Turnover tax absorbed in wholesale price was treated as deductible where the manufacturer did not pass it on to buyers.

Turnover tax borne by the manufacturer without recovery from buyers was treated as part of the wholesale price and, on that basis, as an admissible deduction for refund purposes. Section 18(3) of the Karnataka Sales Tax Act, 1957 prohibits collection of turnover tax from the buyer by a dealer liable under Section 6B, so the tax remains a dealer's burden. Where the manufacturer fixes the sale price and does not separately pass on the turnover tax, the tax element is absorbed within the price structure. The note further states that Bombay Tyres International was inapplicable on these facts because the tax was not passed on to buyers, and the refund claim was therefore said to succeed.

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Issues: Whether turnover tax borne by the manufacturer, without being collected from buyers, is deductible from the wholesale price for the purpose of refund.

Analysis: Section 18(3) of the Karnataka Sales Tax Act, 1957 prohibits collection of turnover tax from the buyer by a dealer liable under Section 6B, so the tax is to be borne by the dealer. Where the manufacturer fixes the sale price and does not recover any extra amount towards turnover tax from buyers, the turnover tax is absorbed within the wholesale price. In that situation, the tax element forms part of the price structure and is an admissible deduction. The principle laid down in Bombay Tyres International was found inapplicable on the facts because the turnover tax was not passed on to the buyers.

Conclusion: The turnover tax paid by the appellant was deductible, and the refund claim was liable to succeed.

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