2008 (9) TMI 903 - HC - VAT and Sales Tax

Whether no entry tax is payable on the purchase of diaphragm? - Held that - We do agree with the learned counsel for the revisionist to the extent that customs duty is a kind of indirect tax like the Central excise and it can be charged by the seller from the purchaser. But in the case of customs duty there can be two modes of making the payment. Supposing an item imported from abroad is purchased from a dealer in India the Indian dealer has a right to add customs duty paid by him to the price of the goods and same can be charged from the subsequent purchaser. Inclusion of such duty by the seller would make the purchase price higher than the purchase price paid by the dealer directly from the seller outside India and such purchaser for importing will have to make payment of customs duty himself. In a later case as per the spirit of definition of purchase price given in clause (gg) the customs duty or other charges paid by the purchaser separately (not charged by the seller) does not to form part of the purchase price. That being so we do not find any error of law committed by the Tribunal in holding that the A.O. and the first appellate authority have erred in law by adding the customs duty paid by the dealer (which the seller has not charged) in calculating the value of the goods imported by the dealer. Thus the revision filed by the Revenue is liable to be dismissed.

Summary

Issues:
Calculation of entry tax on purchase of diaphragms under U.P. Tax on Entry of Goods Act, 2000.

Analysis:
The case involved a revision under section 11(1) of the U.P. Trade Tax Act, 1948 against an order passed by the Trade Tax Tribunal, Dehradun, related to the payment of entry tax on the purchase of diaphragms. The respondent-assessee, a registered firm dealing with machineries, supplied diaphragms to a company for steam turbines. The assessing officer determined that entry tax was payable on the purchase based on the value of the goods. The Deputy Commissioner and the Tribunal were involved in subsequent appeals. The Tribunal held that customs duty not charged by the seller cannot be included in the purchase price for calculating entry tax. The Revenue filed a revision challenging this decision.

The relevant provisions of law under the U.P. Tax on Entry of Goods Act, 2000 were crucial in this case. The definition of "value of goods" under the Act referred to the purchase price as defined in the U.P. Trade Tax Act, 1948. The definition of "purchase price" included the consideration paid or payable for the goods, excluding certain charges like freight or delivery costs. The argument was made that customs duty should be added to the purchase price for calculating entry tax.

The court analyzed the definition of "purchase price" and concluded that only what is actually paid or payable to the seller forms part of the purchase price. Charges not paid to the seller do not constitute the purchase price. While customs duty can be added to the price by the seller, if paid separately by the purchaser, it does not form part of the purchase price. The court agreed with the Tribunal's decision that customs duty not charged by the seller should not be included in the calculation of entry tax.

In light of the above analysis, the court dismissed the revision filed by the Revenue, upholding the Tribunal's decision regarding the exclusion of customs duty from the calculation of entry tax on the purchase of diaphragms.