2017 (5) TMI 174 - HC - VAT and Sales Tax

Inclusion of Entry Tax in VAT Turnover Upheld by Court, Dealer Liable for VAT Payment

M/s Madhya Bharat Papers Ltd. Versus Commissioner, Commercial Tax, U.P. Lucknow

The court affirmed that the Entry Tax paid by the dealer should be included in the turnover for VAT purposes. The dealer is therefore liable to pay VAT on ... Whether the amount paid by the dealer as Entry Tax for bringing the goods within the local area would form part of the turnover of assessee for the purposes of payment of VAT or not? Held that: - By virtue of Explanation 5 to the definition of 'sale price', it is apparent that only the tax charged or chargeable is not to form part of sale price. The amount of Entry Tax paid by the dealer while bringing goods within local area is not liable to be collected from the purchaser, and would not fall within purview of Explanation 5, and thereby would be included in the definition of 'sale price' as contained under Section 2(ad) of the Act - the amount of Entry Tax paid would constitute part of 'turnover of sale' so as to render the dealer liable to pay tax upon it under the U.P. VAT Act - revision dismissed - decided against assessee. Issues Involved:1. Whether the amount paid by the dealer as Entry Tax for bringing goods within the local area forms part of the turnover of the assessee for the purposes of payment of VAT.Issue-wise Detailed Analysis:1. Inclusion of Entry Tax in Turnover for VAT Purposes:The primary issue is whether the Entry Tax paid by the dealer for bringing goods into the local area should be included in the turnover for VAT purposes. The assessee, engaged in trading paper, transferred stock to U.P. and disclosed a turnover of Rs. 6,88,66,891.48/- while paying Entry Tax at 1%. The assessee contended that the Entry Tax collected from the purchaser and reflected in the sale invoice should not be included in the turnover for VAT purposes. However, authorities under the U.P. VAT Act and the Tribunal rejected this plea, prompting the present revision.2. Legal Precedents and Arguments:The revisionist relied on the Supreme Court judgments in M/s Anand Swarup Mahesh Kumar vs. Commissioner of Sales Tax and Asian Paints (India) Ltd. vs. State of Karnataka, arguing that since the Entry Tax was passed on to the purchaser, it should not be included in the turnover. Conversely, the Standing Counsel argued that the amended provisions of the U.P. Tax on Entry of Goods into Local Areas Act, 2007, mandate that the Entry Tax paid by the assessee must be accounted for in the sale price and included in the turnover for VAT purposes.3. Analysis of Relevant Provisions:The court examined Section 3A of the Karnataka Tax on Entry of Goods Act, which permits registered dealers to collect Entry Tax from purchasers, distinguishing it from the U.P. Act, which lacks such a provision. The court noted that under the U.P. Act, there is no provision allowing the dealer to collect Entry Tax from the purchaser, thus making the principles laid down in the cited Supreme Court judgments inapplicable.4. Definition and Implications:The court referred to the definitions of 'turnover of sale' and 'sale price' under Sections 2(aq) and 2(ad) of the U.P. VAT Act. It emphasized that only the tax charged or chargeable is excluded from the sale price under Explanation 5. Since the Entry Tax paid by the dealer cannot be collected from the purchaser, it must be included in the sale price, thereby forming part of the turnover for VAT purposes.Conclusion:The court concluded that the authorities and the Tribunal correctly determined that the Entry Tax paid by the dealer should be included in the turnover of sales. Consequently, the dealer is liable to pay VAT on the amount of Entry Tax. The revision was dismissed, affirming that the Entry Tax forms part of the turnover for VAT purposes.