2002 (10) TMI 93 - SC - Central Excise

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 i.e. whether they fall within the definition of the term other taxes ? Whether such addition, which is a compulsory impost, can be considered and be price on which excise duty is payable by the parties? Held that - In the present case, it has already been held by this Court in Ispat Industries case 2000 (3) TMI 1069 - Supreme Court of India that there is no backing of any statutory provision for the creation of these funds. Further it has already been held, and in our view correctly, that these main steel plants were the only member steel plants. The levy was only on them and the fund was created for the utilization by these member steel plants only. Also to be noted that even though the Essential Commodities Act empowers regulation of price, it does not empower imposition of any taxes. The addition of an element to the ex-works price has no statutory backing or force. It is not by the Central Government or the State Government or any local authority. It is a levy by a Committee majority of whose members are representatives of the steel plants. The purpose of creating funds is for the benefit of these member steel plants. Such a levy, even though, it may be compulsory can never be tax . Principles on which income is to be determined under the Income-tax Act cannot apply when determining 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 Appeals filed by the Revenue are allowed.

Summary

Issues Involved:
1. Whether the elements required to be added by the member 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.
2. Whether such addition, which is a compulsory impost, can be considered as price on which excise duty is payable by the parties.

Issue-wise Detailed Analysis:

1. Admissibility of Deductions under Section 4(4)(d)(ii):

The core issue is whether the elements added to the ex-works price by the member steel plants, as directed by the Joint Plant Committee (JPC), qualify as "other taxes" under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944. The Court examined the nature of these elements, which were added for the Steel Development Fund (SDF) and other purposes.

The Court referenced the case of *Commissioner of C. Ex., Meerut v. Kisan Sahkari Chinni Mills Ltd.*, where it was held that administrative charges imposed by a state statute fell within the term "other taxes" because they were a compulsory exaction under an enactment. However, the Court distinguished the current case, noting that the SDF contributions lacked statutory backing and were not imposed by the Central or State Government or any local authority. Instead, they were levies by a committee with a majority of members from the steel plants themselves. Therefore, such levies, despite being compulsory, could not be classified as "taxes."

2. Whether Compulsory Imposition Can Be Considered as Price:

The second issue was whether the compulsory addition to the ex-works price could be considered part of the price for excise duty purposes. The Court noted that excise duty is chargeable on the value of goods, defined as the normal price at which goods are sold by the assessee to a buyer. The only permissible deductions from this price are excise, sales tax, and other taxes, as specified in Section 4(4)(d)(ii).

The Court examined conflicting decisions from the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The Delhi branch of CEGAT had held that such charges could not be included in the assessable value, while the Calcutta branch had held the opposite. The Larger Bench of CEGAT later ruled that amounts not appropriated by the assessee could not be considered part of the value for excise duty.

However, the Court ultimately agreed with the Calcutta branch's view, emphasizing that the added element was explicitly termed an "element of price" in the relevant notifications. The Court noted that the JPC and SPC, established under the Iron and Steel (Control) Order, derived their powers from notifications that only allowed them to regulate prices, not impose taxes. The added elements were intended to increase the ex-works price, benefiting the steel plants themselves.

Conclusion:

The Court concluded that the compulsory additions to the ex-works price were indeed elements of the price and should be included in the assessable value for excise duty purposes. Consequently, the appeals filed by the Revenue were allowed, and those by the Companies were dismissed. The matters requiring recalculation of duty were referred back to CEGAT for determination of the exact amounts in accordance with the law.