2002 (11) TMI 758 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the cleaning and testing charges of cylinders used for filling carbon dioxide fall within the definition of "turnover" under section 2(xxvii) of the Kerala General Sales Tax Act, 1963.
2. Whether the expenses incurred for cleaning and testing the cylinders can be exempted from the taxable turnover.

Issue-wise Detailed Analysis:

1. Definition of "Turnover" and Inclusion of Cleaning and Testing Charges:

The primary issue revolves around whether the cleaning and testing charges of cylinders used for filling carbon dioxide should be included in the definition of "turnover" under section 2(xxvii) of the Kerala General Sales Tax Act, 1963. The petitioner, engaged in the business of supplying carbon dioxide in cylinders, argued that these charges should not form part of the turnover. However, the assessing authority included these charges in the turnover and assessed them under section 5(1)(iii) of the Act.

The court noted that the petitioner had shown these charges in the invoices and included them in the turnover returned. According to section 2(xxvii), "turnover" means the aggregate amount for which goods are either bought or sold. Explanation (2)(i) to section 2(xxvii) states that the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of, or before, the delivery thereof. Therefore, the court concluded that the charges for cleaning and testing the cylinders are integrally connected with the sale of carbon dioxide and should be included in the turnover.

2. Exemption from Taxable Turnover:

The petitioner claimed exemption for the cleaning and testing charges while arriving at the taxable turnover. Initially, the assessing authority granted this exemption but later reopened the assessments and disallowed the exemption, including the charges in the taxable turnover. The first appellate authority and the Tribunal upheld this decision.

The court emphasized that once amounts fall within the definition of total turnover, only those amounts specified in rule 9 of the Kerala General Sales Tax Rules, 1963, are liable to be deducted in the computation of the taxable turnover. The petitioner did not establish that the charges collected in the invoice, which form part of the turnover, are deductible under any of the clauses in rule 9. Therefore, the court found no merit in the petitioner's claim for exemption.

Relevant Case Law and Precedents:

The court referred to several precedents to support its decision. In Collector of Central Excise, Madras v. Indian Oxygen Ltd., the Supreme Court held that rental on cylinders and interest on deposit receipts for the supply of gases in returnable cylinders are not related to the cost of manufacture. Similarly, in Collector of Central Excise, Bombay-III v. Century Spg. Mfg. Co. Ltd., the Supreme Court ruled that service and maintenance charges are deductible from the assessable value under the Central Excise Act. However, the court found these decisions inapplicable to the present case, as the charges collected by the petitioner fall within the definition of "turnover" under section 2(xxvii) of the Act.

The court also cited the decision in Seven Seas Distillery (P) Ltd. v. State of Kerala, where it was held that the value of cartons used for packing bottled beer, though shown separately in the invoices, is includible in the turnover. Additionally, in State of Kerala v. Madras Rubber Factory Ltd., the Supreme Court held that rubber cess collected from manufacturers forms part of the purchase turnover exigible to sales tax.

Conclusion:

The court concluded that the charges incurred by the petitioner for cleaning and testing the cylinders are collected from the customers and included in the invoice. These charges form part of the turnover as per the definition in section 2(xxvii) of the Act. The petitioner did not establish that these charges are deductible under any of the clauses in rule 9 of the Kerala General Sales Tax Rules. Therefore, the court dismissed the tax revision cases and upheld the decision of the Tribunal.

Orders:

All tax revision cases and accompanying petitions were dismissed.

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