSMENT YEAR : 200304. ASSTT. COMMISSIONER OF INCOME-TAX, M/S. MUMAL MARBLES LTD., C I R C L E : 2, VS. A M B E R I, U D A I P U R. U D A I P U R. P A N / G I R NO. AAA CM 9252 F. ( APPELLANT ) ( RES PONDENT ) ASSESSEE BY : SHRI SURESH GANG, A. R.; DEPARTMENT BY : SHRI M. N. MORYA, SR. D. R. ; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEA R 2003-04 ARISES OUT OF THE ORDER OF THE LD. CIT (APPEALS), UDAIPUR. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE IS AS FOLLOWS :- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING ADDITION OF RS.9,17,871/- MADE BY THE ASSESSING OFFICER BY APPLYING THE PROVISION THE PROVISION OF SECTION 145 -A OF THE I. T. ACT, 1961 ON ACCOUNT OF NON INCLUSION OF EXCISE DUTY ELEMENT TO THE VALUE OF CLOSING STOCK. 2 I. T. APPEAL NO. 498 (JODH.) OF 2009. 3. THE ONLY ISSUE FOR OUR CONSIDERATION RELATES TO DELETING THE ADDITION OF RS.9,17,871/- MADE BY THE ASSESSING OFFICER BY APPLYING PROVISION S OF SECTION 145-A OF THE I. T. ACT, 1961. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE COMPANY DURING THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN MANUFACTURING AND PROCESSING OF MARBLE SLABS AND TILES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHETHER THE EXCISE DUTY WAS INCLUDED IN THE VALUATION OF THE CLOSING STOCK. IT WAS SUBMITTED BY THE ASSESSEE THAT THE TOTAL EXCISE DUTY PAYABLE ON THE CLOSING STOCK AT THE RAT E OF RS. 30/- PER SQ. MTR. AGGREGATED TO RS.11,94,750/-. IT WAS SUBMITTED THAT THE AMOUNT O F RS.2,76,879/- HAD BEEN INCLUDED IN THE VALUATION OF THE CLOSING STOCK. ABOUT THE REMAININ G AMOUNT IT WAS CONTENDED BY THE ASSESSEE THAT AS PER THE SCHEME OF THE EXCISE DUTY WITHIN TH E STATE OF RAJASTHAN, THE GOODS PRODUCED UPTO RS. 1,00,00,000/- WERE TOTALLY EXEMPTED FROM EXCISE DUTY. THEREFORE, OUT OF THE TOTAL AMOUNT OF RS.1,30,17,687/- OF MARBLE SLABS AND TILES THE CRED IT OF RS. 1,00,00,000/- WAS TAKEN AND THE REMAINING EXCISE DUTY PAYABLE ON THE CLOSING STOCK WAS AT RS.30,17,687/- ON WHICH EXCISE DUTY WAS RS.2,76,879/- AND THE PROVISION OF THE SAME HAD BEEN MADE IN THE BOOKS OF ACCOUNTS AND BY THIS AMOUNT THE CLOSING STOCK HAS BEEN INCREASED. THE EXCISE DUTY PAYABLE ON THE CLOSING STOCK WAS SHOWN AS CURRENT LIABILITY. THE ASSESSING OFFI CER ALSO REQUIRED THE ASSESSEE TO EXPLAIN AS TO HOW THE NOTIFICATION OF CENTRAL EXCISE WHICH WAS AP PLICABLE TO SSI HAVING CLEARANCE NOT EXCEEDING RS. 3,00,00,000/- IN THE PRECEDING FINAN CIAL YEAR AND NOT AVAILING CENVAT SCHEME UPTO AN AGGREGATE OF RS. 1,00,00,000/- WAS APPLICAB LE TO THE ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE THAT IF THE ASSESSEE WAS NOT ENTITLED EXEM PTION OF RS. 1,00,00,000/- UNDER CENTRAL EXCISE ACT, THEN THE ASSESSEE WAS TO CALCULATE EXCI SE DUTY ELEMENT ON CLOSING STOCK AS ON 31 ST MARCH, 2003 AS WELL AS OPENING STOCK AS ON 1/04/200 2 THE POSITION WOULD BE THAT EXCISE DUTY ON OPENING STOCK AS ON 1/04/2002 WILL BE RS.12,98,351/ - AND CLOSING STOCK ON 31 ST MARCH, 2003 WOULD BE RS.11,94,780/-. SINCE THE NET EFFECT OF E XCISE DUTY WOULD BE NEGATIVE, PROVISIONS OF SECTION 145-A OF THE ACT WOULD NOT BE APPLICABLE. THE LD. AO, HOWEVER, REJECTED THE CONTENTION OF THE ASSESSEE. HE INCLUDED RS.9,17,871/- THE ELE MENT OF EXCISE DUTY IN THE CLOSING STOCK. 4. ON APPEAL IT WAS SUBMITTED THAT NO EXCISE DUTY W AS LEVIABLE OR PAYABLE TILL THE DATE OF GOODS WERE REMOVED FROM THE FACTORY PREMISES OR GO- DOWN. THE LEVY OF EXCISE DUTY IS DONE 3 I. T. APPEAL NO. 498 (JODH.) OF 2009. WHEN THE GOODS ARE REMOVED FROM THE FACTORY PREMISE S OR THE TIME OF CLEARANCE OF GOODS FROM THE FACTORY AND GO-DOWN. RELIANCE WAS PLACED ON TH E DECISION OF THE ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF M/S. ARPIT MARBLES PVT. LTD. VS. DCI T [2005] JANUARY, 2003 TAX WORLD 43, WHEREIN IT WAS HELD THAT THE ELEMENT OF EXCISE DUTY WAS NOT REQUIRED TO BE ADDED OR INCLUDED WHILE VALUING THE CLOSING STOCK OF FINISHED GOODS A T THE YEAR END AND THE SAME WAS LEVIABLE AT THE TIME OF REMOVAL / CLEARANCE. IT WAS ALSO SUBMITTED THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 IT HAS BEEN HELD THAT ELEMENT OF EXCIS E DUTY CANNOT BE PART OF THE CLOSING STOCK. THE LD. CIT (APPEALS) ON CONSIDERATION OF THE SUBMI SSIONS AND DECISION OF THE ITAT, JODHPUR BENCH IN ASSESSEES OWN CASE DELETED THE ADDITION. 5. BEFORE US THE LD. SR. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT (APPEALS). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. UNDER SECTION 145-A OF THE ACT THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSE OF DETERMINING INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE (I) IN ACCORDANCE WITH THE MET HOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE; AND (II) FURTHER ADJUSTED TO INCLUDE AMOU NT OF ANY TAX, DUTY, CESS OR FEE [BY WHATEVER NAME CALLED] ACTUALLY PAID OR INCURRED BY THE ASSES SEE TO BRING THE GOODS TO THE PLACE OF LOCATION AND CONDITION AS ON THE DATE OF VALUATION. EXPLANA TION TO SECTION 145-A PROVIDES THAT FOR THE PURPOSES OF THIS SECTION ANY TAX, DUTY, CESS OR FEE [BY WHATEVER NAME CALLED] UNDER ANY LAW FOR THE TIME BEING IN FORCE SHALL INCLUDE ALL SUCH PAYM ENTS NOTWITHSTANDING ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT. FROM PLAIN READING OF PROVISIONS OF SECTION 145-A IT IS CLEAR THAT THE CLOSING STOCK SHALL BE ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION. AS PER EXCISE DUTY RULES, THE EXCISE DUTY BECOMES PAYABLE WHEN GO ODS ARE REMOVED FROM THE FACTORY OR FROM WARE-HOUSE. UNLESS GOODS ARE REMOVED THE LIABILITY TO PAY EXCISE DUTY IS NOT INCURRED. THEREFORE, FOR THE PURPOSE OF COMPUTATION OF CLOSIN G STOCK THE ELEMENT OF EXCISE DUTY WHICH HAS NOT BEEN PAID AT ALL CANNOT BE TAKEN INTO ACCOUNT. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT 4 I. T. APPEAL NO. 498 (JODH.) OF 2009. VS. PARRY CONFECTIONARY LTD. [2008] 299 ITR 321 (MA D.) HAS HELD THAT WHERE THE ASSESSING OFFICER WHILE VALUING CLOSING STOCK, INCLUDED EXCIS E DUTY ELEMENT ON THE STOCK CLEARED FROM THE FACTORY AND ALSO ON THE CLOSING STOCK NOT CLEARED F ROM THE FACTORY, BUT THE TRIBUNAL HELD THAT THE EXCISE DUTY LIABILITY ON STOCK NOT CLEARED FROM THE FACTORY WAS NOT INCLUDIBLE. HONBLE MADRAS HIGH COURT HELD THAT THE AMOUNT OF EXCISE DUTY ON T HE CLOSING STOCK NOT CLEARED FROM THE FACTORY SHOULD NOT BE INCLUDED WHILE VALUING THE CLOSING ST OCK. HONBLE GUJARAT HIGH COURT IN THE CASE OF ACIT VS. NARMADA CHEMATUR PETROCHEMICALS LTD. [2 010] 194 TAXMAN 103 (GUJ.) HAS HELD THAT THE EXCISE DUTY CANNOT BE INCLUDED IN THE VALU E OF THE CLOSING STOCK OF THE FINISHED GOODS AT THE END OF THE ACCOUNTING PERIOD. CENTRAL EXCISE D UTY IS LEVIED ON THE GOODS MANUFACTURED I.E. EXCISABLE GOODS MANUFACTURED BY AN ASSESSEE, IT IS NOT A COST OF GOODS PURCHASED. IT IS NOT A PART OF MANUFACTURING COST. IT CAN BE TERMED AS POST-MA NUFACTURING COST. THEREFORE, UNLESS AND UNTIL IT IS ENTERED ON ONE SIDE AS AN ITEM OF COST, IT CA NNOT BE TAKEN AS A COMPONENT OF VALUE OF THE CLOSING STOCK ON THE OTHER SIDE. THE TRUE PURPOSE OF CREDITING THE VALUE OF UN-SOLD STOCK IS TO BALANCE THE COST OF THOSE GOODS ENTERED ON THE OTHE R SIDE OF THE ACCOUNT. EXCISE DUTY IS NOT EFFECTIVELY PAID BY THE MANUFACTURER FROM HIS OWN P OCKET. THE DUTY OF CENTRAL EXCISE IS COLLECTED BY THE MANUFACTURER FROM THE PURCHASER WHETHER WHOL ESALER OR RETAILER. HENCE AT THE TIME AND PLACE OF REMOVAL OF EXCISABLE GOODS THE DUTY IS REC OVERED BY THE MANUFACTURER FROM THE PURCHASER AND SIMULTANEOUSLY PAID TO THE REVENUE. T HE POINT OF TIME OF REMOVAL OF EXCISABLE GOODS IS THE POINT OF TIME WHEN THE LIABILITY TO PA Y CENTRAL EXCISE DUTY IS INCURRED RESULTING IN CORRESPONDING RIGHT UNDER LAW BY THE EXCISE DEPARTM ENT TO TAKE STEPS TO EFFECT RECOVERY IF THE LIABILITY IS NOT DISCHARGED. TILL THAT POINT OF TI ME LIABILITY TO PAY DUTY OF CENTRAL EXCISE CANNOT B E STATED TO HAVE BEEN INCURRED IN LAW AS THE SAME IS NOT DUE AND PAYABLE. FOR THE PURPOSES OF PROVISIONS OF SECTION 145-A OF THE ACT WHAT IS MORE MATERIAL IS THAT THE SAME RELATES TO THE INCLUSION IN THE VALUE OF INVENTORY. THE AMOUNT OF ANY TAX, DUTY, ETC. PAID OR LIABILITY INCURRED FOR THE SAME UNDER ANY LAW IN FORCE, MEANING THEREB Y SUCH TAX, DUTY, ETC. SHOULD HAVE BEEN ACTUALLY PAID OR SHOULD BE ACTUALLY DUE AND PAYABLE UNDER THE LAW APPLICABLE TO SUCH TAX, DUTY, ETC. IN FORCE. OTHERWISE, EVEN SECTION 145-A WILL NOT CARRY CASE OF THE REVENUE ANY FURTHER. IN THE INSTANT CASE, SINCE THE LIABILITY TO PAY EXCISE DUTY HAS NOT BEEN INCURRED AS THE GOODS HAVE NOT BEEN REMOVED FROM THE FACTORY OR BONDED WARE-HOUSE, EXCISE DUTY CANNOT BE INCLUDED IN THE VALUE OF THE CLOSING STOCK BECAUSE IT DOES NOT FORM PART OF THE COST OF THE GOODS MANUFACTURED. EXCISE DUTY PAID OR INCURRED IS POST-MANUFACTURE AC TIVITY. THEREFORE, IN OUR CONSIDERED OPINION, 5 I. T. APPEAL NO. 498 (JODH.) OF 2009. THE LD. CIT (APPEALS) WAS JUSTIFIED IN DELETING THE AMOUNT OF EXCISE DUTY LIABILITY, WHICH WAS PAYABLE ON REMOVAL OF GOODS. ACCORDINGLY, WE DO NO T FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) IN DELETING THE ADDITION. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 26 TH AUGUST, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER AT NEW DELHI . DATED : 26 TH AUGUST, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.