Dy.CIT., Circle-16(2), Hyderabad V. M/s M K Pharma Pvt. Ltd., Hyderabad

ITA 766/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0364 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAJARAM

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 766/HYD/2014 ASSESSMENT YEAR: 2007-08 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 16(2), HYDERABAD. VS. M/S M.K. PHARMA PVT. LTD., HYDERABAD. PAN AACCM3033G (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B. RAJARAM ASSESSEE BY : NONE DATE OF HEARING 23-06-2015 DATE OF PRONOUNCEMENT 26-06-2015 O R D E R PER SAKTIJIT DEY: THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST O RDER DATED 07/11/2013 OF LD. CIT(A)-V, HYDERABAD PERTAINING TO AY 2007-0 8. 2. WHEN THE APPEAL WAS CALLED FOR HEARING, NO ONE A PPEARED ON BEHALF OF ASSESSEE-RESPONDENT. CONSIDERING THE NATU RE OF DISPUTE, WE, THEREFORE, PROCEED TO DISPOSE OF THE APPEAL AFT ER HEARING LD. DR. 3. THE ONLY EFFECTIVELY GROUND RAISED BY THE DEPART MENT IS AS FOLLOWS: 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT TH AT THE AO DISALLOWED THE DOUBLE CLAIM OF EXPENDITURE TOWARDS EXCISE DUTY. 4. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY IS ENG AGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PHARMACEUTICAL FORMULATIONS. FOR THE AY UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 13,32,380. IN COURSE OF ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS REDUCED EX CISE DUTY OF RS. 2 ITA NO. 766 /HYD/2014 M/S M.K. PHARMA PVT. LTD. 92,55,868 FROM SALES WITHOUT REDUCING EXCISE DUTY O F RS. 63,10,435 FROM PURCHASES, WHICH, ACCORDING TO AO, HAS RESULT ED IN DOUBLE DEDUCTION ON ACCOUNT OF EXCISE DUTY. ASSESSEE IN RE SPONSE TO THE QUERY RAISED BY AO SUBMITTED THAT IT IS FOLLOWING T HE PRINCIPLE OF ACCOUNTING AS PER WHICH THE EXCISE DUTY PAID ON PUR CHASE OF INPUTS ( RAW MATERIALS, CONSUMABLES, STORES, ETC.) IS ACCOUN TED TO THE CENVAT CREDIT RECEIVABLE/EXCISE DUTY DEPOSIT ACCOUN T BY REDUCING THE COST OF INPUTS. IT WAS SUBMITTED, THE SAID CENV AT CREDIT RECEIVABLE/EXCISE DUTY DEPOSIT ACCOUNT WAS ADJUSTED AGAINST EXCISE DUTY PAYABLE ON ITS FINISHED GOODS BY CREDITING THE SAID ACCOUNT AND DEBITING EXCISE DUTY ACCOUNT. THEREFORE, THERE IS N O NEED TO MAKE ANY FURTHER ADJUSTMENT. HOWEVER, AO DID NOT FIND MERIT IN THE SUBMISSIONS OF ASSESSEE. HE OBSERVED THAT AS PER COLUMN 12-B AN D 22A OF THE 3CD REPORT, THERE ARE NO ADJUSTMENTS TO BE MADE AS PER ANNEXURE-I AND THAT THERE IS NO OUTSTANDING BALANCE REPRESENTI NG CENVAT AT THE END OF THE YEAR. WHEREAS ASSESSEE HAS MADE ADJUSTME NTS WHICH HAS RESULTED IN CLAIM OF DOUBLE DEDUCTION OF EXCISE DUT Y. HE FURTHER OBSERVED THAT UNDER THE HYBRID SYSTEM OF ACCOUNTING , ASSESSEES CLAIM THAT PURCHASES ARE NET OF EXCISE DUTY CANNOT BE ACCEDED. ACCORDINGLY, AO DISALLOWED AN AMOUNT OF RS. 63,10,4 35 BY OBSERVING THAT ASSESSEE HAS MADE ADDITIONAL CLAIM OF DEDUCTIO N TO THAT EXTENT. BEING AGGRIEVED OF SUCH DISALLOWANCE, ASSESSEE PREF ERRED APPEAL BEFORE LD. CIT(A). 5. REITERATING WHAT WAS STATED BEFORE AO, ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT IN ORDER TO COMPLY WITH THE PRESCRIBED ACCOUNTING STANDARD IN RESPECT OF SALES, THEY ARE G ROSSING UP THE SALES BY ADDING THE AMOUNT OF EXCISE DUTY AND AGAIN REDUCING THE SAME IN THE P&L A/C ADMITTING THE NET SALES. IT WAS SUBMITTED, THE GROSS SALES OF RS. 6,05,32,497 WERE REDUCED BY THE EXCISE DUTY COLLECTED AT RS. 92,55,868 AND THE NET SALE OF RS. 5,12,76,629 WAS OFFERED FOR TAXATION. AS FAR AS THE PURCHASES ARE CONCERNED, IT WAS SUBMITTED THAT ASSESSEE IS FOLLOWING EXCLUSIVE METH OD OF ACCOUNTING 3 ITA NO. 766 /HYD/2014 M/S M.K. PHARMA PVT. LTD. BY ACCOUNTING THE EXCISE DUTY PAID ON THE SAID PURC HASES OF INPUTS TO THE CENVAT CREDIT RECEIVABLE/EXCISE DUTY DEPOSIT AC COUNT BY REDUCING THE COST OF INPUTS. TO SUPPORT ITS CLAIM, ASSESSEE ALSO SUBMITTED THE DETAILS OF PURCHASE OF RAW MATERIALS, PACKING MATERIALS AND EXCISE DUTY ACCOUNTED. EXPLAINING FURTHER, IT W AS SUBMITTED THAT THE EXCISE DUTY OF RS. 63,10435 (BASIC DUTY PLUS CE SS) PAID ON THE PURCHASE WAS TRANSFERRED TO CENVAT CREDIT RECEIVABL E/EXCISE DUTY DEPOSIT ACCOUNT AND UTILIZED AGAINST EXCISE DUTY L IABILITY ON SALES OF THE FINISHED GOODS. IN THIS CONTEXT, ASSESSEE ALSO PRODUCED THE PURCHASE REGISTER SHOWING PURCHASE OF RAW MATERIALS AND PACKING MATERIALS ALONG WITH ENTRIES MADE IN THE BOOKS OF A CCOUNT IN RESPECT OF PURCHASES AND SALES, TREATMENT OF EXCISE DUTY IN RESPECT OF PURCHASES, SALES AND ON FINISHED GOODS. LD. CIT(A) AFTER EXAMINING THE BOOKS OF ACCOUNT AND VERIFYING THE FACTS AND FI GURES FOUND THAT TOTAL PURCHASES DURING THE YEAR ARE TO THE TUNE OF RS. 4,26,60,641. CENVAT CREDIT ON THESE PURCHASES AMOUNTED TO RS. 63 ,10,435. THEREFORE, THE TOTAL PURCHASES INCLUSIVE OF CENVAT COMES TO RS. 4,89,71,076. AS AGAINST THE AFORESAID PURCHASES IN THE P&L A/C, ASSESSEE UNDER SCHEDULE-I BROUGHT IN THE FIGURES OF RS. 3,60,05,782 (RAW MATERIAL), RS. 66,54,859 (PACKING MATERIAL), E XCLUSIVE OF CENVAT PAID ON THESE PURCHASES. HE, THEREFORE, OBSE RVED THAT SINCE THE PURCHASES SHOWN IN THE P&L A/C IS NET OF EXCISE DUTY THERE IS NO NEED TO FURTHER REDUCE THE EXCISE DUTY OF RS. 63,10 ,435 FROM THE PURCHASES. ACCORDINGLY, HE DELETED THE ADDITION MAD E BY AO. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. AS COULD BE SEEN FROM THE ASSESSMENT ORDER, AO BEING OF THE VIEW THAT ASS ESSEE HAS REDUCED THE EXCISE DUTY FROM SALES WHEREAS HE DID N OT REDUCE FROM THE PURCHASES, HAS MADE DISALLOWANCE OF RS. 63,10,4 35 BY REDUCING IT FORM THE PURCHASES. HOWEVER, AS COULD BE SEEN FROM THE ORDER OF LD. CIT(A), ASSESSEE HAS DEMONSTRATED BEFORE HIM BY PRO DUCING THE BOOKS OF ACCOUNT THAT PURCHASES SHOWN IN THE P&L A/ C IS NET OF 4 ITA NO. 766 /HYD/2014 M/S M.K. PHARMA PVT. LTD. EXCISE DUTY. THAT BEING THE CASE, IN OUR VIEW, AO H AS MADE DISALLOWANCE WITHOUT PROPER VERIFICATION OF THE BOO KS OF ACCOUNT AND OTHER RELEVANT INFORMATION. ACCORDINGLY, FACTUALLY THERE BEING NO CLAIM OF DOUBLE DEDUCTION ON ACCOUNT OF EXCISE DUTY BY AS SESSEE, AS ALLEGED BY AO, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) IN DELETING ADDITION MADE BY AO. ACCORDINGLY, WE UPHOL D THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUND RAISED. 7. IN THE RESULT, APPEAL OF DEPARTMENT IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON 26 TH JUNE, 2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 26 TH JUNE, 2015 KV COPY TO:- 1) DCIT, CIRCLE 16(2),ROOM NO. 611, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) M/S M.K. PHARMA PVT. LTD., 415, ADITYA ENCLAVE, AMEERPET, HYDERABAD 3 CIT(A)-V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.