TMI Blog1994 (5) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3.. Section 4 of the Act deals with incidence of taxation. Every dealer whose turnover during the year exceeds the limits specified in sub-section (5) of section 4 shall be liable to pay tax under the Act on his taxable turnover in respect of sales or supplies of goods effected in Madhya Pradesh. Section 6 deals with levy of sales tax. Section 7 deals with levy of purchase tax. Every dealer who in the course of his business, purchases any goods specified in Schedule II from a registered dealer in circumstances in which no tax under sub-section (1) of section 6 is payable by that registered dealer on the sale price of goods or from any other person, shall be liable to pay tax on the purchase price of goods, if after such purchase, the goods are not sold either within the State or in the course of inter-State trade or commerce, but are sold or disposed of otherwise or used or consumed in the manufacture or processing of other goods or used or consumed otherwise. Sugarcane is included in Schedule II. Petitioner, a registered dealer, purchases sugarcane from cultivators who are not required to pay sales tax on the sale price of sugarcane. The petitioner consumes sugarcane in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler. By virtue of clauses (ii) and (iv) of section 2(kk), transport costs and forwarding and handling charges are to be included in "purchase price". The objection of the petitioner is confined to the inclusion of transport cost and forwarding and handling charges as beyond the legislative competence of the State Legislature. 6.. Item 54 of List II, Schedule VII of the Constitution reads: "Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92-A of List I". Entry 92-A of List I reads as follows: "Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce." It is beyond controversy that the State Legislature can enact law levying and imposing a tax on sale or purchase of goods which does not take place in the course of inter-State trade and commerce. The legislative scheme prescribes levy and imposition of sales tax on the basis of sale price as defined and levy and imposition of purchase tax on purchase price as defined. This scheme is very well within the legislative competence of the State Legislature. 7.. Learned counsel for the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te any goods which are under transport by any vehicle or boat and are not covered by a bill of sale or delivery note or other records indicated therein. The court observed: "Entry 54 of List II of the Seventh Schedule to the Constitution authorises the State Legislature to legislate in respect of taxes on the sale or purchase of goods. A legislative entry does not merely enunciate powers; it specifies a field of legislation and the widest import and significance should be attached to it.... taxing entry, therefore, confers power upon the Legislature to legislate for matters ancillary or incidental including provision for preventing evasion of tax. Subsections (1) and (2) of section 42 are intended to set up machinery for preventing evasion of sales tax. But, in our judgment, the power to confiscate goods carried in a vehicle cannot be said to be fairly and reasonably comprehended in the power to legislate in respect of taxes on sale or purchase of goods. By sub-section (3), the officer in-charge of the check-post or barrier has the power to seize and confiscate any goods which are being carried in any vehicle if they are not covered by the documents specified in the three sub-cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which would be added to the consideration paid for the purchase to arrive at the cost price in the hands of the purchaser. The parties may enter into contract distributing burden of costs, either adding it to the consideration or refraining from so doing; the Legislature has attempted to cut the Gordian knot by stipulating that such costs should be added to the consideration of the purchase in order to arrive at the "purchase price". There is nothing in legislative entry 54 of List II which creates specific restriction on the power of the State Legislature in defining "purchase price". On the other hand, as indicated by the Supreme Court, a legislative entry does not merely enunciate powers, but specifies the field of legislation and the widest import and significance should be attached to it. Undoubtedly, the Legislature has the power to enact law levying and imposing purchase tax and for that purpose, specify the components which will go to make up the purchase price for which tax has to be levied. Price undoubtedly is something which the purchaser pays to the seller. It can also include costs incurred in the process of purchase. But this does not necessarily mean that every pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted thus: "There is no substance in the contention raised by counsel for the appellant that in authorising the levy of sales tax on transport charges which formed a component of the price for which the goods were sold, the State Legislature had trespassed upon the legislative field reserved to the Centre by List I, entry 89the power to levy taxes on railway fares and freights. The tax levied is not a tax on railway freight; it is a tax on turnover, that is, on the aggregate of sale price received by the dealer in respect of sale of goods. The fact that the price includes the expenditure incurred by the company for railway freight for transporting the goods from the factory site to its place of business does not make the tax imposed upon that component a tax on railway freight." 13.. In the same way, the Legislature could define "purchase price" as including transport cost and handling charge. The entry, as already mentioned above, is wide enough to include all facets and items of cost as part of the purchase price. In Dyer Meakin Breweries Ltd. v. State of Kerala [1970] 26 STC 248 (SC), the company had claimed the amount expended by it towards freight and handling charges of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of any goods and, therefore, the concept of real price or actual price retainable by the dealer is irrelevant. The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax or freight. The only relevant question to be considered is as to what is the amount payable by the purchaser to the dealer as consideration for the sale and not as to what is the net consideration retainable by the dealer. The exclusion clause in the second part of the definition of 'sale price' can be availed of by the assessee only if the State seeks to rely on the inclusive clause for the purpose of bringing a particular amount within the definition of 'sale price'. But if the State is able to show that the particular amount falls within the first part of the definition and is, therefore, part of the 'sale price', the exclusion clause cannot avail the assessee to take the amount out of the definition of 'sale price'. The exclusion clause is not intended to apply to a case where the cost of freight is part of the price, but the dealer ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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