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TMI Blog2008 (3) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... ath, Advocates with them) for the appellant. S.K. Bagaria, Senior Advocate, (Tarun Gulati, Praveen Kumar and Jaiveer Shergill with him) for the intervenor. Shail Kumar Dwivedi, AAG, Rakesh Dwivedi, Senior Advocate (Abhishek Chaudhary, S.P. Kesarwani, Shantanu Krishna, Manoj Kumar Dwivedi and Gunnam Venkateswara Rao with them) for the respondents. -------------------------------------------------- The judgment of the court was delivered by S.H. KAPADIA J. Leave granted in both the special leave petitions. Civil Appeal arising out of S.L.P. (C) No. 8789 of 2007: [Moriroku UT India (P) Ltd. v. State of U.P.] This civil appeal filed by M/s. Moriroku UT India (P) Ltd. is directed against judgment dated April 6, 2007 Reported as Morriroku UT India Pvt. Ltd. v. State of U.P. [2007] 7 VST 482 (All)., delivered by the Division Bench of the Allahabad High Court in C.M.W.P. (Tax) No. 13 of 2004 by which, the writ petition filed by the appellant herein, seeking to restrain the AO from imposing any tax on moulds (toolings) supplied by its customer, Honda Siel Cars India Ltd., free of cost was sought to be taxed under section 3 of the U.P. Trade Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits or mineral deposits, an "amortisation" to intangible assets, such as, patents, copyrights, trade marks, etc. Thus, depreciation is a form of amortisation. The Accounting Standard (AS 28) relating to impairment of assets uses the following expression: "Depreciation (amortisation) is a systematic allocation of the depreciable amount of an asset over its useful life." One of the working differences between the depreciation and amortisation and the reason why the expression "depreciation" is used in relation to tangible man-made assets in preference to amortisation is that the notion of depreciation is to write off 90 per cent of the cost of asset over its useful life either on a sliding scale system, which is the written-down value method, which works on the reducing balance principle or on the straightline method in which 90 per cent of the cost is written off over the estimated useful life. On the other hand, amortisation generally is to write off the entire cost. The concept of amortisation is indicated in section 35D of the Income-tax Act, 1961. It refers to amortisation of preliminary expenses. These are, however, differences only in practice and not in the fundamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomer to the sale price of auto components in the hands of the appellant herein. According to the department, under section 4(1)(a) of the 1944 Act, value has to be the normal price, which has to be the sole consideration and if the price fixed is without consideration for the moulds then, according to the department, it cannot be said that price was sole consideration. In other words, according to the department, if the consideration for moulds is not taken into account then under the excise law, price, which is the measure of value, cannot be said to be the sole consideration. According to the department, in this case, price of auto components sold by the appellant was fixed or to be fixed by inter se negotiations. That, without the price of the moulds being taken into account, the price of the finished product would not reflect the real assessable value. According to the department, without the supply of moulds from its customer, final product could not be made. By use of the moulds, the appellant was able to manufacture the auto components. Therefore, according to the department, some money value was required to be attributed on account of usage of moulds as such moulds contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which duty is levied because of the event of manufacture which is unrelated to and which is not dependent on any commercial transaction. This observation indicates a vital difference between excise law and sales tax laws. In the case of excise law, the taxable event is manufacture, which is not related to commercial transaction. On the other hand, commercial transaction is the basis of the price-structure in the sales tax laws. In fact, the above observation of this court in Chhotabhai Jethabhai Patel case AIR 1962 SC 1006 has been explained by this court in Bombay Tyre AIR 1984 SC 420 by saying that levy of excise duty is on manufacture while levy of sales tax by its very nature arises at the stage beyond manufacture, namely, the sale of the article. In cases of captive consumption, section 4(1)(a) of the 1944 Act is not attracted. What is attracted in such cases is section 4(1)(b), which refers to "deemed value" and which requires valuation to be done in terms of the Excise Valuation Rules, 2000. The important aspect to be noted is that the department, in the present case, has borrowed the concept of "amortised goods" from rule 6 of the Excise Valuation Rules, 2000. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng vis-a-vis corporate taxation. Therefore, this court observed that accounting for costs differs according to the object and purpose for which the exercise is undertaken. Therefore, when excise law seeks to tax the value, the concept therein cannot be bodily lifted and incorporated in section 3 of the U.P. Trade Tax Act, 1948, which essentially deals with ascertainment of the price-structure depending upon the negotiations between the parties. Moreover, the effect of clause (ii) of Explanation 1 to rule 6 of the Excise Valuation Rules, 2000 is that where any tools or dies or moulds are supplied by the buyer free of charge or at a reduced costs for use in connection with production of the goods, the value apportioned as appropriate to such tools, moulds, etc., to the extent such value has not been included in the price paid or payable, has to be treated as the money value of additional consideration flowing directly or indirectly from the buyer/customer to the assessee in relation to sale of goods being valued and aggregated accordingly. This is because under the excise law, the department has to ascertain the real value of excisable article and to ascertain such real value, if in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that in income-tax cases, tax is exigible on "real income" which means the actual income received by or which accrues to the assessee. In case of sales tax, tax is exigible on real price received or receivable by the dealer in respect of a sale. A dealer is entitled to frame his price-structure in a manner conducive to the type of his business or with a view to withstand the competition. In a given case, cost may be more than the price. The dealer may base his price-structure to give an incentive to his clients, agents, distributors, etc., particularly if he is a manufacturer. In such cases, his price-structure has to be scrutinised by the department under the sales tax law to find out the real sale price receivable by him. There may be cases where he is required to give a discount on account of defect in quality or delay. The important thing to be noted is that "price" is the amount of consideration which a seller charges the buyer for parting with the title to the goods. It comprises of the amount which the dealer himself has to pay for the purchase of the goods, the expenditure, which he is to incur for transporting the goods from the place of purchase to the place of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; and (iii) where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same without profit to the customer, the sale in respect of such goods shall be included in the turnover of the latter dealer alone." We also quote hereinbelow section 2(h) of the 1948 Act, which reads as follows: "(h) 'Sale', with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration, and includes (i) a transfer, otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods, or in some other form) involved in the execution of a works contract; (iii) the delivery of goods on hire purchase or any system of payment by instalments; (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on "sale" to include transfer of the right to use any goods for any purpose for cash or deferred payment or other valuable consideration. In this case we are concerned only with section 3 and not with section 3F of the 1948 Act. Section 3, inter alia, provides that every dealer shall for each assessment year pay a tax at the rates provided under section 3A, section 3D or section 3H on his turnover of sales or purchases or both, as the case may be, which shall be determined in such manner as may be prescribed. Section 3F provides for tax on transfer of right to use any goods or goods involved in execution of works contract. The definition of "sale" in section 2(h) is in two parts. The first part covers the normal sale and the second part covers deemed sales. In the present case, we are concerned with sale of auto components to the buyer. It is a normal sale. The aggregate amount for which these auto parts/components are sold constitutes the turnover relating to such sales within the meaning of turnover in section 2(i). Therefore, it is on such turnover that liability of tax under section 3 of the 1948 Act has to be determined. Therefore, sales tax or trade tax under the 1948 Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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