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TMI Blog2002 (10) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... t empowers regulation of price, it does not empower imposition of any taxes. The addition of an element to the ex-works price has no statutory backing or force. It is not by the Central Government or the State Government or any local authority. It is a levy by a Committee majority of whose members are representatives of the steel plants. The purpose of creating funds is for the benefit of these member steel plants. Such a levy, even though, it may be compulsory can never be "tax". Principles on which "income" is to be determined under the Income-tax Act cannot apply when determining "value" for purposes of Excise Duty. Under the Income-tax Act, tax is payable on income which reaches the assessee. On the other hand, Section 4 of the said Act shows that excise is payable on the price at which goods are ordinarily sold to the buyer. Thus the Appeals filed by the Revenue are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... r sale for other purposes. (2) For the purpose of applying the prices notified under sub-clause (1) the Controller may himself classify any iron and steel and may, if no appropriate price has been so notified, fix such price as he considers appropriate: Provided that where any stocks are required by a special order of the Controller to be moved from one place to another or are to be sold at a place which is not connected with any railhead, the Controller may direct that the maximum prices fixed under sub-clause (1) or (2), shall not apply to such stocks and may, in respect of such stocks, specify the maximum prices at which the iron or steel may be sold. (3) No producer or stockholder or other person shall sell or offer to sell, and no person shall acquire, any iron or steel at a price exceeding the maximum prices fixed under sub-clause (1) or (2). 17-B. Power of Central Government to set up committees, etc. - (1) For the purpose of giving effect to the provisions of this order, with respect to any category of Iron or steel, whether such category is subject to or exempt from the operation of all or any such provisions, the Central Government may, by notification in the Official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teel plants. In the matter of operation of this fund, the Committee shall perform its functions in accordance with and subject to, such regulations or directions as may be issued by the Central Government, from time to time. (9B) The Committee may also add any other element to the ex-works prices determined under sub-clause (8) to enable it to discharge its functions and to implement specific scheme entrusted to it by the Central Government." 7.At a meeting held by JPC on 16th January, 1992 note was taken of a Notification No. S.C./16(6)/91. It was resolved that the members steel plants would add to their ex-works prices certain elements. The relevant Clause of the Notification reads as follows : "(4) The Committee may from time to time require the member steel plants to add the elements listed below to their ex-works prices of all or any of the categories of Iron and steel and to remit the same to the Committee within such periods as may be specified : (I) an element of price towards the Steel Development Fund for financing schemes, projects and other capital expenditures for modernisation, research and development, rehabilitation, diversification, renewals and replacement, ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 4(4)(d)(ii) of the Central Excise Act. This Court held as follows : "7. Under Section 4(4)(d)(ii) of the Central Excise Act what is to be excluded from the assessable value is the amount of duty of excise, sales tax and "other taxes". Taxes, as such, are not defined in the Central Excise Act. If the expression "tax" is to be understood in the absence of any definition, it would certainly cover any levy. In D.G. Ghose & Co. (Agents) Pvt. Ltd. v. State of Kerala & Anr., 1980 (2) SCC 410, broad meaning had been given to the expression "tax". In such an event, administrative charges would be covered under Section 4(4)(d)(ii) as "other taxes" because it is a compulsory exaction made under an enactment and, therefore, a duty or impost and such impost must be held to be in the nature of a 'tax' covered by the aforesaid provisions." 10.Strongly relying on these observations, Mr. Desai submitted that in this case also there is a compulsory exaction and therefore such compulsory exaction is in the nature of "tax" and is covered by the words "other taxes", in Section 4(4)(d)(ii) of the Central Excise Act. 11.Mr. Desai also drew the attention of this Court to the case of Ispat Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SDF. It has been stated by the first respondent, Union of India, through the affidavit filed by the fourth respondent, Joint Plant Committee, that funds out of SDF were disbursed to the member steel plants by the SDF Managing Committee as per directions issued by the Central Government from time to time. It is then submitted that since early 1990s there has been a general recession in the steel industry. SAIL had approached the Central Government for its financial and business restructuring. SAIL had taken over Indian Iron and Steel Company Ltd., a sick company in the year 1978. Indian Iron and Steel Company Ltd. is a wholly-owned subsidiary of SAIL. The proposal given by SAIL to the Central Government contained various components and measures including waiver of loans from SDF made over to member steel plants which were under SAIL. It will be noticed that the amount of SDF was not in fact remitted to the Central Government but was shown as credit to the Central Government in the books of SAIL and its member steel plants. This proposal of SAIL, it would appear, has since been accepted by the Central Government by its letter dated 18-2-2000 which we have reproduced above. 13. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s section, be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale : XXX XXX XXX XXX XXX XXX (4) For the purposes of this section,- (a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent; XXX XXX XXX XXX XXX XXX (d) "value" in relation to any excisable goods,- XXX XXX XXX XXX XXX XXX (II) does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale;" 13.It is thus to be seen that under the said Act excise duty is chargeable on the value of the goods. The value is the normal price i.e. the price at which such goods are ordinarily sold by the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of these funds. Further it has already been held, and in our view correctly, that these main steel plants were the only member steel plants. The levy was only on them and the fund was created for the utilization by these member steel plants only. Also to be noted that even though the Essential Commodities Act empowers regulation of price, it does not empower imposition of any taxes. The addition of an element to the ex-works price has no statutory backing or force. It is not by the Central Government or the State Government or any local authority. It is a levy by a Committee majority of whose members are representatives of the steel plants. The purpose of creating funds is for the benefit of these member steel plants. Such a levy, even though, it may be compulsory can never be "tax". 16.Mr. Desai then submitted that what was being added was an element to the ex-works price. He submitted that this element cannot be considered to be price on which excise duty has to be paid. It was pointed out to us that, on this question, the Customs, Excise and Gold (Control) Appellate Tribunal, Delhi (CEGAT, Delhi) had, in the case of SAIL v. Collector of Central Excise reported in 1997 (90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. It was held that this surcharge was diverted before it reached the hands of the assessee and did not become part of the income of the assessee. It was held that such a surcharge would therefore not be regarded as income assessable to tax. 20.In the case of C.I.T. v. Bijli Cotton Mills reported in (1979) 1 SCC 496, the question was whether certain amounts realized by the assessee on account of "Dharmada" (Charity) in addition to the price from his customers could be stated to be income in the hands of the assessee which were assessable to income-tax. It was held by this Court that though amount of "Dharmada" was undoubtedly a payment which the customers were required to pay in addition, to the price of the goods purchased from the assessee. It was held that the purchase of the goods was only an occasion and not the consideration for the "Dharmada" amount. It was accepted that without payment of the "Dharmada" amount the customer would not be able to purchase the goods from the assessee. It was held that this did not make the payment involuntary because the purchaser purchased the goods of his own volition. It was held that the amount of "Dharmada" was being collected for purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viable. He submitted that from the price that the buyer pays, the only deductions can be those set out in Section 4(4)(d)(ii) of the said Act. He submitted that this levy is not a "tax" and does not fall within the meaning of the term "other taxes". He submitted that this element cannot be deducted from the assessable value of the goods. 24.Mr. Rohtagi further points out that the element which has been added is an "element of price". He relied upon the Notification dated 16th January, 1992 (which has been reproduced hereinabove) and points out Clauses 4(i), 4(ii) and 4(iii) which clearly show that what has been added is an element of price. Mr. Rohtagi submitted that this element could only have been added as price because the JPC and SPC are established by virtue of the Iron and Steel (Control) Order. He submitted that the Iron and Steel (Control) Order is based on the Essential Commodities Act and under that Act there was no power to make any levy or impose any tax on a purchaser. He submitted that the addition being an element of price it has to be included in the assessable value for purposes of excise duty. 25.We have heard the parties. In our view, Mr. Rohtagi is right. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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