1987 (2) TMI 446 - SC - VAT and Sales Tax

Whether insurance charges is a part of turnover under section 2(s) of the Andhra Pradesh General Sales Tax Act 1957 for purposes of levy of sales tax? Held that - Appeal dismissed. The vires of the definition is not in issue and since the bill of sale included insurance charges and the assessee-appellant recovered the amount as part of the consideration for the transaction of sale there is no force in the challenge raised by the appellant against the demand. The explanation attached to the definition of turnover indicates what has to be excluded from it. After the exclusion what remains is clearly taxable.

Summary

Issues:
Inclusion of insurance charges in turnover for sales tax computation under Andhra Pradesh General Sales Tax Act, 1957.

Analysis:
The Supreme Court was tasked with determining whether insurance charges constitute a part of "turnover" as per section 2(s) of the Andhra Pradesh General Sales Tax Act, 1957, for the purpose of levying sales tax. The tax authorities and the Appellate Tribunal concluded that insurance charges should be included in the calculation of tax if the buyer desired transit risk coverage and the seller recovered insurance charges. The High Court, in revision, examined whether the insurance was done at the buyer's behest. The company contended that the insurance premium was paid at the instance of the purchaser, but this assertion was rejected. The High Court concurred that the insurance charges were part of the price and correctly assessed for tax purposes.

The definition of "turnover" under section 2(1)(s) includes the total amount set out in the bill of sale, the total amount charged as consideration for the sale of goods, and any other sum charged by the dealer. In this case, the insurance charges were claimed in the bills of sale, making them a part of the turnover under clause (i) without the need to rely on clause (iii)(c) of the definition. The court emphasized that since the bill of sale incorporated insurance charges and the appellant recovered these charges as part of the sale consideration, the challenge against the tax demand lacked merit.

The court clarified that the vires of the definition of turnover were not in question, and the explanation attached to the definition outlined what should be excluded from turnover. After the exclusions, the remaining amount was deemed taxable. Despite references to legal authorities during the hearing, the court deemed it unnecessary to delve into them, as the clarity provided by the definition in the Act sufficed. Consequently, the appeals were dismissed, and the parties were directed to bear their own costs.

In conclusion, the judgment reaffirmed that insurance charges, when claimed in bills of sale and recovered as part of the sale consideration, are to be included in the turnover for sales tax computation under the Andhra Pradesh General Sales Tax Act, 1957.