TMI Blog1962 (3) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... khs gross of match boxes, annual ceiling fixed for category No. 2 factory. This meant that the factory would have to be re-classified and treated as category No. 1. In the event of the factory being classified as category No. 1 the excise duty payable would also be more than that levied for category No. 2 factory. The assessee, therefore, submitted a petition to the Assistant Collector of Central Excise, Trivandrum, on August 23, 1954, and prayed for permission to work the factory so as to produce more than the maximum limit of 5 lakhs gross of match boxes permissible for category No. 2 factory. The excise duty payable in respect of category No. 2 factory is ₹ 1-15-0 per gross on 40s. and ₹ 2-14-6 per gross on 60s. The duty payable by factory under category No. 1 exceeds the duty in respect of category No. 2 by 1 anna 6 pies for 60s. and 1 anna for 40s. per gross. The Assistant Collector of Central Excise, Trivandrum, by his communication to the assessee dated September 27, 1954, granted permission for the transfer of the factory from category No. 2 to category No. 1. But two conditions were imposed on the assessee: (1) He should remit immediately the differential duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of Central Excise, Madras, for cancellation of the demand on grounds which need not however be adverted to in this judgment. This appeal was rejected on April 19, 1955. The assessee preferred a further appeal to the Central Board of Revenue but was again unsuccessful as the Board rejected it on October 11, 1956. It seems that the assessee moved the Government of India against the order of the Board but did not succeed in obtaining the cancellation of the demand of the differential duty for the period January 1, 1954, to June 30, 1954. During the pendency of these proceedings the assessee debited his account on April 12, 1955, the last day of his accounting year 1954-55 with the sum of ₹ 21,373. He claimed this amount as a proper deductible allowance in computing his income of the year of assessment 1955-1956. The assessee's claim was that though the amount was not actually paid in the year of account, having regard to the fact that he was maintaining the accounts on the mercantile basis, he was entitled to the deduction as the legal liability to pay the duty accrued to him in the previous year relevant to the assessment year 1955-56 in view of the Collector's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Tribunal reached the correct conclusion when it held that the assessee maintained its books only on the mercantile basis. We are however unable to understand what the Tribunal meant by stating that the statutory demand of the excise authorities couched in clear and peremptory words can be called theoretical . We have already adverted to the terms of the demand and it is obvious that the excise authorities meant what they said. The assessee was asked to pay the amount of ₹ 21,373 within ten days of the receipt of the demand. No assessee can after the receipt of such demand treat it as an idle demand not meant to be enforced. Rule 10A referred to in the demand notice of the Collector reads: Where these rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty had for any reason been short-levied or of any other sum of any kind payable to the Central Government under the Act or these rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify. Section 11 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. That the assessee avowed his intention in the proceedings before the Tribunal not to discharge that ascertained liability will not alter his legal liability to the Travancore State nor affect his legal rights under the Income-tax Act and the Excess Profits Tax Act. We respectfully agree with this observation of the learned judge. The liability to pay excise duty on the part of the assessee arose out of the levy of the duty and the demand made against him for payment of such duty. Any dissatisfaction on his part regarding the quantum or propriety of the assessment and levy of the duty cannot minimise the liability or impair its effectiveness. He may raise a dispute over it and strain every nerve to avoid that liability. He may file appeals to the proper authorities questioning the imposition of the liability and praying for relief by way of cancellation of the duty. These are only constitutional modes in which a subject reacts to the levy of taxes and, indeed, there is nothing improper in them. A protest or opposition by a subject to the levy of tax or other duties payable to the Government cannot carry with it the implication that there is no proper levy legally re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putation of subsequently maturing credits or debits is to enquire in which accounting period the right or liability was established and to carry the item into the account in that year...In Bernhard, Lord Hanworth M.R. put the matter thus: 'If there is a liability which is subsequently determined, but which is none the less to be a liability existing at a particular dated, the fact that it is, subsequently to that date, determined and ascertained, does not prevent that liability belonging historically to its right place in the accounts. The quantum of it is ascertained at a later date; but the payment is to be made as at the date when it rightly occurs in the accounts, even if the quantum of it cannot be fixed at that moment'....it seems to follow that, if in the earlier period there is only a provisional or contingent 'liability', it is not until it has been subsequently determined to be an actual 'liability' by admission or decision that it can properly be brought into computation, and it should then be debited even if it is not until a still later period that the exact quantum can be inserted, if need be by reopening the accounts. This decision does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally enforceable against the assessee. The liability itself accrued only after the date of the transfer of the business. When the assessee provided for the bonus payments in the year ending January 31, 1952, it discharged its own liability accruing in that year of account. The expenditure was held to be properly deductible in the accounting year ending on January 31, 1952. It was only in that year that the liability accrued; in the earlier years it was but a contingent liability. That case merely pointed out the distinction between a contingent liability and a payment depending upon a contingency. In fact the expression of the opinion by the Division Bench was obiter as is apparent from the following observation of the learned judge at page 295: The learned counsel for the department urged that, even if the requirements of section 10(2)(xv) were satisfied, the deduction should not be permitted in the assessment year 1952-53, and that the bonus payments for 1949 and 1950 were properly debitable only to the years of account that ended on January 31, 1950, and January 31, 1951, respectively. That was not one of the grounds on which the Tribunal negatived the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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