Sales tax collections without actual tax liability remain part of transaction value and cannot be deducted from assessable value.

Amounts collected from buyers as sales tax were held includible in the transaction value where the assessee was exempt from paying sales tax and no corresponding tax liability existed. The statutory deduction for sales tax under the Central Excise Act, 1944 was unavailable because the amount retained from customers did not represent tax actually payable to the State. The resulting assessable value could not be reduced on that basis, and the differential duty was required to be confirmed.

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Issues: Whether sales tax deduction was admissible in computing the assessable value when the assessee was exempt from paying sales tax but continued to collect an amount from customers representing sales tax.

Analysis: The amount collected from customers as sales tax, when no corresponding liability existed to pay such tax to the State because of exemption, could not be excluded from the assessable value. The collected amount formed part of the transaction value and did not qualify for deduction. The statutory exclusion for sales tax was unavailable in these circumstances under Section 4(3)(d)(ii) of the Central Excise Act, 1944. The failure to confirm the differential duty on this basis rendered the order unsustainable to that extent.

Conclusion: Sales tax deduction was not admissible and the differential duty demand was liable to be confirmed.

Ratio Decidendi: Amounts collected from buyers as sales tax are includible in the transaction value and cannot be deducted from assessable value where no sales tax is actually payable.

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