1985 (4) TMI 277 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of notice under section 21 of the U.P. Sales Tax Act.
2. Inclusion of administrative charges in the turnover of purchases.

Analysis:

1. Validity of notice under section 21 of the U.P. Sales Tax Act:
The judgment addresses the issue of the validity of a notice issued under section 21 of the U.P. Sales Tax Act to the Food Corporation of India. The notice alleged that a part of the turnover had escaped assessment. The court emphasized that the notice must clearly indicate the assessing authority's reason to believe that an escape of assessment has occurred. The absence of this crucial element would render the notice invalid. The court clarified that while the notice must reflect the assessing authority's belief, it is not necessary to provide detailed grounds in the notice itself. The court held that in this case, the notice sufficiently indicated that the assessing officer believed a part of the turnover had escaped assessment, thus upholding the validity of the notice.

2. Inclusion of administrative charges in the turnover of purchases:
The judgment delves into whether administrative charges paid by the Food Corporation of India should be included in the turnover of purchases for taxation purposes. The court analyzed the definitions of "purchase price" and "turnover of purchases" under the U.P. Sales Tax Act. It noted that if administrative charges are part of the purchase price paid, they should be included in the turnover. The court examined the nature of the charges, considering whether they were distinct from the purchase price. The court referred to precedents and highlighted that charges paid for services rendered, especially in pursuance of statutory provisions, do not form part of the purchase price. The court also discussed a concession made by the corporation's counsel regarding the payment of administrative charges to agents, including the State Government. Ultimately, the court concluded that the administrative charges paid by the corporation were akin to commission payments to agents and should be considered part of the purchase price, thus warranting inclusion in the turnover for taxation. The judgment dismissed the revision and upheld the inclusion of administrative charges in the turnover, affirming the decision of the Sales Tax Tribunal.

In conclusion, the judgment addresses the validity of the notice under section 21 of the U.P. Sales Tax Act and the inclusion of administrative charges in the turnover of purchases for taxation purposes, providing detailed analysis and legal interpretation on both issues.