2016 (6) TMI 1418 - HC - VAT and Sales Tax

Valuation - inclusion of customization charges received by the assessee in turnover or not - HELD THAT - Admittedly, customization charges to the software products sold by the assessee was received by the assessee after the sale was completed. The sale proceeds received by the assessee was also declared in the return filed by it. It is also admitted that for the customization charges received, the assessee had paid service tax. 'Sale price' has been defined to mean the valuable consideration received or receivable by a dealer for the sale of any goods less any sum allowed as cash discount, according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods or services at the time of or before delivery thereof, excise duty, special-excise duty or any other duty taxes except the tax imposed in the K.V.A.T. Act. The customization charges are admittedly received by the assessee after the delivery of the goods to the customer. This, therefore, means that the levy of customization charges does not satisfy the requirements of the Act to classify it as part of sale price. If that be so, customization charges could not have formed part of the sale consideration of the assessee and for its non inclusion in its return, the assessee could not have been faulted. Revision dismissed.

Summary

Issues:
- Whether customization charges received by the assessee are part of the turnover.

Analysis:
The case involved revisions filed by the Revenue challenging the order passed by the Kerala Value Added Tax Appellate Tribunal. The respondent, a registered dealer, had received customization charges during the assessment years 2010-11 and 2011-12, which were not included in the return filed. The Commercial Tax Officer conducted an audit and initiated proceedings to include the customization charges in the turnover. The assessee argued that the charges were for services rendered after the sale of software and not part of the sale consideration. The Assessing Officer included the charges in the assessment, which was partially upheld in appeal. The Tribunal set aside the orders, leading to the filing of revision petitions.

The key question was whether the customization charges should be considered part of the turnover. The Court observed that the charges were received after the sale was completed, and the sale proceeds were declared in the filed return. Additionally, service tax was paid on the customization charges. The definition of 'sale price' was considered, which includes sums charged for services done before or at the time of delivery. Since the customization charges were received after delivery, they did not meet the criteria to be part of the sale price. Therefore, the Court held that the charges could not be considered as part of the sale consideration, and the assessee was not at fault for not including them in the return. The impugned order was upheld, and the revisions were dismissed.

The Court rejected the Government Pleader's argument that the transfer of goods in the customization process should be examined as a works contract. However, since this question was not raised or considered by any authority earlier, it could not be addressed at the revisional stage. Therefore, the Court declined to consider this aspect in the judgment.