Assessable value and turnover tax: tax not recoverable from customers is deductible, subject to revenue verification of payment.

Turnover tax payable under the Karnataka Sales Tax Act was treated as deductible from assessable value under Section 4(4)(d)(ii) of the Central Excises and Salt Act because it was a tax statutorily payable by the registered dealer and not recoverable from the customer. Actual payment was not required at the valuation stage, but the Department could call for proof of payment and, if the tax was later found unpaid, revalue the goods after following the prescribed procedure. Disallowance solely because the invoice did not separately show turnover tax was unsustainable, as the tax was not meant to be passed on to buyers.

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Issues: Whether turnover tax payable under the Karnataka Sales Tax Act, 1957 could be deducted while determining the assessable value under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944, and whether the Department could require proof of actual payment and revalue the goods if payment was not made.

Analysis: The value under Section 4(4)(d)(ii) does not include excise duty, sales tax and other taxes payable on the goods. Turnover tax under Section 18 of the Karnataka Sales Tax Act, 1957 is a tax which the registered dealer is statutorily required to pay and, by virtue of Section 18(3), cannot pass on to the customer. On that basis, the tax was treated as deductible while working out valuation, even though actual payment had not yet been made at that stage. The Department was, however, permitted to call for proof of actual payment, and if it was later found that the amount had not been paid, the goods could be revalued after following the prescribed procedure. Disallowance merely because the invoice did not separately show turnover tax was held unsustainable because such tax was not recoverable from customers and therefore would not appear on the invoice.

Conclusion: Turnover tax was deductible in the assessable value, subject to the Department's right to verify actual payment and revalue the goods if payment was not made. Disallowance on the basis that the invoice did not show turnover tax was not justified.

Ratio Decidendi: Taxes payable on the goods but not recoverable from the customer are excludible from assessable value, while the revenue may verify actual payment and recompute valuation if the claimed tax is not in fact paid.

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