TaxTMI 
TaxTMI 
2016 (7) TMI 76
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....ndia Limited established its factory at Dharwad in the State of Karnataka and the said factory was engaged in manufacture of blended packet tea. With the passage of time, Brooke Bond India Limited was amalgamated with the respondent-company with effect from 21.03.1997. There is no dispute over the fact that the respondent-company registered under the Companies Act is a dealer under the KST Act. The dealer was granted sales tax exemption benefit for five years from the date of commencement of production in accordance with exemption eligibility certificate issued by the Government of Karnataka as per the package of incentive granted vide Government Order dated 27.09.1990 and sales tax exemption notification dated 19.06.1991 to which we shall advert to at a later stage. 3. When the matter stood thus, the Assistant Commissioner of Commercial Taxes (Intelligence), Kolar visited the premises of the respondent-assessee on 20th December, 1996. During the course of physical inspection the authority noticed that there was contravention of the conditions laid down under Explanation III(e) to the notification dated 19.06.1991. It was noticed by the said authority that sale of tea packets by t....
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.... The said order was challenged before the High Court in revision petition. 5. The High Court to appreciate the controversy framed the following three questions of law:- "(1) Whether the consideration of sales tax in fixing the price of the goods and sale of such goods along with identical goods on which taxes are collected along with the price has not resulted in an implied collection of tax in respect of such sales tax exempted goods? (2) Whether the assessee who produces identical products, one which is exempt from sales tax and one which sales tax is payable, both being priced on par and sold off the same shelf, could not lead to the presumption that there is a deemed collection and inclusion of sales tax in the price fixed? (3) Whether the legend 'inclusive of taxes' found on the packets of Dharwad and non-Dharwad tea, the distinction as such being lost on the consumer, whether it cannot be said that taxes are inclined and collected on the tax exempted tea." 6. The High Court, after hearing the learned counsel for the parties and analysing the material on record, dissecting the relevant provisions of the KST Act and the notification for exemption came to hold as unde....
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....710 . In the said case, the Court has held that:- "7. The administration of the State of Karnataka represented by its Chief Secretary, does not find the said officer guilty of gross negligence. The Chief Secretary does not find it unpardonable that the statement was made on oath on behalf of the State Government in a pending proceeding before the High Court. We cannot agree. Whether the Chief Secretary thinks it necessary to take action against the said officer or not is not our concern. Our concern is that the State Government made a statement on oath before the High Court that was incorrect and the judgment of the High Court accepts and proceeds upon the basis of that statement. The High Court's judgment must, therefore, be set aside and the matter remanded to the High Court to be heard and decided afresh. 8. We must caution the High Court at Karnataka, having regard to what we have stated above, that it should be very vigilant in accepting as correct a statement, even though it be made on oath, on behalf of the State Government. It is unfortunate that we should have to say this of a State Government, but the record before us leaves us no option. 9. The learned counsel fo....
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.... State (taxable tea), makes the end consumer believe that in the end consumer price sales tax element has been considered, has not been properly considered by the High Court. Learned senior counsel would submit that the High Court has not properly appreciated the authorities in the field and arrived at the erroneous conclusion. Mr. Patil has placed reliance on State of Karnataka v. M/s C. Venkatagiriah and Brothers 1994 Supp (2) SCC 572 and T. Stanes & Co. Ltd. v. State of T.N. and another (2005) 9 SCC 308 . 11. Mr. Salve, learned senior counsel appearing for the assessee-respondent would urge that the declaration made by the assessee about MRP is a statutory declaration required as per Rule 2(r) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 framed under erstwhile Standards of Weights and Measures Act, 1976 and the same does not mean that the assessee had collected any amount by way of tax. The aforesaid statutory declaration only means that the end consumer does not have to pay amount beyond MRP. It is urged by him that the assessee had taken the stand that it has uniform MRP throughout India irrespective of whether sales tax is payable in certain St....
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....tion should not be confused with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allowed to a class or individual from general burden for valid and justifiable reason. For instance tax holiday or concession to new or expanding industries is well known to be one of the methods to grant incentive to encourage industrialisation. Avowed objective is to enable the industry to stand up and compete in the market. Sales tax is an indirect tax which is ultimately passed on to the consumer. If an industry is exempt from tax the ultimate beneficiary is the consumer. The industry is allowed to overcome its teething period by selling its products at comparatively cheaper rate as compared to others. Therefore, both the manufacturer and consumer gain, one by concession of non-levy and other by non-payment. Such provisions in an Act or Notification or orders issued by Government are neither illegal nor against public policy." 13. Reference is also made to the decision of this Court in M/s C. Venkatagiriah and Brothers (supra) wherein it has been observed:- "4. For the said proposition, the Tribunal relied upon a decision of the Mysore High Court ....
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....nce, there is no question of any comparison. In fact, the appellant department is of the view that the respondent assessee ought to have determined lesser price for the exempted unit as compared to other units. It is urged that the absence of any price control the view of the department is neither a legal requirement nor practically possible. Once this erroneous comparison is obliterated, the entire case of department collapses. 15. First, we shall deal with the applicability of the principle stated in Amrit Banaspati (supra). The issue raised in the case of Amrit Banaspati (supra) was quite distinct and separate. The question raised was whether the principle of promissory estoppel would apply, for the learned single Judge of the High Court on facts had found that there was sufficient material to direct the State to honour its commitment to refund the sales-tax. The issue involved in the said case relates to refund of tax paid to the State. In this context, this Court observed that refund of tax was made in consequence of excess payment or when it was realized illegally or contrary to law. The refund of tax due and realised in accordance with law cannot be comprehended and no law ....
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....76, stipulated that the maximum sale price should be inclusive of all taxes. This was the statutory requirement binding on the respondent, who was selling packaged product. The statement on the packaged product inclusive of all taxes, means all taxes which were leviable, were already included in the price mentioned. It should not be constructed as an admission that the respondent had charged sales tax. The respondent could not have deviated or ignored the statutory requirement by making a declaration contrary to the statutory rules. The consequences of not obeying and violating the statutory rules would have been severe. 18. Observations made in M/s C. Venkatagiriah and Brothers (supra) have to be again understood in the context in which they were made. In the said case the dealer was exigible to Central Sales-tax only if he had collected the tax and not otherwise. In the said context, this Court referred to amendment made under the Central Sales-tax Act, putting the burden of proof on the dealer to show that he had not collected the tax. For this reason, it was observed that when an endorsement was made in the Bill that price charged was inclusive of tax, it was prima facie proof....
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....n the present case in spite of the multiple units both exempted and non-exempted, the respondent had adopted and followed uniform market price throughout India. The respondent is entitled and can fix a uniform price meant for whole of India. The uniform market price does not differ in spite of differences in sales-tax payable at the end point, i.e., at the point of sale. This is a matter of business policy and cannot be taken exception to. The respondent has also explained that uniform market retail price at all India level ensures that the goods from one State do not flow to the other State, thereby distorting sales. It avoids and prevents shortages of goods in lower tax area. Uniform pricing cannot be a ground to hold that the respondent was charging sales tax on a sale price of the goods manufactured in the exempt unit. Cost of production in different units of the respondent assessee can vary. Cost of production has various components and is computed with reference to revenue expenditure, rate of return on the capital expenditure, etc. These are complex commercial and business considerations which cannot be decided with reference to a single factor, i.e., the uniform market reta....
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....ion to the price of the goods sold. In that event the price fixed for the goods including the tax payable becomes the valuable consideration given by the purchasers for the goods purchased by him. It that be so, the tax collected by the dealer from his purchasers becomes a part of the sale price fixed, as defined in Section 2(o). In some of the Sales Tax Acts power has been conferred on the dealers to pass on the incidence of tax to the purchasers subject to certain conditions. Those provisions may call for different consideration. In the Act there is no such provision except Section 7-A which was introduced into the Act by Madhya Pradesh Act 23 of 1963. That provision would have relevance only in respect of the assessment for the year 1963-1964. Section 7-A says: "No dealer shall collect any amount, by way of sales tax or purchase tax, from a person who sells agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant or otherwise, when such produce is sold in the form in which it was produced, without being subjected to any physical, chemical or other process for being made fit for....