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2004 (2) TMI 67 - SC - Central ExciseWhether administrative charges collected by the sugar factory for molasses sold from the buyers/allottees on behalf of the State Government in terms of Section 8(5) of the U.P. Sheera Niyantran Adhiniyam, 1964 constituted a duty or impost in the nature of a tax and consequently not includible in the value as defined in terms of Section 4(4)(d)(ii) of Central Excise Act, 1944? Held that - One of the tests for determining as to whether the impost is a 'tax' or 'fee' would, in my opinion, be whether the burden can be passed to the end-user. Under the State Act, the same is permissible. A 'fee' in a situation of this nature cannot be passed on to the end-user, a 'tax' can be. In any event regulatory fee imposed for the purpose of regulating the industry producing molasses, in my opinion, cannot be passed on to the buyers as they are not subjected to any regulation under the Act. The nature of impost is such that burden thereof is to be borne by the buyers and the respondents herein are merely the agents for collecting the same on behalf of the State. The impost, therefore, cannot be termed as a 'fee' so as to deprive the respondents of the benefit of deduction of the tax for the purpose of Section 4(4)(d)(ii) of the Central Excise Act, 1944. We may also notice that in terms of Rule 23 of the U.P. Sheera Niyantaran Niyamawali, 1974, the occupier of a sugar factory is obligated to deposit the administrative charges even prior to delivery of molasses and recovery thereof from the buyers. The impost levied in terms of the said Act must, thus, be held to be a special tax applicable to a section of the people, namely, buyers of molasses. I am also of the opinion that Kisan Sahakari Chinni Mills Ltd. (2001 (8) TMI 119 - SUPREME COURT OF INDIA) holding that the impost impugned therein did not have a backing of a statutory provision and, thus, would not be a tax. But it was clearly held that the same would be so if the levy is imposed by any Central or State legislature or any statutory authority lays down the correct law.
Issues Involved:
1. Whether administrative charges collected by the sugar factory for molasses sold on behalf of the State Government under the U.P. Sheera Niyantran Adhiniyam, 1964, constitute a duty or impost in the nature of a tax and are consequently not includible in the value as defined in Section 4(4)(d)(ii) of the Central Excise Act, 1944. Issue-wise Detailed Analysis: 1. Nature of Administrative Charges: The primary issue was whether the administrative charges collected by the sugar factory for molasses sold on behalf of the State Government under the U.P. Sheera Niyantran Adhiniyam, 1964 (U.P. Act), constituted a duty or impost in the nature of a tax and consequently were not includible in the value as defined in Section 4(4)(d)(ii) of the Central Excise Act, 1944. Analysis of Relevant Provisions: - Section 4 of the Central Excise Act, 1944, provides for the determination of value for charging excise duty, based on the normal price at which goods are ordinarily sold by the manufacturer. - Section 8(4) of the U.P. Act mandates sugar factories to pay administrative charges to the State Government on molasses sold or supplied. - Section 8(5) allows sugar factories to recover these administrative charges from the buyers in addition to the price of molasses. Findings: - The administrative charges do not form part of the consideration for which the molasses are sold or supplied. - The liability to pay administrative charges is on the buyer, not the sugar factory, indicating these charges are not part of the price of molasses. - The administrative charges are collected by the sugar factory on behalf of the State Government and are not appropriated to the revenue of the sugar factory. 2. Nature of Levy - Tax or Fee: The Court examined whether the administrative charges under the U.P. Act were in the nature of a tax or a regulatory fee. Arguments: - The Attorney General argued that administrative charges were regulatory fees and not taxes, emphasizing that regulatory fees do not require a strict quid pro quo. - The Court noted that a tax is capable of being passed on to the consumer or buyer, whereas a fee is a counter payment for services rendered and cannot be passed on. Findings: - The administrative charges under the U.P. Act are imposed on the production for sale of molasses and are passed on to the buyer, indicating they are in the nature of a tax. - The predominant object of the U.P. Act is to maximize revenue by way of tax while regulating the storage and supply of molasses. - The administrative charges do not form part of the revenue of the sugar factory and are not appropriated to its revenue account, indicating the absence of quid pro quo. 3. Interpretation of "Other Taxes" in Section 4(4)(d)(ii): The Court considered whether the administrative charges could be classified as "other taxes" under Section 4(4)(d)(ii) of the Central Excise Act. Findings: - The Court held that administrative charges under the U.P. Act are in the nature of a tax and are excludible from the assessable value under Section 4(4)(d)(ii) of the Central Excise Act. - The Court emphasized that the definition of "taxation" in Article 366(28) of the Constitution could be read into the words "other taxes" under Section 4(4)(d)(ii) of the Central Excise Act. Conclusion: The Supreme Court concluded that the administrative charges collected by the sugar factory for molasses sold on behalf of the State Government under the U.P. Act are in the nature of a tax. Consequently, these charges are not includible in the value as defined in Section 4(4)(d)(ii) of the Central Excise Act, 1944. The appeals were dismissed with no order as to costs.
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