COMMISSIONER OF INCOME TAX, DELHI versus BHARAT CARBON AND RIBBON MFG. CO. (P) LTD.

Citation: [1999] SUPP. 1 S.C.R. 492 · Decided: 17-08-1999 · Supreme Court of India · Bench: D.P. WADHWA, M.B. SHAH · Disposal: Dismissed

Judgment (excerpt)

A 
COMMISSIONER OF INCOME TAX, DELHI 
:.¢.. 
v. 
BHARAT CARBON AND RIBBON MFG. CO. (P) LTD. 
AUGUST 17, 1999 
..-
B 
[D.P. WADHWA AND M.B. SHAH, JJ.] 
Income Tax Act, 1961-Levy of Excise duty under Item 17(2) of Central 
Excise Tariff-Liability challenged by way of Writ Petition-Such disputed 
.... 
and unpaid Excise Duty-Whether a permissible deduction over same 
c accounting period or contingent liability not incurred-HELD, where 
mercantile system of accounting is adopted, amount is deductible when 
liability accrues though discharged at a later date. 
,-
j, 
The Respondent-Assessee was manufacturing Carbon Papers which 
D 
was not liable to Excise Duty till 28th February, 1975. Later on, duty was 
levied on Carbon Papers. The Collector issued a general trade notice making 
Carbon Papers liable to duty as coated paper under Item 17(2) of the Central 
Excise Tariff. Prior to that, the Respondent-Assessee was required to clear 
the carbon paper under residuary Item 68. However, the Respondent-Assessee 
did not accept this classification of carbon appear as Coated-paper. Thereafter, 
E the Assessee received a demand notice for payment of Excise Duty for the 
years 1977-78, 1978-79 and 1979-80. The Assessee challenged the levy of 
Excise Duty by way of a Writ Petition, during the pend ency of which he filed 
<.' 
a revised return, claiming the excise levy as deduction. 
- The Income Tax Officer rejected the claim of the Assessee for deduction 
F for the Assessment Year 1981-82 because the Assessee was maintaining 
mercantile system of accounting. He further stated that, the claim could be 
allowed if the liability was in prasenti and as the dispute was pending, it was 
contingent liabilit~. However, the Commissioner allowed the claim of the 
Assessee. Tribunal dismissed the Appeal as well as the application for 
G referring the questions to the High Court. High Court also dismissed the 
application holding that the answer to the question raised is self-evident in 
view of the earlier decision in Kedarnath Jute Manufacturing Co. Ltd v. 
---
Commissioner of Income Tax (Central), Calcutta, (1971) 82 ITR 363. Hence, 
this Appeal. 
H 
It was contended for the Appellants that the liability of the Assessee 
492 
-
C.I.T. v. BHARAT CARBON AND RIBBON MFG. CO. 
493 
was contingent and the decision in Kedarnath does not apply to the liability A 
to pay the Excise Duty relating to previous Assessment Years 1976-77 to 
1978-80; therefore, deductions were rightly not granted in 1981-82. 
Dismissing the Appeal, this Court 
HELD: 1. The obligation to pay Excise Duty arose in the Assessment B 
Year 1981-82, although the liability to pay the amount might not have been 
enforced pending petition. The liability had been quantified and the demand 
thereof had been made under the demand notice dated 21st April, 1980. 
There was nothing uncertain, tentative, provisional or contingent in the 
matter of Assessee's liability to pay the Excise Duty. The Assessee was C 
bound to pay the same till the order directing the Assessee to pay the same 
was set aside or modified. (496-A-B) 
Indian Molasses Co. (P) ltd v. C.l T. West Bengal, (1959) 37 ITR, 66, 
distinguished. 
Kedarnath Jute Manufacturing Co. Ltd v. Commissioner of Income Tax D 
(Central), Calcutta, (1971) 82 ITR 363 and Pope the King Match Factory 
v. Commissioner of Income Tax, (1963) 50 ITR 495, referred to. 
2. The liability accrued over the accounting period because of demand 
notice issued by the Excise Department. The said demand notice was issued E 
after the show-cause notice and on the basis of the trade notice issued by the 
Collector of Customs in October, 1979 providing that coated paper would be 
liable to be classified under tariff item 17(2). The obligation under the law 
to pay Excise Duty arose at that stage. Raising of the dispute by the Assessee 
by filing writ petition for quashing or deduction of the said liability would 
not be a ground for holding that liability to pay the excise duty as per demand F 
notice was not incurred. (497-D-E) 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 16688 of 
1996. 
From the Judgment and Order dated 20.2.91 of the Delhi High Court in G 
l.T.C. No. 70of1990. 
K.N. Shukla, Ms, Neera Gupta, K.C. Kaushik, S.D. Sharma and S.K. 
Dwivedi for the Appellant. 
V.U. Eradi, Gauri Rasgotra, Ms. Purnima and Sumant J. Khaitan for the H 
494 
SUPREME COURT REPORTS [1999] SUPP. I S.C.R. 
A Respondent. 
The Judgment of the Court was delivered by 
S

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