1. The appellants herein are dealers in timber and tiles. They returned a taxable turnover of Rs. 6,13,830.11 in their A-1 return for the year 1972-73. The assessing authority, however, after checking the accounts determined their taxable turnover at Rs. 6,44,747.09. While computing the taxable turnover, the assessing authority included a sum of Rs. 21,532.39 which is the sawing charges paid by the customers as part of the sale price of timber. He also added a sum of Rs. 5,000 to the taxable turnover towards probable suppression of purchases in view of certain defects found in the accounts.
2. Aggrieved by the addition of these two amounts in the taxable turnover, the assessee went before the Appellate Assistant Commissioner contending that there are no substantial defects in the accounts, and therefore, the addition of Rs. 5,000 towards possible suppression cannot be legally sustained and that the sawing charges being levied towards the post-sale services done by the assessee for cutting the logs purchased by the customers into pieces of particular specification as desired by the purchasers, can never be taken as part of the turnover of the log purchased. The Appellate Assistant Commissioner, after going through the entries in the accounts found that the assessee's contention that there was no discrepancy has some force and that whatever discrepancy that was found by the assessing authority was explained with full particulars and hence the addition of Rs. 5,000 was not justified. In that view, he deleted the said addition of Rs. 5,000. As regards the dispute regarding the sawing charges to the extent of Rs. 21,532.39 the Appellate Assistant Commissioner took the view that it is only a post-sale charge and therefore it cannot be included as part of the sales turnover. In that view the Appellate Assistant Commissioner deleted the sum of Rs. 21,532.39 also from the taxable turnover. The Board of Revenue, in exercise of its suo motu power of revision, has now revised the order of the Appellate Assistant Commissioner and restored the addition of Rs. 5,000 under the head 'probable omission and suppression', and Rs. 21,532.39 under the head 'sawing charges'. Against the said order of the Board of Revenue restoring the addition of the said two sums, the assessee has come up in appeal to this Court.
3. So far as the addition of Rs. 5,000 is concerned, the reasoning given by the Board of Revenue is that the addition is only nominal, and therefore, the Appellate Assistant Commissioner should not have deleted the addition. But we see from the order of the Appellate Assistant Commissioner that the discrepancy which was the basis for making the said addition has been duly explained by the assessee with reference to the entries in the account books. We are not inclined to sustain the reasoning of the Board of Revenue that merely because the addition is nominal it cannot be sustained without going into the merits (sic). In this case, the Appellate Assistant Commissioner has gone into the merits and found that the discrepancy said to have been found by the assessing authority has been duly explained by the assessee, and therefore, no addition is called for under the head 'probable omission and suppressions'. In this view, we cannot uphold the order of the Board of Revenue restoring the addition merely on the ground that the addition is nominal.
4. Coming to the sawing charges amounting to Rs. 21,532.39, the Appellate Assistant Commissioner has deleted the said sum holding that it is a post-sale charge. The Board of Revenue has taken the view that the sawing charges incurred by the assessee and collected from the customers were not post-sale charges as held by the Appellate Assistant Commissioner. But after going through the relevant bills issued by the assessee to its customers, we are in entire agreement with the view taken by the Appellate Assistant Commissioner that the sawing charges are post-sale charges and not pre-sale charges as has been held by the Board of Revenue. The sawing charges have been collected from the customers only in cases where the purchasers purchase timber in logs. The following is a sample of a bill issued by the assessee in respect of a sale effected to Grafex Machinery Company on 22nd December, 1972.
Madras-15. Bill No. 134
Grafex Machinery Company Dated 22-12-1972
Value of teak log 16 x 5'-10'-34 Ft. at Rs. 32 per ft.
Sales tax 38.08
Lot coolie 43.52
Total Rs. 1,171.50
Sawing charge 34.00
Grand Total Rs. 1,205.50
Advance Rs. 100.00
Balance Rs. 1,105.50
There is no dispute before us that the said bill is a representative one. From the above bill it could be seen that the bargain between the parties was only in respect of the teak wood log which was actually purchased by the customer and not the timber in cut sizes. After the log is purchased at a particular time, the sales tax and lot coolie and surcharge are collected on the sale. Thereafter as the customer cannot easily transport the log purchased by him he requires the assessee to cut the log into specific sizes required by the customer and the log is thereafter cut to sizes and the sawing charges are collected from the customer. Thus the work of sawing the log purchased already is an independent bargain and that relates to the services rendered by the assessee after the sale of the log to the purchaser. Therefore, it has to be taken to be a post-sale service which has been the subject-matter of a separate bargain and it has been paid for separately apart from the price of the log purchased by the customer. The view taken by the Board of Revenue that it is a pre-sale charge is therefore not tenable and the sawing charges should be taken to be only a post-sale charge which is the subject-matter of a separate bargain between the assessee and his customer and which is separately paid for. In this view, we have to allow the appeal and set aside the order of the Board of Revenue and restore the order of the Appellate Assistant Commissioner. There will, however, be no order as to costs.