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TMI Blog2014 (5) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by an assessee from any other party, not connected with the sale, cannot be brought within the definition of 'turnover' for assessing the same under the provisions of the Act. Relying upon NEYVELI LIGNITE CORPORATION LTD v. CTO [2001 (9) TMI 926 - SUPREME COURT OF INDIA] - Where the receipt is from any third party who has nothing to do with the sale and the payment has no relevance or reference to the sale, the same could not form part of the sale transaction; hence, there is no question of including the same under the head of 'turnover' - The includability of any payment received by a dealer as part of the sale transaction depended on the fact as to whether the payment has any relevance to the contract of sale to treat the receipt as part of the sale consideration - As the definition of turnover, total turnover and sale go, it is only those payments made by the purchaser, including those liability of the seller that the purchaser undertakes to discharge on behalf of the vendor, can be treated as the amount for which goods are bought or sold or supplied - Post-sale freight separately charged for in the bill would not form part of the turnover. The excise duty elemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Tribunal is correct in deleting the entire penalty levied under Section 16(2) of the Tamil Nadu General Sales Tax Act?. " 3. The following substantial question of law arises for consideration in TC(R).Nos.1604, 1690 and 1866 of 2008:- "Whether the Sales Tax Appellate Tribunal committed an error of law in including the drawback received by the petitioners under Rule 3 of the Customs and Central Excise Duties Drawback Rules, 1971 from the Central Government as part of the turnover of the petitioners under Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959, having come to the factual conclusion that the petitioners did not collect any amount representing duty from the buyers and when the drawback itself was received only as incentive from the Central Government? 4. The assessee herein is a dealer in nylon ropes. The Enforcement Wing of the Commercial Taxes Department conducted an inspection in the place of business of the assessee's firm on 30.8.1990. This led to the recovery of certain records. The seized records revealed that the assessee was manufacturing ropes and twines at their factory at Pune and stock transferred the goods to various branches in India. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out that the definition of 'sale price' as available under the Central Sales Tax Act would clearly show that the sale price would include the amount received, deferred payment and other valuable consideration. The Appellate Authority further pointed out that since the assessee had sold the ropes to the foreign going ships and the Indian coastal region at different prices and that the assessee had received the duty drawback, the said receipt would fall under the definition of sale price; hence, assessable under the provisions of the Act. Thus, while confirming the assessment, he also upheld the penalty levied. 6. Aggrieved by the said order, the assessee went on appeal before the Sales Tax Appellate Tribunal. On a perusal of the invoices, the Tribunal pointed out that the sale price charged in respect of the foreign ship did not include Central Excise Duty element. Since the same formed part of the turnover, the Central Excise Duty leviable on the turnover relating to foreign going vessel necessarily had to be included in the taxable turnover. Since specific details were not available, the Tribunal held that the proportionate duty drawback given was to be deemed as the Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... COMMERCIAL TAX OFFICER, 126 STC 547 TISCO GL. OFFICE RECREATION CLUB v. STATE OF BIHAR, as well as 115 STC 161 INDIAN ALUMINIUM CABLES LTD., v. COMMISSIONER OF SALES TAX, affirmed by Apex Court in 115 STC 172 COMMISSIONER OF SALES TAX v. INDIAN ALUMINIUM CABLES LTD., he submitted that going by the definition of 'turnover' as available under the Tamil Nadu General Sales Tax Act, the price charged by the assessee alone would constitute the turnover to attract the liability under the provisions of the Tamil Nadu General Sales Tax Act. The payment of duty drawback as per the scheme of the Central Government has nothing to do with the local sales, including the price paid by the buyer. He further pointed out that passing on of the liability under the Central Excise Act is a matter of contract between the parties and there is nothing on record to show that the assessee had passed on the excise duty liability to the purchasers to have the same included in the sale price to form part of the turnover. He pointed out that the Department did not deny as a matter of fact that when the assessee effected the sales, it did not pass on the excise duty liability on the goods to the purchaser. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or equipment for use on board a vessel or aircraft proceeding to a foreign port. 12. Rule 3 specifies that subject to the provisions of (a) the Customs Act, 1962, (52 of 1962) and the Rules made thereunder, (b) the Central Excises and Salt Act, 1944 (1 of 1944) and the Rules made thereunder, and (c) these Rules, a drawback may be allowed on the export of goods specified in the Schedule at such amount, or at such rates, as may be determined by the Central Government. The Rules provide for the manner of determination of the drawback. 13. Thus, the above Rules and Section 75 of the Customs Act, make it clear that the duty drawback claim rests on the fact of the export made of the goods manufactured from and out of the duty suffered imported raw materials. Going by the scheme given under the Rules and the provisions of the Act, the duty drawback has nothing to do with the local sales effected or has any relevance to be linked to the price charged on sales therein, or to the sale. On the other hand, the same is linked to 'export' of the goods manufactured from out of the duty suffered imported raw materials. 14. The question as to whether the duty drawback received as per the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus while receipts having an inextricable connection to the sale of goods alone are includable in the turnover, amounts not having any connection with the sale, are not included in the turnover for the purpose of assessment. 'Total turnover' is defined in Section 2(q) to cover all the sales of the dealer during the given period, irrespective of the liability of any portion of the turnover. 'Taxable turnover' is defined to mean the turnover on which the dealer shall be liable to pay tax. Thus, taxable turnover is computed after making deduction from the total turnover in the manner as provided under the Act and the Rules. Apart from what is provided for in the Act as by way of deduction, Rule 6 of the Tamil Nadu General Sales Tax Rules also provides for deduction of turnover from the total turnover, to arrive at the taxable turnover. Section 2(n) defines 'sale' as transfer of property in goods other than by way of mortgage, hypothecation, charge or pledge by one person to another for cash, deferred payment or other valuable consideration. 'Sale price' is defined in the Central Sales Tax Act, 1956 under Section 2(h) in an inclusive way to mean as, consideration for sale of any goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent of each other. Subsidy does not form part of the bargain between the manufacturer and the purchaser of fertiliser. " 15. In so holding, the Apex Court distinguished the case in the decision of the Apex Court reported in 117 STC 457 - E.I.D. PARRY (I) LIMITED v. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES and pointed out that the decision reported in 117 STC 457 was concerned with the plantation subsidy paid by the assessee as part of the sale consideration for the supply of sugarcane pursuant to the agreement between the assessee, purchaser of sugarcane and the cane grower. In terms of the agreement between the vendor and the purchaser, the Apex Court held that the subsidy was a deferred payment to be included in the taxable turnover. Thus when the subsidy payment was pursuant to the agreement between the parties to the sale, the same was held as part of the sale consideration to be included in the taxable turnover. However, in the decision reported in 124 STC 586 NEYVELI LIGNITE CORPORATION LTD v. CTO, the Apex Court pointed out that subsidy received from the Government did not form part of the bargain between the assessee and the purchaser and it had nothing to do with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale was considerably widened in the definition of 'sale' in Clause (29A) of Article 366 of the Constitution, there has been no change in the concept of "consideration". "Consideration" is understood as only the amount paid or payable by the buyer which would also include the amounts payable by others on behalf of such buyer, but would exclude amounts receivable by the seller from others under a scheme to which the buyer is not a party. 18. In the decision reported in 115 STC 161 INDIAN ALUMINUM CABLES LTD v. COMMISSIONER OF SALES TAX, which was affirmed by the Apex Court in the decision reported in 115 STC 172 COMMISSIONER OF SALES TAX v. INDIA ALUMINIUM CABLES LTD., the Allahabad High Court considered a similar situation as regards the excise duty refund under the Central Government Scheme. Referring to the decision in the case of HINDUSTAN SUGAR MILLS LTD v. STATE OF RAJASTHAN - 43 STC 13 and RAMCO CEMENT DISTRIBUTION CO., PVT. LTD v. STATE OF TAMIL NADU - 88 STC 151, the Allahabad High Court held that excise duty, which was the subject matter of refund, would not be included as part of taxable turnover. The Apex Court affirmed the view of the Allahabad High Court reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory or otherwise, under which the purchaser would be liable to pay the amount of excise duty to the dealer....... According to normal commercial practice, excise duty should have been reflected in the bill either as merged in price or being shown separately. As a matter of fact, in the hands of the buyer the cost of liquor is what is charged by the appellant under its bill together with excise duty which the buyer has directly paid on seller's account. The consideration for the sale is thus the total amount and not what is reflected in the bill. We are, therefore, clearly of the opinion that excise duty though paid by the purchaser to meet the liability of the appellant, is a part of the consideration for the sale and is includible in the turnover of the appellant. The purchaser has paid the tax because the law asks him to pay it on behalf of the manufacturer." 22. Thus the Apex Court held that the includability of any amount paid by a party on behalf of the assessee liable to make the payment, depended on the agreement between the parties and the provisions of law relating thereto. Hence, when the purchaser agreed to pay the duty on behalf of the dealer, the price charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration and rightly so in the sale effected, the question of roping in those receipts from the Government of India long after the sale does not arise, to be included in the turnover for the purpose of assessment. In considering this issue, the difference in price charged by the assessee in respect of sale to coastal vessels and to the foreign going vessels, has no relevance at all and it is not the decisive factor in considering the question of taxability of the receipt. So long as the assessee was able to show that the receipt was as per the provisions of Central Excise and Customs Act and the Rules made thereunder with reference to export of goods manufactured from out of duty suffered goods, and the transaction thus answer the definition of 'export' as given under the Duty Drawback Rules, the State is not justified in taxing this receipt as part of the turnover. 25. In the light of the discussion above, we set aside the order of the Tribunal and the revisions filed by the assessee are allowed. As far as the penalty aspect is concerned, in the light of the order passed by us allowing the assessee's case, the Tax Case Revision filed by the Revenue fails and the same is dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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