2013 (10) TMI 1288 - HC - VAT and Sales Tax

Valuation - Whether the Tribunal is correct in finding that the value of free issue materials used in the manufacture of sleepers and included in the assessable value would form part of turnover of the manufacturer under section 2(1)(s) of the Act - Held that - In the order of the Tribunal, the fact that by reference to clauses in the agreement, Tribunal had noticed that fastenings, malleable cast iron inserts and HTS wire (standard) were supplied to the petitioner free of cost. This aspect of the matter is not in dispute. Finally, the cost price that is being paid to the petitioner does not include the value of the free issue material, and it is also not in dispute that the petitioner had not collected any sales tax and the railways had not paid any amount on the value representing the free issue material. In that view of the matter, and in view of the law laid down by the Supreme Court, the sale price for the purpose of section 5 of the Act, is the actual consideration that is received/ receivable by the dealer alone can be the basis for levy of sales tax. - Decided in favour of assessee.

Summary

Issues:
Challenge to the common order passed by the Sales Tax Appellate Tribunal regarding the inclusion of the value of free issue materials in the assessable turnover under the Andhra Pradesh General Sales Tax Act, 1957.

Analysis:
1. The petitioner, an industry manufacturing railway sleepers, contested the inclusion of free issue materials in the assessable turnover. Authorities held the supply as sales, making the petitioner liable for tax on the value of the incorporated free issue materials.

2. The Tribunal rejected the petitioner's argument that the free issue items should not be part of the sale price, stating that the materials received were different from those given back. The key question raised was whether the value of free issue materials should be included in the turnover under the Act.

3. The petitioner argued that the gross turnover should not include the cost of free issue materials, as they were added to the invoice for excise law compliance only. Citing the Supreme Court's judgment in Morriroku UT India (P) Limited v. State of Uttar Pradesh, the petitioner emphasized that sales tax should be based on the actual consideration received by the dealer.

4. The Government Pleader relied on a Division Bench judgment, while the Tribunal acknowledged that the petitioner received the free issue materials at no cost. The Tribunal confirmed that the cost price paid did not cover the value of the free issue materials, and no sales tax was collected on them.

5. The Division Bench judgment cited by the Government Pleader was found to be distinguishable, as it addressed a different issue of refunding wrongly paid sales tax. The judgment clarified that sales tax should be levied only on the net sale price, excluding the value of free issue materials.

6. Ultimately, the tax revision cases were allowed, ruling against the Revenue. The court held that sales tax should be based on the actual consideration received or receivable by the dealer, excluding the value of free issue materials. No costs were awarded, and any related miscellaneous petitions were closed.