1978 (11) TMI 128 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the gallonage fees collected by the distillery form part of the assessees' taxable turnover.

Issue-wise Detailed Analysis:

1. Conception of Turnover under the Taxing Statute:
The Tamil Nadu General Sales Tax Act, 1959, defines "turnover" as the aggregate amount for which goods are bought or sold by a dealer. This definition aligns with the general legal understanding of "sale" as a mutual agreement between seller and buyer, where the consideration for the sale, or price, must be part of this agreement. Thus, a dealer's turnover includes all sums received from purchasers as part of the bargain.

2. Nature and Incidence of Gallonage Fees:
The gallonage fees are a compulsory fiscal imposition designed to augment the State exchequer. The Rules under the Tamil Nadu Prohibition Act clearly place the liability to pay gallonage fees on the purchaser, while obligating the distilleries to collect these fees and remit them to the government. This dual obligation mirrors the structure seen in Section 21-A of the Prohibition Act, which the Supreme Court has interpreted as imposing the tax on the purchaser, with the seller merely collecting it.

3. Judicial Precedents and Comparisons:
The court examined previous decisions, including Spencer & Co. v. Joint Commercial Tax Officer [1969] 24 S.T.C. 161 and Taylor & Co. v. Government of Madras [1974] 34 S.T.C. 391, which dealt with gallonage fees under different statutory contexts. The court distinguished these cases from the present one, noting that in those cases, the gallonage fees were considered part of the dealer's cost without statutory compulsion to collect them from purchasers. In contrast, the present case involves statutory compulsion for the distilleries to collect the fees from purchasers.

4. Practical Implementation by Assessees:
The assessees maintained an advance deposit of gallonage fees with the excise department and collected the fees from purchasers upon each sale. The court found that this practice, whether it involved "collect and credit" or "credit and collect," did not alter the nature of the collections as being under statutory compulsion.

5. Supreme Court's Decision in McDowell & Co. Ltd. v. Commercial Tax Officer [1977] 39 S.T.C. 151 (S.C.):
The court distinguished this case, where excise duty paid directly by purchasers to the government was not part of the distillery's sales turnover, from the present case. It noted that the gallonage fees collected by the assessees, even if retained temporarily, were still collected under legal compulsion and thus did not form part of the distillery's sales turnover.

6. Conclusion:
The court concluded that the gallonage fees collected by the assessees from purchasers do not form part of the assessable turnover for sales tax purposes. The court allowed the tax revision petition, directing the assessing authority to exclude the amount in question from the assessment for 1970-71.

Judgment:
The tax revision case is allowed. The assessing authority is directed to exclude the amount of Rs. 10,16,857.32 from the assessment for 1970-71. The respondent will pay the assessees' costs, with counsel's fee set at Rs. 250.