2005 (8) TMI 629 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of purchase tax under section 3-AAAA on the purchase of "reta" and "bajri" from unregistered dealer, imposition of interest under section 8(1) of the Act, inclusion of freight in the purchase price of goods.

Assessment of Purchase Tax:
The applicant, a civil contractor, challenged the levy of purchase tax on the purchase of "reta" and "bajri" from unregistered dealers under section 3-AAAA for the assessment years 1985-86 and 1986-87. The Tribunal and lower authorities confirmed the tax imposition. The applicant argued that without a notification under section 3-F, purchase tax was unjustified. The Supreme Court's interpretation in Hotel Balaji v. State of Andhra Pradesh clarified that section 3-AAAA aims to tax all sales transactions to avoid untaxed sales. The Court found no merit in the applicant's contentions based on previous judgments and upheld the purchase tax levy.

Imposition of Interest:
Regarding the levy of interest under section 8(1) of the Act, the assessing authority treated the tax as admitted turnover and imposed interest. The Tribunal did not discuss this issue, prompting the applicant to argue the point. The Court noted that the assessment orders were made when section 3-AAAA was not in force due to a previous decision. Referring to Vijay Dal Mills v. Commissioner of Sales Tax, it was held that interest cannot be charged on turnover not admitted by the dealer. The Court ruled that interest under section 8(1) was not justified, but interest under sub-sections (1-A) and (1-B) was applicable.

Inclusion of Freight in Purchase Price:
The applicant's argument against including freight in the purchase price of goods was rejected. The Court found no evidence that freight was paid by the applicant, and the selling dealer had already incurred the cost. The Tribunal's conclusion that freight was part of the turnover was upheld. The Court dismissed the applicant's claim that freight should not be considered part of the turnover.

Conclusion:
The Court allowed the revisions in part, confirming the liability of the applicant to pay purchase tax under section 3-AAAA and freight. However, the Court held that the applicant was liable to pay interest under section 8(1-A) and 8(1-B) of the Act, not under section 8(1). No costs were awarded in the judgment.