2001 (6) TMI 804 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the yarn cess paid under the Textiles Committee Act, collected by the petitioners would be part of the turnover for the purposes of levying sales tax.

Analysis:

1. The petitioners, manufacturers of cotton yarn, filed returns for the assessment year 1984-85, reporting net turnovers. The assessing authority rejected their claim for exemption on yarn cess collections, considering them as part of the turnover. The Appellate Deputy Commissioner dismissed their appeal, leading to a further appeal before the Sales Tax Appellate Tribunal. The Tribunal allowed exemptions for insurance and interState sales but upheld the inclusion of yarn cess in the turnover, prompting the petitioners to challenge the orders through tax revision cases.

2. The primary question before the Court was whether the yarn cess collected by the petitioners under the Textiles Committee Act should be considered part of the turnover for sales tax purposes. Citing a Supreme Court judgment in McDowell & Company Limited v. Commercial Tax Officer [1985] 59 STC 277, the Court found the matter settled and not res integra.

3. Section 5-A of the Textiles Committee Act imposes a cess on textiles and textile machinery manufactured in India. The Court noted that the cess levied under this Act is akin to excise duty, as defined by various Supreme Court judgments. The taxable event for excise duty is the manufacture or production of goods, aligning with the language of section 5-A, confirming that the cess is indeed excise duty.

4. Referring to the definition of "turnover" in the Sales Tax Act, the Court highlighted that excise duty, being part of the consideration for the sale of goods, falls within the ambit of turnover. The Court emphasized that the Supreme Court precedent in McDowell & Company Limited case established that excise duty forms part of turnover for sales tax assessment.

5. Drawing parallels to the McDowell & Company Limited case, where excise duty was held to be part of turnover, the Court found that the duty paid under the Textiles Committee Act, which had been passed on to consumers, should be considered part of the turnover for sales tax purposes. Consequently, the Court dismissed the tax revision cases, upholding the inclusion of the yarn cess in the turnover.

6. In conclusion, the Court dismissed the petitions, affirming that the excise duty paid under the Textiles Committee Act, collected by the petitioners, is indeed part of the turnover for sales tax assessment, in line with the precedent set by the Supreme Court in the McDowell & Company Limited case.