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2010 (8) TMI 862 - HC - VAT and Sales TaxInclusion of payment of cess for the purpose of assessing the liability - Held that - The case on hand is directly covered by the earlier Division Bench decision of this court in Cauvery Sugars and Chemicals Ltd. v. Joint Commercial Tax Officer 1971 (4) TMI 87 - MADRAS HIGH COURT and therefore, there is absolutely no scope for including the payment of cess for the purpose of assessing the liability of tax under the provisions of the Tamil Nadu General Sales Tax Act. Appeal allowed.
Issues Involved:
1. Whether the cess payable under Act 20 of 1949 forms part of the sugarcane price and thereby attracts payment of sales tax under the Tamil Nadu General Sales Tax Act, 1959. 2. Validity of the assessment order and subsequent appellate orders regarding inclusion of cess in the taxable turnover. 3. Applicability of the Supreme Court decision in State of Kerala v. Madras Rubber Factory Ltd. to the present case. Issue-wise Detailed Analysis: 1. Inclusion of Cess in Sugarcane Price for Sales Tax: The primary issue was whether the cess levied under the Madras Sugar Factories Control Act, 1949 (Act 20 of 1949) should be considered part of the sugarcane price, thereby attracting sales tax under the Tamil Nadu General Sales Tax Act, 1959. The court examined sections 2(r) and 3(2) of the Tamil Nadu General Sales Tax Act, 1959, along with the relevant clauses of the Sugarcane (Control) Order, 1966, and sections 10(2) and 14 of Act 20 of 1949. It was determined that the levy of cess is distinct from the purchase price of sugarcane. The cess is levied on the entry of sugarcane into the factory premises and does not form part of the transaction of purchase. Therefore, the cess does not attract sales tax under the Tamil Nadu General Sales Tax Act, 1959. 2. Validity of Assessment and Appellate Orders: The assessing authority had included the cess in the taxable turnover and determined the balance tax due. The Appellate Assistant Commissioner and the Tribunal upheld this inclusion, considering the cess as part of the pre-purchase expenses. However, the court found that the assessing authority and the appellate bodies erred in their interpretation. The court noted that the turnover for sales tax purposes should only include the aggregate amount for which goods are bought or sold, as per section 2(r) of the Tamil Nadu General Sales Tax Act. The court emphasized that the cess levied under section 14(1) of Act 20 of 1949 is not related to the purchase price of sugarcane and thus should not be included in the taxable turnover. 3. Applicability of Supreme Court Decision: The Tribunal had relied on the Supreme Court decision in State of Kerala v. Madras Rubber Factory Ltd. [1998] 108 STC 583 to justify the inclusion of cess in the taxable turnover. However, the court distinguished this case, noting that the provisions under the Rubber Act, 1947, and the Kerala General Sales Tax Act, 1963, were different. The Supreme Court decision involved a specific statutory liability for the inclusion of cess in the price of rubber, which was not analogous to the provisions under the Madras Sugar Factories Control Act, 1949. Therefore, the court held that the reliance on this decision was misplaced and not applicable to the present case. Conclusion: The court concluded that the cess levied under Act 20 of 1949 does not form part of the sugarcane price for the purpose of sales tax under the Tamil Nadu General Sales Tax Act, 1959. Consequently, the orders of the assessing authority, the Appellate Assistant Commissioner, and the Tribunal were set aside. The writ petitions were allowed, and the inclusion of cess in the taxable turnover was deemed incorrect.
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