1970 (7) TMI 62 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the petitioner collected the sum of Rs. 42,839.75 by way of sales tax on sales of liquor.
2. Whether the petitioner is entitled to claim deduction under Rule 6(4)(h) of the Mysore Sales Tax Rules, 1957.
3. Interpretation of previous decisions regarding the necessity of showing sales tax separately in bills for claiming deductions.
4. Conditions under which a dealer can claim deductions for amounts collected by way of tax.

Issue-Wise Detailed Analysis:

1. Collection of Sales Tax:
The primary issue is whether the petitioner collected Rs. 42,839.75 as sales tax on liquor sales from 1st July 1963 to 30th June 1964. The petitioner, a registered dealer under the Mysore Sales Tax Act, 1957, claimed to have collected this amount as tax in addition to the liquor price. The Commercial Tax Officer found that sales tax was not separately charged in the bills but was bifurcated in the account books. This finding led to the rejection of the deduction claim, a decision upheld by the Deputy Commissioner of Commercial Taxes and the Mysore Sales Tax Appellate Tribunal.

2. Entitlement to Deduction under Rule 6(4)(h):
Rule 6(4)(h) allows for the deduction of all amounts collected by way of tax under the Act. The Tribunal and lower authorities rejected the petitioner's claim on the ground that sales tax was not separately shown in the bills. The petitioner argued that the previous court decisions did not mandate showing sales tax separately in bills to claim deductions under Rule 6(4)(h).

3. Interpretation of Previous Decisions:
The Tribunal relied on unreported decisions in Mysore Auto Parts v. State of Mysore and Mysore Vegetable Oil Products v. State of Mysore. These cases dealt with situations where dealers quoted all-inclusive prices without separately charging sales tax, leading to the denial of deductions. The court clarified that these decisions did not establish a rule that sales tax must be separately shown in bills for deductions. The court noted that the matter remains res integra (an open question).

4. Conditions for Claiming Deductions:
The court examined whether a dealer must show sales tax separately in bills to claim deductions. It referred to a Kerala High Court decision, which held that the absence of a stipulation to show sales tax separately does not preclude deduction claims. The court emphasized that Rule 6(4)(h) does not specify such a condition. However, the dealer must establish that amounts were collected as tax, which can be inferred from the contract of sale, invoices, or cash memos. The court stated that if a dealer can demonstrate that the price charged includes sales tax, and this is reflected in the accounts, the deduction can be claimed.

The court concluded that showing sales tax separately in bills is not a mandatory condition for claiming deductions. However, the dealer must provide evidence that the sales tax was intended to be passed on to the buyer and was separately accounted for. The court remitted the case back to the Tribunal to re-examine the petitioner's claim based on this interpretation.

Conclusion:
The High Court set aside the Tribunal's order and remitted the case for re-hearing. The Tribunal must determine if the petitioner can establish that the sales tax was intended to be passed on to the buyer and was separately accounted for, even if not shown separately in the bills. The court clarified that deductions under Rule 6(4)(h) do not require sales tax to be separately shown in bills, provided the dealer can demonstrate the tax was collected in addition to the sale price.

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