The ACIT, Baroda Circle-4, Baroda v. M/S Transpek Indus Ltd, Baroda

ITA 545/AHD/2002 | 1997-1998
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 54520514 RSA 2002
Bench Ahmedabad
Appeal Number ITA 545/AHD/2002
Duration Of Justice 9 year(s) 4 month(s) 12 day(s)
Appellant The ACIT, Baroda Circle-4, Baroda
Respondent M/S Transpek Indus Ltd, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 16-02-2010
Date Of Final Hearing 12-07-2011
Next Hearing Date 12-07-2011
Assessment Year 1997-1998
Appeal Filed On 11-03-2002
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT JUDICIAL MEMBER) ITA NO.545/AHD/2002 [ASSTT. YEAR : 1997-98] ACIT BARODA CIR.4 BARODA. VS. TRANSPEK INDUSTRY LTD. KALALI ROAD ATLADARA VADODARA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RABINDRA KUMAR ASSESSEE BY : SHRI SANJAY R. SHAH O R D E R PER G.D. AGARWAL VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-III BARODA DATED 5.12.2011 ARISING OUT O F THE ORDER OF THE AO UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. THIS APPEAL WAS DECIDED BY THE ITAT VIDE ORDER D ATED 16-2-2010. THEREAFTER VIDE MA NO.208/AHD/2010 THE ABOVE ORDE R WAS PARTLY RECALLED FOR THE LIMITED PURPOSE OF ADJUDICATING GR OUND NO.1(A) AND (B) OF THE REVENUES APPEAL WHICH REMAINED UNDECIDED IN TH E ORDER DATED 16-2- 2010. THEREFORE THE APPEAL WAS RE-FIXED FOR ADJUD ICATING GROUND NO.1(A) AND (B) OF THE REVENUES APPEAL WHICH READ S AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) ERRED ON THE FOLLOWING DIRECTIONS: (A) TO DELETE ADDITION OF RS.420 000/- ON ACCOUNT O F EXCISE DUTY PAYABLE ON THE CLOSING STOCK OF THE FINISHED G OODS; (B) TO EXCLUDE SALES AND EXCISE DUTY FROM THE TURNO VER FOR THE PURPOSE OF WORKING OUT DEDUCTION UNDER SECTION 80HHC OF THE IT ACT. ITA NO.545/AHD/2002 -2- 3. WE HAVE HEAD BOTH THE PARTIES AND PERUSED THE MA TERIAL PLACED BEFORE US. WE FIND THAT GROUND NO.1(A) I.E. WITH R EGARD TO DELETION OF ADDITION OF RS.4 20 000/- ON ACCOUNT OF EXCISE DUTY PAYABLE ON THE CLOSING STOCK OF FINISHED GOODS IS COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF THE ITAT IN THE CASE OF NITROCHEM INDIA P. LTD. VS. ACIT IN ITA NO.2737 AND 2738/AHD/2009 AND OTHERS DATED 8-7- 2011. IN THIS CASE THE ITAT HELD AS UNDER: 11. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. W E FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS CONSIDERED TH E IDENTICAL ISSUE IN THE CASE OF NARMADA CHEMATUR PETROCHEMICAL S LTD. (SUPRA) AND HELD AS UNDER: ONE READS S. 3(1) OF THE EXCISE ACT IN ISOLATION IT APPEARS TO INDICATE THAT THE CHARGE IS LEVIED IN S 3 AND TH E LIABILITY STANDS INCURRED UPON MANUFACTURE OF EXCISABLE GOODS AT THE RATES SET OUT IN FIRST SCHEDULE TO THE CENTRAL EXCI SE TARIFF ACT 1985. HOWEVER THOUGH THE OPENING PORTION OF S UBS. (1) STATES THAT THERE SHALL BE LEVIED AND COLLECTED TH ERE IS NO OTHER PROVISION FOR COLLECTION IN THE SAID SECTION AND THE MANNER OF COLLECTION AS WELL AS LEVY ARE FOUND IN T HE RULES AS PRESCRIBED. IT MAY INDICATE THAT S. 4 WOULD BE A ST ANDALONE PROVISION BUT WHEN ONE READS THE SAID PROVISION IT BECOMES CLEAR THAT THE LEVY IS INCOMPLETE IN AS MUCH AS TH E ASSESSEE UNDER THE EXCISE ACT IS NOT REQUIRED TO DISCHARGE T HE LIABILITY TO PAY DUTY LEVIED UPON THE MANUFACTURE OF EXCISABL E GOODS TILL SUCH GOODS ARE REMOVED FROM THE FACTORY PREMIS ES OR A BONDED WAREHOUSE. THE TEST TO DETERMINE AS TO WHETH ER THE LIABILITY HAD BEEN INCURRED OR NOT WOULD BE AS TO W HETHER A CORRESPONDING RIGHT IS AVAILABLE WITH THE EXCISE AU THORITY TO ENFORCE SUCH A LIABILITY. MERE PRODUCTION OR MANUFA CTURE BY ITSELF WOULD NOT BE SUFFICIENT. THOUGH THERE MIGHT BE LEVY UNDER S. 3 OF THE EXCISE ACT YET NEITHER THE RATE NOR THE VALUE WOULD BE DETERMINABLE TILL THE POINT OF TIME OF REM OVAL OF THE EXCISABLE GOODS FROM THE FACTORY PREMISES AND HENCE THE SCHEME ITSELF INDICATES THAT SO FAR AS AN ASSESSEE IS ITA NO.545/AHD/2002 -3- CONCERNED HE INCURS LIABILITY TO PAY EXCISE DUTY O NLY UPON BOTH THE EVENTS TAKING PLACE NAMELY MANUFACTURE OF EXCISABLE GOODS AND REMOVAL OF EXCISABLE GOODS. THI S POSITION HAS TO BE NECESSARILY ADOPTED CONSIDERING THAT THE DUTY OF CENTRAL EXCISE IS LEVIED AND COLLECTED ON A N AD VALOREM BASIS. IN OTHER WORDS UNLESS AND UNTIL THE VALUE IS KNOWN THE LEVY AND THE COLLECTION WOULD NOT BE COR RECT AND VALID. THE DUTY IS LEVIABLE AND IS ACTUALLY IMPOSED ON THE TRANSACTION VALUE DEFINED IN SUB-S. (3)(D) OF S. 4 OF THE EXCISE ACT. IN THESE CIRCUMSTANCES IT IS NOT POSSIBLE TO STATE THAT UNDER THE EXCISE ACT THE DUTY HAS BECOME DUE AND P AYABLE ONLY BY OPERATION OF S. 3 SIMPLICITER. IF S. 3 OF E XCISE ACT IS CONSIDERED TO BE THE ONLY CHARGING SECTION AND S. 4 OF THE EXCISE ACT IS CONSIDERED AS ONLY A PROVISION FOR AS SESSMENT THE CHARGE LEVIED BY S. 3 OF THE EXCISE ACT CANNOT BE BROUGHT HOME. SECS. 3 AND 4 HAVE TO BE READ TOGETHER TO BRI NG THE CHARGE HOME. THE CHARGE IS PARTIALLY EMBEDDED IN BO TH THE PROVISIONS. IT IS IN THIS CONTEXT THAT ONE FINDS VA RIOUS JUDGMENTS IN RELATION TO DISPUTES RAISED ON THE BAS IS OF A PARTICULAR CUT-OFF DATE SAY 28TH FEBRUARY OR 1ST M ARCH QUA THE GOODS ALREADY MANUFACTURED AND LYING IN STOCK U PTO 28TH FEBRUARY WHICH BECOME AMENABLE TO DUTY OF CENTRAL E XCISE ONLY UPON THE POINT OF TIME OF REMOVAL NAMELY AFT ER 1ST MARCH. THEREFORE TO READ PROVISIONS OF S. 3 OF THE EXCISE ACT TO BE A COMPLETE PROVISION FOR THE PURPOSES OF CHAR GING DUTY OF CENTRAL EXCISE WOULD NOT BE A FULLY CORRECT PROP OSITION OF LAW. UNDER A TAXING STATUTE WHEN A CHARGE IS FASTEN ED THE PURPOSE IS TO COLLECT TAX. A LEVY IS FOR THE PURPOS ES OF IMPOSING A TAX OR A DUTY BY WHATEVER NAME CALLED AND FOR THE PURPOSES OF COLLECTION OF SUCH IMPOST. A STATE CANNOT BE INTERESTED IN A LEVY WHICH DOES NOT RESULT IN INFLO W OF REVENUE TO THE EXCHEQUER. THE POSITION IN LAW IS T HEREFORE THAT FOR THE PURPOSES OF LEVY AND COLLECTION OF DUT Y OF CENTRAL EXCISE THE PROVISIONS OF EXCISE ACT READ WITH RULE S THEREUNDER EVOLVE A SELF-CONTAINED SCHEME UPON A CO NJOINT READING OF SS. 3 AND 4 OF THE EXCISE ACT WITH RR. 9 AND 9A OF THE CENTRAL EXCISE RULES. THEN FOR THE PURPOSES OF THE ACT NAMELY IT ACT THE POSITION IN LAW CANNOT BE DIFFE RENT. AN INTERPRETATION OF A PARTICULAR STATUTE SHOULD NOT O RDINARILY BE IN CONFLICT WITH ANOTHER STATUTE UNLESS AND UNTIL S PECIFICALLY PROVIDED SO BY THE OTHER STATUTE. THE ACT DOES NOT PROVIDE ITA NO.545/AHD/2002 -4- FOR ANY CONTRARY INTERPRETATION I.E. WHAT IS CONT RARY TO THE POSITION PREVAILING UNDER THE EXCISE LAW. THE POINT OF TIME OF REMOVAL OF EXCISABLE GOODS IS THE POINT OF TIME WHE N THE LIABILITY TO PAY CENTRAL EXCISE DUTY IS INCURRED RE SULTING IN CORRESPONDING RIGHT UNDER LAW IN THE EXCISE DEPARTM ENT TO TAKE STEPS TO EFFECT RECOVERY IF THE LIABILITY IS N OT DISCHARGED. TILL THAT POINT OF TIME LIABILITY TO PAY DUTY OF CE NTRAL EXCISE CANNOT BE STATED TO HAVE BEEN INCURRED IN LAW AS TH E SAME IS NOT DUE AND PAYABLE. ON BEHALF OF THE REVENUE RELIANCE HAS ALSO BEEN PLA CED ON PROVISIONS OF S. 145A WHICH HAS BEEN INSERTED BY FI NANCE (NO. 2) ACT 1998 W.E.F. 1ST APRIL 1999. THE ASSE SSMENT YEAR BEING 1997-98 THE SAID PROVISION CANNOT BE INVOKED. THOUGH THE BILL PROPOSED RETROSPECTIVE INSERTION ULTIMATEL Y THE SECTION HAS COME ON THE STATUTE BOOK ONLY FROM 1ST APRIL 1999. WHAT IS MORE MATERIAL IS THAT THE SAME RELATE S TO INCLUSION IN THE VALUE OF INVENTORY THE AMOUNT OF A NY TAX DUTY ETC. PAID OR LIABILITY INCURRED FOR THE SAME U NDER ANY LAW IN FORCE. MEANING THEREBY SUCH TAX DUTY ETC. SHOULD HAVE BEEN ACTUALLY PAID OR SHOULD BE ACTUALLY DUE A ND PAYABLE UNDER THE LAW APPLICABLE TO SUCH TAX DUTY ETC. IN FORCE. OTHERWISE EVEN S. 145A WILL ALSO NOT CARRY C ASE OF REVENUE ANY FURTHER. THE TRIBUNAL WAS THEREFORE JUS TIFIED IN LAW IN EXCLUDING THE EXCISE DUTY AT THE TIME OF VAL UATION OF THE CLOSING STOCK OF FINISHED GOODS AT THE END OF T HE ACCOUNTING PERIOD. FROM THE ABOVE IT IS EVIDENT THAT THEIR LORDSHIPS HAVE EXAMINED THE LIABILITY OF THE ASSESSEE TO THE EXCISE DUTY AN D HAVE ARRIVED AT THE CONCLUSION THAT THE LIABILITY OF EXCISE DUTY IS INCURRED ONLY WHEN TWO EVENTS TAKES PLACE VIZ. MANUFACTURER OF EXCISA BLE GOODS AND ALSO REMOVAL OF EXCISABLE GOODS. THEIR LORDSHIPS HA VE ALSO EXAMINED THE SECTION 145A AND HAVE HELD THAT THE SE CTION 145A WILL BE APPLICABLE FROM A.Y.1999-2000 AND HAS ALSO EXAMINED UNDER WHAT CIRCUMSTANCES SECTION 145A WOULD BE APPL ICABLE. THEIR LORDSHIPS HELD THAT THE SECTION 145A WOULD BE APPLICABLE WHEN THE LIABILITY OF THE TAX OR DUTY IS ACTUALLY P AID OR ACTUALLY DUE AND PAYABLE AS PER THE LAW. HOWEVER SINCE THE LIA BILITY OF EXCISE DUTY IS DUE AND PAYABLE ONLY UPON THE REMOVAL OF TH E EXCISABLE GOODS NO LIABILITY IS INCURRED BY THE ASSESSEE DUR ING THE YEAR ITA NO.545/AHD/2002 -5- UNDER CONSIDERATION WITH REGARD TO CLOSING STOCK. SINCE NO LIABILITY IS INCURRED BY THE ASSESSEE THE SAME CANNOT BE INC LUDED IN THE VALUATION OF THE CLOSING STOCK EVEN AFTER THE APPLI CABILITY OF SECTION 145A. THE FACTS BEING IDENTICAL THE RATIO OF THE ABOVE D ECISION WOULD BE SQUARELY APPLICABLE TO THE CASE UNDER APPEAL BEFORE US. IN VIEW OF THE ABOVE WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ACIT VS. N ARMADA CHEMATUR PETROCHEMICALS LTD. 327 ITR 369 AND THE DECISION O F THE ITAT IN THE CASE OF NITROCHEM INDIA P. LTD. (SUPRA) UPHOLD THE ORDER OF THE CIT(A) ON THIS POINT AND REJECT GROUND NO.1(A) OF THE REVE NUES APPEAL. 4. THE GROUND NO.1(B) OF THE REVENUES APPEAL IS AL SO COVERED AGAINST THE REVENUE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. LAKSHMI MACHINE WORKS 290 ITR 667 (SC) WHEREIN THEIR LORDSHIPS HELD AS UNDER: THE PRINCIPAL REASON FOR ENACTING A FORMULA IN SECT ION 80HHC OF THE INCOME-TAX ACT 1961 IS TO DISALLOW A PART OF THE CONCESSION THEREUNDER WHEN THE ENTIRE DEDUCTION CLAIMED CANNOT BE REGARDED AS RELATING TO EXPORTS. THEREFORE WHILE INTERPRETI NG THE WORDS TOTAL TURNOVER IN THE FORMULA IN SECTION 80HHC ON E HAS TO GIVE A SCHEMATIC INTERPRETATION. THE VARIOUS AMENDMENTS MA DE THEREIN SHOW THAT RECEIPTS BY WAY OF BROKERAGE COMMISSION INTEREST RENT ETC. DO NOT FORM PART OF BUSINESS PROFITS AS THEY HAVE NO NEXUS WITH THE ACTIVITY OF EXPORT. THE AMENDMENTS MADE FROM TI ME TO TIME INDICATE THAT THEY BECAME NECESSARY IN ORDER TO MAK E THE FORMULA WORKABLE. IF SO EXCISE DUTY AND SALES TAX ALSO CAN NOT FORM PART OF THE TOTAL TURNOVER UNDER SECTION 80HHC(3) : OTHER WISE THE FORMULA BECOMES UNWORKABLE. ITA NO.545/AHD/2002 -6- WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE APEX COURT UPHOLD THE ORDER OF THE CIT(A) ON THIS POINT AND RE JECT GROUND NO.1(B) OF THE REVENUES APPEAL. 5. IN THE RESULT GROUND NO.1(A) AND 1(B) OF THE RE VENUES APPEAL ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND JULY 2011 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 22-07-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD