- (1.) CHANDIGARH (for short, 'the Tribunal'), in ITA No. 375/Chd/1999, raising the following substantial questions of law : "(i) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that Central excise duty component could not be included in the value of closing stock ? (ii) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that for the purpose of calculation of deduction under s. 80HHC of the IT Act, 1961, sales -tax and excise duty component cannot be included in the total turnover -
(2.) AS far as question No. (i) is concerned, the Tribunal, while rejecting the appeal of the Revenue, against the order passed by the CIT(A), relied upon the order passed by it for the earlier year in the case of the assessee, wherein it was held as under : "Similar issue had come up before the Tribunal in assessee's own case for asst. yrs. 1991 -92 to 1995 -96 and the same of the order of the Tribunal in ITA No. 462/Chd/1995 is reproduced below : "9. Coming to ground No. 5, the Dy. CIT has dealt with the issue in para 8 of the assessment order, which mentions that contention that the excise duty does not form part of the cost of goods where the goods have been manufactured but have not been cleared for excise, was not accepted by Dy. CIT. It was observed by him that the liability for payment of excise duty accrues on completion of production but collection of the same is postponed to the date of removal of the goods. Before learned chartered accountant (sic), it was submitted that the assessee has been consistently valuing inventory at cost. Other contentions put forth by the assessee have been recorded in paras 6.2 to 6.5 of the impugned order and learned CIT(A) ultimately deleted the addition. Learned Departmental Representative relied on the order of the Dy. CIT and submitted that the case law cited before learned CIT(A) stands overruled in CIT vs. British Paints India Ltd. (1991) 91 CTR (SC) 108 : (1991) 188 ITR 44 (SC) and it was urged for restoration of AO's order. Learned counsel, on the other hand, submitted that since this excise duty amount was added by the Dy. CIT in valuing closing stock and added, it cannot form part of the closing stock, as it has not been expended during the year under consideration and thus cannot form part of valuing closing stock. Reliance was placed on ITO vs. Food Specialities Ltd. (1994) 48 TTJ (Del) (SB) 621 : (1994) 49 ITD 21 (Del)(SB) and it was urged that learned CIT(A) has rightly deleted the addition. In view of the facts and circumstances of the case, we uphold the order of learned CIT(A) on the point for the reasons given therein and find no merit in the ground of the Revenue, which fails."
(3.) FURTHER , while dealing with an issue involving Modvat credit on unconsumed material, Hon'ble the Supreme Court in CIT vs. Indo Nippon Chemicals Co. Ltd. (2003) 182 CTR (SC) 291 : (2003) 261 ITR 275 (SC) held that merely because the Modvat credit was an irreversible credit available to manufacturers upon purchase of duty paid raw material, that would not amount to income which was liable to be taxed under the Act; income was not generated to the extent of the Modvat credit on unconsumed raw material. It cannot be disputed that excise duty is to be paid to the State and the same is not a kind of profit in the hands of the assessee. Accordingly, while accepting the findings of the Tribunal, the issue is decided against the Revenue.;