1997 (7) TMI 390 - AT - Central Excise

Summary

Issues:
Abatement of sales tax credited to "Tax for Growth Fund" under a government scheme.

Analysis:
The appeal concerned the abatement of sales tax credited to the "Tax for Growth Fund" under a scheme formulated by the Government of Kerala. The lower authority held that since the appellants ultimately benefited from the scheme, the sales tax amount collected from customers and remitted to the State Government could not be abated. The lower authority emphasized that the appellants were the beneficiaries of the scheme, not the Kerala Government. The consultant for the appellants argued that their unit qualified for the subsidy scheme and had followed all procedures, including filing necessary returns and paying duty based on ex-works price. The consultant contended that the sales tax collected and credited to the State Government should be allowed abatement under Section 4(4)(d)(ii) as it was in accordance with the Sales Tax Act.

The Departmental Representative argued that since the appellants benefited from the sales tax realization through State agencies, it should be considered as extra consideration for the goods sold, thus impacting the assessable value. The Departmental Representative claimed that the suppression of this benefit constituted a reason for deeming it as additional consideration. The Tribunal analyzed the facts and determined that the appellants had realized the sales tax element from customers, remitted it to the State authorities, and no extra consideration flowed from buyers. The Tribunal emphasized that for assessing the price under Section 4, the consideration should be the amount at which goods are ordinarily sold without any additional benefits. The Tribunal concluded that the sales tax collected and remitted by the appellants should be allowed as abatement under Section 4(4)(d)(ii) since it was in line with the Sales Tax Act.

The Tribunal further discussed the State's power to raise revenues through taxes and the sovereign right to provide subsidies for various sectors. It clarified that Central Excise laws do not consider state subsidies in determining assessable value. The Tribunal held that the lower authority erred in including the subsidy equivalent to sales tax in the assessable value. Consequently, the Tribunal allowed the appeal, setting aside the lower authority's order and ruling in favor of the appellants.