1965 (12) TMI 92 - SC - VAT and Sales Tax

Whether the Tribunal is right in holding that the Central sales tax paid by the opposite party at its purchase point and charged on to its customers does not form a part of the sale price of the commodity sold so as to be taxable under the Orissa Sales Tax Act 1947? Whether the allowance of the claim of the opposite party for deduction of Central sales tax collected from its customers is permissible under the provisions of the Orissa Sales Tax Act and the Rules framed thereunder? Held that - Appeal dismissed. There is no force in the contention that the Central sales tax realised by the assessee falls within the expression any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof . The assessee by paying the Central sales tax when he bought the goods did not do anything to the goods and the tax was paid in respect of the transaction of purchase and not in respect of the goods.

Summary

Issues:
Interpretation of the term "tax" under the Orissa Sales Tax Act in relation to Central sales tax.
Deduction of Central sales tax from the taxable turnover under the Orissa Sales Tax Act.

Analysis:
The case involved an appeal against the Orissa High Court's judgment regarding the treatment of Central sales tax under the Orissa Sales Tax Act, 1947. The primary issue was whether the Central sales tax paid by the assessee should be included in the taxable turnover. The Tribunal had allowed the deduction, stating that the Central sales tax did not form part of the sale price. The High Court upheld this decision, emphasizing that the Central sales tax was not part of the consideration for the sale as it was collected under specific authorization from the Central Government.

The High Court relied on precedents to support its decision, highlighting the distinction between cases where dealers are authorized to collect taxes and cases where they are not. In this instance, the controlled stock-holder was permitted to collect Central sales tax from customers under the Iron and Steel Control Order, which was a statutory provision. The High Court concluded that the Central sales tax could not be considered part of the sale price as defined in the Orissa Sales Tax Act.

The appellant argued three main points before the Supreme Court. Firstly, they contended that the term "tax" in the Act referred only to taxes levied under the Orissa Sales Tax Act, not the Central Sales Tax Act. Secondly, they claimed that the Central sales tax should be considered valuable consideration under the Act. Lastly, they argued that the Central sales tax paid by the assessee should be included as a sum charged for goods before delivery.

The Supreme Court agreed with the High Court's interpretation, stating that the Central sales tax did not form part of the sale price or turnover under the Orissa Sales Tax Act. The Court did not delve into the interpretation of the term "tax" under the Act but focused on the specific provisions related to the controlled stock-holder's pricing regulations. The Court emphasized that the price fixed by the Government of India was the valuable consideration for the sale, excluding the Central sales tax paid by customers. The Court dismissed the appeals, affirming the High Court's decision to allow the deduction of Central sales tax from the taxable turnover.

In conclusion, the Supreme Court upheld the High Court's ruling that the Central sales tax paid by the assessee was not part of the sale price or turnover under the Orissa Sales Tax Act, leading to the dismissal of the appeals.