2008 (3) TMI 513 - SC - VAT and Sales Tax

Whether amortisation cost of toolings was includible in the sale price of auto components as in the case of excise duty under Central Excise Act, 1944? Whether the Department was right in equating sales tax to excise duty? Held that - Appeal allowed. High Court had erred in holding that the amortization cost calculated in terms of Rule 6 of the Excise Valuation Rules, 2000 is includible in the sale price of auto components sold by the appellant herein to its customer, M/s Honda Siel Cars India Ltd.

Summary

Issues Involved:
1. Whether amortisation cost of toolings was includible in the sale price of auto components under the U.P. Trade Tax Act, 1948.
2. Whether the Department was right in equating sales tax to excise duty.

Detailed Analysis:

1. Amortisation Cost Inclusion in Sale Price:
The central issue in this case was whether the amortisation cost of toolings (moulds) supplied free of cost by the customer (Honda Siel Cars India Ltd.) to the appellant (Moriroku UT India (P) Ltd.) should be included in the sale price of auto components for tax purposes under the U.P. Trade Tax Act, 1948. The appellant argued that the amortisation cost should not be included in the sale price, while the Department contended that it should be included, similar to the provisions under the Central Excise Act, 1944.

The Supreme Court examined the concept of amortisation, which refers to the systematic allocation of the depreciable amount of an asset over its useful life. The Department sought to load the amortised cost of the moulds onto the sale price of the auto components, arguing that the price fixed should reflect the real assessable value, including the value of the moulds.

2. Equating Sales Tax to Excise Duty:
The Court addressed whether Section 4 of the Central Excise Act, 1944, read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, could be applied to Section 3 of the U.P. Trade Tax Act, 1948. The Court noted that valuation under excise law is based on the transaction value for each removal, whereas sales tax is levied on the aggregate amount for which goods are sold.

The Court highlighted the fundamental differences between excise duty and sales tax. Excise duty is a tax on the event of manufacture and is calculated on the value of manufactured goods, independent of ownership or sale. In contrast, sales tax is levied on the consideration for the transfer of property in goods from the seller to the buyer.

The Court emphasized that the concept of amortised cost under Rule 6 of the Excise Valuation Rules, 2000, which includes the value of tools, dies, and moulds supplied free of charge, could not be automatically applied to the U.P. Trade Tax Act, 1948. The Court noted that the U.P. Trade Tax Act is a self-contained code for the levy of tax on the sale or purchase of goods, and there is no provision in the Act to include notional additions like amortised cost in the sale price.

Conclusion:
The Supreme Court concluded that the High Court erred in holding that the amortisation cost calculated in terms of Rule 6 of the Excise Valuation Rules, 2000, is includible in the sale price of auto components sold by the appellant. The Court set aside the impugned judgment and allowed the civil appeal filed by the assessee, Moriroku UT India (P) Ltd., with no order as to costs.

In a related appeal (TS Tech Sun (India) Ltd. v. State of Uttar Pradesh & Ors.), the Court, in light of the above judgment, also allowed the appeal with no order as to costs.