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2016 (9) TMI 1221 - GUJARAT HIGH COURT

2016 (9) TMI 1221 - GUJARAT HIGH COURT - [2016] 96 VST 342 (Guj) - 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” .....

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rried out by third party agency. Though the terms of the contract also 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 d .....

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hat: - when there is no independent sale of packing material but the 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 .....

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. - TAX APPEAL NO. 359 of 2013 - Dated:- 15-9-2016 - MR. AKIL KURESHI 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 .....

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rges of the goods as part of the sale price and arises in the following 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 .....

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his amount, therefore, cannot be considered as part of the sale consideration. 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 comp .....

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harges did not form part of the sale price and the same was therefore 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 .....

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party agency was not the sale consideration. It would not matter that 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 t .....

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the time of or before delivery thereof other than the cost of insurance 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 .....

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essor and machinery from the wooden box used for packing and transportation, 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 d .....

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set off, drawback or refund of tax in respect of purchase of goods 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 .....

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eme Court held and observed that this Section only envisages a case 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 ra .....

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of the goods. It is not open for anyone to say that the value of different 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 .....

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