1984 (8) TMI 302 - HC - VAT and Sales Tax

Summary

Issues:
Whether the sales tax paid by the assessee could be excluded from the total turnover as claimed by the assessee.

Analysis:
The case involved the question of whether the sales tax paid by the assessee, a producer and dealer in tea, could be excluded from the total turnover. The assessee sold tea at auction through brokers at prices inclusive of sales tax. The assessee claimed that the sales tax amount should be excluded from the total turnover. However, the assessing authority, the Appellate Assistant Commissioner, and the Sales Tax Appellate Tribunal did not accept this claim, stating that since the sales tax was not separately collected from the purchasers, it could not be excluded from the total amount collected. The Tribunal's decision was challenged in the High Court.

Upon review, the High Court found that the Tribunal's decision was inconsistent with previous court decisions and legal provisions. Referring to earlier cases such as Lipton (India) Ltd. v. State of Tamil Nadu, the court emphasized that if there was a clear understanding between the seller and the buyer that the amount paid included sales tax, the seller could exclude the sales tax from the turnover. The court highlighted that even if the sales tax was not separately shown in the sale documents, as long as both parties were aware that the price included the tax, the seller could claim deduction for the sales tax paid.

The court also cited cases like State of Tamil Nadu v. Ultramarine and Pigments Ltd. and State of Tamil Nadu v. Shaw Wallace and Co., which supported the principle that if the price indicated included the tax payable, the seller could exclude the sales tax amount from the total turnover. The court further referenced a case from the Patna High Court, Radha Krishna Surajmal v. Commissioner of Commercial Taxes, which upheld the deduction of sales tax where it was understood by both parties that the amount paid included the tax.

Based on the consistent legal precedent and statutory provisions, the High Court concluded that the assessee was entitled to seek deduction of the sales tax paid from the gross turnover. Therefore, the tax revision cases were allowed, and no costs were awarded.