TMI Blog2008 (3) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocates with them, for the Respondent. S/Shri S.K. Bagaria, Sr. Advocate, Tarun Gulati, Praveen Kumar and Jaiveer Shergill, Advocates with him, for the Intervenor. [Judgment per : S.H. Kapadia, J.]. Leave granted in both the special leave petitions. Civil Appeal arising out of SLP(C) No. 8789/07: [Moriroku UT India (P) Ltd. v. State of U.P. Ors.] 2. This civil appeal filed by M/s Moriroku UT India (P) Ltd. is directed against judgment dated 6-4-2007 delivered by Division Bench of the Allahabad High Court in CWP (Tax) No. 13/04 by which, the writ petition filed by the appellant herein, seeking to restrain the AO from imposing any tax on moulds (toolings) supplied by its customer, Honda Siel Cars India Ltd., free of cost was sought to be taxed under Section 3 of U.P. Trade Tax Act, 1948, stood dismissed. 3. Appellant is the company registered under the Companies Act, 1956 and is a manufacturer of plastic automobile components. Appellant is manufacturing such components for use in the Honda Siel Cars manufactured in India by Honda Siel Cars Ltd. (hereinafter called the customer ), as per designs and specifications given by it. The customer supplies tools, die ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferences between the depreciation and amortisation and the reason why the expression depreciation is used in relation to tangible man-made assets in preference to amortisation is that the notion of depreciation is to write off 90% of the cost of asset over its useful life either on a sliding scale system, which is the written-down value method, which works on the reducing balance principle or on the straight-line method - in which 90% of the cost is written off over the estimated useful life. On the other hand, amortisation generally is to write off the entire cost. The concept of amortisation is indicated in Section 35D of the Income-tax Act, 1961. It refers to amortisation of preliminary expenses. These are, however, differences only in practice and not in the fundamental underlined concept, i.e., to apportion the cost of even fixed assets over a period of time, namely, their useful life. 10. Amortisation, therefore, is an accounting concept similar to depreciation. It is gradual reduction of the value of an asset or liability by a periodic amount. It is essentially a means to allocate categories of assets and liabilities to their pertinent time period. The key difference b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment, if the consideration for moulds is not taken into account then under the excise law, price, which is the measure of value, cannot be said to be the sole consideration. According to the Department in this case, price of auto components sold by the appellant was fixed or to be fixed by inter se negotiations. That, without the price of the moulds being taken into account, the price of the finished product would not reflect the real assessable value. According to the Department, without the supply of moulds from its customer, final product could not be made. By use of the moulds, the appellant was able to manufacture the auto components. Therefore, according to the Department, some money value was required to be attributed on account of usage of moulds as such moulds contributed to the value of the final product, namely, auto components. Therefore, by not taking into account the money value of moulds supplied by the customer, the price stood depressed. In the circumstances, according to the Department, amortised cost had to be loaded to the price charged or chargeable by the appellant for the finished products. 12. On the above case of the Department, the question which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of the price-structure in the sales tax laws. In fact, the above observation of this Court in Chhotabhai Jethabhai Patel case (supra) has been explained by this Court in Bombay Tyre (supra) by saying that levy of excise duty is on manufacture while levy of sales tax by its very nature arises at the stage beyond manufacture, namely, the sale of the article. In cases of captive consumption, Section 4(1)(a) of the 1944 Act is not attracted. What is attracted in such cases is Section 4(1)(b), which refers to deemed value and which requires valuation to be done in terms of Excise Valuation Rules, 2000. The important aspect to be noted is that the Department, in the present case, has borrowed the concept of amortised goods from Rule 6 of the Excise Valuation Rules, 2000. Therefore, we quote herein below Rule 6, which reads as follows : Rule 6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of Section 4 of the Act except the circumstances where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the negotiations between the parties. Moreover, the effect of clause (ii) of Explanation 1 to Rule 6 of Excise Valuation Rules, 2000 is that where any tools or dies or moulds are supplied by the buyer free of charge or at a reduced costs for use in connection with production of the goods, the value apportioned as appropriate to such tools, moulds etc., to the extent such value has not been included in the price paid or payable, has to be treated as the money value of additional consideration flowing directly or indirectly from the buyer/customer to the assessee in relation to sale of goods being valued and aggregated accordingly. This is because under the excise law, the Department has to ascertain the real value of excisable article and to ascertain such real value, if in a given case, the Department detects apportionment of the value between the manufacturer and its customer then under clause (ii) of Explanation 1 to Rule 6, on account of deeming fiction, loading of such additional consideration is required to be made to the price of the final products. Such loading takes place on account of the express provision, namely, clause (ii) of Explanation 1 to Rule 6, which uses t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dealer may base his price-structure to give an incentive to his clients, agents, distributors etc., particularly if he is a manufacturer. In such cases, his price-structure has to be scrutinized by the Department under the sales-tax law to find out the real sale-price receivable by him. There may be cases where he is required to give a discount on account of defect in quality or delay. The important thing to be noted is that price is the amount of consideration which a seller charges the buyer for parting with the title to the goods. It comprises of the amount which the dealer himself has to pay for the purchase of the goods, the expenditure, which he is to incur for transporting the goods from the place of purchase to the place of sale, the duties, if any, levied on the particular goods bought by him, the octroi duty, which he may have had to pay and his own margin of profit after meeting handling charges including interest on the capital invested. The cost price of the goods actually paid by him under various heads of accounts would no doubt constitute the consideration for which he would part with his title to the goods. The entire amount of consideration, including the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2(h) of the 1948 Act, which reads as follows : (h) Sale , with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration, and includes (i) a transfer, otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration : (ii) a transfer of property in goods (whether as goods, or in some other form) involved in the execution of a works contract; (iii) the delivery of goods on hire purchase or any system of payment by instalments; (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (v) the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; and (vi) the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on his turnover of sales or purchases or both, as the case may be. which shall be determined in such manner as may be prescribed. Section 3-F provides for tax on transfer of right to use any goods or goods involved in execution of works contract. The definition of sale in Section 2(h) is in two parts. The first part covers the normal sale and the second part covers deemed sales. In the present case, we are concerned with sale of auto components to the buyer. It is a normal sale. The aggregate amount for which these auto parts/components are sold constitutes the turnover relating to such sales within the meaning of turnover in Section 2(i). Therefore, it is on such turnover that liability of tax under Section 3 of the 1948 Act has to be determined. Therefore, sales-tax or trade-tax under the 1948 Act is leviable on sale, whether actual or deemed, and for every sale there has to be a consideration. On the other hand, excise duty is a levy on a taxable event of manufacture and it is calculated on the value of manufactured goods. Excise duty is not concerned with ownership or sale. The liability under the excise law is event-based and irrespective of whether the goods are sold or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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