1987 (1) TMI 442 - SC - VAT and Sales Tax

Whether the amount collected by the seller from the buyer which comprises of the two components the actual sale price and the sales tax is a part of the turnover and comes within the expression any other sum charged by the dealer whatever be the description, name or object thereof occurring in the definition in section 2(s) Section 2(s) of the Andhra Pradesh General Sales Tax Act, 1957? Held that - Appeal dismissed. There is no substance in any of the contentions urged on behalf of the appellants. The view taken by the High Court who repulsed the plea of the assessees that the amount of sales tax so collected from the buyers was not includible in the turnover for the purposes of computing the sales tax liability of the assessees is unexceptionable. The interim orders shall stand vacated. The appellants- assessees will be liable to pay the amount due as sales tax along with interest thereon at 12 per cent as per the condition imposed by this Court at the time of granting the interim stay. The sales tax authorities may recover the amount due by encashing the bank guarantee as also by effecting recovery in accordance with law.

Issues Involved:

1. Whether the amount collected by the seller from the buyer, which includes sales tax, is part of the "turnover" under Section 2(s) of the Andhra Pradesh General Sales Tax Act, 1957.
2. Whether the seller acts as an agent of the Government when collecting sales tax from the buyer.
3. Whether sales tax collected separately under debit notes but kept in a suspense account can be included in the turnover.

Issue-wise Detailed Analysis:

1. Inclusion of Sales Tax in Turnover:

The primary issue is whether the amount collected by the seller from the buyer, which includes the actual sale price and sales tax, is part of the "turnover" as defined in Section 2(s) of the Andhra Pradesh General Sales Tax Act, 1957. The High Court had previously ruled that the sales tax collected from buyers is includible in the turnover for computing the sales tax liability of the assessees.

The definition of "turnover" includes the total amount set out in the bill of sale as consideration for the sale or purchase of goods, including any sums charged by the dealer for anything done in respect of goods sold at the time of or before delivery, and any other sums charged by the dealer, whatever be the description, name, or object thereof.

The Supreme Court upheld the High Court's decision, stating that the sales tax component included in the sale price is indeed part of the turnover. The Court reasoned that the amount collected by the vendor from the vendee as a condition or consideration for passing the property in the goods is the sale price and not tax. The Court emphasized that the statutory liability to pay sales tax is on the dealer, not the purchaser, and thus, what is collected by the vendor is part of the sale price.

2. Seller as Agent of the Government:

The assessees argued that since the Act does not prohibit the dealer from passing on the sales tax component to the purchaser, the dealer should be deemed an agent of the Government for collecting the sales tax amount. However, the Court rejected this argument, highlighting several salient features:

- There is no legal obligation on the vendor to recover sales tax from the vendee.
- The buyer is not legally required to pay sales tax at the time of purchase.
- The Act does not mandate the vendor to mention sales tax in the bill or voucher.
- The vendor is not required to keep the sales tax amount separately or maintain a separate account for it.
- The dealer's liability to pay sales tax is from his own property, not from any earmarked collection.
- The dealer is not remunerated for collecting sales tax, which would be required if he were an agent.

Based on these factors, the Court concluded that the dealer does not act as an agent for the State in collecting sales tax from the buyers. The amount collected as sales tax is part of the sale price and not a separate tax collected on behalf of the Government.

3. Sales Tax Collected Under Debit Notes:

In cases where sales tax is not mentioned in the bill but is collected separately under debit notes and kept in a suspense account, the appellants argued that such amounts should not be included in the turnover. The Court dismissed this argument, stating that the amount includible in the turnover cannot become excludible merely by the accountancy device adopted by the assessee.

The Court referenced the decision in George Oakes P. Ltd. v. State of Madras, where it was established that the ultimate economic incidence of the tax is on the consumer, and the payment made by the purchaser is part of the price paid to the seller. The Court also distinguished the present case from McDowell & Co. Ltd. v. Commercial Tax Officer, where excise duties paid directly by purchasers to excise authorities were not included in the dealer's turnover, as the present case involves amounts charged or recovered by the sellers.

Conclusion:

The Supreme Court found no merit in any of the contentions raised by the appellants. The sales tax component included in the sale price is part of the turnover under Section 2(s) of the Act. The dealer does not act as an agent of the Government when collecting sales tax, and amounts collected under debit notes but kept in a suspense account are includible in the turnover. The appeals were dismissed, and the appellants were directed to pay the sales tax due along with interest.

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