Turnover-based sales tax on free units treated as second and subsequent sales where agreed consideration was already taxed earlier.

An ad hoc addition for probable omissions was sustained because unexplained stock discrepancies found on surprise inspection supported the lower authorities' inference and the assessee's explanation did not displace the record-based findings. The turnover issue was decided in favour of the assessee: under a turnover-based sales tax regime, the levy attaches to turnover and not quantity, and goods supplied with free units were sold for an agreed consideration already subjected to single-point tax at an earlier stage. The later sale in the chain could not be treated as a fresh first sale merely because free units formed part of the supply, so the disputed turnover was exempt as second and subsequent sales.

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Issues: (i) Whether the adhoc addition of Rs. 2,000 for probable omissions was justified. (ii) Whether the turnover relatable to free units supplied along with the commodity was liable to be assessed as first sales in the hands of the assessee, or was exempt as second and subsequent sales.

Issue (i): Whether the adhoc addition of Rs. 2,000 for probable omissions was justified.

Analysis: The stock discrepancies noticed on surprise inspection remained unexplained, and the surrounding facts supported the inference drawn by the lower authorities. The explanation offered did not displace the findings based on the records and the nature of the detected variations.

Conclusion: The addition of Rs. 2,000 was upheld against the assessee.

Issue (ii): Whether the turnover relatable to free units supplied along with the commodity was liable to be assessed as first sales in the hands of the assessee, or was exempt as second and subsequent sales.

Analysis: The levy under the Tamil Nadu General Sales Tax Act, 1959 is on turnover and not on quantity. The materials showed that the manufacturer sold the commodity, including the free units, for an agreed consideration and suffered single-point tax on that turnover. The wholesalers thereafter sold the same quantity structure to the assessee, and the assessee's onward sale was only a later sale in the chain. Since the invoices and the scheme reflected an agreed consideration for the entire quantity, including the free units, the disputed turnover could not be isolated and treated as a fresh first sale in the assessee's hands.

Conclusion: The assessee was not the first seller in respect of the free units, and the disputed turnover was eligible for exemption as second and subsequent sales.

Final Conclusion: The appeal succeeded only on the turnover issue, while the disallowance relating to the adhoc addition remained undisturbed, resulting in partial relief to the assessee.

Ratio Decidendi: Under a turnover-based sales tax regime, where the same goods are sold as part of an agreed consideration already subjected to single-point tax at an earlier stage, the later seller cannot be treated as the first seller merely because free units are included in the supply.

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