2011 (3) TMI 1538 - HC - VAT and Sales Tax

Rejection of books of account and the enhancement of turnover - whether the excise duty paid by the purchaser would be liable to be included in the turnover of the assessee? Held that - So far as the enhancement of the turnover is concerned, in my view the matter requires reconsideration by the Tribunal. The Tribunal has not given any basis for the enhancement of the turnover by ₹ 5 crores. The Tribunal even has not referred the discrepancies found in the books of account. Therefore, the order of the Tribunal in this regard is liable to be set aside. The order of the Tribunal, so far as it held that excise duty is the part of the turnover, is upheld. Revision is allowed in part.

Summary

Issues Involved:
1. Rejection of books of account and enhancement of turnover.
2. Inclusion of excise duty paid by the purchaser in the turnover of the assessee.

Issue-wise Detailed Analysis:

1. Rejection of Books of Account and Enhancement of Turnover:
The assessing authority rejected the applicant's books of account and enhanced the turnover based on various discrepancies. The applicant's appeal to the Deputy Commissioner (Appeals) was dismissed, and the Tribunal partially allowed the appeal but sustained the enhancement of turnover by Rs. 5 crores. The Tribunal did not provide a basis for this enhancement or refer to the discrepancies found in the books of account. The court noted that the enhancement of turnover requires reconsideration by the Tribunal, as the Tribunal's order lacked a clear basis and failed to address the discrepancies. Thus, the order estimating and enhancing the turnover by Rs. 5 crores was set aside, and the matter was remanded back to the Tribunal for fresh determination.

2. Inclusion of Excise Duty Paid by the Purchaser in the Turnover of the Assessee:
The assessing authority included the excise duty paid by purchasers outside U.P. in the turnover, treating it as part of the sale price. The applicant contended that the excise duty was payable by the purchaser upon removal of goods from their warehouse, not by the manufacturer. Citing various legal provisions and precedents, the applicant argued that the excise duty paid by the purchaser should not be included in the sale price of the petroleum products.

The court examined relevant provisions of the Central Excises and Salt Act, 1944, and the Central Excise Rules, 1944, which indicate that excise duty is a levy on the manufacturer, payable at the point of removal. The court referenced several Supreme Court decisions, including McDowell & Company Limited v. Commercial Tax Officer, which established that excise duty is primarily a burden on the manufacturer. Even if paid by the purchaser, it is considered payment on behalf of the manufacturer and thus part of the turnover.

The court concluded that the Central excise duty paid by the purchaser is liable to be included in the sale price for tax purposes. The Division Bench decision in Hindustan Sugar Mills Ltd. v. State of U.P. and the apex court decision in State of Punjab v. Guranditta Mal Shauti Prakash, cited by the applicant, were found not applicable to the present case. The court upheld the Tribunal's decision that excise duty is part of the turnover but remanded the matter regarding the enhancement of turnover for fresh determination.

Conclusion:
The revision was allowed in part. The inclusion of excise duty in the turnover was upheld, but the enhancement of turnover by Rs. 5 crores was set aside, and the matter was remanded to the Tribunal for reconsideration.