2016 (8) TMI 1075 - HC - VAT and Sales Tax

Purchase Price computation - whether the customs duty paid by the Respondent herein (M/s Bajaj Tempo Ltd.) on goods imported by it from out of the country, and which are used in the manufacture of their vehicles, should be included in the definition of the words purchase price as set out in section 2(22) of the BST Act? - Held that - The term purchase has been defined in section 2(28) with reference to the definition of the term sale . From the aforesaid definition, it would thus be clear that the term purchase for the purposes of the BST Act is a purchase made within the State. This is made further clear by the fact that whilst computing the turnover of purchase for ascertaining the liability for registration under section 3, or for ascertaining the leviability of additional tax under section 15AI, or the turnover tax under section 9, only the purchases which are effected within the State have to be taken into consideration.Section 75 clearly stipulates that nothing in the BST Act or the Rules made thereunder shall be deemed to impose or authorise the imposition of tax on any sale or purchase of any goods of which sale or purchase takes place inter alia in the course of import of the goods into the territory of India or the export of the goods outside such territory If the situs of the inter-State purchases and imports is not within the State then such purchases are not a purchase as defined under section 2(28) of the BST Act. This being a case, it would therefore logically follow that the term purchase price as defined in section 2(22) is applicable only to purchases made within the State and would not be applicable to purchases which take place in the course of import of the goods into the territory of India or export of the goods out of such territory (section 75 of the BST Act). This being the clear position, as can be discerned from the statutory provisions as set out in the BST Act, the customs duty paid on the goods imported into the territory of India by the Respondent herein, cannot be held to be a part of the import purchase price for the purposes of deduction or set off under Rule 41D. BST Act is a State Legislation and does not have extra-territorial jurisdiction. This is clear from the preamble of the Act which clearly states that this is a law (BST Act) relating to the levy of tax on the sale or purchase of certain goods in the State of Bombay. Section 1(2) of the BST Act clearly stipulates that it extends to the whole of the State of Maharashtra. This is yet another factor which would persuade us to hold that the customs duty paid on purchases which take place in the course of import of goods into the territory of India can never be included in the definition of purchase price of the said goods. Accordingly questions of law referred to this Court by the MSTT and more particularly set out in paragraph 1 above, are answered in the affirmative and in favour of the Respondent.

Summary

Issues Involved:
1. Interpretation of the term "Purchase Price" in section 2(22) of the Bombay Sales Tax Act, 1959.
2. Inclusion of customs duty in the "Purchase Price" under Rule 41D of the Bombay Sales Tax Rules, 1959.

Issue-wise Detailed Analysis:

1. Interpretation of the term "Purchase Price" in section 2(22) of the Bombay Sales Tax Act, 1959:

The core issue revolves around whether the customs duty paid by the Respondent on imported goods should be included in the "purchase price" as defined in section 2(22) of the BST Act. The definition of "purchase price" includes any amount of valuable consideration paid or payable for any purchase made, including sums charged for anything done by the seller in respect of the goods at the time of or before delivery. Explanation I to this definition explicitly states that duties levied or leviable under the Customs Act, 1962 shall be deemed part of the purchase price, regardless of whether these duties are paid by the seller, purchaser, or any other person.

2. Inclusion of customs duty in the "Purchase Price" under Rule 41D of the Bombay Sales Tax Rules, 1959:

The Tribunal had to determine whether the customs duty paid by the Respondent should be considered part of the purchase price for the purpose of set-off under Rule 41D. The MSTT held that the situs of the purchase and import was not within the State, and therefore, such purchases were not "purchases" as defined in the BST Act. Consequently, the term "purchase price" under section 2(22) was applicable only to purchases made within the State and not to those covered by section 75 of the BST Act, which pertains to purchases in the course of imports.

Detailed Judgment Analysis:

Facts and Background:

The Respondent, a manufacturer of motor vehicles, was assessed under the BST Act for the financial year 1998-99, resulting in a refund. Dissatisfied with the assessment, the Respondent appealed, leading to partial relief from the Appellate Deputy Commissioner. Further dissatisfaction led to a Second Appeal before the MSTT, where the primary contention was whether customs duty paid on imports should be included in the purchase price for set-off purposes under Rule 41D.

Tribunal's Findings:

The MSTT concluded that the term "purchase price" as defined in section 2(22) of the BST Act did not include customs duty for imports, as these were not purchases within the State. The Tribunal's reasoning was that the BST Act's jurisdiction was limited to transactions within Maharashtra, and customs duties on imports fell outside this scope.

Court's Analysis and Conclusion:

The Court agreed with the MSTT's interpretation. It emphasized that the BST Act was a State legislation with no extra-territorial jurisdiction, as indicated by its preamble and section 1(2). Therefore, customs duties paid on imports could not be included in the "purchase price" for deductions or set-offs under Rule 41D. The Court held that the statutory provisions clearly delineated the scope of "purchase price" to intra-state transactions, excluding inter-state and import purchases.

Final Judgment:

The Court answered both questions of law in the affirmative, favoring the Respondent. It concluded that customs duty paid on imported goods could not be considered part of the purchase price under the BST Act for the purpose of Rule 41D set-offs. The Sales Tax Reference was disposed of accordingly, with no order as to costs.