ITAT directs BPC to produce Excise Records and permission from Excise department to set up bonded Warehouse within Factory premises

The Income Tax Appellate Tribunal (ITAT), Allahabad Bench directed the assessee, Bharat Pumps & Compressors Ltd. (BPC)  to produce excise records and permission from the excise department to set up a bonded warehouse within factory premises before the Assessing Officer.

The assessee, Bharat Pumps & Compressors Ltd. is a Public Sector Enterprise being Government of India undertaking. The assessee has raised the issue regarding the valuation of closing stock of finished goods. The assessee has not included excise duty payable on closing stock of finished goods to the tune of Rs. 64.73 lakhs, while valuing its closing stock of finished goods, which as per Revenue infringes on Section 145A(ii) of the 1961 Act.

The AO made additions to the income of the assessee to the tune of Rs. 16.40 lakhs by invoking provisions of Section 145A(ii) of the 1961 Act, which additions were enhanced by CIT(A) by Rs. 48.33 lakhs to make additions to the income to the tune of Rs. 64.73 lakhs as this is the amount of excise duty payable on closing stock of finished goods which was not added to the value of closing stock of finished goods by the assessee.

The tribunal in the first round of litigation granted relief to the assessee to the tune of Rs. 48.33 lakhs, which was in fact by way of enhancement by CIT(A). The assessee filed MA with tribunal which was allowed by tribunal and the issue was restored to the file of tribunal for fresh adjudication.

Both the Counsel for the assessee as well department made their submissions to support their contentions. The dispute is in a very narrow compass. The assessee has not included excise duty component while valuing closing inventory of finished goods as at year end which it is required to do so keeping in view provisions of Section 145A(ii) as claim is made by assessee that the same are lying in its warehouse situated in factory premises and the same were not removed from the factory/warehouse by the end of the year. The claim of the assessee is that the excise duty although is leviable on manufacturing of goods but is payable when the goods are removed from factory.

The Coram of Vijay Pal Rao and Ramit Kochar held that for computing valuation of finished goods as at year end in the case of the assessee, excise duty shall not be included if the said finished goods are lying in the factory premises or are lying in the bonded warehouse within the factory premises, and provided that the bonded warehouse was set up by assessee with the permission of excise department to transfer manufactured goods to bonded warehouse without firstly paying excise duty.

However, the Tribunal noted that the assessee is claiming that its finished goods are lying in the warehouse, but the complete facts as to status /location of warehouse are not emerging from records. Thus, it is not clear from the records as to the location of the warehouse and whether the same is located within factory premises or is at some other location outside factory premises.

The Tribunal while restoring the issue back to the file of the AO for fresh determination said that these facts need verification by the AO and the assessee is directed to produce records before AO to prove its stand , including producing excise records as well permission from excise department to set up bonded warehouse within factory premises and to shift finished goods to bonded warehouse without firstly paying excise duties. In case it is found by AO after verification that the finished goods are lying in the bonded warehouse within factory premises and the finished goods are allowed to be shifted by excise department to bonded warehouse without firstly paying excise duty , then obviously the liability for excise duty incidence has not occurred and the same cannot be included for the purposes of Section 145A(ii).

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