2017 (3) TMI 54 - HC - VAT and Sales Tax

Valuation - whether the Tribunal was justified in holding that transportation expenses borne by the revisionist for procuring the lubricant oil from IOC formed a part of its purchase price u/s 2(y) of the Act? - Section 2(y) of the Act - Held that - the total amount of consideration for the purchase of goods would include the price strictly so called and also other amounts which are payable by the purchaser or which represents the expenses required for completing the sale, as the seller would ordinarily include all of them in the price at which he would sell his goods - Tribunal was justified in treating the expenses incurred towards transportation as constituting purchase price payable, and thus forming part of turnover of purchase. Whether the Tribunal has misconstrued Section 2(ad) read with Explanation VI of the Act, and thereby illegally added incentive amount received by IOC to the sale price? - Held that - sale price includes the amount payable to dealer as consideration for the sale of any goods less any sum allowed as cash discount, but inclusive of any sum charged for anything done by the dealer in respect of goods at that time or before the delivery of such goods, other than cost of outward freight or delivery, in the case where such cost is separately charged. The amount of incentive is not an amount payable to a dealer as consideration for the sale of any goods. This amount is received by the dealer from IOC, and therefore, it cannot be treated to be a part of sale price - Tribunal was not justified in adding the incentive of ₹ 64,85,695/- received from IOC towards the sale price/turnover of sale. Whether the Tribunal was justified in rejecting books of account of the applicant, without any adverse material available on record to justify it? - Held that - the physical stock available with the dealer on the date of survey tallied with books of account, the same was not liable to be discarded. However, the entry in the books of account appropriating the amount of freight towards expenses and not including it in the purchase price is found to be wrong, and on that basis, the liability of tax imposed would be justified - tribunal was justified in rejecting books of accounts. Revision disposed off - decided partly in favor of assessee.

Issues Involved:
1. Whether the Tribunal was justified in holding that transportation expenses borne by the revisionist for procuring the lubricant oil from IOC formed a part of its purchase price under Section 2(y) of the Act.
2. Whether the Tribunal has misconstrued Section 2(ad) read with Explanation VI of the Act, and thereby illegally added the incentive amount received by IOC to the sale price.
3. Whether the Tribunal was justified in rejecting the books of account of the applicant, without any adverse material available on record to justify it.

Issue-wise Detailed Analysis:

1. Transportation Expenses as Part of Purchase Price:
The Tribunal held that transportation expenses borne by the revisionist for procuring lubricant oil from IOC formed a part of its purchase price under Section 2(y) of the U.P. Value Added Tax Act, 2008. The revisionist argued that purchase price should only include the amount paid to the seller and not the transportation costs incurred by the dealer. The Tribunal, however, interpreted that the purchase price includes all amounts payable to complete the transaction of sale, including transportation costs. This interpretation was supported by various judgments, including *Dyer Meakin Breweries Ltd. vs. State of Kerala* and *Commissioner of Trade Tax vs. S/S. Ramapati Tewari Jainath Tewari*, which held that expenses incurred to make goods available at the place of sale should be included in the purchase price. The Tribunal's decision to include transportation expenses in the purchase price was thus justified.

2. Incentive Amount as Part of Sale Price:
The Tribunal added the incentive amount received by the revisionist from IOC to the sale price, which the revisionist contested. The definition of "sale price" under Section 2(ad) includes the amount payable to a dealer as consideration for the sale of any goods but excludes amounts received as incentives. The Tribunal's inclusion of the incentive amount in the sale price was found to be incorrect, as the incentive was not part of the consideration for the sale of goods but a separate transaction. The Tribunal erred in adding the incentive amount to the sale price, and the revisionist's contention was upheld.

3. Rejection of Books of Account:
The Tribunal rejected the books of account of the revisionist based on a loose parcha found during a survey. However, the Tribunal in the second appeal accepted the claim of the assessee regarding the inclusion of sales based on the loose parcha amounting to ?15,60,000/-. The physical stock available with the dealer on the date of the survey matched the books of account, indicating no discrepancy. The Tribunal's rejection of the books of account was therefore not justified. However, the entry in the books of account appropriating the amount of freight towards expenses and not including it in the purchase price was found to be incorrect, justifying the tax liability imposed.

Conclusion:
The Tribunal's decision to include transportation expenses in the purchase price was upheld, while the inclusion of the incentive amount in the sale price was found to be incorrect. The rejection of the books of account was not justified, except for the incorrect entry regarding freight expenses. The Tribunal was directed to proceed further in accordance with the law. Both revisions were disposed of accordingly.

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