1982 (10) TMI 204 - HC - VAT and Sales Tax

Including Buyer's Excise Duty in Seller's Taxable Turnover: Court's Decision on Sales Tax Assessment

Vinayak Beer & Wine Stores Versus Commercial Tax Officer, X Circle, Hyderabad

The Court held that excise duty paid by the buyer was to be included in the seller's taxable turnover for sales tax assessment. The responsibility to pay ... - Issues:1. Whether excise duty paid directly by the buyer should be included in the taxable turnover of the seller for sales tax assessment.2. Interpretation of relevant rules under the A.P. Distillery Rules and A.P. Indian Liquor (Storage in Bond) Rules in determining liability for excise duty payment.3. Assessment of sales tax under specific items in the First Schedule to the A.P. General Sales Tax Act based on the nature of the transaction.Analysis:The petitioner, a dealer in liquor, sought a writ to quash proceedings by the Commercial Tax Officer, who included excise duty paid by the buyer in the petitioner's taxable turnover. The petitioner contended that as per a Supreme Court decision, excise duty paid by the buyer should not be included in the seller's turnover. The Court noted the previous ruling's applicability when rules were not amended and emphasized the responsibility of the buyer to pay excise duty before obtaining liquor. However, amendments to the A.P. Distillery Rules and A.P. Indian Liquor (Storage in Bond) Rules shifted the responsibility to the licensee (seller) to pay excise duty before removal of liquor from the bonded warehouse.The Court highlighted the amended rules, specifying that only the licensee (petitioner) can remove liquor from the bonded warehouse, altering the previous practice where buyers could pay and obtain liquor. It was deemed that excise duty paid by the buyer was considered paid by the petitioner, forming part of the sale price. The Court rejected the argument that the petitioner did not collect excise duty from the buyer, stating that the duty was part of the consideration for the sale. Consequently, the excise duty amount was deemed part of the taxable turnover, warranting assessment under item 26(b) of the First Schedule to the A.P. General Sales Tax Act.Regarding the contention that sales tax should be assessed under item 26(a) instead of 26(b due to the absence of explicit mention of excise duty in bills, the Court held that the nature of the transaction determined the applicable tax item. As the excise duty was considered part of the sale consideration, item 26(b applied. Ultimately, the Court dismissed the writ petition, emphasizing that the excise duty paid by the buyer was to be included in the petitioner's turnover for sales tax assessment. The request for leave to appeal to the Supreme Court was refused.