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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether additional sales tax could be levied on the basis of the assessable value of hair oil computed under section 4 of the Central Excise Act, 1944 instead of the actual sale consideration disclosed by the assessee.
Analysis: The decisive question was whether the assessing authority could substitute a hypothetical price derived from excise assessable value for the real sale price in a completed sale transaction. The governing principle applied was that tax on sale of goods must have nexus with the actual taxable event and the actual consideration received or receivable. The Court relied on the Supreme Court's holding that a notional or assumed price cannot replace the price agreed in the completed contract of sale, and that the burden lay on the Revenue to establish under-billing or collection of any amount beyond the disclosed invoices, returns, and books of account. As no such proof was brought on record, the mere difference between MRP-related value and the declared sale price could not justify additional tax.
Conclusion: Additional sales tax could not be imposed on the basis of the excise assessable value or any hypothetical sale consideration; the issue was decided in favour of the assessee.
Ratio Decidendi: For levy of sales tax, the taxable measure must bear a real nexus to the completed sale and the actual consideration, and a notional value unrelated to the contract of sale cannot be substituted in the absence of proof of extra collection.
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