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Commissioner of Sales Tax Vs. Associated Cement Company Limited - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case Number Miscellaneous Civil Case No. 233 of 1971
Judge
Reported in1972MPLJ504; [1972]29STC577(MP)
AppellantCommissioner of Sales Tax
RespondentAssociated Cement Company Limited
Appellant Advocate M.V. Tamaskar, Deputy Government Adv.
Respondent Advocate M.M. Sapre, Adv.
Cases ReferredDelhi Cloth & General Mills Co. Limited v. Commissioner of Sales Tax
Excerpt:
.....fixed and the stock-holder was not entitled to and did not charge more are sufficient to enable us to come to the conclusion that the central sales tax paid under the provisions of the iron and steel (control) notification did not form part of the price paid by the customer to the..........the turnover of the non-applicant added the sales tax which was separately charged to the sale price of coal and assessed sales tax on the total. this was objected to by the assessee. ultimately, the board of revenue considered the matter in detail and accepted the contention of the assessee. consequently, at the instance of the commissioner of sales tax, the present common reference in all the three cases has been made as mentioned above.4. from the m. p. general .sales tax act, 1958, some definitions have to be noted. the words 'taxable turnover' has been defined by section 2(r) and the relevant part is as follows:(r) 'taxable turnover' in relation to any period means that part of a dealer's turnover for such period which remains after deducting therefrom....(iii) all such.....
Judgment:

Bishambhar Dayat, C.J.

1. This judgment shall govern the disposal of two other Miscellaneous Civil Cases Nos. 234 and 235 of 1971 (The Commissioner of Sales Tax, Madhya Pradesh v. Associated Cement Company Limited, Nowrazabad Colliery, Shahdol) also.

2. These are three references under Section 44(1) of the M. P. General Sales Tax Act, 1958, at the instance of the Commissioner of Sales Tax. Although three cases referred to are for the different periods but the facts on which the question arises are exactly the same. The question referred in all these three cases is common :

Whether on the facts and in the circumstances of the case the amount of sales tax charged separately on the sale of coal will not form part of the turnover.

The facts on which the question arises are not in dispute. The non-applicant is running a coal mine. During the period in question, coal was a controlled commodity. The price of coal was fixed by a notification (annexure D). Relevant part of the notification is Table II which gives a chart fixing the price for different grades of coal, per ton of 2,240 pounds or per ton of 1,000 kilograms. Below this chart, there is an explanation which is as follows :

Explanation-(i) The prices given in the above Tables from I to V....

(a) are exclusive of...any tax leviable under the sales tax law of any State or under the Central Sales Tax Act, 1956 (74 of 1956) and...but. inclusive of all other cesses or imposts.

3. This notification was issued under the Colliery Control Order, 1945. Paragraphs 4 and 5 arc as follows :

4. The Central Government may, by notification in the Gazette of India, fix the price at which coal may be sold by colliery owners, and any such notification may fix different prices : (i) for different grades of coal and coke, and (ii) for different collieries.

5. (i) No colliery owner, and no person acting on behalf of a colliery owner shall sell, agree to sell or offer to sell coal at a price different from the price fixed in that behalf under clause 4 or while purporting to charge a price not different from the price fixed under clause 4, grant or agree to grant, any commission, rebate or such other concession in any form which will have the effect of reducing either directly or indirectly the said price so far as the purchaser is concerned.

(ii) Where a colliery owner has, whether by himself, or by another, entered into an agreement for the sale of coal at a price different from the price fixed in that behalf under clause 4, no coal shall be delivered in pursuance thereof unless the agreement is by mutual consent so revised as to bring the price into conformity with the price fixed under clause 4.' It will be seen from the above quotations that the purpose of this notification is merely to fix a price at which the collieries can sell coal to their customers or the allottees. The purpose of the notification is nothing more. The assessee in the case was charging from its customers the price mentioned in the chart plus M. P. sales tax separately. The sales tax department while calculating the turnover of the non-applicant added the sales tax which was separately charged to the sale price of coal and assessed sales tax on the total. This was objected to by the assessee. Ultimately, the Board of Revenue considered the matter in detail and accepted the contention of the assessee. Consequently, at the instance of the Commissioner of Sales Tax, the present common reference in all the three cases has been made as mentioned above.

4. From the M. P. General .Sales Tax Act, 1958, some definitions have to be noted. The words 'taxable turnover' has been defined by Section 2(r) and the relevant part is as follows:

(r) 'taxable turnover' in relation to any period means that part of a dealer's turnover for such period which remains after deducting therefrom....

(iii) all such other deductions as may be prescribed.

The word 'turnover' has been defined by Section 2(t) as follows i

(t) 'turnover' used in relation to any period means the aggregate of the amount of sale prices received and receivable by a dealer in respect of any sale or supply or distribution of goods made during that period...

The word 'sale price' is also defined by Section 2(o) as follows '(o) 'sale price' means the amount payable to a dealer as valuable consideration for the sale of any goods, less any sum allowed as cash discount according to ordinary trade practice but including any sum charged for anything done by the dealer in respect of the goods at the time or before delivery thereof other than the cost of freight or delivery or the cost of installation when such cost is separately charged and the expression 'purchase price' shall be construed accordingly.'

After consideration of these definitions, it is quite clear that a dealer, when selling his goods, charges a price and whatever he charges for selling his goods, it is included within the term 'price' and consequently with the term 'turnover' as stated above and the whole of the turnover is 'taxable turnover' except those deductions which are not relevant here.

5. The question which has been referred in these cases, therefore, turns upon this, whether the tax, which has been passed by the assessee on to his customers expressly mentioning it as tax in his contracts, is to be treated as having been realised as tax or as having been realised as part of the price. If it is realised as only a part of the price, it must form a part of it for the purposes of calculating the 'turnover' also. But if it is chargeable separately as a tax, then its realisation cannot be treated to be as part of the 'price' and, therefore, cannot form a part of the 'turnover' for the purposes of calculating the tax. The answer to this question must depend upon the fact whether the assessee was entitled to pass on this sales tax to its customers under any law,

6. In the present case, the notification which has been quoted above, was issued for the purpose of specifying particular price which the assessee can charge from its customers. No inference can be drawn from this notification that the assessee was entitled to collect sales tax from the customers. The M. P. General Sales Tax Act, 1958, also does not provide that the seller will be entitled to realise sales tax from his customers. Of course, there is no prohibition either in the Central or State Sales Tax Act against the seller realising the sales tax as price from the customers. The contention of the learned counsel appearing for the non-applicant is that by the notification the sale price has been fixed in the chart and it has been directed that the assessee cannot charge anything more or less than the price mentioned in the notification. The tax which he charges, therefore, cannot be treated as a part of the price which has been determined by the notification. The argument on behalf of the applicant-department is that the notification has mentioned the price in the chart and by the explanation has made it quite clear that this price in the chart can be added to by those items which have been mentioned in the explanation including the sales tax under the Sales Tax Act. In effect, therefore, the notification thus fixes the price as mentioned in the chart plus the tax and, therefore, the taxes are a part of the price.

7. We agree with the contention of the department. If the contention of the learned counsel appearing for the non-applicant-assessee is accepted that only the price mentioned in the chart is the price which it could realise, the result would be that its realisation of the tax will wholly become illegal and it would be committing an offence in realising anything more than what has been mentioned in the notification. The expression 'exclusive of...any tax etc.' used in the explanation is a very common expression generally used in commercial documents. Whenever a price is quoted exclusive of expenses or taxes, it means that the price which has been quoted will be increased by such expenses as may be incurred or the taxes as may have to be paid. Quoting a price exclusive of expenses or taxes does not mean that expenses or taxes, when incurred as charged, do not form part of the price. This notification, therefore, clearly provides, to our mind, that the price which the collieries can charge is the rate mentioned in the chart plus the taxes levied under the States Sales Tax Act or the Central Sales Tax Act.

8. In this connection, we may also deal with the argument of the learned counsel appearing for the assessee based upon paragraph 12B of the Colliery Control Order, 1945, which is as follows:

12B. A person who has been allotted coal under this Order shall not use it otherwise than in accordance with the conditions contained or incorporated in the document containing the order of allotment and shall not divert or transfer any such coal to any other person except under a written authority from the Central Government and at such price as may be fixed by the Government, and in fixing such price, the Central Government shall have due regard to the price fixed under clause 4 of this Order and the freight, cesses, taxes, middleman's commission and other incidental charges including supervisory and storage charges paid by the original allottee.

The contention of the learned counsel is that while fixing the sale price for the allottee, the Government will take into consideration the tax he may have to pay, which means that the allottee is liable to pay the tax. We are unable to agree with this contention. This paragraph does not place the liability to pay the tax upon the allottee but merely says that in the circumstances in which the allottee has to pay tax, while fixing the price for the allottee, the Government will take into consideration the tax which he has to pay. Whether a particular allottee has to pay a tax or not is a matter to be determined by some other provision of law and not by this paragraph 12B of the said Order. This paragraph does not lead to the conclusion that in the present case, the allottee who purchased the coal from the assessee was liable to pay the tax to the assessee.

9. Learned counsel appearing for the non-applicant relied upon some decided cases in order to support his contentions. We shall only deal with the case, State of Orissa v. Utkal Distributors (Private) Limited [1966] 17 S.T.C. 320 (S.C.), which is relevant and nearest to the facts of this case. In that case, the assessee, as a stock-holder, was selling iron and steel under the Iron and Steel Control Order, 1956, and the notification under this Order provided :

The customer shall pay to the controlled stock-holder the Central sales tax incurred by the controlled stock-holder in obtaining the material and also pay such additional Central sales tax, if any, incurred on the sale to the customer.

On this provision, the question was whether the sales tax realised by the stock-holder was a part of the price or it was realised by him separately as sales tax and did not become a part of his turnover. Their Lordships of the Supreme Court, after discussing the different provisions of the local Sales Tax Act of Orissa, as well as the provisions of the notification, ultimately rested their decision upon the following observation :

In our opinion, the fact that the price which the stock-holder was entitled to charge was statutorily fixed and the stock-holder was not entitled to and did not charge more are sufficient to enable us to come to the conclusion that the Central sales tax paid under the provisions of the Iron and Steel (Control) Notification did not form part of the price paid by the customer to the assessee.

Thus, their Lordships came to the conclusion that since the customer had paid the tax under the provisions of the notification, it did not form part of the price paid by the customer to the stock-holder. The position in this case is different. Here the notification does not make it a responsibility of the purchaser from the assessee to pay the tax. As stated above, the notification fixed the price and permitted the price to be increased by adding the tax. It did not compel the purchaser to pay the tax.

10. The ruling relied upon by the learned counsel for the department is Delhi Cloth & General Mills Co. Limited v. Commissioner of Sales Tax [1971] 28 S.T.C. 331 (S.C.), That was a case which had gone to the Supreme Court from this State and all the definitions of 'turnover' and 'sale price', which we have quoted above, were also considered. After dealing with these definitions, their Lordships observed as follows :

In view of the definition of sale price all that we have to see is whether the collection of sales tax by the dealer from his purchasers can be considered as valuable consideration received by him for the sale of goods.

Their Lordships then observing that in view of the liability placed under Section 4 for payment of tax upon the dealer, held as follows :

If the dealer passes on his tax burden to his purchasers he can only do it by adding the tax in question to the price of the goods sold. In that event the price fixed for the goods including the tax payable becomes the valuable consideration given by the purchaser for the goods purchased by him. If that be so, the tax collected by the dealer from his purchasers becomes a part of the sale price fixed, as defined in Section 2(o).

The learned counsel for the assessee relied upon a sentence in this judgment which is as follows :.Unless the price of an article is controlled, it is always open to the buyer and the seller to agree upon the price to be payable. While doing so it is open to the dealer to include in the price the tax payable by him to the Government.

11. The contention of the learned counsel appearing for the assessee is that the other observations in this case are distinguishable because in the case which was being dealt with by their Lordships of the Supreme Court, there was no price fixed by the Control Order as in the present case, but the one sentence quoted above fully supports him. We are unable to agree. As stated above, our interpretation of the 'notification is that the price fixed by the notification itself includes the taxes which the assessee is entitled to add to the price. Since there is no prohibition against the assessee realising the tax from its customers, it has done so and it has become price which is permitted by the notification.

12. It is also noteworthy that their Lordships of the Supreme Court, in Delhi Cloth & General Mills Co. Limited v. Commissioner of Sales Tax [1971] 28 S.T.C. 331 (S.C.), further go on to observe as follows :

The levy and collection of tax is regulated by law and not by contract. So long as there is no law empowering the dealer to collect tax from his buyer or seller, there, is no legal basis for saying that the dealer is entitled to collect the tax payable by him from his buyer or seller. Whatever collection that may be made by the dealer from his customers the same can only be considered as valuable consideration for the goods sold.

13. On a consideration of all the circumstances of the case, our answer to the question is as follows :

Upon the facts and circumstances of the case, the amount of sales tax charged separately on the sale of coal is a part of the 'turnover' liable to be assessed to tax under the M. P. General Sales Tax Act, 1958,

The parties shall bear their own costs in all these references.


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