1967 (5) TMI 67 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether foot-wear manufactured by hand and sold for a price not exceeding Rs. 15 to a registered dealer by the manufacturer would be free from liability to sales tax when resold by the registered dealer.
2. Whether it was legal to treat the sales tax collected separately by a registered dealer from customers as part of the sale price.

Analysis:

Issue 1:
The assessee claimed deduction for foot-wear purchased from local manufacturers under entry 5 of the First Schedule of the M.P. General Sales Tax Act. The contention was that the foot-wears were hand-manufactured, sold for a price not exceeding Rs. 15, and purchased from manufacturers. However, the departmental authorities denied the deduction as the assessee was not the manufacturer. The court held that all conditions under entry 5 must be satisfied for exemption. Since the second condition of the manufacturer selling to the assessee was not met, the deduction was disallowed. The court referred to a similar Supreme Court decision emphasizing the necessity to fulfill all conditions for exemption.

Issue 2:
The second question revolved around the treatment of sales tax collected separately by the dealer from customers. The court relied on a Nagpur High Court decision stating that the sales tax amount recovered by the dealer forms part of the sale price and must be included in the taxable turnover. Citing a Supreme Court case, the court confirmed that the entire amount paid by the purchaser, including tax, should be considered as the sale consideration. Therefore, the Sales Tax Authorities were deemed correct in adding the separately collected sales tax to the taxable turnover. The court answered this question in the affirmative, supporting the legal inclusion of sales tax in the sale price.

In conclusion, the court ruled against the assessee on both issues, denying the exemption claimed for foot-wear sales and affirming the addition of separately collected sales tax to the taxable turnover. The decision aligns with the statutory provisions and judicial interpretations, emphasizing the importance of meeting all conditions for tax exemptions and considering sales tax as part of the sale price for tax calculation purposes.