M/S. Bangalore Paints Ltd. Vs. Commissioner of Central Excise, - Court Judgment

Excerpt:
1. the issue in this appeal is the eligibility of turn over tax (herein after referred to tot) claimed as abatement under section 4 of the central excise act, 1944.2. the commissioner (appeals), in the order impugned, has accepted the ground in the departments appeal, that in terms of section 18 (3) of the kst act 1951, no dealer shall collect any amount by way of tot.thereby tot cannot be treated as tax separately; as it does not form part of the price, as tax and is not permitted to be collected, as such it has to be treated as overhead ie. indirect expenses and seller to meet the same out of project resulting in reduction in the project margin. therefore, it gets merged with other costs and it becomes an overhead expense not qualifying as tax on such goods, hence is not deductable. the commissioner (appeals) further relied upon the decision in m/s bata india ltd (1996 (84) elt 164 (sc), concluded that tot which does not from part of cost price as in this case, would not be eligible abatement. since the wholesale price t dealer does not include tot, deduction of tot does not arise and therefore he concluded that the tribunal decision, in the appellants own case cited before him, on the same issue, required no detailed discussion and he allowed the department's appeal.3. we have heard learned jdr and considered the written submission of the consultant sent vide letter dt 6.2.2001, informing his inability to attend the hearing due to self sickness and the grounds in appeal and find- (a) the issue of a state sales tax act legal embargo on collection of tot from the buyer, similar to the one is kst act 1957 section 18 (3)was in west bengal sales tax 1954 section 4 aaa & was the subject matter of an advise of the law ministry in light of supreme court clarificatory order in the case of m/s bombay tyres international (p) ltd dt. 14/15 november 1982. therein the law ministry has opined as follows - "the order passes by the supreme court on 14-11-83 is self-explanatory. it has been clarified therein that turnover tax should be allowed to be deducted from the sale price in order to arrive at the assessable value. the only condition is that the assessee should prove that turn over tax has been paid. 2. in view of the above, the provision in the west bengal sales tax act. 1954 that no dealer shall realise from his purchaser the turnover tax payable by him will not have any relevance. irrespective of whether the turnover tax can be passed on to the consumer or not, the court has ordered that it should be allowed to be deducted from the sale price in order to arrive at the assessable value. 3. apart from the above , section 4 (4) (b) also clarified that value in relation to any excisable goods does not include the amount of the duty of excise, sales tax and other taxes, if any payable on such goods. the central excise and salt act does not stipulate that the taxes which are not to be included in the value are those which will be passed on to the consumer." (b) in this view of boards instructions, law ministry's advise in the basic (sic) for officers, we do not find any grounds or reason on part of the revenue to have not accepted the order if the assistant commissioner, who had granted the tot deductions; this advise, not only binding on revenue, is the correct position in law. tot deductions are eligible. (c) we have perused the decision of m/s bata india ltd (1996 (84) elt 164 (sc) ) and find that the issues decided therein are not deduction of tot, held as permissible, by the constitutional bench of supreme court in the case of m/s bombay tyres international (p) ltd. case, but deductions for purposes of interpreting the exemption notification. the ratio of that decision is not applicable in this case.we also rely on tribunal decision reported in 2000 (118)elt 530 and & 1997 (89)elt 720.4. when we find that the commissioner (appeals) has relied on a decision, we set aside the order, restore the order of the assistant commissioner and allow this appeal.

Judgment:
1. The issue in this appeal is the eligibility of Turn Over Tax (herein after referred to TOT) claimed as abatement under Section 4 of the Central Excise Act, 1944.

2. The Commissioner (Appeals), in the order impugned, has accepted the ground in the departments appeal, that in terms of Section 18 (3) of the KST Act 1951, no dealer shall collect any amount by way of TOT.Thereby TOT cannot be treated as tax separately; as it does not form part of the price, as tax and is not permitted to be collected, as such it has to be treated as overhead ie. indirect expenses and seller to meet the same out of Project resulting in reduction in the Project margin. Therefore, it gets merged with other costs and it becomes an overhead expense not qualifying as tax on such goods, hence is not deductable. The Commissioner (Appeals) further relied upon the decision in M/s Bata India Ltd (1996 (84) ELT 164 (SC), concluded that TOT which does not from part of cost price as in this case, would not be eligible abatement. Since the wholesale price t dealer does not include TOT, deduction of TOT does not arise and therefore he concluded that the Tribunal decision, in the appellants own case cited before him, on the same issue, required no detailed discussion and he allowed the department's appeal.

3. We have heard learned JDR and considered the written submission of the Consultant sent vide letter dt 6.2.2001, informing his inability to attend the hearing due to self sickness and the grounds in appeal and find- (a) The issue of a State Sales Tax Act legal embargo on collection of TOT from the buyer, similar to the one is KST Act 1957 Section 18 (3)was in West Bengal Sales Tax 1954 Section 4 AAA & was the subject matter of an advise of the Law Ministry in light of Supreme Court clarificatory order in the case of M/s Bombay Tyres International (P) Ltd dt. 14/15 November 1982. Therein the Law Ministry has opined as follows - "The order passes by the Supreme Court on 14-11-83 is self-explanatory. It has been clarified therein that turnover tax should be allowed to be deducted from the sale price in order to arrive at the assessable value. The only condition is that the assessee should prove that turn over tax has been paid.

2. In view of the above, the provision in the West Bengal Sales Tax Act. 1954 that no dealer shall realise from his purchaser the turnover tax payable by him will not have any relevance.

Irrespective of whether the turnover tax can be passed on to the consumer or not, the court has ordered that it should be allowed to be deducted from the sale price in order to arrive at the assessable value.

3. Apart from the above , section 4 (4) (b) also clarified that value in relation to any excisable goods does not include the amount of the duty of excise, sales tax and other taxes, if any payable on such goods. The Central Excise and Salt Act does not stipulate that the taxes which are not to be included in the value are those which will be passed on to the consumer." (b) In this view of Boards instructions, Law Ministry's advise in the Basic (SIC) for officers, we do not find any grounds or reason on part of the Revenue to have not accepted the order if the Assistant Commissioner, who had granted the TOT deductions; This advise, not only binding on Revenue, is the correct position in law.

TOT deductions are eligible.

(c) We have perused the decision of M/s Bata India Ltd (1996 (84) ELT 164 (SC) ) and find that the issues decided therein are not deduction of TOT, held as permissible, by the Constitutional Bench of Supreme Court in the case of M/s Bombay Tyres International (P) Ltd. case, but deductions for purposes of interpreting the exemption notification. The ratio of that decision is not applicable in this case.We also rely on Tribunal decision reported in 2000 (118)ELT 530 and & 1997 (89)ELT 720.

4. When we find that the Commissioner (Appeals) has relied on a decision, we set aside the order, restore the order of the Assistant Commissioner and allow this appeal.