Latest Supreme Court case on taxing of tax incentives

The law relating to excise valuation in India has undergone a sea change due to the Supreme Court’s recent decision in the case of Super Synotex (India) and its earlier decision in Fiat India (2012). The recently announced Union Budget has proposed certain amendments to the Excise Valuation Rules to lessen the impact of the decision in the Fiat case.

The Super Synotex case is discussed below.

Outline of the case

At issue was whether sales tax collected but not paid by an assessee, because of a sales tax incentive scheme introduced by the state government, should form part of the assessable value under section 4 of the Central Excise Act, 1944, for payment of central excise duty.

The facts as adumbrated in the judgment were that the assessee had collected the entire sales tax from its customers, however only 25% of the sales tax collected was paid to the state government while the balance was retained in accordance with the Rajasthan Sales Tax Incentive Scheme, 1989.

Karthik Sundaram is an associate partner and Tejus Golchha is an associate manager at Economic Laws Practice. This article is intended for informational purposes and does not constitute a legal opinion or advice.