1975 (11) TMI 144 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether excise duty paid by buyers directly to the State Government forms part of the assessable turnover of the assessees.
2. Whether the assessing authority has jurisdiction to reopen and consider items of turnover not disputed by an assessee at the original assessment during reassessment proceedings.
3. Whether the value of unserviceable gunnies sold and freight charges are permissible deductions.

Issue-wise Detailed Analysis:

1. Excise Duty as Part of Assessable Turnover:
The court examined whether the excise duty paid by buyers directly to the State Government for liquor purchased from the assessee-manufacturers forms part of the assessable turnover. The court referred to Section 21 of the Andhra Pradesh Excise Act, 1968, which empowers the State Government to levy excise duty on excisable articles manufactured or produced in the State. The court clarified that the statutory liability to pay excise duty lies with the manufacturer or producer, regardless of whether the duty is paid by the buyer. It emphasized that the excise duty is chargeable at the point of production or manufacture of liquor. The court held that any excise duty paid by the purchaser before the removal of liquor from the factory must be construed as paid on behalf of the manufacturer. Consequently, the excise duty forms part of the sale consideration and constitutes the turnover of the seller, even if not included in the bill of sale.

2. Jurisdiction to Reopen Items During Reassessment:
The petitioner contended that the validity of sales tax on items not disputed during the original assessment could be challenged during reassessment. The court rejected this argument, stating that reassessment under Section 14(4) of the Andhra Pradesh General Sales Tax Act, 1957, is limited to escaped turnover. The court emphasized that reassessment proceedings do not allow reopening of items that were not disputed during the original assessment and have become final. The court referred to analogous principles under the Indian Income-tax Act, 1922, where reassessment is confined to escaped income and does not permit reevaluation of items settled in the original assessment.

3. Permissibility of Deductions for Freight Charges and Unserviceable Gunnies:
The court addressed the petitioner's claim that freight charges paid by buyers and the value of unserviceable gunnies sold should not form part of the turnover. The court noted that these items were included in the total turnover during the original assessment and were not disputed at that stage. The court reiterated that reassessment proceedings cannot consider the validity of sales tax on items not contested during the original assessment. The court distinguished the case from the Supreme Court decision in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh, where it was held that sales tax cannot be levied on railway freight if it is not part of the sale price. The court concluded that the inclusion of freight charges and the value of unserviceable gunnies in the taxable turnover was valid, as they were not disputed during the original assessment.

Conclusion:
The court dismissed the tax revision cases and writ petitions, affirming that:
1. Excise duty paid by buyers forms part of the assessable turnover of the assessees.
2. The assessing authority cannot reopen items not disputed during the original assessment in reassessment proceedings.
3. Freight charges and the value of unserviceable gunnies are validly included in the taxable turnover, as their inclusion was not contested during the original assessment.

Petitions dismissed with costs.