NEW DELHI: In a recent development, the Supreme Court, upon reviewing a petition by Urmin Products, has decided to grant relief to tobacco manufacturers.
The case, originating in 2006 over the classification of chewing tobacco and scented Zarda for excise duty purposes, saw the tribunal initially ruling in favour of the companies. However, a subsequent appeal by revenue authorities led to a significant financial burden on the manufacturers.
While the tobacco companies did the valuation for excise duty purposes based upon the maximum retail price valuation rule, the revenue authorities disputed by levying and demanding the differential tax, based on the transaction value of product. Abhishek A Rastogi, founder of Rastogi Chambers, representing the tobacco companies argued for the application of cum duty tax principles in determining the duty owed.
He argued that the cardinal principle of cum duty can’t be ignored for finalisation of the demand and the quantum of duty must be finalised by the tribunal, keeping in mind the provisions of cum duty tax. The apex court accepted the review application to the extent of cum duty tax and ordered that tribunal must determine the quantum of duty based on this principle.
Cum duty principles will make the differential taxes to almost nil as these products were charged at 67% tax at that time. Interestingly, the tribunal had not given any ruling on the principles of cum duty tax at the initial stage as on the other two principles the tribunal had already decided in favour of the companies.