28 July 2016

Uniform price does not prove charging of tax from buyers

Supreme Court has held that uniform pricing cannot be a ground to hold that the assessee was charging sales tax on the sale price of goods manufactured in the exempt unit. The assessee was engaged in manufacture of blended packet tea in its factory at Dharwad in Karnataka, wherein it was granted sales tax exemption for five years from the date of commencement of production in accordance with exemption eligibility certificate. Exemption was later denied contending that the sale of tea packets from the unit which had the benefit of exemption and the units manufacturing tea which did not have the benefit of exemption, were similarly priced i.e. the assessee ought to have determined lesser price for the tea manufactured at the exempted unit in comparison to other units.
The Supreme Court in the case of Deputy Commissioner of Commercial Taxes v. Hindustan Lever Limited  held that adoption of uniform market price throughout India, in spite of production taking place in both exempted and non-exempted units, was a matter of business policy and could not be taken exception to. It was held that the assessee was entitled to fix the maximum retail price of its products. The Court accepted the contention that a uniform MRP ensured that the goods from one State did not flow to other States, thereby distorting sales. Department’s appeal was dismissed by the Apex Court holding that the sale consideration received should not be bifurcated on the basis of any assumption that the sale price received must have included the tax.


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