2018 (3) TMI 1727 - HC - VAT and Sales Tax

Valuation - stock transfer of Medicament - relevancy of Maximum Retail Price i.e. MRP shown on the product - enhancement of value of turnover - Held that - The turnover of the assessee would have to be determined with reference to the rate at which the product is sold by the assessee, and for such purposes the maximum retail price i.e. MRP at which product would be sold by the retailer is not material - MRP is usually fixed/specified by the manufacturer to ensure that the product manufactured by it is sold at one rate across the State. It is not at MRP that the product is being sold by the manufacturer from its stocks situated within the State of U.P. The Tribunal, therefore, was not justified in enhancing the turnover of the assessee and thereby imposing higher tax - Decided in favor of assessee and against Revenue.

Summary

Issues:
Determining turnover for tax assessment based on Maximum Retail Price (MRP) vs. actual selling price before tax in the case of stock transfer of Medicament within Uttar Pradesh.

Analysis:
The judgment dealt with the issue of determining the turnover of an assessee, a reputed dealer of Medicament, for tax assessment purposes. The assessee contended that the MRP displayed on the product is not relevant for stock transfer within Uttar Pradesh, as the transfer is based on rates before sales tax to maintain uniformity in pricing. However, the Tribunal disagreed, citing the discrepancy in pricing columns and upheld the increase in turnover and consequential tax imposition. The assessee argued that the turnover should be determined based on the actual selling price before tax, not the MRP. The Standing Counsel acknowledged the stock transfer but supported the Tribunal's turnover determination.

The High Court analyzed the submissions and held that the turnover should be calculated based on the actual selling price by the assessee, not the MRP. The Court emphasized that the MRP is set by the manufacturer to ensure uniform pricing across the state, but the actual selling price may differ. The Court found no factual dispute regarding stock transfer or the selling price disclosed by the assessee. Disbelieving the selling price solely based on a higher MRP was deemed unjustified. The Court clarified that the product was not sold at MRP from the stockyard in Uttar Pradesh. Therefore, the Tribunal's decision to enhance turnover and impose higher tax was deemed incorrect. The judgment favored the assessee, ruling against the revenue authority.

In conclusion, the High Court's judgment resolved the issue in favor of the assessee, emphasizing the importance of determining turnover based on the actual selling price before tax rather than the MRP. The Court highlighted the manufacturer's intent behind setting MRP for uniform pricing and clarified that the actual selling price should be considered for tax assessment purposes in cases of stock transfer within the state.