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STATE OF GUJARAT THROUGH Versus DRESSER RAND INDIA PVT LTD

2016 (9) TMI 1221 - GUJARAT HIGH COURT

Pre-sale inspection charges - works contract for supply and installation of machinery - Gujarat Sales Tax Act - export sale - assessee had a taxable turnover of ₹ 25.57 crores (rounded off) which included a sum of ₹ 3.71 lacs (rounded off) towards performance test/inspection charges - such tests carried out in the premises of the assessee's factory itself by a third party agency and were pre-sale tests - “sale price” as defined under section 2(29) of the Act - whether on the facts an .....

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lso referred to inspection as part of the sale consideration, the same when appreciated in connection with other conditions would show that such inspection was after installation inspection and did not refer to presale inspection - the test performed for the inspection was neither done by the assessee nor was charged by the assessee and would therefore not be included in the expression “any some charged for anything done by the dealer in respect of the goods.” as defined in section 2(29) of the .....

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e value of the packing material goes into determining the value of the goods sold, the deeming fiction provided under Section 6(C) of the said Act would apply and even the value component of packing material would be taxed at the same rate as the goods themselves. Even on the other hand, on facts it is found that the packing material is sold separately from the sale of goods, the rate of tax on such packing material would be one prescribed for such packing material. In either case, there would b .....

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HI AND MR. A.J. SHASTRI, JJ. FOR THE APPELLANT : MR HARDIK VORA, AGP FOR THE OPPONENT : KUNTAL A PARIKH, ADVOCATE, MR PARESH M DAVE, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the State Government challenging the judgment of The Gujarat Value Added Tax Tribunal ( the Tribunal' for short), in which the following questions of law have been framed: (A) Whether on the facts and in the circumstances of the case, the tribunal has rightly held that, .....

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wing background. The respondent-assessee is a company engaged in the business of manufacturing compressors and parts and sale thereof. The assessee also sells some of its products through export sale. For the assessment year 2004-05, the Assessing Officer noted that the assessee had a taxable turnover of ₹ 25.57 crores (rounded off) which included a sum of ₹ 3.71 lacs (rounded off) towards performance test/inspection charges. The Assessing Officer noted that such tests were being car .....

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sideration. The Assessing Officer, however, proceeded to add such amount upon which the assessee approached the Tribunal after failing before the Appellate Commissioner. The Tribunal noted that the assessee was awarded a contract by one Indraprastha Gas Ltd. for supplying machinery and execution of project for a total contract price of 20.90 crores (rounded off) on F.O.T.site basis. The contract price would remain fixed till complete execution of the work order. The contract price would include .....

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re required to be deducted from the total sale consideration. Thereupon, the revenue has filed this appeal. 3. From the material on record, it emerges that the assessee had been awarded the works contract for supply and installation of machinery. The pre-sale inspection or performance testing though was done at the site of the factory of the assessee, it was being done at the instance of the purchaser for which the purchaser had separately paid and the inspection was being carried out by third p .....

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hat inititally the amount may have been paid by the assessee which was later on reimbursed by the purchaser. Section 2(29) of the Act defines sale price as under: 2(29). sale price means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation when such cost is separately charged and .....

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ance for transit or of installation when it is separately charged. In the present case, the test performed for the inspection was neither done by the assessee nor was charged by the assessee and would therefore not be included in the expression any some charged for anything done by the dealer in respect of the goods. 4. Coming to the second question, it pertains to the assessee's claim of set off on packing materials used for delivery of the product. The Assessing Officer was of the view tha .....

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ortation, the box would not be in a condition to be reused. The box would have to be dismantled before taking out the machinery. The value of the packing material was merely 0.25% of the total value of the goods. He, therefore, concluded that the seller did not intend to sell the packing separately and was therefore not entitled to set off under Rule 44 of the Gujarat Sales Tax Rules. 5. Ultimately, the Tribunal referred to the decisions of the Supreme Court in the case of Rasheel (supra) and of .....

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sold in course of intra-state trade or commerce or export out of the territory of India or transported to a place outside the State of Gujarat. In this context, the question arises whether in case on hand, the assessee had sold the packing material while selling the main product. In case of Rajsheel (supra), the constitutional validity of Section 6(C) of A.P.General Sales Tax Act, 1957 was challenged. This provision provided for a deeming fiction under which where goods packed in any materials .....

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where it is the goods which are sold and there is no actual sale of the packing material. In such situation, the section provides for a legal fiction that the packing material shall be deemed to have been sold with the goods. In other words, though there is no sale of the packing material, it will be deemed that there is such sale. In that event, the tax will be leviable on such deemed sale of the packing material at the same rate applicable to the sale of goods themselves. It was observed that .....

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ifferent components which have entered into a determination of the price of the goods should be separated nor different rates of tax could be applied according to the component used. Section 6(C) merely clarifies and explains that the components which have entered into determining the price of the goods cannot be treated separately from the goods themselves. Section 6(C) was therefore not unconstitutional. It was further observed that the transaction of sale may consist of a sale of the product .....

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