Customs, Excise and Gold Tribunal - Delhi
Cadbury India Ltd. vs Collector Of Central Excise on 8 September, 1992
Equivalent citations: 1993(63)ELT163(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. The appellants have filed an appeal against the order-in-appeal No. 42/91, dated 31-1-1991 passed by the Collector of Customs & Central Excise (Appeals), Bangalore and simultaneously they have filed an application seeking stay of the recovery of an amount of differential duty amounting to Rs. 33,07,742/- demanded in terms of the order appealed against. Appearing on behalf of the appellants the learned advocate Shri R.G. Seth stated that the basic issue in the impugned order pertains to the abatement of turnover tax while determining the assessable value under Section 4 of the Central Excises and Salt Act, 1944. He added that the appellants' claim for abatement of turnover tax was rejected by the lower authority not withstanding the fact that the law on the subject was well settled in view of the decisions of the Hon'ble Supreme Court of India. He submitted that as far as abatement of turnover tax is concerned even after the decision of the Supreme Court in the case of Assistant Collector of Central Excise v. Madras Rubber Factory reported in 1987 (27) E.L.T. 553, the decision of the Supreme Court in the case of Union of India v. Bombay Tyres International Ltd. reported in 1984 (17) E.L.T. 329 had been followed by the Tribunal in the cases of Mysore Acetate & Chemicals Co. Ltd. v. Collector of Central Excise 1992 (59) E.L.T. 441 and Hindustan Gas Industries Ltd. v. Collector of Central Excise 1992 (59) E.L.T. 306. The learned counsel argued that the Collector (Appeals) ought to have appreciated that Turnover Tax imposed under Karnataka Sales Tax or Bombay Sales Tax Act is non-recoverable in nature and therefore, it is not permissible for an assessee to recover any amount towards the Turnover Tax from his dealer/customer, nevertheless the amount paid by him being an expense it would be permissible for him to claim it as a deduction under Section 4 of the Central Excises & Salt Act, 1944. He added that the argument of the Collector (Appeals) that Turnover Tax could be allowed as abatement only if it formed a part of the wholesale price was totally erroneous and had arisen on account of incorrect interpretation of the provision of Section 6(b) of the Karnataka Sales Tax Act. On these grounds he pleaded for unconditional stay of the recovery of the entire amount demanded. He also pleaded that the appeal may also be simultaneously disposed of in terms of the Tribunal's order cited by him.
2. On behalf of the Revenue the learned JDR Shri M.N. Dhar appeared before us. He reiterated the points in the order passed by the Collector (Appeals) and opposed the appellants' prayer for unconditional stay. He, however, stated that he did not have any objection as regards the appellants' request for simultaneous disposal both the stay application and the appeal.
3. We have examined the records of the case and considered the submissions made by both sides. Briefly stated the facts of the case are that the appellants filed Price Lists No. 1/88, 2/88, 4/88 and 1/89 to 11/89 effective from the dates mentioned in the respective price lists, for approval by the proper officer. In these price lists deduction from the wholesale price of the goods on account of average freight, additional sales tax, turnover tax, transit insurance and octroi were claimed. The Assistant Collector issued a show cause notice requiring the appellants to show cause as to why the price lists filed by them should not be approved without allowing the deductions on account of turnover tax and interest charges on duty paid stocks and receivables. Thereafter, the Assistant Collector passed an order approving the price lists after disallowing all the deductions. He, however, permitted the appellants to claim refund after producing documentary evidence before the proper officer in regard to the expenditure incurred by them on average freight, additional sales tax, transit insurance, and octroi. Being aggrieved by the order passed by the Assistant Collector the appellants filed an appeal before the Collector (Appeals). The Collector (Appeals) observed that the issue agitated before him was only in regard to disallowance of the deductions by the Assistant Collector on account of turnover tax, on the grounds that the turnover tax could not deemed as a permissible deduction since it could not form a part of the price on account of the provision in relevant Sales Tax law which prohibited the appellants from recovering the tax from the customer. In the impugned order the Collector (Appeals) while confirming the order passed by the Assistant Collector, observed that no abatement on account of turnover tax was permissible since in the appellants' case the normal price charged for the goods could not be inclusive of turnover tax in terms of Section 6(b) of the Karnataka Sales Tax Act, 1957, which prohibited the dealers who were liable to pay the tax from collecting any amount by way of such turnover tax.
4. Having regard to the case law cited by the appellants we allow the application for stay of the recovery of the entire amount demanded as differential duty in terms of the impugned order. Since both sides have requested for hearing of the appeal, we proceed to decide the appeal on merits.
5. It is seen that in the case of Associated Pigments Ltd. v. Collector of Central Excise reported in 1989 (40) E.L.T. 186 on the ratio of the decision of the Hon'ble Supreme Court in the case of Union of India and Ors. v. Bombay Tyres International Pvt. Ltd. (supra), the Tribunal had held that taxes such turnover tax which are deductible under Section 4 of the assessable value cannot be disallowed even if they are paid periodically to the relevant taxing authority in accordance with the relevant provisions of the taxing statutes/rules. The relevant extract from para 5 of the said decision is reproduced below :
"We have heard both sides and have gone through the facts and circumstances of the case. During the hearing, the appellants have pressed for the following deductions from the assessable value :-
(i) Cost of transportation including delivery charges.
(ii) Turnover tax leviable under the provisions of Bengal Sales Tax Act, 1941 and West Bengal Sales Tax Act, 1954.
(iii) Purchase tax in respect of goods sent to Delhi, Kanpur and Bangalore depots.
(iv) Octroi duty.
In view of the judgment of the Hon'ble Supreme Court in the case of the Union of India v. Bombay Tyres International reported in 1983 (14) E.L.T. 1896, the freight, whether actual or equalised from the factory to the depot has to be allowed. In the matter before us the appellant is having depots at different places. We are of the view that the equalised freight has to be allowed and the deductions from the assessable value has to be given in view of the finding given in Paras No. 49 and 50 of the Bombay Tyres International Ltd.'s case. The Hon'ble Supreme Court had observed that "In cases, where the goods are sold by the assessee in the course of wholesale trade at a place or places outside the factory gate, the assessee will be entitled to a deduction on account of cost of transportation of the excisable article from the factory gate of the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight even where such freight is charged on average basis so that the wholesale cash price from any place or places outside the factory gate is the same as the wholesale cash price has to be deducted in order to arrive at the real wholesale cash price at the factory gate and no Excise duty can be charged on it." In the clarificatory order in the case of Union of India and Ors. v. Bombay Tyres International Pvt. Ltd. reported in 1984 (17) E.L.T. 329 (SC) the Hon'ble Supreme Court had held that the taxes which are permissible to be deducted under Section 4 from the assessable value cannot be disallowed even if they are paid periodically to the relevant taxing authorities in accordance with the relevant provisions of taxing statutes/rules. The taxes are additional sales tax, surcharge on sales tax, turnover tax...."
6. We find that in the case of Mysore Acetate and Chemicals Co. Ltd. v. Collector of Central Excise, reported in 1992 (59) E.L.T. 441 the Tribunal had once again held turnover, tax as an allowable deduction from the assessable value in terms of Section 4 of the Central Excises & Salt Act, 1944. Paras 3 and 4 of the said decision being relevant are reproduced below :-
"3. We have heard the learned SDR and have gone through the written submissions and the records. The dispute is as to allowing of the turnover tax from the assessable value as deduction. The matter is squarely covered by the decision of the Supreme Court in the case of Union of India v. Bombay Tyres International Ltd. reported in 1984 (17) E.L.T. 329. Para 2 from the said judgment is reproduced below :-
"2. Taxes - Additional Sales Tax, Surcharge on Sales Tax, and Turnover Tax should be allowed to be deducted from the sale price in order to arrive at the assessable value, and also octroi where payable/paid by the manufacturer. These taxes if proved to have been paid, should be allowed even if they are paid periodically to the relevant taxing authorities in accordance with the relevant provisions of taxing statutes/rules."
This Tribunal in the case of Associated Pigments Ltd. v. Collector of Central Excise reported in 1989 (40) E.L.T. 186 (Tribunal) has held as under :-
"In the case of Union of India and Ors. v. Bombay Tyres International Ltd. the Supreme Court has held that the taxes which are permissible to be deducted from the assessable value cannot be disallowed even if they are paid periodically to the relevant taxing authorities in accordance with the relevant taxing provisions of taxing statutes/rules. The taxes are additional sales tax, surcharge on sales tax, turnover tax. The Assistant Collector is directed to allow cost of transportation and delivery charges, turnover tax and octroi duty as deductions from assessable value".
"4. In view of the above observations, we are of the view that turnover tax is allowable as a deduction from the assessable value. Accordingly, we set aside the impugned order and remand the matter to the Assistant Collector having jurisdiction to readjudicate the same in the light of the Supreme Court decision in the case of Union of India and Ors. v. Bombay Tyres International Ltd. reported in 1984 (17) E.L.T. 329 and the decision of the Tribunal in the case of Associated Pigments Ltd. v. Collector of Central Excise reported in 1989 (40) E.L.T. 186 following the Supreme Court decision. We further order that while readjudicating the matter, the adjudicating authority shall observe principles of natural justice and shall grant an opportunity of personal hearing."
7. In view of the above discussion, we hold that turnover tax if paid in accordance with the relevant statute would be deductible from the assessable value in terms of Section 4, even if it is paid periodically to the concerned taxing authority. We, therefore, set aside the impugned order and remand the matter to the Assistant Collector to readjudicate the case in the light of the Supreme Court's decision in the case of Union of India and Ors. v. Bombay Tyres International Ltd. (supra) and the decisions of the Tribunal which have been referred to in this order. We further order that while readjudicating the matter, the adjudicating authority shall observe the principles of natural justice.
8. In view of the above, the appeal is allowed by way of remand.