TMI Blog1982 (2) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... aid bars, billets and rods during the above year of account. The iron scrap purchased by the assessee as raw materials were goods specified in entry 3 of Schedule B, Part I, to the Bombay Act, but even when the assessee had converted iron scrap into bars, billets and rods by a process of "manufacture" as defined in section 2(17) of the Bombay Act, the assessee had not done anything to the iron scrap which it had originally purchased, so as to take the manufactured bars, billets and rods out of the description of the goods contained in the aforesaid entry 3 of Schedule B, Part I, to the Bombay Act. Therefore, the sales of the above bars, billets and rods as manufactured goods in question continued to be resale of original goods, namely, raw materials consisting of scrap, within the meaning of the expression "resales" as defined in clause (iii) of section 2(26) of the Bombay Act. The assessee was entitled to deduction of such resales from its turnover of sales for the purpose of assessment. In short, the assessee was not liable to pay any tax on such resales. This is an undisputed position before us. The case of the department was that the assessee had issued sale bills to its cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les tax was merely done in order to inform the customers that they were not liable to pay tax on the relevant sales and that the liability to pay tax thereon, if at all or any, was wholly upon the assessee. It was, therefore, wrong to interpret the sale bills of the assessee as indicating that the assessee had collected the disputed sum of Rs. 27,104 or any amount by way of tax under section 46(2) of the Bombay Act. It was urged before the Tribunal that even though the assessee had charged and recovered price as being inclusive of sales tax, it has really not collected any amount of sales tax from the customers and what the purchasers were charged was only a lump-sum price being the consideration for the resales to the purchasers in question. It was urged that by the term "inclusive of tax" printed on the bills, what was conveyed to the customers was that tax, if any, payable on the transactions shall be paid by the assessee and that the customer would have nothing to do in regard to the concerned resales so far as the tax liability was concerned. The aforesaid submissions made before the Tribunal were not accepted by it. The view which the Tribunal took was that when the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits, the disputed amounts so collected by way of tax would actually come to Rs. 27,104. Having reached this conclusion, the Tribunal dismissed the second appeal and confirmed the order passed by the learned Assistant Commissioner. Having been dissatisfied and aggrieved by the aforesaid order of dismissal passed by the Tribunal on 1st May, 1972, the assessee sought a reference on a question of law. The question of law which is referred to us is in the following terms: "Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in upholding the order of forfeiture of Rs. 27,104 under section 37(1) read with section 46(2) of the Bombay Sales Tax Act, 1959?" Before we proceed to consider the submissions made before us by Mr. R.D. Pathak, the learned Advocate for the assessee, we would like to make a reference to certain observations passed by the Division Bench of this Court in Hemchandbhai Co. v. State of Gujarat (Sales Tax Reference No. 13 of 1979, decided on 8th December, 1981-Gujarat High Court) [1982] 50 STC 274 with regard to the penal proceedings taken by the sales tax authorities. P.D. Desai, J., speaking for the Division Bench, stated: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and steel as manufactured by the assessee out of the iron scrap only amounted to resale so as not to take the transactions out of entry 3 of Schedule B of part I to the Bombay Act. It is also an undisputed position that the assessee was not liable to pay any tax on those resales. It is also undisputed that the credit of tax on such resale was sought and was given by the department. It is also undisputed that the assessee had resold the goods in question to its customers under the sale bills which incorporated a phrase or a term "inclusive of sales tax". Mr. Pathak submitted that merely because the bills contained the phrase or term "inclusive of sales tax", it did not mean that every time what the assessee recovered from its customers was the price plus tax. Mr. Pathak submitted that when the goods were taxable, the phrase or term "inclusive of tax" would mean that the purchaser would not have to pay the same tax. Further, the customers were supplied the same set of bills even with respect to goods which did not attract any liability in the hands of the assessee to pay any tax and in such an eventuality what the phrase or term "inclusive of tax" means is "inclusive of the tax, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive of tax". The conclusion to levy penalty is reached thus primarily upon an inference drawn from the phrase or term used in the assessee's bills, namely, "inclusive of tax". We do not find any other reason in the order of the Tribunal for reaching that conclusion. We repeatedly asked Mr. R.P. Bhatt, the learned Assistant Government Pleader appearing for the department, whether there was any evidence to show that the sum of Rs. 27,104 was recovered as tax, barring the department's inference based upon the same phraseology "inclusive of tax". Mr. Bhatt candidly admitted that the entire result rests upon the explanation of the "inclusive of tax" and that is how so far as the present reference is concerned, we are called upon to answer the question as to whether when the assessee has used a phrase "inclusive of tax" it would necessarily imply under the facts and circumstances of the case that the forfeited amount was recovered by it as tax and not as a sale price. As rightly observed by the Tribunal, it seems beyond any dispute that the assessee was at liberty to include any tax which was paid or payable by him as included in the sale price. The difficulty arises only if the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax collected by the dealer from his purchaser becomes a part of the 'sale price', as defined in section 2(o) of the Act. Unless the price of an article is controlled, it is always open to the buyer and the seller to agree upon the price payable. While doing so it is open to the dealer to include in the price the tax payable by him to the Government. If he does so, he cannot be said to be collecting the tax payable by him from his buyers. The levy and collection of tax is regulated by law and not by contract. So long as there is no law empowering the dealer to collect tax from his buyer or seller, there is no legal basis for saying that the dealer is entitled to collect the tax payable by him from his buyer or seller. Whatever collection may be made by the dealer from his customers can only be considered as valuable consideration for the goods sold." It is undisputed that in the present case, the assessee was at liberty to cover the tax paid by his vendors against his own purchasers and that is what he has done. Merely because the goods are sold under the bills containing the phrase or term "inclusive of tax" it does not mean that what the assessee collected was the tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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