1982 (12) TMI 168 - HC - VAT and Sales Tax

Summary

Issues:
- Assessment of purchase turnover for raw cotton under the Tamil Nadu General Sales Tax Act, 1959.
- Treatment of invisible loss in the process of converting raw cotton into ginned cotton for tax purposes.

Analysis:
The judgment by the Madras High Court involved two separate appeals concerning the assessment of purchase turnover for raw cotton under the Tamil Nadu General Sales Tax Act, 1959. The appellants in both cases were ginning factory owners who did not maintain accounts of their purchases but had sales records of ginned cotton. The assessing authority estimated the purchase turnover by considering the last purchase value of raw cotton and adding the loss of cotton during the ginning process. The Appellate Assistant Commissioner accepted the appellants' argument that the invisible loss should not be included in the purchase turnover, leading to the deduction of the estimated loss amounts.

However, the Board of Revenue disagreed with the Appellate Assistant Commissioner's decision, stating that there is no provision for deducting invisible loss in the purchase turnover calculation under the Act. The Board emphasized that the tax is levied based on the purchase value at the last point of purchase and does not account for any subsequent losses during the manufacturing process. The appellants argued that invisible loss should not be considered part of the purchase turnover, but the Court clarified that the tax is imposed on the purchase consideration of raw cotton before it is converted into ginned cotton.

The Court upheld the Board's decision, stating that the calculation of purchase value by adding the estimated loss is a substitute for the actual purchase consideration in the absence of accurate data from the assessees' accounts. The judgment emphasized that there is no provision for allowances for driage or wastage in the manufacturing process of taxable commodities at the purchase point. Therefore, in cases where correct data is lacking, the assessing authority may estimate the purchase value without accounting for subsequent losses. Ultimately, the appeals were dismissed, and the appellants were ordered to pay costs and counsel fees.