Excise duty liability accrues in the accounting year of manufacture and is deductible even if assessed later under the mercantile accounting system.

1At the instance of the assessee the Income Tax Appellate Tribunal, Cochin Bench referred the following question of law for our opinion.
"Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in having held that the excise duty demands raised relating to this year in the subsequent year was not an admissible deduction?"
We are concerned with the assessment year 1983-84, for which the accounting period ended on 30-6-1982. The assessee paid central excise duty on the goods manufactured by it in accordance with its own calculations. Subsequent to the close of the accounting year relevant to the assessment year 1983-84, the Central Excise Department had raised certain demands based on a different calculation. This additional demand was later paid by the assessee. The assessee also contested the validity of the demand, without success, before the appellate authorities. The assessee paid the additional central excise duty as demanded in respect of the goods manufactured in the accounting year only after the close of the accounting year and claimed the same as a deduction in the accounting year. The Tribunal, upholding the finding of the Assessing Officer and the Commissioner of Income tax (Appeals), held that the additional demand for the central excise duty of Rs. 1,46,476/- was raised by the Central Excise Authorities for the period 1-3-1982 to 30-4-1982 and Rs.73,645/- related to the period from 1-5-1982 to 30-6-1982 and that as the quantification of the two figures were made on 6-10-1982, which fell outside the accounting year which ended on 30-6-1982, the same are not allowable as deduction in the year in question. It is, thereafter, the above question of law was referred for our opinion.

2We heard counsel. Admittedly the method of accounting followed by the assessee is 'mercantile' and the accounting period ended on 30-6-1982. Under S.3 of the Central Excises And Salt Act, 1944 the central excise duty shall be levied and collected on all excisable goods produced or manufactured in India at the rate set forth in the schedule to the Central Excise Act. Excise duty is primarily a duty on production of goods produced or manufactured within India. The tax can be levied at a convenient stage so long as the character of the impost is not lost. The method of collection will not affect the character of excise duty. The collection in point of time need not synchronise with the completion of manufacturing process, for the point of collection is located where the statute declares it will be. In Union of India and Others v. Bombay Tyre International Ltd. 1983 E.L.T. 1896, the Supreme Court held that:
"A duty of excise, according to the Federal Court in the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 (1939) F.C.R. 18 = 1978 E.L.T. (J 269) is a duty ordinarily levied on the manufacturer or producer in respect of the manufacture or production of the commodity taxed. A distinction was drawn between the nature of the tax and the point at which it was collected, and Gwyer, C J. observed that theoretically "there can be no reason why an excise duty should not be imposed even on the retail sale of an article, if the taxing Act so provides. Subject always to the legislative competence of the taxing authority, a duty on home-produced goods will obviously be imposed at the stage which the authority find to be the most convenient and the most lucrative, wherever it may be; but that is a matter of the machinery of the collection, and does not affect the essential nature of the tax. The ultimate incidence of an excise duty, a typical indirect tax, must always be on the consumer, who pays as he consumes or expends; and it continues to be an excise duty, that is, a duty on home-produced or home-manufactured goods, no matter at what stage it is collected."
Further the Supreme Court after examining several cases held:
"We think we have shown sufficiently that while the levy is on t