1981 (6) TMI 116 - HC - VAT and Sales Tax

Summary

Issues:
1. Inclusion of freight inward in the turnover of sales of coal for tax assessment.
2. Interpretation of the expression "turnover" under the U.P. Sales Tax Act.

Analysis:
The judgment pertains to a revision under section 11(1) of the U.P. Sales Tax Act regarding the inclusion of freight inward in the turnover of sales of coal for tax assessment. The assessing authority had initially rejected the disclosed turnover of the assessee, a coal dealer, as it did not include the amount of freight inward. The Additional Judge (Revisions) accepted the assessee's contention that since freight charges were paid by the principals directly, they should not be included in the turnover. The Commissioner filed a revision challenging this decision.

The key issue revolved around the interpretation of the term "turnover" as defined in section 2(i) of the Act. The department argued that the inward freight should be included in the turnover, irrespective of separate invoicing, as per the Act's definition. Conversely, the assessee contended that if the obligation to pay freight lies with the purchaser, it should not be part of the sale price. The court analyzed the definition of "turnover" and the relevant provisions, emphasizing that the amount payable for goods sold constitutes turnover.

The court referred to a similar definition of "sale price" under the Rajasthan Sales Tax Act, highlighting that consideration passing from the purchaser to the dealer determines the sale price, regardless of components like freight. The judgment emphasized that the inclusive clause in the definition of turnover should be invoked by the department to include certain amounts. In this case, as the inclusive clause was not invoked, the freight paid by the purchaser was part of the consideration for the sale and should be included in the turnover.

The court rejected attempts to distinguish relevant precedents and held that the observations in prior cases, like Hindustan Sugar Mills, were binding. It underscored the importance of considering the entire transaction process, including the modus operandi of the assessee's business, to determine the components of the turnover. Ultimately, the court allowed the revision, ruling that the inward freight should be treated as part of the sale price of coal, liable for taxation. The Commissioner was awarded costs, and the petition was allowed.