1991 (3) TMI 342 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exigibility to Andhra Pradesh sales tax of the subsidy amount received by a manufacturer of fertilizer from the pool regulated by the Central Government.
2. Definition and interpretation of "turnover" u/s 2(s) of the Andhra Pradesh General Sales Tax Act, 1957.
3. Applicability of subsidy as part of sale consideration for tax purposes.

Summary:

1. Exigibility to Andhra Pradesh Sales Tax of Subsidy Amount:
The primary issue was whether the subsidy received by fertilizer manufacturers from the Central Government pool should be included in the sales turnover and thus be subject to Andhra Pradesh sales tax. The court noted that the subsidy was provided to compensate for the loss or deficit due to the retention price system imposed by the government, which prevented manufacturers from increasing prices in proportion to their production costs. The assessing authority had included this subsidy in the sales turnover, treating it as part of the sale price of fertilizers.

2. Definition and Interpretation of "Turnover" u/s 2(s) of the Andhra Pradesh General Sales Tax Act, 1957:
The court examined the definition of "turnover" both before and after the Amendment Act 18 of 1985. Before the amendment, "turnover" was defined as the total amount set out in the bill of sale or charged as consideration for the sale of goods. After the amendment, the definition was expanded to include various scenarios where the bill of sale might not correctly set out the sale amount or where there was no bill of sale. The court emphasized that the petitioners had issued bills of sale as required by law and had not received any amount from purchasers beyond what was mentioned in these bills.

3. Applicability of Subsidy as Part of Sale Consideration for Tax Purposes:
The court concluded that the subsidy received from the Central Government did not form part of the sales turnover. The subsidy was intended for the larger interest of the industry and was not related to any single sale transaction. The court referred to previous judgments, including State of A.P. v. Ranka Cables Pvt. Ltd., which supported the view that payments under government schemes for industry support should not be treated as part of the sale price for tax purposes. The court also considered other cases cited by the Government Pleader but found them not applicable to the present controversy.

Judgment:
The writ petition was allowed, and the assessment order for the year 1983-84, which included the subsidy as part of the turnover, was set aside. The court ruled that the subsidy received by the manufacturer could not be treated as part of the turnover u/s 2(s) of the Andhra Pradesh General Sales Tax Act. The proceedings concerning other items under the Act were to be decided according to law. No costs were awarded, and the Government Pleader's fee was set at Rs. 500.