Commissioner of Income-tax-III, Bangalore / The Commissioner of Income-tax Central, Bangalore v. SPR Group Holdings Pvt. Ltd
[Citation -2020-LL-0817-19]

Citation 2020-LL-0817-19
Appellant Name Commissioner of Income-tax-III, Bangalore / The Commissioner of Income-tax Central, Bangalore
Respondent Name SPR Group Holdings Pvt. Ltd.
Court HIGH COURT OF KARNATAKA
Relevant Act Income-tax
Date of Order 17/08/2020
Assessment Year 1999-00
Judgment View Judgment
Keyword Tags substantial question of law • indian made foreign liquor • value of closing stock • method of accounting • liability to pay • total income • excise duty
Bot Summary: The assessee filed return of income for the Assessment year 1999-2000 declaring the total income on 31.12.1999, of Rs.3.85,12,715/-, wherein value of closing stock of finished goods did not include the excise duty leviable at the time of their removal from the premises of the respondent. Subsequently, Commissioner of Income 4 Tax on account of revenue audit of objections ordered revision of the assessment by passing an order under Section 263 of the Act on 28.08.2003 directing the Assessing Officer to reframe the assessment after including the value of excise duty on the finished goods in the value of closing stock of finished goods and also apply the provisions of Section 43B of the Act. The Tribunal by an order dated 12.08.2011l inter alia by placing reliance on decision of the Supreme Court in COMMISSIONER OF CENTRAL EXCISE VS. POLYSET CORPORATION AND ANOTHER , 115 ELT 41 held that till date of clearance of goods, excise duty payable on such goods does not get crystallized and assessee cannot be said to have incurred the excise duty liability. Learned counsel for the revenue submitted that the Tribunal ought to have appreciated that the liability to pay excise duty accrues as soon as goods are 6 manufactured and not on its transportation as incidence of taxation is manufacture of goods. It is further submitted that the aforesaid issue is no longer res integra and has been answered in favour of assessee by the Supreme Court in COLLECTOR OF CENTRAL EXCISE VS. POLYSET CORPORATION SUPRA AND WALLACE FLOUR MILLS COMPANY LTD., VS. COMMISSIONER OF CENTRAL EXCISE , 4 SCC 592. The question which arises for consideration in this appeal is whether liability to pay excise duty is incurred immediately n manufacture of liquor or it arises 7 only when the same is sought to be removed from the premises of the manufacturer, either for the purposes of sale or otherwise. Section 16(3) of the Karnataka State Excise Act, 1965 reads as under: Without the sanction of the State Government no intoxicants shall be removed from any distillery, brewery, warehouse or other place of storage established or licensed under this Act, unless the duty, if any, imposed under this Act has been paid or a bond has been executed for the payment thereof.


1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 17TH DAY OF AUGUST 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.16 OF 2012 BETWEEN: 1. COMMISSIONER OF INCOME-TAX-III CENTRAL REVENUE BUILDINGS, QUEENS ROAD BANGALORE 560 001. 2. COMMISSIONER OF INCOME TAX CENTRAL BANGALORE APPELLANTS (By Sri.E.I.SANMATHI, ADV.,) AND: M/S SPR GROUP HOLDINGS PVT. LTD., 34/2, 5TH MAIN GANDHINAGAR BANGALORE 560 009. ... RESPONDENT (By Sri.V.CHANDRASHEKAR, ADV. AND SRI.M.LAVA, ADV.) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 12.08.2011 PASSED IN ITA 2 NO.569/BANG/2003 FOR ASSESSMENT YEAR 1999-00, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. (I) SET ASIDE APPELLATE ORDER DATED 12.08.2011 PASSED BY ITAT, BENCH, BANGALORE IN APPEAL PROCEEDINGS ITA NO.569/BANG/2003 AS SOUGHT FOR IN THIS APPEAL, IN INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to Assessment year 1999-00. appeal was admitted by bench of this Court vide order dated 02.04.2012 on following substantial question of law: (i) Whether on facts and in circumstances of case, tribunal is justified in holding that as per provisions of Section 145A value of closing stock need not be increased by State excise duty as Excise duty was neither paid nor incurred without 3 appreciating law that goods became dutiable on day of manufacturing and liability, therefore, stand incurred on that day and consequently value of closing stock should have been increased by amount of liability incurred? 2. Facts giving rise to filing of this appeal briefly stated are that assessee is private limited company engaged in business of manufacture of Indian Made Foreign Liquor (IMFL). assessee filed return of income for Assessment year 1999-2000 declaring total income on 31.12.1999, of Rs.3.85,12,715/-, wherein value of closing stock of finished goods did not include excise duty leviable at time of their removal from premises of respondent. assessment for Assessment year 1999-00 was completed under Section 143(3) of Act accepting valuation of closing stock of finished goods. Subsequently, Commissioner of Income 4 Tax (Appeals) on account of revenue audit of objections ordered revision of assessment by passing order under Section 263 of Act on 28.08.2003 directing Assessing Officer to reframe assessment after including value of excise duty on finished goods in value of closing stock of finished goods and also apply provisions of Section 43B of Act. Assessing Officer after complying with directions, passed order on 30.03.2004. 3. respondent preferred appeal to Income Tax Appellate Tribunal (hereinafter referred to as Tribunal , for short). Tribunal by order dated 12.08.2011 held that excise duty payable on goods manufactured but not removed and shown as closing stock of finished goods need not be part of finished goods valuation. aforesaid order was subject matter of challenge before this court in I.T.A No.103/2006. bench of this court by order dated 22.11.2010 inter alia held that Tribunal has not taken 5 into consideration method of accounting under Section 145A, which came into force with effect from 01.04.1999. matter was therefore, remitted for decision afresh with reference to Section 145A of Act. Tribunal by order dated 12.08.2011l inter alia by placing reliance on decision of Supreme Court in COMMISSIONER OF CENTRAL EXCISE VS. POLYSET CORPORATION AND ANOTHER , 115 ELT 41 (SC) held that till date of clearance of goods, excise duty payable on such goods does not get crystallized and assessee cannot be said to have incurred excise duty liability. Thus, it was held that in respect of excise goods not being removed, no liability is accrued and there is no question of payment of excise duty. Being aggrieved, revenue is in appeal before us. 4. Learned counsel for revenue submitted that Tribunal ought to have appreciated that liability to pay excise duty accrues as soon as goods are 6 manufactured and not on its transportation as incidence of taxation is manufacture of goods. On other hand, learned counsel for assessee has invited attention of this court to Section 145A of Act as well as Section 16(3) of Karnataka State Excise Act, 1965 and has submitted that assessee s liability to pay duty on goods manufactured arises only at time of removal of same. It is further submitted that aforesaid issue is no longer res integra and has been answered in favour of assessee by Supreme Court in COLLECTOR OF CENTRAL EXCISE VS. POLYSET CORPORATION SUPRA AND WALLACE FLOUR MILLS COMPANY LTD., VS. COMMISSIONER OF CENTRAL EXCISE , (1989) 4 SCC 592. 5. We have considered submissions made by learned counsel for parties and have perused record. question which arises for consideration in this appeal is whether liability to pay excise duty is incurred immediately n manufacture of liquor or it arises 7 only when same is sought to be removed from premises of manufacturer, either for purposes of sale or otherwise. Section 16(3) of Karnataka State Excise Act, 1965 reads as under: Without sanction of State Government no intoxicants shall be removed from any distillery, brewery, warehouse or other place of storage established or licensed under this Act, unless duty, if any, imposed under this Act has been paid or bond has been executed for payment thereof. 6. Thus, it is evident that assessee s liability to pay duty on goods manufactured arises only at time of removal of same from its premises, be it distillery, or warehouse or any other place of storage established or licensed under Karnataka State Excise Act and not at any time earlier. aforesaid issue is no longer res integra in view of decisions of Supreme Court in Polyset Corporation supra and Wallace Flour Mills Co. 8 Ltd. same view has been reiterated in MARUTI SUZUKI (INDIA) LIMITED VS. COMMISSIONER OF INCOME TAX, DELHI , (2020) 3 SCC 718. aforesaid legal position has also been reiterated by various high courts in CIT VS. LOKNETE BALASAHEB DESAI SSK LTD. , 339 ITR 288 (BOMBAY), CIT VS. RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD , 392 ITR 421 (RAJ), ACIT VS. NARMADA CHEMATURE PETROCHEMICALS LTD , 327 ITR 369 (GUJ) and ACIT VS. D & H SECHERON ELECTRODES P. LTD , 173 TAXMAN 188 (MP). In view of preceding analysis, substantial question of law framed is answered against revenue and in favour of assessee. In result, appeal fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE Commissioner of Income-tax-III, Bangalore / Commissioner of Income-tax Central, Bangalore v. SPR Group Holdings Pvt. Ltd
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