Ita/16/2012 Of Commissioner Of Income Tax-Iii v. M/S Spr Group Holdings

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 1/ DAY OF AUGUST 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD ILT.A. NO.16 OF 2012 BE!TVW E 1.|COMMISSIONER OF INCOME-TAX-III CENTRAL REVENUE BUILDINGS, QUEENS ROAD BANGALORE - 560 OO1. 2.|THE COMMISSIONER OF INCOME TAX. CENTRAL BANGALORE ... APPELLANTS (By Sri.E.I.LSANMATHI, ADV.,) AND: M/S SPR GROUP HOLDINGSPVT. LTD.,.34/2, 5 MALN|GANDHINAGARBANGALORE - 560 OO9. .. RESPONDENT (By Sri.V.CHANDRASHEKAR, ADV.AND SRI.M.LAVA, ADV.) | THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT OF ORDER DATED 12.08.2011 PASSED IN [TA| NO.569/BANG/2003 FOR THE ASSESSMENT YEAR 1999-00,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO:(1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN.» (1) SET ASIDE THE APPELLATE ORDER DATED 12.08.2011.PASSED BY THE ITAT, ‘A. BENCH, BANGALORE IN _ APPEAPROCEEDINGS ITA NO.569/BANG/2003 AS SOUGHT FOR IN THIS|APPEAL, IN THE INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax|Act, 1961 (hereinafter referred to as the Act for short)Nas been preferred by the revenue. Tne subject matter of the appeal pertains to the Assessment year 1999-00.The appeal was admitted by a bench of this Court videorder dated 02.04.2012 on the following substantialquestion of law: (I)Whether on the facts and jin thecircumstances of the case, the tribunal|is justified in holding that as perprovisions of Section 145A tne value of|closing stock need not be increased by|State excise duty as Excise duty was)neitherpaidNOTincurredwithout appreciating the law that the goodsbecamedutiableOP)theday|Of|manufacturingandtheliability, therefore, stand incurred on that day|and consequently the value of closingstock should have been increased by|the amount of liability incurred? 2 |Facts giving rise to filing of this appeal brieflystated are that the assessee is a private limitedcompany engaged in the business of manufacture ofIndian Made Foreign Liquor (IMFL). The assessee filedreturn of income for the Assessment year 1999-2000|declaring.thetotal.incomeON|31.12.1999,ofRs.3.85,12,715/-, wherein value of closing stock offinished goods did not include the excise duty leviable atthe time of their removal from the premises of therespondent. The assessment for Assessment year1999-00 was completed under Section 143(3) of the Actaccepting the valuation of the closing stock of thefinished goods. Subsequently, Commissioner of Income Tax (Appeals) on account of revenue audit of objectionsordered revision of the assessment by passing an orderunder Section 263 of the Act on 28.08.2003 directingthe Assessing Officer to reframe the assessment after|including the value of excise duty on the finished goodsin the value of closing stock of finished goods and alsoapply the provisions of Section 43B of the Act. TheAssessing Officer after complying with the directions,passed an order on 30.03.2004. 3.The respondent preferred an appeal to theIncome Tax Appellate Tribunal (hereinafter referred toas the Tribunal’, for short). The Tribunal by an orderdated 12.08.2011 held that excise duty payable ongoods manufactured but not removed and shown asclosing stock of finished goods need not be part offinished goods valuation. Tne aforesaid order wassubject matter of challenge before this court in I.T.ANo.103/2006. A bench of this court by an order dated.22.11.2010 inter alia neld that Tribunal nas not taken 3.The respondent preferred an appeal to theIncome Tax Appellate Tribunal (hereinafter referred toas the Tribunal’, for short). The Tribunal by an orderdated 12.08.2011 held that excise duty payable ongoods manufactured but not removed and shown asclosing stock of finished goods need not be part offinished goods valuation. Tne aforesaid order wassubject matter of challenge before this court in I.T.ANo.103/2006. A bench of this court by an order dated.22.11.2010 inter alia neld that Tribunal nas not taken into consideration the method of accounting underSection 145A, which came into force with effect from01.04.1999. The matter was therefore, remitted for.decision afresh with reference to Section 145A of theAct. The Tribunal by an order dated 12.08.2011IInter|aliaby placing reliance on decision of the Supreme.Court In)‘COMMISSIONER OF CENTRAL EXCISE VS,POLYSET CORPORATION AND ANOTHER’, 115 ELT41 (SC)held that till date of clearance of goods, excise|duty payable on such goods does not get crystallizedand assessee cannot be said to have incurred theexcise duty liability. Thus, it was held that in respect ofthe excise goods not being removed, no liability isaccrued and there is no question of payment of exciseduty. Being aggrieved, the revenue is in appeal beforeUS. 4Learned counsel for the revenue submittedthat the Tribunal ought to have appreciated that theliability to pay excise duty accrues as soon as goods are manufactured and not on its transportation as incidenceof taxation is manufacture of goods. On the other hand,learned counsel for the assessee has invited theattention of this court to Section 145A of the Act as wellas Section 16(3) of the Karnataka State Excise Act,1965 and has submitted that assessee’s liability to payduty on the goods manufactured arises only at the timeof removal of the same. It Is further submitted that theaforesaid issue is no longerres integraand has been.answered in favour of assessee by the Supreme Court in)COLLECTOR OF CENTRAL EXCISE VS, POLYSETCORPORATIONSUPRAAND|‘WALLACEFLOURMILLS COMPANY LTD., VS. COMMISSIONER OFCENTRAL EXCISE’, (1989) 4 SCC 592 5.|We have considered the submissions madeby learned counsel for the parties and have perused therecord. The question which arises for consideration inthis appeal is whether liability to pay excise duty isincurred immediately n manufacture of liquor or it arises only when the same is sought to be removed from thepremises of the manufacturer, either for the purposes ofsale or otherwise. Section 16(3) of the Karnataka StateExcise Act, 1965 reads as under: “Without the sanction of the StateGovernment no I[ntoxicants shall be removedfrom any distillery, brewery, warehouse orother place of storage established or licensedunder this Act, unless the duty, if any,imposed under this Act has been paid or abond has been executed for the payment.thereof. ” 6.|Thus, it is evident that assessee’s liability topay duty on the goods manufactured arises only at the.time of removal of the same from its premises, be itdistillery, or a warenouse or any other place of storageestablished or licensed under the Karnataka State Excise|Act and not at any time earlier. The aforesaid issue is nolonger|res integrain view of decisions of Supreme Courtin Polyset Corporation supra and Wallace Flour Mills Co. Ltd. The same view has been reiterated in|‘MARUTISUZUKI (INDIA) LIMITED VS. COMMISSIONER OFINCOME TAX, DELHI’, (2020) 3 SCC 718.Theaforesaid legal position has also been reiterated byvarious high courts in)‘CIT VS. LOKNETE BALASAHEBDESAI SSK LTD.’, 339 ITR 288 (BOMBAY), ‘CIT VS.RAJASTHAN STATE GANGANAGAR SUGAR MILLS.LTD’, 392 ITR 421 (RAJ), ‘ACIT VS. NARMADACHEMATURE PETROCHEMICALS LTD’, 327 ITR 369(GUJ)and‘ACIT VS. D & H SECHERON ELECTRODESP. LTD’, 173 TAXMAN 188 (MP). In view of preceding analysis, the substantial|question of law framed is answered against the revenue.and in favour of the assessee. In the result, the appeal fails and is hereby dismissed. Sd/- JUDGE. Sd/-JUDGE.