TaxTMI 
TaxTMI 
2017 (3) TMI 54
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....of revisionist and sale price to the retailer is made good by IOC in the form of incentives etc. Assessee pays VAT upon turnover of purchase made from IOC and also charges VAT on the sale of lubricants to the retailers. The revisionist has submitted annual tax returns in Form 26-A, according to which it purchased lubricant worth Rs. 8,52,29,213.02 and incurred a sum of Rs. 49,47,445 for procuring the lubricant oil, which was appropriated towards transportation expenses in trading account. It had sold products worth Rs. 8,62,62,905.27 and also received an incentive of Rs. 64,85,695.40 from IOC. As per the return, assessee had purchased a total of 7,39,916.03 litres of lubricant, and sold 7,39,756.65 litres. It transpires that during the assessment year, a survey was conducted, in which one loose parcha was found, which has been attempted to be explained in one way by the assessee, but has been understood in quite another manner by the revenue. However, on 24.4.2009 when the survey was conducted, there was no discrepancy found between the books of account and the stocks physically verified to be present at the premises of the revisionist. 2. The assessing authority exercising its ju....
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....s purchase price under Section 2(y) of the Act? (ii) Whether the Tribunal has misconstrued Section 2(ad) read with Explanation VI of the Act, and thereby illegally added incentive amount received by IOC to the sale price? 5. (iii) Whether the Tribunal was justified in rejecting books of account of the applicant, without any adverse material available on record to justify it? 6. I have heard Sri Rahul Agrawal, learned counsel for the revisionist and Sri B.K. Pandey, learned Standing Counsel, and have perused the materials brought on record. 7. Sri Rahul Agrawal has emphatically urged that purchase price can only be the amount paid by the assessee to the seller i.e. IOC, as consideration for purchase of goods. It is stated that explanation clarifies that purchase price does not include the amount charged by seller from the purchaser of goods, if such amount has been shown separately on sale invoice or tax invoice by the seller. In the facts of the present case, it is pointed out that the assessee has truthfully disclosed the amount, which it has paid to the seller i.e. IOC. It is also urged that sale invoice or tax invoice does not mention any amount towards freight, and therefo....
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....ns the amount payable by a purchaser to a seller as consideration for the purchase of any goods made by or through him after deducting the amount, if any refunded to the purchaser by the seller in respect of any goods returned to such seller within such period as may be prescribed. Explanation: Purchase price does not include- (i) the amount representing the cost of outward freight or cost of installation, charged by the seller from the purchaser of goods if such amount has been shown separately on sale invoice or tax invoice issued by the seller; (ii) amount of tax if such amount is shown separately on the sale invoice or tax invoice." 10. The provisions contained under Section 2(ad), which defines 'sale price', and Section 2(ap) 'turnover of purchase', and 2(aq) 'turnover of sale' are also relevant, and thus reproduced:- "2. Definitions- In this Act, unless there is anything repugnant in the subject or context; (ad) "sale price" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anyt....
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....ry dealer on his taxable turnover of sale or purchase of goods, as the case may be, at the rates specified. Turnover of purchase has been defined to mean the aggregate amount of purchase price paid or payable in respect of purchase of goods made by a dealer. Purchase price in law means the amount payable by a purchaser, to a seller as consideration, for the purchase of any goods. The definitions are categorical, inasmuch as it does not include only the amount paid to the purchaser, but would also include the amount payable by a purchaser to a seller. The contract of sale in the present case is by IOC in favour of revisionist to transfer lubricant oil. The transaction of sale is completed with delivery of goods to the assessee. The purchase price, therefore, would include the price actually paid and also other amounts, which are payable by the purchaser for completing the transaction of sale itself. Hon'ble Supreme Court in Dyer Meakin Breweries Ltd. Vs. State of Kerala, (1970) 26 STC 248, was pleased to make following observations:- "It is common ground that the sale of the liquor took place in Ernakulam. The company arranges to transport liquor for sale from the factories to....
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....transpires from the above case law is that the amounts paid by way of consideration by the purchaser to the seller of goods in pursuance of the contract of sale can legitimately be regarded as purchase price while calculating the turnover for the purposes of sales tax legislation. What can legitimately be brought to sales tax or purchase tax is the aggregation of the consideration for the transfer of property. All the payments should have been made pursuant to the contract of sale and not de hors it. Any amount paid as ex gratia payment or as an advance cannot be the component of the purchase price and therefore can not legitimately be included in the turnover of the purchasing dealer. Whether one of the components of the purchase price goes to the coffers of the seller or not will not cease to be so if it is necessary for completing the same. Thus the total amount of consideration for the purchase of goods would include the price strictly so called and also other amounts which are payable by the purchaser or which represent the expenses required for completing the sale as, the seller would ordinarily include all of them in the price at which he would sell his goods. But if the sal....
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....rb. The component of freight or other charges incurred in processing of mentha-herb was rightly excluded, as what has been found to be purchased by the dealer was mentha-oil and not mentha-herb. It was a different product, which had come into being, and the question being dealt was as to what was the purchase price of mentha-oil, and therefore, any cost incurred in processing of mentha-herb was rightly excluded. The argument advanced by Sri Agrawal that freight though would constitute a part of the cost price, but would not be included in the purchase price, as this amount does not go to seller i.e. IOC, is not liable to be accepted, inasmuch as the cost of freight is incurred to complete the transaction of sale itself, and therefore, the freight incurred for getting the commodity to the place of sale would have to be treated as part of purchase price, so as to include it in the turnover of purchase. The first question urged is answered by holding that the Tribunal was justified in treating the expenses incurred towards transportation as constituting purchase price payable, and thus forming part of turnover of purchase. 15. Second question urged relates to adding of incentive of R....