2010 (7) TMI 909 - HC - VAT and Sales Tax

Whether purchase turnover of the assessee is liable to be excluded to the extent of inter-State sale under section 27 or the said benefit could be denied on the ground that interState sale was not taxable? Held that - Since it is not disputed that the turnover in question is covered by taxable turnover under section 6, only question to be considered is whether the same is excluded under section 27. The mandate of section 27 is to exclude turnover on account of purchase of goods specified in Schedule D liable to tax at the stage of last purchase and sold in the course of interState trade. Contention on behalf of the Revenue that the benefit under the Central Act have already been taken in respect of inter-State sale or on account of export by the purchasing dealer, section 27 will not be attracted, is not born out by the provision or by any principle of interpretation or by any case law. On the contrary, the turnover of inter-State sale being outside the purview of the State law, only relevant taxable turnover is the turnover of purchase which is liable to be excluded to the extent of sale in the course of inter-State trade. Appeal allowed.

Summary

Issues:
- Interpretation of section 27 for exclusion of turnover on account of purchase of goods specified in Schedule D
- Whether purchase turnover should be excluded to the extent of inter-State sale under section 27

Analysis:
The judgment by the High Court of Punjab and Haryana revolves around the interpretation of section 27 of the Act concerning the exclusion of turnover on account of the purchase of goods specified in Schedule D. The court considered whether the purchase turnover should be excluded to the extent of inter-State sale under section 27. The court emphasized that the plain language of the statute must be adhered to, and the purchase turnover should be excluded from the taxable turnover if the qualifications laid down in the section are fulfilled, one of which is inter-State sale. The court rejected the Revenue's argument that the benefit of turnover of inter-State sale had already been taken under the Central Act, emphasizing that the turnover of inter-State sale is outside the purview of the State law, and only the relevant taxable turnover is the turnover of purchase. Therefore, the benefit of exclusion of purchase turnover should not be denied. The court highlighted that the turnover of inter-State sale being outside the State law's purview, the only relevant taxable turnover is the turnover of purchase that is liable to be excluded to the extent of sale in the course of inter-State trade.

The court further clarified that under the State law, what is taxable is the turnover of sale or purchase in the State, while turnover of sale or purchase in the course of inter-State sale or export is outside the purview of the taxable turnover under the State law. In the case at hand, the sale to a dealer in Ghaziabad, being an inter-State sale, was outside the purview of the turnover. The court also noted that the goods in question, paddy, are declared goods under the Act and the Central Sales Tax Act, and the stage of taxability specified is the last purchase within the State. The court referred to the provisions of sections 6 and 27 of the Act to support its interpretation and decision.

In conclusion, the High Court held in favor of the assessee, emphasizing that the purchase turnover should be excluded from the taxable turnover to the extent of inter-State sale under section 27. The court allowed the appeals, stating that the turnover of inter-State sale being outside the State law's purview, only the relevant taxable turnover is the turnover of purchase, which is liable to be excluded to the extent of sale in the course of inter-State trade. The impugned orders were not sustained, and the appeals were allowed.