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2014 DIGILAW 2948 (MAD)

State of Tamil Nadu v. Tvl. Trent Ltd.

2014-08-27

G.M.AKBAR ALI, R.SUDHAKAR

body2014
Order R. Sudhakar, J. 1. The above tax revisions are preferred by the Department aggrieved against the orders passed by the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai in T.A. Nos.147/05, 148/05, 168/05, 129/08, 141/08 and 109/09. 2. The respondent in these cases is a dealer in readymade garments and general goods and an assessee on the files of the Commercial Tax Officer, Anna Salai, III Assessment Circle, Chennai. All the above tax revisions relate to assessment orders for the years 2001-2002, 2002-2003, 2003-2004, 2004-2005, 2005-2006 and 2006-2007. 3. The issue involved in all these cases is that the Assessing Officer had rejected the claim of deduction from the total turnover, the sales tax portion, on the ground that though sales tax was not charged separately , the bills revealed that the dealer had charged the cost of goods including sales tax and not collected tax separately and in terms of Explanation (1-A) to Section 2 (r) of the Tamil Nadu General Sales Tax Act, 1959, any amount collected by a dealer by way of tax should not be included in the turnover. Accordingly, the Assessing Officer revised the assessment in respect of each year levying tax on the entire amount without giving the benefit of the taxable portion of the turnover. The appeals by the assessee to the first appellate authority was futile against which six appeals were filed before the Tribunal. The facts, relevant to each assessment year, as set out by the Tribunal in its order, are as follows :- “TA 168/2005 (2001-02) (TNGST) : The appellant were originally assessed on a total taxable turnover of Rs.7,70,43,317/- and Rs.6,92,69,581/- respectively for the assessment year 2001-2002 under the TNGST Act, 1959, in the proceedings dated 16.7.2003. The taxable turnover inter alia includes an amount of Rs.31,23,110/- collected towards sales tax which was rejected by the Assessing Officer on the ground that the amount was collected without showing it separately in the invoices and however shown including in the sales price. Hence, the Assessing Officer had disallowed the claim of exemption as sales tax collection and assessed the above turnovers to tax. On appeal, the first appellate authority had dismissed the appeal for the reasons stated thereon. Hence, aggrieved, the appellants preferred this present appeal. Hence, the Assessing Officer had disallowed the claim of exemption as sales tax collection and assessed the above turnovers to tax. On appeal, the first appellate authority had dismissed the appeal for the reasons stated thereon. Hence, aggrieved, the appellants preferred this present appeal. TA 147/2005 (2002-03) (TNGST) : The appellants were originally assessed on a total and taxable turnover of Rs.9,68,42,900/- and Rs.9,63,51,644/- respectively for the assessment year 2002-2003 under the TNGST Act, 1959, in the proceedings dated 13.2.2004. In this year also, the verification of the sale bills and sales registers revealed that the dealer had sold goods by charging the cost of goods including sales tax, surcharge, etc., and in their sale bills, taxes were not shown and collected separately on the cost of the goods. Hence, following the Explanation (1-A) to Section 2(r) of the TNGST Act, 1959, the Assessing Officer had disallowed the claim of exemption as sales tax collection on Rs.45,77,730/- and assessed the turnovers to tax. On appeal, the first appellate authority had dismissed the appeal for the reasons stated thereon. Hence, aggrieved, the appellants preferred this present appeal. TA 148/2005 (2003-04) (TNGST) : The appellants were originally assessed on a total and taxable turnover of Rs.10,95,61,063/- and Rs.10,91,73,678/- respectively for the assessment year 2003-2004 under the TNGST Act, 1959, in the proceedings dated 30.6.2004. In this year also, the verification of the sale bills and sales registers revealed that the dealer had sold goods by charging the cost of goods including sales tax, surcharge, etc., and in their sale bills, taxes were not shown and collected separately on the cost of the goods. Hence, following the Explanation (1-A) to Section 2(r) of the TNGST Act, 1959, the Assessing Officer had disallowed the claim of exemption as sales tax collection on Rs.50,49,873/- and assessed to tax. On appeal, the first appellate authority had dismissed the appeal for the reasons stated thereon. Hence, aggrieved, the appellants preferred this present appeal. TA 141/2008 (2004-2005) (TNGST) : The appellants were originally assessed on a total and taxable turnover of Rs.13,90,78,192/- and Rs.13,55,67,621/- along with re-sale turnover of Rs.32,19,958/- as against the reported total and taxable turnover of Rs.13,27,33,895/- and Rs.12,92,23,324/- along with re-sale turnover of Rs.32,19,958/- respectively for the assessment year 2004-2005 under the TNGST Act, 1959, in the proceedings dated 12.12.2005. TA 141/2008 (2004-2005) (TNGST) : The appellants were originally assessed on a total and taxable turnover of Rs.13,90,78,192/- and Rs.13,55,67,621/- along with re-sale turnover of Rs.32,19,958/- as against the reported total and taxable turnover of Rs.13,27,33,895/- and Rs.12,92,23,324/- along with re-sale turnover of Rs.32,19,958/- respectively for the assessment year 2004-2005 under the TNGST Act, 1959, in the proceedings dated 12.12.2005. In this year also, the verification of the sale bills and sales registers revealed that the dealer had sold goods by charging the cost of goods including sales tax, surcharge, etc., and in their sale bills, taxes were not collected separately on the cost of the goods. Hence, following the Explanation (1-A) to Section 2(r) of the TNGST Act, 1959, the Assessing Officer had disallowed the claim of exemption as sales tax collection on Rs.63,44,297/- and assessed to tax. On appeal, the first appellate authority had dismissed the appeal for the reasons stated thereon. Hence, aggrieved, the appellants preferred this present appeal. TA 129/2008 (2005-2006) TNGST) : The appellants were originally assessed on a total and taxable turnover of Rs.17,88,38,682/- and Rs.17,53,01,211/- along with re-sale turnover of Rs.31,46,741/- as against the reported total and taxable turnover of Rs.17,88,50,332/- and Rs.17,53,01,211/- along with re-sale turnover of Rs.31,46,741/- respectively for the assessment year 2005-2006 under the TNGST Act, 1959, in the proceedings dated 31.08.2006. The verification of the sale bills and sales registers revealed that the dealer had sold goods by charging the cost of goods including sales tax, surcharge, etc., and in their sale bills, taxes were not collected separately on the cost of the goods. Hence, following the Explanation (1-A) to Section 2 (r) of the TNGST Act, 1959, the Assessing Officer had disallowed the claim of exemption as sales tax collection on Rs.80,85,081/- and assessed to tax. On appeal, the first appellate authority had dismissed the appeal for the reasons stated thereon. Hence, aggrieved, the appellants preferred this present appeal. TA 109/2009 (2006-2007) (TNGST) : The appellants were originally assessed on a total and taxable turnover of Rs.15,84,78,660/- and Rs.15,43,79,435/- along with re-sale turnover of Rs.38,75,238/- as against the reported total and taxable turnover of Rs.15,14,65,866/- and Rs.14,73,66,643/- along with re-sale turnover of Rs.38,75,238/- respectively for the assessment year 2006-2007 under the TNGST Act, 1959, in the proceedings dated 29.06.2007. TA 109/2009 (2006-2007) (TNGST) : The appellants were originally assessed on a total and taxable turnover of Rs.15,84,78,660/- and Rs.15,43,79,435/- along with re-sale turnover of Rs.38,75,238/- as against the reported total and taxable turnover of Rs.15,14,65,866/- and Rs.14,73,66,643/- along with re-sale turnover of Rs.38,75,238/- respectively for the assessment year 2006-2007 under the TNGST Act, 1959, in the proceedings dated 29.06.2007. In this year also, the verification of the sale bills and sales registers revealed that the dealer had sold goods by charging the cost of goods including sales tax, surcharge, etc., and in their sale bills, taxes were not collected separately on the cost of the goods. Hence, following the Explanation (1-A) to Section 2 (r) of the TNGST Act, 1959, the Assessing Officer had disallowed the claim of exemption as sales tax collection on Rs.70,12,791/- and assessed to tax. On appeal, the first appellate authority had dismissed the appeal for the reasons stated thereon. Hence, aggrieved, the appellants preferred this present appeal.” 4. The Tribunal, while holding that the turnover in question based on bills show that it is inclusive of all taxes and that the books of accounts relating to the turnover clearly show breakup of sales tax payable on the goods sold, consequently, placing reliance upon the decision of this Court in S.M. Garments Vs. State of Tamil Nadu (T.C. ® No.1443/2006 dated 9.3.12), which decision was followed by this Court in Bata India Ltd. Vs. State of Tamil Nadu (T.C. (R) Nos.1725/08, 1736/08 & 7/09 dated 4.1.2013) came to the conclusion that the assessee has sold the goods and charged customer the price of the goods and the sales tax as one component. The assessee has also maintained books of accounts, which would disclose the price of goods, sales tax and other charges collected from the customers and on the basis of the said decisions, held that the assessee had shown break up details of sales tax and surcharge separately in the accounts for the assessment years mentioned above and set aside the orders of assessment. Against the abovesaid orders of the Tribunal, the Department is before this Court by preferring the above revisions. 5. Against the abovesaid orders of the Tribunal, the Department is before this Court by preferring the above revisions. 5. The following substantial question of law arises for consideration in these revisions :- “Whether on the facts and in the circumstances of the case the Tribunal was right in law in explaining the scope of (1-A) of Section 2 (r) of TNGST Act that if sale price is shown in the books of accounts, it is sufficient to get deduction amounts even though the sale invoice contains lump sum amount inclusive of tax without charging the tax elements separately?” 6. Heard Mr. Manoharan Sundaram, learned Addl. Government Pleader (Taxes) appearing for the petitioner/Revenue in all the revisions. 7. The only ground taken by the learned standing counsel for the petitioner is that Explanation (1-A) of Section 2(r) mandates that any amount charged as tax separately without including it in the price of the goods shall not be included in the turnover. For better clarity, Explanation (1-A) to Section 2(r) is extracted hereunder :- “Sec. 2 (r) - “turnover” means the aggregate amount for which goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (n), by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticulture produce, other than tea, and rubber (natural rubber latex and all varieties and grades of raw rubber) grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover; * * * * * * * * * Explanation (1-A) – Any amount charged by a dealer by way of tax separately without including the same in the price of the goods bought or sold shall not be included in the turnover. * * * * * * * * *” 8. In this case, admittedly, the respondent/assessee had raised a common ground that the form of the sale bill adopted by them is uniform all over India and the rate of sale is inclusive of all taxes. The sale bill mentions the sale price as inclusive of all taxes. * * * * * * * * *” 8. In this case, admittedly, the respondent/assessee had raised a common ground that the form of the sale bill adopted by them is uniform all over India and the rate of sale is inclusive of all taxes. The sale bill mentions the sale price as inclusive of all taxes. It was further pleaded by the assessee that the assessee had maintained details of the sale, i.e., value of goods and tax paid separately in their account books. They are therefore entitled to the benefit of exclusion of tax component from the total turnover even in terms of Rule 5-B (a) of the TNGST Rules. The assessee relied upon the judgment of the Kerala High Court reported in 94 STC 396 and the decisions reported in 32 STC 194, 39 STC 53, 43 STC 203, 63 STC 411 and 88 STC 1. The assessee also pleaded that where the sales tax amount is shown in the sale bill as inclusive and where the account shows proper bifurcation of sale price and sales tax, the deduction of sales tax from the total turnover is to be allowed. At the time of filing the revisions, the assessee relied upon the judgment of the Kerala High Court in 94 STC 396, which was upheld by the Supreme Court in SLP (Civil) No.11699 of 1992 – ((1993) 88 STC FRSC 1). However, at the time when the Tribunal disposed of the appeals, the Tribunal took into consideration the decision of this Court in S.M. Garments Vs. State of Tamil Nadu (T.C. (R) No.1443/2006 dated 9.3.12) followed by Bata India Ltd. Vs. State of Tamil Nadu (T.C. (R) Nos.1725/08, 1736/08 & 7/09 dated 4.1.2013) in arriving at its conclusion. 9. In S.M. Garments case (supra), this Court, while considering Explanation (1-A) to Section 2 (r) of the TNGST Act, was of the view that the intentment of the Act is only to support the deeming object of the Act, i.e., to exclude the tax component from the total turnover. 9. In S.M. Garments case (supra), this Court, while considering Explanation (1-A) to Section 2 (r) of the TNGST Act, was of the view that the intentment of the Act is only to support the deeming object of the Act, i.e., to exclude the tax component from the total turnover. If the books of accounts reflect the correct position with regard to sales tax component and the buyer and the seller know that the price of the goods is inclusive of tax component and if the tax is collected and paid out to the Government, the question of including the sales tax component in the total turnover is not correct. They also relied upon the judgment in State of Tamil Nadu Vs. Ultramarine & Pigments Ltd. & Anr. (1979 (39) STC 53) where it is held that it is not necessary to show in the sales bill the sales tax collected for the purpose of claiming the benefit of the Board's instruction not to include sales tax in the taxable turnover. 10. The above proposition of law laid down by this Court has also been followed in Bata India case (supra), wherein reliance was also placed on Garware Nylons Ltd. Vs. Commercial Tax Officer (T.C. (R) No.1928/06 dated 8.6.12). 11. A perusal of the earlier decisions of this Court on the very same issue, where Explanation (1A) to Section 2(r) of the Act has been interpreted to mean that where even the sale bill is inclusive of the tax, if there is material to show that the account books are available to show correspondingly that tax has been separately collected and paid out to the Government, the question of excluding the tax component from the total turnover does not arise. 12. We also notice that in the explanation, the intentment of the statute is that any amount charged by the dealer by way of tax separately, without including the same in the price of the goods bought or sold, shall not be included in the turnover. This is to mean that tax collected will not be included in the turnover. There is no specification or indication in Explanation (1-A) that tax collected should be shown separately in the bill and only then it shall be excluded in the turnover. This is to mean that tax collected will not be included in the turnover. There is no specification or indication in Explanation (1-A) that tax collected should be shown separately in the bill and only then it shall be excluded in the turnover. That appears to be the rationale behind the interpretation of the said provision in the earlier decisions of this Court in S.M. Garments case and Bata India case (supra), which have been referred to by the Tribunal while deciding in favour of the assessee. 13. Though a reference is made to the decision in M/s. Sundaram Industries Ltd. Vs. The State of Tamil Nadu (T.C. (R) No.1218 and 1242 of 2006 dated 19.9.11), by the learned Addl. Government Pleader, we find that the abovesaid decision as well as the decision in Modern Food Industries (India) Ltd. Vs. The Registrar & Anr. (W.P. No. 37025/2002) have been considered in S.M. Garment's case (supra) and has been distinguished on facts, the relevant portion of which is extracted hereunder for better clarity :- “7. The learned counsel appearing for the Revenue relied on the unreported judgment of this Court in T.C.Nos.1218 and 1242 of 2006 dated 19.09.2011 in the case of M/S SUNDARAM INDUSTRIES LIMITED V. THE STATE OF TAMIL NADU, wherein this Court has considered the scope of Section 2(r) and Explanation 1-A of the Act and in para 12, it has held as follows: "12. A reading of the above said definition shows that 'turnover' means the total amount for which the goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the manner referred to in clause (n). As far as Explanation (1-A) to Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959 is concerned, where an amount charged by the dealer by way of tax is separately shown and not included in the price of the goods bought or sold, the same shall not be included in the turnover. In the present case, admittedly, the assessee had charged a consolidated amount for the execution of the works contract. The indivisible contract showed no bifurcation as regards labour and materials. Even in the accounts, the assessee did not have the details on the cost of the materials used to have a deduction of the labour charges from the consolidated price charged. The indivisible contract showed no bifurcation as regards labour and materials. Even in the accounts, the assessee did not have the details on the cost of the materials used to have a deduction of the labour charges from the consolidated price charged. The consolidated amount charged is stated to include the tax element. Even for claiming deduction on the labour charges, the assessee adopted the statutory percentage only. In the above circumstances, on a consolidated sum thus charged, it is difficult to accept the claim of the assessee that the adjustment entries given in the accounts have to be taken as tax charged separately. In the decision reported in (2010) 34 VST 273 (SC) (India Meters Ltd. Vs. State of Tamil Nadu (SC), following the earlier decisions of the Apex Court, the Apex Court held as follows: "It is no doubt true that rule 6(c) of the Rules permits deduction of the cost on freight while determining the taxable turnover. However, that provision must be read in the context of definition of "turnover" as also the definition of "sale" in sections 2(r) and 2(n) respective of the Act. "Turnover" is defined in the Act, inter alia, to mean "the aggregate amount for which goods are bought or sold or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (n)." The Apex Court further pointed out that "even if freight and insurance charges are shown separately in the Bill and added to the price of the goods, the character of payment would remain the same. Since freight and insurance charges represent expenditure incurred by the dealer in making the goods available to the purchaser at the place of sale, they would constitute an addition to the cost of the goods to the dealer and would clearly be a component of the price to the purchaser. The amount of freight and insurance charges would be payable by the purchaser not under any statutory or other liability but as part of the consideration for the sale of the goods and would therefore, form part of the sale price." From a reading of the above, it is clear that in that judgment the assessee/dealer has charged a consolidated amount for the execution of the works contract. The indivisible contract showed no bifurcation as regards labour and materials. The indivisible contract showed no bifurcation as regards labour and materials. Further the Court held that in the accounts, the assessee did not have the details on the cost of the materials used to have a deduction of the labour charges from the consolidated price charged. It was stated by the assessee in that case that they have charged consolidated amount which included the tax element. Even for claiming the labour charges, the assessee has adopted the statutory percentage. Therefore, it was held by the Court that it is very difficult to accept the claim of the assessee that the adjustment entries given in the accounts have to be taken as tax charges separately. It is merely claimed by way of adjustment entries in the account. Therefore, the Court relied on the Explanation and rejected the contention and taken a view that it shall form part of the turnover. Therefore, the judgment is not helpful to the Revenue and if the assessee had shown it separately in the books of accounts the turnover relating to the sale as well as tax component, certainly the assessee is entitled to the deduction from the turnover. 8. In another unreported judgment of this Court in W.P.No.37025 of 2002 dated 01.04.2004 in the case of TVL. MODERN FOOD INDUSTRIES (INDIA) LTD. V. THE REGISTRAR AND AOTHER, wherein, in paragraph 6 this Court has held as follows: "6. It could be seen that Explanation (1-A) to Section 2(r) clearly stipulates that any amount charged by a dealer by way of tax separately without including the same in the price of the goods bought or sold shall not be included in the turnover. The petitioners' contention can well be accepted if the words "without including the same in the price of the goods bought or sold" are not there in the statute. At this juncture, it is relevant to point out that in fact those words viz., "without including the same in the price of the goods bought or sold" were not in the statute prior to 1986 and the same were included in Explanation clause 1-A of the Section by way of an amendment. We are also not able to accept the explanation of the petitioner that the break-up figure was given on the back side of the bill for the administrative convenience. We are also not able to accept the explanation of the petitioner that the break-up figure was given on the back side of the bill for the administrative convenience. It is only likely that entries on the backside were made only subsequently." From a reading of the above, it is clear that the assessee had given break up of the component of tax on the backside of the bill, which was rejected by the Court. It was further held that the likelihood entries on the backside of the bill were made subsequently and due to the said reason, this Court has rejected the contention of the assessee. So, the facts are entirely different as from our case.” Therefore, the reliance placed on the judgments in Sundaram Industries Ltd. Case and Modern Food Industries case (supra) by the learned standing counsel for the Revenue does not advance the case of the Department. 14. In view of the proposition of law as enunciated by this Court in S.M. Garments case and Bata India case (supra), which clearly negatives the stand taken by the Revenue with regard to interpretation of Explanation (1-A) to Section 2(r), the present revisions being filed on similar set of facts and law, this Court is of the considered opinion that the revisions filed by the Revenue has to necessarily fail, as the decisions in S.M. Garments case and Bata India case (supra) are squarely applicable to the facts of the present case. In view of the binding precedent, no question of law, much less substantial question of law arises for consideration in all these petitions. 15. In the result, finding no merit, all the revision cases are dismissed.