ORDER
K. Sreedharan, J. (President)
1. The appellants, M/s Sujata Textiles Mills, are engaged in the manufacture of cotton yarn, flax yarn and man-made yarn which are excisable goods. In arriving at the value of the goods so manufactured for the purpose of assessment, they claimed various deductions like turnover tax, cash discount, trade discount and dealer discount, octroi, etc. The discounts so claimed by the manufacturer were not allowed by the department. Notice dated 1-12-1995 was issued to the manufacturer requiring them to show cause as to why various deductions claimed as per the price list should not be disallowed. Those deductions included trade discount and cash discount; freight and insurance; transport bills and octroi; brokerage; selling commission; interest on inventories; depot expenses; turnover tax and Textile Committee Cess and Central Excise duty, other than actuals paid at the time of clearance of goods. Adjudicating authority by Order-in-Original No. 124/96, dated 29-3-1996 allowed deductions claimed towards octroi, transportation and insurance charges and Textile Committee Cess on actual. A claim of deduction on account of turnover tax, selling commission, brokerage, depot expenses and interest on finished goods, inventories were disallowed. Trade discount and cash discount paid till 31-1-1996 was disallowed but the same incurred from 1-2-1996 was allowed to be deducted. In terms of this finding he modified the price declarations and consequently demands were confirmed. Manufacturer took up the above or-der-in-appeal. Appellant authority, namely, the Commissioner (A) by Or-der-in-Appeal No. 465/98–C.E., dated 27-3-1998 dismissed the appeal. Hence, the manufacturer has approached this Tribunal questioning the correctness of the orders of the authorities below in refusing the deduction of the amount payable as turnover tax and the amount taken as trade discount/cash discount.
2. The period with which we are concerned in this appeal, as can be seen from the order-in-original, is from December 1994 to April 1995. The adjudicating authority directed the Superintendent of Central Excise to finalise the provisional assessment in terms of his orders.
3. The same issue, namely, whether the department was right in not allowing the turnover tax to be deducted in determining the assessable value and whether the cash discount was also a permissible deduction, came up for consideration before this Tribunal at the instance of the present appellant for an earlier period in Appeal Nos. E/958/98-A and E/1025-1034/98-A. This Tribunal accepted the contention of the appellant on the deductibility of turnover tax and held that turnover tax is to be deducted in determining the assessable value. On the issue of deductibility of the trade discount, matter was remitted to the adjudicating authority to enter a finding as to whether trade discount as claimed by the manufacturer was known to the trade before clearance. The above view taken by the Tribunal in Final Order Nos. 849-859/99-A, dated 11-6-1999 was placed before us in support of the appellant’s contention that they are entitled to deduct the turnover tax from the price for arriving at the assessable value for the purpose of charging duty. Ld. Counsel also submitted that on the question of trade discount, the matter may be remitted back, for the authorities to find whether the trade discount was known to the trade before effecting clearance of the goods.
4. Ld. DR raised a contention that appellant is not entitled to get the turnover tax deducted unless he establishes actual payment of that tax. In the case of trade discount, this Tribunal remitted the matter to the authorities below for entering a clear finding as to whether practice of allowing trade discount was known to the trade before clearance. So matter regarding payment of turnover tax must also be remitted to the authorities. Only on entering a finding on the actual payment of turnover tax can the appellant get deduction. In support of this argument, ld. Counsel relied on the decision of Supreme Court in Union of India v. Bombay Tyres International Pvt. Ltd. 1984 (17) E.L.T. 329. According to the Departmental Representative, the decision of the Supreme Court makes it clear that if only there is proof of payment of turnover tax can that be deducted in finding out the value of the assessable goods. Paragraph 2 of the judgment of the Supreme Court was relied on to support this argument. It reads :-
2. Taxes. – Additional Sales Tax, Surcharge on Sales Tax, and Turnover Tax should be allowed to be deducted from the sale price in order to arrive at the assessable value, and also octroi where payable/paid by the manufacturer. These taxes if proved to have been paid, should be allowed even if they are paid periodically to the relevant taxing authorities in accordance with the relevant provisions of taxing statutes/rules.
Section 4(4)(d)(ii) of the Central Excise Act, 1944, inter alia, states that “Value, in relation to any excisable goods does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods”. This Section makes it clear that in computing the value of excisable goods, sales tax and other taxes, payable on such goods must be excluded. This aspect has been recognised by their Lordships in the first sentence of the paragraph quoted above. The turnover tax payable by the manufacturer should be allowed to be deducted from the sale price. In the second sentence of the above paragraph, their Lordships deals with an entirely different situation wherein according to us, excise authorities are imposing duty on a manufacturer who has not paid the tax at the time when the goods were removed. In calculating the duty payable by such a manufacturer on the goods manufactured, for arriving at the value of the goods, the tax which had already been paid must be given credit to. It cannot be contended that in all cases manufacturer will be entitled to get deduction on account of turnover tax only if he had already paid the turnover tax. Excise duty is payable at the time of removal of the goods from the factory. At that time no turnover tax would have been paid by the manufacturer. Turnover tax is to be paid periodically, much later after the removal of the goods. If turnover tax is payable under a Statute, then that amount must be deducted from the gross price for assessing excise duty. This is more so because of the clear reading of the Section, namely, value in relation to excisable goods does not include sales tax and other taxes payable on such goods. The word used in the Section is ‘payable’ and not ‘paid’. This Tribunal dealing with the turnover tax in Geep Industrial Syndicate Ltd. v. C.C.E., Allahabad 1999 (104) E.L.T. 375 observed as under:
“… Turnover tax and octroi which were made irrecoverable would not have been collected but the assessee paid these taxes and dues to the authorities concerned. If these amounts had not been collected from the buyers, assessee would have paid the same only from the price collected from the buyers. Therefore, amount of turnover tax and octroi paid by the assessee has to be deducted from the price in order to arrive at the assessable value, in cases where the assessee did not collect these dues from the buyers. In fact the question of deduction would arise only in cases where the appellant did not collect these dues over and above the price. Where it is collected over and above the prices the question of deducting these dues from the price would not arise and nor would the question of addition of these dues to the price to arrive at the assessable value would arise. The lower authorities were, therefore in error in disallowing deduction.”
5. Deduction on account of turnover tax was disallowed by authorities because that tax was not included by the manufacturer in the selling price. Under Section 18(3) of the Karnataka Sales Tax, a manufacturer is prohibited from passing on the turnover tax to the buyer. By virtue of that provision, he did not show the turnover tax in his invoices. Because of the statutory prohibition, a manufacturer could not show it in the invoice. But the turnover tax was legally payable by the manufacturer. That turnover tax has been disallowed by the authorities below because it was not shown in the invoice. This is no reason for disallowing the turnover tax. The question of deduction would arise only in case where the manufacturer did not collect these dues over and above the price. The question of deducting said liability from the price would arise when it was not claimed over and above the sale price of the goods. Thus, we hold that the authorities below were not right in disallowing the turnover tax which was payable by the manufacturer.
6. The question relating to the trade discount was remitted to the authorities below in the case of the same appellant for the previous year in the order of this Tribunal referred to earlier. We think it better to adopt the same course for the concerned period as well. So, the issue relating to trade discount is remitted to the adjudicating authority for decision as lawhether such a practice was known to the trade before the goods were removed.
7. Appeal is partly allowed on the above terms with consequential relief relating to the liability of the appellant on turnover tax which was payable by him.