2009 (10) TMI 849 - HC - VAT and Sales Tax

Supreme Court clarifies expenses in turnover calculation, rules in favor of Revenue.

The Supreme Court remitted a case back for fresh consideration regarding the interpretation of expenses incurred by the State or agencies of the Food ... Whether, in the facts and circumstances of the case, the expenses incurred by the State or agencies of the Food Corporation of India after acquiring or purchasing the goods before delivery to the petitioner-dealer could form part of gross turnover and be subject to tax? Whether, in the facts and circumstances of the case, could the market fee be included in the purchase turnover in view of Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax [1980 (9) TMI 238 - SUPREME COURT OF INDIA ]? Held that:- Considering the definition of expression 'turnover' as defined in section 2(i) of the Act it is concluded that any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof would be included in the expression 'turnover'. In view of the above, question No. (1) has to be answered against the Food Corporation of India and in favour of the Revenue. The reference stands disposed of accordingly. Issues:1. Interpretation of expenses incurred by the State or agencies of the Food Corporation of India in relation to gross turnover and tax liability.2. Inclusion of market fee in purchase turnover as per legal precedent.Issue 1: Interpretation of expenses in relation to gross turnover and tax liabilityThe Food Corporation of India filed a case before the High Court seeking direction to refer two questions of law to the court regarding expenses incurred before delivery of goods and their tax treatment. The court directed the Tribunal to refer the questions, including whether expenses incurred by the State or agencies of the Food Corporation of India could be part of gross turnover and subject to tax. The Division Bench answered the second question but did not address the first question as it was not evident from the Tribunal's order. The Supreme Court later held that the first question should have been answered and remitted the matter back for fresh consideration. The case involved disputes over expenses like service charges, market fees, and labor charges forming part of the bill and consideration. The Assessing Authority held these expenses as part of the consideration, which was affirmed on appeal and by the Tribunal.Issue 2: Inclusion of market fee in purchase turnoverThe case also addressed the inclusion of market fees in the purchase turnover based on legal precedent. The Division Bench concluded that any sum charged for activities done by the dealer before delivery of goods should be included in turnover. It emphasized that expenses incurred before delivery, such as bag price, labor charges, stitching charges, and carriage, should be considered part of turnover. The court held that expenses related to effective delivery of goods, including carriage and labor charges, should be included in turnover. Consequently, the first question was answered against the Food Corporation of India and in favor of the Revenue based on the interpretation of turnover and expenses incurred before delivery.