IN THE HIGH COURT OF DELHI AT NEW DELHI 
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   ITA 85/2012  
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 CIT            ..... Appellant 
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 Through Mr. Sanjeev Sabharwal, sr. standing counsel 
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 versus 
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 HOLOSTIK INDIA LTD       ..... Respondent 
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 Through Mr. P C Yadav and Mr. Ravi Gupta, Advs. 
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 CORAM: 
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 HON'BLE MR. JUSTICE SANJIV KHANNA 
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 HON'BLE MR. JUSTICE R.V.EASWAR 
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 O R D E R 
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      14.02.2012 
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 Issue notice. 
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 2. Notice is accepted by Mr. P C Yadav, Adv. for the respondent. 
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 3. This appeal by the Revenue under Section 260A of the Income Tax 
 Act, 1961 is directed against the order dated 16.11.2010 passed by the 
 Income Tax Appellate Tribunal (tribunal, for short), in the case of 
 Holostik India Ltd., and relates to the assessment year 2003-04. 
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 4. The assessee is in the business of manufacturing and trading 
 hologram and holographic films.  As per the accounts, the assessee had 
 total turnover of manufactured goods of Rs.32,99,34,000/-.  This included 
 excise duty of Rs.3,21,06,490/-.  The net sales after deducting the 
 excise duty of Rs.29,78,27,000/- was taken to the profit and loss 
 account.  The figure of net sales declared was exclusive of and did not 
 include the excise duty of Rs. 3,21,06,490/-.  This was shown separately. 
 The assessee had made  purchases of Rs.8,49,97,000/- as per the schedule 
 to the audited accounts.  This excluded an amount of Rs.1,45,24,853/- by 
 way of Cenvat credit available on the said purchases.  This amount was 
 not included in the purchases of the raw material.  The assessee had an 
 opening Cenvat credit of Rs.41,53,151/-.   Out of the aforesaid amount of 
 Rs.41,53,151/- and fresh Cenvat credit of Rs.1,45,24,853/-, the assessee 
 utilized Cenvat credit of Rs.1,79,16,028/-.  This left a closing balance 
 of Rs.7,61,976/-.  This amount was declared as a part of the assets in 
 the balance sheet. 
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 The Assessing Officer had made an addition of Rs.1,79,16,028/- i.e. the 
 Cenvat credit which was utilized by the assessee during the assessment 
 year in question.  The addition was deleted by the CIT(Appeals).  The 
 tribunal has agreed with the CIT(Appeals).  It will be appropriate to 
 reproduce the reasons and findings recorded by the CIT(Appeals): 
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 ?(a) Cenvat credit has been claimed under the Cenvat Credit Rules, 2002. 
 Under Rule 3 of the said Rule, the manufacturer or producer of final 
 products shall be allowed to take credit of the excise duty specified in 
 the first and second schedule of the Central Excise Tariff Act etc. paid 
 on any input used in the manufacture of final or intermediate products. 
 Under sub-clause (3) of Rule 3 of Cenvat Credit Rules, 2002, it has been 
 stated that Cenvat credit may be utilized for payment of any duty of 
 Excise on my final product.  It is under the mandate of the said Rules 
 that the appellant has availed the Cenvat credit and utilized a part of 
 the credit towards payment of excise duty. 
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 (b) As per accounts the appellant had an opening balance of 
 Rs.4153151/- of Cenvat Credit, and during the year under appeal, it had 
 recognized a further amount of Rs.14524853/- by way of Cenvat Credit on 
 the inputs.  From out of the opening balance and fresh Cenvat credit, the 
 appellant utilized an amount of Rs.1,79,16,028/- for payment of excise 
 duty of clearance of excisable finished goods. 
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 (c) The appellant has taken to the profit and loss account net sales 
 i.e. sales less excise duty.  The appellant has taken to the PandL account 
 net value of purchases i.e. purchase less Cenvat credit.  If both excise 
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 duty and cenvat credit are consolidated to the sales and purchases respectively, then also there would have been not case of under 
 assessment of income equivalent to the amount of Cenvat Credit utilized 
 for payment of excise duty.  This is on account of the fact that Cenvat 
 credit to an extent of Rs.17916028/- has been utilized for payment of 
 excise duty, which otherwise is allowable under sub-clause (3) of Cenvat 
 Credit Rules, 2002. 
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 In view of the analysis above I hold that the Assessing Officer has erred 
 in assessing the amount of Cenvat credit utilized for payment of excise 
 duty as appellant?s income for the year under appeal.? 
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 5. We concur with the aforesaid reasons.  Utilization of Cenvat credit 
 which is included in the price paid, is not income earned.  The sales 
 made includes the Cenvat credit utilized.  The balance unutilized Cenvat 
 credit at the end of the year has been accounted for and not touched by 
 the Assessing Officer.  The book entries mentioned above clearly indicate 
 that the accounts did not distort the profit or reduce the income.  We do 
 not find any substantial question of law arises for consideration.  The 
 appeal is dismissed with no order as to costs. 
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 SANJIV KHANNA, J 
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 R.V.EASWAR, J 
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 FEBRUARY 14, 2012 
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 vld 
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 $ 1 
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