1956 (12) TMI 39 - HC - VAT and Sales Tax

Issues Involved:

1. Inclusion of charity payments (dharmam) in the total turnover.
2. Definition and scope of "turnover" under Section 2(i) of the Madras General Sales Tax Act as amended by the Madras General Sales Tax (Andhra Amendment) Act, 1954.
3. Treatment of sales tax collected by dealers as part of turnover.

Issue-Wise Detailed Analysis:

1. Inclusion of Charity Payments (Dharmam) in the Total Turnover

The Tribunal found that charity payments (dharmam) were made voluntarily by customers as a matter of custom, were not part of the price, and were used for charitable purposes as earmarked in the account books of the assessees. The Tribunal held that these payments should be excluded from the assessable turnover.

However, the Full Bench disagreed, emphasizing that the amended definition of "turnover" in Section 2(i) is of a wide and sweeping character. It includes "any other sums charged by the dealer whatever be the description, name or object thereof." The Court concluded that even though the payment for dharmam is voluntary and not shown as part of the price in the bill, it still forms part of the turnover. The total amount paid by the purchaser, including dharmam, represents the consideration for the sale.

2. Definition and Scope of "Turnover" Under Section 2(i)

The Full Bench was tasked with interpreting the scope of "turnover" under Section 2(i) of the Madras General Sales Tax Act, as amended. The amended definition reads: "Turnover means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods...including any sums charged by the dealer for anything done in respect of the goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof."

The Court noted that the definition is designedly broad to include various sums collected by the dealer, such as sales tax and dharmam, as part of the turnover. The Court emphasized that the consideration for the sale is the entire amount paid by the purchaser, regardless of how it is split in the bill or invoice.

3. Treatment of Sales Tax Collected by Dealers as Part of Turnover

The Full Bench reviewed previous decisions and legislative changes to determine whether sales tax collected by dealers should be included in the turnover. Initially, the Madras High Court had held that sales tax collected by a dealer was not part of his turnover, as it was collected as an agent of the State. However, the Amending Act sought to nullify this view by including sales tax in the definition of turnover.

The Court reasoned that the entire sum paid by the purchaser, including the sales tax, constitutes the consideration for the sale. The dealer may collect the tax as part of the price, and the total amount paid by the purchaser should be included in the turnover. The Court also noted that the repeal of Section 8-B and the substitution of a new definition of "turnover" were intended to ensure that sales tax collected by the dealer is included in the turnover.

Judgment

Following the opinion given by the Full Bench, the revisions (petitions) were allowed with costs. The Court ruled that both the sales tax collected by dealers and the payments made by buyers for dharmam should be included in the total turnover of the dealer. Advocate's fee was set at Rs. 100 in each case.

Petition allowed.

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