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1997 (12) TMI 564 - SC - VAT and Sales TaxWhether the cess payable under the provisions of the Rubber Act, 1947, will form part of the purchase turnover of the respondents under the Kerala General Sales Tax Act, 1963? Held that - Appeal allowed. The incidence of duty is directly relatable to the production of rubber. The character of levy is not altered merely because the payment of duty is deferred till the purchase of the rubber by the manufacturer. The character of levy is on the production of the rubber and the duty paid should, therefore, be deemed to be part of the price that the producer had paid for the goods purchased. Neither a provision for deferred payment nor the liability cast on the manufacturer of rubber goods for payment of the duty to facilitate easy collection, can alter the duty as being one on the production of rubber as provided by section 12(1) of the Rubber Act and such duty even though paid later, will be a part of the price of goods purchased and would, therefore, form part of the producers turnover.
Issues Involved:
1. Whether the cess payable under the provisions of the Rubber Act, 1947, forms part of the purchase turnover under the Kerala General Sales Tax Act, 1963. Issue-wise Detailed Analysis: 1. Inclusion of Cess in Purchase Turnover: The primary issue in this case was whether the cess payable under the Rubber Act, 1947, should be included in the purchase turnover of the respondents under the Kerala General Sales Tax Act, 1963. Relevant Provisions: - Section 5 of the Kerala General Sales Tax Act, 1963: Tax on rubber is a single point tax levied on the last producer of rubber within the state. - Section 2(xxvii) of the Sales Tax Act: Defines "Turnover" as the aggregate amount for which goods are bought or sold. - Section 12 of the Rubber Act, 1947: Imposes a duty of excise on all rubber produced in India. Arguments by Appellants: - The cess is a duty of excise on rubber produced in India and should be included in the purchase turnover. - The definition of "turnover" in the Sales Tax Act is broad enough to include the cess. Arguments by Respondents (Dealers): - The cess is not part of the purchase price and should not be included in the turnover. - The liability to pay cess arises when the manufacturer uses the rubber, not at the time of purchase. Court's Analysis: - The cess imposed under Section 12(1) of the Rubber Act is a duty of excise on rubber produced in India. - The duty is determined by applying a fixed rate to the weight of the rubber produced. - The liability to pay the cess gets attached to the rubber when it is produced, making it an inherent part of the price paid for the rubber. - The excise duty is directly relatable to the production or manufacture of goods, even if its collection is deferred to a later stage. Precedents Considered: - McDowell & Company Limited v. Commercial Tax Officer: The excise duty paid by the buyer is part of the consideration for the sale and includible in the taxable turnover. - Mohan Breweries & Distilleries Ltd. v. Commercial Tax Officer: Excise duty on liquor is part of the manufacturer's turnover, even if collected at a later stage. Conclusion: - The court concluded that the incidence of duty is directly relatable to the production of rubber. - The character of the levy is not altered by the deferred payment or the liability cast on the manufacturer. - The cess forms part of the purchase turnover and should be included in the taxable turnover under the Kerala General Sales Tax Act, 1963. Judgment: - The appeals were allowed, and the judgment under appeal was set aside. - The decision of the sales tax authorities to include the cess in the purchase turnover was restored. - No order as to costs. Summary: The Supreme Court held that the cess payable under the Rubber Act, 1947, is a duty of excise on rubber produced in India and should be included in the purchase turnover under the Kerala General Sales Tax Act, 1963. The court emphasized that the incidence of duty arises at the time of production, making the cess an inherent part of the price paid for the rubber. The appeals were allowed, restoring the decision of the sales tax authorities to include the cess in the purchase turnover.
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