THE COMMISSIONER OF I.T. . vs. SUNRISE SOAPS & CHEMICALS P LTD,C/O J.C.RANPURA & CO., C.A.

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.By way of this reference, the following question is raised for consideration before this Court :- “Whether the Appellate Tribunal is right in law and on facts in holding that an amount of Rs.7,40,066/- being the differential excise duty was allowable in the year under consideration?” 2.The case in brief which give rise to this Reference are that :- The assessee is a private ltd. company manufacturing hair oil and different types of soaps. For the assessment year 1984 – 1985, the company filed its return of income on 19.05.1984 showing losses. The ITO found a mention of Central Excise Duty Difference and the company was asked to justify its claim. The company explained that they were manufacturing soaps falling under Central Excise Tariff Item No.15 and held license under the licensing control of Superintendent of Central Excise, A.R. Wankaner. The soap under brand name 'Yuva' was classified under toilet soap under tariff item No.15A(1) which was being cleared on payment of duty @ 5% advalorem. However, the Superintendent of Central Excise by various show cause notices informed that the duties paid under the brand name 'Yuva' were short paid and this short payment was recoverable from the company u/s. 11A of the Central Excise and Salt Act,1944. In response the Company approached the Assistant Collector, Central Excise, Yagnik Road, Rajkot and stressed that 'Yuva' was a toilet soap, which was not accepted and rejected the objections against the show cause notices. Two appeals were preferred before the Collector of Central Excise (Appeals) which were dismissed based on the findings of the test result by the Chemicals Examiner. The Excise Department raised demand for differential excise duty against the company for the period from May 1981 to August 1982. Thereafter, the company approached this Court by way of Special Civil Application No.5458/1985, wherein Rule issued by this Court was extended from 15.03.1986 and later by subsequent order 27.11.1986. In compliance of the order, the company also furnished security and also paid 50% of the disputed differential excise duty. However the ITO claimed that the claim did not pertain to the sale of the said excisable article in the year under consideration and payment of the differential excise duty was disputed by the assessee. Therefore, he disallowed differential excise duty as not being a charge on current years profits. Thereafter, an Appeal was made before the CIT (A), Rajkot wherein the assessee tried to justify its claim. However CIT(A) held that since the matter was pending with this Court and the final decision as to whether the amount of excise duty under tariff item No.15(2) was leviable or not on company's product 'Yuva' was still being awaited, it could not be said that the liability had crystallized during the Assessment Year : 1984-1985 and CIT(A) rejected the assessee's appeal. When the matter came up before the Tribunal in second Appeal, the assessee relying on various decisions submitted that the liability of the assessee was independent of assessment and that the excise duty liability in question had crystallized much earlier. The Tribunal found that the facts of the two cases were quite identical and therefore, the view taken by the Tribunal in the case of Susan

Textiles

Bearing

Ltd.

(ITA No.1069/Ahd/88) should govern the issue. The Tribunal held that the assessee company was entitled to allowance of the differential excise duty liability in the year under consideration. And hence, this Income Tax Reference.

in October,

1979, providing that coated paper would be liable to be classified under tariff item No.172(2). The obligation under law to pay the excise duty arose at that stage. Raising of the dispute by the assessee by filing writ petition for quashing or deduction of the said liability would not be a ground for holding that liability to pay the excise duty as per the demand notice was not incurred. In this view of the matter, the High Court rightly rejected the application filed by the Revenue for raising and referring the questions whether the amount was deductible.” 4.On the other hand, learned Counsel appearing for the respondent has contended that no interference is called for by this Court in view of the concurrent findings. 5.In light of the above facts and considering the submissions canvassed, it is necessary to reproduce the relevant part of the order of the Income Tax Appellate Tribunal which reads as under :- “9. Looking to all the relevant facts and circumstances of the case attending on the claim of the assessee company, we are clearly of the opinion that the differential excise duty liability was allowable in the year under consideration, we hold accordingly and direct the authorities concerned to allow the same to the assessee in this year. Part payment, if any, made and allowed as deduction in subsequent year(s) would reduce company's claim this year to that extent.