Supreme Court: Unpaid excise duty on closing stock not added to income

The Supreme Court, by a two‑judge bench comprising Hon'ble Mr. Justice S.V.N. Bhatti and Hon'ble Mr. Justice N.V. Anjaria, allowed the civil appeal filed by Lakshmi Sugar Mills Co. Ltd and set aside the Assessing Officer’s addition of Rs 69.91 lakh to the assessee’s income under Sec.43B read with Sec.145A.

Lakshmi Sugar Mills had filed its 2005‑06 return showing a loss. The tax audit reported excise duty of Rs 2.80 crore on the closing stock, of which Rs 2.10 crore had been paid and Rs 69.91 lakh remained unpaid. The unpaid portion related to stock that was still stored in a bonded warehouse. The Assessing Officer treated the unpaid duty as a liability and added it to the assessable income, invoking Sec.43B and Sec.145A.

The principal issue was whether the unpaid excise duty on stock that had not been removed from the bonded warehouse could be added to the value of the stock under Sec.43B and whether Sec.145A required inclusion of duties that were not actually paid. The Court observed that liability to pay excise duty arose only upon removal of the goods from the bonded premises. Since the stock remained in the warehouse, the condition of payment before filing the return under Sec.43B was not satisfied, and Sec.145A mandated inclusion of duties actually paid, not merely assessed.

Consequently, the Court set aside the impugned order, deleted the addition of Rs 69.91 lakh, and allowed the civil appeal, confirming that the unpaid duty could not be treated as part of the closing stock’s valuation for income‑tax purposes.

Read the judgment and its head note on DLJ: Lakshmi Sugar Mills Co. Ltd vs Commissioner Of Income Tax Delhi Ii (2026 INSC 1162).