1990 (6) TMI 195 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether "commitment charges" collected by the assessee as interest on the sale price, unpaid up to the time of delivery, form part of the "taxable turnover" under the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:

Background Facts:
The assessment year in question is 1976-77. The assessee had agreements with a rubber factory for the supply of tyre curing presses. Due to delays in delivery and payment, the initial terms were revised in a package deal, which included a provision for "commitment charges" (initially termed as "interest") at 16% on the outstanding amounts until the time of delivery.

Assessment Officer's Decision:
The assessing authority included the "commitment charges" in the taxable turnover, amounting to Rs. 3,82,749, despite objections from the assessee.

Appellate Assistant Commissioner's Decision:
The Appellate Assistant Commissioner affirmed the assessment, concluding that the "commitment charges" were part of the money consideration for the goods. The rationale was that the sale was not complete until the entire price, including the "commitment charges," was paid.

Tribunal's Decision:
The Tribunal upheld the decision, stating that the "commitment charges" were an escalation of the sale price due to delayed payment and delivery. It referenced Section 2(r) of the Tamil Nadu General Sales Tax Act, which defines "turnover" as the aggregate amount for which goods are sold, including all payments made in consideration of the sale.

Arguments by the Assessee:
The assessee contended that the "commitment charges" should not be included in the taxable turnover as they were separately invoiced and not part of the sale price. The counsel cited explanations and precedents, including the cases of State of Madras v. Baliga Lighting Equipment (P.) Ltd. and Food Corporation of India v. State of Kerala, to argue that these charges were distinct from the sale price.

Arguments by the Additional Government Pleader:
The Additional Government Pleader argued that the Tribunal's decision was legally sound and that the "commitment charges" should be included in the taxable turnover.

Court's Analysis:
The Court examined the definitions under the Tamil Nadu General Sales Tax Act:
- Section 2(r) defines "turnover" as the aggregate amount for which goods are sold, including deferred payments.
- Section 2(p) defines "taxable turnover" as the turnover liable to tax after prescribed deductions.

The Court referred to the Supreme Court's judgment in Hindustan Sugar Mills v. State of Rajasthan, which stated that the consideration for the sale includes all amounts payable by the purchaser to the dealer. The Court also cited the judgment in George Oakes (Pvt.) Ltd. v. State of Madras, emphasizing that the entire amount paid by the purchaser, inclusive of taxes, forms the consideration for the sale.

Court's Conclusion:
The Court concluded that the "commitment charges" were indeed part of the sale price and should be included in the taxable turnover. It rejected the assessee's argument that these charges were separate from the sale price. The Court also distinguished the cited cases, noting that they did not apply to the facts at hand.

The Court held that the "commitment charges" were linked to the payment and delivery, forming part of the consideration for the sale of goods, which took place at the time of delivery. Therefore, the aggregate amount received by the assessee, including the "commitment charges," was rightly included in the taxable turnover.

Final Judgment:
The tax revision case was dismissed, and the inclusion of "commitment charges" in the taxable turnover was upheld. There was no order as to costs.

Petition dismissed.