Case Law Details
Maruti Suzuki India Ltd. Vs CIT (Supreme Court)
Conclusion: Since unutilized credit in the MODVAT scheme without incurring the liability could not be treated as sum actually paid by assessee under section 43B hence the unutilized credit under MODVAT scheme did not qualify for a deduction.
Held: Assessee-company was engaged in manufacturing and sale of various cars and also trading in spares and components of the vehicles. It acquired exciseable raw materials and inputs which were used in the manufacturing of the vehicles. Assessee had been taking benefit of MODVAT credit on the raw material and inputs used in the manufacturing. At the end of the assessment year 1999-2000 an amount of Rs.69,93,00,428/ was left as unutilised MODVAT credit. In the return it was claimed that the company was eligible for deduction under Section 43B as an allowable deduction. Similarly, the company claimed deduction under Section 43B of an amount of Rs. 3,08,88,171/in respect of Sales Tax Recoverable Account. AO, CIT, ITAT and High Court upheld the disallowance of the above deduction on the ground that advance payment of Excise Duty which represented unutilized MODVAT credit without incurring the liability of such payment was not allowable as deduction. It was held that the deductions under Section 43B are allowable only when the sum is actually paid by assessee. In the present case, the Excise Duty leviable on assessee on the manufacture of vehicles was already adjusted in the concerned assessment year from the credit of Excise Duty under the MODVAT scheme. The unutilized credit in the MODVAT scheme could not be treated as sum actually paid by assessee. Assessee when paid the cost of raw materials where the duty is embedded, it does not ipso facto mean that assessee is the one who is liable to pay Excise Duty on such raw material/inputs. It is merely the incident of Excise Duty that has shifted from the manufacturer to the purchaser and not the liability to the same hence the unutilized credit under MODVAT scheme did not qualify for a deduction u/s 43B.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
By these appeals the assessee has challenged the judgment of the High Court of Delhi dated 07.12.2017 deciding the Income Tax Appeal No.31 of 2005. ITA No.31 of 2005 related to Assessment year 1999-2000 and ITA No.442 of 2005 related to Assessment year 2000-2001, in both the appeal similar questions were answered against the assessee. For deciding these two appeals it is sufficient to notice the facts in CA No.11923 of 2018 for Assessment Year 19992000. The High Court by the impugned judgment has affirmed the views of Income Tax Appellate Tribunal on the questions which have been raised in this appeal. The Assessing Officer as well as the Commissioner of Income Tax (Appeals) has not accepted the claim of the appellant. The appellant (hereinafter referred to as the “assessee”) is engaged in the business of manufacturing automobiles, which are chargeable to Excise Duty under the Central Excise Act, 1994. The assessment year in question is assessment year 19992000. The assessee, a Company, has been engaged in manufacturing and sale of various Maruti Cars and also trades in spares and components of the vehicles. It acquires exiceable raw materials and inputs which are used in the manufacturing of the vehicles. The assessee had also been taking benefit of MODVAT credit on the raw material and inputs used in the manufacturing. At the end of the Assessment year 19992000 an amount of Rs.69,93,00,428/ was left as unutilised MODVAT credit. In the return it was claimed that the Company was eligible for deduction under Section 43B of the Income Tax Act as an allowable deduction. Similarly, the Company claimed deduction under Section 43B of an amount of Rs. 3,08,88,171/in respect of Sales Tax Recoverable Account.
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