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of <h1>Supreme Court affirms decision on sales tax collection for tea sales</h1> <h3>Deputy Commissioner of Commercial Taxes (Vigilance) Versus M/s Hindustan Lever Limited</h3> Deputy Commissioner of Commercial Taxes (Vigilance) Versus M/s Hindustan Lever Limited - [2016] 93 VST 452 (SC), 2016 AIR 3085, 2016 (5) SCR 635, 2016 ... Issues Involved:1. Whether the consideration of sales tax in fixing the price of the goods resulted in an implied collection of tax in respect of sales tax-exempted goods.2. Whether the sale of identical products, one exempt from sales tax and one taxable, priced on par, leads to a presumption of deemed collection and inclusion of sales tax.3. Whether the legend 'inclusive of taxes' on packets of both exempted and non-exempted tea implies that taxes are included and collected on tax-exempted tea.Issue-wise Detailed Analysis:1. Implied Collection of Tax in Sales Tax-Exempted Goods:The Assistant Commissioner of Commercial Taxes noted that the sale prices of tea packets from the Dharwad unit (exempted) and non-Dharwad unit (non-exempted) were identical. The non-Dharwad tea had a sales tax component, whereas the Dharwad tea did not. It was concluded that the dealer had added the tax component to the sale price of Dharwad tea, violating Explanation III(e) to the notification dated 19.06.1991. However, the tribunal held that the company had not collected local taxes as such from consumers, as the invoices for Dharwad tea specifically left the tax component blank. The High Court agreed with this finding, stating that mentioning MRP does not prove tax collection under sales tax laws.2. Presumption of Deemed Collection and Inclusion of Sales Tax:The High Court framed the question of whether pricing identical products on par, one exempt from sales tax and one taxable, could lead to a presumption of deemed collection of sales tax. The court noted that the company was required by the Standards of Weights and Measures Act, 1976, to print the sale price inclusive of all taxes on the packages. The tribunal and the High Court found that the company had not collected sales tax, as evidenced by invoices and price circulars showing no separate tax component. The High Court concurred with the tribunal's view that the company's uniform MRP policy across India did not imply tax collection.3. Legend 'Inclusive of Taxes' on Packets:The High Court considered whether the legend 'inclusive of taxes' on packets of both Dharwad and non-Dharwad tea implied that taxes were included and collected on tax-exempted tea. The court found that the statutory requirement to print MRP inclusive of all taxes did not mean that the company had collected sales tax. The respondent's invoices clearly stated that the goods were exempt from sales tax. The tribunal and the High Court concluded that the company had not collected sales tax on Dharwad tea, as the sale price did not include a tax component.Conclusion:The Supreme Court upheld the High Court's decision, agreeing that the respondent had not collected sales tax on the sale of tea from the Dharwad unit. The court emphasized that the statutory requirement to print MRP inclusive of all taxes did not imply tax collection. The appeal was dismissed with costs assessed at Rs. 1,00,000.
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