TMI Blog1979 (4) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Iron and Steel Co. Ltd. and the Durgapur and Rourkela Steel Plants of Messrs. Hindustan Steel Ltd. The supplies made by the petitioner are covered by regular contracts wherein there is a contracted price with an escalation clause. The escalation clause runs thus: "The basic prices prescribed in clause 5 above are based on the rates of remuneration and benefits for labour including employer's contribution to provident fund and royalties presently current either in fact or provisionally calculated as detailed in Schedule A hereto. Any variation that may from time to time occur in such items or any change by way of additional benefits to labour or any additional cess or tax (other than a tax charged upon income by the Indian Income-tax Act, 1922, or any statutory modification or re-enactment thereof) not expressly provided for in this agreement, made or imposed upon or suffered by the sellers whether by or resulting from any statute, rule or order or any award or decision of any statutory body or board such as the Wage Board or any tribunal or conciliation proceeding or agreement therein shall be reflected by a proportionate increase or decrease, as the case may be, in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued after 1st April, 1975, were produced in support of the claim of concessional rate of tax. The assessing officer referred to the balance sheet for the year ending 31st March, 1975, wherein the sales turnover had been shown including the returned amount and the aforesaid amount of Rs. 41,02,864. According to the assessing officer, the petitioner maintained the mercantile system of accounting and it accepted the entire turnover to be of the year and there was, therefore, no justification to keep a part of the turnover to be offered for assessment in future while sales had been completed and the sale price became receivable for the entire sum. In regard to the claim to be taxed at the concessional rate in respect of the turnover of about Rs. 13 lakhs on the basis of the declaration forms, the Sales Tax Officer did not agree by holding that the turnover related to the period ending 31st March, 1975, but the declaration forms had been issued in the subsequent year and, as such, they could not be accepted as relating to that turnover. These two writ applications have, therefore, been filed challenging the two assessments. 3.. In the counter-affidavit, it has been specifically pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof........" In the case of State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 S.T.C. 353 (S.C.); A.I.R. 1958 S.C. 560. , the court observed: "...Thus, according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which of course presupposes capacity to contract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale........" In the instant case, there is a contract to sell, and there is actually passing of title for consideration. The claim raised by the petitioner under the escalation clause does not become "sale price" until the buyer consents to the fact of escalation. From the escalation clause, it is clear that the higher price becomes payable with effect from the effective date as may be mutually agreed upon between the seller and the buyer. With a view to satisfyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer for a part of the claim (i.e., for a sum of about Rs. 13 lakhs) there was acceptance by the buyer. The petitioner, therefore, raised bills treating the same as sale price and obtained declaration forms under the Central Act for concessional rate of tax. According to the petitioner, the entire amount of Rs. 41 lakhs relating to the escalation claim has been accept. ed by the buyers in due course and in an additional affidavit placed before us by way of rejoinder the petitioner has maintained that on the entire sale price, tax has already been paid. 6.. The real dispute, therefore, is ultimately not one relating to whether any portion of the sum is "sale price" but as to when the amount became payable by way of sale price to the petitioner. Keeping the escalation clause in the contracts and the relevant definitions in both the statutes in view, there can be no two opinions that before 31st March, 1975, no part of the escalated demand became sale price in respect of which tax could be demanded. The Sales Tax Officer relied heavily on the balance sheet and the trading account of the petitioner for the relevant year. Admittedly, therein the entire amount including the sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter......" We are inclined to agree with Dr. Pal that the ratio of these decisions supports the stand of the petitioner. In law, the escalated claim did not constitute sale price and no sales tax under either Act became exigible and merely because the petitioner had in its balance sheet and trading account shown the entire amount (the sale price plus the escalated claim) as the sales turnover, the amount did not truly represent at that time the sale price and it was not open to the Sales Tax Officer to raise a demand of sales tax in relation to the escalated claim. 7.. The learned standing counsel placed reliance on a Bench decision of the Kerala High Court in the case of Aluminium Industries Ltd. v. State of Kerala[1978] 42 S.T.C. 72. In the case before the Kerala High Court, there was also a clause for price variation, as in the contracts in question. The learned Chief Justice referring to "turnover" and "sale pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the learned Chief Justice would in fact mean that, if the terms of the escalation clause were before the court, the position would have been different. At any rate, if the amount could not be collected without raising a supplementary bill, even in the opinion of the learned Chief Justice, there would have been a difference. 9. The learned standing counsel next relied upon another passage of the same decision, where it was indicated: "In paragraph 10 of its order, the Tribunal has noticed that, according to the assessee, a sum of Rs. 45,14,106.73 is the actual amount of price variation due to them during the year of assessment. Out of this, according to the assessee, there is no intimation to the customer that an amount of Rs. 12,35,531.41 is payable and this amount is only a provision for anticipated price variation and its anticipated variation receipt and does not represent actual receipt since the assessee had not drawn or issued any price variation bills for this amount. The Tribunal, in our opinion, rightly pointed out that, although the bills might not have been issued, the assessee had included the amount in the balance sheet and, therefore, that will form p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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