1992 (8) TMI 304 - AT - Income Tax

Summary

Issues Involved:

1. Inclusion of the price of PVC straps in the sale price of wireless receiving sets.
2. Inclusion of handling charges in the sale price of transistor sets.
3. Deduction of sales tax from the sale price.
4. Limitation of time for the demands issued and confirmed.

Detailed Analysis:

1. Inclusion of the price of PVC straps in the sale price of wireless receiving sets:

The department contended that the price of PVC straps, which increased from Rs. 3 to Rs. 7 over the relevant period, should be included in the sale price of the wireless receiving sets. They argued that the respondents suppressed the actual price to evade duty. The respondents, however, argued that the PVC strap was merely an accessory and not essential to the wireless receiving set's marketability. They provided evidence that sets were sold without the straps and claimed the confidential circular mandating the purchase of straps was withdrawn promptly. The Tribunal agreed with the respondents, ruling that accessories not essential to the marketability of the main product should not be included in the sale price for duty assessment. The Tribunal cited various case laws supporting this view, including *International Tractors Co. of (Bomb.) India Ltd. v. UOI* and *Webel Telecommunications (P) Ltd. v. C.C.E., Calcutta*.

2. Inclusion of handling charges in the sale price of transistor sets:

The department argued that handling charges of 1% collected from dealers should be included in the sale price of the transistor sets. The respondents countered that these charges were not passed on to consumers but were a reduction in the dealers' margins. The lower appellate authority found in favor of the respondents, stating that handling charges were post-manufacturing expenses and should not be included in the sale price, referencing the Supreme Court's judgments in *Voltas Ltd.* and *Atic Industries Ltd.*. The Tribunal upheld this view, remanding the matter to the Assistant Collector to verify if handling charges were indeed not passed on to consumers.

3. Deduction of sales tax from the sale price:

The department contended that only Rs. 19.03, the sales tax payable for the bulk of sales, should be deducted from the sale price, not Rs. 19.39 as claimed by the respondents. The respondents explained they had two types of dealers with different sales tax liabilities. The Tribunal ruled that sales tax should be deducted on an actual basis, i.e., Rs. 19.03 for some consignments and Rs. 19.39 for others, as paid by the respondents.

4. Limitation of time for the demands issued and confirmed:

The respondents argued that the demands were partly time-barred, with only the last show cause notice alleging suppression. They claimed they believed in good faith that the value of straps was not includible, thus negating the suppression allegation. The Tribunal did not provide a specific finding on the limitation issue due to the absence of a lower appellate authority's finding. However, they noted that the matter of limitation was not the subject of the appeal.

Conclusion:

The Tribunal agreed with the lower appellate authority's finding that the respondents were entitled to a deduction at the rate of Rs. 24 per set if they were now asked to pay duty at that rate. This finding rendered other issues academic, as the duty demanded would collapse based on this deduction. Consequently, the appeal was rejected.