TMI Blog1996 (3) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of sale of products and not subsidy or compensation and thereby the Commissioner of Taxes upheld the orders of assessment passed by the Superintendent of Taxes. The petitioner-company has also challenged the notice of demand issued by the Superintendent of Taxes levying tax on the amount received by it from the pool account of the Oil Co-ordination Committee. 3.. Facts of the cases are: The petitioner is a company with limited liability. It is a Government of India undertaking, under the administrative control of the Ministry of Petroleum and Natural Gas. The company is engaged in the refining crude oil and manufacturing of petroleum products. The company is a registered dealer under "the Taxation Act, 1955" and the Central Sales Tax Act, 1956. According to the petitioner, the prices of petroleum products are fixed by the Government of India on the basis of recommendation of the Oil Price Committee set up by the Government of India. The said Committee after considering various aspects, submitted its report fixing the retention price of refinery products. The formula for fixing the retention price of refinery products as recommended by the Oil Price Committee is as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause and also appeared before the Superintendent of Taxes through its representatives. The petitioner submitted that the amount received from the pool account maintained by the Oil Co-ordination Committee did not form part of the sale price and therefore, the said amount could not form part of turnover and accordingly, no tax was leviable on the said amount. There were various correspondences between the petitioner-company and the Superintendent of Taxes. Documents were also placed before the Superintendent of Taxes to show that the amount received by the petitioner-company from the pool account was not a part of sale price. It was contended by the petitioner-company that the amount received by the company from the pool account was in the nature of subsidy or compensation. The contention of the petitioner-company was not accepted by the Superintendent of Taxes and he completed the assessment. In the said assessments, the Superintendent of Taxes included the amount received from the pool account by the petitioner-company as taxable turnover and accordingly levied taxes thereon. Pursuant to the said assessment orders demand notices had also been served on the petitioner-company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n force and the provisions of the said Act were applicable in the present case. However, this Act has been repealed by the Assam General Sales Tax Act, 1993 as per section 74(1) of the Act. The expression "sale" has been defined under sub-section (10) of section 2 of the Taxation Act, 1955, which I quote" 'Sale' with all its grammatical variations and cognate expressions means any transfer of property in goods by any person for cash or deferred payment or other valuable consideration: Provided that any shortage in excess of one per centum of the quantities of motor spirit received into stock by a dealer for sale shall, unless the contrary is proved, be deemed to be a sale for purposes of this Act." "Sale price" has been defined in sub-section (10A) of section 2, which I quote" 'Sale price' used in relation to any dealer means the amount of money consideration for sale of taxable goods less any sum allowed as cash discount according to ordinary trade practice, but including any sum charged for containers or other materials used in packing of such goods." "Turnover" has been defined in sub-section (11A) of section 2 of the Taxation Act, 1955, which I quote" 'Turnover' used in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual cost due to variation of standard production pattern owing to specific directive given by the Government. This was made with a view to lowering the price of petroleum product. Creation of a pool account was to compensate to those refineries whose cost of production were higher and thereby to prevent the refineries from closing down. As per the said scheme all the refineries were to receive transfer price either through sale proceeds or from the pool account. The contention of the learned counsel for the petitioner-company was that as the amount received from pool account was only in the form of subsidy and/or compensation to compensate the loss because of the high cost of production the said amount cannot be said as "sale price", therefore, it could not form part of the turnover. Therefore, as per the price control policy the seller was not entitled to receive any amount other than the amount fixed. 10.. In this connection some decisions had been cited by the counsel appearing for the petitioner. In Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13, the Supreme Court had the occasion to consider the meaning of "sale price". The sale of cement was controlled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he country at a controlled price. No doubt, the price was described as a maximum beyond which the sale price could not go but the intention, which was also carried out by all the suppliers, was that cement was to be sold at what may be described as a controlled price on terms 'free on rail destination'. In other words, the producer was entitled to the controlled price irrespective of the amount of freight which might have been incurred in respect of the transaction. Having regard to the fact that the freight on consignments to places near the factory and consignments to places far away from the factories could show a lot of variation, the Control Order created a machinery by which all freight charges were credited to a common account and any particular cement manufacturer incurring more than a specified amount was entitled to be reimbursed for the excess freight incurred by him. As the learned Judges pointed out in the earlier decision, the whole Control Order proceeds on the footing that the freight charges are to be met by the producer and that he was entitled to a consolidated price irrespective of the freight he may have incurred. In this view of the matter, the sale price, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectrical goods from the assessee and thus the findings of the Tribunal was held to be correct. Again in another decision in Fertiliser Corporation of India Ltd. v. Commercial Tax Officer (OFA), Punjagutta Division, Hyderabad [1991] 83 STC 129, the said High Court held that the subsidy received from the Central Government by the manufacturer could not be treated as a part of turnover within the meaning of section 2(s) of the Andhra Pradesh General Sales Tax Act, especially when the assessment order itself showed that the transactions were covered by bills as required by the statutory provisions and no amount had been paid on behalf of the purchaser nor any amount collected by the dealer in excess of the price mentioned in the bill. This view is reiterated in a later decision of the Andhra Pradesh High Court in Coromandel Fertilisers Ltd. v. Commercial Tax Officer (OFA) [1992] 85 STC 552, wherein also the court held that the subsidy cannot form part of the turnover. The Kerala High Court in Madras Fertilisers Limited v. Asst. Commissioner (Assessment), Special Circle-II, Agrl. Income-tax and Sales Tax Department, Ernakulam [1994] 95 STC 134 took a similar view in respect of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser of fertilisers, is only for payment of the price subject to the maximum fixed by the Central Government and not for any other. This being the contract, any other sum received by the seller-petitioners for a different purpose and not as consideration for the sale, is not part of the sale price, and therefore of their turnover. The fact that the amount of subsidy is determined with reference to the quantum of fertilisers cleared from the factory on which considerable stress was made by the Government Pleader, does not lead to any inference that the payment is made in consideration of the sale. The retention price and the transfer price are fixed with reference to various factors. The subsidy is paid for the benefit of the public, to keep the prices at a reasonable level, and at the same time to ensure a reasonable return on investment to the units, and not as consideration for the sales effected by them. I am therefore of the view that the amount of subsidy received by the petitioners for the purpose of their units, which is not related to any particular transaction of sale, but is related to other circumstances, cannot constitute turnover in their hands assessable under the KG ..... X X X X Extracts X X X X X X X X Extracts X X X X
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