2014 (8) TMI 1212 - HC - VAT and Sales Tax

Claim of deduction from the total turnover - Rejection on the ground that though sales tax was not charged separately the bills revealed that the dealer had charged the cost of goods including sales tax and not collected tax separately and in terms of Explanation (1-A) to Section 2 (r) of the Tamil Nadu General Sales Tax Act 1959 - Whether on the facts and in the circumstances of the case the Tribunal was right in law in explaining the scope of (1-A) of Section 2 (r) of TNGST Act that if sale price is shown in the books of accounts it is sufficient to get deduction amounts even though the sale invoice contains lump sum amount inclusive of tax without charging the tax elements separately? HELD THAT - In this case admittedly the respondent/assessee had raised a common ground that the form of the sale bill adopted by them is uniform all over India and the rate of sale is inclusive of all taxes. The sale bill mentions the sale price as inclusive of all taxes. It was further pleaded by the assessee that the assessee had maintained details of the sale i.e. value of goods and tax paid separately in their account books. They are therefore entitled to the benefit of exclusion of tax component from the total turnover even in terms of Rule 5-B (a) of the TNGST Rules - in the explanation the intentment of the statute is that any amount charged by the dealer by way of tax separately without including the same in the price of the goods bought or sold shall not be included in the turnover. This is to mean that tax collected will not be included in the turnover. There is no specification or indication in Explanation (1-A) that tax collected should be shown separately in the bill and only then it shall be excluded in the turnover. Revision dismissed.

Summary

Issues Involved:
1. Rejection of the claim for deduction of sales tax from the total turnover.
2. Interpretation of Explanation (1-A) to Section 2 (r) of the Tamil Nadu General Sales Tax Act, 1959.
3. The validity of the Tribunal's reliance on previous judgments in similar cases.

Detailed Analysis:

1. Rejection of the claim for deduction of sales tax from the total turnover:
The primary issue in these cases revolves around the Assessing Officer's decision to reject the deduction of the sales tax portion from the total turnover. The Assessing Officer contended that the sales tax was included in the cost of goods and was not charged separately on the invoices. Consequently, the entire amount was taxed without giving the benefit of the taxable portion of the turnover. This decision was upheld by the first appellate authority, leading the assessee to file appeals before the Tribunal.

2. Interpretation of Explanation (1-A) to Section 2 (r) of the Tamil Nadu General Sales Tax Act, 1959:
Explanation (1-A) to Section 2 (r) states: "Any amount charged by a dealer by way of tax separately without including the same in the price of the goods bought or sold shall not be included in the turnover." The Tribunal, while deciding in favor of the assessee, relied on the interpretation provided in previous judgments, particularly S.M. Garments Vs State of Tamil Nadu and Bata India Ltd. Vs State of Tamil Nadu. These judgments clarified that if the books of accounts reflect the correct position regarding the sales tax component and the tax is collected and paid to the Government, the tax component should not be included in the total turnover, even if the sale price is inclusive of all taxes.

3. The validity of the Tribunal's reliance on previous judgments in similar cases:
The Tribunal's decision was based on the precedent set by the High Court in S.M. Garments and Bata India Ltd. cases. In these cases, the Court held that the intent of the Act was to exclude the tax component from the total turnover if the books of accounts showed the breakup of sales tax and other charges collected from customers. The Tribunal concluded that the assessee had shown the breakup details of sales tax and surcharge separately in the accounts for the relevant assessment years, thereby justifying the exclusion of the tax component from the total turnover.

Conclusion:
The High Court upheld the Tribunal's decision, stating that the interpretation of Explanation (1-A) by the Tribunal was consistent with the intent of the statute. The Court emphasized that the tax component should be excluded from the total turnover if the books of accounts provide a clear breakup of the sales tax collected and paid to the Government. The Court dismissed the revisions filed by the Revenue, finding no merit in their arguments and affirming that no substantial question of law arose for consideration.

Result:
All the revision cases filed by the Revenue were dismissed, and the Tribunal's orders were upheld.