1975 (4) TMI 121 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Deduction of the amount refunded for goods returned by customers.
2. Liability to pay sales tax on the sale of scrap.

Issue-wise Detailed Analysis:

1. Deduction of the Amount Refunded for Goods Returned by Customers:
The petitioners, manufacturers and dealers in tractor and automobile parts, excluded Rs. 10,360.70 from their total turnover for the assessment year 1966-67, claiming it as the amount refunded for goods returned by customers. The assessing officer disallowed this claim due to the lack of details correlating sales returns to the sales effected and the inability to prove that the goods were returned within six months as required under section 13(5) of the Tamil Nadu General Sales Tax Act. Both the Appellate Assistant Commissioner and the Tribunal upheld this view.

The petitioners argued that they are entitled to deduct the amount under rule 5-A(b)(i) of the Tamil Nadu General Sales Tax Rules, 1959, which allows exclusion of refunded amounts from the total turnover if the accounts show the date of return and refund. The Court noted that rule 5-A(b)(i) does not restrict the deduction to the year of sale but allows it in the year of refund. This interpretation aligns with previous judgments in Devi Films (Private) Ltd. v. State of Madras and State of Andhra Pradesh v. Vauhini Pictures Private Ltd.

The Court also discussed the legislative intent behind section 13(5), introduced by Madras Act 15 of 1964, which allows deduction of the tax levied on sales if the goods are returned within six months. The Court concluded that section 13(5) and rule 5-A(b)(i) provide different rights: section 13(5) allows deduction in the year of sale if the return is within six months, while rule 5-A(b)(i) allows deduction in the year of refund. Consequently, the petitioners were entitled to deduct Rs. 10,360.70 from the total turnover for 1966-67, with specific tax rates applied to different portions of this amount.

2. Liability to Pay Sales Tax on the Sale of Scrap:
The petitioners claimed they were not liable to pay sales tax on Rs. 13,308.32 from the sale of scrap, arguing they were not dealers in scrap. The authorities held that scrap, being a by-product of the petitioners' business, was liable to sales tax. The Court referenced the Supreme Court's decision in State of Tamil Nadu v. Burmah Shell Co. Ltd., which established that turnover from incidental business activities is taxable. Thus, the Court concluded that the turnover from the sale of scrap was rightly included in the taxable turnover.

Judgment Summary:
The Court allowed the petitioners to deduct the refunded amount of Rs. 10,360.70 from the total turnover for the assessment year 1966-67, affirming the applicability of rule 5-A(b)(i). However, the Court dismissed the petitioners' claim regarding the non-liability of sales tax on the sale of scrap, affirming that the turnover of Rs. 13,308.32 from scrap sales was taxable. The tax revision was partly allowed concerning the refunded amount and dismissed concerning the sales of scrap, with no order as to costs.