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of <h1>Supreme Court upholds tax assessment on 'hair oil' sales, emphasizing evidence-based approach</h1> The Supreme Court dismissed the Revenue's revision petitions challenging the imposition of additional sales tax on a manufacturer for 'hair oil' sales. ... Whether the assessing authority was justified in imposing additional sales tax on the basis of assessable value of the commodity 'hair oil' sold by the assessee-manufacturer to the distributor M/s. Bajaj Sevashram Limited computed as per section 4 of the Central Excise Act, 1944 irrespective of actual sale consideration charged by the assessee for sale of the said commodity? Held that:- The assessing authority could not impose any additional tax in the hands of the respondent-assessee on the basis of hypothetical price or sale consideration assuming it to be 50 per cent of the MRP which is the assessable value as computed for the purpose of the Central Excise Act, 1944. There appears to be nothing brought on record by the assessing authority to prove the case of under-billing or charging of anything beyond the disclosed sale consideration in its returns or invoices. It is doubtless that the burden of proof in this regard lies upon the Revenue. Even if the difference between MRP and the sale consideration shown by the assessee may appear to be huge, it can at best give rise to the initiation of proceedings which the assessing authority may initiate for discharging the aforesaid burden of proof as it is a question of fact whether the assessee has charged something extra beyond the disclosed sale consideration or not. Ex hypothesi sale consideration cannot be increased to assessable value as computed under section 4 of the Central Excise Act for the purpose of levy of sales tax. Thus the appellate authorities below cannot be said to have committed any error in setting aside imposition of additional tax upon the respondent-assessee. Revision petitions filed by the Revenue dismissed. Issues involved:Whether additional sales tax can be imposed based on the assessable value of a commodity irrespective of the actual sale consideration charged by the assessee.Analysis:The revision petitions filed by the Revenue questioned the imposition of additional sales tax on a manufacturer for the commodity 'hair oil' sold to a distributor. The appellate authorities ruled in favor of the assessee, stating that the assessing authority could not levy additional tax unless the sale consideration was proven to have been charged by the assessee. The authorities held that the imposition of Central excise duty based on the assessable value was hypothetical for the assessee, and the burden of proof lay on the Revenue to establish any extra charges. The Revenue's counsel cited a Supreme Court decision related to the Drug Price Control Order, arguing that the excise duty component was already included in the taxable sale price.The respondent-assessee's counsel referred to the same Supreme Court decision and a judgment by the Rajasthan High Court, supporting the contention that the assessing authority could not impose additional tax based on assumed values. The Supreme Court's decision in the Rajasthan Chemists Association case invalidated a provision empowering sales tax based on maximum retail price, emphasizing that taxing a transaction not constituting a completed sale distorts the concept of 'sale of goods.'The Supreme Court's ruling highlighted that the legislation must tax completed sales and not hypothetical values. It emphasized that the subject of tax should be the 'sale of goods' as defined under the Sales Act, and any measure of tax must have a nexus with the taxable event. The judgment clarified that substituting notional values for tax purposes, unrelated to the actual sale, undermines the essence of taxation on sales transactions.Based on the authoritative pronouncement of the Supreme Court, the assessing authority cannot levy additional tax on the respondent-assessee based on hypothetical prices or assessable values. The burden of proof lies with the Revenue to demonstrate any under-billing or extra charges beyond disclosed sale considerations. The judgment concluded that the appellate authorities were correct in setting aside the additional tax imposition, as there was no evidence to support it. Consequently, the revision petitions by the Revenue were dismissed for lacking merit.In conclusion, the judgment clarifies the legal principles governing the imposition of additional sales tax based on assessable values and reinforces the requirement for tangible evidence to support tax assessments, in line with established legal precedents.
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