1982 (12) TMI 156 - HC - VAT and Sales Tax

Court rules collection charges paid by assessees are part of turnover, supporting tax inclusion.

The court dismissed the tax revision cases, ruling that the collection charges paid by the assessees are part of the purchase amount and should be ... - Issues Involved:1. Whether there is a sale of abnus leaves to make the assessees the last purchasers of the goods.2. Whether the collection charges paid by the assessees can be included in their turnover.Detailed Analysis:Issue 1: Sale of Abnus LeavesThe first issue raised by Mr. P. Venkatarama Reddy, the learned counsel for the assessees, was whether there is a sale of abnus leaves in favor of the assessees, making them the last purchasers of the goods. However, this contention was conceded by Mr. Reddy in light of the Supreme Court decision in State of M.P. v. Orient Paper Mills Ltd. [1977] 40 STC 603 (SC). Therefore, the court did not address this issue in detail.Issue 2: Inclusion of Collection Charges in TurnoverThe second and more pressing issue was whether the collection charges paid by the assessees should be included in their turnover. Mr. Venkatarama Reddy argued that the agreement between the purchasers and the Government was essentially two agreements rolled into one: one for the price of abnus leaves and the other for the collection charges payable to the agents appointed by the Government. He contended that since these charges are separately paid and distinguished in the agreement, they should not be considered part of the sale consideration for the abnus leaves.Court's Analysis:The court examined the agreement clauses in detail to address this contention. The form of the agreement, prescribed by the Andhra Pradesh Minor Forest Produce (Regulation of Trade in Abnus Leaves) Rules, 1970, includes 26 clauses under alphabets A to Z. The relevant clauses for this case were:- Clause (A): The purchaser is required to buy all abnus leaves collected in the unit by the Government or its agents.- Clause (B): It details the sale amount, which includes the tendered rate per standard bag and specifies that the royalty component is calculated by deducting the cost of collection, handling, pruning, and remuneration charges from the tendered rate.- Clause (D): Specifies the process for taking delivery of abnus leaves.- Clause (K): Details the payment of the sale amount, including both royalty and collection charges.The court found that the 'purchase amount' comprises both royalty and collection charges. The agreement explicitly states that these components together form the purchase amount. The collection charges are paid to the Range Officer before taking delivery of the leaves, while the royalty is remitted to the treasury.The court also referred to the definition of 'turnover' in section 2(1)(s) of the Andhra Pradesh General Sales Tax Act, which includes any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods. It cited the Supreme Court's interpretation in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC), which emphasized that the total amount payable by the purchaser as consideration for the sale is relevant, not the net consideration retainable by the dealer.Conclusion:The court concluded that the collection charges are part of the purchase amount and should be included in the turnover of the assessees. The agreement's language and the statutory definition of 'turnover' support this conclusion. The contention that the collection charges paid directly to the agent (in T.R.C. No. 143 of 1978) should not be included was also rejected. The court emphasized that the agent is an agent of the Government, and payment to the agent is equivalent to payment to the Government.Judgment:The tax revision cases were dismissed, and it was held that the collection charges form part of the purchase amount and have been rightly included in the turnover of the assessees. No order as to costs was made, and Advocate's fees were set at Rs. 125 in each tax revision case.