TMI Blog2003 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... sible for the Assessing Officer under the Income-tax Act to adopt different methods of valuation of excise duty paid raw material when purchased and the unconsumed raw material on hand at the end of the year ? The assessees are manufacturing units liable to excise duty Under the Modvat scheme, they get credit for the excise duty already paid on the raw materials purchased by them and utilised in manufacture of excisable goods. When they manufacture the goods and sell them, the proportionate part of the modvat credit is set off against their excise duty liability. In each of these cases, the Assessing Officer took the view that the Modvat credit that is available should be treated as an income or an advantage in the nature of income, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o possible methods of valuation of stock. The first would be the "gross method", in which the stock is valued at cost price inclusive of the excise duty element. If this method is adopted, then the unconsumed stock also must necessarily be valued in the same manner. The other method is the "net method", in which the raw material purchased is valued at the actual cost, that is the actual purchase price and, on this, Modvat credit would be available. If this method is to be adopted, then uniformly the same method must be adopted while valuing the unconsumed stock at the end of the year. Whichever method one adopts, the result would be the same. We are unable to accept the view of the Assessing Officer that merely because Modvat credit is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commerce. We think that such realism must inform the meaning that the courts give to words of a commercial nature, like cost, which are not defined in the statutes which use them. A man of commerce would, in our view, look at the matter thus : 'I paid Rs. 100 to the seller of the raw material as the price thereof. The seller of the raw material had paid Rs. 10 as the excise duty thereon. Consequent upon purchasing the raw material and by virtue of the Modvat Scheme, I have become entitled to the credit of Rs. 10 with the excise authorities and can utilise this credit when I pay excise duty on my finished product. The real cost of the raw material (exclusive of freight, insurance and the like) to me is, therefore, Rs. 90. In reckoning the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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