2003 (2) TMI 456 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner of Commercial Taxes to revise the order of the Additional Commissioner under section 20(1) of the APGST Act.
2. Inclusion of publicity and advertisement expenditure in the sale consideration.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Commissioner of Commercial Taxes:

The primary issue is whether the Commissioner of Commercial Taxes had the authority to revise the order of the Additional Commissioner under section 20(1) of the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act). The appellant contested the jurisdiction, arguing that the Additional Commissioner was not subordinate to the Commissioner at the time the order was passed on April 21, 1993. The Commissioner exercised his powers under section 20(1) to revise the Additional Commissioner's order, asserting that rule 44-A of the APGST Rules, 1957, made the Additional Commissioner subordinate to him.

Section 20(1) of the APGST Act grants the Commissioner suo motu powers to examine the records of any order passed by a subordinate authority. Rule 44-A specifies that the Additional Commissioner is subordinate to the Commissioner. However, this rule was introduced through G.O.Ms. No. 788, Revenue Department, dated September 21, 1996, and was not in effect when the Additional Commissioner passed the order in 1993. Consequently, the Additional Commissioner was not considered subordinate to the Commissioner at that time, making the Commissioner's revision of the order without jurisdiction. The court concluded that the doctrine of subordination applied only after the rule's introduction in 1996, rendering the Commissioner's action arbitrary and illegal.

2. Inclusion of Publicity and Advertisement Expenditure:

The second issue is whether the publicity and advertisement expenditure recouped by the purchaser forms part of the sale consideration. The appellant, M/s. Model Bottling Company Private Limited, argued that these expenditures should not be included in the turnover as they are post-sales expenditures reimbursed by the purchaser. The assessing authority initially included these expenditures in the turnover, leading to the appellant's appeal.

The Appellate Commissioner ruled in favor of the appellant, stating that the assessing authority was wrong in treating advertisement expenditure as part of the sale price. The Additional Commissioner, upon review, agreed with the appellate authority, stating that publicity and advertisement expenditures collected from the customer do not form part of the turnover. However, the Commissioner of Commercial Taxes later revised this decision, arguing that the definition of "turnover" under section 2(s) of the APGST Act includes the total amount set out in the bills of sale, and the advertisement charges were calculated with reference to sales, thus forming part of the sale price.

The court, however, did not delve deeply into this issue, as the primary focus was on the jurisdictional aspect. Given the conclusion that the Commissioner's revision was without jurisdiction, the court set aside the order dated January 8, 1996, by the Commissioner, thus allowing the appeal in favor of the appellant.

Conclusion:

The court allowed the appeal, setting aside the Commissioner's order dated January 8, 1996, on the grounds of lack of jurisdiction. The Additional Commissioner was not subordinate to the Commissioner at the time the original order was passed, rendering the Commissioner's revision arbitrary and illegal. The court did not find it necessary to further address the inclusion of publicity and advertisement expenditure in the sale consideration due to the jurisdictional conclusion. The appeal was allowed with no costs.