1983 (1) TMI 237 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Determination of "sale price" for tax purposes.
2. Whether sales tax collected separately forms part of the "sale price".

Issue-wise Detailed Analysis:

1. Determination of "sale price" for tax purposes:
The applicants, Bata India Limited, were registered dealers under the Bombay Sales Tax Act, 1959, and sold footwear. They entered into an agreement with wholesalers, selling a pair of shoes priced at Rs. 15.80 but provided a trade discount of Rs. 1.34, resulting in a net price of Rs. 14.46. The sales tax charged was Rs. 0.73, making the total invoice amount Rs. 15.19. The Deputy Commissioner of Sales Tax initially determined that the sale price was Rs. 14.46 after deducting the trade discount. However, the Commissioner of Sales Tax later revised this decision, including the sales tax in the sale price, making it Rs. 15.19. The Tribunal upheld this revision, leading to the present reference to the High Court.

2. Whether sales tax collected separately forms part of the "sale price":
The core legal question was whether the sales tax collected by the dealer from customers and shown separately in the invoice formed part of the "sale price". The Commissioner and Tribunal relied on Supreme Court decisions in George Oakes (Private) Ltd. v. State of Madras and Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore to support their view. The applicants argued that these decisions were under different Sales Tax Acts and not applicable to the Bombay Sales Tax Act. They cited other Supreme Court and Bombay High Court decisions to support their contention.

Relevant Legal Provisions:
- Clause (29) of Section 2 defines "sale price" as the amount of valuable consideration paid or payable to a dealer for any sale made.
- Clause (36) of Section 2 defines "turnover of sales" as the aggregate of the amounts of sale price received and receivable by a dealer.
- Section 46 prohibits the collection of tax in certain cases and limits the amount a registered dealer can collect by way of tax.
- Section 37 imposes penalties for collecting tax in excess of the amount payable.
- Section 63 outlines the penalties for contravening the provisions of Section 46.

Case Law Analysis:
- George Oakes (Private) Ltd. v. State of Madras: The Supreme Court held that the tax collected by a dealer forms part of the sale price.
- Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore: The Supreme Court held that if a dealer passes on the tax burden to the purchaser, it becomes part of the sale price.
- Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax: The Supreme Court distinguished cases where the dealer is authorized by law to pass on the tax to the purchaser, stating that such tax does not form part of the consideration for the levy of tax.
- R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited: The Supreme Court supported the view that the dealer is authorized to pass on the tax to the purchaser under the Bombay Sales Tax Act.

High Court's Conclusion:
The High Court concluded that under the Bombay Sales Tax Act, the dealer is authorized to collect the tax separately from the sale price. Rule 46-A of the Bombay Sales Tax Rules, 1959, allows the dealer to exclude the amount collected by way of tax from the sale price. Therefore, the sale price in respect of which the applicants became liable to pay sales tax was Rs. 14.46, not Rs. 15.19. Consequently, the sales tax payable was at the rate of five paise in the rupee, not ten paise.

Judgment:
The High Court answered the question in the negative, in favor of the assessee and against the department. The respondents were ordered to pay the applicants' costs, and the applicants were entitled to a refund of the fee paid.