TMI Blog1988 (9) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ices had been received from Superintendent, Central Excise requiring the assessee to show cause to Asst. Collector Central Excise why additional duty as mentioned in said notices be not demanded and recovered. It was argued before the ITO that since the assessee company was maintaining accounts on mercantile basis the liability as mentioned in said notices had accrued in the relevant accounting year and should be allowed as deduction. The assessee filed photostat copies of all the notices relevant to the claim. It was found that the assessee had filed objections in response to show cause notices and in respect of same of the show cause notices Asst. Collector had passed final orders while in respect of other show cause notices no order had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed this year. He, therefore, allowed deduction of amount relating to item No. 1 and disallowed the claim in respect of other items. 4. The assessee filed appeal before the CIT (A) and reiterated the same plea. The CIT(A) confirmed the disallowance. The assessee is in further appeal before us. 5. We have considered the submissions made by the parties, and decisions cited before us. We find that legal position regarding allowability of excise duty when assessee is following mercantile system of accounting is as follows: "Like Sales-tax the liability for excise duty comes into existence by force of the relevant statute. In regard to the admitted liability, for the assessees keeping mercantile system of accounts, the liability is incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived in the earlier year and taxing event did not take place this year. As far as item No. 3 is concerned, although show cause notice has been received the period to which it relates fall in the earlier years and final adjudication has taken place in subsequent year. Hence this item also was ex-facie not allowable. 8. We are then left with items No. 2 and 4 to 10. Each and every notice is a mere show cause notice. None of them is a demand notice. The assessee had paid excise duty, which according to assessee is payable. Addl. duty is proposed to be levied by the concerned authorities. But that is merely a proposal. There is no determination of liability. The assessee had been called upon to show cause why additional duty should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n person before the case is adjudicated. If no mention is made about this in their written application, it would be presumed that they do not desire personal hearing. If no cause is shown regarding the action proposed to be taken within 30 days of the receipt of this notice or they do not appear before the adjudicating officer whom the case is posted for hearing the case will be decided ex parte." 9. The decision of the Calcutta High Court in the case of Century Enka Ltd. is not an authority for the proposition that a provision made on the basis of mere show cause notice was allowable as deduction. Observations in the judgment are to be weighed in the light of facts involved therein. In Calcutta case, the so-called show-cause notice was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, in this case the statutory liability does not exist in this year. It would come into existence in the year in which Asstt. Collector or Collector, as the case may be, determines the liability after considering evidence of assessee. This is not a case of mere quantification of an incurred liability. This is a case of determining the existence of liability itself. It is to be noted that in respect of four show cause notices no liability has been determined by the Asstt. Collector even in 1988 when we heard these appeals. We were informed about this in the course of arguments. 11. For the reasons given above, the ITO was justified in disallowing deduction of amounts mentioned in various show cause notices which represented mere proposal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Poysha Industrial Co. Ltd. vs. ITO (1982) 29 CTR (Trib) 22 (Bom) (SB) : (1983) 4 ITD 41. We respectfully follow said decisions and reject this ground. We hold exchange difference of Rs. 1,46,205 was not a revenue expenditure and was not allowable as deduction. We confirm the disallowance of deduction. 14. As regards ground No. 3(b), the Tribunal has allowed it on the basis of a decision of Ahmedabad Bench in the case of Windsor Foods Ltd. (ITA 728/Ahd/84). We find that Benches of the Tribunal at Bombay are taking a different view on this point. The plain words in s. 32A does not justify allowance of investment allowance on exchange difference amount which was required to be paid several years after the installation of new machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X
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