1996 (1) TMI 401 - HC - VAT and Sales Tax

Summary

Issues involved:
The judgment addresses the question of whether the subsidy allowed on fertilizer by the Central Government is liable to be included in the "turnover" as defined in section 2(i) of the U.P. Sales Tax Act, 1948.

Details of the Judgment:
The judgment consolidates several writ petitions concerning assessment proceedings and sales tax realization for various years. The petitioners sought relief from assessing, levying, or recovering sales tax on the subsidy provided by the Government of India. Previous judgments were cited to support the petitioners' argument that the subsidy should not be considered turnover. The Standing Counsel argued that the definition in the U.P. Sales Tax Act differs from that of the Andhra Pradesh General Sales Tax Act, specifically regarding the terms "total amount charged" and "aggregate amount."

The Court examined the definitions of "total" and "aggregate" to determine if they convey the same meaning. It was noted that both terms essentially mean the whole or total amount. The subsidy scheme introduced by the Government of India for the nitrogenous fertilizer industry aimed to ensure a reasonable return on investment and industry growth. The subsidy is paid directly to manufacturers based on manufacturing costs, including capital costs. The definition of "sale" in the U.P. Sales Tax Act involves the transfer of goods for a price, which is agreed upon between the buyer and seller.

The Court emphasized that the subsidy provided by the Government cannot be considered part of the price paid by the purchaser in a sale transaction. Citing a judgment from the Kerala High Court, it was highlighted that subsidies are meant for public benefit and to maintain reasonable prices, not as consideration for sales. Therefore, the subsidy amount should not be included in turnover for sales tax purposes. The Court disagreed with the arguments presented by the Standing Counsel and held that the subsidy cannot be covered within the turnover definition of the U.P. Sales Tax Act.

Consequently, all the writ petitions were allowed, restraining the Assistant Commissioner from imposing or realizing tax on the subsidy amount for the mentioned assessment years under both U.P. and Central Sales Tax Acts. Each party was directed to bear their own costs.