2011 (4) TMI 1259 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the differential amount received by the respondent from the Government is a valuable consideration and is covered under the definition of the words 'sale price' as per section 2(zg) of the Punjab Value Added Tax Act, 2005?
2. Whether the respondent was required to pay tax on the sale of molasses on the differential amount received by it from the Government on behalf of the purchasers, i.e., distilleries?
3. Whether the assessment order passed by designated officer charging tax on the differential amount received by the respondent from the Government on behalf of the purchasers is sustainable in law?

Analysis:

1. The appeal involved a dispute under the Punjab Value Added Tax Act, 2005 regarding the taxation of a differential amount received by the respondent from the Government in addition to the sale price of molasses. The Tribunal set aside the addition to the turnover beyond the sale price, ruling that the appellant was not liable to pay tax on the differential price. The Tribunal reasoned that since no invoice was issued for the differential price, and the price was fixed by the Government, the appellant could not be compelled to pay tax on the difference. The Tribunal held that if the price fixed by the Government is considered the sale price, then the State may become liable to pay tax on the remaining amount. The High Court upheld the Tribunal's decision, emphasizing that any amount received in addition to the sale proceeds, not part of the sale price, cannot be added to the turnover for VAT purposes.

2. The designated officer had added the subsidy paid by the State on the sale of molasses to the turnover for VAT assessment. However, the appellate authority and the Tribunal both ruled in favor of the respondent, stating that the VAT should only be levied on the sale price, not on the amount given by the State. The High Court concurred with this interpretation, highlighting that the charging provision under the Act mandates VAT levy on the turnover, and any additional amount received beyond the sale proceeds should not be included in the turnover for tax calculation purposes.

3. The appellant contended that the profit and loss accounts showed receipt of an amount from the State on account of the sale of molasses, in addition to the sale proceeds, but no tax was paid on this differential price as per the State's policy. The High Court rejected this argument, stating that if the assessee received any further amount beyond the sale proceeds, not constituting the sale price, it should not be added to the turnover for VAT assessment. Therefore, the Court dismissed the appeal, affirming the Tribunal's decision that no substantial question of law arose and upholding that the appellant was not liable to pay tax on the differential price received from the Government.