T. J. Joice, A.M. - (1.) THESE appeals by the department are directed against the order of the Commissioner (Appeals) dated 28-12-1993 for the assessment years 1986-87 and 1987-88. As the grounds of appeals are similar both the appeals are being disposed of by this common order for the sake of convenience.
(2.) The point in dispute for both the years is regarding the disallowance made by the assessing officer under section 43B which was deleted by the Commissioner (Appeals). The amounts involved are Rs. 58,75,999 for assessment year 1987-88 and Rs. 44,58,378 for assessment year 1986-87. The assessee-firm is a processing house carrying on the business of dyeing and printing of cloths of merchants entirely on job work basis. It is not processing the cloth of its own. The grey cloth is supplied by the merchants i.e., owners of the cloth and after dyeing and printing it is returned to the respective merchants for which labour charges are recovered. In the process Excise Duty is leviable. It collects the Excise Duty from the merchants on the cloth processed for them by way of a separate debit note and the same is debited to excise account of merchant in separate ledger kept for the purpose. For the sake of convenience the assessee-firm deposits certain amount with the excise department as advance and as and when the cloth is cleared, the said advance is adjusted against the Excise Duty payable in respect of the cloth cleared. The assessee-firm has kept separate excise account of each merchant. The Excise Duty paid is debited and the Excise Duty recovered from the merchants is credited to that account. The assessee-firm is not showing the receipt in the trading account nor is claiming Excise Duty paid to the excise department as an expenditure. Whatever balance remained unpaid at the end of the year is shown in the balance-sheet. The assessee-firm has shown the unpaid Excise Duty collected from the merchant owners in the balance-sheet under the head "Deposit against differential Excise Duty". The Central Excise Department is charging Excise Duty on selling price of the cloth printed by the assessee for the merchants. The assessee-firm disputed this mode of charging the Central Excise Duty as according to it duty should have been charged only on the value of the job work done by the assessee-firm and not on the ultimate sale price of the cloth. However, the assessee-firm continued to collect the Excise Duty from the merchants on the full value of the cloth and the job charges. The assessee-firm with other processors ultimately went to the Supreme Court which granted stay under which the officers of the Excise Department have been restrained from levying and recovering the disputed, portion of the duty on the condition that the assessee firm should furnish bank guarantee of equivalent amount to the excise department. In order to secure the bank guarantee, the assessee had to deposit the equivalent amount with the bank in fixed deposit. The position regarding the collecting of Excise Duty, fixed deposits with the bank and furnishing of the bank guarantee is shown as under : judgement_1467_tlit0_19990.htm The assessee-firm put differential Excise Duty collected in the fixed deposits with the bank and furnished the bank guarantee within the time prescribed by the Hon'ble Supreme Court i.e., within four weeks of each clearance. Disputed unpaid Excise Duty has been shown by the assessee in the liabilities side of the balance-sheet under the head sundry creditors, the details of which have been given in schedule 'C' to the balance-sheet. The amount has been shown under the head deposit against differential Excise Duty. It has been pointed out that the amount of fixed deposits has been reflected in the balance-sheet in the assets side. It has been further submitted by the assessee that ultimately after the decision of Supreme Court, the excise department encashed the bank guarantee and realised the amount against the deposits after encashing the fixed deposits as under : judgement_1467_tlit0_19991.htm 4. The assessing officer considered the Excise Duty collection as part of the trading receipts of the assessee by applying the following case laws: 1. Chowringhee Sales Bureau (P) Ltd. v. CIT (1973) 87 ITR 542 (SC). 2. CIT v. Saraswati Industrial Syndicate Ltd. (1973) 91 ITR 501 (Punj). 3. P. Krishna Rao v. CIT (1978) 112 ITR 26 (AP).
(3.) DECCAN Hides & Skins Co. v. CIT (1983) 142 ITR 175 (Bom).;