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TMI Blog2019 (9) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... rices with the facility charges and both are linked to each other. In the instant case, the facility charge is a consideration passing from the purchaser (Tata Steel Limited) to the dealer (Linde India Limited) in relation to the sale of gases. According to the agreement, the freight charges are being taken for the provision, operation and maintenance of the plant, the pipelines and the meters. All the three constituents are important for selling gases by the petitioner to Tata Steel Limited and in their absence sale may not be complete. The plant is important for producing the saleable goods, the pipeline is important for transporting the saleable goods and the meter is important for calculating the total quantity of goods sold - Accordingly, facility charges are directly relatable to sale of goods by the petitioner to Tata Steel Limited and is a consideration passing from Tata Steel Limited to the petition for sale of goods. Thus is ample clear that taxable event in case of Central Excise and Sales Tax is different. While manufacture is the event in case of Central Excise; the taxable event in the case of VAT is sale . The Facility Charge levied by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the performance of its blast furnace producing hot metal, steel melting shops producing steel, etc. 4. The further case of the petitioner-company is that pursuant to the aforesaid agreements, Tata Steel Ltd. provided land adjacent to its works to the petitioner, wherein the petitioner erected its industrial unit for production of gases having capacity of 1290 Tonne per day (for short TPD ) and 225 TPD respectively. Apart from establishing its industrial unit at the site adjacent to Tata Steel Ltd. at Jamshedpur, the petitioner also constructed pipelines from its industrial unit to the industrial unit of Tata Steel Ltd., which is owned, operated and maintained by the petitioner itself; and, further, industrial unit for production of gases is also owned, operated and maintained by the petitioner. It is an admitted fact that aforesaid two units were installed by the petitioner at its own cost pursuant to the agreements entered with Tata Steel Ltd. for ensuring continuous supply of gases to Tata Steel Ltd. The meter for measuring the quantity of gases supplied was installed in the periphery of the premises of the industrial unit of the Petitioner and not in the premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of inspection, the inspecting team recommended for initiation of proceedings under Section 40(2) of the JVAT Act, 2005 by suggesting, inter alia, that the amount of facility charge should be treated as an additional consideration of sale and since the petitioner has not discharged the liability of VAT on the amount of facility charge realized by it, the same amounts to suppression of facts. 9. Pursuant to the said inspection, notices were issued to the petitioner-company by the office of the Deputy Commissioner of Commercial Taxes, Jamshedpur Circle and the petitioner filed its reply before the said authority denying its liability for payment of VAT on facility Charge . However, the respondent-Deputy Commissioner of Commercial Taxes, Jamshedpur circle, in exercise of the power under Section 40(2) of the JVAT Act, levied VAT on the amount of facility charge realized by the petitioner, @ 4% thereupon and further levied interest @ 2% for delayed payment of tax. Even penalty was imposed upon the petitioner in exercise of the power under Section 40(2) of the JVAT Act. The petitioner, being aggrieved by the said order, preferred suo-moto revision applications before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Indian Oxygen Ltd. reported in 1988 (4) SCC 139, wherein it was held that rental shall not form part of the sale consideration. 12. It has been further submitted that so far as supply of gases in liquid form through tankers, which are stored in the premises of the buyer in vacuum insulated storage tanks (VIST), the petitioner provides facility to its respective customers for erecting and maintaining the VIST, and realized facility charge which has no relation to the sale of gases. It has been submitted that, ordinarily, it is the duty of the buyer of the petitioner to construct and maintain the VIST storage tanks in its premises, but due to hazardous nature of the gases, customer of the petitioner requested the petitioner to construct the storage tanks in the buyer s premises and to maintain the said tanks. The Petitioner, for the said facility provided to its buyer, charges facility charge , which is nothing but the cost of investment made by the petitioner on the construction of VIST at the buyer premises and other equipments including cost of maintenance. The said amount of facility charge realized by the petitioner has no relation with the sale of gases a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise and Service Tax Appellate Tribunal (for short CESTAT ), Kolkata and vide its Judgment and order dated 8th November, 2004, it was held by learned CESTAT, Kolkata that facility charge were payable by the buyer even when there was no sale during the month to the buyer concerned and it was categorically held that facility charge realized by the petitioner-company cannot be treated as an additional consideration for sale for the purpose of computing assessable value of gases for levy of excise duty. It was further submitted that the said decision of learned CESTAT, Kolkata, reported in (2005) 183 ELT 475 was followed by the subsequent decision of learned CESTAT, Kolkata passed in Central Excise Appeal No. EDM-126/05 dated 31.01.2008, wherein again levy of central excise duty on facility charge by treating it to be an additional consideration of sale was set aside by learned CESTAT, Kolkata. Counsel for the petitioner further submits that the said order passed by learned CESTAT, Kolkata was subject matter of challenge before the Hon ble Supreme Court in Civil Appeal No. 5689 of 2008, wherein Hon ble Supreme Court, vide its Judgment and order dated 28th July, 2009, was pleased to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon the decision of the Hon ble Supreme Court in the case of DJ Malpani Vs- Commissioner of Central Excise, Nasik, reported in 2019 SCC Online SC 496 to contend, inter alia, that the term transaction value occurring in the central excise enactment is much wider in scope than the definition of sale price as contained under the JVAT Act. By relying upon the aforesaid decision of the Hon ble Supreme Court, it was contended that in the said decision, the amount charged towards Dharmada separately at the time of sale of goods was sought to be included in the transaction value for levy of excise duty on the sale of goods. However, the Hon ble Supreme Court in the said Judgment has held that any amount paid at the time of sale transaction for the purpose other than the price of goods cannot form part of the transaction value; and has held in the said decision that the amount charged towards Dharmada cannot be computed as the consideration received towards sale of goods. On the strength of the said Judgment, it has been submitted that facility charge is an amount charged other than the price of the goods i.e. gases and, hence, cannot form part of Sale Price as said p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price index, it cannot be said that facility charge is only being charged as against maintenance of the plant but also includes components of the cost and sale price of the gases so being supplied by the petitioner company. 20. The learned Counsels for the Respondent State referred the judgment passed in the case of BOC India Ltd. v. Commissioner of Commercial Taxes, (2016) 93 UPTC 326 , following the mandates as laid down in the case of Hindustan Sugar Mills v. State of Rajasthan (AIR 1978 SC 271) wherein the central issue was as to whether facility Charge should be a part of sales price or not. The Hon ble Apex Court held that as the facility charge is for supply of gases and is charged from the customer, the same is subject to sale price under the West Bengal Vat Act, which is paripassu to the definition of sale price in JVAT, 2005. 21. It has been further submitted that apart from almost 90 per cent of the gases so being supplied to Tata Steel, the petitioner company also supplies gases to other companies such as Usha Martin, Tata Motors etc. The same is stated in the inquiry report as attached by the petitioner as Annexure-3 4 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Wholesale Price Index for Manufactured Products (base 1981/82 = 100) as published by the Reserve Bank of India in its weekly bulletins, calculated as a simple arithmetic average of the indices for each week ending in a Month. 2.4:For any planned repair and shutdown of BOCL s Plant, BOCL shall give written notice of not less than 7 days to TISCO. During any shutdown or plant outage, Nitrogen (Low Pressure) (GN-PL) and Nitrogen (Medium Pressure) (GN-MP) will not be available. During shutdowns other that Major maintenance, TISCO s demands of Oxygen, Nitrogen (High Pressure) (GNHP) and Argon shall continue to be met. 2.5:BOCL agrees to reserve up to a maximum of 3500 tonnes Oxygen liquid storage capacity for TISCO to meet agreed rates of demand during any planned repair and shutdown including Major Maintenance of BOCL s Plant. Total Oxygen availability to TISCO during such period of Major Maintenance will be limited to 3500 tonnes. BOCL will use liquid Oxygen in the liquid Oxygen storage for the purpose of supplying its other requirements. However, BOCL will ensure a minimum safety stock of 1500 tonnes in the storage at any point of time, reserv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------ ------------- ----------------- 11.1.B Oxygen Gas Price Variation on Power Cost: The above prices for Oxygen supplies are based on a Power cost of ₹ 2.32 KWh. For any increase/decrease in the actual cost of power from the base rate, there will be a corresponding pro rata increase/decrease in the gas price applicable for the week, as per clause 11.1.A, per 1P/kWh Power Cost variation from the base rate. 11.2.A For Nitrogen and Argon supplies (unit charge): Nitrogen -- High Pressure : ₹ 0.60 per Nm3 Nitrogen -- Medium Pressure :₹ 0.30 per Nm3 Nitrogen -- Low Pressure : ₹ 0.05 per Nm3 Argon -- : ₹ 5.00 per Nm3 11.2.B The gas prices for Nitrogen and Argon are based on a Power Cost of ₹ 2.31 per kWh. For every 1P/kWh increase/decrease in the actual Power Cost from this base rate there will be a corresponding pro-rata increase/decrease in the gas prices for Nitrogen and Argon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es by the parties hereto, except in a situation of Force Majeure condition affecting BOCI operations, in which case the monthly Facility Charge shall be payable by TISCO for a maximum period of one month in case the Force Majeure condition continued beyond one month. 16: Force Majeure- In the event of either party hereto being prevented or hindered from performing any of its obligation under this Agreement as a result of any breakdown of or accident to machinery or equipment, damage to pipelines, failure of electrical or water supply, any act of God, flood, fire, accident, commotion, strike, lockout, any act of third party or of Government or any cause beyond its reasonable control, the affected party shall give immediate written notice to the other. During the continued existence of the effect of such events, the parties shall be excused from the performance of their obligation under this Agreement, other than in the case of payment by TISCO of the monthly Facility Charge which will continue to be paid as specified in Clause 11. However, if due to Force Majeure event affecting BOCL operations, BOCL is prevented from supplying the gases to TISCO, then the Facili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in direct proportion to the wholesale price index. Further, gas price of various gases such as Oxygen, Nitrogen and Argon are also variable and is based on price variation on power cost. This term is stipulated in Clause 11.1.A, 11.1.B, 11.2.A and 11.2.B. The relation between the facility charge and the price of gas makes it clear that the facility charge as payable is dependent upon the price of gas so supplied. Further, as the facility charge is dependent upon the wholesale price index, it cannot be that facility charge is only being charged as against maintenance of the plant but also includes components of the cost and sale price of the gases so being supplied by the petitioner. 27. Further, as per the inquiry report, which is attached as annexure- 3 and 4 to the writ petition, it transpires that apart from almost 90 per cent of the gases so being supplied to Tata Steel the petitioner company also supplies gases to other companies such as Usha Martin, Tata Motors etc. The rates of supply of gases to those companies are variable and higher than that of Tata Steel. Therefore, it can be safely inferred that certain aspect of price is charged from Tata Steel under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taking into consideration few specific clauses. The agreement has to be read in whole. The same has been rightly held by the Ld. Tribunal in paragraph 20 of its order wherein the entire agreement has been read, understood and interpreted in its entirety. The submissions made by the petitioner show that facility charge has been created in order to circumvent the applicability of JVAT on the same amount. Any agreement made with the intent to evade taxes is in contradiction to Section 23 of the Indian Contract Act, 1872 and hence the same is void. The same was held in the case of Unitech Limited v. Union of India (2016) 2 SCC 569. 30. The Hon ble High Court of Calcutta in its judgment rendered in the case of BOC India Limited v. West Bengal Commercial Tax Appellate and Revisional Board, Kolkata Ors. reported in (2010) 34 VST 448 has dealt with a case, which is similar to the instant case filed here by the same Petitioner i.e. BOC India Ltd., pertaining to the applicability of sales tax on the facility charge being taken by the Petitioner. The Hon ble High Court of Calcutta after analyzing the definition of Sale Price under the Bengal Finance (Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods. It was pointed out that the test was as to what was the consideration passing from the purchaser to the dealer for the sale of goods? It was immaterial to inquire as to how the amount of consideration was made up, whether it included excise duty or sales or freight. The only relevant question to ask is as to what is the amount payable by the purchaser to the dealer as consideration for the sale and not as to what is the net consideration retainable by the dealer . It was further held that the concept of real price or actual price retainable by the dealer was irrelevant. Reference in that connection was made by this Court to what Goddard, L.J. stated in Love v. Norman Wright (Builders) Ltd. [(1944) 1 All ER 618 : 1944 KB 484] This Court then observed that if the dealer transported goods from his factory to his place of business and sold them at a price which was arrived at after taking into account freight and handling charges incurred by him in transporting the goods, then the said charges would obviously be part of the sale price because it would be payable by the purchaser to the dealer as part of the consideration for the sale of goods. It was also observed that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta Steel Limited and in their absence sale may not be complete. The plant is important for producing the saleable goods, the pipeline is important for transporting the saleable goods and the meter is important for calculating the total quantity of goods sold. Accordingly, facility charges are directly relatable to sale of goods by the petitioner to Tata Steel Limited and is a consideration passing from Tata Steel Limited to the petition for sale of goods as also confirmed by the Hon ble Supreme Court of India in its judgment dated 03.02.2016 passed in Civil Appeal No. 1799 of 2010 wherein this very Petitioner was the contesting party. 36. Further, it is also relevant to note that the Petitioner for the same goods i.e. gases which are being sold to purchasers other than Tata Steel Limited is not charging facility charges but the petitioner is charging higher sale price for the said goods. This indicates that where the facility charge is not charged separately by the petitioner the sale price of the goods is higher and accordingly it demonstrates that the facility charge is a part of sale price but charged separately to some customers and charged compositely to other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se duty is not concerned with ownership or sale. The liability under the excise law is event based and irrespective of whether the goods are sold or captively consumed. Under the excise law, the liability is there even when the manufacturer is not the owner of raw material or finished goods (as in the case of job-workers). Excise duty, therefore, is independent of ownership [see Ujagar Prints (II) v. Union of India [(1989) 3 SCC 488 : 1989 SCC (Tax) 469] ]. Therefore, for sales tax purposes, what has to be taken into account is the consideration for transfer of property in goods from the seller to the buyer. For this purpose, tax is to be levied on the agreed consideration for transfer of property in the goods and in such a case cost of manufacture is irrelevant. As compared to the sales tax law, the scheme of levy of excise duty is totally different. For excise duty purposes, transfer of property in goods or ownership is irrelevant. As stated, excise duty is a duty on manufacture 41. Thus is ample clear that taxable event in case of Central Excise and Sales Tax is different. While manufacture is the event in case of Central Excise; the taxable event in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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