TMI Blog1976 (12) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... mount representing the price refunded by the dealer is included in his turnover, the dealer shall be entitled to claim deduction of the tax levied in respect of such sale, within a period of six months from the date of sale by adjustment in the assessment and the final assessment shall be completed accordingly, but such dealer shall not be entitled to claim any adjustment or refund of the tax in respect of the sale of such articles after the expiry of the said period of six months." Applying this provision, the Tribunal held in this case that, since the claim for adjustment of tax was made after the expiry of six months from the date of sale, the petitioner herein was not entitled to such adjustment. It is the correctness of this conclusion of the Tribunal that is challenged in the present tax revision case. Having regard to the language of section 13(5) of the Act, the conclusion of the Tribunal on the facts of this case is correct. However, the learned counsel for the petitioner draws our attention to a judgment of this court in Madras Radiators and Pressings v. State of Tamil Nadu[1976] 37 S.T.C. 123., to which one of us was a party. In that judgment, after elaborately referri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aman, JJ., for determination as to the scope of section 13(5) of the Tamil Nadu General Sales Tax Act, 1959. The petitioner-assessee sold medicine (Methol) worth Rs. 69,640 by invoice No. 4268 on 3rd March, 1966, to the customer. The customer returned the goods on 2nd September, 1966, and it was brought to account on the same day. A credit note was also issued. On 25th October, 1966, the assessee claimed refund in his monthly return for September, 1966. On 25th January, 1969, the assessing authority rejected the claim. On appeal by the assessee, the Appellate Assistant Commissioner also rejected the claim on the ground that the claim was made beyond six months, as provided for under section 13(5) of the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as the Act. The Tribunal also dismissed the appeal of the assessee. Hence the revision by the assessee against the order of the Tribunal. The sale was on 3rd March, 1966, and the return of the goods by the customer was on 2nd September, 1966. In the monthly return for the month of September filed on 25th October, 1966, in relation to the assessment year 1966-67, an adjustment of tax was claimed. Section 13(5) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concluding portion of the sub-section, no refund is allowable in the present case. But the reference to a Full Bench was necessitated as a Bench of this Court in Madras Radiators and Pressings v. State of Tamil Nadu[1976] 37 S.T.C. 123., after referring to the provisions of the Act and the scope of rule 5-A(b)(i) of the Tamil Nadu General Sales Tax Rules, 1959, hereinafter referred to as the Rules, observed as follows: "Thus, section 13(5) and rule 5-A(b)(i) deal with different rights of a dealer." One of the learned Judges who heard the revision felt that because of the express provisions of section 13(5), the view that the two provisions, section 13(5) and rule 5-A(b)(i), referred to different rights of the dealer might not be correct. The learned Judge was also of the view that the restriction of a period of six months could not be got rid of by reference to a rule and that, in the event of there being a conflict, the rule being a subordinate legislation, would have to yield to the statutory provisions itself. We will now proceed to refer to the necessary provisions in the Act and the Rules and the decision in Madras Radiators and Pressings v. State of Tamil Nadu(1). S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the amounts specified in the following clauses shall not, subject to the conditions specified therein, be included in the total turnover of a dealer". Amongst the amounts that are not to be included in the total turnover is one contained in rule 5-A(b)(i), which states: "all amounts refunded to purchasers in respect of goods returned by them to the dealer when the goods are taxable on the amount for which they have been sold, provided that the accounts show the date on which the goods were returned and the date on which and the amount for which refund was made or credit was allowed to the purchaser." The rule which is in pursuance of explanation (2) to section 2(r) enables a dealer not to include the amounts refunded to the purchasers. As the turnover for the purpose of taxation under section 3 is to be for the year, the non-inclusion is for the year. That is, section 2(r), explanation (2)(iii), and rule 5-A(b)(i) all rleate to the turnover for the year. If both the transactions are not in the same year, that is, if the refund is in the subsequent year, the refund cannot be included in the turnover for the year. As it was felt that the dealer should not be deprived of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining a tax deduction so far as the amount refunded was concerned. On this ground alone, it is safe to state that the dealer is not entitled to a refund of tax on the price refunded by him. We will now proceed to examine the purport of rule 5-A(b)(i), which a Bench of this Court in Madras Radiators and Pressings v. State of Tamil Nadu(1) held, dealt with different rights of a dealer than section 13(5). The rule is framed, as already stated, in pursuance of explanation (2) to section 2(r) of the Act, and section 2(r) deals with the contents of a turnover and permits a dealer to exclude from his turnover any amount refunded. The turnover, we are of the opinion, is for the purpose of levy of tax under section 3 and it is for the financial year. Normally, it could not be understood as enabling a dealer to exclude the amount in the subsequent year. The rule does not advance the contention that it confers a different right. The rule enables a dealer not to include in his total turnover the amount refunded to purchasers. Not included in the total turnover would necessarily mean the turnover submitted for the year. This was realised by the legislature and section 13(5) was enacted to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclusion in the assessee's assessable turnover and the date of allowance determines the exclusion from the gross turnover under rule 5(1)(b). It may be noted that what has been really allowed to purchasers in that case was the amount of the unpaid instalments of the sale price. The court held that the assessee is not entitled to claim that the entire sale price has been allowed within the meaning of rule 5(1)(b). The court proceeded to explain that in the case of a transaction of sale in the form of a hire-purchase agreement, where the goods themselves are returned to the seller and the unpaid instalments of the purchase money ceased to be payable under the terms of the agreement, the seller is entitled to claim under rule 5(1)(b) the total of the unpaid instalments as an allowance made within the meaning of rule 5(1)(b). In the circumstances of that case, the amount was included as an allowance. The facts disclose that the unpaid instalments cannot be included in the sale at all. Further, as we observed at the outset, this decision was rendered before section 13(5) was enacted and, therefore, it cannot be treated as an authority for the proposition with which we are dealing. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied that the decision in Madras Radiators and Pressings v. State of Tamil Nadu[1976] 37 S.T.C. 123. is erroneous. In any event, after the introduction of section 13(5), the construction put forward by the Bench in the above decision is unsupportable. RAMASWAMI, J.-I have had the advantage of reading the judgment of my Lord, the Chief Justice. Having given my careful and anxious consideration, I regret my inability to agree with the conclusion reached by the learned Chief Justice. The assessee is a dealer who has opted for assessment under rule 18 of the Tamil Nadu General Sales Tax Rules, 1959 (hereinafter called the Rules). He had sold under bill No. 4268 dated 3rd March, 1966, medicine (Methol) for Rs. 69,640.00. This sale was included in the taxable turnover in the monthly return for the month of March, 1966, relating to the assessment year 1965-66 and the tax of Rs. 1,741 relating to the said sale was also remitted along with the return for the month. The goods sold under this invoice were returned to the assessee on 2nd September, 1966. and the assessee refunded the entire value of Rs. 69,640 plus sales tax of Rs. 1,741. In the monthly return relating to September, 1966, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sury. The return so filed for each month is provisionally accepted under clause (3) of rule 18. For the monthly return so submitted without a treasury receipt or cheque for the full amount of tax payable, the assessing authority shall provisionally assess the tax payable for the month on the basis of the return and shall serve upon the dealer a notice in form B-2 and the dealer shall pay the sum demanded therein. After the close of the year in which the said monthly provisional assessment has been made, the assessing authority shall, after such scrutiny as he considers necessary and satisfying himself that the monthly returns filed are correct and complete, finally assess under a single order on the basis of the returns and determine the tax or taxes payable under the Act for the year to which the returns relate. The provisions relating to the refund of any amount in respect of goods returned by customers will have to be understood with reference to this scheme of assessment. Prior to the introduction of section 13(5) in the Act, the legal position as per the provisions of the Act and the Rules and as understood by this court in respect of the amount refunded for articles returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include that sale in the taxable turnover in the monthly return and pay tax on it. If the return of the article was in any period subsequent to the sale but within the same assessment year the assessee would be entitled to deduct the same from the total turnover when he is finally assessed under a single order for the assessment year under rule 18(6), irrespective of the fact that the return was within six months or beyond the period of six months from the date of sale. No question of excluding the sale itself from the original monthly return could arise. In respect of an assessment under rule 18, the words "shall not be included in the turnover" in explanation (2) to section 2(r) and rule 5-A will, therefore, have to be understood only as a deduction from the total turnover. In cases where the sale and return were in the same assessment year, when a dealer submits his return under rule 15, the amount for which it was sold is included in the turnover and the amount refunded is deducted from the same before arriving at the total turnover of the dealer because the sale is still a taxable sale in spite of the refund made on return of the article. In such a case, it is also immateria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen existing prior to the introduction of section 13(5) of the Act. In Devi Films (Private) Ltd. v. State of Madras[1961] 12 S.T.C. 274., a Division Bench of this Court had to consider a similar question. The facts in that case are as follows: The assessee in that case sold some cinema machinery and apparatus under hire-purchase agreements. The aggregate of the amount due under these agreements was Rs. 68,275. In computing the taxable turnover of the assessee the aggregate amount was included in the year of the transaction and was assessed to sales tax. This was for the reason that the hire-purchase agreements were considered to be sales and the tax is payable on the aggregate amount for which the goods were sold, even though the consideration for the same was payable in future. When the purchaser defaulted in payment of the instalments, the assessee got a return of the goods. This default and return of the goods was in the assessment year 1955-56, long subsequent to the year of the transaction. The aggregate of the unpaid instalments in respect of these transactions was Rs. 21,191-1-6. The assessee claimed that since there was a return of the article and default in payment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to the purchasers. Relying on the rule, the assessee claimed a deduction of the amount refunded in the assessment year 1958-59. A Division Bench of the Andhra Pradesh High Court allowed the claim and held: "We find that rule 6(1)(b)(i) discreetly omits to mention that the deduction claimed for refund of price in regard to the return of goods should be confined only to a particular period. All that rule mentions is that when goods are taxable on sales, the amounts allowed to purchasers in respect of the goods returned by the purchasers to the dealer is an allowable item. Further on, the condition laid down in that rule (despite repetition) says 'provided the accounts show the date on which the goods were returned and the date on which and the amount for which refund was made'. It looks to us that the mention of the date is not with a view to find out when the claim for deduction has arisen, but only to make it feasible for the taxing authority to verify when the goods were got by the seller and how refunds were made in respect of them. Therefore, to have to read into this fact that the date of the return of the goods is to be specified by the assessee and that a revaluation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting law did not provide; (3) What remedy the legislature had resolved to cure; and (4) The true reason of the remedy. The reason for the addition of sub-section (5) of section 13 of the Act is explained in the statement of objects and reasons to the amending Bill and it reads as follows: "Under explanation (2) to the definition of 'turnover' in section 2(r), any amount refunded in respect of articles returned by customers shall not be included in the turnover of a dealer. But when such articles are sold by a dealer at the close of a financial year and customers return those articles and obtain refund of the price from the dealer some time after the close of that year, the dealer is unable to exclude the amount of price so refunded by him from his turnover before he furnishes his return for that year. It is considered necessary that he should be enabled to claim deduction of the tax included in his assessment in respect of the sale of such articles. It is not however considered necessary that a dealer should have the benefit of claiming such deduction of tax or refund of such tax for any indefinite period. It is accordingly proposed to amend section 13 of the said Act to allow ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 13(5) was again amended by the Tamil Nadu General Sales Tax (Second Amendment) Act, 1972, by substituting the words "within such period as may be prescribed" for the words "within a period of six months from the date of sale", and rule 5-B was also introduced in the Rules. Under rule 5-B such claim for adjustment or refund of tax could be made within a period of six months from the date of sale or before the date of final assessment, whichever is later. Under the provisions of section 13(5) and rule 5-B as they stand now, if the sale and the return take place in different assessment years, the assessee could claim a deduction of the amount refunded from the turnover of the year in which the sale took place before the date of final assessment for that year. Even if the assessment had been completed, he could ask for an adjustment or reopening of the assessment or rectification of the assessment if he makes a claim for such adjustment or rectification within a period of six months from the date of sale itself. This is the position both in regard to assessment under rule 15 or an assessment under rule 18. Thus, section 13(5) is not intended to cover a case where the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in sales tax the taxable event is the sale. But the Act has also to look to the process of assessment and collection of this tax. Hence it adopts the principle of aggregation familiar to fiscal measures, and makes the assessment to tax a yearly assessment by aggregating all sales that a taxpayer makes in the course of that year. The aggregate of the sales in the fiscal period of one year Is called the turnover. This is the reason why sales tax also goes by the other appellation, turnover tax. It would be correct to say that the tax is at once a tax on sales and a tax on turnover. There are sections in the Act which are oriented towards the one conception of aggregation; there are other sections which are founded on the other idea of severality of transactions. It is unnecessary for me to refer to all the relevant sections that illustrate the scheme of the Act, which I have outlined. Section 13(5) is one of those provisions in the Act, which takes up for special treatment an individual sale, which forms part of the aggregate of sales called turnover. Any transaction which is a sale, and is part of the taxable turnover of a year, gets taxed and must get taxed, in the assessment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit for the making of any claim by the taxpayer for deduction of the tax referable to the sale in question. While the Act permits the dealer to get a deduction of tax in respect of the sales return, it insists that the claim for such deduction should be made within six months from the date of sale. If, by then, the assessment of the turnover, in which the sale is included, is not completed, then an adjustment will be made in the computation of the taxable turnover by removing the amount covering the sales return from the figure of turnover, and the year's tax will be calculated on the net figure after exclusion of the amount of sales return from the turnover. The section having provided the six months' time-limit for deduction of tax in respect of sales returns, logically makes provision for cases where, even during the subsistence of the six months' time-limit, the final assessment happens to have been already completed. In such cases, the section entitles the dealer to obtain relief by way of refund of the tax levied in the already completed assessment, but always insisting that the claim for deduction of tax must be filed before the assessing authority within six months of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it is said, warrant the taxation of a sale in one year's assessment and the exclusion of the sales return in respect of that very sale in a subsequent year's assessment. With respect, I do not see how the words point to his conclusion. Ramaswami, J., has observed that the words "shall not be included" only mean that to the extent of the sales return there shall be a "deduction" from the turnover. In my view, the concept of a deduction in the sense of an allowance, such as we know in the realm of income-tax for business expenditure, is alien to the scheme of the Tamil Nadu General Sales Tax Act. "Shall not be included" does not mean shall be deducted. Nor does it mean "shall be excluded". In my opinion, the words "shall not be included" convey the idea that but for the provision for non-inclusion the thing would be included in the turnover. Samuel Goldwyn, the movie Mogul in a famous Goldwynism asked his host to "include me out" from the list of invitees. Adopting this Goldwynism I would say that a sales return is such a return as might be included out of the taxable turnover. In other words, only those sales returns whose relative sales, but for their non-inclusion, are includib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax any one of the sales of E, F, G and H. I do not find any warrant in the words of rule 5-A(b)(i) to desist from taxing a sale which falls within the charge. The exclusion of a sales return must, therefore, be strictly confined to the very year in which the sale itself has been effected and would otherwise have had to be included and charged to tax. This is the principle of the provision in section 13(5). When the section uses the words "deduction of tax" which, so far as I can see, is a new phrase in sales tax literature, it is implicit that only that tax with which the sale itself is charged, or would be charged, is the subject of tax relief. It is in this context that section 13(5) provides for adjustment of tax in the assessment in cases where the claim for deduction of tax is made before the assessment is over, although within six months of the turnover. It is on the same principle that section 13(5) provides for actual refund of tax-another innovation introduced by the Amendment Act of 1964-whenever the claim is made after the assessment gets completed, but within six months of the sale. It was suggested that section 13(5), occurring as it does in the section marginall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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