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Judgment
Ashwani Kumar Mishra, J.—This revision under Section 58 of the U.P. Value Added Tax, 2008 (hereinafter referred to as ''the Act'') is by the assessee, questioning imposition of value added tax in proceedings under Section 28 of the Act, pertaining to assessment year 2009-2010. Assessee is engaged in the business of purchase and sale of lubricant oil, which it purchases from Indian Oil Corporation (hereinafter referred to as ''IOC''), under an agreement, from within the State. According to assessee, it has entered into an agreement with the IOC, according to which lubricant oil is sold to the retailer as per discount directed to be given every month by IOC. It is alleged that difference between the purchase price of revisionist and sale price to the retailer is made good by IOC in the form of incentives etc. Assessee pays VAT upon turnover of purchase made from IOC and also charges VAT on the sale of lubricants to the retailers. The revisionist has submitted annual tax returns in Form 26-A, according to which it purchased lubricant worth Rs.8,52,29,213.02 and incurred a sum of Rs.49,47,445 for procuring the lubricant oil, which was appropriated towards transportation expenses in trading account. It had sold products worth Rs.8,62,62,905.27 and also received an incentive of Rs.64,85,695.40 from IOC. As per the return, assessee had purchased a total of 7,39,916.03 litres of lubricant, and sold 7,39,756.65 litres. It transpires that during the assessment year, a survey was conducted, in which one loose parcha was found, which has been attempted to be explained in one way by the assessee, but has been understood in quite another manner by the revenue. However, on 24.4.2009 when the survey was conducted, there was no discrepancy found between the books of account and the stocks physically verified to be present at the premises of the revisionist.
The assessing authority exercising its jurisdiction under Section 28-A of the Act passed assessment order on 4.12.2010. The assessing authority added Rs.49.47 lacs to the turnover of purchase, rejecting revisionist''s plea of having incurred it towards transportation expenses and added it to the purchase price, and thus worked out the sale price as Rs.130/- per litre. The turnover of revisionist was assessed at Rs.9,61,68,364.50. The loose parcha found during survey was made the basis for rejecting account books of the revisionist. The assessing authority estimated 12000 litres of lubricant oil to have been sold by the revisionist without reflecting it in the account books, and added it to the turnover of the assessee. The assessing authority based upon the average sale price worked out at Rs.130/- per litre held that a sum of Rs.14,68,320/- was additional purchase that had not been reflected in the account books. The turnover disclosed by revisionist at Rs.8,62,62,905.27 was not accepted, and stood enhanced to Rs.9,91,96,684.50. As against the admitted tax of Rs.1,15,36,928.23, the assessee was held liable to pay Rs.1,32,60,905.70 as tax.
The assessee preferred first appeal, and various grounds were urged in support thereof. However, the Additional Commissioner (Appeals) rejected the appeal preferred by the revisionist, and affirmed the order passed by the assessing authority. A second appeal thereafter was preferred before the Tribunal, which has been partly allowed, vide order dated 26.5.2011. The Tribunal disallowed the alleged suppressed sale price amounting to Rs.15,60,000/-, and thereby determined the turnover at Rs.9.29 crores. The total liability of tax assessed earlier at Rs.1,32,60,905.70 was accordingly reduced to Rs.1,24,33,400/-. The Tribunal, however, negatived the dealer''s plea with regard to challenge laid to inclusion of Rs.49,47,445/- as expenses and held that this amount was to be appropriated towards the purchase price. The incentive amount received from IOC of Rs.64,85,695.40 was held to have rightly been appropriated towards the sale price. Thus aggrieved, the revisionist has preferred instant revision.
Following questions of law have been framed for consideration in this revision :-
(i) Whether the Tribunal was justified in holding that transportation expenses borne by the revisionist for procuring the lubricant oil from IOC formed a part of its purchase price under Section 2(y) of the Act ?
(ii) Whether the Tribunal has misconstrued Section 2(ad) read with Explanation VI of the Act, and thereby illegally added incentive amount received by IOC to the sale price ?
(iii) Whether the Tribunal was justified in rejecting books of account of the applicant, without any adverse material available on record to justify it?
I have heard Sri Rahul Agrawal, learned counsel for the revisionist and Sri B.K. Pandey, learned Standing Counsel, and have perused the materials brought on record.
Sri Rahul Agrawal has emphatically urged that purchase price can only be the amount paid by the assessee to the seller i.e. IOC, as consideration for purchase of goods. It is stated that explanation clarifies that purchase price does not include the amount charged by seller from the purchaser of goods, if such amount has been shown separately on sale invoice or tax invoice by the seller. In the facts of the present case, it is pointed out that the assessee has truthfully disclosed the amount, which it has paid to the seller i.e. IOC. It is also urged that sale invoice or tax invoice does not mention any amount towards freight, and therefore, the explanation is not attracted. It is submitted that IOC has sold the product from its depot, which is transported by the dealer out of its own expenses, and the cost of freight in bringing the goods from IOC depot to the dealer''s place is a part of expenses incurred by the assessee, which cannot be treated to be the purchase price under the Act. Arguments are raised that authorities as well as Tribunal have erred in including the transportation cost in the purchase price. Learned counsel has placed heavy reliance upon a decision of this Court in M/s. Bharat Rice Mills, Rampur v. Commissioner of Sales Tax, 1995 UPTC 689. It is contended that there is a distinction between the purchase price and cost price, and that the transportation cost may be a part of the cost price, but it cannot be treated to be purchased price, as purchase price would constitute only that part of cost, which is actually paid to the seller.
Per contra, learned Standing Counsel submits that purchase price is not confined to the amount actually paid, but refers to the amount payable to a seller, and since the purchase of goods is being made at the sight of the dealer, therefore, the cost incurred towards transportation in getting the lubricants from IOC depot to the place of the dealer has rightly been included in the purchase price. Learned Standing Counsel has relied upon a decision of this Court in Commissioner of Sale Tax v. M/s. M.P. Traders, reported in 1981 UPTC 860, in order to contend that the amount of expenditure by assessee on freight in importing goods is not liable to be excluded. Reliance is also placed upon judgments of this Court in M/s. K.S. Suppliers v. Commissioner of Sales Tax, 2001 UPTC 280; Commissioner of Trade Tax v. S/S. Ramapati Tewari Jainath Tewari, Varanasi, 2005 UPTC 76; Commissioner of Sales Tax v. S/S. Sharma Coal Company, Azamgarh, 1999 UPTC 62; M/s. Ghaziabad Bhatta Samiti, Ghaziabad v. Commissioner of Trade Tax, Lucknow, 2014 UPTC 447, and M/s. Mc Dowell & Company Ltd. v. The Commercial Tax Officer, Secunderabad, AIR 1986 SC 649.
In order to consider the first question raised in this revision, it would be necessary to examine Section 2(y) of the Act, which defines ''purchase price'' in following words :-
"2. Definitions - In this Act, unless there is anything repugnant in the subject or context;
(y) "purchase price" means the amount payable by a purchaser to a seller as consideration for the purchase of any goods made by or through him after deducting the amount, if any refunded to the purchaser by the seller in respect of any goods returned to such seller within such period as may be prescribed.
Explanation: Purchase price does not include-
(i) the amount representing the cost of outward freight or cost of installation, charged by the seller from the purchaser of goods if such amount has been shown separately on sale invoice or tax invoice issued by the seller;
(ii) amount of tax if such amount is shown separately on the sale invoice or tax invoice."
The provisions contained under Section 2(ad), which defines ''sale price'', and Section 2(ap) ''turnover of purchase'', and 2(aq) ''turnover of sale'' are also relevant, and thus reproduced :-
"2. Definitions-In this Act, unless there is anything repugnant in the subject or context;
(ad) "sale price" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practise normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of goods at the time of or before the delivery of such goods, other than cost of outward freight or delivery or cost of installation in cases where such cost is separately charged;
Explanation:-
(i) In a case in which any amount of any duty payable by a dealer is deferred for a period or in a case in which point of payment of any duty is shifted, amount of such duty shall be deemed part of the sale price;
(ii) The price of packing material in which any goods are packed shall be deemed part of sale price of goods sold.
(iii) Sale price of goods in relation to transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, shall be determined after deducting the aggregate of actual amount incurred towards labour and services, amount of profit relating to supply of labour and services and such other amounts as may be prescribed from the total amount received or receivable in respect of such works contract;
(iv) In respect of transfer of right to use goods, any goods for any purpose (whether or not for a specified period) sale price means the valuable consideration received or receivable in respect of such transfer of right to use goods but does not include any sum payable as a penalty or as compensation or damages for breach of contract;
(v) Tax charged or chargeable shall not form the part of the sale price;
(vi) Cash or trade discount at the time of sale as evident from the invoice shall be excluded from the sale price but any ex post facto grant of discounts or incentives or rebates or rewards and the like shall not be excluded from the sale price;
* * *
(ap) "turnover of purchase" with its cognate expressions means the aggregate of the amounts of purchase prices paid or payable in respect of purchase of goods made by a dealer either directly or through another dealer, whether on his own account or on account of others, after deducting the amount, if any, refunded by the seller in respect of any goods returned to such seller within such period as may be prescribed;
(aq) "turnover of sale" means the aggregate of amount of sale prices of goods, sold or supplied or distributed by way of sale by a dealer, either directly or through another, whether on his own account or on account of others;"
Section 3 of the Act imposes liability to pay tax upon every dealer on his taxable turnover of sale or purchase of goods, as the case may be, at the rates specified. Turnover of purchase has been defined to mean the aggregate amount of purchase price paid or payable in respect of purchase of goods made by a dealer. Purchase price in law means the amount payable by a purchaser, to a seller as consideration, for the purchase of any goods. The definitions are categorical, inasmuch as it does not include only the amount paid to the purchaser, but would also include the amount payable by a purchaser to a seller. The contract of sale in the present case is by IOC in favour of revisionist to transfer lubricant oil. The transaction of sale is completed with delivery of goods to the assessee. The purchase price, therefore, would include the price actually paid and also other amounts, which are payable by the purchaser for completing the transaction of sale itself. Hon''ble Supreme Court in Dyer Meakin Breweries Ltd. v. State of Kerala, (1970) 26 STC 248, was pleased to make following observations :-
"It is common ground that the sale of the liquor took place in Ernakulam. The company arranges to transport liquor for sale from the factories to its warehouse at Ernakulam. It was not brought for any individual customer. All the expenditure incurred is prior to the sale and was evidently a component of the price for which the goods were sold. It is true that separate bills were made out for the price of the goods ex-factory and for "freight and handling charges". But, in our judgment, the Tribunal was right in holding that the exemption under Clause (f) of Rule 9 applies when the freight and charges for packing and delivery are found to be incidental to the sale and when they are specified and charged for by the dealer separately and expenditure incurred for freight and packing and delivery charges prior to the sale and for transporting the goods from the factories to the warehouse of the company is not admissible under Rule 9(f). Rule 9(f) seeks to exclude only those charges which are incurred by the dealer either expressly or by necessary implication for and on behalf of the purchaser after the sale when the, dealer undertakes to transport the goods and to deliver the same or where the expenditure is incurred as an incident of sale. It is not intended to exclude from the taxable turnover any component of the price, expenditure incurred by the dealer which he had to incur before sale and to make the goods available to the intending customer at the place of sale."
In Commissioner of Trade Tax v. S/S. Ramapati Tewari Jainath Tewari, Varanasi (supra), this Court, relying upon Apex Court in Dyer Meakin Breweries Ltd. (supra), had held that the expenditure incurred by the dealer before sale to make the goods available to the customers at the place of sale was held to be included in the taxable turnover. Again in E.I.D. Parry (I) Ltd. v. Assistant C.C.T., 2000 (2) SCC 321, Hon''ble Supreme Court has been pleased to observe that whether one of the components of the purchase price goes to the coffers of the seller or not will not cease to be so if it is necessary for completing the same. It has, therefore, been observed that the total amount of consideration for the purchase of goods would include the price strictly so called and also other amounts which are payable by the purchaser or which represents the expenses required for completing the sale, as the seller would ordinarily include all of them in the price at which he would sell his goods. Para-18 of the decision is reproduced :-
"18. What transpires from the above case law is that the amounts paid by way of consideration by the purchaser to the seller of goods in pursuance of the contract of sale can legitimately be regarded as purchase price while calculating the turnover for the purposes of sales tax legislation. What can legitimately be brought to sales tax or purchase tax is the aggregation of the consideration for the transfer of property. All the payments should have been made pursuant to the contract of sale and not de hors it. Any amount paid as ex gratia payment or as an advance cannot be the component of the purchase price and therefore can not legitimately be included in the turnover of the purchasing dealer. Whether one of the components of the purchase price goes to the coffers of the seller or not will not cease to be so if it is necessary for completing the same. Thus the total amount of consideration for the purchase of goods would include the price strictly so called and also other amounts which are payable by the purchaser or which represent the expenses required for completing the sale as, the seller would ordinarily include all of them in the price at which he would sell his goods. But if the sale price is fixed statutorily then the only obligation of the purchaser under the agreement would to pay that price only and no other amount can be included in the purchase price even if the same is paid by the purchaser to the seller."
Other judgments are also relied upon by the learned Standing Counsel in Commissioner of Sale Tax (supra), M/s. K.S. Suppliers (supra), Commissioner of Trade Tax (supra), Commissioner of Sales Tax (supra), M/s. Ghaziabad Bhatta Samiti, Ghaziabad (supra), and M/s. Mc Dowell & Company Ltd. (supra), which are to the same effect.
The judgment of this Court in M/s. Bharat Rice Mills, Rampur (supra) relied upon by Sri Rahul Agrawal holds as under in Para-4 :-
"4. �.. The Hon''ble Supreme Court has held that tulai shall be a part of delivery charges and in case it has been separately charged in respect of each of the sale transaction entered into between the customers and the assessee, the same would be entitled to exemption of tax otherwise it would come within the definition of purchase price and taxable turnover. In this case the seller or anybody else has not charged anything from the dealer in respect of the distillation charges. What has been purchased by the dealer is not the mentha-herb but the mentha-oil that had already been extracted and, therefore, the question relating to distillation charges would not arise. In any case, there is no finding that there was any difference in the purchase price of mentha-oil extracted by the assessee himself and that was not so extracted. In the absence of any such finding it cannot be said that, by the dealer suffering the distillation charges himself, any valuable consideration had passed to the farmer from whom the mentha-oil was purchased. It is important to remember that "purchase price" as defined in Section 2(gg) is not the same thing as "cost price". The later, would include all costs connected with the purchase. The former, however, is restricted to the consideration paid to the seller. In my view, therefore, the cost of extraction of oil from mentha-herb which has been suffered by the dealer himself could not be included in the purchase price of mentha-oil and the enhancement in the turnover is not legally sustainable. �..."
This Court in M/s. Bharat Rice Mills, Rampur (supra) was dealing with transaction of sale of mentha-oil, which got extracted from mentha-herb. The component of freight or other charges incurred in processing of mentha-herb was rightly excluded, as what has been found to be purchased by the dealer was mentha-oil and not mentha-herb. It was a different product, which had come into being, and the question being dealt was as to what was the purchase price of mentha-oil, and therefore, any cost incurred in processing of mentha-herb was rightly excluded. The argument advanced by Sri Agrawal that freight though would constitute a part of the cost price, but would not be included in the purchase price, as this amount does not go to seller i.e. IOC, is not liable to be accepted, inasmuch as the cost of freight is incurred to complete the transaction of sale itself, and therefore, the freight incurred for getting the commodity to the place of sale would have to be treated as part of purchase price, so as to include it in the turnover of purchase. The first question urged is answered by holding that the Tribunal was justified in treating the expenses incurred towards transportation as constituting purchase price payable, and thus forming part of turnover of purchase.
Second question urged relates to adding of incentive of Rs.64,85,695/- towards the sale price of the revisionist. The sale price as is defined under Section 2(ad), has already been extracted above. It includes the amount payable to dealer as consideration for the sale of any goods less any sum allowed as cash discount, but inclusive of any sum charged for anything done by the dealer in respect of goods at that time or before the delivery of such goods, other than cost of outward freight or delivery, in the case where such cost is separately charged. The amount of incentive is not an amount payable to a dealer as consideration for the sale of any goods. This amount is received by the dealer from IOC, and therefore, it cannot be treated to be a part of sale price. The amount of incentive has not been shown to have been received pursuant to contract of sale and any amount received dehors the contract of sale cannot be included within the definition of sale price, in terms of Section 2(ad). Learned Standing Counsel has not been able to demonstrate any provision of law, where under an amount of incentive received by the dealer from IOC could be added to the component of sale price, so as to include it in the turnover of sale. Even explanation VI, which has been relived upon, would not be material, inasmuch as the amount of incentive received has no relevance to it. In such circumstances, the second question formulated is answered, by holding that the Tribunal was not justified in adding the incentive of Rs.64,85,695/- received from IOC towards the sale price/turnover of sale.
Turning to the last question with regard to rejection of books of account, this Court finds that the Tribunal while passing the order in second appeal has already accepted the claim of assessee to the extent of inclusion of sale based upon the loose parcha amounting to Rs.15,60,000/-. Moreover, once it has been found that the physical stock available with the dealer on the date of survey tallied with books of account, the same was not liable to be discarded. However, the entry in the books of account appropriating the amount of freight towards expenses and not including it in the purchase price is found to be wrong, and on that basis, the liability of tax imposed would be justified.
All three questions raised by the assessee are answered accordingly. No other question was pressed. The Tribunal shall proceed further, in accordance with law.
Both the revisions, accordingly, stand disposed of.