Page 109 - ELT_15th June 2020_VOL 372_Part 6th

2020 ] MARUTI SUZUKI INDIA LTD. v. COMMISSIONER OF INCOME TAX, DELHI 787

High Court Answered Question Nos. (ii) and ((iii) relating to the above noted
disallowance in favour of the Revenue. Aggrieved by the judgment of the High
Court, these appeals have been filed.
3. The two questions which were answered by the High Court in fa-
vour of the Revenue which were subject matter of this appeal are Question Nos.
(ii) and (iii) as framed by the High Court are to the following effect :
“(ii) Whether the ITAT had committed an error of law in upholding the
disallowance of the amount of Rs. 69,93,00,428/- which represented
MODVAT credit of Excise Duty that remained unutilised by 31st
March, 1999 i.e. the end of the relevant accounting year ?
(iii) Whether the ITAT has committed an error of law in upholding the
disallowance of Rs. 3,08,99,171/- in respect of Sales Tax Recoverable
Account, under Section 43B of the Income-tax Act ?”
4. We have heard Shri S. Ganesh, Learned Senior Counsel for the appel-
lant-assessee and Shri Arijit Prasad, Learned Senior Counsel for the Revenue.
5. Shri Ganesh submits that the amount paid by way of Excise Duty by
the assessee to its suppliers of raw materials and inputs, is accepted as Excise
Duty under the provisions of Central Excise Act and Rules. Consequently, when
the said payments are made by the assessee to its suppliers, they should be treat-
ed as payments of Excise Duty which straightaway qualify for deduction under
Section 43B of the Income-tax Act, irrespective of whether or when the MODVAT
credit arising from such payments is utilised to make payment of Excise Duty on
the products manufactured by the assessee. The High Court erroneously held
that the above payments made by the assessee are mere contractual payments
and not payments by way of Excise Duty. As soon as the raw materials and in-
puts are received in the appellant’s factory, the assessee becomes entitled to avail
of MODVAT credit in respect of Excise Duty paid on the raw materials and in-
puts and which is mentioned in the manufacturer-supplier’s invoice. The as-
sessee was clearly entitled for deduction of unutilised MODVAT credit balance
as on 31-3-1999.
6. Shri Ganesh in alternative submits that questions are squarely cov-
ered in favour of the assessee by the 1st proviso to Section 43B. The assessee’s
Excise Returns establish that while the untilised MODVAT credit as on 31-3-1999
was Rs. 69.30 crores, the entire amount was utilised in April, 1999 itself. Conse-
quently, the assessee is entitled to the deduction under the 1st proviso to Section
43B. The object and purpose of Section 43B of the Act is to ensure that an assessee
does not get deduction in respect of an amount unless and until the amount has
been received by the Government. In the present case the full amount of Excise
Duty was paid into the coffers of Government when the manufacturer of raw
material/inputs had cleared the same from his factory gate for supply to the as-
sessee. The basic object of Section 43B of the Act is fully subserved and deduction
should have been granted as claimed by the assessee.
7. Shri Arijit Prasad, Learned Senior Counsel for the Revenue refuting
the submissions of the Learned Counsel for the assessee contends that deduction
under Section 43B is allowable only when the amount of tax, Cess etc. are due
and payable and the assessee actually pays the same. In the present case the Ex-
cise Duty becomes due and payable only when the assessee removes the finished
product from the factory gate, at the point in time when the assessee makes
payment to the suppliers the Excise Duty is not due and payable. It is not in dis-
EXCISE LAW TIMES  15th June 2020  109