Income Tax Appellate Tribunal - Hyderabad
Jayalakshmi Cotton & Oil Products (P.) ... vs Income-Tax Officer. on 23 May, 1995
Equivalent citations: [1995]55ITD195(HYD)
ORDER
Per M. Ramakrishna, Judicial Member - In this appeal by the assessee directed against the order of the CIT(A), Vijayawada, dated 22-3-1989 for the assessment year 1985-86, first ground relates to disallowance of provisions of cess on oils of Rs. 2,80,443 under section 43B.
2. Facts in brief relating to this ground are that the assessee made a provision of Rs. 2,80,445 towards cess on oils and claimed that disallowance under section 43B shall be made only in respect of tax or duty and that Cess being neither tax nor duty, no disallowance shall be made in respect of the provision made for the cess. The Assessing Officer observed that this cess was in the nature of excise duty levied by the Central Government, as even the cess on oils is also paid to Central Government and this amount goes to the Consolidated Fund of India. Since according to him, this cess is, in the nature of duty, the same was disallowed under section 43B of the Act, as the amount in question was not paid to the credit of the Government account during the year. On appeal before the CIT(A), it was reiterated for the assessee that the cess in question was neither a tax nor a duty and hence disallowance was uncalled for. Rejecting this contention, the CIT(A), observing that merely by way of nomenclature, the assessee was not justified in claiming the said amount to be neither a tax nor a duty, though in reality it was so, confirmed the view taken by the Assessing Officer. Aggrieved by the order the CIT (A) on this issue, assessee preferred this further appeal on this point before us.
3. Reiterating the contentions urged before the lower authorities, the learned counsel for the assessee submitted that the cess on oils is neither a duty nor a tax, and as such the disallowance made by the Assessing Officer under section 43B is quite unjustified. He also filed before us a copy each of the Vegetable Oils Cess Act, 1983 and the National Oilseeds and Vegetable Oils Development Board Act, 1983, and placing strong reliance on the decisions of the Supreme Court in Om Parkash Agarwal v. Giri Raj Kishori [1987] 164 ITR 376; and of the A.P. High Court decision in Srikakollu Subba Rao & Co. v. Union of India [1988] 173 ITR 708; submitted that the provision made for cess on oils cannot be disallowed in terms of section 43B.
4. The learned Departmental Representative on the other hand strongly supported the orders of the lower authorities and submitted that merely because of nomenclature, the impugned levy cannot be treated as a cess, as made out by the learned counsel for the assessee, though the Act described the levy as a duty of excise on vegetable oils produced in any mill and though the levy so collected goes to the credit of the Consolidated Fund of India.
5. We have considered the rival submissions and perused the orders of the lower authorities, material brought on record and the decisions relied upon by the learned counsel for the assessee. The crucial question that clinches the issue is whether the cess on oils levied under the provisions of Vegetable Oils Cess Act, 1983 is in the nature of a tax or duty or it is in the nature of a cess, as the very nomenclature indicates. In this connection, we may first examine the relevant provisions of Vegetable Oils Cess Act, 1983, a copy of which is filed before us. Sections 3 and 4 of the said Act reads as follows -
"3. Levy and collection of Cess on Vegetable Oils -
(1) There shall be levied and collected by way of cess for the purpose of the National Oilseeds and Vegetable Oils Development Board Act, 1983, a duty of excise on vegetable oils produced in any mill in India at such rate not exceeding five rupees per quintal of vegetable oil, as the Central Government may, from time to time, specify by notifications in the Official Gazette :
Provided that until such rate is specified by the Central Government the duty of excise shall be levied and collected at the rate of one rupee per quintal of vegetable oil.
(2) The duty of excise levied under sub-section (i) shall be in addition to the duty of excise leviable on vegetable oils under the Central Excise and Salt Act, 1944, or any other law for the time being in force.
(3) The duty of excise levied under sub-section (b) shall be payable by the occupier of the mill in which the vegetable oil is produced.
(4) The provisions of the Central Excise and Salt Act, 1944, and the rules made thereunder, including those relating to refunds and exemptions from duty shall, so far as may be apply in relation to the levy and collection of the said duty of excise on vegetable oils under that Act.
(a) For such notification see Gaz. of Ind. 8-12-1983, Pt. II, section 3(i), Ext. P. 1 (No. 466).
4. Crediting proceeds of duty to the Consolidated Fund of India -
The proceeds of the duty of excise levied under sub-section (1) of section 3 shall first be credited to the Consolidated Fund of India and the Central Government may, if Parliament by appropriation made by law in this behalf, so provides pay to the Board, from time to time, from out of such proceeds (after deducting the cost of collection) such sums of money as it may think fit for being utilised for the purposes of the National Oilseeds and Vegetable Oils Development Board Act, 1983."
From the above provisions of the Vegetable Oils Cess Act, it is clear that the levy under the said Act, though made by way of cess for the purposes of the National Oilseeds and Vegetable Oils Development Board Act, 1983, it is in the nature of a duty of excise on vegetable oils produced in any mill in India. The said duty was specified to be in addition to the duty of excise leviable on vegetable oils under the Central Excise and Salt Act, 1944, and in all matters relating to refunds and exemptions from the said duty, the provisions of the Central Excise and Salt Act, 1944 were made applicable. It is further clear, that the proceeds of the duty of excise collected under sub-section (4) of section 3 of the Vegetable Oil Cess Act, shall first be credited to the Consolidated Fund of India, and the Central Government may, if Parliament by appropriation made by law in this behalf, so provides pay to the Board from time to time from out of the proceeds (after deducting the cost of collection) such sums of money as it may think fit for being utilised for the purposes of the National Oilseeds and Vegetable Oils Development Board Act, 1983. Thus, there is a discretion vested with the Central Government with regard to payment of monies to the Board from out of the proceeds collected under the Act after deducting the cost of collection.
6. The Statement of Objects and Reasons for the National Oilseeds and Vegetable Oils Development Board Act, 1983, in paras-4 to 6 states as follows -
"4. In order to deal effectively with these problems, under conditions of growing supply and demand gap in the vegetable oils sector, it is necessary to have an integrated approach towards oilseeds production, processing, procurement, marketing, storage, prices and quality control. The Bill seeks to provide for the integrated development of the oil seeds industry (including coconut industry) and the vegetable oils industry under the control of the Union and for the establishment of a Board to be known as the National Oilseeds and Vegetable Oils Development Board. The Board will provide technical, financial and other assistance for the promotion of seeds industry. It is proposed to vest the Board with adequate powers to deal with various aspects of oil seeds industry and the vegetable oils industry.
5. The Board shall have representatives of the concerned Ministries of the Central Government, oil seeds growing states, growers of oil seeds, vegetable oils industry and other connected interests.
6. The finances of the Board will consist of sums provided by the Central Government out of the proceeds of cess on vegetable oils (vide Vegetable Oils Cess Bill 1983) grants or loans made by the Central Government or by any other person or donations from the State Governments, voluntary organisations and other institutions. The Board will also have power to borrow money, with the approval of the Central Government from the public by the issue or sale of Bonds and debentures and from any bank or any other authorities, organisation or institution."
Section 9 of the National Oilseeds and Vegetable Oils Development Board Act, provides for the functions of the Board.
7. In the case of Om Parkash Agarwal (supra), the Honble Supreme Court was concerned with the question whether add velorem cess levied on dealers of agricultural produce under section 3 of the Haryana Rural Development Fund Act, 1983 was a fee or a tax. Drawing a distinction between a tax and a fee, the Supreme Court noted that such a distinction is recognised by the Constitution, which while empowering Parliament and the State Legislature to levy taxes under the relevant entries in List I and List II respectively, also refers to the power of the appropriate Legislature to levy fees in respect of matters specified in the said Lists and also in the Concurrent List and tests have been laid down by Supreme Court for determining the character of a levy. It noted that in determining a levy as a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area or class, it being of no consequence that the State may ultimately or indirectly be benefited by it. It also noted that the primary meaning of taxation is raising money for purposes of Government by means of contributions from individual persons, a compulsory exaction of money by a public authority for public purposes enforceable at law and not a payment for services rendered. The Court noted the famous statement of Lantham, C.J. in Matthews v. Chicory Marketing Board 60 CLR 263 that "A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not a payment for services rendered". It also notes that the said statement has been quoted with approval the Supreme Court in Commissioner, Hindu Religious Endowments v. Lakshmindra Thirtha Swamiar of Sri Shirur Mutt [1954] SCR 1005, and in that connection extracted relevant portion of the opinion rendered by the Constitution Bench, delivered by Mukherjea, J. From the said portion extracted, the Court noted the three principal characteristics of a tax noticed by Mukherjea, J. as follows -
"(i) that it is imposed under statutory power without the taxpayers consent and the payment is enforced by law; (ii) that it is an imposition made for public purposes without reference to any special benefit conferred on the payer of the tax; and (iii) that it is a part of the common burden, the quantum of imposition upon the taxpayer depending generally upon the capacity of the taxpayer to pay."
The Supreme Court then referred to the observations of Mukherjea, J. on the nature of fee. It then referred to the decision of the Supreme Court in Sreenivasa General Traders 3 SCR 843; in Municipal Corpn. of Delhi v. Mohd. Yasin [1983] 142 ITR 737 and in Southern Pharmaceuticals & Chemicals v. State of Kerala [1982] 1 SCR 519 and noted that in none of those cases, it has been stated that a fee may be validly imposed when no services either directly or indirectly were rendered to the person from who it was collected. Drawing distinction between the facts emanating in those cases with the facts before it, the Supreme Court noted that -
"As mentioned earlier, a cess collected under section 3 of the Act is no doubt required to be credited to the Fund constituted under section 4(1) of the Act. The Fund, however, vests in the State Government and not in the municipality or a marketing committee or any other local authority having limited functions specified in the enactment under which it is constituted. The State Government is entitled under sub-section (5) of section 4 of the Act to spend the cess credited to the Fund in the rural areas, in connection with the development of roads, hospitals, means of communication, water supply, sanitation facilities and for the welfare of agriculture labour or for any other scheme approved by the State Government for the development of the rural areas. This sub-section authorises the State Government to spend the money credited to the Fund virtually on any object which the State Government considers to be the development of rural areas. The definition of the expression rural area in section 2(h) of the Act, which is extracted above is as vague as it can be. It means an area the population of which does not exceed 20,000 persons. It need not necessarily be a local area as it is ordinarily understood. Ordinarily, a local area means a municipal corporation, a town municipality, a panchayat, a notified area, a sanitary board, etc...."
Ultimately, observing that it is constitutionally impermissible for any State Government to collect any amount which is not strictly of the nature of a fee in the guise of a fee, the Supreme Court declared the Haryana Rural Development Fund Act, 1983 as unconstitutional on the ground that the State Legislature was not competent to enact it.
Considering the nature of the levy made under Vegetable Oils Cess Act, 1983, in the light of the observations of the Supreme Court on the nature of a tax made in the case of Om Parkash Agarwal (supra), we find that just as in that case, in the case before use also, the levy collected under the Vegetable Oils Cess Act vests in the Central Government, as it is first credited to the Consolidated Fund of India, and not in the municipality or marketing committee or any other local authority having limited functions specified in the enactment under which it is constituted. As already noted above, in the case before us also, there is discretion vested in the Government under the Vegetable Oils Cess Act, 1983, on the payments to be made by it to the National Oilseeds and Vegetable Oils Development Board, from out of the collections made under the Vegetable Oils Cess Act, after deducting the expenditure on collection. Further, the enactment itself envisaged the Cess on oil as a duty of excise on vegetable oils produced in any mill in India; as a duty in addition to the duty of excise leviable on vegetable oils under the Central Excise and Salt Act, 1944, or any other law for the time being in force; and even made the provisions of Central Excise and Salt Act, 1944 applicable in the matters of refund or exemption from duty of cess on oils under the Vegetable Oils Cess Act, 1983. In this view of the matter, merely because it is termed as cess on vegetable oils, notwithstanding the letter and spirit of the enactment, it cannot be said that it is only a cess and not a duty or tax.
8. The decision of the A.P. High Court in the case of Srikakollu Subba Rao & Co. (supra), relied upon by the learned counsel for the assessee for drawing in analogy between the agricultural market cess considered in that case and the cess on oils in the case on hand, is of no application to the facts of the case on hand, for the simple reason that while the cess on oils collected in the case before us first goes to the credit of the Consolidated Fund of India in the first place, and then the Central Government may make payments out of it, after deducting expenses on collection, to the Board from time to time, the agricultural market cess directly vests with the market committee which applies the same for the purpose and objects, for which it was constituted. In this view of the matter, the said decision had no application to the facts of the case on hand.
9. Considering the totality of facts and circumstances of the case and nature of the cess on oils in the light of the provision of the Vegetable Oils Cess Act, 1983, we are inclined to agree with the view taken by the authorities below that it is in the nature of excise duty, and as such, it is liable to be disallowed under section 43B of the I. T. Act. Consequently, we uphold the disallowance made by the Assessing Officer, and reject the ground of the assessee in this behalf.
10. to 13. These paras are not reproduce here as they involve minor issues.