Contribution To Steel Fund Taxable

Steel companies would have to pay the excise duty on their contributions to the steel development fund and other elements they add to the ex-works prices of steel and iron, the Supreme Court held last week.

The conflict of views between the larger Bench of the Customs, Excise and Gold (Control) Appellate Tribunal (Cegat) in Delhi, and a Bench at Calcutta was thus resolved and the Delhi view was held to be wrong.

The steel companies led by Tata Iron and Steel Company (Tisco) and excise authorities had moved the Supreme Court because of the differing decisions. The court dismissed the steel companies appeal.

 

A joint plant committee and a steel priority committee were set up to determine prices of iron and steel items which would be uniform throughout the country. By a notification in 1998, the committees were allowed to add certain elements to the ex-works price.

They related to payments towards the steel development fund, administrative costs, and contributions to the engineering goods export assistance fund.

The companies, thereafter, started adding those elements to the ex-works prices. The excise department claimed that excise was chargeable on those payments.

The question was whether these elements in prices were exempted from the excise duty under Section 4 of the Central Excise Act.

In other words, whether compulsory imposts were taxes or part of the price. The steel companies argued that since payments were in the nature of compulsory exaction, they were tax and not the price of the product. Therefore, it was exempted from the levy.

The government argued that duty was chargeable on the value of the goods. The value is the price at which the goods are sold by the assessee to the buyer. Therefore, the price which the buyer pays is the price on which the duty is leviable.

In this case, the levy was not