@JUDGMENTTAG-ORDER
F. M. Ibrahim Kalifulla, J.@mdashThis writ petition is directed against the order of the third respondent-Tribunal dated October 3, 2005 passed in S. T. A. No. 215 of 2000. The petitioner seeks to set aside the said order of the Tribunal.
2. The brief facts, which are required to be stated are that the petitioner is engaged in the manufacture of industrial valves. The goods manufactured by the petitioner are subjected to duty of excise under the Central Excise Act, 1944. The assessment pertains to the year 1990-91 and the issue concerned is the levy of tax under the Central Sales Tax Act (hereinafter called as "the Act").
3. According to the petitioner, the Government of India provided a scheme of cash assistance/refund of excise duty to the manufacturer effecting sales and supply to certain specified projects to which deemed export status was extended under the Import and Export Policy of the Government of India. The petitioner stated to have secured a contract of M/s. Oil India Limited vide order No. 130299/DJA, dated February 22, 1990, which was entitled for deemed export benefit status. Under the said contract in clause 4.0 under the heading "duties and taxes", it was specifically agreed to the effect that "no excise duty is leviable as per deemed export benefit notice. Necessary project authority''s certificate is enclosed herewith". The petitioner while effecting supplies to M/s. Oil India Limited stated to have raised invoices claiming only the price plus Central sales tax. The excise duty was neither claimed in the invoices nor the purchasers were debited towards that.
4. According to the petitioner, M/s. Oil India Limited did not also pay the excise duty. The petitioner stated to have however incurred the excise duty and by virtue of the deemed export status to the extent of the duty paid towards excise, the petitioner was stated to have been granted cash assistance based on submission of appropriate claims. While so, the assessment for the year 1991, which was completed in the usual course without imposing any tax on the excise duty incurred was stated to have been reopened by notices dated March 4, 1996 and March 13, 1996. A revised order dated March 26, 1996 was stated to have been passed u/s 16 read with section 9(2) of the Act.
5. On appeal by the petitioner, the Appellate Assistant Commissioner, in his order dated January 23, 1998 cancelled the assessment. It is stated that the first respondent preferred an appeal before the third respondent and by the impugned order, the third respondent-Tribunal has held that excise duties form part of the sale price. Therefore, irrespective of the facts as to whether such excise duties were passed on to the purchaser or not, the petitioner was liable to pay tax on the excise duty as well along with the price agreed with the purchaser. The Tribunal, therefore, by the impugned order, restored the order of the assessing authority dated March 26, 1996.
6. Assailing the order of the Tribunal, Mr. N. Prasad, learned counsel for the petitioner after taking us through the relevant contract between the petitioner and the Oil India Limited as well as section 2(g) and 2(h) of the the Central Sales Tax Act (hereinafter referred to as, "the Act") contended that the value for which, the petitioner supplied goods to its purchaser did not include the Central excise duty and that at no point of time, the purchaser was liable to meet the said payment and therefore, the payment of Central excise duty by the petitioner cannot form part of the sale price in order to attract the levy of tax under the Act.
7. The learned counsel for the petitioner contended that except for export sales, since there is no provision for grant of exemption under the Central Excise Act, while at the same time in public interest, the Government of India came forward to grant deemed export status and thereby provided for payment of cash assistance to meet whatever Central excise duty borne by the petitioner and when such payment of Central excise duty did not form part of the sale value under the contract between the petitioner and M/s. Oil India Limited, the cash assistance made by the Government of India cannot be taxed under the Act.
8. The learned counsel placed reliance upon the decisions in Neyveli Lignite Corporation Ltd. v. Commercial Tax Officer Cuddalore reported in (2001) 124 STC 586 (SC) and Indian Potash Limited v. Assistant Commissioner (CT) (2002) 128 STC 446 (Mad) which followed the decision
9. As against the abovesaid submission, Mr. Naziruddin, learned Special Government Pleader (Taxes), in his submissions contended that under clause 4.0 of the purchase order, when it was specifically referred to the effect that excise duty was not leviable as per deemed export benefit notice and the necessary certificate was also enclosed, the cash assistance received by the petitioner from the Government of India forms part of the sale price and therefore, the assessing authority was justified in passing the revised order dated March 26, 1996.
10. According to the learned Special Government Pleader, the definition of "sale" u/s 2(g) of the Central Sales Tax Act and "sale price" u/s 2(h) of the Act when applied to the nature of the transaction between the petitioner and the Oil India Limited would include the Central excise duty paid by the petitioner and consequently, the petitioner was bound to pay the tax on the value of the Central excise duty also. The learned counsel attempted to distinguish the decision in
11. Having bestowed our serious consideration to the respective submissions and having perused the order impugned in this writ petition, the other material papers, we find force in the submission of the learned counsel for the petitioner. As noted earlier, the term agreed in the purchase order relating to the sale price has specifically excluded Central excise duty. As per the scheme extended by the Government of India, in respect of such supplies effected to organization like Oil India Limited and certain other specified projects, the deemed export status was granted and consequently, the excise duty paid was stated to have been reimbursed by way of cash assistance subject to certain formalities to be complied with by the suppliers while making claim for payment of cash assistance. It is not disputed that since because there is no provision for grant of exemption from payment of excise duty except for exports, such deemed export status was granted by the Government of India and thereby provided for payment of cash assistance for sales effected for certain specified projects.
12. Under the said scheme, while the supplier to such specified parties had to bear the Central excise duty and to the extent to which such duties are borne by the supplier, cash assistance is paid later on based on the claim by such suppliers. The most significant factor is that such a benefit by way of cash assistance to off-set whatever Central excise duty paid by the supplier was an exclusive arrangement between the Government of India and the supplier for certain specified reasons. The said arrangement and the benefit extended by way of cash assistance had no effect on the sale effected as between the petitioner and its buyer, viz., Oil India Limited. It is not as if that in the event of failure in getting reimbursement of the Central excise duty in the form of cash assistance, the buyer, viz., Oil India Limited would have made good the loss to the petitioner. In other words, by virtue of the categoric terms contained in the purchase order, the petitioner agreed to supply goods to its purchaser, viz., M/s. Oil India Limited by agreeing to bear the Central excise duty payable on such supplies. In order to ensure that, the purchaser, viz., M/s. Oil India Limited retains its right as the owner of the goods supplied on completion of the sale. Necessary certificate called as project authority certificate is also annexed with the purchase order to confirm the position that the purchaser, viz., Oil India Limited is engaged in a project which has been accorded the status, viz., deemed export status.
13. In the said circumstances, when we apply section 2(g) of the Act, which defines "sale" and section 2(h) which defines "sale price", we are convinced that in the case of supply effected by the petitioner to its purchaser, viz., M/s. Oil India Limited, the transfer of property in goods passed on to the purchaser for the price fixed in exclusion of Central excise duty, which the petitioner agreed to bear.
14. As far as the "sale price" as defined u/s 2(h) is concerned, the said definition makes it clear that it would only mean the amount payable to a dealer as consideration for the sale of any goods. Therefore, applying the substantive part of the said definition when the petitioner and its purchaser agreed in tacit terms that the sale price would not include the Central excise duty and such an agreement cannot be held to be a contract against the statute, we do not find any statutory impediment for the petitioner to only incur the tax liability on the agreed price excluding Central excise duty borne by it.
15. In the abovestated background, when we apply the principles laid down by the honourable Supreme Court in the decision in
11. Sale is a bilateral transaction which stems out of a contract between the seller and the purchaser. An essential ingredient of a sale is ''price''. Fixation of the price is a matter of agreement between the parties. Sub-section (1) of section 9 of the Sale of Goods Act, 1932, provides that the price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing between the parties. In cases where the price is not determined in accordance with these provisions, the buyer shall pay the seller a reasonable price. Therefore, price is an essential element of a contract of sale and is ordinarily a matter of agreement between the parties. What the purchaser of the fertiliser bargains when he purchases fertiliser from the petitioners is to obtain a certain quantity of fertilisers at a certain price which shall not exceed the price fixed by the Central Government by notification under the Fertilizer (Control) Order. The sale is not conditional on the Central Government paying any amount by way of subsidy. There is no agreement between the parties for any further amount to be paid, than what is paid by the purchaser at the time of the sale. Turnover'' is defined in section 2(xxvii) of the KGST Act as meaning the aggregate price for which goods are either bought or sold, supplied or distributed by a dealer. ''Sale'' is defined in section 2(xxi) as meaning every transfer, whether in pursuance of a contract or not, of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or for other valuable consideration. The essential contract between the parties, namely, the seller and the purchaser of fertilisers, is only for payment of the price subject to the maximum fixed by the Central Government and not for any other. This being the contract, any other sum received by the seller-petitioners for a different purpose and not as consideration for the sale, is not part of the sale price, and therefore of their turnover. The fact that the amount of subsidy is determined with reference to the quantum of fertilisers cleared from the factory on which considerable stress was made by the Government Pleader, does not lead to any inference that the payment is made in consideration of the sale. The retention price and the transfer price are fixed with reference to various factors. The subsidy is paid for the benefit of the public, to keep the prices at a reasonable level, and at the same time to ensure a reasonable return on investment to the units, and not as consideration for the sales effected by them. I am therefore of the view that the amount of subsidy received by the petitioners for the purpose of their units, which is not related to any particular transaction of sale, but is related to other circumstances, cannot constitute turnover in their hands assessable under the KGST Act.
and has held that the essential ingredients of a sale is a price and such price is a matter of agreement between the parties. Here in the case on hand as between the petitioner and its purchaser, M/s Oil India Limited, it was agreed between them that the price would be in exclusion of the Central excise duty. Further, the receipt of cash assistance by the petitioner at a later point of time was as between the petitioner and the Government of India and the sales as between the petitioner and M/s. Oil India Limited was not conditional on the Central Government paying the amount by way cash assistance. In fact, after the agreement between the petitioner and M/s. Oil India Limited and after the sale had been effected, if the Government of India had withdrawn the payment of cash assistance, having regard to the tacit agreement between the petitioner and M/s. Oil India Limited, there would have been no scope for the petitioner to fall back upon M/s. Oil India Limited to get back whatever Central excise duty borne by it. There was also no other condition attached in effecting the sale by the petitioner to M/s. Oil India Limited as regards the excise duty borne by the petitioner. The price as between the petitioner and M/s. Oil India Limited was fixed, which specifically did not include payment of Central excise duty can also be said that the benefit extended by the Government of India providing for payment of cash assistance to the extent of Central excise duty payment by the petitioner by specifically restricting such benefits in respect of certain projects above was by taking into account, the nature of the projects which had its own effect on national interest which in turn can be held to be in public interest. Therefore, in every respect whatever principles laid down in the decision in Neyveli Lignite Corporation Ltd. v. Commercial Tax Officer Cuddalore reported in (2001) 124 STC 586 (SC) would squarely apply to the case on hand and consequently the entitlement of the petitioner in seeking for exclusion of the Central excise duty from the sale price on working out the tax liability under the Act was perfectly justified.
16. In the decision in Indian Potash Limited v. Assistant Commissioner (CT) (2002) 128 STC 446 (Mad) on more or less identical situation, the Division Bench followed the decision in
Having regard to the pronouncement of the apex court that the price is that which the seller receives from the purchaser and that the subsidy received by the seller from the Government in terms of an administered scheme which does not provide that the amount paid by the Government is being paid on behalf of the buyer, the amount of the ''concession'' received by the petitioner from the Government cannot be regarded as forming part of the price which alone can be subjected to tax under the Act.
17. Following the said decision as well and applying the same to the facts of this case, we are convinced that the order of the Appellate Assistant Commissioner was well justified and the sale price as agreed between the petitioner and its purchaser, M/s. Oil India Limited, under the purchase order in exclusion of Central excise duty was valid in law and there was no scope for imposing any tax liability based on the Central excise duty incurred by the petitioner. The order of the Tribunal in holding that who pays the excise duty is immaterial and the sale price must include excise duty also without reference to the nature of transaction between the petitioner and its purchaser was not therefore in consonance with the definitions of "sale" and "sale price" as defined u/s 2(g) and 2(h) of the Act. The impugned order of the Tribunal is therefore set aside and the order of the Appellate Assistant Commissioner stands confirmed. This writ petition stands allowed. Consequently, W. P. M. P. No. 1550 of 2006 is closed. No costs.
