2008 (7) TMI 892 - HC - VAT and Sales Tax

Amount of security and insurance charges as realised from the customers by the dealer-opposite party - whether is not a part of taxable turnover? Held that - Sufficient force in the argument of the learned Standing Counsel that the security amount is liable to be included in the turnover of the dealer-opposite party. The contrary view taken by the Tribunal is not legally tenable. So far as the question of insurance charge is concerned, the learned Standing Counsel could not persuade this court to take a different view of the matter. The Tribunal has held that the insurance charge, on the facts of the present case, was charged separately and goods were insured on the request of the customers. On these facts, the Tribunal was justified in holding that the insurance charge shall not form part of the turnover. Appeal allowed in part.

Summary

Issues:
1. Whether security and insurance charges realized from customers constitute taxable turnover?

Analysis:
The case involves a revision against the Trade Tax Tribunal's order related to the assessment year 1986-87. The dealer in question deals with safety razors and blades and admitted a taxable turnover but contested the inclusion of security and insurance charges in the turnover. The assessing officer initially included these charges in the turnover, a decision upheld by the Deputy Commissioner (Appeals) but later reversed by the Tribunal.

The primary issue was whether the security amount charged by the dealer constituted part of the turnover. The assessing authority found that the dealer charged security fees to ensure timely payments and offset interest losses. However, the Tribunal accepted the dealer's account books and held that since the disclosed turnover was not disputed, the security charges should not be considered part of the turnover. The court examined the definition of "turnover" under the U.P. Trade Tax Act, emphasizing the inclusion of all amounts received for goods sold, including security charges.

Regarding insurance charges, the Tribunal found that these charges were separate and related to customer requests for insurance, thus not forming part of the turnover. The court upheld this decision but disagreed with the Tribunal on the treatment of security charges. It ruled that the security amount should indeed be included in the turnover, as it represented part of the sale consideration and had not been refunded to customers as claimed by the dealer.

In conclusion, the court partially allowed the revision, holding that security charges should be included in the turnover while upholding the exclusion of insurance charges. The judgment clarifies the interpretation of turnover under the Trade Tax Act and emphasizes the importance of considering all amounts received in connection with sales when determining taxable turnover.