1994 (5) TMI 258 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legislative competence of the State Legislature to define "purchase price" under the M.P. General Sales Tax Act, 1958.
2. Inclusion of transport costs and forwarding and handling charges in the definition of "purchase price".
3. Alleged discrimination between the definitions of "sale price" and "purchase price".

Issue-Wise Detailed Analysis:

1. Legislative Competence of the State Legislature:
The primary contention raised by the petitioner was the lack of legislative competence of the State Legislature to include certain items in the definition of "purchase price" under the M.P. General Sales Tax Act, 1958. The court examined Item 54 of List II, Schedule VII of the Constitution, which authorizes the State Legislature to legislate on taxes on the sale or purchase of goods, excluding newspapers, and subject to the provisions of entry 92-A of List I. Entry 92-A of List I pertains to taxes on the sale or purchase of goods in the course of inter-State trade or commerce.

The court concluded that the legislative scheme of levying and imposing sales tax based on the sale price and purchase tax based on the purchase price is within the legislative competence of the State Legislature. The court emphasized that a legislative entry specifies a field of legislation and the widest import and significance should be attached to it. Therefore, the State Legislature is competent to define "purchase price" and include various components within it.

2. Inclusion of Transport Costs and Forwarding and Handling Charges:
The petitioner objected to the inclusion of transport costs and forwarding and handling charges in the definition of "purchase price" as stipulated in clauses (ii) and (iv) of section 2(kk) of the Act. The petitioner argued that these expenses, incurred after the purchase is effected, should not be included as part of the purchase price.

The court analyzed the definition of "purchase price" in section 2(kk) of the Act, which includes not only the consideration for the purchase but also costs or expenses such as transport costs, trade commission, forwarding and handling charges, insurance charges, local taxes, excise duty, cost of packing, etc. The court held that these items are intimately connected with the transaction of purchase and the purpose for which the purchase is effected. Therefore, the inclusion of transport costs and forwarding and handling charges within the definition of "purchase price" is within the legislative competence of the State Legislature.

3. Alleged Discrimination Between Definitions of "Sale Price" and "Purchase Price":
The petitioner contended that there is discrimination between the definitions of "sale price" and "purchase price" as the definition of "sale price" excludes the cost of freight or delivery when such cost is separately charged, whereas no such exclusion is available in the definition of "purchase price".

The court addressed this contention by stating that the difference in the concept of sale and purchase may necessitate different criteria for determining sale price and purchase price. The court referred to various Supreme Court decisions, including Vinod Coal Syndicate v. Commissioner of Sales Tax, U.P., Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, and Hindustan Sugar Mills Ltd. v. State of Rajasthan, to illustrate that the legislative intention and the nature of the provisions under the Act determine the inclusion or exclusion of certain items from sale price or purchase price.

The court concluded that the State Legislature is competent to provide for the inclusion of particular items as part of the purchase price to tax turnover. The definitions of "sale price" and "purchase price" may differ based on the legislative intent to include or exclude specific items. Therefore, the court found no unconstitutional discrimination in defining "sale price" and "purchase price".

Conclusion:
The court dismissed the petition, holding that the inclusion of transport costs and forwarding and handling charges in the definition of "purchase price" was within the legislative competence of the State Legislature. The court found no unconstitutional discrimination between the definitions of "sale price" and "purchase price". The petition was dismissed without costs, and the security deposit, if any, was ordered to be refunded to the petitioner.

Petition dismissed.