PerV.K. Agrawal :

In these three appeals, arising out of a common Adjudication Order No. 1/Commr/M-1/2001 dt. 2.1.2001, the issue involved is whether Turn Over Tax @ 2% is deductible from the assessable of the excisable goods manufactured by M/s. Modipon Fibre Co. even in cases where the goods were sold to 'backward area' customers as the rate of Turn Over Tax is only 0.25%.

2. Shri J. Vellapally, Ld. Senior Advocate, submitted that M/s. Modipon Fibre Co., Appellant No. 1, manufacture Nylon and Polyester Yarn which is cleared by them to their various depots situated all over India from where the yarn is sold to dealers/customers; that they pay the duty at the time of removal of yarn on the basis of the Depot sale price after claiming permissible deductions under Section 4 of the Central Excise Act; that one of the such deduction is Turn Over Tax (TOT); that in respect of yarn cleared to their Surat Depot in the State of Gujarat, they claimed deduction @ 2% on account of TOT; that the Government of Gujarat by a Notification dt. 19.10.93 exempted sale of yarn of all kinds by a registered dealer to a special manufacturer of processed yarn or to an eligible unit to the extent of which the rate of TOT exceeds 0.25% of the total turn over, if the specified manufacturer furnishes to the selling dealer a certificate in Form 26 and if the processed yarn is sold within the State of Gujarat; that the Commissioner has confirmed the demand of duty for the period from March'94 to March'97 and imposed penalty on Appellant company, Shri P.C. Majumdar, Vice President (Business) and Shri S.C. Gupta, Manager (Sales), holding that the Appellants were eligible for deduction on account of TOT in real terms depending upon the class of customers in two specified and distinct areas.

3. The Ld. Senior Counsel, further, submitted that at the time of clearance of yarn from the factory, the Appellants have no knowledge as to the location of the customers/dealers who would eventually buy the goods from the Depots; that at the time of sale from the depot at Surat, they are not aware whether the purchaser is a 'special manufacturer' or an eligible unit within the meaning of said Notification dt. 19.10.93 nor do they know whether the goods will ultimately be sold in the State of Gujarat; that it is thus not possible for the Appellant to determine whether ultimately they will be required to pay TOT @ 2% or 0.25% in the case of sales made from Surat Depot; that as they have no means of knowing at the time of either filing of the declaration under Rule 173-C of the Central Excise Rules or at the time of removal of goods or even at the time of removal from the Depot whether ultimately the TOT would be paid @ 2% or 0.25%; they claimed deduction of TOT @ 2% in the declaration filed by them; that Section 4 of the Central Excise Act provides for the deduction of tax 'payable' whereby Tax normally payable on the sale transaction of the goods can be claimed as deductions in the declaration; that for want of information they cannot file different price declarations for sales made by them from Surat Depot to various customers; that as per the provisions of Section 4 (4) (d) (ii) and the Explanation thereto, the concept of effective duty of excise payable on the goods is restricted only to duties of excise and has not been extended to Sales Tax and other taxes payable on such goods; that further the said Explanation itself brings in the concept of "effective duty of excise" i.e. the duty of excise as reduced to give full and complete effect to an exemption; that in absence of any such Explanation in regard to Sales Tax and other Taxes, it is normal rate of such tax and not any reduced rate that is excludible from the value and accordingly the Sales Tax required to be deducted from the normal prices is the tax payable on such goods normally and not the effective tax paid thereon; that in any case, even as on date, the assessment of the Appellants with regard to TOT payab