1994 (3) TMI 376 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of excise duty in taxable turnover.
2. Interpretation of "turnover" and "sale price" under U.P. Sales Tax Act and Central Sales Tax Act.
3. Applicability of precedents from Andhra Pradesh High Court and Supreme Court.

Issue-Wise Detailed Analysis:

1. Inclusion of Excise Duty in Taxable Turnover
The primary issue was whether the excise duty initially paid by the manufacturer but subsequently refundable by the Government, which is included in the bill sent to the purchaser, should be included in the taxable turnover even though the purchaser has neither paid nor is liable to pay this excise duty under the contract.

The court referred to the Andhra Pradesh High Court's decision in State of A.P. v. Ranka Cables Pvt. Ltd. [1990] 78 STC 111, which held that excise duty neither paid nor payable by the buyer cannot be included in the taxable turnover of the assessee. The court agreed with this decision, emphasizing that the excise duty did not form part of the price of the goods supplied by the assessee to the purchaser and that the purchaser was under no liability to pay this amount.

2. Interpretation of "Turnover" and "Sale Price" under U.P. Sales Tax Act and Central Sales Tax Act
The court examined relevant provisions of both the U.P. Sales Tax Act and the Central Sales Tax Act to determine what constitutes taxable turnover. Under section 3 of the U.P. Sales Tax Act, sales tax is payable on the turnover of sales or purchases. The definitions of "purchase price," "turnover," and "turnover of purchases" were analyzed to emphasize that the taxable amount is the consideration paid or payable by the purchaser for the goods.

Similarly, under the Central Sales Tax Act, the definitions of "sale," "sale price," and "turnover" were scrutinized. The court noted that the emphasis in both Acts is on the amount paid or payable by the purchaser. Therefore, if the price of goods is reduced by the excise duty refundable to the manufacturer, the reduced amount is the taxable turnover.

3. Applicability of Precedents from Andhra Pradesh High Court and Supreme Court
The court relied on several precedents to support its decision. In Ranka Cables Pvt. Ltd. [1990] 78 STC 111, the Andhra Pradesh High Court had ruled that excise duty refundable to the manufacturer should not be included in the taxable turnover. The court also cited Sakthi Engineering Co. v. State of Andhra Pradesh [1993] 91 STC 59 and Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 STC 487, which supported the exclusion of non-payable excise duty from taxable turnover.

The court distinguished the present case from McDowell & Company Limited v. Commercial Tax Officer [1985] 59 STC 277 (SC); 1985 UPTC 747 (SC), where excise duty paid by the purchaser on behalf of the manufacturer was included in the turnover. In the present case, the excise duty was reimbursed by the Central Government and not paid by the purchaser.

The court also reviewed Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 and Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu [1993] 88 STC 151; AIR 1993 SC 123, which dealt with the inclusion of freight charges in the taxable turnover. These cases were found not applicable because, in the present case, the excise duty was not payable by the purchaser.

Conclusion
The court concluded that the sales tax authorities had committed an error by including the excise duty in the taxable turnover of the assessee. The revision applications were allowed, and the orders under challenge were set aside. The return filed by the assessee, showing his taxable turnover exclusive of the excise duty, was to be accepted, and sales tax was to be assessed accordingly. The applicants were also entitled to costs from the respondents.

Petition allowed.