1998 (12) TMI 573 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the term "purchase price" for the purpose of deduction under rule 42 of the Gujarat Sales Tax Rules, 1970.

Analysis:

Issue 1: Interpretation of "purchase price" for deduction
The Gujarat Sales Tax Tribunal referred a question regarding the interpretation of "purchase price" under rule 42 of the Gujarat Sales Tax Rules. The rule provides for granting drawback, set-off, or refund of tax paid on goods used in manufacturing. The dispute arose over the deduction of 2% of the purchase price for calculating the aggregate amount eligible for drawback. The Revenue contended that the purchase price should include the tax element, while the assessee argued that only the actual purchase price should be considered for the deduction.

Issue 2: Tribunal's decision and reasoning
The Tribunal ruled in favor of the Revenue, holding that the purchase price should include the purchase tax as well. However, the High Court disagreed with this interpretation. The Court emphasized that the term "purchase price" should not include any tax liability incurred by the purchaser after acquiring the goods. The Court analyzed the relevant provisions and highlighted that the rule does not envisage different sums for computing drawback and for deducting 2% from the aggregate amount. The Court also clarified that no notional grossed-up price should be assumed for inflating the purchase price.

Issue 3: Comparison with relevant case laws
The Court distinguished the cases cited by the Revenue, namely Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore and Commissioner of Sales Tax, Maharashtra State v. National Plastic & Allied Industries. The Court explained that these cases dealt with different issues related to sales tax and the inclusion of tax in the sale price, which was not directly relevant to the current controversy over the interpretation of "purchase price" for deduction purposes.

Conclusion
The High Court concluded that the purchase price for the purpose of deduction under rule 42 should not include any tax liability borne by the purchaser. Therefore, the Court answered the referred question in the negative, in favor of the assessee and against the Revenue. The judgment provides clarity on the interpretation of "purchase price" in the context of calculating deductions under the Gujarat Sales Tax Rules, 1970.