Facts

The assessee is manufacturer of tea. One such unit in Karnataka (Dharwad unit) was availing sales tax exemption for a period of 5 years while the other units     did not have benefit of such/similar exemption. The assessee sold the tea packets being manufactured from all its units at a uniform rate of Rs. 118/-, basis MRP (inclusive of taxes). The Revenue was of the view that ultimate selling price in  both the cases was Rs. 118 (Rs 12.27/- being the sales tax component in the other units) and hence, the assessee has violated the sales tax exemption as it had added and collected the sales tax component, though not under the nomenclature of tax or cess. The assessee contended that MRP was a statutory declaration and     it did not imply that the assessee with respect to the sales tax-exempt unit had collected any amount by way of tax. The assessee had taken  a decision of having    a uniform price of its products across the country, irrespective of sales tax being payable in certain States or not.

Issue

Whether price of sale of goods “inclusive of taxes” on MRP would amount to collection of sales tax by the dealer in respect of goods sold under exemption?

View

The Court was of the view that the MRP  is  a  statutory declaration required as  per Rules framed under the Standards of Weights and Measures Act, 1976. A market retail price stating “inclusive of all taxes” would not prove and establish  the collection of sales-tax on the produce of a tax exempted unit. The Court further stated that a uniform market price throughout the country is a matter of business policy and it is followed to prevent distortion of sale of the product  from one State to another. The Court held that the respondent had not passed on the    tax liability and assumption that the phrase “inclusive of all taxes” includes the collection of sales taxes is a fiction that cannot be applied in the instant case, as there exists no such principle in law.

Held

Affixation of MRP on the product does not lead to the inevitable conclusion   that sales tax has been collected from the purchaser. (CA  No. 656 of  2008    dt. 30-6-2016)

Editorial: GST is an indirect tax, from an economic point of view, however, from a legal standpoint, it is a direct tax. It is a tax on supply. It is to be paid         by supplier (with certain exceptions). Thus, irrespective  of  the fact whether GST is collected separately from the recipient or not or it is treated as  inclusive  of GST,  the liability to pay GST vests with the supplier. Hence, GST regime does    not recognise MRP based assessment. There is no such concept under the CGST Act or rules. Section 7 provides for scope of supply. Section 15(1) provides for value of supply which is transaction value. Section 15(2) of the CGST Act, 2017 provides the inclusions under transaction value. The above ruling would be of significance, according to me, even under GST regime, as sale on MRP basis would not lead to the conclusion that tax has been collected by the supplier. It would not be hit by section 32 of the CSGT Act which prohibits unauthorized collection of tax or would not amount to unjust enrichment under section 54 of   the CGST Act.

I do not want to foresee the future.

I am concerned with taking care of the present. God has given me no control over the moment following.”

– Mahatma Gandhi