Hyderabad Tools (P) Limited vs Commissioner Of Commercial Taxes, Andhra Pradesh

Syed Shah Mohammed Quadri, J.—This special appeal is filed u/s 23(1) of the Andhra Pradesh General Sales Tax Act, 1957 (for short, "the Act"). The appellant is a dealer registered under the Act. For the assessment year 1976-77, the turnover of the appellant was assessed to sales tax. In so far as the disputed amount of Rs. 1,86,000 which is said to have been received by the appellant as commission from M/s. Navabharat Ferro Alloys Limited, the Commercial Tax Officer, VII Circle, granted exemption while passing the order of assessment on July 13, 1978. However, in exercise of powers u/s 14(4), he chose to tax the said amount on the ground that it has escaped assessment and passed orders levying tax on the said amount on March 15, 1982. Aggrieved by the said order of the Commercial Tax Officer, the appellate filed an appeal before the Deputy Commissioner, Commercial Taxes (Appeals), Hyderabad-I Division. On June 16, 1982, the Deputy Commissioner (Appeals) allowed the appeal holding that the disputed turnover did not relate to goods at all but related to the handling charges paid by M/s. Navabharat Ferro Alloys Limited to the appellant. It was also observed that on the turnover of the goods taxes were paid by M/s. Navabharat Ferro Alloys Limited and that was not in dispute. While so, exercising power u/s 20(1) of the Act the Commissioner of Commercial Taxes revised the order of the Deputy Commissioner and assessed tax at the rate of 4 1/2 per cent on the said amount of Rs. 1,86,000 by order passed in proceeding No. L.III(2)/3056/82 dated March 5, 1986. It is the correctness of this order that is assailed in this appeal.

Shri Srinivas Reddy, the learned counsel appearing for the appellant, contends that so far as the appellant is concerned the said amount was paid to it as handling charges or commission. It has nothing to do with the turnover of sale or purchase of the goods. Therefore, the order of the Commissioner under appeal is wholly illegal. The learned Government Pleader submits that the said amount could have been received from the purchases made by M/s. Navabharat Ferro Alloys Limited and, therefore, it becomes the turnover and as that escaped assessment it was liable to be taxed in the hands of the appellant herein.

The short question that arises in this appeal is : Whether the said amount of Rs. 1,86,000 forms part of the turnover of the appellant ? Having regard to the definition of "turnover" in section 2(s) of the Act, we are of the view that the said amount cannot be treated as turnover of the appellant. The reason given by the Commissioner in the order under appeal reads as follows :

"On perusal of the assessment orders passed in respect of M/s. Navabharat Ferro Alloys Limited for the year 1976-77, there is no proof that the turnover relating to the expenses like the handling charges, loading and unloading of goods relating to M/s. Hyderabad Tools Private Limited have been included in the turnover of M/s. Navabharat Ferro Alloys Limited, Hyderabad. Hence the objection raised by the dealer is not tenable and, therefore, it is rejected."

From a perusal of the order extracted above it appears that the Commissioner proceeded on the assumption that that amount has to be included in the turnover of M/s. Navabharat Ferro Alloys Limited and as there was no proof that the turnover relating to expenses has been so included in the turnover of M/s. Navabharat Ferro Alloys Limited that amount was taxable in the hands of the assessee. Whether that amount could have been included in the turnover of M/s. Navabharat Ferro Alloys Limited is a question which cannot be determined in this appeal in the absence of M/s. Navabharat Ferro Alloys Limited. We have only to see whether that can properly be treated as a turnover of the appellant. It is nobody''s case that that amount was received by the appellant as part of sales or purchase price of the goods. Therefore, this amount does not fall within the meaning of turnover. As such, it cannot be taxed in the hands of the assessee. The order of the Commissioner is wholly illegal and cannot be sustained. It is accordingly set aside. The appeal is allowed with costs.

Appeal allowed.