1994 (7) TMI 313 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the assessments imposing tax on the amount of subsidy are legal and sustainable.
2. Whether the consumer price support subsidy should be considered part of the sale consideration for assessing sales tax.
3. Whether the subsidy amount received by the respondents is part of their taxable turnover under the Kerala General Sales Tax Act.

Analysis:
1. The judgment challenged in this case involved assessments in various O.P. numbers, where the learned single Judge deemed the tax imposition on the subsidy amount as illegal and unsustainable. The writ petitions were allowed, quashing the tax levied on the subsidy amount in question. The appellants contended that the subsidy payment was related to the sale event and should be part of the sale consideration for tax assessment. However, the learned single Judge ruled against this argument, stating that the amount of subsidy is not part of the taxable turnover of the respondents under the Kerala General Sales Tax Act.

2. The controversy revolved around the interpretation of the consumer price support subsidy and its inclusion in the sale consideration for sales tax assessment. The Central Government's scheme for retention prices aimed to provide a reasonable return on investment in the fertiliser industry, with a subsidy component. The respondents objected to the inclusion of the subsidy amount in their taxable turnover, arguing that it should not be taxed as it was not directly received from the purchaser. The Andhra Pradesh High Court decisions were cited, but the learned single Judge held that the Kerala Act's definition of turnover differed, justifying the exclusion of the subsidy amount from taxable turnover.

3. The key issue was whether the subsidy amount received by the respondents should be considered part of their taxable turnover under the Kerala General Sales Tax Act. The learned single Judge determined that since the sale was not conditional on the subsidy payment from the Central Government and there was no agreement for any additional amount beyond the purchaser's payment, the subsidy amount should not be included in the turnover. The judgment emphasized that the subsidy received was not related to specific sale transactions but other circumstances, making it non-exigible to tax under the Kerala Act. The writ appeals challenging this decision were dismissed by the Court, affirming the exclusion of the subsidy amount from the taxable turnover of the respondents.