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TMI Blog2004 (2) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... such that burden thereof is to be borne by the buyers and the respondents herein are merely the agents for collecting the same on behalf of the State. The impost, therefore, cannot be termed as a 'fee' so as to deprive the respondents of the benefit of deduction of the tax for the purpose of Section 4(4)(d)(ii) of the Central Excise Act, 1944. We may also notice that in terms of Rule 23 of the U.P. Sheera Niyantaran Niyamawali, 1974, the occupier of a sugar factory is obligated to deposit the administrative charges even prior to delivery of molasses and recovery thereof from the buyers. The impost levied in terms of the said Act must, thus, be held to be a special tax applicable to a section of the people, namely, buyers of molasses. I am also of the opinion that Kisan Sahakari Chinni Mills Ltd. (2001 (8) TMI 119 - SUPREME COURT OF INDIA) holding that the impost impugned therein did not have a backing of a statutory provision and, thus, would not be a tax. But it was clearly held that the same would be so if the levy is imposed by any Central or State legislature or any statutory authority lays down the correct law. - 7488-7492 of 2001 - - - Dated:- 27-2-2004 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Being aggrieved, the Department preferred an appeal before the Customs, Excise and Gold Control (Appellate) Tribunal (CEGAT), New Delhi. However, CEGAT vide impugned judgment and order dated 27th July, 1999, rejected the appeal holding that the said administrative charge was a tax and it was not includible in the assessable value in terms of Section 4(4)(d)(ii) of the Act by placing reliance on the judgment of this Court in the case of D.G. Gose Co. (Agents) (P) Ltd. v. State of Kerala reported in [(1980) 2 SCC 410]. Against the impugned judgment, the revenue has come by way of appeal to this Court under Section 35L of the Central Excises and Salt Act, 1944. Analysis of the Central Excise Act, 1944 and U.P. Adhiniyam, 1964 : 5.In order to answer the point at issue one has to analyse the relevant provisions of Central Excise Act, 1944 (as it stood at the relevant time). We quote hereinbelow Section 4 of the said Act :- 4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the place of removal is not known and the value thereof is determined with reference to the price for deliver at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price. The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of Section 3. 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; (b) place of removal means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory, and from where such goods are removed; (ba) time of removal , in respect of goods removed from the place of removal referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of such goods from the duty of excise under such Act is for the time being in force, the duty of excise computed with reference to the rate specified in such Act, in respect of such goods as reduced so as to give full and complete effect to such exemption; and (ii) in any other case, the duty of excise computed with reference to the rate specified in such Act in respect of such goods; (e) wholesale trade means sales to dealers, industrial consumers, Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail. 6.Section 3(1) of the Central Excise Act, 1944 is a charging section, which creates the liability to pay the excise duty on the goods produced or manufactured in India and the said sub-section clearly indicates the nature and character of the duty, namely, that it is a tax on production and manufacture of goods, while Section 4 is in the nature of machinery provision and, therefore, any thing said therein must be read so as to carry out the basic concept of excise duty. Section 4 of the said Act provides for determination of value for the purposes of charging the duty of excise under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merated in the section to preserve the molasses. Under section 7 of the U.P. Act, the Controller is required to take steps to remove adulterated molasses. Sections 8 and 10 of the U.P. Act are relevant for the purposes of deciding these appeals and accordingly they are quoted herein below :- Sale and supply of molasses. 8. - (1) The Controller may by order require the occupier of any sugar factory to sell or supply in the prescribed manner such quantity of molasses to such person, as may be specified in the order, and the occupier shall, notwithstanding any contract, comply with the order. The order under sub-section (1) - (a) shall require supply to be made only to a person who requires it for his distillery or for any purpose of industrial development; (aa) may require the person referred to in clause (a) to utilise the molasses supplied to him under an order made under this section for the purpose specified in the application made by him under sub-section (1) of Section 7A and to observe all such restrictions and conditions as may be prescribed. (b) may be for the entire quantity of molasses in stock or to be produced during the year or for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(2) makes it clear that such supply of molasses shall be made only to a person who requires it for his distillery or for industrial development. Under Section 8(4), the sugar factory shall be liable to pay to the State Government and in the manner prescribed, administrative charges at specified rates on the molasses sold or supplied by the sugar factory. Under Section 8(5), the sugar factory shall be entitled to recover from the person to whom the molasses is sold or supplied, an amount equivalent to such administrative charges, in addition to the price of the molasses (underline supplied by us). A perusal of Section 8(5) shows that the said administrative charges do not form part of the consideration for which the molasses are sold or supplied. Under Section 8(5) of the U.P. Act administrative charges are recoverable by the sugar factory from the buyers in addition to the price of the molasses. It shows that liability to pay administrative charges is on the buyer and that it has no co-relation with the price of the molasses. The sugar factory recovers these administrative charges from the buyers and passes it on to the Government. These administrative charges are not appropriated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actory is only a collecting agent for the State Government. It is for this reason that Section 8(5) of the U.P. Act requires the sugar factory to recover from the buyer or the allottee an amount equivalent to the administrative charges in addition to the price of the molasses. Reading Section 8(5) of the U.P. Act with Rule 23 it is clear that the liability to pay administrative charges under the U.P. Act is on the buyer/allottee and not on the factory. Arguments : 10.At the outset, learned Attorney General submitted that the main question which arises for consideration is: whether the administrative charges levied under the U.P. Act are other taxes within the meaning of Section 4(4)(d)(ii) of the Act. It was inter alia urged that above judgment of the Division Bench in the case of Commissioner of Central Excise v. Kisan Sahkari Chinni Mills Ltd. (supra) is erroneous for interpreting the words other taxes in Section 4(4)(d)(ii) of the Act in the light of the word taxation as defined in Article 366 (28) of the Constitution of India, that there is no warrant for interpreting the words other taxes in the Act with similar amplitude, that it was clear from the scheme of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act to order any sugar factory to sell or supply the given quantity of molasses to an intending buyer. These provisions also found place in the U.P. Rules which provide inter alia for analysis and testing of samples and maintenance of accounts. It was submitted that regulatory regime for molasses was required in the public interest in view of the potential danger to public health and environment if the industry and the product are not properly regulated. In this connection it was submitted that this Court has held that regulatory fees do not require an element of quid pro quo in the strict sense and that a reasonable relationship between the levy and the services rendered is sufficient. That if the activities for which a licence is given requires regulation, the fee charged for this purpose is correctly classifiable as a fee and not as a tax. In support of this contention, reliance was placed on the judgments of this Court in the case of City Corporation of Calicut v. Thachambalath Sadasivan Ors. [(1985) 2 SCC 112]; Commissioner and Secretary to Government Commercial Taxes and Religious Endowments Department Ors. v. Sree Murugan Financing Corporation, Coimbatore Ors. [(1992) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is to say, the price at which the excisable goods are ordinarily sold by the manufacturer to a buyer. In the case of Union of India and Others etc. v. Bombay Tyre International Ltd. and etc. reported in [1983 (14) E.L.T. 1896 (S.C.) = AIR 1984 SC 420], it was inter alia held that under the Act while the levy is on the manufacture or production of goods, the stage of collection need not in point of time tally with the completion of the manufacturing process, that while the levy has the status of a constitutional concept; the point of collection is located where the Act declares it will be and that where the excise duty is levied on ad valorem basis the value on which such duty is levied is a conceptual value . This judgment of the Apex Court is relevant for two reasons. Firstly, it lays down that levy under the Act has the status of a constitutional concept. Therefore, we do not find merit in the argument of the learned Attorney General that the definition of the word taxation in Article 366(28) cannot be read into the words other taxes under Section 4(4)(d)(ii) of the Act. Secondly, it lays down that an article becomes an object of assessment when it is sold by the manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d)(ii) of the Act. Hence, there is no merit in the contention advanced on behalf of the Revenue that administrative charges payable by the assessee under Section 8(4) of the U.P. Act are includible while determining value of goods for the purposes of assessment under the Act. The matter can also be looked at from a conceptual angle. An assessee under the Act incurs expenses in the course of manufacture of goods, which includes taxes. The concept of price covers cost plus profit plus taxes. Therefore, under Section 4(1)(a) if the normal price includes taxes, {See [(1978) 4 SCC 271]} they have to be deducted. But if an item of expenditure or cost does not fall in the normal price, there is no question of deduction of that item from such a price as such a component never formed part of the normal price in the first instance and, therefore, it cannot come within the ambit of assessable value under Section 4(1)(a) of the Act. On this very point, this matter stands concluded. 12.However, as stated above, in these civil appeals, we are required to decide the true purport of the words other taxes in Section 4(4)(d)(ii) of the Act. It is argued on behalf of the Department that admini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodities, such as their import or sale, or production for sale. It has been further held that going by the general tendency of a tax, it is capable of being passed on to the consumer or the buyer. In our view, the above test is important because a tax is capable of being passed on to the consumer or the buyer whereas a fee is a counter payment by the buyer who receives the benefit of the services for which he is charged and such fees are not capable of being passed on as fees to the consumer or the buyer. The above point of distinction is applicable to the facts of this case. In the present matter, as stated above, levy of administrative charges under Section 8(4) of the U.P. Act is on the producer of molasses; it is imposed on production of molasses for sale and under Section 8(5) the same is passed on to the buyer - distillery. In the circumstances, levy of administrative charges under the U.P. Act is a tax. There is one more circumstance which indicates that the levy of administrative charges under the U.P. Act is a tax. In the case of Matthews v. The Chicory Marketing Board (Victoria) reported in [(1938) 60 Commonwealth Law Reports 263], it has been held that customs and excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not necessary to examine numerous judgments cited at the bar on the question of difference between the tax and fee. Ultimately, each matter will have to be decided in the light of the provisions of the statute in question. We are, therefore, in agreement with the view expressed in the case of Commissioner of Central Excise, Meerut v. Kisan Sahkari Chinni Mills Ltd. (supra). For the above reasons, all the civil appeals herein stand dismissed with no order as to costs. 16.[Judgment per : S.B. Sinha, J.]. - 'Taxation' is defined in Clause (28) of Article 366 of the Constitution of India to mean : taxation includes the imposition of any tax or impost, whether general or local or special, and tax shall be construed accordingly; 17.The Constitution of India postulates either a tax or a fee. However, the use of expression 'tax' or 'fee' in a statute is not decisive; as on a proper construction thereof and having regard to its scope and purport, 'fee' may also be held to be a tax. 18.The definition of 'tax' in terms of Clause (28) of Article 366 of the Constitution is wide in nature. The said definition may be for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no provision in the Municipal Corporation Act for levying services charges. The only provision is by way of tax. Undisputedly, the appellant-Corporation is collecting the tax from general public for water supply, street lighting and approach roads etc. Thus, the 'tax' was sought to be imposed in the garb of 'service charges... 23.We may furthermore notice that a Seven-Judge Bench of this Court in Synthetics and Chemicals Ltd. and Others v. State of U.P. and Others [(1990) 1 SCC 109], while considering the question as to whether the levy on industrial alcohol by the State is justifiable, inter alia, held that when revenue earned out of the impost is substantial, the same would not be justifiable as fee. 24.In Liberty Cinema (supra), this Court, while interpreting Section 548 of the Calcutta Municipal Act providing for grant of a licence, observed : ...The reference to the heading of Part V can at most indicate that the provisions in it were for conferring benefit on the public at large. The cinema house owners paying the levy would not as such owners be getting that benefit. We are not concerned with the benefit, if any, received by them as members of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when it will be exercised it is for the Corporation to decide. It is impossible to call it a power, as the respondent wants to do, for it is not given to the Corporation for its own benefit. The Corporation has been set up only to perform municipal duties and its powers are for enabling it to perform those duties. Furthermore there is no doubt that an estimate of the licence fee has to be included in the budget and therefore the word 'tax' in Section 127(3) must be deemed to include the levy under Section 548. The words subject to the provisions of Part IV in Section 127(3) must be read with the addition of the words where applicable ... The20. conclusion to which we then arrive is that the levy under Section 548 is not a fee as the Act does not provide for any services of special kind being rendered resulting in benefits to the person on whom it is imposed. The work of inspection done by the Corporation which is only to see that the terms of the licence are observed by the licencee is not a service to him. No question here arises of correlating the amount of the levy to the costs of any service. The levy is a tax. It is not disputed, it may be stated, that if the lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r term is not to be found in the constitution, yet the former necessarily implies it. Indirect stands opposed to direct. There may, perhaps, be an indirect tax on a particular article, that cannot be comprehended within the description of duties, or imposts, or excises, in such case it will be comprised under the general denomination of taxes. For the term tax is the genus, and includes, (1) Direct taxes. (2) Duties, imposts, and excises. (3) All other classes of an indirect kind, and not within any of the classifications enumerated under the preceding heads. 33.We may notice that the validity of U.P. Act came to be considered by a Full Bench of the Allahabad High Court in M/s. Shriram Industrial Enterprises Ltd. v. The Union of India and others [AIR 1996 (Allahabad) 135], wherein one of us V.N. Khare, J. (as the Hon'ble Chief Justice of India then was) speaking for the Bench upheld the vires thereof, inter alia, on the ground that the same has been enacted in terms of Entry 33, List III of the Constitution of India. The said Act is, therefore, held to be regulatory in nature. 34.When a statute deals with an essential commodity in terms wher ..... X X X X Extracts X X X X X X X X Extracts X X X X
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