1972 (11) TMI 87 - HC - VAT and Sales Tax

Summary

Issues:
1. Determination of turnover in sales under hire-purchase agreements
2. Assessment of turnover of trucks
3. Disallowance of rebates in determining turnover
4. Legality of levy of surcharge

Analysis:

Issue 1: Determination of turnover in sales under hire-purchase agreements
The petitioner, a dealer in motor vehicles, challenged the assessment order by the Sales Tax Officer regarding the turnover in sales under hire-purchase agreements. The petitioner objected to the method proposed by the first respondent for fixing the sale price, which involved deducting percentages for depreciation without providing a clear basis for such deductions. The petitioner argued that depreciation should be calculated based on the actual period of hire, not just the period stipulated in the agreements. The court emphasized that until ownership of the vehicle is transferred to the customer, there is no sale, and depreciation should be allowed until ownership is actually transferred. The court highlighted that the determination of depreciation must be reasonable and based on relevant materials, with the assessee required to produce evidence to assist in the decision-making process. The court found the first respondent's method of fixing sale prices unsustainable and directed a reassessment according to law.

Issue 2: Assessment of turnover of trucks
Regarding the turnover of trucks, the petitioner contended that there was no sale of trucks as a whole but rather separate contracts for chassis and body supply. The petitioner argued that turnover should have been determined separately for chassis and body supply, with different tax rates applicable. However, the petitioner had not raised this factual issue before the first respondent, leading to a lack of consideration on this matter in the assessment order.

Issue 3: Disallowance of rebates in determining turnover
The petitioner raised an objection to the disallowance of rebates given to customers in determining turnover. This issue was to be considered by the first respondent in accordance with the relevant provisions of the Kerala General Sales Tax Act, 1963, and the rules made under the Act.

Issue 4: Legality of levy of surcharge
The petitioner contested the legality of the levy of surcharge, arguing that the Kerala Surcharge on Taxes Act, 1957, was unconstitutional. However, this contention was rejected by the court, citing a previous decision that upheld the constitutionality of the surcharge act.

In conclusion, the court quashed the assessment order in part and directed the first respondent to reassess the petitioner's turnover in compliance with the law and the court's observations, without awarding costs to either party.