1980 (11) TMI 147 - HC - VAT and Sales Tax

Issues Involved:
1. Inclusion of sales tax in the total turnover for assessing sales tax.
2. Constitutionality of including sales tax in the turnover.
3. Interpretation of "turnover" under the Andhra Pradesh General Sales Tax Act.
4. Impact of prior legal precedents and statutory provisions on the inclusion of sales tax in turnover.
5. Whether the collection method (via bills or debit notes) affects the inclusion of sales tax in turnover.
6. Fundamental rights and potential deprivation of property due to high tax incidence.

Detailed Analysis:

Issue 1: Inclusion of Sales Tax in Turnover
The primary question was whether the sales tax amount realized by a dealer in selling liquor could be included in the total turnover for assessing the sales tax due under the Andhra Pradesh General Sales Tax Act. The court held that the total amount set out in the bill of sale, including the sales tax component, constitutes the consideration for the sale and is included within the definition of "turnover." The court reasoned that the sales tax is paid by the purchaser and collected by the seller before the delivery of the goods, making it part of the total consideration for the goods.

Issue 2: Constitutionality of Including Sales Tax in Turnover
The petitioners argued that including the sales tax component in the taxable turnover would offend the fundamental right guaranteed under Article 19(1)(g) of the Constitution. The court rejected this argument, stating that business in liquor is not a fundamental right, and the State has the authority to impose heavy taxes to restrict this business. Therefore, the inclusion of the sales tax component in the taxable turnover does not violate constitutional rights.

Issue 3: Interpretation of "Turnover"
The court interpreted "turnover" under Section 2(1)(s) of the Act, which includes the total amount set out in the bill of sale as the consideration for the sale or purchase of goods, including any sums charged by the dealer for anything done in respect of the goods sold at the time of or before the delivery of the goods. The court concluded that the sales tax collected by the dealer is part of the consideration for the sale and, therefore, part of the turnover.

Issue 4: Impact of Prior Legal Precedents and Statutory Provisions
The court referred to several precedents, including George Oakes (Pvt.) Ltd. v. State of Madras, Hindustan Sugar Mills Ltd. v. State of Rajasthan, and McDowell & Co. v. Commercial Tax Officer. These cases affirmed that the amount collected as sales tax by the dealer forms part of the sale price and is included in the turnover. The court also considered the statutory provisions under the Andhra Pradesh General Sales Tax Act, which do not exclude the sales tax component from the taxable turnover.

Issue 5: Collection Method (Bills or Debit Notes)
The court addressed the petitioners' argument that the method of collection (via bills or debit notes) should affect the inclusion of sales tax in turnover. The court held that whether the sales tax is shown in the bill or collected via debit notes, it is still collected by the seller at the time of the sale and forms part of the consideration for the sale. Therefore, it should be included in the turnover.

Issue 6: Fundamental Rights and Deprivation of Property
The petitioners argued that including the sales tax component in the taxable turnover would result in a heavy incidence of tax, potentially stifling their business and amounting to deprivation of property. The court rejected this argument, stating that the State has the authority to impose high taxes on liquor to restrict its sale. The court also clarified that the inclusion of the sales tax component in the taxable turnover does not amount to tax on tax and is within the legislative competence of the State.

Conclusion:
The court dismissed the writ petitions and the tax revision case, holding that the sales tax collected by the dealer from the purchasers in respect of liquor sold to them can be validly computed as part of the taxable turnover. The court found no merit in the petitioners' contentions and upheld the inclusion of the sales tax component in the turnover for assessing sales tax. The court also rejected the request for granting leave to appeal to the Supreme Court but directed the stay of the recovery of tax involved for two months.

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