TaxTMI 
TaxTMI 
2002 (10) TMI 93
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....d Steel (Control) Order, 1956. Clauses 15 and 17(b) of the said Order read as follows : "Power to fix price.15. - (1) The Controller may from time to time by notification in the Gazette of India, fix the maximum prices at which any iron or steel may be sold (a) by a producer, (b) by a stockholder including a controlled stockholder and (c) by any other person or class of persons. Such price or prices may differ for iron and steel obtaining from different sources and may include allowances for contribution to and payment from any Equalisation Fund established by the Controller for equalising freight, the concession rates payable to each producer or class of producers under agreements entered into by the Controller with the producers from time to time and any other disadvantages. The Controller may also, by a general or special order in writing, require any person or class of person enumerated above to pay such amount on account of allowances for contribution to any Equalisation Fund, within such period and in such manner as the Controller may direct in this behalf: Provided that the Controller may, with the approval of the Central Government, fix maximum prices for sale of iron or ....
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....A) and a Steel Priority Committee (SPC) were set up. Clause 8 of this Notification reads as follows : The Committee may determine, announce and list"(8) prices (base prices as well as extras) from time to time or all categories of iron or steel not subject to price control under clause 15 of the Iron and Steel (Control) Order, 1956. The prices so determined will be ex-works prices. The Controller shall add a fixed element of equalised freight to the ex-works prices announced from time to time in order to ensure that buyers of steel all over the country pay the same railway freight irrespective of the distance from the source of supply. The Committee may take such measures as it considers necessary or desirable to ensure that buyers of iron or steel all over the country pay the same price." 5.It must be mentioned that the Committees constituted under the Notification consisted of a Chairman, i.e. the Iron and Steel Controller, one representative of each of the main Steel Plants i.e. one from TISCO, one from the Indian Iron and Steel Company Limited, one from the Hindustan Steel Limited, Raurkela, one from the Hindustan Steel Limited, Bhilai, one from the Hindustan Steel Limited, D....
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....ted to it by the Central Government; (III) An element of price towards the Engineering Goods Export Assistance Fund." (emphasis supplied) Pursuant to this Notification these Companies started adding that element to their ex-works price. The Excise Department claims that excise is payable even on this component. 8.The questions which therefore arise are (i) whether the elements required to be added by the members steel plants, as per the decision of the JPC, are admissible deductions under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944 (hereinafter called the said Act) i.e. whether they fall within the definition of the term "other taxes" and (ii) whether such addition, which is a compulsory impost, can be considered and be price on which excise duty is payable by the parties. 9.Mr. Desai has submitted that the Iron or Steel Companies have to compulsory add this element to the ex-works price. He submitted that this therefore is a compulsory exaction. He relied upon the case of Commissioner of C. Ex., Meerut v. Kisan Sahkari Chinni Mills Ltd., reported in 2001 (132) E.L.T. 523 (S.C.). In this case, in the State of Uttar Pradesh there w....
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....or the main steel plants who were subjected to add an element of their ex-works price and remit the same towards SDF. SAIL and TISCO were the member steel plants. SAIL was having four plants at Bhilai, Bokaro, Durgapur and Rourkela. Indian Iron and Steel Company Ltd. subsequently got merged with SAIL. By notification dated 16-1-1992 the Central Government withdrew the price restrictions under the Control Order and thereafter by notification dated 21-4-1994 contributions by the member steel producers towards SDF was also discontinued. It is the Central Government, which exercises control over SDF though there is no backing of any statutory provision for creation of SDF. The primary object of SDF was to enable the main steel producers for modernization, research and development with the object of ensuring the production of iron and steel in the desired categories and grades by the main steel plants. Other steel producers who were known as secondary producers were not members of the Joint Plant Committee. They were not subjected to add an element of ex-works price of steel but could add any element of their choice and not to make remittance of the same to SDF. It does not stand to rea....
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....rol price which included elements of SDF. While the collection and remittance to SDF has been discontinued w.e.f. April 1994, the petitioner made its claim for the first time in 1999 which would appear to be rather incongruous. It is submitted that the claim made by the petitioner is not bona fide and the writ petition has been filed with ulterior motives, which are not difficult to fathom. SAIL had stressed immediate need for restructuring and modernizing all the main steel plants. Due to recession, SAIL has been passing through a severe financial position and has to suffer a loss of Rs. 1574 crores in 1998-99. It has further to suffer the burden of interest to the tune or Rs. 2017 crores per annum for modernization. In the aforesaid circumstances, the petitioner does not have any right to claim any relief in the writ petition pertaining to utilization of SDF. It is quite apparent that from the very nature of the creation of SDF, the manner of remittance to SDF and purpose of its utilization, it is a fund created ultimately for the utilization by the member steel producers only." Mr. Desai submitted that this case shows that what was being added was an element to the ex-works pri....
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.... From the price at which the assessee sells to the buyer the only deductions permissible are those under sub-clause 4(d)(ii) i.e. excise, sales tax and other taxes and in certain cases trade discounts. It is nobody's case that the extra element is an excise or a sales tax or a trade discount. The only question is whether it would fall within the meaning of the term "other taxes". 14.In Kisan Sahkari Chinni Mills Ltd.'s case, to give a broad meaning to the term "tax", reliance was placed upon the case in D.G. Gose and Co. v. State of Kerala which is reported in (1980) 2 SCC 410. In D. G. Gose's case the question was regarding the validity of tax imposed by the Kerala State on buildings by virtue of the Kerala Building Tax Act, 1975. The validity of this Act was challenged, inter alia, on the ground that this was the tax on the capital value and assessee of an individual or a Company and therefore fell within the scope of Entry 86 of List I of the VII Schedule of the Constitution and not under Entry 49 of List II. On this basis it was urged that the State did not have the statutory authority to impose such a tax. In dealing with these questions this Court held as follows : "5. The ....
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....bove the price without right to appropriate it for themselves and with duty of making it over a third party i.e. the JPC, the charges could not be regarded as part of the consideration for the sale price of the goods. It was held that these charges could not be added for determining the assessable value. 17.It was pointed out that another matter appeared before the Calcutta branch of CEGAT. The earlier Judgment of CEGAT was shown to the Calcutta branch. The Calcutta branch in the case of SAIL & Anr. v. Collector of Central Excise, Bhubaneswar reported in 1998 (24) RLT 394 (CEGAT) differed with the earlier Judgment and held that this addition was nothing but an element of price and that therefore the same had to be included in determining the assessable value for payment of excise duty. 18.In view of these conflicting decisions, the question was referred to a Larger Bench of CEGAT. In the case of SAIL v. Collector of Central Excise, Bhubaneshwar reported in 2000 (119) E.L.T. 249, the Larger Bench held that the normal price was a price at which the goods were ordinarily sold by the assessee to the buyer. It was held that if any part of the amount paid by the buyer to the assessee w....
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....itable purposes. It was held that these therefore did not form income of the assessee. It was held that these amounts were not part of the price of the goods but were payments for specific purpose of being spent on charitable purposes. 21.In the case of Mohan & Co. v. Collector of Central Excise reported in 1987 (30) E.L.T. 624, relying upon the above mentioned two decisions of this Court CEGAT, Delhi held that "Dharmada" (charity) receipts were not includible in the assessable value under Section 4 of the Central Excise Act. Mr. Desai submitted that an SLP filed against this order was summarily rejected by this Court. 22.Mr. Desai submitted that all the above authorities including the Larger Bench decision of CEGAT and the decision of CEGAT in Mohan & Co.'s case clearly show that when there is a compulsory impost or exaction, the assessee has to collect but the assessee cannot retain for himself and he has to pass on the same, then such a compulsory exaction cannot be included in the value for purposes of assessing excise duty. He submitted that such imposts cannot be deemed to be price. Mr. Desai submitted that the minutes of the JPC dated 16th January, 1992 as well as the Noti....
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....g "value" for purposes of Excise Duty. Under the Income-tax Act, tax is payable on income which reaches the assessee. On the other hand, Section 4 of the said Act shows that excise is payable on the price at which goods are ordinarily sold to the buyer. Thus the principles on which Bijli Cottons Mills' case and Tollygunge Club's case were decided would not be appropriate and would not apply for deciding "value" for the purposes of the said Act. In our view the decision of CEGAT in Mohan & Co.'s case cannot be said to be good law. 26.We are supported in our view by the decision in the case of Hindustan Sugar Mills v. State of Rajasthan reported in (1978) 4 SCC 271. In this case the question was whether the assessee was liable to pay sales tax on the amount of railway freight collected by them from the purchaser. It was held that the assessee was bound to pay sales tax on such amounts. In the case of E.I.D. Parry (I) Ltd. v. Asstt. Commissioner of Commercial Taxes reported in (2000) 2 SCC 321 it was held that the purchase price is the total amount of consideration for the purchase of goods. It was held that this would include price and also other amounts payable by the purchaser. Th....