13. Can it be said that a return due is outstanding from an assessee even if a return is not furnished admitting the tax due for the period covered by such return?

Held : No

Brief facts emanating in this case are: The assessment of the appellant under the Bombay Sales Tax Act, 1959 for the period 1-4-1999 to 31-3-2000 resulted in a refund of Rs. 9,03,093/- after adjustment of interest under section 36(3)(a) at Rs.1,30,654/- whereas the assessment under the Central Sales Tax Act, 1956 resulted in a demand of Rs. 70,994/- The assessment order was passed on 24-2-2003. The assessing authority did not grant any interest under section 43A on the refund. In appeal before the Deputy Commissioner of Sales Tax (Appeals),Nagpur, the appellant pleaded for interest under section 43A as well as remission of interest under section 36(3)(a) on the basis of out of pocket theory. The Deputy Commissioner was pleased to grant interest under section 43A at Rs. 1,57,784/- and remission of Rs. 40,000/- in the interest levied under section 36(3)(a). The appeal order was passed on 21-4-2004. Subsequent to the passing of appeal order, the appellate authority issued Form N-41 proposing to rectify the appeal order. The appellate authority proposed to withdraw the interest granted under section 43A as the appellant had adjusted the refund against the return dues for December 2002 and January 2003. He also proposed to withdraw the remission granted in interest under section 36(3)(a). The Rectification was passed on 12-8-2004 rejecting the submissions put forth by the appellant.

The plea of the appellant before the Tribunal was that on the date of passing the assessment order no recovery for any period was due from the assessee. The assessing officer adjusted the refund towards the return dues for the months of December 2002 and January 2003 by refund adjustment order on 13-3-2003 which is subsequent to the date of assessment order; i.e., 24-2-2003. The Deputy Commissioner in appeal had taken a conscious decision regarding the interest under section 43A and remission of interest under section 36(3)(a) and therefore there is no mistake apparent on record to justify the action under section 62.

The revenue submitted that by the time the assessment order was passed the tax for the months of December 2002 and January 2003 was due and according to it under Rule 29 even without submitting return the tax become due on the date prescribed by it. According to the revenue recovery of tax due for the months of December 202 and January 2003 was outstanding against the appellant and the same is therefore required to be deducted from the amount of refund due as per the assessment order.

The Tribunal observed that the question for its consideration is whether recovery of return dues for the months of December 2002 and January 2003 was outstanding on 24-2-2003 when the assessing officer passed the assessment order quantifying the refund due to the appellant. The Tribunal disagreed with the submission of the department that without filing the return, tax payable for a period covered by a return become due for recovery on the date prescribed for filing the return and it can be recovered even though it is not admitted by filing a return. After considering the provisions of sections 32(1), 38(2), 38(4)(a) and Rule 39, the Tribunal was of the view that unless a notice of demand as provided under section 38(4) is issued requiring a dealer to pay tax due and admitted in the return furnished by him, it cannot be recovered from a dealer and thereby it cannot be said that a recovery of return dues is outstanding from the appellant even if a return is not furnished admitting tax due for the period covered by such return. The Tribunal further observed that where a dealer fails to furnish return by the prescribed date, section 33(5) provides that the Commissioner shall proceed to assess to the best of his judgment (Malabar Products 99 STC 546 - BHC). Thus where a return is not furnished by the prescribed date, the tax due for a period covered by such a return cannot be recovered unless the tax is assessed under section 33(5). It further went on to observe that unless a return is filed without making payment of tax admitted therein and unless a notice of demand is issued under section 38(4) to recover tax, it cannot be said that recovery of tax due from a dealer for the period covered by a return was pending against him. The Tribunal therefore held that there was no mistake in granting interest under section 43A in the first appeal.

Coming to the withdrawal of remission in interest under section 36(3)(a) granted, the Tribunal observed that the only reason assigned by the appellate authority for withdrawal of remission was that the refund was adjusted towards the return dues for the months of December 2002 and January 2003. According to the Tribunal even then the amount of refund due as per the assessment order remained out of pocket of the appellant from the end of the period of assessment; i.e.,. from 1-4-2000 till it is adjusted on 13-3-2003 towards the return dues. The appellant is deprived of interest on this refund during the period and remission granted in interest by applying out of pocket theory in First Appeal order is justifiable.

The Simplex Mill Co. Ltd. vs. the State of Maharashtra (Second Appeal No. 1731 of 2004 dated 30th March 2007). The judgment of the Tribunal was delivered at Second Bench of the Tribunal by Hon’ble Member Shri D.H. Sali. The appellant was represented by Mr.D.K. Charade, Advocate.

14. Whether the free supply of certain parts and components by the buyer to the seller to be used in manufacturing a particular product, which is ultimately sold, would constitute a purchase by the seller and the corresponding value (assessed by the Central Excise Authorities) thereof would form part of sale price taxable in the hands of the seller?.

Held : No

As a common point was involved in a group of appeals by two different appellants, the Hon’ble Tribunal decided the issue by delivering a common judgment. The facts in brief are as under:–

One of the appellants M/s Ghatge Patil Industries Limited, manufacturer of cast iron castings engineering and automobile parts received an order from Bharat Earth Movers Limited of Kolar Gold Field (Karnataka) who are manufacturers of bulldozers and other earth movers for manufacture and supply of clutch assembly and other assemblies. The said BEML had agreed to supply certain imported parts, such as discs and bearings imported by them and requested the appellant to insert the same in the assembly during the process of manufacture. These parts were referred to as "assistance material". According to the appellant these parts are supplied by BEML free of cost. According to the Central Excise department, Pune, the insertion of the said parts in the assembly before delivery should form part of the assessable value for the purpose of excise duty. The appellant denied the liability. On the basis of the show cause notice issued, the appellant was assessed by the Assistant Commissioner of Sales Tax, Kolhapur for 1994-95 on 31-3-1998 and for 1995-96 on 30-1-1999, creating a demand of Rs. 84 lakhs odd and 86 lakhs odd in both periods respectively under the Central Sales Tax Act, 1956. In the appeals filed before the Deputy Commissioner, the orders were set aside and the case was remanded to the assessing authority; against which the appellant moved the Tribunal.

Similarly, in the case of Budhale and Budhale had sold Triangle L.H. Assembly and Triangle R.H. Assembly to M/s Piaggio Greaves Vehicles Limited. The said assembly consists of 15 components; out of which the Piaggio Greaves had agreed to supply 3 components (specifically described). While issuing the Excise invoice the appellant added the value of raw material supplied by Piaggio Greaves with the agreed sale price and calculated the excise duty thereon. The buyer was entitled for Modvat benefit. However, while issuing the sale bill the value of raw material supplied by the buyer was deducted and on the net balance the applicable sales tax was charged. The assessing authority added the value referred to above and taxed the total sales at appropriate rates. In addition interest under section 36(3)(b) was levied.

Before the Tribunal the appellants submitted that in the purchase order itself it is specified that certain items such as discs, bearings will be provided by the buyer free of cost. The appellant had not charged any price for inserting the said items. Since the goods were received free of cost the appellant had not added the value in its purchase nor billed for the same . According to the appellant under the provisions of Bombay Sales Tax Act and Rules framed thereunder, there was no provision for determination of assessable value. The Bombay Act levies a tax on sale of goods on the sale price in accordance with section 2(28) read with a section 2(29) and does not provide for determination of assessable value as provided by the Central Excise Rules, 1944. Referring to the definition of "sale price" it was submitted that the definition would show that only the amount of valuable consideration paid or payable by a dealer alone constitutes "sale price". The Revenue submitted that the assistance material is part and parcel and indispensable part of the assembly; hence it is a composite sale transaction and it cannot be segregated into two sales. Both the appellants have received the assistance material and the excise duty charged forms part of the sale price. In Budhale and Budhale it was pointed out that the scrap generated out of the material supplied by the buyer was disposed of by the appellant, which shows that ownership of material received by the buyer belongs to the appellant.

The Tribunal referred to the definition of sale price, turnover, and the relevant observations of the Apex Court and High Courts, especially in the case of Hindustan Aeronautics Limited vs. The State of Karnataka (55 STC 314). It also refereed to its own decision in M/s Autocomp Corporation (Second Appeal Nos.1083 to 1085 of 1999 dated 26-9-2003. The Tribunal observed that what is to be seen is the dominant intention of the parties to the contract. According to the Tribunal there is nothing to show that the parties intended to transfer chattel as a chattel for particular price. The main and dominant object of the contract is to use only that assistance material in manufacturing the finished product and even assuming there is any incidental transfer of said assistance material in the finished product, it would certainly not amount to sale of that assistance material. According to the Tribunal the excise duty determined by the Commissioner, Central Excise on the value of said assistance material under the relevant provisions of the Excise Law would also not determine the nature of the contract between the parties that the intention of the parties has to be ascertained on the basis of agreement of the parties and not subsequent event took place because of "operation of law". The Tribunal distinguished the facts of N.M. Goel & Company vs. Sales Tax Officer (72 STC 368) In view of the elaborate discussion, the Tribunal held that as far as the assistance material is concerned there is no intention of the parties to transfer chattel as a chattel for particular price and it would certainly not amount to sale of these goods nor will the value of such assistance material become part of the sale price of the final product manufactured by the appellants.

Ghatge Patil Industries Limited vs. vs.the State of Maharashtra (Second Appeal Nos. 320 to 327 of 2002 & S.A. 1682,2044 and 2045 of 2003), M/s Budhale & Budhale (Second Appeal No.1052 of 2006 dated 30th March, 2007). The judgment of the Tribunal was delivered at First Bench of the Tribunal by Hon’ble President Shri G.D. Parekh. The appellants were represented by Mr.P.V. Surte Advocate and Mr.A.B. Ghanekar, Sales Tax Practitioner.