Excise duty paid by the buyer forms part of sale consideration, and deliberate omission can attract penalty reduction.

Excise duty paid by the purchaser on behalf of the manufacturer was treated as part of the sale consideration and therefore includible in the assessee's taxable turnover. The return excluding that amount was not accepted because the omission was found deliberate rather than a bona fide mistake. On that basis, penalty under section 45A was justified on merits, but the quantum was held excessive on the facts and was reduced.

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Issues: Whether excise duty paid by the purchaser on the assessee's behalf formed part of the assessee's taxable turnover and whether penalty under section 45A was justified, and if so, to what extent.

Analysis: The excise duty paid by the purchaser for and on behalf of the manufacturer was held to be part of the consideration for the sale and therefore includible in the assessee's turnover. In view of the binding principle that such duty does not lose its character as part of sale consideration merely because it is paid by the buyer, the return excluding that amount was not accepted as correct. The omission was found to be deliberate and not based on a bona fide misunderstanding, and the conduct was treated as sufficient to attract penalty under section 45A. At the same time, the quantum of penalty was considered excessive on the facts, warranting judicial reduction.

Conclusion: Penalty under section 45A was upheld on merits, but the amount was reduced to Rs. 2 lakhs.

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