DEPUTY COMMISSIONER OF COMMERCIAL TAXES (VIGILANCE) versus M/S HINDUSTAN LEVER LIMITED

Citation: [2016] 5 S.C.R. 635 · Decided: 30-06-2016 · Supreme Court of India · Bench: DIPAK MISRA · Disposal: Dismissed

Judgment (excerpt)

[2016] 5 S.C.R. 635 
DEPUTY COMMISSIONER OF 
COMMERCIAL TAXES (VIGILANCE) 
v. 
MIS HINDUSTAN LEVER LIMITED 
(Civil Appeal No. 656 of2008) 
JUNE 30, 2016 
(DIPAK MISRA AND N.V. RAMANA, JJ.J 
Karnataka Sales Tax Act, 1957 - Exemption from sales tax -
To one of the 111anufacturing units of the assessee-Company - Under 
Exe111ption Notification dated 19. 6.1991 - Revenue noticed that 
maxi111um retail price of a product fro111 the unit which had the benefit 
exemption and also from other unit which did not have benefit of 
exemption were the sa111e - Revenue therefore concluded that the 
exempted unit had added the tax co111ponent to the sale price which 
was violative of condition under Explanation III (e) of the 
Notification and hence the assessee-company was not entitled to 
tax exemption - Revenue, therefore, rejected claim of exe111ption by 
the assessee - Appellate auhority upheld the view of assessing 
authority - Appellate Tribunal as well as High Court held that the 
assessees were liable to tax exemption - On appeal, held: Assessee 
is entitled to fix unifor111 price meant for whole of India - Uniform 
market price does not differ in spite of differences in sales-tax 
payable at the end point - A market retail price stating that it is 
inclusive of all taxes could be a starting point and would not prove 
collection of sales tax - Also state111ent on the packaged product 
'inclusive of all taxes' is a statutory requirement under Standards of 
Weights and Measures Act, and should not be construed as an 
admission for having charges sales tax - The documents on record 
show that the assessee had not collected any sales tax - Appeal of 
Revenue liable to be dismissed - Cost of Rupees one lakh imposed 
- Standards of Weights and Measures (Packaged Commodities) 
Rules, 1977 - r.2 - Standards of Weights and Measures Act, 1976. 
Dismissing the appeal, the Court 
HELD: 1. An assessee is entitled to carry on and conduct 
business, fix the maximum retail price of its products. In the 
635 
A 
B 
c 
D 
E 
F 
G 
H 
636 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 5 S.C.R. 
present case in spite of the multiple units both exempted and 
non-exempted, the respondent had adopted and followed uniform 
market price throughout India. The respondent is entitled and 
can fix a uniform price meant for whole of India. The uniform 
market price does not differ in spite of differences in sales-tax 
payable at the end point, i.e., at the point of sale. This is a matter 
of business policy and cannot be taken exception to. (Para 
20)[(649-G-H] 
2. Rule 2 of the Standards of Weights and Measures 
(Packaged Commodities) Rules, 1977, framed under the 
erstwhile Standards of Weights and Measures Act, 1976, 
stipulated that the maximum sale price should be inclusive of all 
taxes. This was the statutory requirement binding on the 
respondent, who was selling packaged product. The statement 
on the packaged product inclusive of all taxes, means all taxes 
which were leviable, were already included in the price mentioned. 
It should not be constructed as an admission that the respondent 
had charged sales tax. The respondent could not have deviated 
or ignored the statutory requirement by making a declaration 
contrary to the statutory rules. (Para 17)(648-B-D] 
3. It has been highlighted that 3,50,000 invoices relating 
to the said product manufactured and sold from the Dhaward unit 
were placed on record. Apart from this the assessee-respondent 
had also placed 1200 price circulars issued, which showed that 
the assessee respondent had not collected sales tax. The books 
of account corroborate the trade price circular and invoices. The 
entire sale proceeds or consideration was shown as receipt and 
the amount was not bifurcated into sale price and tax collected. 
[Para 19)(649-E-F] 
4. The respondent has also explained that uniform market 
retail price at all India level ensures that the goods from one 
State do not flow to the other State, thereby distorting sales. It 
avoids and prevents shortages of goods in lower tax area. Uniform 
pricing cannot be a ground to hold that the respondent was 
charging sales tax on a sale price of the goods manufactured in 
the exempt unit. Cost of production in different units of the 
respondent assessee can vary. Cost of production has various 
components and is computed with reference to revenue 
DEPUTY COMMISSIONER OF COMMERCIAL TAXES 
(VIGILANCE) v. MIS HINDUSTAN LEVER LTD. 
expenditure, rate

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