IN THE GUJARAT VALUE ADDED TAX TRIBUNAL AT AHMEDABAD.

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1 SALE PRICE Octroi collected and paid to Surat Municipality - Not part of Sale Price - Decision of Jayantilal Bhimji 32 STC 527 and Mahavir Ice Factory (SA Nos. 292 & 293 of 1984) dt followed - Interest u/s. 47(4)(6) confirmed. IN THE GUJARAT VALUE ADDED TAX TRIBUNAL AT AHMEDABAD. Before: Hon. Mr. Justice K.A. Puj, President Shri Y.P. Bhatt, Member SECOND APPEAL NO. 16 OF 2005 M/S. ANKUR MOTORS PVT. LTD.... Appellant v/s THE STATE OF GUJARAT... Respondent Appearance Shri H.V. Shah, the learned STP for the Appellant Shri C.D. Parmar, the learned Govt. Agent for the Respondent Date: 12/06/2013 JUDGMENT Per Hon. Mr. Justice K. A. Puj, President:- The appellant has filed this appeal against the order passed by the learned Deputy Commissioner of Sales Tax, Appeal-2, Baroda on 29/09/2004 whereby the appeal filed before him came to be dismissed. While dismissing the said appeal, the learned Deputy Commissioner of Sales Tax has held that the octroi is included within the definition of sale price as defined in Section 2(29) of the Gujarat Sales Tax Act and has further held that the order passed by the learned Asst. Commissioner of Sales Tax is just and proper and it requires no interference by this Tribunal. 2, Being aggrieved by the said order, the appellant has filed the present appeal before this Tribunal. 3. It is the case of the appellant that the appellant is a company incorporated under the provisions of the Companies Act, 1956 and it is engaged in the business of reselling motor vehicles, their spare parts and accessories. The appellant is, therefore, registered as a dealer under the Gujarat Sales Tax Act, The appellant also effects interstate sales and therefore it is also registered under the Central Sales Tax Act, The appellant purchases goods within the State as well as out of the State of Gujarat and therefore the appellant pays sales tax on sales of the goods purchased from out of the State of Gujarat declaring as taxable sales in the returns. 4. It is also the case of the appellant that the appellant has showroom within the Surat Municipal Area and it has godown at outside the Surat Municipal area and it has godown at outside the Surat Municipal area. The modus operandi of the appellant is to sell the goods at godown delivery. However, it is the custom in their business to give services of discharging the responsibility of the customer to pay octroi, RTO Tax, Insurance etc. The appellant, however, does not include the amount of octroi etc. in the sale bills because these services are not part of sale contract and they are at the option of the appellant. The appellant also provides these services free of charge. The customer pays octroi amount to the appellant by cheque, which is deposited by the appellant to the Octroi Department and obtain octroi receipt and thereafter all these papers/documents are handed over to the purchaser of the vehicle. The appellant does not charge for providing these additional services. 5. It is also the case of the appellant that the learned assessing officer had noticed from the customers accounts in the ledger of the appellant that they had paid by cheques the amount of octroi and hence the assessing officer has formed belief that the appellant had collected the octroi amount from the customers and therefore the octroi amount is also part of sale price. He has therefore added this amount in the actual turnover of sales and levied sales tax. According to the appellant there is no question of any gain or loss as whatever amount is paid by the purchaser by way of octroi, the same was deposited by the appellant with

2 the Octroi Department. It is only with a view to raise goodwill in the market that the appellant provides free service to the customers and there was no obligation on the part of the appellant to provide such service while selling the vehicles to the customers. While framing the assessment the learned assessing officer has assessed the turnover of sales of Rs.29,67,72,974/- which interalia includes an amount of octroi of Rs.13,79,060/- paid by the customers to the appellant. In the books of accounts of the appellant, the turnover of sales was shown at Rs.29,53,93,914/-. Because of this addition on account of octroi, additional demand of Rs.1,82,548/- arose against the appellant which interalia includes tax of Rs.1,02,408/- and interest of Rs.80,140/-. 6. Being aggrieved by the order of the assessing officer the appellant filed first appeal before the learned Deputy Commissioner which came to be dismissed and against the order of the learned Deputy Commissioner the present appeal is filed before this Tribunal. 7. Mr. H.V. Shah the learned STP appearing for the appellant has submitted that the learned assessing officer has committed serious error of law in considering the octroi paid through the appellant as part of sales consideration of the appellant. As a matter of fact, the real transaction of sale completed on delivery of the vehicle at godown. Therefore the octroi paid for entry in the Surat city is to be paid by the customer which was paid through the services of the appellant. The appellant does not charge any additional amount except the actual amount of octroi payable by the customer. He has, therefore, submitted that the addition made in the turnover of sales on the ground of collection of octroi by the appellant is required to be deleted and appellant is required to be assessed as per the books and returns filed by the appellant. Mr. Shah further submitted that the learned assessing officer has made an addition of Rs.13,79,060/- in the actual turnover of sales while framing the assessments and while doing so he has not considered the fact that the appellant was providing these services only after completion of sale and these services are not forming part of sale contract. The appellant does not charge any additional amount and therefore to levy sales tax on the amount of octroi is to put the appellant into loss by the amount of sales tax that may be required to be paid on the amount of octroi. He has, therefore, submitted that the assessment order passed by the assessing officer and confirmed by the learned Deputy Commissioner is required to be modified to the extent of the addition made in the turnover of sales. 8. Mr.Shah further submitted that the octroi paid by the customer did not form part of the sale price in the hands of the appellant. He has further submitted that what is sale price is succinctly explained by the Hon. Gujarat High Court in the case of the State of Gujarat Vs. Jayantilal Bhimji & Sons 32 STC 527 (Guj.) wherein it is held that the expression of sales price is defined in Section 2(29) of the Act and the same is as follows: 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 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. 9. The definition of sale price given in the Act can be divided into three parts, viz. (1) amount of valuable consideration paid or payable to a dealer for any sale made; (2) including any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof; and (3) other than the cost of insurance for transit or of installation, when such cost is separately charged. The definition thus given is an exhaustive one, because it defines what the sale price is, and it includes certain charges as sale price and also provides for exclusion of certain charges from it. In the case before the Hon. Gujarat High court, the amount recovered as postal charges, telephone call charges and bank charges do not fall in the second part of the definition i.e. the inclusive part of the definition. While rejecting the plea of the State Government that the amount recovered as postal charges, telephone call charges and bank charges are included within the first part of the definition and particularly within the words valuable consideration, the Hon. Gujarat High Court has held that the postage, trunk call charges and bank charges included in the sale bills should not be added to the turnover of the sales of the dealer. Mr. Shah has also relied on the decision of this Tribunal in the case of Mahavir Ice Factory vs. The State of Gujarat, (S.A. Nos.292 & 293 of 1984 decided on 23/02/1987) wherein it is held that the cartage charges and dharmada

3 charges recovered by the appellant did not form part of the sale price and therefore they cannot be included in the turnover of sales. While taking this view, it was observed by this Tribunal that cartage charges recovered by the appellant were not the money recovered for doing anything to the goods sold either at the time of sale or before sale, but it was service rendered to the customer by the appellant subsequent to the completion of sale. The appellant could have refused to keep the ice in the cold room. As the appellant was also doing the business of cold storage it showed its indulgence or willingness to store the ice and then sent it to the customers on payment of storage charges as well as cartage charges. Based on these two decisions Mr. Shah has strongly urged that octroi recovered by the appellant from the customers and paid to the Octroi Department does not form part of the sale price and it is therefore not required to be included in the turnover of sales. 10. Mr. Shah further submitted that while framing the assessment, the learned assessing officer has also charged interest of Rs.80,140/- under Section 47(4A) of the GST Act on the ground that the appellant has not paid the tax along with returns in time and hence interest for late payment of tax is required to be charged. He has, however, submitted that appellant has paid tax along with interest as per the returns, amounting to Rs.2,94,39,456/- whereas the appellant was liable to pay tax along with interest as per the assessment order to the tune of Rs.2,96,62,04/-. The difference between the tax paid as per the return and the tax payable as per the assessment order is of Rs.1,82,548/- which is less than 10% of the tax so paid by the appellant and since the appellant has paid the interest along with the tax paid late by few days, the interest under Section 47(4A) is therefore not liable. 11. In view of these submissions Mr. Shah has strongly urged that the appeal of the appellant deserves to be allowed on both these issues. 12. Mr. C.D. Parmar the learned Govt. Agent appearing for the respondent on the other hand supported the orders passed by the authorities below. He has submitted that looking to the definition of sale price under Section 2(2) of the Act that octroi received by the appellant from the customers is certainly part of the sale price and it is righly included in the turnover of sales. He has further submitted that the decisions cited and relied upon by Mr. Shah are altogether on different points and items covered under these decisions are not the same as it is covered under the present case. The question of octroi was not there in any of the two decisions and hence the said decisions cannot be pressed into service. So far as the levy of interest under Section 47(4A) is concerned, Mr. Parmar has submitted that the appellant has made consistent default in payment of tax. He has furnished the statement showing the details of payment of tax. The said statement gives monthwise details of tax payable, tax paid, date of payment of tax, payment of tax made late by number of days, interest charged and interest paid. On the basis of this submission, he has submitted that the interest is rightly charged by the assessing officer and it does not call for any interference by this Tribunal. He has, therefore, submitted that the appeal filed by the appellant deserves to be dismissed. 13. Having considered the rival submissions and facts of the case and having considered the statutory provisions and decided case law on the subject, we are of the view that the appellant has not included the amount of octroi in its sale price indicated in almost all invoices. Barring few invoices in which the vehicles were sold within the area of Surat Municipality, the octroi was included in the sale price. When the vehicles were sold outside the city limits and delivery was effected from the godown which is situated outside the city limit, no octroi was charged by the appellant nor the said amount was recovered in the sale bill. However, after effecting the delivery when such vehicles are to be entered into the city limit, the octroi is required to be paid by the customer. At the request of such customer the amount was received by cheque and the very same amount was paid to the Octroi Department. This amount was never reflected in the books of accounts of the appellant. The amount of octroi shown by the appellant in its balance sheet under the head direct expenses of schedule 9 the same was recovered by the appellant and it was forming part of the invoice. However, amount in question in the present appeal is Rs.13,79,060/- which is not forming part of the turnover of the appellant as per the books of accounts and it was the amount of octroi paid by the customers subsequent to the sale and as per the decision of the Hon. Gujarat High Court in the case of The State of Gujarat Vs. Jayantilal Bhimji & Sons (supra) as well as the decision of this Tribunal in the case of M/s. Mahavir Ice Factory vs. The State of Gujarat (supra) the amount of octroi recovered by the appellant

4 was not money recovered for doing anything to the vehicles sold either at the time of sale or before sale but it was services rendered to the customer by the appellant subsequent to the completion of sale. It was at the sole discretion of the appellant and the appellant could have refused to render such service to the customer. It is the primary responsibility of the customer to pay octroi while bringing the vehicle within the city limits. The appellant has shown its indulgence or wiliness to pay the octroi on behalf of the customer after collecting the amount from such customer and hence it cannot form part of the sale price as defined in Section 2(29) of the Act and it is therefore not included in the turnover of sales. The authorities below are, therefore, not justified in making addition of octroi in the turnover of sales. Such additions are therefore deleted. 14. So far as levy of interest under Section 47(4A) is concerned, the statement furnished by Mr. Parmar at the time of hearing of this appeal clearly indicates that there is consistent default of the appellant in making payment as per returns. The details given in the statement are as under: Month Tax payable Tax paid Date of Payment of tax Payment of tax paid late by no. of days Interest payable Interest paid April ,40,726 13,40,726 5/6/ , May ,85,882 11,85,882 3/7/ June ,71,806 20,71,806 6/8/ , July ,73,668 26,73,668 4/9/ , August ,67,045 23,67,045 19/10/ , Sept ,34,102 19,50,861 19/11/ ,261 16,759 Oct ,50,000 42,50,000 4/12/ , Nov ,42,722 28,42,722 10/01/ , Dec ,76,414 17,76,414 4/2/ Jan ,12,512 31,20,512 10/3/ ,745 8,000 Feb ,97,000 34,97,000 7/4/ , March ,02,820 24,02,820 7/5/ , Total 80,102 25,299 = Difference of interest = Rs Rs = Rs.54,803/- From the above statement it appears that except in respect of the returns filed for September 2002 and Janury 2003 the appellant has not paid interest along with tax as per the return and the default committed by the appellant is ranging from one day to sixteen days. As against the interest of Rs.80,102- payable by the appellant for late payment, the appellant has paid interest of Rs25,299/- along with tax paid as per the returns. The differential amount of interest to the tune of Rs.54,803/- was not paid by the appellant along with tax as per the returns and hence to this extent it cannot be said that appellant has fulfilled both the conditions laid down in the proviso to Section 47(4A)of the Act. The appellant is, therefore, not entitled to benefit of the judgment of this Tribunal in the case of M/s. Gujarat Tea Processor and Packers Ltd decided on 8/1/2013. Considering the number of days as well as the amount of interest it cannot be said that the

5 amount is very negligible and the default is of a few days. We, therefore, confirm the levy of interest. However, the amount of interest charged may be reduced consequent to the deletion of the addition made on account of octroi in the taxable turnover and as a result thereof, the tax amount is also required to be reduced accordingly. 15. Subject to the aforesaid observation and conclusion, we pass the following order. ORDER 16. This appeal is partly allowed. An addition of Rs.13,79,060/- made in the taxable turnover of sales is hereby deleted. The interest charged under Section 47(4A)(b) is confirmed subject to the consequential reduction in the quantum of the interest amount. 17. There shall be no order as to cost. Pronounced in open court on this 12 th day of June, Sd/- Sd/- (Mr. Justice K.A. Puj) (Y.P. Bhatt) President Member

REVISIONAL APPLICATION NO ) & 122 OF 2011 M/S. KHADI GRAMODYOG DEVELOPMENT

REVISIONAL APPLICATION NO ) & 122 OF 2011 M/S. KHADI GRAMODYOG DEVELOPMENT ASSESSMENT Khadi & Village Industries benefit not granted after 1-4-06 - Decisions of Kishorekumar Prabhudas Tanna 23 VST 298 (Guj.) and Jan Seva Khadi Gramodyog (SCA No. 1863 of 2011) dt. 29-4-11 discussed