2017 (8) TMI 344

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....common judgment. In case of Supreme Industries Ltd., the applicant i.e. Supreme Industries Ltd. manufactures items such as injections and extrusions films, radio accessories, fan accessories etc. For manufacture of these products, the applicant develops moulds / rectifies moulds, which are exclusively used to manufacture the products of the applicant. The said moulds remain with the applicant and are not delivered to the customers. However, the applicant raises debit notes to the customers for making / rectifying the moulds used for making the components as development charges. In the matter of Tata Johnson Control Automotive Ltd., the assessee manufactures seating systems. 2. Save and except the difference in the product manufactured by Tata Johnson Controls Automotive Ltd. and Supreme Industries Ltd., rest of the facts are similar. For reference purpose, the facts are taken from the group of M/s. Tata Johnson Controls Automotive Ltd. 3. The applicants have filed Reference Application under Section 61 (1) of the Bombay Sales Tax Act,1959 with a request to refer certain questions of law to this Court for its decision. 4. The facts in nutshell are as under. 5. The applic....

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....e applicant for M/s.TELCO. Certain portion of designing work is done by Johnson Control Automotive UK Ltd. The purchasers partly reimbursed the cost incurred for designing and tooling. There is no sale of design of tools (moulds) . As such, the amounts received from the purchasers do not form part of the sale price neither the business, nor the tools are transferred to the purchasers. That part of the amount which is not reimbursed by the purchasers towards designing and tooling cost is written off by the applicant in the profit and loss account. The designing cost and tooling cost will not capitalized by the applicant nor is any depreciation claimed thereof. According to the learned Counsel, the designing and tooling are not sold or transferred to the purchasers. Hence, levy of tax on amounts received from the purchasers by way of partial reimbursement of designing and tooling cost cannot be treated as a sale price. 9. The learned Counsel further submits that there are no provision in the Sales Tax Act regarding marketing price. As such, sale price can be the amount received by the applicant on sale of seating systems. The provisions of the Central Excise Act are different from....

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.... its customers / buyers into sale price and development charges. This is a modus adopted to avoid payment of sales tax. The said amount also forms part of the sale invoice. The learned Counsel further submitted that designing and rectification or manufacture of moulds are necessary parts and have direct nexus with the manufacture of goods / components. The said charges would fall within the definition of anything done by the supplier in respect of the goods at the time of or before the delivery thereof. The said charges are mandatory payment by the purchaser as part of the sale price for the same transaction. According to the learned Counsel, if the purchaser had agreed to pay merely the price of the goods but not development charges for design and or tooling, the purchaser would not get the delivery of goods. The learned Counsel further submits that the definition of "purchase price" also is relevant. It would be seen that the sale and purchase are two sides of the same coin. The purchaser has paid the whole consideration for the purchase of component that he gets including all the charges for anything done by the supplier in respect of the goods at the time of or before the deliv....

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....be made pursuant to the contract of sale. The total amount of consideration for 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 supplier would ordinarily include all of them in the price at which he would sale his goods. It is clear that in the present case, the sale price is not statutorily fixed but it is a part of contract between the parties. The prima dona consideration would be the total price paid by the purchaser for acquisition of the product under sale. The contract will have to be examined. The payment of designing and tool cost is necessary concomitant of the final sale price of the seating system. The amount of money which goes from the pocket of the vendee to the pocket of the vendor as a consideration for passing of the property in the goods is the "sale price". It is the amount but for the payment of which the vendor would not transmit his title of the goods in favour of the vendee. The applicant / seller would not deliver / sale the seating system without recovering the cost of designing and moulds required for manufacture o....