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TMI Blog2016 (7) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... . The respondent has also explained that uniform market retail price at all India level ensures that the goods from one State do not flow to the other State, thereby distorting sales. It avoids and prevents shortages of goods in lower tax area. Uniform pricing cannot be a ground to hold that the respondent was charging sales tax on a sale price of the goods manufactured in the exempt unit. Cost of production in different units of the respondent assessee can vary. Cost of production has various components and is computed with reference to revenue expenditure, rate of return on the capital expenditure, etc. These are complex commercial and business considerations which cannot be decided with reference to a single factor, i.e., the uniform market retail price. A market retail price stating that it is inclusive of all taxes could be the starting point, but would not prove and establish that the sales-tax has been collected. In the case at hand, when the respondent was not liable to pay tax and had not passed on the tax liability, we do not think, sale consideration received should be bifurcated and divided on the basis of any assumption that the sale price received must have inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not have the benefit of exemption were similarly priced. Two invoices one from Dharwad unit and one from non-Dharwad unit were taken note of and found that the ultimate sale price in both cases is ₹ 118 (the non-Dharwad tea had a sales tax component of ₹ 12.27, whereas the Dharwad tea had no sales tax component). Based on the said material as well as material evincible from the price circulars of the respondent-company found in the office, the intelligence officer arrived at the conclusion that the dealer had added the tax component to the sale price of Dharwad tea though not under the nomenclature of tax or cess. Hence, it was concluded that the respondent company was not entitled to the benefit of exemption, for Explanation III(e) to the notification dated 19.06.1991 had been violated. 4. As the facts would further unravel, on the basis of the aforesaid finding of fact of the inspecting authority, a series of assessment orders dated 15.06.1998, 31.01.1999, 22.02.2000 and 01.07.2000 were passed wherein, inter alia, the claim of exemption on the turnovers of Dharwad tea based on notifications dated 27.09.1990 and 19.06.1991 came to be rejected. The assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arwad tea and non-Dharwad tea. Same is reflected in the books of accounts. The Company is governed by the Standards of Weights and Measures Act, 1976 and Rules. Rule 6 read with Rule 2(r) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 requires that the sale price of the package commodity shall be printed on the packages strictly in the following form: Maximum (or Max) Retail Price Rs..... ... incl. of all taxes. or MRP Rs. ... INCL. OF ALL TAXES 31. Much of arguments were advanced before us that in the light of inclusive rate of tax, there is nothing but collection in the case on hand. The Tribunal in its order would say that so long as the buyer has not agreed to pay tax, and so long as the bill would show that the company is exempted from tax, there can be no inference of tax collection. Tribunal, in our view, is right in noticing that mere mentioning of MRP does not by itself a proof of any collection of tax in terms of sales tax laws. We are in agreement with the finding of the Tribunal. 32. In fact, in Annexure-F there is a clear mention of exemption of tax in terms of the note at the end of the invoice itself. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervation in respect of affidavits filed on behalf of the State Government. As we have already stated, we have done so because the Chief Secretary of the State of Karnataka does not seem particularly troubled by the fact that a statement was made on oath on behalf of the State Government before the High Court which was not correct. He does not even think that the said officer was grossly negligent in making the statement that the said government order was not gazetted only on the basis of going through the Gazettes for the succeeding three months. We must assume that other officers of the State Government will be encouraged to make statements before the courts on oath upon as little or no enquiry, expecting from the Chief Secretary the same unconcern . 9. After so holding, the Court has allowed the appeals and directed the State Government to pay costs which was quantified in the sum of ₹ 50,000/-. In the second round of litigation, the State of Karnataka sought to deny the exemption on the ground that grinding of tea does not amount to manufacture and, therefore, as such the exemption was not available. The matter travelled to this Court but eventually the appeals were d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent in different States because the assessee has felt that it is necessary to have uniform MRP for PAN India to prevent flowing of goods from one State to another. It is his further submission that revenue has erroneously based its conclusion on a comparison of price between the two units of the same manufacturer either in the same State or in two different States wherein one unit is covered by exemption and the other is not. Incrementing the said argument learned senior counsel would contend that though the two prices are uniform, the revenue on an erroneous comparison has presumed that the assessee has collected tax without appreciating the fact that the assessee has adopted a singular business model to have a uniform price throughout India which does not countenance any kind of comparison. Mr. Salve would contend that the authorities cited by the revenue are absolutely inapplicable to the facts of the case, for the controversy is totally different therein. According to Mr. Salve, the controversy in the case has been put to rest in Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore (1971) 2 SCC 559 . 12. The heart of the matter is whether the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysore (1970) 26 STC 283 (Mys) . The proposition enunciated in the said decision is that the dealer can be held to have collected the tax under the Act, if: [F]rom the facts and circumstances, it can be inferred that the seller intended to pass on the tax and the buyer had agreed to pay the sales tax in addition to the price and that in the accounts of the dealer he has shown such amounts separately. (emphasis supplied) Applying the said proposition, the Tribunal held that even though the bills issued by the dealer in this case did say specifically that the price charged was inclusive of tax it cannot be held that he has collected the tax. We are of the opinion that the additional requirement envisaged in Spencer Co. Ltd (supra) is not correct in law. Whether a dealer has discharged the burden that is laid upon him by the statute is a question of fact, to be decided in each case with reference to the facts and material in that case. It is not a matter of law nor can the mode of proof be reduced to a proposition of law. Sub-section (2) or sub-section (1) of Section 10 of the Amendment Act do not provide for such a requirement. In such a situation, it cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of tax to a manufacturer realized under the statute for the same would be invalid and ultra vires. A promise or an agreement to refund tax which was due under the law and realised in accordance with the law would be a fraud on the Constitution and breach of faith of the people. It is in this context, the aforesaid observations were made in paragraph 11 in the case of Amrit Banaspati (supra). 16. In fact, a careful elucidation of the said reasoning would support the stand of the respondent. The assessee, on the basis of exemption notification had set up a new undertaking incurring expenditure. This was done on the foundation that the new unit would be exempt from tax. The exemption granted under the law by a legally valid notification was to encourage investment in the backward districts and enabled the newly established industry to overcome initial financial problems, recoup and ensue reasonable return on the capital expenditure and associated risks. Exemptions are allowed to industrial units to overcome the teething problems. Observations in paragraph 11 in Amrit Banaspati (supra), nowhere stipulate that the sale price as fixed must expressly exclude the tax component. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler s contention and in such circumstances where burden was on the dealer, he should produce material to displace the presumption. The finding of the tribunal that the Central Sales-tax had not been charged independently in the Bills, it was observed, would not be a conclusive proof or good finding in law. Importantly, this Court observed that the question whether the dealer had discharged the burden placed upon him by the statute is the question of fact and has to be decided in each case with respect to facts and material of the case. Significantly, in the present case no such burden has been placed on the assessee. Further the tribunal and the High Court have recorded as a finding of the fact that the assessee respondent had not collected the tax on sales made from the exempted unit. The assessee has relied upon invoices issued by them to the purchaser which have the following declaration:- Goods sold under this invoice are fully exempted from levy of KST/CST under exemption certificate No. IDF/E3/50-St/92-93 dt. 1-12-1992 by the Director of Industries and Commerce Department, Govt. of Karnataka, Bangalore as applicable to our newly set up tea factory at Dharwad. We are on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price. A market retail price stating that it is inclusive of all taxes could be the starting point, but would not prove and establish that the sales-tax has been collected. 21. Reliance placed on T. Stanes Co. Ltd. (supra) is misconceived. The question involved therein related to interpretation of Section 22 of the Tamil Nadu General Sales-tax Act. The said Section stipulates that no person, who was not a registered dealer would collect any more tax and no registered dealer shall make any such collection, except in accordance with the provisions of the Act and the rules. The proviso stipulated that the sub-section would not apply to collection of an amount by a registered dealer towards an amount of tax already suffered under the Act in respect to the goods, the sale or purchase price of which was controlled by any law in force. In this background, it was observed that the term collected would include any collection in any manner and purported recoupment as projected and pleaded would be nothing but collection. The contention of the assessee that he was only recouping and was not collecting the tax was rejected. Thus, the factual score is totally different. 22. In this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de fit for consumption save mere dehusking, cleaning, grading or sorting. 7. In these appeals, it is not necessary to examine the relevance of that provision. But that provision does any give only statutory power to collect sales tax as such from any class of buyers. There is no other provision in the Act which confers such a power on the dealers. Unless the price of an article is controlled, it is always open to the buyer and the seller to agree upon the price to be payable. While doing so it is open to the dealer to include in the price the tax payable by him to the Government. If he does so, he cannot be said to be collecting the tax payable by him from his buyers. The levy and collection of tax is regulated by law and not by contract. So long as there is no law empowering the dealer to collect tax from his buyer or seller, there is no legal basis for saying that the dealer is entitled to collect the tax payable by him from his buyer or seller. Whatever collection that may be made by the dealer from his customers the same can only be considered as valuable consideration for the goods sold. x x x x x x x x x x 10. From all these observations, it is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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