2023 (3) TMI 734 - HC - VAT and Sales Tax

Non-deletion of Tax free and First Point Tax Paid goods turnover from the taxable turnover - receipts of hire charges recovered from contractors by appellant falls within ambit of deemed sales as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act or not - receipt of hire charges of machineries from inter-department of the assessee for account purpose is sale to self as contemplated u/s 2(g) (iv) of the Orissa Sales Tax Act or not. Whether the learned Tribunal is justified in not deleting the Tax free and First Point Tax Paid goods turnover from the taxable turnover and as such the order is illegal and arbitrary? - HELD THAT - The Court is of the view that if indeed SAIL was unable to produce materials to show to what extent the canteen sales included sale of tax-free goods and first point tax paid goods, remanding the matter to the AO will be a futile exercise. In the absence of SAIL producing records relevant to the issue, even in this Court, the estimation that 70% of the sales was of cooked food items and 30% of tea, coffee and snacks etc. cannot be said to be arbitrary. Consequently, in this aspect the Court is not inclined to accept the plea of SAIL and remand the matter to the AO. In other words, the question is answered in the affirmative i.e. in favour of the Department and against the Assessee. Whether the learned Tribunal is justified in holding that the receipts of hire charges recovered from contractors by appellant falls within ambit of deemed sales as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act? - whether the receipt of hire charges of machineries from inter-department of the assessee for account purpose is sale to self as contemplated u/s 2(g) (iv) of the Orissa Sales Tax Act? - HELD THAT - Whether in fact the Tribunal asked SAIL to produce the full contract is not clear from the impugned order of the Tribunal. On its part, with SAIL having offered to produce the entire contract, the Tribunal could have asked SAIL to produce it before deciding the issue - With SAIL offering to produce the entire contract and the matter any way being remanded to the AO as regards the other questions, the Court considers it appropriate to refer questions also to the AO for being considering afresh by examining the complete text to the contract to be produced by SAIL as undertaken by it - the Court while setting aside the orders of the AO, the ACCT and the Tribunal on both issues and remands them to the AO for a fresh determination. Petition allowed by way of remand.

Summary

Issues Involved:
1. Inclusion of Tax-Free and First Point Tax Paid Goods Turnover in Taxable Turnover.
2. Classification of Hire Charges from Contractors as Deemed Sales.
3. Classification of Hire Charges from Inter-Departmental Use as Deemed Sales.

Summary:

Issue 1: Inclusion of Tax-Free and First Point Tax Paid Goods Turnover in Taxable Turnover

The Court addressed whether the Tribunal was justified in not deleting the tax-free and first point tax paid goods turnover from the taxable turnover. SAIL contended that canteen sales, which included tax-free goods and first point tax paid items, should not be included in the gross turnover as they were subsidized and not part of the business. The Tribunal noted that SAIL failed to provide detailed accounts to substantiate its claims, leading to the estimation that 70% of the canteen sales were of cooked food taxed at 4% and 30% of tea, coffee, and snacks taxed at 12%. The Court concluded that remanding the matter to the AO would be futile in the absence of detailed records from SAIL and upheld the Tribunal's decision, answering question 'b' in favor of the Department and against SAIL.

Issue 2: Classification of Hire Charges from Contractors as Deemed Sales

The Court examined whether the hire charges recovered from contractors fell within the ambit of deemed sales under Section 2(g)(iv) of the OST Act. SAIL argued that the machinery was used within its premises and under its control, hence not constituting a transfer of the right to use. The Tribunal, however, held that the contractors had legal possession and control over the machinery, thus the hire charges were taxable. The Court noted that SAIL had offered to produce the complete contract, which was not examined by the Tribunal. Therefore, the Court set aside the orders of the AO, ACCT, and Tribunal on this issue and remanded it to the AO for fresh determination, directing the AO to examine the complete contract and relevant documents.

Issue 3: Classification of Hire Charges from Inter-Departmental Use as Deemed Sales

Similar to the second issue, the Court considered whether hire charges from inter-departmental use of machinery constituted a sale to self under Section 2(g)(iv) of the OST Act. SAIL maintained that the machinery remained under its control and was used only for its work. The Tribunal had previously included these charges in the taxable turnover. The Court, recognizing the need to examine the full contract and additional documents, remanded this issue to the AO for fresh consideration, instructing the AO to decide independently of prior decisions.

Conclusion:

The tax revision petitions were disposed of with the Court upholding the Tribunal's decision on the inclusion of canteen sales in the taxable turnover but remanding the issues of hire charges to the AO for a fresh determination based on the complete contract and relevant documents to be produced by SAIL. The AO is directed to decide these issues within three months, uninfluenced by previous decisions. No order as to costs.