2002 (5) TMI 824 - HC - VAT and Sales Tax

Summary

Issues:
1. Are liquidated damages for delay in the supply of goods liable to be deducted from the sale price while levying sales tax under the Central Sales Tax Act, 1956?

The judgment addressed the issue of whether liquidated damages levied for delay in the supply of goods should be deducted from the sale price for the purpose of levying sales tax under the Central Sales Tax Act, 1956. The petitioner, a registered dealer, filed an appeal against an additional tax demand raised by the Assessing Authority. The appellate authority and Sales Tax Tribunal upheld the decision. The petitioner sought a reference to the High Court under the Punjab General Sales Tax Act, 1948. The key contention was whether the tax should be levied on the actual amount received by the dealer considering any deductions made for delay in supply. The petitioner argued that any amount deducted for delay should reduce the gross turnover. However, the Court examined the definition of "sale price" under Section 2(h) and concluded that the sale price is the amount payable to the dealer as consideration for the supply of goods, without considering deductions for liquidated damages.

The Court analyzed relevant judgments cited by the petitioner, emphasizing that deductions were allowed for rebates or discounts, not for liabilities such as liquidated damages. The petitioner argued for a reduction in the sale price based on the liquidated damages levied by the buyer. However, the Court examined the contract terms, which allowed the buyer to recover liquidated damages for delays in delivery. The Court determined that such damages were meant to compensate for losses due to the supplier's default and were not considered discounts under the law. The damages were viewed as an expenditure incurred by the dealer for its default, distinct from the agreed sale price between the parties. Ultimately, the Court found the Tribunal's decision legal and reasonable, dismissing the petition without costs.

In conclusion, the judgment clarified that liquidated damages for delay in the supply of goods are not deductible from the sale price for the purpose of levying sales tax under the Central Sales Tax Act, 1956. The Court emphasized that such damages are distinct from discounts or rebates and do not affect the agreed sale price between the parties. The decision reaffirmed that sales tax should be levied based on the consideration for the supply of goods without considering deductions for liabilities like liquidated damages.