1987 (11) TMI 136 - AT - Income Tax

Summary

Issues:
1. Incorrect application of facts by the Tribunal regarding liabilities of the assessee.
2. Interpretation of Excise Rules and procedures regarding proforma credit system.
3. Modification of systems and procedures for proforma credit system in relation to Zinc.

Detailed Analysis:
1. The application by the assessee arose from the Tribunal's decision on the issue of liabilities amounting to Rs. 9,06,352 and Rs. 42,257 raised by the Central Excise Authorities. The assessee argued that the Tribunal erred in its understanding of the facts related to the Proforma Credit system. The Central Excise Authorities initially granted the assessee Proforma Credit related to zinc in its finished product, which was later found to be wrongly given. The assessee contended that the Proforma Credit system aims to adjust credits against future or subsequent payments of Excise Duty, resulting in a reduced amount charged to the Profit & Loss Account. The Tribunal's conclusion was challenged by the assessee, stating that the liability should be allowed as a deduction based on the incorrect application of facts and Excise Rules.

2. The Senior Departmental Representative highlighted that the Excise Rules and procedures concerning the Proforma Credit system were correctly presented by the assessee. However, it was argued that only if these rules were misinterpreted would the result be modified.

3. The issue revolved around the modification of procedures for the Proforma Credit system in relation to Zinc. Rule 56A of the Central Excise Rules 1944 governed the granting of proforma credits for duty paid material used in manufacturing excisable goods. The Excise Authorities issued a notice demanding Rs. 9,06,352 from the assessee, citing the incorrect grant of proforma credit for zinc. The authorities realized their mistake in allowing the credit and subsequently raised the demand. The Tribunal's misinterpretation of the facts led to an incorrect conclusion. Upon review, the Tribunal modified its decision, allowing the liabilities of Rs. 9,06,352 and Rs. 42,257 as deductions from the total income of the relevant year.

In conclusion, the judgment addressed the incorrect application of facts by the Tribunal, the interpretation of Excise Rules regarding the Proforma Credit system, and the modification of procedures for proforma credits related to Zinc. The decision clarified the liability of the assessee based on the Supreme Court precedent and directed the allowances as deductions from the total income for the relevant year.