TMI Blog2007 (7) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... Even till today i.e., signing of the order, nothing has been filed from the side of the revenue. 2. These two appeals pertaining to assessment years 1984-85 and 1985-86 were earlier heard and disposed of by the Tribunal in favour of the assessee vide orders dated 15-3-1991 and 17-8-1992 respectively. In the Civil Appeals decided by the Hon ble Supreme Court for these two years, the Hon ble Supreme Court vide its order dated 2-3-2006 (decision in CIT v. Varas International (P.) Ltd. [2006] 284 ITR 80 1 has set aside the decisions of the Hon ble Calcutta High Court and that of the Tribunal and remanded the matter back to the Tribunal. 3. The facts relating to the controversy raised in the instant appeals and leading to the remand back of matters to the Tribunal are that the assessee-company who is engaged in the business of manufacturing and bottling of country liquor, had imported spirit from outside the West Bengal. In terms of Rule 6 of the West Bengal (Manufacture of Country Spirit in labelled and capsuled Bottles) Rules, 1979 (hereinafter referred to as the "Rules") issued in exercise of the powers conferred by section 86 of the Bengal Excise Act, 1909, a fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivilege and specified fee as mentioned in Rules 2 and 6 of the Excise Rules cannot be construed as fee used in section 43B, the word "fee" was not there in section 43B before 1-4-1989 and that "fee" was neither tax nor duty and the same cannot be disallowed by invoking the provisions of section 43B. 3.5 References were preferred against both the orders of the ITAT before the Hon ble High Court, Calcutta by the revenue. Before the Hon ble High Court the following three questions of law were referred for its opinion by the Tribunal ( a )"Whether, on the facts and in the circumstances of the case and on a correct interpretation of the amendment made by the Finance Act, 1988 to the section 43B( a ) of the Income-tax Act, 1961 which has been explained as clarificatory of legislative intention by the Explanatory notes issued by the Government, the Tribunal was justified in law in not holding that the said amendment will be retrospective in its application? ( b )Whether on the facts and in the circumstances of the case and on a correct Interpretation of section 2(10) of the Bengal Excise Act, 1909 by applying the principles of " Ejusdem Generis " the Tribunal was justified in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Court that the levy in question was in fact a countervailing duty and the State Government was competent under Entry 51 of List II to levy excise duty and countervailing duty and the word "duty" under section 43B before its amendment would cover both the duties. Hon ble Supreme Court after hearing the parties finally set aside the decision of the High Court and the Tribunal and remanded the matter back to the Tribunal for the purpose of deciding the issue with the following observations "We find that the order of the CIT(A) is not very clear on this aspect. As far as the Tribunal is concerned, it is true that the submission of the Department was that the levy was neither a fee or excise duty. However, we note that Rule 6 under which the levy is imposed on the import of spirit is contained in the rules which are described as Excise Rules. Additionally we find that in the grounds of appeal before this Court it has been submitted that the levy was a duty and the duty would include payment of public revenue levied on the import, export, manufacture or sale and that the additional fee was nothing but duty and section 43B of the Income-tax Act, 1961 was fee on any sum pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nserted by the Finance Act, 1983, with effect from 1-4-1984 and has enacted a deeming fiction whereby certain expenses can be allowed only on payment basis even if allowable under the Act on accrual basis in keeping with the Mercantile system followed by an assessee. Earlier the term "cess or fee, by whatever name called" was not there in section 43B. It has been incorporated with effect from 1-4-1989, but the term "tax, duty" is there right from inception. He then took us to Entry 51 of List II of the Seventh Schedule to the article 246 of the Constitution of India and submitted that under the said Entry the State Government is competent to impose countervailing duties on the alcoholic liquors manufactured elsewhere in India but imported into the State. He then submitted that the "additional fee" imposed under Rule 6 is nothing but the countervailing duty falling under the legislative competence of the State Government under the aforesaid Entry of the Constitution of India. 6. The Ld. Senior Counsel for the revenue took us through the provisions of the Bengal Excise Act, 1909, copy of which is filed in the paper-book. He submitted that as per section 2( 7a ), "excise duty" and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Area of Calcutta. 7. The Ld. Senior Counsel Mr. Som further submitted that the aforesaid Rules as amended makes a clear distinction between privilege of manufacturing country spirit on the one hand and the additional fee for the importation of the country spirit from outside West Bengal for the purpose of use of country spirit for selling by wholesale. The Tribunal in the first round of proceedings held as a fact-finding authority in its order for the assessment year 1985-86 that the assessee does not own distillery and therefore, it is obliged to import spirit or alcohol from outside the State of West Bengal. Thus, according to Mr. Som, the Ld. Senior Standing Counsel, the countervailing/duty additional fees imposed under the Bengal Excise Act on the import of spirit is nothing but "duty" and the additional fees payable by the assessee-company but not paid in the relevant years is hit by the mischief of the provisions of section 43B. In the written submissions filed, he relied upon a judgment of the Hon ble Supreme Court in Kandelwal Metal Engg. Work v. UOI AIR 1985 SC 1211, a three judge Bench judgment where the Hon ble Supreme Court while considering section 3(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act becomes clear on perusal of the relevant rules framed under the Bengal Excise Act, 1909. He submitted that the original rules were framed vide Notification dated 23-3-1979 issued by the Government of West Bengal, Department of Excise in exercise of power conferred by the Bengal Excise Act, 1909. 9. ( a ) As per rule 6, a manufacturer was liable to pay a fee of two paise per bottle for the privilege of manufacture of country spirit. This rule is not relevant in the instant case as the impugned levy is not, admittedly, on the manufacture. 9. ( b ) He submitted that the aforesaid rule 6 was amended by the Notification dated 12-2-1981 and Rule 6(1) to Rule 6(3) were inserted after rule 6. As per these rules, an additional fee of 60 paise per bulk litre was imposed on the import of "rectified spirit" (Emphasis supplied). Thus, it is apparent that the levy of additional fee is on the import of "rectified spirit" and not on any other item. 9. ( c ) He further submitted that as per article 245 of the Constitution of India, the Legislature of any State has exclusive power to make laws with respect to any of the matters enumerated in List II in the Seventh Schedule (know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court following the aforesaid judgment in the case of Synthetics Chemicals Ltd. ( supra ) held that the State can levy excise duty only on potable liquor fit for human consumption and as "rectified spirit" does not fall under that category, the State Legislature cannot impose any excise duty. 10. We heard both the Counsels at length, we have carefully gone through the material on record and the paper book filed. We have also carefully gone through the judgment of the Hon ble Supreme Court remanding the matter back to our file. We agree with the contention of both the Counsels that the Hon ble Supreme Court has remanded a very limited issue for our consideration viz., whether the levy in question in the instant case is a countervailing duty in terms of Entry 51 of List II to the Seventh Schedule to the Constitution. If that is so, needless to say, the word "duty" appearing in section 43B before its amendment would cover the same and the assessee s claim for deduction on accrual basis would stand dismissed. 11. In the course of hearing, we asked the Ld. Counsel appearing for the assessee-company to produce some direct evidences to prove his contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the assessee with sworn affidavit and place further material evidences in order to facilitate the Bench to discharge its duties properly. We allowed more than one month s time. Needless to say, they could not comply as per our direction till date. As such, we had to proceed to dispose of the matter without allowing it to continue as protracted litigation in accordance with the direction of the Hon ble Apex Court. We rejected the revenue s objection in limine and admitted the documents filed on behalf of the assessee. However, we directed the revenue to verify the authenticity of the documents from the excise authorities and report the outcome within ten days in the form of an affidavit if the documents submitted are found to be ingenuine. A letter dated 14-5-2007 has been filed by the revenue authorities in the registry informing that a letter dated 11-5-2007 has been written to the Excise Commissioner but the required information can be available only after a month. 13. At the time of writing this order, more than a month s time has elapsed but no further information has been received. We cannot wait perpetually. In the circumstances, we have no option but to proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer to make laws with respect of the matters enumerated in List II of the Seventh Schedule. The contents of Entry 51 are given hereunder "Duties of Excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates or similar goods manufactured or produced elsewhere in India ( a )alcoholic liquors for human consumption; ( b )opium, Indian hemp and other narcotic drugs and narcotics, but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph ( b ) of this entry." From the above, it can be clearly seen that countervailing duty can be imposed only on alcoholic liquors for human consumption and not on "rectified spirit". The Hon ble Supreme Court in a five member Bench judgment in the case of Synthetics Chemicals Ltd. ( supra ) held that the expressions used in the Constitution has to be understood in common and normal sense. Thus "consumption" of alcohol used in the Constitution in the List I of Item 84 and List II of Item 51 is in the context of direct physical intake by human beings and not utilization in manufacturing process. The Hon ble Supreme Court held at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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