Karnataka High Court
The Deputy Commissioner Of Commercial ... vs Hindustan Lever Limited (Lipton ... on 25 January, 2007
Equivalent citations: (2007)10VST330(KARN)
Bench: R. Gururajan, N. Ananda
ORDER
Page 0690
1. State of Karnataka is before us aggrieved by the orders passed in STA Nos. 279/1999, 280/1999, 323, 444, 497 and 498/2001 and 296/2003 dated 27.12.2003 in this revision petition.
2. Facts as narrated in the revision petition are as under:
Respondent is a Company registered under the Companies Act. It is a registered dealer under the Karnataka Sales Tax Act and Central Sales Tax Act (for short 'the Acts'). Respondent was earlier known as Brooke Bond Lipton India Limited (Lipton Division) and was amalgamated with the respondent Company w.e.f. 21.3.1997. Respondent has established a new industrial unit engaged in the production of blended packed teas at Dharwad since 8.9.1992 and 6.5.1993 respectively. Respondent availed sales tax exemption benefit for a period of six years from the date of commencement of commercial production in terms of the scheme evolved by the Government vide Government Order dated 27.9.1990 and sales tax exemption Notification dated 19.6.1991.
3. The Assistant Commissioner of Commercial Tax (Intl), Kolar visited the premises of the respondent as on 20.12.1996. According to the revision petition, he noticed the contravention of the conditions laid down under Explanation III(e) to the Notification dated 19.6.1991. He therefore issued a Provisional Notice dated 12.4.1997 under Section 28(6) of the KST Act 1957 for the assessment year 1995-96 on the footing that the respondent which produces several branded blended packed teas at Dharwad Unit also produces the very same branded blended packed teas at other units of the respondent within the State and elsewhere and markets these products along with teas produced at Dharwad Unit (herein after referred to as 'Dharwad Tea' for brevity) and teas produced at other units (hereinafter referred to as Non-Dharwad teas), which do not Page 0691 enjoy the benefit of sales tax exemption, at the same price. The authority on the basis of a detailed study held that the respondent had included sales tax and had taken into consideration the sales tax in fixing the sale price of Dharwad tea. In these circumstances a reply was sought and the reply was obtained. Thereafter after hearing, an adverse order was passed for the assessment years 1992-93, 1993-94, 1994-95, 1995-96, 1996-97 and 1997-98 in terms of an order dated 30.3.1999, 31.7.1999, 22.2.2000 and 5.3.2002 respectively Under Section 12(3) and 12(A) of the KST Act. Same was challenged unsuccessfully before the appellate authority. Second appeals were filed before the Tribunal. Tribunal referred the cases to a Full Bench consisting of three District Judge members and two Commercial Tax members. The Tribunal, after hearing has chosen to accept the case of the respondent. It is in these circumstances, the State is before us raising several grounds in terms of the revision petition. The following three questions of law are framed for our consideration:
1) Whether the consideration of sales tax in fixing the price of the goods and sale of such goods along with identical goods on which taxes are collected along with the price has not resulted in an implied collection of tax in respect of such sales tax exempted goods?
2) Whether the assessee who produces identical products, one which is exempt from sales tax and one which sales tax is payable, both being priced on par and sold off the same shelf, could not lead to the presumption that there is a deemed collection and inclusion of sales tax in the price fixed?
3) Whether the legend 'inclusive of taxes' found on the packets of Dharwad and Non-Dharwad tea, the distinction as such being lost on the consumer, whether it can not be said that taxes are included and collected on the tax exempted tea.
4. Notice was issued. Assessee is represented by a Counsel.
5. Learned Advocate General appearing for the State would take us through the material on record to say that an exemption was granted in terms of Section 8A of the Act. According to him, a notification was issued by the Government providing for exemption of sales tax concession. Explanation III of the notification provides for the notification being not applicable to certain units and under certain circumstances. Explanation 3a(e) provides for non-application of the notification to the turnovers on which any tax is collected by a new industrial unit under the provision of KST Act of 1957.
(Underlining is by us).
6. Learned Advocate General says that in the case on hand, Dharwad tea is entitled for exemption provided in terms of Notification. No sales tax can be collected by the respondent in terms of the notification for the purpose of exemption. Learned Advocate General argues that the material on record would show that the respondent did consider the sales tax for the purpose of sale price in terms of the material available on record. He refers to us the various materials on record in the case on hand to contend that a collection Page 0692 was factually made contrary to the notification and that therefore the authorities are justified in denying exemption in the case on hand. He finds fault with the order of the Tribunal by contending that the Tribunal is wrong in holding in favour of the assessee despite sale consideration in the sale price fixed by the assessee. He relies on various case laws in support of his submissions.
7. Per contra, learned Counsel for the assessee invites our attention to the notification in the case on hand to say that the Government did provide for concession in respect of turnovers of tea manufactured at Dharwad. There is absolutely no collection made by the Company in terms of the material available on record. He says by mis-understanding the material facts the respondents have chosen to issue notices and have chosen to initiate proceedings contrary to the material placed by the Company. He says that collection in terms of the sales tax stands on a totally different footing in terms of the law declared by the Courts of law in particular, the Apex Court. Learned Counsel further says that there is no collection at all warranting for any proceedings. He invites our attention to various materials on record by way of supporting the order of the Tribunal. He also relies on various case laws.
8. After hearing, we have carefully perused the material placed on record.
9. All the three questions of law can be considered together since each question, to a certain extent, overlaps the other questions of law. Admitted facts would reveal that the State Government has chosen to issue a notification dated 27.9.1990 bearing No. CI 138 SPC 190(P). In the said notification, the Government was pleased to sanction the revised package of incentives and concessions for new industrial investments in the State with effect from 1.10.1990. For the purpose of applicability of this package, the Taluks of the State are classified into four zones. We are concerned only with Dharwad Zone and it falls with Zone IV covering six Taluks and three growth centres to be set up in Hassan, Raichur and Dharwad. Sales Tax Concession is provided in Clause IV of the Notification. It provides for concession to tiny, small, medium and large-scale industries. All new industrial units in the above sectors shall be exempted from payments of ST (CST & KST) on the output of such industrial units and in terms of the notification. In so far as Zone IV is concerned, the Government granted 100 per cent exemption for a period of five years from the date of commencement of commercial production. Special concession shall be given to thrust sectors in so far as Clause V is concerned. Government granted 100 per cent exemption for a period of six years from the date of commencement of commercial production. It also provided for an eligibility certificate from the Department of I and C specifying therein the category of Thrust Sector under which the industry is considered and the special concessions that are to be extended. Sanction of incentives and concession as per this Government order shall be subject to certain terms and conditions specified in detail in Clause XIVs. The said notification was issued with the concurrence of Finance Department in terms of the notification. Page 0693 Thereafter, the Government issued another notification on 19.6.1991 in exercise of the powers conferred by Sub-section (1) of Section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957). The Government exempted the tax payable in the said Act in respect of the goods manufactured and sold by new industrial units mentioned in Column (2) located in the zones specified in Column (3) to the extent indicated in column (4) and during the period mentioned in column (5). A new industrial unit has been defined in terms of the explanation found at page 152. Explanation would provide for exemption being available to an existing tiny/SSI/medium/large scale industrial unit registered as such with the Director of Industries and Commerce, subject to certain conditions mentioned therein. Explanation III would provide for non-applicability of the notification to new industrial units to the turnovers on which any tax is collected to a new industrial unit under the provisions of the KST Act.
10. From the material on record, it is seen that on an earlier occasion, the department took a view that the activity of blending tea and packing it did not amount to an activity of manufacture and that therefore, the respondent was not entitled for exemption. The same was challenged by way of writ petition in this Court. This Court rejected the writ petition in terms of an order dated 21.12.1993. Those orders were challenged before the Supreme Court in Civil Appeal Nos. 5428-29/1994. Apex Court, after hearing, allowed the appeals and set aside the order of this Court and remanded the matter for re-decision. The appellate court also imposed a cost of Rs. 50,000/- in that case in terms of the order dated 8.10.1996. After remand, the matter was heard. After hearing, a Division Bench of this Court in the Judgment reported in 109 STC 265 had chosen to hold that the products of the industrial unit of the petitioner at Dharwad are entitled to exemption from sales tax as envisaged under the two notifications. The State thereafter filed SLPs before the apex court and the apex court dismissed the Special Leave Petitions on merits.
11. Thereafter, the department undertook a search of the office premises on 20.12.1996 and issued a provisional notice dated 12.4.1997. In the provisional notice, it is stated that the respondent had claimed exemption to sales tax on the sale of tea produced at its factory at Dharwad by virtue of being a 'new industry' covered under the Government Notification dated 19.6.1991, it had in the price charged to its customers including sales tax and that factor has been taken into consideration by respondent in fixing the sale price of tea and thereby contravened the specific condition laid down under Explanation III(e) of the Government Notification dated 19.6.1991. Show cause notice further stated that on verification of books of accounts, it would reveal that for the tea produced at Dharwad factory on which turnovers it had claimed exemption to sales tax as stated in para-3, the price charged to its customer includes sales tax and that factor has been taken into consideration by the Company in fixing the price. It was also stated that the price circulars issued periodically for the teas produced at Dharwad would contain the Page 0694 End Consumer Prices (ECP) and it includes local taxes. Ultimately, the Assistant Commissioner of Commercial Taxes (Int.), Kolar issued a Notification under Section 28(6) that the respondent had conceded the sales tax while fixing the price of teas produced at Dharwad factory which is included in the sale price and concluded by the company and is disentitled to the benefit of sales tax exemption under Notification dated 19.6.1991. Government gave an opportunity in terms of Section 28(6) of the Act and ask the respondent to show cause against the notice within seven days from the date of receipt of a notice.
12. On receipt of notice, a detailed reply was submitted by the respondent. Respondent mentioned about the background of the case and also referred to various material facts in the body of the reply. The essential contention of the respondent was that they had not violated the condition in terms of the exemption notification. They would explain their stand with reference to case laws in terms of the detailed reply running to several pages as we see from pages 98 to 121 of the paper-book. They have also enclosed various annexures along with the same. Thereafter, the Commissioner passed a detailed order, and, in the order he referred to various material facts and ultimately came to a conclusion that the provisional assessment notice has to be confirmed thereby disallowing the exemption claimed on the turnover on the tea produced at Dharwad factory. Aggrieved by the confirmatory order, an appeal was filed to the Joint Commissioner of Commercial Taxes (Appeals), Bangalore Division. The Joint Commissioner heard the parties and thereafter has chosen to accept the order confirming the provisional notice in terms of the order passed by the authority. Aggrieved by the same, a second appeal was filed before the Karnataka Appellate Tribunal (for short, "the Tribunal"). The Tribunal after hearing has chosen to pass orders on 21.12.2003 allowing the appeals thereby setting aside the orders of the authorities below. The Tribunal directed the assessing authority to pass assessment order afresh by extending the benefit of sales tax incentives/exemptions as envisaged in the Government Order dated 27.9.1990 and the Government Order dated 19.6.1991. However, out of five learned Members of the Bench, a dissenting judgment is made by Sri K.A. Uthappa, Commercial Taxes Member. Government is before us aggrieved by the majority decision of the Tribunal in the matter of granting sales tax exemption to the respondent assessee.
13. Three questions are framed by the petitioner for our consideration. All three questions have some link with each other, and, and hence we would consider all three questions of law together.
14. Learned Advocate General invited our attention to the judgment of the Supreme Court in State of Orissa v. Sudhansu Misra and Ors. and also the judgment of the House of Lords and Privy Council in Page 0695 Quinn v. Leathem in (1991) 1991 PC 495. The apex court in (supra) has chosen to say that : "A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in it. It is not a profitable task to extract a sentence here and there from a judgment and to build upon it. (1991) PC 495 was referred to by the apex court. In (1991) PC 495 Quinn v. Leathem, the House of Lords have ruled that every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. It further ruled that a case is only an authority for what it actually decides.
15. Learned Advocate General also places before us another judgment of the apex court in Ambika Quarry Works, Etc. v. State of Gujarat and Ors. . The apex court in para 18 of its judgment has ruled that the ratio of any decision must be understood in the background of the facts of that case; and that it had been said long time ago that a case is only an authority for what it actually decides and not what logically follows from it.
16. In the light of the law laid down by the apex court with regard to the understanding of case laws, we have to see as to whether the Tribunal was justified in granting relief to the respondent assessee.
17. The Tribunal in its judgment has chosen to frame nine issues and they have been answered with detailed reasons. Two notifications are available on record with regard to exemption if favour of the assessee. First notification is dated 27.9.1990. In the said notification, the Government has provided exemption of payment of sales tax for five years for specific industries. Dharwad district enjoys benefit in terms of the Notification. Second Notification was issued on 19.6.1991. In the said second notification, Government has provided exemption in respect of goods manufactured and sold by new industrial units. On an earlier occasion, the Government has denied exemption in terms of the second notification. Same was successfully challenged before the apex court. Apex Court remitted the matter back and thereafter the Division Bench of this Court ordered that the products of the industrial units of the petitioner at Dharwad are entitled to exemption from sales tax as envisaged under two notifications.
18. In course of arguments, we are confronted with the directions in terms of the Division Bench judgment in 109 STC 265 (KAR) Brooke Bond Lipton India Limited v. State of Karnataka, and arguments were advances with regard to entitlement in the light of the judgment. Learned Advocate General Page 0696 ultimately clarified to us that this judgment would not come in the way of our considering the present petition since the said judgment has to be understood in the given circumstances, and, in fact, the said judgment also makes it clear that the entitlement to exemption is as envisaged under the said two notifications. Learned Advocate General says that if there is violation of the notifications, then entitlement benefit gets evicted at the hands of the authorities. We are satisfied with the submission of the learned Advocate General with regard to consideration of the entitlement and also the disallowance on the ground of violation of the said notifications. Not much of arguments were advanced with regard to the applicability of the said notifications. In fact, parties addressed arguments with regard to a clause provided for disentitlement in terms of the notifications. The Notification provides for disentitlement in the event of collection of sales tax by a company. The entire process started in the light of search carried out by the Department. Noticing certain documents with regard to price structure to arrive at ECP, the authority issued a notification under Section 28(6) of the Karnataka Sales Tax Act, 1957 (for short, "the Act"). Authorities notices price structure in terms of the documents seized and noticed sales tax benefit was also taken into consideration for the purpose of price structure. In fact, they have also noticed certain invoices for the purpose of collection of sales tax contrary to the notification. It was on that basis, proceedings were initiated. As mentioned earlier, proposition notice was confirmed and that confirmation was upheld by the appellate authority. It is only the Tribunal that has set aside the confirmatory order passed under Section 28(6) of the Act. The Tribunal in its detailed order has ruled that sales invoice of Dharwad tea carries a specific legend reading as under:
29. It is an admitted fact that the sale Invoices of Dharwad tea carries a specific legend.
Goods sold under this invoice are fully exempted from levy of KST/GST under exemption certificate No. IDF/E3/50-ST/92-93 dated 1.12.1992 by the Director of Industries and Commerce Department, Government of Karnataka, Bangalore as applicable to our newly set up tea factory at Dharwad. We are on rolls of Asst. Commissioner, ST Bangalore. Our principal place of Business is at No. 2, 4th Cross, MM Compound, Mysore Road, Bangalore OR Goods sold under this invoice are fully exempted from levy of KST/CST in terms of Government of Karnataka's Order No.C/1/138/SPC/90 (GO dated 27.9.1990 and Finance Department Notification NO. FD/239/CSI/90 dated 19.6.1991 and Industries and Commerce Department Certificate No. IDF/FS/91-24/93-94 dated 5.6.1993 applicable to our newly set up factory at Dharwad (Kar). Our principal place of business is at Books Fields, Marathahalli.
The Tribunal has also noticed that the respondent in its books of accounts has credited the entire sale proceeds to the sale consideration and it was not bifurcated as sale price and tax collected. The Tribunal Page 0697 after noticing these facts and after noticing of no-agreement to pay tax by the customer and collection of tax by the company, held that it cannot be inferred that it has collected tax when there is a specific legend in the invoice that the company was exempt from paying tax. Merely by printing MRP price inclusive of all taxes on the packaged Tea, would not ipso facto prove the collection of tax. The Tribunal also ruled that the Department has failed to prove collection of the same. What is argued before us is that they though there will not be a direction for collection of tax, but there is consideration of tax on the sale price, and that is nothing but a collection in violation of the Notification.
19. Several case laws have been relied upon by both the parties. The State would rely upon (2005) 141 STC 227 T. Stanes & Co. Ltd. v. State of Tamil Nadu and Anr., to contend that there is collection by the Department. State also would strongly rely on (1975) 36 STC 206 The State of Mysore v. Hanjarimal Saremalji and (1970) 26 STC 283 Spencer & Co. Ltd v. The State of Mysore. Per contra, respondent would rely strongly on a judgment reported in (1983) 52 STC 227 Ahmedabad Steel Craft and Rolling mills v. State of Gujarat, (1971) 28 STC 331 Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore and (1973) 32 STC 194 Lipton (India) Limited v. State of Tamil Nadu.
20. The notifications, as mentioned earlier, would not be applicable to a new industrial unit on the turnover on which any tax is collected by a new industrial unit under the provisions of the Act. Non-applicability of the notification is with reference to turnover on which any tax is collected under the provision of the Act. 'Turnover' has been defined in Section 2(v) of the Act, reading as under:
"Turnover" means the aggregate amount for which goods are bought or sold, or supplied or distributed or delivered or otherwise disposed of in any of the ways referred to in Clause (t) by a dealer, either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration.
"Total turnover" is defined in Section 2(1), reading as under:
Total turnover" means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India.
Page 0698 "Sale" has been defined in Section 2(1) of the Act. Section 18 provides for collection of tax by dealers.
21. In the light of specific clause, only in the event of collection of tax in terms of Act, the exemption can be denied by the State in terms of the Notifications. Learned Advocate General would show to us the price structure to say that there is consideration of sales tax component in terms of the material available on record. In fact, he referred to us Dharwad and non-Dharwad tea to say that prices are same and that therefore there is consideration of sale tax component for price structure and that would amount collection of tax. Collection of tax has been considered by several courts. Apex court in (2005) 141 STC 227 T. Stanes & Co. Ltd. v. State of Tamil Nadu and Anr., has considered the word 'collection' in paragraphs 3 and 4 of its judgment, reading as under:
3. The question involved is whether Section 22 of the Madras Sales Tax Act bars the appellant from collecting in any manner amounts paid by them to the seller by way of tax. The relevant portion of Section 22 reads as under:
2.2. Collection of tax by dealer.- (1) No person who is not a registered dealer shall collect any amount by way of tax or purporting to be by way of tax under this Act; and no registered dealer shall make any such collection except in accordance with the provisions of this Act and the Rules made thereunder:
Provided that nothing in this sub-section shall apply to the collection of an amount by a registered dealer, towards the amount of tax already suffered under this Act, in respect of goods, the sale or purchase price of which is controlled by any law in force.
4. The wording of the section is very clear. The term "collect" would include in its ambit collection in any manner. Purported recoupment or recovery would be nothing else but collection. Once the dealer is prevented from collecting, it is not open to say that he is not collecting but is only recouping. We find ourselves unable to accept the reasoning given by the High Court in the Metal Sales Corporation's case [(1983) 52 STC 392]. Mere case of a different nomenclature or language cannot be allowed to defeat the clear provision of the section. If the reasoning of the High Court in Metal Sales Corporation's case is accepted, Section 22 would be rendered nugatory. It would enable dealers to collect by just terming the collection as recoupment, recovery, etc. The recoupment, recovery, collection is nothing else but the amount paid by the assessee to its seller towards the tax liability of the seller. Further recovery, recoupment or collection from their buyers is what is prevented by Section 22. In our view, the High Court is absolutely right in the reasoning given in the impugned judgment. The law laid down in the Metal Sales Corporation's case is not good law and stands overruled. Accordingly, the special leave petitions stand dismissed. There will be no order as to costs.
Page 0699
22. This Court in The State of Mysore v. Hanjarimal Saremalji 36 STC 206, would hold that the : "What has got to be ascertained is whether any amount by way of sales tax is intended to be passed on to the buyer as a bargain in the transaction. The process by which the matter could be determined has been explained by this Court in Spencer and Company Limited v. The State of Mysore (1970) 26 STC 283. It is therefore clear that the matter has to be investigated as to whether the assessee has not collected sales tax in the given circumstances. In 26 STC 283 (supra), this Court notices the phrase "Amounts collected by way of tax". After noticing, this Court ruled reading as under:
The clause "all amounts collected by way of tax under the Act by a dealer" in Rule 6(4)(h) and Section 18, in our opinion, means all amounts collected in the character of or as being tax, under the Act. The evidence concerning the transaction must show that the buyer had agreed to pay sales tax in addition to the price and the seller's account books should disclose such amounts separately. Where there is absence of such evidence, it cannot be said that amounts were collected by the dealer in the character of or as being tax. Therefore, in our judgment, a dealer can be said to have collected the amounts by way of tax under the Act where from the facts and circumstances, it can be inferred that the seller intended to pass on the tax and the buyer had agreed to pay the sales tax in addition to the price and that in the accounts of the dealer he has shown such amounts separately. If the cash memo or the invoice separately shows the sales tax passed on to the buyer, no difficulty arises. But even in the absence of evidence furnished in the cash memos or bills, it may be possible for a dealer to establish that he has collected the amounts by way of tax under the Act. There are dealers who publish catalogues which show the price exclusive of sales tax. The intending buyer can see from the catalogue what the price of the goods exclusive of sales tax is. If such a dealer shows a consolidated figure in the invoice or cash memo, he will be entitled to the deduction, provided in his accounts he has shown the collection separately. There are dealers who exhibit price lists of articles which are open to inspection by the customers. If the price list shows the price of the goods exclusive of sales tax, it is not necessary that the bill should show the price and sales tax separately. There may be correspondence between the parties and such correspondence may show the price of the goods exclusive of sales tax. If it is possible to find out from the accounts maintained and other documentary evidence that the dealer has fixed a price exclusive of sales tax for his goods and that the cash memos give a consolidated figure inclusive of sales tax, in such a case also, the dealer can be said to have collected the amount by way of sales tax under the Act. But if the dealer offers a price without specifically mentioning that it is Page 0700 exclusive of sales tax, the inference to be drawn is that the dealer does not intend to pass on the tax to the buyer and in that case he cannot claim any deduction.
The Madras High Court in (1973) 32 STC 194 Lipton (India) Limited v. State of Tamil Nadu, has ruled at page 197 reading as under:
The contention on behalf of the assessee before us is that the bills rendered by it should be read along with the price list, already supplied to the purchasers, and that if so read, the inclusive sum mentioned in the bill can easily be taken to represent the price proper as also the sales tax payable thereon. The learned Counsel for the assessee contends that the Tribunal as well as the lower authorities have erred in completely overlooking the price list, which formed the basis of the bargain between the assessee and his purchasers. The learned Counsel does not dispute the fact that in cases such as the last two items mentioned in the price list, where the assessee has charged an inclusive price for the goods sold by him without any indication as to whether he had intended to pass on the sales tax to his purchaser, it can be taken that the inclusive price will come under the definition of the turnover. But, what the learned Counsel submits is that in the peculiar facts of this case, where all sales are based on the price list supplied to the purchasers, the purchaser is clearly made aware of the fact as to what portion of the billed amount represents the net price for the tea and what portion represents the sales tax, and that the Tribunal is not right in its finding that the amount billed for did not in fact include the sales tax.
23. As against this ruling, the assessee relies on a judgment of the Gujarat High Court in the case of Ahmedabad Steel Craft and Rolling Mills v. State of Gujarat (1983) 52 STC 227. The Gujarat High Court in the said case has observed as under:
In the instant case, the Tribunal having regard to the language of the relevant provisions and on the facts and in the circumstances of the case, came to a definite conclusion that the assessee had not recovered any amount by way of tax from the persons to whom it sold the goods in question and that the assessee had recovered only the sale price and that such sale price, even assuming that it contains the tax element, could not be taken as comprehending collection of an amount by way of tax. In terms, the Tribunal found that no amount was recovered by way of tax under Section 56 and that, therefore, the prohibition enacted by Section 56 was not breached and that the penalty under Section 46(1)(ii) was not leviable and that the assessee was entitled to succeed in the penalty proceedings. In our opinion, the Tribunal, in view of these clear and unequivocal findings, had no option but to quash the penalty orders and to order the refund of the Page 0701 amounts retained by way of penalty. The further exercise undertaken by the Tribunal appears to us to be wholly unjustified and unwarranted having regard to the clear findings recorded by it as aforesaid. In the face of such findings, there was no room for any further exercise based on the assumption that even if what was collected was tax, in fact, was leviable in view of the decision of the Supreme Court in Pyare Lal's case . Such an exercise, even assuming that it was permissible, would have been required to be undertaken only if the Tribunal had found that the assessee had in fact collected any amount by way of tax.
24. The Supreme Court in the case of Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore (1971) 28 STC 47, would hold reading as under:
In these appeals, it is not necessary to examine the relevance of that provision. But that provision does not give any statutory power to collect sales tax as such from any class of buyers. There is no other provision in the Act which confers such a power on the dealers. Unless the price of an article is controlled, it is always open to the buyer and the seller to agree upon the price to be payable. While doing so it is open to the dealer to include in Page 0702 the price the tax payable by him to the Government. If he does so, he cannot be said to be collecting the tax payable by him from his buyers. The levy and collection of tax is regulated by law and not by contract. So long as there is no law empowering the dealer to collect tax from his buyer or seller, there is no legal basis for saying that the dealer is entitled to collect the tax payable by him from his buyer or seller. Whatever collection that may be made by the dealer from his customers the same can only be considered as valuable consideration for the goods sold.
25. Let us see as to whether consideration of sales tax in the price structure would be a collection of tax in terms of the Sales Tax Act. The Supreme Court in Delhi Cloth & General Mills Co. Ltd. (supra), has categorically ruled that : "While doing so it is open to the dealer to include in the price the tax payable by him to the Government. If he does so, he cannot be said to be collecting the tax payable by him from his buyers." The Supreme Court further ruled that when the seller passes on his tax liability to the buyer, the amount recovered by the dealer is really part of the entire consideration paid by the buyer and the distinction between the two amounts - tax and price - loses all significance. This judgment squarely applies to the facts of the case. Learned Advocate general tried to distinguish the same stating that the Court was not considering the aspect involved in the case on hand. We are not prepared to accept his submission. Apex Court in unmistakable terms has stated that it is open to the dealer to include in the price the tax payable by him to the Government and that if does so, he cannot collect the tax payable in terms of the Act. In fact, Gujarat High Court in the case of Ahmedabad Steel Craft And Rolling Mills (supra) has chosen to consider tills very question, and, thereafter, it has categorically ruled that even assuming that it contains tax element, sale price could not be taken as comprehending collection of an amount by way of tax. In the case on hand, the Tribunal after noticing the apex court ruling with regard to collection of tax, has rightly chosen, in our view, to hold in favour of the assessee. In fact, the Tribunal notices in its judgment that 'consideration' concept cannot be equated to 'collection' in terms of the Act. We are in agreement with the findings of the Tribunal, particularly in the light of the binding judgment of the apex court while considering the word 'collection' in terms of Sales Tax Laws.
26. However, strong reliance is placed on the subsequent ruling of the Supreme Court in T. Stones & Co. Ltd. v. State Of Tamil Nadu and Anr. (2005) 141 STC 227. At the first blush, one may hold that there is collection in the case on hand. But, if the judgment is read as a whole, it would show that in the said case, dealer was recouping the sales tax as we see from the facts of the case. It was in the context of recoupment by a different nomenclature, the Supreme Court ruled that recoupment by change of nomenclature would certainly amount to 'Collection'. That is not the case here. There is no change of nomenclature as in the case of T. Stanes And Company Limited (supra). Moreover, in the present case, it is only consideration of tax component in the sales tax. That judgment is distinguishable on facts. In fact, this Court in the case of State of Mysore v. Hanjarimal Saremalji (1975) 36 STC 206, has categorically ruled that the matter has to be investigated into and all relevant material gathered before arriving at a decision whether the assessee had not collected the sales tax. In fact, a Division Bench of this Court has noticed its earlier judgment in Spencer & Co. Ltd. (supra). In fact, the said judgment was strongly relied upon by the State to say there is collection by the dealer. It is no doubt true that in the said judgment the Court has ruled that the expression "amounts collected by way of tax" by a dealer means all amounts collected in the character of or as being tax under the Act. In fact, in that very judgment, the Division Bench has ruled that the evidence concerning the transaction must show that the buyer had agreed to pay sales tax in addition to the price and the seller's account books should disclose such amounts separately. It further ruled that:
If it is possible to find out from the accounts maintained and other documentary evidence that the cash memos give a consolidated figure inclusive of sales tax, in such a case also, the dealer can be said to have collected the amount by way of sales tax under the Act. But if the dealer offers a price without specifically mentioning that it is Page 0703 exclusive of sales tax, the inference to be drawn is that the dealer does not intend to pass on the tax to the buyer and in that case he cannot claim any deduction.
27. In the case on hand, material facts would reveal that there is no collection. In fact, the Tribunal notices that : "No doubt the company had considered the local tax element in the list price fixed, but it cannot be stated that the company had collected the local taxes as such from the consumers. It further observes that there is no price control order for the tea sold by the appellant company. The Tribunal further rules that two price circulars dated 29.1.1996 and 17.4.1996, which were inadvertently issued to consider the sale tax components in the sale price of Dharwad tea were subsequently withdrawn. The Tribunal also notices that : "In the absence of such an agreement to pay the tax by the customer and to collect the same by the appellant, it cannot be inferred that it has collected tax, when there is specific legend in the invoice that the appellant has been exempted from paying tax." In unmistakable terms the Tribunal observes that the company is enjoying exemption from tax. The Tribunal notices that in the 1200 price circulars the tax to be collected is shown as NIL and that in about 3.5 lakhs invoices no single invoice showed the element of tax separately in respect of Dharwad tea. The Tribunal after noticing the material facts rightly, in our view, in the light of the apex court judgment, has ruled in favour of the assessee. We accept the finding of the Tribunal that there is no collection of tax in terms of exemption notification. The buyer has been told in unmistakable terms about the exemption of tax and what the buyer has agreed is a comprehensive price and not... tax.
28. Strong reliance is placed with regard to mentioning of the same price on Dharwad tea as well as non-Dharwad tea. It may be true in the given circumstances. That by itself would not mean violation of the condition of the notification as argued before us. So long as there is no price control and so long as there is no agreement between buyer and the company with regard to payment of tax, a mere price would not by itself would amount to collection of tax on turnover in terms of the notification. The Tribunal has dealt in detail with regard to this aspect of the matter and we do not want to repeat the same. We agree with the reasonings given by the Tribunal on this aspect.
29. It is also pointed out to us that MRP mentioned is a retail price. In the case on hand, the Department is unable to say that the buyer had agreed to pay sales tax and books of accounts would not disclose such amounts separately. In this view of the matter, the Tribunal is right in answering this issue in favour of the assessee.
30. Learned Advocate General invites our attention with regard to the price being the same with regard to Dharwad tea and non-Dharwad tea. Same is reflected in the books of accounts. The Company is governed by the Standards of Weights and Measures Act, 1976 and Rules. Rule 6 read with Rule 2(r) of the Standards of Weights and Measures (Packaged Commodities) Page 0704 Rules, 1977 requires that the sale price of the package commodity shall be printed on the packages strictly in the following form:
Maximum (or Max) Retail Price Rs....
... incl. of all taxes.
Or MRP Rs. .... INCL. OF ALL TAXES
31. Much of arguments were advanced before us that in the light of inclusive rate of tax, there is nothing but collection in the case on hand. The Tribunal in its order would say that so long as the buyer has not agreed to pay tax, and so long as the bill would show that the company is exempted from tax, there can be no inference of tax collection. Tribunal, in our view, is right in noticing that mere mentioning of MRP does not by itself a proof of any collection of tax in terms of sales tax laws. We are in agreement with the finding of the Tribunal.
32. In fact, in Annexure-F there is a clear mention of exemption of tax in terms of the note at the end of the invoice itself. Therefore, the buyer is told in unmistakable terms that what is being paid as sale price and not as sales tax.
33. The Tribunal, in our view, has considered not only the facts of the case but also all the case laws as applicable, and thereafter has come to a right conclusion in holding against the State. We are in agreement with the findings of the Tribunal.
34. Learned Advocate General, however, places before us the judgment of the apex court in Amrit Banaspati Company Limited and Anr. v. State of Punjab and Anr. (1992) 85 STC 493. In the said judgment, the apex court has ruled at page 505 reading as under:
Exemption from tax to encourage industrialization should not be confused with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allowed to a class or individual from general burden for valid and justifiable reason. For instance tax holiday or concession to new or expanding industries is well known to be one of the methods to grant incentive to encourage industrialization. Avowed objective is to enable the industry to stand up and compete in the market. Sales tax is an indirect tax which is ultimately passed on to the consumer. If an industry is exempt from tax the ultimate beneficiary is the consumer. The industry is allowed to overcome its teething period by selling its products at comparatively cheaper rate as compared to others. Therefore, both the manufacturer and consumer gain, one by concession of non-levy and other by nonpayment. Such provisions in an Act or notification or orders issued by the Government are neither illegal nor against public policy.
Page 0705 There can be no quarrel over the proposition with regard to the interest of the consumer. However, while considering the denial of exemption notification, this Court has to go only by the clause in the notification and the clause unfortunately did not apply to the present set of circumstances. However, we once again deem it proper to observe that the State would be well advised in re-drafting the exemption notification at least in future so that the ultimate consumer is benefited on account of grant of exemption to a new industrial unit. We do hope that the Government would bestow its best attention while drafting the exemption notification so that even consideration aspect can result in denial of exemption. It is for the Government and governmental authorities to consider this matter and take appropriate steps.
35. In the result, on the facts of this case, we answer questions of law against the Government and accept the findings of the majority view of the Tribunal. No costs.