These are cross-appeals by assessee and by Department for same assessment. In appeal by assessee, firm issue is regarding claim of extra-shift allowance of Rs. 2,06,677 and another claim of Rs. 38,376 which has been treated as entertainment expenses by authorities below. In respect of first issue, plea of assessee before us was that extra shift allowance has to be provided for on basis of extra shift run by concerns and not on basis of working of each of machines. authorities below have confirmed disallowance on basis that extra- shift has to be related to each machine's working. ld. departmental representative was of view that extra shift has to be allowed on basis of each machine's working. On this issue, in view of specific provisions in IT Rules, which provides for manner of calculation of extra shift, working clearly provides that it shall be made separately in proportion which number of days for which concern worked double or triple shift as case may be. Therefore, claim of assessee is fully justified, which we allow. On second issue, assessee referred to order of ITO and submitted that expenses that were included under misc. expenses were: (a) Incurred on Inspectors of buyers for lodging and boarding. (b) Present of articles to customers of value of more than Rs. 50. (c) Entertainment expenses incurred at Labour Court. In respect of first of items, plea of assessee was that it is in interest of assessee that goods are approved by buyers prior to its leaving premises so that it would avoid complaints and assessee having to replenish goods which are rejected by buyer subsequently. Since buyers have to stay overnight because inspection could not be completed they have to be necessarily provided with boarding as well as lodging facilities. These are, therefore, related to business as such. It was further argued that expenses should be such that it could be called to be entertainment and unless and until expenses could be said to be entertainment in nature, disallowance is not permissible. It was further argued that these cannot be said to be entertainment in nature at all. Similarly, expenses on gift articles does not involve any entertainment and expenses incurred in Labour Court in respect of various labour cases cannot be said to be entertainment in nature. On other hand, plea of Department was that these are nothing but entertainment. In view of amendment to s. 37, all such expenses as have been incurred are entertainment in nature and have been rightly disallowed. On this issue, first of item could perhaps be treated to be expenses in nature of or equivalent to payment of salary to temporary employees, i.e., employees being provided for lunch or dinner instead of being paid cash. However, Expln. 2 to s. 37(2B) provides that such expenses could be treated as staff welfare only if they are incurred either in office or factory or other places of work. In instant case, expenses are incurred in hotel and they cannot be said to be incurred in office or factory or other works site. Therefore, they have to be treated as entertainment expenses only. As regards gift articles of value of over Rs. 50, r. 6B clearly provides that articles which are presented of value of upto Rs. 50 would be allowed if they are for advertisement purposes. There is no denial that gifts are made for advertisement purposes only and, therefore, they are to be disallowed if value of gift is more than Rs. 50 which in instant case is so and we have, therefore, to confirm disallowance. As regards entertainment expenses on Labour Court it is not case o f assessee that it is incurred on staff and, therefore, they are rightly disallowable. We, therefore, have only to confirm action of lower authorities on this issue. In departmental appeal, there are two issues, first being two amounts of Rs. 9,06,352 and Rs. 42,257 claimed as liability on account of Excise Duty on mere basis of show cause notice allowed as expenses. second issue is in respect of certain claim of expenditure on scientific research in respect of assets hitherto used for purpose of business but transferred to scientific research purposes. In respect of first issue plea of Department was that Excise authorities issued show cause notice dt. 19th Sept., 1982 wherein they have asked assessee to explain as to why amount of Rs. 9,06,352 and Rs. 42,257 allowed to them as credit should not be withdrawn or recovered from them. Referring to this notice, ld. departmental representative submitted that certain credit on account of Excise Duty was allowed to assessee in earlier year by means of order dt. 8th Aug., 1980, which credit as per present show cause notice was provisional. As per show cause notice, earlier advice issued was apparently wrong as assessee was not entitled to any proforma credit in respect of Zinc. In these circumstances, assessee was called upon to explain as to why amount should not be withdrawn. In this notice, they have further observed that assessee should put forth all evidences in support of their claim. According to IAC, on this basis of this particular notice, there was no liability arising on assessee as still remained to be quantified or even determined as it was only proposal or enquiry with view to examine whether earlier action of granting of credit was proper or not. ld. CIT(A), however, allowed provision made by assessee on this basis as liability on ground that show cause notice issued was only procedural matter and, in fact, liability is fastened on assessee. ld. departmental representative relying on State Bank of India vs. CIT (1985) 49 CTR (SC) 379: (1986) 157 ITR 67 (SC), submitted that claim of assessee could not have been allowed at all in year as there was no liability on assessee and it could be allowed at best only in year in which it is actually quantified and also fastened on assessee which has already been so observed by IAC in his order. As regards second issue, he placed reliance on order of Tribunal in case of assessee dt. 30th May, 1985, wherein on same circumstances issue was decided that claim was not allowable at all to assessee. plea of assessee, on other hand, was that excise authorities have apparently mis-interpreted notification dt. 19th June, 1980 and 19th July, 1980 and had wrongly granted credit to assessee in respect of zinc, while assessee had been following system of set off respect of zinc, while assessee had been following system of set off although. According to assessee, show cause notice of 19th March, 1982 proposing to withdraw credit already granted was fully justified and since liability to that extent has arisen in year under review provision has been rightly made. assessee placed reliance on Tribunal vs. B. Hill and Co. (P) Ltd. (1981) 29 CTR (All) 301: (1983) 142 ITR 185 (All) where on basis of show cause notice issued by ST Department provision made on accounts was held to have been made on proper basis though liability was disputed and it was held, that amount was allowable. assessee also relied on L.H. Sugar Factories and Oil Mills vs. CIT (1980) 124 ITR 58 (All), which related to gratuity provision which was statutory liability and reliance was also placed in respect of sales tax liability, consequent to assessment being reopened, allowed as deduction in CIT vs. Rajeshwari Distributors (P) Ltd. (1980) 125 ITR 618 (Cal). Reliance was also placed on Supreme Court decision in Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC). Reliance was also placed on Bombay High Court decision in CIT vs. Nagri Mills Co. Ltd. (1958) 33 ITR 681 (Bom) to emphasis that since rate of taxation being uniform it does not really matter as to which year it is allowed, i.e., whether it should be related to year in which credit is allowed or in year of claim or in year of actual quantification. On issue of expenses claimed on scientific research it was fairly conceded that decision of Tribunal is against assessee. We have given very careful consideration to arguments put forth by parties. reading of show cause notice dt. 19th March, 1982 indicates that issuing authority with view to examine whether their earlier action of granting of proforma credit in respect of zinc was proper or otherwise had called upon assessee to explain its case. In this notice has been mentioned that earlier credit that was provided was provisional and it has further been said that since no set off prior to 1st Jan., 1980 is permissible, assessee is not entitled to proforma credit allowed earlier. notice further adds that assessee is called upon to show cause as to why credit already allowed should not be recovered. It further says that assessee should produce all evidence which they intend to rely in support of their case. reading of notice gives indication that it is somewhat similar to notice issued under s. 154 in respect of certain claims earlier allowed but sought to be withdrawn. Therefore, prima facie it appears that excise authorities have expressed only their doubt in respect of their earlier action of granting of proforma credit may have been done on erroneous impression and that they would like only to examine issue to ensure whether action was justified or if it is wrong to rectify position. nature of excise duty payment is not over-head during course of manufacture but is specific duty on production. It is levied on manufacturer in respect of commodities manufactured and does not include tax on raw materials used in manufacture. It is, in fact, tax on goods, which are in existence and is levy by statutes. Excise duty is tax levied prior to actual sale of commodity and is not tax on sale. Under Excise Act, excise duty is payable by manufacturer before removal of goods from factory to outside point either with view to sale or otherwise. There are no doubts that excise authorities, to make it convenient to assessees may permit for having deposit and get this deposit adjusted against duty payable on time to time basis. Therefore, claim of excise duty to be deductible expense has necessarily to be related to quantum of production. said show cause notice issued to assessee is not in any way related to actual production of commodities but is in respect of certain credits allowed, which is proposed to be withdrawn. Allowing of credit in respect of excise duty indicates that it is in nature of deposit only and if this credit is being withdrawn, it only results in wiping off deposit. It is to be borne in mind that as observed earlier that what is chargeable as expenses is only that quantum of excise duty, which is levied on assessee in proportion of goods so manufactured. In instant case, it is not in that nature at all. claim of assessee was not based on fact that amount earlier granted to it as proforma credit has resulted in reduction in expenditure charged to profit and loss account. In fact, this particular angle of matter was not at all examined by authorities below. Even assuming that is was credited to profit and loss account in asst. yr. 1982-83 on basis of earlier credit allowed, assessee could perhaps claim deduction if it is to be treated as deduction. Only when it is determined or accepted by assessee finally that it is in fact, liability on gods manufactured. In other words, deposit of duty or refund of duty does not result in either expenditure or income, in view of fact that nature of excise duty being such that it is chargeable as expense in proportion of goods manufactured and it requires actual production of goods before they are sold. Excise duty is exaction, which must be paid by manufacturer and it stops at point of payment and there is no provision for refund of excise duty once it is paid under law, except where it is found that collection has been excessive, then is permitted under law. On this basis, we are of view that claim of assessee is not at all tenable in law. In this respect argument of ld. departmental representative by placing reliance on Supreme Court decision in case of State Bank of India (1985) 49 CTR (SC) 379: (1986) 157 ITR 67 (SC) is fully justified as entries that are made in books of accounts and as shown in balance sheet are not necessarily determinative of question whether assessee had incurred expenditure and whether it is allowable as deduction or not. In case law relied on by assessee in B. Hill & Co. Pvt. Ltd. (1981) 29 CTR (All) 301: (1983) 142 ITR 185 (All) is not of help in sense that in that case no doubt it was also liability claimed on basis of show cause notice by ST authorities in respect of sales of past years, but it was allowed by placing reliance on Supreme Court decision in case of Kedarnath Jute Manufacturing Co. (1971) 82 ITR 363 (SC) and was in respect of actual cost of sale. Sales tax unlike excise duty, is tax on sale and in that case question was whether goods imported and acquired in Bombay could be treated as sale made in Bombay or not. As observed earlier, excise duty is specific duty levied in proportion to goods manufactured it could be allowed only in year in which goods are manufactured and if any duty is levied in addition to existing levy in subsequent year, then perhaps claim of assessee could be upheld. In case before us, it is not case of assessee that it is additional levy in proportion to goods manufactured in earlier year which was leviable in that year but wrongly not recovered or allowed as credit. other cases relied on in respect of gratuity liability as well as sales tax levied, pending reassessment would not apply to facts of case for reason observed above that levy is relatable to goods produced. What ultimately boils down, therefore, is that in case this amount is to be repaid to excise authorities on subsequent date when it is actually quantified and at that point of time it could be said that it is relatable to actual goods produced, claim of assessee in that year as deduction could definitely be considered and allowed. In respect of transfer of assets used for business earlier to scientific research issue had been considered in case of assessee for earlier two years and it was held that asset to be allowed as expenditure has to be purchased in year for scientific research purposes and since asset was not purchased in year but only transferred from business asset, claim of assessee is not at all justified. For same reason, we uphold this claim of Department on this issue and restore order of ITO. In result, both appeals are partly allowed. *** INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX v. MULTIMETALS LTD.