1995 (4) TMI 255 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of incentive money in taxable turnover.
2. Inclusion of insurance charges in taxable turnover.
3. Inclusion of Material Service Performance Security Deposit (M.S.P.S.D.) and Labour Service Performance Security Deposit (L.S.P.S.D.) in taxable turnover.
4. Rejection of defective "C" forms.
5. Liability for payment of interest.

Detailed Analysis:

1. Inclusion of Incentive Money in Taxable Turnover:
The applicant operated an incentive scheme where dealers received a remission in price based on sales volume. The authorities included this incentive money in the taxable turnover, arguing it was per tractor, not on the price. The court referred to Section 2(i) of the U.P. Sales Tax Act and relevant case law, concluding that such incentives qualify as discounts. The Supreme Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Motor Industries Co. [1983] and this Court in Commissioner, Sales Tax, Uttar Pradesh, Lucknow v. Indian Farmers Fertilizers Co-operative Limited [1993] held that incentives promoting trade qualify as discounts. Thus, the applicant was entitled to deduct the incentive from its taxable turnover.

2. Inclusion of Insurance Charges in Taxable Turnover:
The applicant charged insurance only from dealers requesting coverage during transit. The Tribunal included these charges in the taxable turnover due to the applicant's failure to produce the insurance policy. The court found this finding perverse, noting invoices showed selective charging for insurance, indicating it was based on specific requests. Therefore, the insurance charges should be excluded from the taxable turnover.

3. Inclusion of M.S.P.S.D. and L.S.P.S.D. in Taxable Turnover:
The applicant collected these deposits to ensure dealers provided free services and replacement parts. The Tribunal included these deposits in the taxable turnover despite evidence showing they were refundable and not part of the sale price. The court ruled that security deposits are not part of the sale price and should be excluded from the taxable turnover.

4. Rejection of Defective "C" Forms:
The assessing authority rejected "C" forms covering significant sales due to defects. The applicant provided certificates from the Commercial Tax Officer of Begu Sarai, Bihar, validating the forms. The court found the rejection unjustified and ruled the applicant is entitled to a proportionate tax reduction for these forms.

5. Liability for Payment of Interest:
Given the court's acceptance of the applicant's pleas on the above issues, the question of charging interest does not arise. The applicant is not liable for interest on the disputed amounts.

Conclusion:
The court ruled in favor of the applicant on all issues:
- The incentive money should be deducted from the taxable turnover.
- Insurance charges should be excluded from the taxable turnover.
- M.S.P.S.D. and L.S.P.S.D. should not be included in the taxable turnover.
- The applicant is entitled to a tax reduction for the wrongly rejected "C" forms.
- The applicant is not liable for interest.

The Sales Tax Tribunal is directed to pass a consequential order under Section 11(8) of the U.P. Sales Tax Act. Petitions allowed.