Case: MWP Ltd Vs. Commnr. of Income Tax Karnataka (Central)

2. The facts noticed are those arising in the appeal for the assessment yearthough the same would suffice for the other appeals also. There is no dispute that in terms of the Agreement between the buyer and seller, thehad directly deposited the excise duty payable on the goods and had claimed and received the deductions under the said head. It is also not in dispute that the assessee has been granted the benefit of other components of the sale price. The manufacturerM/S. Mc Dowell & Co. Ltd., did not include the excise duty element in its turn over as the same was directly paid by the buyer and had denied its liability to pay sales tax on the said component. The claim of M/S. Mc Dowell & Co. Ltd. was, however, negatived by all forums including this Court. Having been found to be liable for payment of sales tax on the excise duty component, M/S. Mc Dowell & Co. Ltd. had raised a demand upon the assessee for the same and the assessee accordingly filed revised return for the assessment year in question.The assessing officer refused the benefit of deduction which, however, was granted by the Appellate Commissioner before whom for the first time an agreement dated 18.12.1981 by and between the assessee and M/S. Mc Dowell & Co. Ltd. was produced. Clause 8 of the Agreement which is relevant to the present controversy is being extractedis hereby agreed by the buyer that in the event of the Government of Andhra Pradesh treating the excise duty paid by the buyer as part of turnover of the seller and demanding sales tax and other charges on the excise duty, the buyer hereby agreed with the seller to reimburse the sales tax and other charges payable by the seller to the Government of Andhra Pradesh on sufficient proof being furnished by the seller to the buyer in this regard".The aforesaid view of the Appellate Commissioner was affirmed by the Tribunal in an appeal filed by the Revenue. Aggrieved, a reference was sought and obtained by the Revenue which having been answered in the manner indicated above, the assessee is before us in the present appeals.The order of the High Court dated 5th April, 2005 would go to show that the sole basis on which the claim of the assessee was negatived is the authenticity of the agreement dated 18.12.1981. According to the High Court as the said agreement was for the first time produced before the Appellate Commissioner and there was no reference to the same in any of the relevant correspondence of the assessee, the Agreement dated 18.12.1981 was of doubtful credibility. The High Court, on an assumption that the agreement was bone fide, also took the view that as by the said agreement the discharge of liability was contemplated on the happening of certain events, the same would not be enforceable in law.

Court's reasoning:
8. Having considered the submissions advanced on behalf of the rival parties, we do not find that the issues that arise for consideration should detain the Court. Admittedly and evidently no question with regard to the authenticity of the Agreement dated 18.12.1981 was framed so as to require or justify an answer by the High Court. In the absence of a specific question to the above effect before the High Court, we decline to go into the merits of the issue though urged before us. Instead, we hold that the High Court had exceeded its jurisdiction in recording a finding with regard to the authenticity of the Agreement dated 18.12.1991. If the Agreement dated 18.12.1991 is to be treated as a part of the record of the assessment proceedings, undoubtedly, a liability had been cast upon the assessee insofar as the sales tax payable on the excise duty component is concerned. It is not in dispute that the mercantile system of accounting was in vogue in the assessee company. In the revised return filed by the assessee deduction of the amounts claimed byM/S. Mc Dowell & Co. Ltd.on sales tax was reflected. That the original return filed by the assessee did not reflect the aforesaid figures is not difficult to understand. At the time when the said return was filed (29.09.1982) the liability ofM/S. Mc Dowell & Co.disclaimed by the said Company, was yet to be determined. After the said claim ofM/S. Mc Dowell & Co.was negatived by the Andhra Pradesh High Court (06.12.1982) and during the pendency of the appeals before this CourtM/S. Mc Dowell & Co.had issued a letter dated 07.05.1983 to the assessee intimating that in the event the decision of the Supreme Court is adverse toM/S. Mc Dowell & Co.the sales tax element will be collected by Mc Dowell from the assessee. It is thereafter that the revised return was filed on 27.08.1984. The liability ofM/S. Mc Dowell & Co.attained finality with the decision of the Constitution Bench dated 17th April, 19851985 (3) SCC 230 M/s Mc Dowell and Company Limited v. Commercial Tax Officer .