TaxTMI 
TaxTMI 
2025 (10) TMI 1186
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....llenging the order of the Gujarat Value Added Tax Tribunal, Ahmedabad [for short 'the Tribunal'] dated 28.06.2007 in Second Appeal Nos. 402 to 409 of 2006. The Tax Appeals are admitted by order dated 07.12.2012 for consideration of the following substantial questions of law: (i) Whether the Gujarat Value Added Tax Tribunal was right in law and in facts in coming to the conclusion that respondent had not collected any amount by way of tax? (ii) Whether the Gujarat Value Added Tax Tribunal was right in holding that the provisions of section 56 of the Gujarat Sales Tax Act are not attracted in the present case? 3. The respondent-M/s. Hindustan Coca Cola Beverages Pvt. Ltd. (hereinafter to be referred to as 'the assessee'] is engaged in manufacture/trading of soft drink, packaged drinking water etc. and registered under the provisions of the Gujarat Sales Tax Act, 1969 [for short 'the Sales Tax Act'] and under Central Sales Tax Act, 1956 [for short 'the CST Act']. 3.1 The assessee had obtained sales tax exemption certificate under section 49(2) of the Sales Tax Act and availed sales tax exemption of Rs. 49,54,14,504/- till 24.11.2003 on the sale of manufactured ....
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....ducting crate rental/ wear and tear charges, net price was worked out and since the sale price was inclusive of the tax if any, the component on taxable sale was calculated by working back from net price and the tax component thus calculated was subtracted from the net price to arrive at a price excluding sales tax. 3.5 The Sales Tax Officer, therefore, was of the that selling price pattern has remained same since beginning and thus, net price which was inclusive of sales tax, if any, was charged form the end consumer and no charge was collected towards sales tax separately invoice or commercial invoice in any case. 3.6 The Sales Tax Officer therefore, made comparison between the price pattern for the period prior to the completion of incentive period and after that and it was found that there was no change in price structure and net price remained the same. It was therefore, concluded that in the net price, the component of sales tax was included even for the period of exemption availed by the assessee. 3.7 The Sales Tax Officer therefore, made investigation with regard to accounting of the sale of the products by the assessee and it was found that assessee was having "Ja....
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....01 which showed the provision of the amount of sales tax which was otherwise computed on the exempted sales transaction. The Sales Tax Officer, therefore, came to the conclusion that the account of sales tax is being maintained by the assessee irrespective of the transaction whether its taxable or exempted. It was also found on perusal of the sales tax working that to calculate sales tax on taxable goods, component of sales tax was calculated by working back from the net price and to calculate the quantum of sales tax exemption to be availed, the assessee calculated the sales tax directly instead of working back method with an intention to create an illusion that the sales was made without inclusion of the sales tax. 3.12 The Sales Tax Officer however, relying upon the price pattern of the assessee being "inclusive of tax" concluded that the assessee could not have computed the sales tax exemption without including the same in the sale price and therefore, net price or the Maximum Retail Price of the assessee was inclusive of the sales tax. 3.13 The Sales Tax Officer further found that a sales register maintained in "Jaguar" software clearly indicated the sales tax component ....
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....r this Act....No proceedings for that matter before any other authority during the course of which the current proposal of penalty can be said to have arisen. 2. Cited the observations of the Hon. High Court in the case of Ahmedabad Steel Craft and Rolling Mills-Vs. State of Gujarat (1985) 0052 STC 0227 "It is apparent that the penal provision is attracted where any person collects any amount by way of tax in contravention of the provisions of section 56...." 3. The allegation made in the SCN that the Company had collected sales tax on its exempted products manufactured at Goblej are without basis and unsustainable. 4. The SCN proceeds on the entirely erroneous footing that by considering the sales tax element in the pricing of its exempted products, the company has in effect collected sales tax on exempted goods and, therefore, violated the provisions of Section 56(1) and to apply the same to any case. 5. The question of applying section 56(1) would arise only when there is collection of tax amount. 6. The Company has not only collected any amount towards sales tax on exempted goods but, it is important to note that the way the....
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....te are clearly unsustainable. 17. They are passing certain scheme of entries involving determination of amounts pertaining to the exemption entitlement in a separate set of books of account being maintained as per USGAAP. These transactions recorded in the USGAAP accounts are totally delinked from the actual transactions and have absolutely no relevance for sales tax purposes of for understanding the actual transactions with the parties. 18. They assume that the entire sales in a month are taxable goods and accordingly calculate the total sales tax amount thereon in the USGAAP books of account. Even the USGAAP books of account do not reflect any amount being charged by way of sales tax on exempted goods. 19. Further the USGAAP entries do not consider 'the actual operations and sales of the unit as the above scheme of entries is based on the principle that the tax advantages arising as a result of a tax exemption obtained should be considered to accrue to the business uniformly over the period for which the unit needs to carry on operations under the industrial policy. 20. They have relied on the judgment of Hon. High Court of Gujarat in the case ....
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.... is issued without prejudice to any other action that may be taken against them under the Gujarat Sales Tax act, 1969 or any other Rules of the time being force." 3.19 Feeling aggrieved by the assessment order, the assessee preferred First Appeals before the Deputy Commissioner of Commercial Tax which were dismissed by confirming the assessment made by the Sales Tax Officer on the ground that the appeals were without any merit inasmuch as the assessee/appellant collected sales tax from the distributors and retailers and therefore, it was liable to be penalized and consequently, orders of penalty were also upheld in the First Appeals. The Deputy Commissioner dismissed the appeals filed by the assessee after considering the Books of Accounts maintained by the assessee under two different account systems: one under the USGAAP [Generally Accepted Accounting Principles in USA)and other under IGAAP [Generally Accepted Accounting Principles in India]. 3.20 It is not in dispute that the assessee has shown the sales tax component on the basis of the reverse working under the accounting system maintained by the assessee in USGAAP, however, there is no reference to collection of sales t....
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....y way of tax, in some different name or under some different guise during exemption period." xxxxx "76. In view of the above discussion it is empty clear that A. There is no evidence on record to show that the appellant has collected some amount by way of tax from distributors, retailers and customers. B. Sale invoices do not show collection of tax in any manner, in any form, in any name. C. Sale invoices contain endorsement that the sales are exempted from payment of tax. D. There are positive affidavits of distributors indicating that there was no agreement between the appellant and the distributor regarding payment of sales tax on the sale of the product in question made by the appellant to the distributor. The affidavits further show that the no sales tax has been paid by the distributors to the appellant. E. It has also come on record that the appellant has not been collecting tax from the distributor and retailers. This is so when the exemption was available to the appellant. The said practice has been continued by the appellant even after the expiry of the period of exemption. F. It is true that there is....
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....accordance with law and therefore they are required to be set aside. For foregoing reasons and discussions, this Tribunal is of an opinion that on one hand the appellant is not proved to have collected some amount by way of tax from the distributor and retailers. On the other hand, the penalty has been imposed only on such a finding. Therefore after considering the facts of the matters, the documents on record, the arguments advanced by Mr. Nanavati, learned senior Advocate for the appellant and Mr. Mihir Joshi learned Additional Advocate General for the respondent and after going through and keeping in mind the principle enunciated in the case laws shown on behalf of both the parties, this Tribunal is of a considered opinion that the appellant is not proved to have collected any amount by way of tax from the distributors or retailers. Consequently the appellant is not liable to pay penalty. Therefore the assessment orders as well as the appellate orders imposing penalty on the appellant are illegal and hence they are required to be set aside. Hence we pass following order. ORDER 1. These second appeals are allowed and the penalty orders u/s. 46 read with sec. 56 ....
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....f exempted goods which clearly proved that the assessee was collecting sales tax by including the same in the Net/MRP. In support of his submissions, reliance was placed on the decision of the Hon'ble Apex Court in case of Amrit Banaspati Co. Ltd and anr vs. State of Punjab and anr. reported in [1992] 085 STC 493. 4.2 Learned advocate Mr. Utkarsh Sharma further referred to and relied upon the decision of Hon'ble Apex Court in case of South India Alloy Industries vs. Collector of Central Excise reported in 1997 (8) SCC 729. 4.3 Learned advocate Mr. Sharma submitted that the Tribunal has clearly erred in relying upon the additional evidence in the Second Appeal, more particularly, the opinion of S.R. Bailiboi & Co., Chartered Accountants and affidavits of Shri D.D. Nageshwar Rao, Shri Sunil Gupta and explanation to entries under USGAAP in the parallel accounts maintained by the assessee, income tax returns and other documents which did not form part of the assessment proceedings or the First Appeal. It was pointed out that such additional evidence ought not to have been permitted by the Tribunal which were adduced only with a view to plug the loopholes established in the assess....
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....x forming part of the amount of sale price and another by not showing such component and showing the entire amount of sale price without inclusion of the sales tax, such double standards cannot be accepted on the pretext that the assessee was required to show the sales tax component on the exempted sales to its parent company. It was therefore, submitted that the respondent-assessee was liable to pay the sales tax as it was collected from its end users being part of the Net/MRP charge on the sale of the bottles containing soft drink. 4.5 Learned advocate Mr. Sharma also submitted that the Tribunal has committed an error by arriving at a conclusion that the respondent-assessee did not collect any amount by way of tax and as such, there is clear violation of the provision of section 56 of the Sales Tax Act and Assessing Officer and the First Appellate Officer have rightly computed the amount of tax and penalty payable by the respondent-assessee. It was therefore, prayed that the appeals may be allowed by answering the questions in favour of the Revenue and against the assessee. 5. Per contra, learned advocate Mr. Kunal Nanavati appearing for the respondent-assessee submitted th....
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....as also considered the decision relied upon by the Revenue in case of Amrit Banaspati Co. Ltd. (supra) and clarified and distinguished the same. 5.4 It was therefore, submitted that the assessee was entitled to fix Maximum Retail Price of its products by adopting uniform market price throughout India which would not defer in spite of the differences in sales tax payable at the point of sale. It was submitted that it was the business policy of the respondent-assessee and no exception can be taken and uniform market retail price would ensure that the goods from one State do not flow to the other State by distorting the sales. It was therefore, submitted that in similar facts, the Hon'ble Apex Court has clearly held that the respondent-assessee was not liable to pay tax and had not passed on the tax liability and therefore, the Revenue could not have bifurcated and divided the sale consideration on the basis of any assumption that the sale price received have included the tax and such fiction has no application in the facts of the case. 5.5 It was therefore, submitted that both the questions framed by this Court are squarely answered by the Hon'ble Apex Court in favour of the as....
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....ssessee was bifurcating its sale price by showing separately the sales tax component embedded therein as sales tax payable which was later on transferred to sales tax incentive and deferred sales tax account to be spread over overlooking period as per the agreement between the respondent-assessee and the Government to run the plant at Goblej, District-Kaira. 9. However, it is clarified by respondent-assessee that such entries were passed in account only under USGAAP and later, such entries were reversed in the Books of Accounts maintained in IGAAP which otherwise could have been deleted but, in order to maintain audit trail such entries were reversed and the entire amount of sale consideration was shown as gross sale without any bifurcation between the sale price and the amount of sales tax payable by the respondent-assessee. 10. The assessee has also explained net impact of the entries both in the Books of Accounts maintained USGAAP and in the Books of Accounts maintained under IGAAP before the authorities which was reproduced by the Tribunal in the impugned order as under: "1. Incentive is credited in USGAAP books for exempted goods is on lock-in-period over the in....
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....o found that the respondent-assessee has not collected tax even after the expiry of period of exemption. With regard to two different accounting systems maintained by the respondent-assessee, the Tribunal has rightly relied upon the accounts maintained in accordance with the IGAAP system which is relevant for the purpose of assessment under the provisions of the Sales Tax Act wherein, no amount was shown as collected as collection of tax by the respondent-assessee and in the returns filed under the provisions of the Sales Tax Act also there was no mention about collection of any amount as tax. 13. The Tribunal has therefore, rightly held that the amount of tax could not have been bifurcated by the Revenue simply because the sales has been inclusive of tax. 14. The finding of fact arrived at by the Tribunal is further fortified by the decision of the Apex Court in case of M/s. Hindustan Liver Limited (supra) wherein, the Apex Court considered the following three questions of law framed by the High Court: "5. The High Court to appreciate the controversy framed the following three questions of law: "(1) Whether the consideration of sales tax in fixing the price....
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.... basis of the exemption notification, had set up a new undertaking incurring expenditure as such exemption was granted by way of valid notification to encourage investment in the backward districts and to overcome initial financial problems for establishing new industries and to recoup an ensure reasonable return on capital expenditure and associated other risks. The Hon'ble Apex Court, therefore, by referring to para 11 in the case of Amrit Banaspati Co. Ltd (supra) held that in the said decision, it was nowhere stipulated that the sale price as fixed must expressly exclude the tax component. The Apex Court has observed that when the exemption is granted, the manufacturer would fix the sale price taking such exemption into account so as to see that both the manufacturer and the consumer would be benefited. It was therefore, held that "sales tax" is an indirect tax, the purchaser has to pay the same and when the tax is not levied, the purchaser does not pay the same. 17. After considering the facts of the case the Hon'ble Apex Court held as under: "23. An assessee is entitled to carry on and conduct business, fix the maximum retail price of its products. In the present ....
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....xt, it would be relevant to refer to the decision of the Court in Delhi Cloth and General Mills Co. Ltd. (supra). This case relates to Madhya Pradesh General Sales-tax Act, 1958. While interpreting the words "turnover" and "sale price" in the context of the charging Section it was observed that the liability to pay tax was on the dealer and the purchaser had no liability to pay tax. If a dealer had to pass the tax burden on to the purchaser, he could only do by adding the tax in question to the price of the goods sold. If that be so, the taxes collected by the dealer from the purchaser became a part of the sale price as fixed. Thus, the amount recovered by the dealer was in reality a part of the entire sale consideration. To appreciate the principle we may usefully reproduce certain passages from the said authority:- "6. Under Section 4 the liability to pay tax is that of the dealer. The purchaser has no liability to pay tax. There is no provision in the Act from which it can be gathered that the Act imposes any liability on the purchaser to pay the tax imposed on the dealer. If the dealer passes on his tax burden to his purchasers he can only do it by adding the tax in qu....
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....ideration for the goods sold. * * * 10. From all these observations, it is clear that when the seller passes on his tax liability to the buyer, the amount recovered by the dealer is really part of the entire consideration paid by the buyer and the distinction between the two amounts, - tax and price - losses all significance." The relevance of this decision is that it holds that in a given case the tax component may form a part of the sale price and cannot be treated as a separate component. In the case at hand, when the respondent was not liable to pay tax and had not passed on the tax liability, we do not think, sale consideration received should be bifurcated and divided on the basis of any assumption that the sale price received must have included the tax. This fiction has no application in the present case. There is neither such principle nor any precept in law. In any case the finding of fact is to the contrary." 18. In view of the above dictum of law and considering the facts of the case, the only ground on which the penalty was levied under section 46 read with section 56(1) of the Sales Tax Act was that the price while fixed ....