ACIT, New Delhi V. M/s. Kaiser Industries Ltd., New Delhi

ITA 555/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0404 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI RAMACHANDRAN
• Section: 43B; 28; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL ITA NO. 555(DEL)/2010 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF KAISER INDUSTRIES LTD., INCOME-TAX, CIRCLE 5(1), VS. 304-305 , SHIVAM HOUSE, NEW DELHI. KARAMPURA COMMERCIAL COMPLEX, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.RAVI RAMA CHANDRAN, DR RESPONDENT BY : SHRI NAVIN GUPTA, ADVOCATE ORDER PER K.G. BANSAL: AM THE ONLY QUESTION RAISED BY THE REVENUE IN THIS CASE IS WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS. 33,01,199/- MADE BY THE AO U/S 43B READ WITH SECTION 43(2), THERE BY DISALLOWING THE DEDUCTION CLAIMED ON ACCOUNT OF ADJUSTMENT OF MODVAT CREDIT AGAINST THE LIABILITY. 2. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE W AS REQUESTED TO SUBMIT THE EVIDENCE OF PAYMENT OF EXCISE DUTY ON FINIS HED GOODS. IT WAS SUBMITTED THAT THE LIABILITY HAS BEEN ADJUSTED THROUGH MODVAT CREDIT ITA NO. 555(DEL)/2010 2 IN APRIL AND MAY, 2005. THE ADJUSTMENT IS AS GOOD S AS THE PAYMENT OF EXCISE DUTY. SINCE THE ADJUSTMENT HAS BEEN MAD E PRIOR TO DUE DATE OF FILING OF THE RETURN OF INCOME U/S 139(1), IT WA S CLAIMED THAT THE AMOUNT IS DEDUCTIBLE IN COMPUTING THE INCOME. IN THIS CONNEC TION, THE AO NOTED THAT THE LIABILITY TO PAY EXCISE DUTY ARISES EVEN IF GOODS ARE LYING IN THE BONDED WAREHOUSE IN THE LIGHT OF THE PROVISIONS CONTAINED IN SECTION 145A. NO COMMENT HAS BEEN MADE ON THIS ISSUE IN F ORM NO. 3CD. THE WORD PAID IS DEFINED IN SECTION 43(2) TO ME AN ACTUALLY PAID OR INCURRED ACCORDING TO METHOD OF ACCOUNTING ON THE BASIS O F WHICH PROFITS AND GAINS ARE COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. FURTHER, IT IS NOTED THAT UNEXPIRE D MODVAT CREDIT AVAILABLE TO THE ASSESSEE ON THE LAST DATE OF T HE PREVIOUS YEAR DOES NOT AMOUNT TO PAYMENT OF EXCISE DUTY U/S 43B. IN VI EW THEREOF, THE SUM OF RS. 33,01,199/- WAS ADDED IN ABSENCE OF ACTUAL P AYMENT OF THE CENTRAL EXCISE DUTY. 3. THE LD. CIT(APPEALS) WAS OF THE VIEW THAT THE GOODS WERE LYING IN THE BONDED WAREHOUSE. THE LIABILITY TO PAY THE CENTRAL EXCISE DUTY ARISES WHEN THE GOODS ARE REMOVED. THE LIABILITY MAY B E DISCHARGED BY ACTUAL PAYMENT OR BY ADJUSTMENT FROM MODVAT CREDIT AVAI LABLE TO THE ITA NO. 555(DEL)/2010 3 ASSESSEE. SINCE THE GOODS WERE NOT REMOVED, TH E LIABILITY TO PAY EXCISE DUTY DID NOT ARISE IN THIS YEAR. IT AROSE IN THE NEXT YEAR WHEN IT WAS SETTLED BY SETTING IT OFF AGAINST THE MODVAT CR EDIT AVAILABLE TO THE ASSESSEE. FURTHER, HE WAS OF THE VIEW THAT THIS W AS THE REASON BECAUSE OF WHICH THE AUDITOR DID NOT MAKE ANY NOTE OR OBSE RVATION IN THE STATUTORY AUDIT REPORT. REFERRING TO THE DECISION OF SPEC IAL BENCH OF CHANDIGARH TRIBUNAL IN THE CASE OF CIT VS. GLAXO SMITHKLINE HEALTHCARE LTD., (2007) 107 ITD 343, IT WAS NOTED THAT THE QUESTION BEFORE THE BENCH WAS ENTIRELY DIFFERENT, NAMELY,-WHETHER, MODVAT CRE DIT BALANCE AT THE END OF THE YEAR WOULD AMOUNT TO ACTUAL PAYMENT EVEN BEFORE THE OPTION IS EXERCISED TO ADJUST IT AGAINST THE PAYMENT OF E XCISE DUTY? THIS IS NOT THE QUESTION HERE. THEREFORE, THE DISALLOWANCE WAS D ELETED. 4. BEFORE US, THE LD. DR REFERRED TO THE PROVISI ONS CONTAINED IN SECTIONS 145A(A), 43B AND 43(2) OF THE ACT. HE ALSO REFERRED TO THE FINDINGS IN THE ASSESSMENT ORDER ON INTERPRETA TION OF THESE SECTIONS. IT IS SUBMITTED THAT THE MODVAT CREDIT WAS NOT ADJUS TED AGAINST THE LIABILITY OF CENTRAL EXCISE DUTY AND, THEREFORE, IT CANNOT BE SAID THAT THE PAYMENT HAS ACTUALLY BEEN MADE BY THE ASSESSEE. THE LIABILITY TO PAY CENTRAL EXCISE DUTY ACCRUES AS SOON AS THE GOO DS ARE MANUFACTURED AND, ITA NO. 555(DEL)/2010 4 THEREFORE, THE SAME HAS TO BE TAKEN INTO ACCO UNT FOR VALUATION OF CLOSING STOCK U/S 145A. AT THE SAME TIME, SINCE THE LI ABILITY HAS NOT BEEN PAID, NO DEDUCTION CAN BE ALLOWED. ACCORDINGLY, IT IS VEHEMENTLY ARGUED THAT THE ORDER OF THE LD. CIT(APPEALS) MAY BE SET ASI DE AND THAT OF THE AO MAY BE RESTORED. 4.1 REPLY, THE LD. COUNSEL SUBMITTED THAT THE A SSESSEE DID NOT MAKE ANY PROVISION FOR THE LIABILITY OF CENTRAL EXCISE D UTY PERTAINING TO THE GOODS MANUFACTURED AND LYING IN THE BONDED WAREHOUSE EV EN THOUGH THE LIABILITY ACCRUED AS SOON AS THE GOODS WERE MANUFACTURED. HOWEVER, THE LIABILITY HAS BEEN ADJUSTED IN APRIL-MAY, 2005, WHICH IS AS GOOD AS PAYMENT OF LIABILITY AS PER DECISION IN THE CA SE OF GLAXO SMITHKLINE HEALTHCARE LTD. (SUPRA). HE REFERRED TO PARAGRA PH NO. 54 OF THE DECISION IN THIS BEHALF. THUS, IT IS ARGUED THAT SINCE THE L IABILITY STOOD PAID COMPLETELY BY MAY, 2005, THE ASSESSEE IS ENTITLED TO DEDUC T THE AMOUNT AS IT HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF THE R ETURN U/S 139(1). FOR THE SAKE OF FACILITY, PARAGRAPH NO. 54 OF THE DECISI ON IS REPRODUCED BELOW:- 54. THE FORCEFUL ARGUMENT OF THE LD. COUNSEL AP PEARING FOR THE ASSESSEE IS ON THE BASIS OF THE SUPREME COURT DECISION IN THE CASE OF EICHER MOTORS (SUPRA). THE ARGUM ENT OF THE LD. COUNSEL IS THAT THE SUPREME COURT HAS HELD THAT TH E FACILITY OF ITA NO. 555(DEL)/2010 5 MODVAT CREDIT IS AS GOOD AS TAX PAID. HE ARGUED THAT THE UNEXPIRED MODVAT CREDIT AVAILABLE TO AN ASSESSE E IS TO BE TREATED AS GOOD AS CENTRAL EXCISE DUTY PAID BY THE ASSESSEE ON ACCOUNT. BUT WE FIND THAT THE CONTEXT IN WHI CH THE OBSERVATION WAS MADE BY THE SUPREME COURT HAS T O BE NOTED OF. THE OBSERVATION OF THE SUPREME COURT HAD BE EN MADE IN A CASE WHERE THE ASSESSEE HAD SET OFF THE MODVA T CREDIT AGAINST THE DEMAND OF EXCISE DUTY. WHEN THE U NEXPIRED MODVAT CREDIT IS SET OFF AGAINST THE EXCISE DUTY PAYABLE AND THEREBY THE LIABILITY HAS BEEN EXTINGUISHED/RE DUCED, THAT THE SUPREME COURT HAS HELD THAT SETTING OFF MODVAT CRE DIT IS AS GOOD AS TAX PAID. THE ABOVE OBSERVATION OF THE SUPREME COURT BECOME OPERATIVE ONLY WHEN THE UNEXPIRED MO DVAT CREDIT HAS ACTUALLY BEEN SET OFF AGAINST THE C ENTRAL EXCISE DUTY PAYABLE BY THE ASSESSEE. THE UNEXPIRED MODV AT CREDIT AVAILABLE IN THE HANDS OF THE ASSESSEE ON THE L AST DAY OF THE PREVIOUS YEAR IS THE AMOUNT, WHICH HAS NOT SO FAR BEEN SET OFF AGAINST PAYMENT OF EXCISE DUTY. THERE IS A DISTINCTION BETWEEN UNEXPIRED MODVAT CREDIT AVAILABLE IN THE H ANDS OF THE ASSESSEE AS WELL AS THE SET OFF OF THE CREDIT B ALANCE AGAINST ACTUAL LIABILITY. THE TIME LAG BETWEEN THE TWO POINTS CANNOT BE IGNORED. ON ACTUAL SET OFF OF THE UNEXPIRED M ODVAT CREDIT AGAINST THE LIABILITY TOWARDS THE PAYMENT OF DUTY MAY BE AS GOOD AS TAX PAID BUT, THE UNEXPIRED MODVAT CRED IT BEFORE THE POINT OF SUCH SET OFF CANNOT BE TREATED AS TAX PAID. THEREFORE, THE CONTENTION OF THE LD. COUNSEL T HAT UNEXPIRED MODVAT CREDIT MUST BE TREATED AS ADVANCE PAYM ENT OF EXCISE DUTY IS NOT TENABLE IN LAW. 4.2 HE REJOINDER, THE LD. DR RELIED ON THE ORDE R OF THE AO. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AN D THE SUBMISSIONS MADE BEFORE US. WE MAY EXAMINE VARIOUS PROVISIO NS OF THE ACT REFERRED TO BY THE LOWER AUTHORITIES. SECTION 145A PROVID ES THAT THE INVENTORY ITA NO. 555(DEL)/2010 6 SHALL BE VALUED IN ACCORDANCE WITH METHOD OF ACC OUNTING REGULARLY EMPLOYED BY THE ASSESSEE; AND IT SHALL BE FURTH ER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GO ODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUAT ION. OBVIOUSLY, THIS PROVISION CONTEMPLATES THE VALUATION AS ARRIV ED AT BY EMPLOYING REGULAR METHOD OF ACCOUNTING AND ADJUSTING IT TO INCLUD E INTER-ALIA ANY DUTY INCURRED BY THE ASSESSEE TO BRING THE GOODS TO T HE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION. THE LIA BILITY OF CENTRAL EXCISE DUTY IS INCURRED AS SOON AS THE GOODS ARE MANUF ACTURED ALTHOUGH IT MAY BECOME PAYABLE SUBSEQUENTLY ON REMOVAL OF GOODS. THE PROVISION USES THE WORD INCURRED AND NOT THE WORD PAYABLE. THEREFORE, THE EXCISE DUTY INCURRED ON MANUFACTURE OF GOODS WILL HAVE T O BE ADDED FOR THE PURPOSE OF VALUATION OF CLOSING STOCK. FOR THE SAKE OF FACILITY, THE PROVISION CONTAINED IN SECTION 145A IS REPRODUCE D BELOW:- 145A NOTWITHSTANDING ANYTHING TO THE CONTRAR Y CONTAINED IN SECTION 145, THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE- (A) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE; AND ITA NO. 555(DEL)/2010 7 (B) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF AN Y TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALL Y PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO T HE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUAT ION. EXPLANATION- FOR THE PURPOSES OF THIS SECTION, A NY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) UNDER ANY LAW FOR THE TIME BEING IN FORCE, SHALL INCLUDE ALL SUCH PAY MENT NOTWITHSTANDING ANY RIGHT ARISING AS A CONSEQUEN CE TO SUCH PAYMENT. 5.1 SECTION 43(2) DEFINES CERTAIN TERMS RELEVAN T TO INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION. SUB-SECTION (2) DEFINES THE WORD PAID TO MEAN ACTUALLY PAID OR INCURRED ACCORDI NG TO METHOD OF ACCOUNTING. THE DEFINITION READS AS UNDER:- (2) PAID MEANS ACTUALLY PAID OR INCURRED ACCO RDING TO THE METHOD OF ACCOUNTING UPON THE BASIS OF WHICH THE P ROFITS OR GAINS ARE COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION; 5.2 SECTION 43B STARTS WITH A NON-OBSTANTE CLAUSE AND PERMITS THE DEDUCTION OF ANY SUM PAYABLE BY WAY OF TAX, DUTY , CESS OR FEE, BY WHATEVER NAME CALLED, IN THE YEAR IN WHICH THE S UM IS ACTUALLY PAID IRRESPECTIVE OF THE METHOD OF ACCOUNTING REGULARL Y EMPLOYED BY THE ASSESSEE. ON CONJOINT READING OF THE PROVISIONS CONTAINED IN SECTION 43B AND 43(2), IT WILL TRANSPIRE THAT DEDUCTION IN RESPECT OF CENTRAL EXCISE ITA NO. 555(DEL)/2010 8 DUTY WILL BE ALLOWED ONLY IN THE YEAR IN WHICH IT HAS BEEN ACTUALLY PAID. FOR THE SAKE OF READY REFERENCE, THE PROVISION CONTAINED IN SECTION 43B, TO THE EXTENT RELEVANT FOR US, IS REPRODUCED BELO W:- 43B NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, A DEDUCTION OTHERWISE A LLOWABLE UNDER THIS ACT IN RESPECT OF- (A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, D UTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LA W FOR THE TIME BEING IN FORCE, OR (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES, (C) ANY SUM REFERRED TO IN CLAUSE (II) OF SUB-SECTION (1) OF SECTION 36, OR (D) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INS TITUTION OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUC H LOAN OR FOLLOWING, OR (E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR ADVANCES FROM A SCHEDULED BANK IN ACCO RDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR ADVANCES, OR (F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE, ITA NO. 555(DEL)/2010 9 SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YE AR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO I N SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTU ALLY PAID BY HIM: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION S HALL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FO R FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SE CTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENC E OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONG WITH S UCH RETURN. 5.3 THE QUESTION IS-WHETHER, ADJUSTMENT OF MOD VAT CREDIT TOWARDS CENTRAL EXCISE LIABILITY AMOUNTS TO ACTUAL PAYM ENT? THE SPECIAL BENCH OF THE TRIBUNAL, WHILE DEALING WITH THIS ISSUE, CONS IDERED THE DECISION IN THE CASE OF EICHER MOTORS LTD. VS. UNION OF INDIA, (1999) 106 ELT 3 (SC). ON THE BASIS OF THIS DECISION, THE ARGUMENT OF TH E LD. COUNSEL WAS THAT MODVAT CREDIT IS AS GOOD AS TAX PAID. THE T RIBUNAL MENTIONED THAT THE OBSERVATIONS OF THE SUPREME COURT HAD BEEN MA DE IN A CASE WHERE THE ASSESSEE HAD SET OFF THE MODVAT CREDIT AGAINST THE DEMAND OF EXCISE DUTY. WHEN THE UNEXPIRED MODVAT CREDIT IS SET OFF AGAINST THE EXCISE DUTY PAYABLE AND THEREBY THE LIAB ILITY HAS BEEN EXTINGUISHED OR REDUCED, THE SUPREME COURT HELD THAT SETTIN G OFF OF MODVAT CREDIT IS AS GOOD AS DUTY PAID. THE ABOVE OBSERVAT ION BECOMES OPERATIVE ONLY ITA NO. 555(DEL)/2010 10 WHEN THE UNEXPIRED MODVAT CREDIT HAS ACTUALLY BEEN SET OFF AGAINST THE CENTRAL EXCISE DUTY PAYABLE BY THE ASSESSE E. HOWEVER, UNEXPIRED MODVAT CREDIT AVAILABLE IN THE HANDS OF THE ASS ESSEE ON THE LAST DATE OF THE PREVIOUS YEAR HAS NOT BEEN SO SET OFF. T HE TWO SITUATIONS ARE DISTINGUISHABLE. THE TIME LAG BETWEEN TWO POIN TS CANNOT BE IGNORED. THEREFORE, IT WAS HELD THAT UNEXPIRED MODVAT CREDIT CANNOT BE TREATED AS TAX PAID BEFORE IT IS SET OFF AGA INST THE DUTY PAYABLE. COMING TO THE FACTS OF THIS CASE, THE CREDIT REMAINED UNEXPIRED FOR THE SIMPLE REASON THAT IT WAS ACTUALLY ADJUSTED IN APRIL -MAY, 2005. FURTHER, IT WAS ADJUSTED IN THESE MONTHS. THEREFORE, IT CAN BE SAID THAT THE ADJUSTMENT WAS AS GOOD AS THE DUTY PAID AND IT AMOUNTS TO ACTUAL PAYMENT. THE PAYMENT HAS BEEN MADE BEFORE THE DU E DATE OF FILING THE RETURN U/S 139(1). THE FIRST PROVISO CONTAINS A PROVISION TO THE EFFECT THAT NOTHING CONTAINED IN THIS SECTION SHALL BE AP PLICABLE IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETUR N OF INCOME UNDER SUB- SECTION (1) OF SECTION 139. IN VIEW THEREOF, THE PROVISION CONTAINED IN SECTION 43B(A) BECOMES INAPPLICABLE TO THE FAC TS OF THE CASE OF THE ASSESSEE. ITA NO. 555(DEL)/2010 11 5.4 AT THIS STAGE, WE MAY ALSO REPRODUCE THE F INDINGS OF HONBLE SUPREME COURT IN THE CASE OF EICHER MOTORS LTD . (SUPRA), IN WHICH VALIDITY AND APPLICATION OF THE SCHEME, AS MOD IFIED BY INTRODUCTION TO RULE 57F [READ AS 57F(4A)] OF THE CENTRAL EXCISE RULES, 1944, UNDER WHICH CREDIT WHICH WAS LYING UNUTILIZED ON16TH MARCH, 1995 WITH THE MANUFACTURERS, STOOD LAPSED IN THE MANNER SET OUT THEREIN WAS QUESTIONED. PARAGRAPH 5 OF THE JUDGMENT IS RE PRODUCED BELOW:- 5. RULE 57F(4A) WAS INTRODUCED INTO THE R ULES PURSUANT TO BUDGET FOR 1995-96 PROVIDING FOR LAPSING OF CREDIT LYING UNUTILIZED ON 16.3.1995 WITH A MANUFACTURER OF TRACTORS FALLING UNDER HEADING NO. 87.01 OR MOTOR VEHIC LES FALLING UNDER HEADING NO. 87.02 AND 87.04 OR CHASSIS OF SUCH TRACTORS OR SUCH MOTOR VEHICLES UNDER HEADING NO. 87.06. HOWEVER, CREDIT TAKEN ON INPUTS WHICH WERE LY ING IN THE FACTORY ON 16.3.1995 EITHER AS PARTS OR CONTAIN ED IN FINISHED PRODUCTS LYING IN STOCK ON 16.3.1995 WAS ALLOW ED. PRIOR TO 1995-96 BUDGET, CENTRAL EXCISE/ADDITIONAL DUTY O F CUSTOMS PAID ON INPUTS WAS ALLOWED AS CREDIT FOR PAYMEN T OF EXCISE DUTY ON THE FINAL PRODUCTS, IN THE MANUFACTURE O F WHICH SUCH INPUTS WERE USED. THE CONDITION REQUIRED FOR THE SAME WAS THAT THE CREDIT OF DUTY PAID ON INPUTS COULD HA VE BEEN USED FOR DISCHARGE OF DUTY/LIABILITY ONLY IN RESPECT OF THOSE FINAL PRODUCTS IN THE MANUFACTURE OF WHICH SUCH INPUT S WERE USED. THUS, IT WAS CLAIMED THAT THERE WAS A NEXUS BETWEEN THE INPUTS AND THE FINAL PRODUCTS. IN 1995-96 BUDGET MODVAT SCHEME WAS LIBERALIZED/SIMPLIFIED AND THE CREDIT EARNED ON ANY INPUT WAS ALLOWED TO BE UT ILIZED FOR PAYMENT OF DUTY ON ANY FINAL PRODUCT MANUFACTURED WITHIN THE SAME FACTORY IRRESPECTIVE OF WHETHER SUCH INPUT S WERE USED IN ITS MANUFACTURE OR NOT. THE EXPERIENCE SHOW ED THAT CREDIT ACCRUED ON INPUTS IS LESS THAN THE DUTY LIABLE TO BE PAID ON THE ITA NO. 555(DEL)/2010 12 FINAL PRODUCTS AND THUS THE CREDIT OF DUTY EAR NED ON INPUTS GETS FULLY UTILIZED AND SOME AMOUNT HAS TO BE P AID BY THE MANUFACTURER BY WAY OF CASH. PRIOR TO 1995-96 B UDGET, THE EXCISE DUTY ON INPUTS USED IN THE MANUFACTURE O F TRACTORS, COMMERCIAL VEHICLES VARIED FROM 15% TO25%, WHE REAS THE FINAL PRODUCTS WERE ATTRACTED EXCISE DUTY OF 10 % OR 15% ONLY. THE VALUE ADDITION WAS ALSO NOT OF SUCH A MAGNITUDE THAT THE EXCISE DUTY REQUIRED TO BE PAID ON FIN AL PRODUCTS COULD HAVE BEEN EXCEEDED THE TOTAL INPUT CRE DIT ALLOWED., SINCE THE EXCESS CREDIT COULD NOT HAVE BEEN UT ILIZED FOR PAYMENT OF THE EXCISE DUTY ON ANY OTHER PRODU CT, THE UNUTILIZED CREDIT WAS GETTING ACCUMULATED. THE STAND OF THE ASSESSEES IS THAT THEY HAVE UTILIZED THE FACIL ITY OF PAYING EXCISE DUTY ON THE INPUTS AND CARRIED THE CR EDIT TOWARDS EXCISE DUTY PAYABLE ON THE FINISHED PRODUCTS. F RO THE PURPOSE OF UTILIZATION OF THE CREDIT ALL VESTITIVE FA CTS OR NECESSARY INCIDENTS THERETO HAVE TAKEN PLACE PRIOR TO 16. 3.1995 OR UTILIZATION OF THE FINISHED PRODUCTS PRIOR TO 1 6.3.1995. THUS, THE ASSESSEES BECAME ENTITLED TO TAKE THE CREDI T OF THE INPUT INSTANTANEOUSLY ONCE THE INPUT IS RECEIVED IN THE FACTORY ON THE BASIS OF THE EXISTING SCHEME. NOW BY APPLICA TION OF RULE 57F (4A) CREDIT ATTRIBUTABLE TO INPUTS ALREADY USED IN THE MANUFACTURE OF THE FINAL PRODUCTS AND THE FINA L PRODUCTS WHICH HAVE ALREADY BEEN CLEARED FROM THE FACTORY ALONE IS SOUGHT TO BE LAPSED, THAT IS, THE AMOUNT THAT IS SOUGHT TO BE LAPSED RELATES TO THE INPUTS ALREADY USED IN T HE MANUFACTURE OF THE FINAL PRODUCTS BUT THE FINAL PRODUCT S HAVE ALREADY BEEN CLEARED FROM THE FACTORY BEFORE 16.3.1995 . THUS, THE RIGHT TO THE CREDIT HAS BECOME ABSOLUTE AT ANY RATE WHEN THE INPUT IS USED IN THE MANUFACTURE OF THE FINAL PRODUCT. THE BASIC POSTULATE, THAT THE SCHEME IS MERELY BEIN G ALTERED AND, THEREFORE, DOES NOT HAVE ANY RETROSPECTIVE OR RETROACTIVE EFFECT, SUBMITTED ON BEHALF OF THE STATE, DOES NO T APPEAL TO US. AS POINTED OUT BY US THAT WHEN ON THE STRENGTH OF THE RULES AVAILABLE CERTAIN ACTS HAVE BEEN DONE BY THE PA RTIES CONCERNED, INCIDENTS FOLLOWING THERETO MUST TAKE PLACE IN ACCORDANCE WITH THE SCHEME UNDER WHICH THE DUTY HAD BEEN PAID ON THE MANUFACTURED PRODUCTS AND IF SUCH A SITUATION IS SOUGHT TO BE ALTERED, NECESSARILY IT FOLLOWS T HAT RIGHT, WHICH HAD ACCRUED TO A PARTY SUCH AS AVAILABILITY OF A SCHEME, IS ITA NO. 555(DEL)/2010 13 AFFECTED AND, IN PARTICULAR, IT LOSES RIGHT OF THE FACT THAT PROVISION FOR FACILITY OF CREDIT IS AS GOOD AS TAX PAID TILL TAX IS ADJUSTED ON FUTURE GOODS ON THE BASIS OF T HE SEVERAL COMMITMENTS WHICH WOULD HAVE BEEN MADE BY THE ASS ESSEES CONCERNED. THEREFORE, THE SCHEME SOUGHT TO BE INTRODUCED CANNOT BE MADE APPLICABLE TO THE GOODS WHICH HA D ALREADY COME INTO EXISTENCE IN RESPECT OF WHICH THE EAR LIER SCHEME WAS APPLIED UNDER WHICH THE ASSESSES HAD AVAILED OF THE CREDIT FACILITY FOR PAYMENT OF TAXES (EMPHASIS SUPPLIED). IT IS ON THE BASIS OF THE EARLIER SCHEME NECESSARILY T HE TAXES HAVE TO BE ADJUSTED AND PAYMENT MADE COMPLETE. ANY M ANNER OR MODE OF APPLICATION OF THE SAID RULE WOULD RES ULT IN AFFECTING THE RIGHTS OF THE ASSESSEES. (EMPHASIS SUPPLIED). 6. IN THE RESULT, THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 1 8 FEBRUARY, 2011. SD/- SD/- (I.P.BANSAL) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 18TH FEBRUARY, 2011. SP SATIA COPY OF THE ORDER FORWARDED TO: KAISER INDUSTRIES LTD., NEW DELHI. ACIT, CIRCLE 5(1), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REG ISTRAR.