1988 (3) TMI 420 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the petitioner collected specific amounts by way of sales tax.
2. Whether the addition of these amounts to the taxable turnover is legal.

Detailed Analysis:

Issue 1: Whether the petitioner collected specific amounts by way of sales tax.

The petitioner, a co-operative society dealing in grocery and other articles, was assessed for the years 1973-74, 1974-75, and 1975-76. The assessing officer enhanced the taxable turnover by Rs. 81,156.95, Rs. 1,27,897.72, and Rs. 2,09,028.96 respectively, arguing that these amounts represented sales tax realized from purchasers and should not be deducted from the taxable turnover. The petitioner succeeded in appeal before the Appellate Assistant Commissioner, but the Tribunal restored the assessing officer's orders on the Revenue's appeal.

The petitioner did not show the price of goods and the sales tax amount separately in the sale memos but bifurcated and recorded them separately in the books of accounts. The Tribunal rejected the claim due to the absence of separate indication in the sale memos. The controversy required reference to the Orissa Sales Tax Act, 1947, particularly the definitions of "gross turnover" and "sale price" under sections 2(dd) and 2(h), and the provisions of section 9-B regarding "collection of tax by dealers."

Issue 2: Whether the addition of these amounts to the taxable turnover is legal.

Section 9-B(2) mandates that registered dealers issue cash or credit memos showing the price of goods sold and the tax amount separately. Rule 26-A requires maintaining accounts of moneys realized or stipulated for realization by way of tax. Despite the petitioner's compliance with Rule 26-A, the Revenue disallowed the deduction due to the failure to indicate the tax separately in the sale memos.

Section 5(2)(A)(b) of the Act allows a registered dealer to deduct from gross turnover the amount of tax realized. The court referenced a similar case, Gopabandhu Type Foundry v. State of Orissa, where it was held that the dealer's right to deduction cannot be affected by the failure to show tax separately in memos if it is indicated in the accounts.

The court examined decisions from other High Courts, including Madras, Kerala, Patna, and Mysore, which supported the view that tax collected separately in accounts but not shown in sale memos still qualifies for deduction. The existence of statutory provisions authorizing dealers to collect tax from purchasers was deemed crucial.

The court concluded that the petitioner, having shown the tax separately in the books of accounts and being authorized by law to pass on the tax burden to purchasers, is entitled to deduct the amount from the taxable turnover. The failure to show tax separately in sale memos does not deprive the petitioner of this right.

Conclusion:

The answer to the question is given in favor of the petitioner and against the Revenue. The petitioner is entitled to claim the deduction of the sales tax amounts from the taxable turnover. The petitioner is also awarded costs, with a hearing fee assessed at Rs. 250.

Separate Judgment:

K.P. Mohapatra, J. concurred with the judgment.

Reference answered in the affirmative.