STATE OF ORISSA v. GHEWARCHAND KAMAL KUMAR — 1992 DIGILAW 64 (ORI)

JUDGMENT : A. Pasayat, J. - At the instance of the revenue, the following question has been referred to this Court u/s 24(1) of the Orissa Sales Tax Act, 1947 ('the Act') by the Orissa Sales Tax Tribunal: Whether the Sales Tax Tribunal is correct to hold that filing of 'C? form amply proves that tax component has been included in the sale price even though not shown separately in the bills and the accounts and, therefore, the dealer-assessee is entitled for the deduction from the turnover as provided under sub-section (1) of section 8 of the Central Sales Tax Act, 1956? Background facts as indicated by the Tribunal in statement of facts drawn are as follows: For the assessment year 1981-82, Ghewarchand Kamal Kumar (the assessee) filed its returns as required under the Central Sales Tax Act, 1956 (the Central Act) and Central Sales Tax (Orissa) Rules, 1957 (the Central Rules) . The STO being of the view that the assessee had not collected or paid any tax on sales in course of inter-State trade, treated gross turnover of Rs. 52,23,001.60 to be net turnover for the purpose of tax. Since a sum of Rs. 51,94,763.60 was covered by valid declaration forms, the same was taxed at the rate of 4 per cent and the balance sum of Rs. 28,248 was subjected to tax at the rate of 8 per cent. Accordingly, a tax demand of Rs. 2,10,050 was raised. Petitioner assailed assessment in appeal before the Assistant Commissioner of Sales Tax, Cuttack. Amongst other grounds it was urged that Assessing Officer should have allowed proper deduction in terms of section 8A of the Central Act. Appellate authority found that sales memos and sales account did not indicate that price included amount of sales tax and, therefore, no relief was available to the assessee-appellant. The matter was carried in appeal before the Tribunal. Reference was made u/s 8A by the assessee to contend that turnover as defined in section 2(j) of the Central Act means the aggre- gate of the sale prices. As the entire amount of consideration including the sales tax component which the purchaser pays constitutes the sale price of goods, levy of tax on such amount will be a levy on the amount of the tax itself, which is prohibited under the law. As the entire amount of consideration including the sales tax component which the purchaser pays constitutes the sale price of goods, levy of tax on such amount will be a levy on the amount of the tax itself, which is prohibited under the law. Stand of the revenue, on the contrary, was that where Central sales tax is shown to have been separately collected and forms part of the aggregate of the sales price, section 8A has application. Since the assessee failed to prove that turnover included Central sales tax there was no scope for interference. The Tribunal came to hold that since the assessee had obtained 'C forms from the purchasing registered dealers against his sales in course of inter-State sales, it was obvious that the dealer-assessee had charged concessional rate of tax at the rate of 4 per cent on such sales, although not shown separately in the bills or accounts. It was held that amount was inclusive of sales tax component and filing of 'C' form amply proved that the sales tax component has been included in the turnover of sales and formed part of the sale price, and the assessee was entitled to the benefit of deduction as provided in section 8A. The matter was remitted to the Assessing Officer to re-determine the turnover in the light of the observations made. At the instance of the revenue, question as referred to above has been referred to this Court. 2. Stand of the revenue in essence, is that section 8A has no application where the assessee has not led evidence to show that any tax component forms part of the sale price. The onus lies on the assessee to show that there was such inclusion. The learned counsel for the assessee has submitted that by providing the deduction in section 8A(1) benefit was extended to the dealers who had not separately charged sales tax and, therefore, the formula was prescribed to arrive at the deduction. According to the learned counsel for the assessee, deduction is not available where dealer had claimed deduction for Central sales tax collected by him separately. 3. For resolution of dispute, it is relevant to refer to section 8A. This section was inserted with retrospective effect by the Central Sales Tax (Amendment) Act, 1969. According to the learned counsel for the assessee, deduction is not available where dealer had claimed deduction for Central sales tax collected by him separately. 3. For resolution of dispute, it is relevant to refer to section 8A. This section was inserted with retrospective effect by the Central Sales Tax (Amendment) Act, 1969. The object and reasons for making addition in the Act were stated in the following words: This clause seeks to insert with retrospective effect a new section 8(A) in the principal Act. New section 8A provides for the deduction which should be allowed in determining turnover of a dealer for the purpose of the Act. The deductions provided in rule 11(2) of the Central Sales Tax (Registration and Turnover) Rules, 1957 as amended from time to time, regarding the tax element and the goods returned to a dealer, have been incorporated in the section. To cover contingencies which may arise in future, power is also being taken to prescribe other deductions having regard to the prevalent market conditions, facility of trade interest of consumers. In Tata Iron & Steel Co. Ltd. v. State of Bihar AIR [1958] SC 452, it was held that sale price for purposes of calculation of taxable turnover of a dealer includes the sales tax. The effect of this view has been that even though a dealer charged sales tax on all his sales, he had still to pay as sales tax from his own pocket. Clause (a) of sub-section (1) of section 8A prescribes a formula for deduction of turnover of a dealer for the purpose of the Act to do away with this difficulty of the dealers. Principle underlying the formula is that no tax should be levied on the amount of tax itself. Manner of deduction as provided is very simple. The dealer is entitled to keep a separate account of inter-State sales tax collected by him on the sales. If he does so, he is entitled to deduct total amount of sales tax from the aggregate of 'sale prices' which included that total tax amount. But if the dealer fails to keep a separate account of inter-State sales tax collected by him, the formula given in clause (a) of sub-section (1) of section 8A will have to be applied to fulfil the object. But if the dealer fails to keep a separate account of inter-State sales tax collected by him, the formula given in clause (a) of sub-section (1) of section 8A will have to be applied to fulfil the object. Section 8A(1) (a) reproduces the formula which is identical to that earlier prescribed under rule 11(2) of the Central Sales Tax (Registration and Turnover) Rules, 1957. For the purpose of separating or deducting, as it may be called, the Central Sales Tax component from the aggregate sale price, in cases where the Central sales tax is not otherwise deducted, the section provides for the deduction to be made in accordance with the formula. The proviso makes it clear that the above formula shall not apply if the amount collected by way of Central sales tax has been otherwise deducted from the aggregate of sale prices. The formula has no application where the aggregate sale price does not include Central sales tax. The application of the formula may be explained by following the illustration. As the heading of section 8A and the language used therein clearly reflect, the manner of determination of turnover of a dealer is prescribed therein. While making such determination, deductions are to be made from the aggregate of sale prices. 'Turnover' has been defined in section 2(j) to mean the aggregate of the sale prices received and receivable by a dealer in respect of sales of any goods in the course of inter-State trade or commerce made during any period and determined in accordance with the provisions of the said Act and Rules made thereunder. The manner of determination of inter-State turnover of a dealer is indicated in section 8A. The expression 'sale price' has been defined in section 2(j) . 'Price' is the amount of consideration which a seller charges the buyer for parting with the title to the goods. The entire amount of consideration including sales tax component which purchaser pays, therefore, constitutes price of goods. In Paprika Ltd. v. Board of Trade [1944] 1 All ER 374 it was observed by Lawrence, J. that whenever a sale attracts purchase tax, the tax presumably affects the price which the seller who is liable to pay the tax demands but it does not cease to be the price which the buyer has to pay even if the price is expressed X plus purchase tax. The same view was expressed in Love v. Norman Wright (Builders) Ltd. [1944] 1 All ER 618, Goddard, LJ. observed that where an article is taxed, whether by purchase tax, customs duty or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer. If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or not. In George Oakes (P.) Ltd. Vs. State of Madras it was observed that under the definition of turnover the aggregate amount for which goods are bought or sold is taxable. This aggregate amount includes the tax as a part of the price paid by the buyer. Coming to the facts of the present case, we find that the assessee did not take any definite stand. Before the Assistant Commissioner, the stand was that the assessee had not collected any tax separately on the bills, and the price charged on the bills was inclusive of Central sales tax. No definite material was placed to substantiate the stand. Before the Tribunal, it was simply staled that the assessee was entitled to deduction as per section 8A. It is for the assessee to establish that price included tax element to have the benefit of formula since there was no separate indication of collection of tax. In the instant case, the Tribunal came to the presumptuous conclusion that filing of 'C? forms amply proved that the tax component has been included in the turnover of sales. This was not the case of the assessee before any of the forums below. It was simply stated that the price was inclusive of sales tax. No strait-jacket formula or method of proof can be laid down, as to how the assessee can show that price charged included sales tax. Materials have to be placed by the assessee in that regard. It is open to a seller not to include tax component in the sale price notwithstanding the fact that he shall be required to pay tax on the taxable turnover of sale. No material in the instant case was placed by the assessee. Materials have to be placed by the assessee in that regard. It is open to a seller not to include tax component in the sale price notwithstanding the fact that he shall be required to pay tax on the taxable turnover of sale. No material in the instant case was placed by the assessee. Stand of the assessee before the Tribunal was not that, because it had obtained 'C forms from the purchasing dealer, concessional rate of tax had been charged although not shown separately on the bills or accounts. If that was not the stand of the assessee, it was not open to the Tribunal to make a presumptuous conclusion. Our answer to the question referred to, therefore, is that the Tribunal was not correct to hold that filing of 'C' forms amply proved that tax component has been included in the sale price even though not shown separately in the bills and the accounts, since there is no material to show that the same was assessee's stand. In a given case the assessee may be able to prove by placing materials to show that tax component was included in the sale price which is evident from issue of 'C' forms, and payment of concessional rate of tax. When the matter goes back to the Tribunal for disposal u/s 24(5) of the Act, the Tribunal shall consider the matter afresh keeping in view the position of law indicated by us. The reference is, accordingly, answered. No costs.