1968 (10) TMI 100 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether lot cooly charges paid by customers form part of the turnover chargeable to sales tax.

Analysis:
The judgment by the Madras High Court addressed the issue of whether lot cooly charges paid by customers should be considered as part of the turnover chargeable to sales tax. The charges in question were initially not included in the assessments but were later subjected to tax by the revenue department. The revenue's argument was that these charges, paid at the time of sale along with the price of goods, should be treated as part of the turnover. The petitioners argued that these charges were collected for specific services rendered to customers at the time of selecting timber. The court examined the definitions of "sale" and "turnover" under the Madras General Sales Tax Act and emphasized that only the aggregate value paid for the transfer of property in goods should be subject to tax. The court highlighted that service charges cannot be equated to consideration for the transfer of property in goods.

The court specifically analyzed Explanation (2) to section 2(r) of the Madras General Sales Tax Act, which defines turnover. The court emphasized that any sums charged for anything done by the dealer in respect of goods at the time of or before delivery should relate to activities involving the transfer of property in goods for consideration. The court clarified that the charges in question, which were for services like selecting and preparing timber, did not meet the criteria for being considered part of the turnover chargeable to sales tax. The court disagreed with a previous judgment and allowed the petitions, stating that the revenue should have an opportunity to reexamine the matter, especially regarding whether the charges collected exceeded the actual service costs incurred by the assessee.

In conclusion, the court ruled in favor of the petitioners, stating that the lot cooly charges paid by customers should not be considered as part of the turnover chargeable to sales tax. The court emphasized that only sums charged for activities involving the transfer of property in goods for consideration should be subject to tax, and service charges like lot cooly charges do not fall under this category. The revenue department was given the opportunity to reevaluate the matter, especially in cases where the charges collected exceeded the actual service costs incurred by the assessee.