SC Allows Income Tax Deduction on Excise Duty Paid in Advance in the Personal Ledger Account [Read Judgment]

Revised Return - Share Application Money - Supreme Court of India - Taxscan

A two-judge bench of the Supreme Court of India, while dismissing a departmental appeal against M/s Modipon Ltd, categorically held that the advance deposit of central excise duty constitutes actual payment of duty within the meaning of Section 43B of the Central Excise Act and, therefore, the assessee is entitled to the benefit of deduction of the said amount under the provisions of the Income Tax Act, 1961.

In the instant case, the assessee has been claiming deduction under the above head in the past years. It had been adding back the same amount as part of the taxable income in the immediately succeeding accounting year in order to avoid double deduction. The Revenue was consistently allowing the claim. However, the same has been disallowed for the year under consideration.

On appeal, the High Court allowed the plea of the assessee and held that advance deposit of central excise duty would get income tax deduction. Aggrieved by the order, the Revenue approached the Apex Court for relief.

Dismissing the appeal, Justices Ranjan Gogoi and Navin Sinha noted that the deposit of Central Excise Duty in the PLA is a statutory requirement.

The bench observed that “The Central Excise Rules, 1944, specify a distinct procedure for payment of excise duty leviable on manufactured goods. It is a procedure designed to bring in orderly conduct in the matter of levy and collection of excise duty when both manufacture and clearances are a continuous process. Debits against the advance deposit in the PLA have to be made of amounts of excise duty payable on excisable goods cleared during the previous fortnight. The deposit once made is adjusted against the duty payable on removal and the balance is kept in the account for future clearances/removal. No withdrawal from the account is permissible except on an application to be filed before the Commissioner who is required to record reasons for permitting an assessee to withdraw any amount from the PLA. Sub-rules (3), (4), (5) and (6) of Rule 173G indicates a strict and vigorous scrutiny to be exercised by the central excise authorities with regard to manufacture and removal of excisable goods by an assessee. The self removal scheme and payment of duty under the Act and the Rules clearly shows that upon deposit in the PLA the amount of such deposit stands credited to the Revenue with the assessee having no domain over the amount(s) deposited.”

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