Summary
The Supreme Court rejected Section 43B deductions for unutilised MODVAT credit and the sales-tax recoverable balance. Paying suppliers a price containing duty shifted its economic incidence, not their statutory duty liability, to the purchaser. Unutilised credit was not actual payment of the purchaser’s own duty. Its later use before the return deadline did not satisfy the first proviso because the corresponding liability arose in the subsequent year.
Issues
- Whether unutilised MODVAT credit and the sales-tax recoverable balance qualified for Section 43B deductions.
- Whether using the credit before the return-filing deadline brought the claim within the first proviso.
Provisions considered
- Section 43B(a) and first proviso, Income Tax Act, 1961Deduction required the assessee’s own statutory liability and actual payment; the proviso required liability incurred in the relevant previous year. (¶¶ 10, 11, 12, 13, 16, 17, 18, 33, 34)
Held
- Section 43B requires a sum payable by the assessee as tax or duty and actual payment by it. Input suppliers bore the statutory excise liability on their products; the purchaser’s duty-inclusive price transferred only the economic incidence. Unused MODVAT credit did not constitute actual payment of its own excise duty. (¶¶ 11, 12, 13, 14, 15, 16, 17, 18)
- Authorities describing MODVAT credit as equivalent to tax paid concerned preservation or valuation of that credit, not deduction of an unutilised balance under Section 43B. Berger Paints likewise concerned duties actually paid and did not decide this issue. (¶¶ 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30)
- The separately recorded sales-tax recoverable amount was available for setoff against tax on finished-goods sales. The Court upheld its disallowance on the reasoning applied to the credit claim. (¶¶ 31, 32)
- The first proviso concerns liability incurred in the relevant previous year but paid before the return deadline. Here the duty discharged by later use of the credit arose on removal of finished goods in the subsequent year, so use before that deadline did not support the earlier-year deduction. (¶¶ 33, 34)
Result
Assessee’s appeals dismissed; both disallowances and the High Court’s answers in favour of the Revenue affirmed.