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TMI Blog2020 (2) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tribunal on the questions which have been raised in this appeal. The Assessing Officer as well as the Commissioner of Income Tax (Appeals) has not accepted the claim of the appellant. The appellant (hereinafter referred to as the "assessee") is engaged in the business of manufacturing automobiles, which are chargeable to Excise Duty under the Central Excise Act, 1994. The assessment year in question is assessment year 1999-2000. The assessee, a Company, has been engaged in manufacturing and sale of various Maruti Cars and also trades in spares and components of the vehicles. It acquires exiceable raw materials and inputs which are used in the manufacturing of the vehicles. The assessee had also been taking benefit of MODVAT credit on the raw material and inputs used in the manufacturing. At the end of the Assessment year 1999-2000 an amount of Rs. 69,93,00,428/was left as unutilised MODVAT credit. In the return it was claimed that the Company was eligible for deduction under Section 43B of the Income Tax Act as an allowable deduction. Similarly, the Company claimed deduction under Section 43B of an amount of Rs. 3,08,88,171/in respect of Sales Tax Recoverable Account. 2. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments by way of Excise Duty. As soon as the raw materials and inputs are received in the appellant's factory, the assessee becomes entitled to avail of MODVAT credit in respect of Excise Duty paid on the raw materials and inputs and which is mentioned in the manufacturer supplier's invoice. The assessee was clearly entitled for deduction of unutilised MODVAT credit balance as on 31.03.1999. 6. Shri Ganesh in alternative submits that questions are squarely covered in favour of the assessee by the 1st proviso to Section 43B. The assessee's Excise Returns establish that while the untilised MODVAT credit as on 31.03.1999 was Rs. 69.30 crores, the entire amount was utilised in April, 1999 itself. Consequently, the assessee is entitled to the deduction under the 1st proviso to Section 43B. The object and purpose of Section 43B of the Act is to ensure that an assessee does not get deduction in respect of an amount unless and until the amount has been received by the Government. In the present case the full amount of Excise Duty was paid into the coffers of Government when the manufacturer of raw material/inputs had cleared the same from his factory gate for supply to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which deduction is sought to be claimed. Section 43B is as follows: "43B.Certain deductions to be only on actual payment. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b)any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c)any sum referred to in clause (ii) of subsection (1) of section 36, or (d)any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or (e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank[or a cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank] in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that year under the relevant law." 12. The fulfillment of the above statutory conditions is necessary for allowing deduction under Section 43B. We have to examine the facts of the present case to find out as to whether all the conditions which are necessary for permissible deduction under Section 43B are present here or not. 13. The crucial words in Section 43B(a) are "any sum payable by the assessee by way of tax, duty, cess or fee...". We need to examine as to whether unutilised credit under MODVAT Scheme was sum payable by the assessee. 14. The Excise Duty is levied under the Central Excise Act, 1944 and collected as per the Central Excise Rules, 1944. The assessee in reference to the Central Excise Rules, 1944 is Assessee as defined in Rule 2(3) which is to the following effect: "Rule 2(3). "assessee" means any person who is liable for payment of duty assessed and also includes any producer or manufacturer of excisable goods or a registered person of a private warehouse in which excisable goods are stored;" 15. The taxable event is manufacture and production of excisable articles and payment of duty is relatable to date of removal of such article from the factory. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the incident of Excise Duty that has shifted from the manufacturer to the purchaser and not the liability to the same. 18. We thus, conclude that the unutilised credit under MODVAT scheme does not qualify for deductions under Section 43B of the Income Tax Act. 19. Shri Ganesh has relied on judgment of this Court in Eicher Motors Ltd. and another versus Union of India and others, (1999) 2 SCC 361, and submits that facility of credit is as good as tax paid, hence, it be accepted that by payment of Excise Duty although which is part of sale invoice issued by manufacturer or producer of raw material or inputs, the payment by appellant was Excise Duty which qualified for deduction under Section 43B. 20. In Eicher Motors Ltd. and another, the challenge to the validity of scheme as modified by introduction of Rule 57F of Central Excise Rules, 1944 was under consideration. According to Section 57F( 4A) of Central Excise Rules, 1944, credit which was lying unutilised on 16.03.1995 with the manufacturers, stood lapsed, Rule 57F( 4A) has been extracted in paragraph 2 of the judgment which is to the following effect: 19 "2. The relevant Rule reads as follows: "57F. (4A) Notwithsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessees." 22. The observations in the above paragraph that facility of credit is as good as tax paid till tax is adjusted on future goods were made in context of 57F( 4A) of Central Excise Rules,1944. 23. The above observation cannot be read to mean that payment of Excise Duty by the appellant which was component of sale invoice purchasing the raw material/inputs by the appellant is also payment of Excise Duty on raw material/inputs. 24. By payment of component of Excise Duty as included in sale invoice is benefit which is given to appellant by virtue of credit as envisaged in statutory scheme of Rule 57A to 57I of Central Excise Rules, 1944. The above judgment thus in no manner supports the submissions of the appellant for the purposes of the present case. 25. Next judgment relied by Shri Ganesh in Collector of Central Excise, Pune and others versus Dai Ichi Karkaria Ltd. and others; (1999) 7 SCC 448. In the above case, this Court had occasion to consider Section 4 of Central Excise Act, 1944, which provides for valuation of raw material covered by MODVAT Scheme. Referring to Rule 57A( 1) and Rule 57F( 1), this Court laid down following in paragraph 18, 19 and 20: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 263 of the Act claiming that Assessing officer had wrongly allowed the claim for deduction. The Commissioner held that assessing officer incorrectly relied on judgment of Gujarat High Court in Lakhan Pal National Ltd. versus ITO (1986) 162 ITR 240, ITAT also. ITAT referred a question to the High Court. The High Court answered the question in favour of Revenue against which the appeal was filed. The relevant facts have been noticed in the judgment of this Court in following words: "... In the assessment proceedings of the assessment year 198485, the Inspecting Assistant Commissioner of Incometax allowed the appellant-assessee's claim that it was entitled to deduct the entire sum of Rs. 5,85,87,181/being the duties actually paid during the relevant year previous to the assessment year 198485. The Commissioner of Incometax initiated proceedings under section 263 of the Act on the ground that the Assessing Officer had wrongly allowed the claim for deduction of an amount of Rs. 98,25,833/towards customs and Excise Duty paid during the previous year but credited to the profit and loss account in closing stock of goods under the provisions of Section 43B. the assessee relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 52. The facts are the Assessee pays sales tax on the purchase of raw materials and computers used in the manufacture of cars. Though, the salestax paid is part of the cost of raw material, the Assessee debits the purchases net of sales tax; the sales tax paid is debited to a separate account titled 'Salestax Recoverable A/c". Under the Haryana General Sales Tax Act 1973, the Assessee cold set off such salestax against its liability on the sales of the finished goods i.e. cars. Whenever the goods are sold, the tax on such sales is credited to the aforesaid account." 32. The High Court had rightly answered the above question in favour of the Revenue relying on its discussion with respect to Question No.1. The sales tax paid by the appellant was debited to a separate account titled 'Sales Tax recoverable account'. The assessee could have set off sales tax against his liability on the sales of finished goods i.e. vehicles. We do not find any infirmity in the view of the High Court answering the above question. 33. The next submission which has been advanced by Shri Ganesh is on the first proviso to Section 43B. It has been submitted that Return for the assessment year in question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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