1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.19763 OF 2017 (Arising out of S.L.P.(C) No.29816 of 2011) COMMISSIONER OF INCOME TAX II ...APPELLANT(S) VERSUS M/S MODIPON LTD. ...RESPONDENT(S) WITH CIVIL APPEAL NO. 19767 OF 2017 (ARISING OUT OF S.L.P. (C) NO.16633 OF 2012) CIVIL APPEAL NO.19768 OF 2017 (ARISING OUT OF S.L.P. (C) NO. 15939 OF 2012) CIVIL APPEAL NO.19769 OF 2017 (ARISING OUT OF S.L.P. (C) NO. 29817 OF 2011) CIVIL APPEAL NO.19770 OF 2017 (ARISING OUT OF S.L.P. (C) NO. 31209 OF 2011) JUDGMENT RANJAN GOGOI,J. Signature Not Verified 1. Leave granted in all Special Leave Digitally signed by SUKHBIR PAUL KAUR Date: 2017.11.24 12:42:44 PKT Reason: Petitions. 2 2. Four of present appeals involve same assessee, i.e., M/s Modipon Ltd. and are in respect of Assessment Years 1993-1994, 1996-1997, 1997-1998 and 1998-1999 respectively. fifth appeal is in case of another assessee, i.e., Paharpur Cooling Towers Ltd. and pertains to Assessment Year 1996-1997. 3. question involved in all appeals is same and may be formulated as hereunder: Whether assessee is entitled to claim deduction under Section 43B of Income Tax Act, 1961 in respect of excise duty paid in advance in Personal Ledger Account ( PLA for short)? 4. Before delving into question formulated one significant fact common to appeals involving assessee-Modipon Ltd. may be noted. From Assessment Year 1984-1985 (from which assessment year 3 Section 43B of Income Tax Act, 1961 came into force), assessee has been claiming deduction under aforesaid provision of Income Tax Act in respect of balance amount in PLA at end of each accounting year and assessee had been adding back same amount as part of taxable income in immediately succeeding accounting year in order to avoid double deduction. aforesaid practice consistently adopted by assessee had been all along accepted by Revenue from Assessment Year 1984-1985 up to Assessment Year 1998-1999 except for four assessment years under consideration. 5. Shri K. Radha Krishnan, learned senior counsel for Revenue has urged that though levy of excise is on manufacture of excisable goods, actual payment of duty is at stage of removal. advance duty 4 paid in PLA is adjusted/debited from time to time, against clearances/removal made by assessee. Unless such clearances/removal are made and excise duty is debited from advance deposit there is no actual payment of duty so as to entitle assessee to benefit of deduction under Section 43B of Income Tax Act which contemplates deduction only against actual payment as distinguished from accrual of liability. It is urged on behalf of Revenue that amount in deposit is akin to loan and under provisions of Central Excise Rules, part or whole of said amount can be refunded to assessee. It is further submitted that under Rule 21 of Central Excise Rules, 1944, at any time before removal, Commissioner or other authorities prescribed therein may remit duty in respect of manufactured goods lost or 5 damaged or otherwise unfit for consumption or marketing. amount of advance deposit, therefore, does not represent actual payment of duty so as to entitle assessee to benefit of deduction under Section 43B. Accordingly orders of High Courts challenged in appeals are liable to interference. 6. In reply, Shri Ajay Vohra, learned senior counsel appearing for assessee has submitted that practice followed by assessee in claiming deduction for balance amount in PLA at end of each accounting year and adding back same as part of taxable income in immediately succeeding accounting year really makes dispute between parties academic as revenue implication, in any event, is nil. Shri Vohra has submitted that aforesaid practice has been accepted by Revenue 6 for Assessment Years 1984-1985 to 1998-1999 except for four assessment years in question. There is no compelling reason to reopen issue and, therefore, to maintain consistency issue may be resolved in favour of assessee. Reliance in this regard has been placed on decisions of this Court in Radhasoami Satsang vs. C.I.T.1 and C.I.T. vs. Excel Industries Ltd.2 Shri Vohra has further submitted that very same issue had been decided in favour of assessee by two High Courts i.e. Delhi High Court in C.I.T. vs. Maruti Suzuki India Ltd.3 and Punjab & Haryana High Court in C.I.T. vs. Happy Forgings Ltd.4 and C.I.T. vs. Raj and San Deeps Ltd.5 There has been no appeal by Revenue against any of said decisions of High Courts. Neither there is 1 (1992) 193 ITR 321 (SC) 2 (2013) 358 ITR 295 (SC) 3 (2013) 212 Taxman 603 (Del.) 4 ITA No. 590 of 2007 decided by Punjab & Haryana High Court on 11.07.2008 5 (2007) 293 ITR 12 7 compelling good reason or public interest involved so as to reopen issue. It is submitted that decisions rendered by Delhi and Punjab & Haryana High Courts, on merits, would commend for acceptance. Accordingly, it is submitted that, in absence of strong compelling reasons, on ratio of decision in C.K. Gangadharan and Anr. vs. C.I.T.6 present appeals ought to not be entertained any further. 7. On merits it has been submitted by Shri Vohra that under Section 3 of Central Excise Act, event for levy of excise duty is manufacture of goods though duty is to be paid at stage of removal of goods. Pointing out provisions of Rule 173G of Central Excise Rules, 1944 it is submitted that 6 (2008) 8 SCC 739 8 advance deposit of central excise duty in current account is mandatory requirement from which adjustments are made, from time to time, against clearances effected. Though, sub-rule (1)(A) contemplates refund from current account, such refund can be granted only on reasons being recorded by concerned authority i.e., Commissioner on application filed by assessee. Refund is not matter of right. amount deposited in PLA is irretrievably lost to assessee, it is argued. Payment of central excise duty takes place at time of deposit in PLA, though deposit is on basis of approximation and precise amount of duty qua goods removed is ascertained at stage of removal/clearances. said facts, according to learned counsel, would not make deposit anything less than actual payment of duty. 9 8. We have considered submissions made on behalf of parties. Notwithstanding acceptance by Revenue of practice adopted by assessee-Modipon Ltd. in all assessment years except for ones under dispute as enumerated above and absence of any challenge to decisions of Delhi and Punjab & Haryana High Courts, present challenge would still be entertainable so long as it discloses substantial question of law or issue impacting public interest or same has potential of recurrence in future. Revenue cannot be shut out from present proceedings merely because of its acceptance of practice of accounting adopted by assessee or its acceptance of decision of two High Courts in question. adjudication of question(s) arising cannot be refused 10 merely on above basis. We will, therefore, have to proceed to answer merits of challenge made by Revenue in present appeals. 9. Deposit of Central Excise Duty in PLA is statutory requirement. Central Excise Rules, 1944, specify distinct procedure for payment of excise duty leviable on manufactured goods. It is procedure designed to bring in orderly conduct in matter of levy and collection of excise duty when both manufacture and clearances are continuous process. Debits against advance deposit in PLA have to be made of amounts of excise duty payable on excisable goods cleared during previous fortnight. deposit once made is adjusted against duty payable on removal and balance is kept in account for future clearances/removal. No withdrawal from 11 account is permissible except on application to be filed before Commissioner who is required to record reasons for permitting assessee to withdraw any amount from PLA. Sub-rules (3), (4), (5) and (6) of Rule 173G indicates strict and vigorous scrutiny to be exercised by central excise authorities with regard to manufacture and removal of excisable goods by assessee. self removal scheme and payment of duty under Act and Rules clearly shows that upon deposit in PLA amount of such deposit stands credited to Revenue with assessee having no domain over amount(s) deposited. 10. In C.I.T. vs. Pandavapura Sahakara Sakkare Karkhane Ltd.7 and C.I.T. vs. Nizam Sugar Factory Ltd.8 cited at Bar, High Courts of Karnataka and Andhra Pradesh 7 198 ITR 690 (Kar.) 8 253 ITR 68 (AP) 12 respectively had occasion to consider as to whether amounts credited to Molasses Storage Fund out of sale proceeds of molasses received by assessee constitute taxable income of assessee. Under scheme, assessee had no control over amounts deposited in fund and assessee was also not entitled to withdraw any amount therefrom without approval of authorities. Further amount deposited could be utilized only for purpose specified. In those circumstances, High Court held and in our view correctly, that deposits made, though part of sale proceeds of assessee, did not constitute taxable income at hands of assessee. We do not see why same analogy would not be applicable to case in hand. 13 11. Delhi High Court in appeals arising from orders passed by it has also taken view that purpose of introduction of Section 43B of Central Excise Act was to plug loophole in statute which permitted deductions on accrual basis without requisite obligation to deposit tax with State. Resultantly, on basis of mere book entries assessee was entitled to claim deduction without actually paying tax to State. Having regard to object behind enactment of Section 43B and preceding discussions, it would be consistent to hold that legislative intent would be achieved by giving benefit of deduction to assessee upon advance deposit of central excise duty notwithstanding fact that adjustments from such deposit are made on subsequent 14 clearances/removal effected from time to time. 12. above discussions, coupled with peculiar features of case, noticed above i.e. consistent practice followed by assessee and accepted by Revenue; decisions of two High Courts in favour of assessee which have attained finality in law; and no contrary view of any other High Court being brought to our notice, should lead us to conclusion that High Courts were justified in taking view that advance deposit of central excise duty constitutes actual payment of duty within meaning of Section 43B of Central Excise Act and, therefore, assessee is entitled to benefit of deduction of said amount. 15 13. We, therefore, dismiss appeals and affirm orders of High Courts of Delhi and Calcutta impugned in present appeals. ....................,J. (RANJAN GOGOI) ....................,J. (NAVIN SINHA) NEW DELHI NOVEMBER 24, 2017 16 ITEM NO.1501 COURT NO.3 SECTION XIV S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Civil Appeal No.19763 of 2017 arising out of Petition(s) for Special Leave to Appeal (C) No(s). 29816/2011 (Arising out of impugned final judgment and order dated 27-01-2011 in ITA No. 768/2004 passed by High Court Of Delhi At New Delhi) COMMISSIONER OF INCOME TAX II Petitioner(s) VERSUS M/S MODIPON LTD. Respondent(s) ([ HEARD BY : HON. RANJAN GOGOI AND HON. NAVIN SINHA, JJ. ]RESPONDENT CAUSE TITLE MAY BE SHOWN AS "M/S MODIPON LTD.") WITH Civil Appeal No.19767 of 2017 @ SLP(C) No. 16633/2012 (XVI) Civil Appeal No.19768 of 2017 @ SLP(C) No. 15939/2012 (XIV) Civil Appeal No.19769 of 2017 @ SLP(C) No. 29817/2011 (XIV) Civil Appeal No.19770 of 2017 @ SLP(C) No. 31209/2011 (XIV) Date : 24-11-2017 These matters were called on for pronouncement of judgment today. For Petitioner(s) Mrs. Anil Katiyar, AOR For Respondent(s) Mr. U.A. Rana, Adv. Mr. Himanshu Mehta, Adv. Mr. Satendra Kr. Rai, Adv. For M/S. Gagrat And Co, AOR Mr. Jagdish Kumar Chawla, AOR Hon'ble Mr. Justice Ranjan Gogoi pronounced judgment of Bench comprising of His Lordship and Hon'ble Mr. Justice Navin Sinha. Leave granted in all special leave petitions. appeals are dismissed in terms of signed reportable judgment. (SUKHBIR PAUL KAUR) (ASHA SONI) AR CUM PS BRANCH OFFICER (Signed reportable judgment is placed on file) Commissioner of Income-tax II v. Modipon Ltd