2008 (11) TMI 379 - SC - VAT and Sales Tax

Whether the value representing the credit notes issued by the manufacturers to the distributors was to be included in the taxable turnover? Whether the value of the credit notes goes to reduce the purchase turnover of the dealers or not? Held that - As the adjudication of the basic issue involved depends upon the amount on which tax has been paid by the selling dealer, it would be appropriate to permit the assessee to produce the books of account for adjudication before the concerned Deputy Commissioner. In the instant case it is the Deputy Commissioner (CT), Sikandrabad. The assessees shall appear before the said authority on November 4, 2008 (sic) without further notice. It shall produce evidence to show that the tax has been paid by the selling dealer on the illustrative figure of 100 given in the illustration. The said authority shall verify the correctness of the claim with reference to the documents to be produced. If it is established, tax shall be payable on ₹ 10 as shown in the illustration. Otherwise, the Revenues stand shall stand established.

Summary

Issues:
Challenge to judgment of Division Bench of Andhra Pradesh High Court regarding inclusion of credit notes in taxable turnover under Andhra Pradesh General Sales Tax Act, 1957.

Analysis:
The appeal challenged the judgment of the Division Bench of the Andhra Pradesh High Court concerning the inclusion of credit notes in the taxable turnover under the Andhra Pradesh General Sales Tax Act, 1957. The issue revolved around whether the value of credit notes issued by manufacturers to distributors should be considered in the taxable turnover. The assessees were distributors of liquor brands manufactured by specific companies. The sales tax was leviable on the first and last sale, with intermediate dealers being taxable on the differential turnover. The assessees contended that they should only be taxed on the differential turnover after excluding the turnover already taxed. The Revenue argued that the credit notes represented a part of the tax collected and should be included in the taxable turnover.

The High Court upheld the Revenue's position, stating that the value of credit notes did not reduce the purchase turnover of the dealers. The appellant argued that the wholesalers had already paid tax on the entire amount before adjusting the credit notes, hence further demand was unwarranted. The Revenue and authorities supported the High Court's decision. The dispute centered on whether tax should be calculated on the total sale price or the difference between purchase and sale price after accounting for credit notes.

The assessees claimed they were not given a personal hearing before the authorities passed orders. They also mentioned that their books of accounts were not produced due to being seized by taxing authorities. The court directed the assessees to produce the books of account before the Deputy Commissioner to verify the tax paid by the selling dealer. The decision would be based on whether tax was paid on the entire sale price or the difference between purchase and sale price after considering the credit notes. If the tax was paid on the full amount, the turnover for tax calculation would be the difference between purchase and sale price. Otherwise, the Revenue's stance would prevail.

In conclusion, the appeal was disposed of with the directive for the assessees to present their books of account for assessment before the Deputy Commissioner to determine the correct taxable turnover based on the tax paid by the selling dealer.