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TMI Blog1986 (2) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... This view of the appellate authority is confirmed by the Sales Tax Appellate Tribunal in appeals filed at the instance of the Revenue. The State has come up in revision under Section 41 of the Kerala General Sales Tax Act. 2. Rubber cess is payable under Section 12 of the Rubber Act, 1947 (Central Act 24 of 1947). Section 12 as it originally stood is extracted below : "Imposition of rubber cess. - (1) With effect from such date as may be notified by the Central Government in this behalf, there shall be levied and collected as a cess for the purposes of this Act a duty of excise on all rubber produced in India at such rate not exceeding one anna per pound of rubber so produced as the Central Government may, by the same or a like notification, from time to time fix. (2) The said duty of excise shall be payable by the owner of the estate on which the rubber is produced, and shall be paid by him to the Board within one month from the date on which he receives a notice of demand therefor from the Board. (3) The said duty of excise may be recovered as if it were an arrear of land revenue. (4) For the purpose of enabling the Board to assess the amount of the duty of excise paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he section as substituted by the Amendment Act is extracted below : "Imposition of new rubber cess. - (1) With effect from such date as the Central Government may, by notification in the Official Gazette, appoint, there shall be levied as a cess for the purposes of this Act, a duty of excise on all rubber produced in India at such rate, not exceeding fifty naye paise per kilogram of rubber so produced, as the Central Government may fix. (2) The duty of excise levied under sub-section (1) shall be collected by the Board in accordance with rules made in this behalf either from the owner of the estate on which the rubber is produced or from the manufacturer by whom such rubber is used. (3) The owner or, as the case may be, the manufacturer shall pay to the Board the amount of the duty within one month from the date on which he receives a notice of demand therefor from the Board and, if he fails to do so, the duty may be recovered from the owner or the manufacturer, as the case may be, as an arrear of land revenue. (4) For the purpose of enabling the Board to assess the amount of the duty of excise levied under this section - (a) the Board shall, by notification in the Offici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess by the owners of the estates, either by evasion of registration or by failure to submit correct returns or any returns at all. There are about 26,000 estates under production in the country and most of them are small holdings. Many of them do not render returns of production to the Rubber Board and thus evade payment of duty. From October, 1947, to December, 1954, it was found that 20,608 tons of rubber escaped assessment and the Board suffered during the period a loss of Rs. 3,30,805. The Rubber Board estimates that under the present system there is no likelihood of more than 65 per cent of the potential revenue being realised each year. With a view to improving the efficiency of collection, it is proposed to amend Section 12 of the Act so as to enable the cess to be collected either from the owners or the manufacturer who ultimately consumes the rubber produced in the estates. There are at present 347 registered rubber manufacturers in the country. It is felt that it would be far more easy to collect the cess from a small number of manufacturers than from about 26,000 producers whose number will increase year by year. The proposed amendment of Section 12 in the amending B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 985) 59 STC 277 (S.C.) referred to above stated at Page 290 : "The definition clearly indicates that the total amount charged as the consideration for the sale is to be taken into account for determining the turnover." In support of the above provision the Supreme Court refers to the following observation in its earlier decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan (1979) 43 STC 13 (S.C.) : "The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax 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.........." There can, therefore, be no doubt that the excise duty charged on the production of goods sold forms part of the sale consideration and should properly be included in the purchase turnover. 7. Shri Hyder Ali Khan, Shri Pathrose Mathai, Shri M.B. Kurup and Shri T.L. Viswanatha Iyer, Advocates, who argued the case on behalf of the respective assessees, place considerable reliance on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The view expressed by the Supreme Court in the first McDowell Co. Ltd.'s case (1977) 39 STC 151 (S.C.) was not approved in its later decision reported in McDowell Co. Ltd. v. Commercial Tax Officer (1985) 59 STC 277 (S.C.) (hereinafter referred to as the second McDowell Co. Ltd.'s case). The Second McDowell Co. Ltd.'s case (1985) 59 STC 277 (S.C.) also related to the question whether the excise duty paid by the purchasers directly to the Government is liable to be included in the turnover of the assessee, the owner of the distillery where the liquor is manufactured. At the relevant time, however, the Andhra Pradesh Distillery Rules had been amended, as per which the liability to pay excise duty was made exclusively that of the manufacturer. However, by private arrangement the purchasers of liquor were paying excise duty directly to Government and the bills or invoices issued by the assessee-manufacturer did not include the excise duty in the price paid for the sale of liquor. The decision of the Supreme Court, however, is not entirely based on the change effected in the Distillery Rules as per which the liability for excise duty was exclusively on the manufacturer. The Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rubber cess under Section 12 of the Rubber Act is a duty of excise on all rubber produced in India and the taxable event is the production of rubber as defined in the Act. It is such rubber that the assessees had purchased. It is true, as per the amended provisions of Section 12 the purchasers who are manufacturers of rubber products are also made liable for payment of rubber cess. But as noticed by the Supreme Court in the decision in Jullundur Rubber Goods Manufacturers' Association's case AIR 1970 S.C. 1589 the amendment was only for the purpose of facilitating easy collection of the rubber cess due on the production of rubber. The assessees have no case that the rubber purchased by them have not passed the stage of production before their purchase which alone is the taxable event in the matter of levy of rubber cess under Section 12 of the Rubber Act. Since the incidence of duty is directly relating to production of rubber, a deferred payment after the purchase by the manufacturer does not alter the character of the levy as one on the production of goods, and the duty paid should, therefore, be deemed to form part of the price that the purchaser had paid for the goods pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee that the rubber cess paid does not form part of his purchase turnover. We have already noticed that the decision in the first McDoweil Co. Ltd.'s case (1977) 39 STC 151 (S.C.) itself was held as not laying down the correct law in regard to this aspect of the matter in the second McDowell Co. Ltd.'s case (1985) 59 STC 277 (S.C.). 11. Shri Pathrose Mathai, counsel for some of the assessees, strongly relies on Rule 33D of the Rules framed under the Rubber Act as per which a notice of demand for rubber cess is to be issued only to the manufacturer of rubber goods and not to the producer of rubber. Strong reliance is placed also on the following observation of the Supreme Court on the effect of Rule 33D in Jullunder Rubber Goods Manufacturers' Association's case AIR 1970 SC 1589 at Page 1596 : "13. Now the above rule seems to contemplate the filing of return both by the owners of rubber estates and manufacturers. But under Rule 33D the demand notice can be sent only to a manufacturer on receipt of which he must make payment to the Board of the amounts specified therein. On his failure to make such payment the Board can take steps for recovery of the amounts due as ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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