1995 (5) TMI 70 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of provision of cess on oils under section 43B.
2. Nature of cess on oils: Whether it is a tax, duty, or cess.

Detailed Analysis:

1. Disallowance of Provision of Cess on Oils under Section 43B

The first ground of appeal concerns the disallowance of a provision of Rs. 2,80,443 towards cess on oils under section 43B. The assessee argued that the cess is neither a tax nor a duty and thus should not be disallowed under section 43B. The Assessing Officer, however, treated the cess as a duty of excise, which is payable to the Central Government and credited to the Consolidated Fund of India. Consequently, the provision was disallowed as it was not paid to the government account during the year. The CIT(A) upheld this view, rejecting the assessee's contention that the cess is not a tax or duty, leading to the present appeal.

2. Nature of Cess on Oils: Tax, Duty, or Cess

The core issue is whether the cess on oils levied under the Vegetable Oils Cess Act, 1983, is a tax, duty, or merely a cess. The assessee's counsel argued that the cess is not a duty or tax, referencing the Supreme Court decision in Om Parkash Agarwal v. Giri Raj Kishori and the A.P. High Court decision in Srikakollu Subba Rao & Co. v. Union of India. The Departmental Representative countered that the nomenclature of the levy does not change its nature as a duty of excise, which is credited to the Consolidated Fund of India.

Upon reviewing the relevant provisions of the Vegetable Oils Cess Act, 1983, the Tribunal noted that the levy, though termed as 'cess,' is essentially a duty of excise on vegetable oils produced in any mill in India. This duty is in addition to the excise duty under the Central Excise and Salt Act, 1944, and follows the same rules regarding refunds and exemptions. The proceeds of this duty are first credited to the Consolidated Fund of India, and the Central Government has discretion over the funds' allocation to the National Oilseeds and Vegetable Oils Development Board.

The Tribunal also considered the Supreme Court's observations in Om Parkash Agarwal regarding the distinction between a tax and a fee. The levy under the Vegetable Oils Cess Act, 1983, vests in the Central Government and is not directly used by a local authority or committee, unlike the agricultural market cess considered in Srikakollu Subba Rao & Co. Thus, the Tribunal concluded that the cess on oils is in the nature of excise duty, making the disallowance under section 43B justified.

Conclusion:

The Tribunal upheld the disallowance made by the Assessing Officer, agreeing that the cess on oils is in the nature of excise duty and thus falls under section 43B. The ground of the assessee was rejected, affirming the decision of the lower authorities.