TMI Blog1991 (12) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... the sugar companies for the lower recovery of sugar from cane during the summer months, the Government of India formulated a scheme of rebate on the excise duty payable by the sugar companies. This scheme was announced by the Ministry of Finance (Deptt. of Revenue), New Delhi, on 21-4-1982 by Notification No. 132 of 1982 - Central Excise. Broadly speaking the Notification announced a rebate of Rs. 40 per quintal of free sale sugar and Rs. 24.50 per quintal of levy sugar from the excise duty payable by the sugar factories. The Scheme, in short, provided that the rebate shall be allowed in respect of excess production during a particular sugar year as compared to the production of sugar during the lean period in the preceding three sugar years. The preceding three sugar years were called the ' base period '. All sugar mills were entitled to the rebate on the excise duty in respect of the excess production during a particular year over and above the average production of sugar during the base period. According to the Notification vide para 3 thereof, the average sugar production during the base period was to be worked out in such a way that if there was no production in any of the thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sugar year 1981-82 = 1,16,531 quintals Excess production entitled to excise duty rebate is 92,059 quintals i.e. (1,16,531 minus 24,472). Similarly, the excess production of sugar entitled to excise duty rebate for the sugar year 1982-83 was worked out by the assessee at 1,52,674 quintals as under :--- Production of sugar in the sugar year 1982-83 = 1,77,146 quintals Average production during base period = 24,472 quintals ---------------------------- Excess production = 1,52,674 quintals ---------------------------- 6. It will be seen from the above computation that the assessee's working of the average production of sugar during the base period was based on the principle that even though there was no production in two of the years forming the base period those years had also to be taken into account for arriving at the " average production ". This method naturally resulted in a lesser figure of average production and consequently higher figure of excess production entitling the assessee to higher excise duty rebate. This interpretation was not acceptable to the Excise Department. According to the Excise Department, the average production had to be worked out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sugar year 1982-83. In deference to the interim orders passed by the Hon'ble High Court as aforesaid, the assessee-company furnished the bank guarantee and it is also not in dispute that the respective amounts claimed by the assessee as excise duty rebate were allowed to be credited to the personal ledger account by the Excise Department. 8. The assessee-company filed its return of income on 27-9-1983. While scrutinising the return of income and the companying statements filed by the assessee the Assessing Officer found that Note 4 of Schedule ' H ' to the printed accounts filed by the assessee for the relevant accounting year contained the following narration :-- " The accounts in respect of insurance, excise and other claims receivable and interests receivable on deposits under Company Deposits (S.C. I.T.) Scheme, 1983, have been maintained partly on cash basis." The Assessing Officer further found that Note 8 of the same Schedule mentioned that-- " The Company had received Rs. 26,13,819 towards excise duty rebate for the years 1981-82 1982-83 in terms of an interim order of the Calcutta High Court by furnishing a bank guarantee of the like amount. The said amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but shown in the Balance sheet in the liability side as the same is disputed by the Excise Authorities. The High Court of Punjab Haryana in L.P.A. No. 854 of 1978 by a judgment dated Feb. 12, 1981 in the case of Union of India v. Morinda Co-operative Sugar Mills Ltd. has held amongst others that on true interpretation of the relevant notification and having regard to the intention of the notification granting exemption of the sugar factories that if a sugar factory did not produce sugar in 1 or 2 of the three specified years the same should not be ignored while arriving at the average. In other words, year or years with nil production should also be taken into account for the purpose of finding out the average in the cases falling under paragraph 3 of the said notification. The Union of India has filed a special leave petition to the Supreme Court against the judgment of the Punjab Haryana High Court and same is pending in the Supreme Court. On a transfer petition filed the writ petition in the instant case has also been transferred to the Supreme Court. All the matters are tagged together and pending in the Supreme Court. The Supreme Court in the case of CIT v. Hindustan Housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued by the Government of India, the letters written by the assessee to the Excise Department elaborating its claim and the interim orders by the Hon'ble Calcutta High Court. The assessee contended, on the basis of these documents, that even though it has followed the cash basis of accounting in respect of the excise duty rebate and also received the amounts during the previous year relevant to the assessment year 1985-86, the amount did not represent income at all and till the dispute between the assessee and the excise department regarding the rebate is finally settled the amount received by it under the interim orders could not be stated to partake the character of income in its hands. It was also pointed out before the CIT(Appeals), as was done before the Assessing Officer, that the writ petitions filed by the assessee before the Hon'ble Calcutta High Court challenging the notifications dated 21-4-1982, 11-6-1982 and 30-4-1983 were transferred to the Supreme Court of India to be heard along with the Special Leave Petition filed by the Union of India against the judgment of the Punjab Haryana High Court in SLP No. 854 of 1978 dated February 12, 1981, involving the same iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue, namely, whether the larger rebate claimed by the assessee is at all allowable to it under the relevant notifications. He was of the considered opinion that till the decision of the Supreme Court on the proper interpretation of the notifications became available it was not correct to treat the receipt as income, since, according to him, the amount merely represented an advance drawn by the assessee under the interim orders of the Hon'ble High Court and even though the assessee followed the cash system of accounting, the receipt of money by way of advance did not constitute income in the hands of the assessee. In this view of the matter, the CIT(Appeals) held that the rebate of Rs. 26,13,819 was not the income of the assessee for the assessment year 1985-86. 13. It has to be mentioned here that in the course of the appellate order, the CIT(Appeals) had also referred to the decision of the Supreme Court in the case of Hindustan Housing Land Development Trust Ltd. He has also referred to a decision of his own in the case of Gobindaram Sugar Mills Ltd. for the assessment year 1985-86 (Order dated 19-7-1988) in which case also he appears to have taken the same view. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifications issued by the Government of India. So long as there was no adjudication of the rights of the parties, Mr. Bajoria contended, the assessee was not entitled to excise duty rebate as a matter of right and that the right to receive the excise duty rebate did not accrue to the assessee. He elaborated his contention by pointing out the fact that it was only pursuant to the interim orders passed by the Hon'ble Calcutta High Court that the assessee was allowed to withdraw the excise duty rebate, that too on furnishing bank guarantee for a like amount, and that under these circumstances it can only be said that the assessee had received an advance of the excise duty rebate. He stated that if ultimately the assessee was to lose the dispute, the entire rebate obtained by it by credit to the personal ledger account has to be foregone. His contention was that since the right to the excise duty rebate itself was not accepted by the excise department, there was no accrual of any income and the receipt during the year of account was merely in the nature of an advance to be adjusted later. The learned counsel for the assessee drew our attention to the decision of the Supreme Courtin Hind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government had no authority to lay down or specify the mode or manner of exemption in such a way that would be discriminatory and that the Government was bound to recognise the years where production was ' nil ' even in cases falling within para 3 of the notification (No. 132/21-4-1982) as has been recognised by the Government itself in para 4 of the said notification. It is also seen from the correspondence exchanged between the assessee and the excise department that the excise department did not accept the basis of computing the production of sugar during the base period. As stated earlier, it was the case of the assessee in the Writ petitions that the notifications themselves recognised the distinction between the years where production is nil and the years where there was some production. When the very basis of the notifications was questioned by the asscssee and resisted by the excise department we find it difficult to accept the submission made by the learned departmental representative Shri Biswas that there was no substantive dispute between the assessee and the excise department and that the dispute is really one of quantification only. 17. The Special Bench of ITAT, P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in CIT v. Hindusthan Housing Land Development Trust Ltd. [1977] 108 ITR 380. This was a case dealing with compulsory acquisition of land. Certain lands belonging to the company were compulsory acquired by the State Government. The Land Acquisition Officer awarded a particular sum as compensation. The award was enhanced by the Arbitrator on appeal by the company. Thereafter, the State Government preferred an appeal to the High Court against the enhancement made by the Arbitrator. Pending the appeal, the State Government was directed to deposit in the Court the additional compensation of Rs. 7,36,691. The company was permitted to withdraw the amount upon the condition that it should furnish a Security bond for refunding the amount in the event of appeal of the State Government being allowed. The Company received the amount after furnishing a bank guarantee and credited the same to the Suspense Account. The question was whether the amount was taxable in its hands as income. The Calcutta High Court while disposing of the matter at the instance of the Commissioner of Income-tax and while dealing with the assessee's claim that the enhanced compensation withdrawn by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to receive payment is in dispute and it is not a question of merely quantifying the amount to be received and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles. Mr. Biswas, learned departmental representative, sought to distinguish the decision of the Supreme Court in Hindustan Housing Land Development Trust Ltd.'s case by saying that it dealt with the case of compensation payable on acquisition of land and that the principle laid down therein would not apply to the present case. We fail to see any distinction in principle. The Supreme Court held that it was only when a dispute is finally adjudicated upon that the rights of parties can be said to have crystallised. Only then income can be said to arise or accrue. It follows that any payment made under interim orders of the Court or the Tribunal can only be received as money or advance, subject to the condition that it should be refunded or returned if the recipient's claim is not ultimately upheld by the Court or Tribunal. The observations of the Supreme Court, in our view, are wide enough to cover cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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