Central Excise Valuation -Sales Tax Incentive - Tax Collected from buyer, not deposited with Government - Whether forms part of value
THERE is an incentive scheme under Sales Tax by which the assessee is allowed to collect the full rate of Sales Tax from the buyers, but has to deposit only 25 percent with the Government. The balance 75% is incentive for the manufacturers. Now, the question is whether this part of sales tax retained as incentive by the manufacturers is includible in the assessable value for the purpose of payment of Central Excise Duty. The Tribunal benches were almost unanimous in holding that it is not includible, but the Government was not convinced and they took all these cases to the Supreme Court.
The Supreme Court in a landmark decision delivered on Friday held that the incentive is NOT includible in the assessable value prior to 1.7.2000, but formed part of the “transaction value” after 1.7.2000.
In the pre-2000 valuation Rules, value, did not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and …
But the 2000 Rules stipulated that "transaction value" means the price actually paid or payable for the goods, …………; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
The Supreme Court observed that the clear legislative intent is on "actually paid". The Court further held, "unless the sales tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of "transaction value".
An Impossible Mathematics: This is not the end of the story - calculation of excise duty and sales tax is going to be impossible. Sales tax is calculated on the value plus excise duty. Now you add up sales tax to the value, excise duty goes up and when excise duty goes up, Sales Tax goes up, part of which should again be added to value; then value goes up excise duty goes up and sales tax goes up - and so they go perennially.
A Consultant commented: Department takes settled cases to Supreme Court only with a hope to disturb the settled law..and they are successful!
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